Corporate Entrepreneurship

Juan A. Moriano

UNEDUNED

DEFINITION

Independent entrepreneurshipis the process where an individual or group of individuals act independently, create a new organization

CE = Entrepreneurial behaviour inside established CE = Entrepreneurial behaviour inside established

organizations.

CE = Entrepreneurial efforts that require organizational

resources for the purpose of carrying out innovative activities

in the form of product, process, and organizational

innovations.

Source: Morris & Kuratko (2002); Sathe (2003)

Independent

Entrepreneurship

Entrepreneurship

Corporate

Entrepreneurship

CorporateStrategic

Hierarchy of terminology in corporate entrepreneurship

Source: Sharma / Chrisman (1999)

Corporate

VenturingInnovation

Strategic

Renewal

Internal

corporate venturing

Potential outcomes:

new divisions

External

corporate venturing

Potential outcomes:

Joint ventures

Spin off

TYPES OF CE

1. Strategic renewal: entrepreneurial efforts

inside organization, whose results are

substantial changes in a business model,

strategy or structure of the organization.

NOKIA

Nokias history demonstrates corporate entrepreneurship, which

has been defined as a set of behavior, processes or activities that

rejuvenate, renew or reinvent an organization.

1885: Paper factory

1898: Nokia's rubber business

1912: Nokia's cable businesses.

1960: First electronics department

1979: TV and Radio

1991: Nokia equipment is used to make

the worlds first GSM call

TYPES OF CE

2. External corporate: the creation of a new business unit. The

output is the existence of partially or fully autonomous units

operating outside existing organization, e.g. joint ventures or spin-

offs. offs.

TYPES OF CE

3. Internal corporate: the creation of organizational entities

operating inside existing organization, e.g. new departments,

divisions or cross-functional teams.

Xerox established an innovation board in the 1980s to aid decision making. 1980s to aid decision making.

The administrative board gave way in 1989 to an internal venture-capital group called Xerox

Technology Ventures

XTV was terminated in the mid-1990s, and yet another structure, called Xerox New Enterprise,

became its replacement.

XNE took more aggressive ownership of the ventures yet sought to infuse them with

entrepreneurship. XNE, in turn, was terminated in

the late 1990s

Corporate and independent entrepreneurs

Similarly, both find the entrepreneur encountering resistance and obstacles, necessitating perseverance, ability to formulate innovative solutions and develop creative strategies for solutions and develop creative strategies for leveraging recourses.

Both involve significant risk and ambiguity and require risk-management strategies and the ability of the entrepreneur to balance vision with managerial skill, passion with pragmatism, and proactiveness with patience.

Corporate and independent entrepreneurs

Independent

Entrepreneurship

Corporate

Entrepreneurship

Risks ? ?

Concept or idea ? ?Concept or idea ? ?

Rewards ? ?

Failures ? ?

External influences ? ?

Freedom ? ?

Decision making ? ?

Social support ? ?

Resources ? ?

The intrapreneurial framework

Figure characterizes different types of people in the organization based on

the extent to which they focus on:

1. The conceptualization part of things

2. Making it happens

Depth of Action

Str

en

gth

of

Vis

ion

Dreamer Artist Inventor Planner Intrapreneur Manager Technician

Traditional manager vs. Intrapreneur

Traditional Manager Intrapreneur

Primary motives (e.g.

McClelland)

? ?

Time orientation ? ?Time orientation ? ?

Focus of attention ? ?

Tendency to action ? ?

Attitude toward risk ? ?

Skills ? ?

Who serves ? ?

Relationship with others ? ?

Decision-making style ? ?

Are you a corporate entrepreneur?

1. Does your desire to make things work better occupy as much of your time as fulfilling your duty to maintain them the way they are?

2. Do you get excited about what you are doing at work?

Pinchot (1985), a quick test, answer yes or no to each question

3. Do you think about new business ideas while driving to work or taking a shower?

4. Can you visualize concrete steps for action when you consider ways to make a new idea happen?

5. Do you get in trouble from time to time for doing things that exceed yourauthority?

6. Are you able to keep your ideas under cover, suppressing your urge to telleveryone about them until you have tested them and developed a plan forimplementation?

Are you a corporate entrepreneur?

7. Have you successfully pushed through bleak times when something youwere working on looked as if it might fail?

8. Do you have a network of friends at work whom you can count on for help?

9. Do you get easily annoyed by others incompetent attempts to execute partsof your ideas?of your ideas?

10. Can you consider trying to overcome a natural perfectionist tendency to do all the work yourself and share the responsibility for your ideas with a team?

11. Would you be willing to give up some salary in exchange for the chance to try out your business idea if the rewards for success were adequate?

If you answered more time yes than no,

you are probably already behaving as a corporate entrepreneur.

