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MGT 709 New Venture Creation

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On Venturing. MGT 709 New Venture Creation. Determining how entrepreneurial projects will be pursued. Corporate Entrepreneurship. Corporate culture Leadership Structural features that guide and constrain action Organizational systems that foster learning and manage rewards. - PowerPoint PPT Presentation

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Page 1: On Venturing

MGT 709 New Venture Creation

Page 2: On Venturing

Determining how

entrepreneurial projects will be

pursued

Corporate culture Leadership Structural features that guide and

constrain action Organizational systems that foster

learning and manage rewards

Use of teams in strategic decision makingWhether the company is product or service orientedWhether the firm’s innovation efforts are aimed at product or process improvementsThe extent to which it is high-tech or low-tech

Page 3: On Venturing

Autonomous corporate venturing (work) groupFrees entrepreneurial team members from constraints imposed by existing norms and routinesFacilitates open-minded creativityBut, does isolate the group from the corporate mainstreamNew venture groups (NVGs)Business incubators

Focused Approaches to Corporate Entrepreneurship

Autonomous corporate venturing

work group

Page 4: On Venturing

Goal is to identify, evaluate, and cultivate venture opportunitiesTypically function as semi-autonomous units with little formal structureInvolvement includes

Innovation and experimentationCoordinating with other corporate divisionsIdentifying potential venture partnersGathering resourcesLaunching the venture

Focused approachFocused approachNew VentureNew Venture

GroupGroup

Page 5: On Venturing

Business incubators are designed to “hatch” new businessesIncubators provide some or all of the following functions

FundingPhysical spaceBusiness servicesMonitoringNetworking

Focused approachFocused approachBusiness Business

IncubatorsIncubators

Page 6: On Venturing

Dedication to principles and practices of entrepreneurship is spread throughout the firm

Ability to change is a core capabilityStakeholders can bring new ideas or venture opportunities to anyone in the organization

Two related aspects of dispersed entrepreneurship

Entrepreneurial cultureProduct champions

Page 7: On Venturing

Culture of entrepreneurshipSearch for venture opportunities permeates every part of the organizationEffect is strongest when it animates all parts of the organizationStrategic leaders and the culture generate a strong impetus

To innovateTake risksSeek out new venture opportunities

Dispersed approach Dispersed approach Entrepreneurial Entrepreneurial

CultureCulture

Page 8: On Venturing

Product (or project) championsBring entrepreneurial ideas forwardIdentify what kind of market exists for the product or serviceFind resources to support the venturePromote the venture concept to upper management

New project must pass two critical stages

Project definitionProject impetus

Dispersed approach Dispersed approach ProductProduct

ChampionsChampions

Page 9: On Venturing

Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives appear doomed

Comparing strategic and financial goals

Are the products or services offered by the venture accepted in the marketplace?

Are the contributions of the venture to the corporation’s internal competencies and experience valuable?

Is the venture able to sustain its basis of competitive advantage?

Page 10: On Venturing

Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives appear doomed

Exit championsWilling to question the viability of a venture projectDemand hard evidence and challenge the belief system that is carrying an idea forwardHold the line on ventures that appear shaky

Real optionsManaging the uncertainty associated with launching new ventures

Page 11: On Venturing

How can mature companies act like a startup? Make sure everybody is creating value

Reward great people, give them a voice Get back to market validation

Every presentation around customer pain Communicate a common vision

Don’t waste resources on internal competition Align new products with the sales model Harness entrepreneurial energy

Reward great ideas, give people autonomy, establish safe havens

Page 12: On Venturing

How can mature companies act like a startup? Make decisions and act fast – speed wins

Cut the bureaucracy, take risks 50% of time in meetings Listen to customers or lead people

Stick to your core competency work with people who will get the job done

Create smaller, dynamic units 16 person teams in military, minimal org overhead

Keep R&D alive

Page 13: On Venturing
Page 14: On Venturing

Ecosystem venturing Supports and encourages a network of

customers and suppliers Value of benefits for existing businesses

divided by invested capital – don’t lose focus Innovation venturing

Spend a proportion of an existing functional budget in a ‘venturing