2. Barriers of CE

Strategic

SystemSystem

Political

Behavioral

Strategic barriers

Caused by missing or unclear vision,

in which direction thecompany should go in thefuture,future,

missing strategy focusingon entrepreneurial activityinside organization,

the absence of innovationgoals,

missing effective support from top-management

Strategic barriers

Support requires managers who are visionary and perceive their firm

and its employees, as how they can become not how they are.

If you want to build a ship, don't drum If you want to build a ship, don't drum

up people together to collect wood and

don't assign them tasks and work, but

rather teach them to long for the endless

immensity of the sea

Antoine de Saint-Exupery quotes (French Pilot,

Writer and Author of 'The Little Prince', 1900-1944)

System barriers

Consequence of formal managerialsystems that were developed in theorganization during the years in order to provide stability and coordination

Examples? Examples? Byrocratic routine reporting, necessity to sign

one document by five people, preference ofform to content, wrong remuneration systems, inflexible budgeting, large documentationrequired

Hierarchical levels slow down informationflow upward, good ideas get stucksomewhere, exchange of relevantinformation between departments ismissing

System barriers

Political barriers

Caused by power relations and issues of control and authority

Example? Managers will not want to support somebody else project in order Managers will not want to support somebody else project in order

not to loose their own influence, i.e. they can withdraw resourcesor not provide complete information

Who will stay at the head? Top-management may want rewardsfor nothing.

In case of concerns about own career people may leave theproject

Focus on cost reduction not enough resources for new projects

Departments may defend theirtraditional areas

Behavioral barriers

Perception of risk that my careergrowth will stop in case of participationin an unsuccessful project

Tendency to be consumed by presentissuesissues

Perception of time and own skills limits

No motivation for going beyond my ordinary tasks and goals.

The consequence is a hesitance to acceptchallenge

3. Innovation dilemmas

Innovation dilemmas

1. Seeds vs. Weeds

Separate the wheat from the chaff

Is it worth?

Deciding the merits of innovative ideas

Seeds likely to bear fruit

Weeds should be cast aside

Dilemma: Some innovation projects require

considerable level of investment before merit can

be determined

What mechanisms can they use to select right

innovation projects?

Innovation dilemmas

2. Experience vs. Initiative

Who will lead the new project? Rank or enthusiasm

Senior managers Midlevel employeesSenior managers Midlevel employees

Have experience and credibility

Tend to be more risk averse

May be the innovators themselves

May have more enthusiasm

Innovation dilemmas

3. Internal vs. External staffing

Social capital or fresh air

Innovation projects need competent staffs to succeed

People drawn from inside People drawn from outside

May have greater social capital Know the organizations culture and routines May not be able to think outside the box

Can bring new knowledge Are costly to recruit, hire, train May have difficulty building relationships

Innovation dilemmas

4. Building capabilities vs. Collaborating

Organizations must choose whether to collaborate with someone

outside the firm:

The collaborator can share costs, bring immediate relevant The collaborator can share costs, bring immediate relevant

expertise, and send a market signal about the projects worth.

Create dependencies and inhibit internal skills development

Sharing benefits of innovation may create conflict

Organizations may try to develop new skills internally (and it costs

time and money):

Development of internal capacity is limited

Innovation dilemmas

5. Incremental vs. Pre-emptive launch

Milestones or Full Engagement

Incremental launch Large-scale launch

Less risky Requires few resources Serves as a market test

Requires more resources Can effectively preempt a competitive response

Role of individuals (1)

Initiator Starts innovative activity.

Champion Champion Takes the lead. Coordinates

the project. Looks for resources,

stimulates interest. Keeps the project viable,

overcomes barriers, leads it to implementation.

Role of individuals (2)

Sponsor / Facilitator High-level manager

advocate of entrepreneurialactivity

Provides advice for the Provides advice for thechampion, supports projectwith his authority.

Functions as a buffer. Protects champion if he goesagainst some firm rules.

Helps to find resources and information.

He / She should believe in champions vision.

Role of individuals (3)

Devils advocate Objectively criticises new

projects, focus on weaknesses, requests forclear unemotionalclear unemotionalexplanations.

Must be tough. Helps the firm to save money.

Member of innovation team Champion cannot make it

alone he / she needs a wellfunctioning team.

HP Case study

Discuss in group the following questions about the

case:

1. What type of Corporate Entrepreneurship is described in 1. What type of Corporate Entrepreneurship is described in

the case?

2. What barriers did they face to improve the processes in HP?

How did they overcome these barriers?

3. Which innovation dilemmas did they experience?

What decisions did they take about them?

4. What role play Cheng and Anderson in reengineering the

process?

Organizational Entrepreneurial Intensity

1. Innovativeness: attempts to embrace creativity,

experimentation and novelty.

2. Risk taking: committing a high percentage of 2. Risk taking: committing a high percentage of

resources to projects with uncertain outcomes, and

entering unknown markets.

3. Proactiveness:

Acting rather than reacting to the environment

Nike slogan Just do it

Distinction between the inventor and the

intrapreneur.

Michael

H. Morris

Three Frontiers of InnovationThree Frontiers of Innovation

Services Services new or improved servicesnew or improved services

Innovativeness Innovativeness

Services Services new or improved servicesnew or improved services

Products Products unique or improvedunique or improved

Processes Processes new or better ways to accomplish a task or functionnew or better ways to accomplish a task or function

Innovativeness Innovativeness to what extent is the company doing things to what extent is the company doing things that are novel, unique, or differentthat are novel, unique, or different

Does the concept address a need that has not previously Does the concept address a need that has not previously been addressedbeen addressed

Innovativeness Innovativeness

been addressedbeen addressed

Does it change the way one goes about addressing a needDoes it change the way one goes about addressing a need

Is it a dramatic improvement over conventional solutionsIs it a dramatic improvement over conventional solutions

Does it represent a minor modification or improvement to Does it represent a minor modification or improvement to an existing productan existing product

Is it just the geographic transfer of a proven productIs it just the geographic transfer of a proven product

RiskRisk--takingtaking

FinancialFinancial

TechnicalTechnical

Risk-taking

TechnicalTechnical

MarketMarket

PersonalPersonal

SocialSocial

Total Risk

Missing-the-Boat and Sinking-the-Boat Risk

Risk taking strategy

Planning Time

Missing the

boat risk curve

Sinking-the-Boat

Relating innovativeness to risk

HighHome-run

strategy

Innovativeness

Risk

Low

Little to no

innovative

activity

Lots of trials and experiments /

Balanced portofolio of projects

Radical

breakthroughs

Nintendo vs. Xbox

HighHigh

DreamerDreamer EntrepreneurEntrepreneur

Exploring the Dimensions of Entrepreneurship

RiskRisk--taking taking

InnovativenessInnovativeness

Low Low Low Low HighHigh

Stuck inStuck inthe Mudthe Mud

WildWild--eyedeyedGamblerGambler

Entrepreneurial Intensity:Combining Degree and Frequency of Entrepreneurship

Combining Degree and FrequencyCombining Degree and Frequency

The Entrepreneurial GridThe Entrepreneurial GridThe Entrepreneurial GridThe Entrepreneurial Grid

Entrepreneurial Intensity:

Combining Degree and Frequency of EntrepreneurshipF

requ

ency

of

Fre

quen

cy o

f E

ntre

pren

eurs

hip

Ent

repr

eneu

rshi

pHighHigh

Continuous/Continuous/

IncrementalIncremental

DynamicDynamic

RevolutionaryRevolutionary

Fre

quen

cy o

f F

requ

ency

of

Ent

repr

eneu

rshi

pE

ntre

pren

eurs

hip

Degree of Degree of EntrepreneurshipEntrepreneurship

(innovativeness, risk(innovativeness, risk--taking, proactiveness)taking, proactiveness)

Low Low Low Low HighHigh

Periodic/Periodic/

IncrementalIncremental

DynamicDynamic

Periodic/Periodic/

DiscontinuousDiscontinuous

Applying the Entrepreneurial Grid to Organizations

The entrepreneurial grid is a useful too for The entrepreneurial grid is a useful too for

managers attempting to define the role of managers attempting to define the role of

entrepreneurship within their organizations.entrepreneurship within their organizations.

A companyA companys entrepreneurial strategy is s entrepreneurial strategy is effectively defined according to where it falls effectively defined according to where it falls

on the grid.on the grid.

Applying the Entrepreneurial Grid to Organizations

Procter &

Gamble

Google

High

Frequency of

Wendys

Nucor Steel

3M

Low

Low High

Frequency of

Entrepreneurship

Degree of

Entrepreneurship

The World's 10 Most Innovative Companies

Applying the Grid at the Level of the Individual Manager

The entrepreneurial grid can serve as a useful The entrepreneurial grid can serve as a useful

means for diagnosing entrepreneurial means for diagnosing entrepreneurial

management profilesmanagement profilesmanagement profilesmanagement profiles

Applying the Grid at the Level of the Individual Manager

Richard Branson(Virgin)High

Rich DeVos (Amyway

Household

Products)

Ted Turner (CNN)

Akio Morito (Sony) Steven Jobs

(Apple, NeXT and Pixar)

Low

Low High

Frequency of

Entrepreneurship

Degree of

Entrepreneurship

Ray Kroc(McDonalds)

Sachiro Honda(Honda Motors)

Herb Kellehner(Southwest Airways)

Howard Head(Head Skis, Prince Tennis Racquets)

(Apple, NeXT and Pixar)

Google

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=1524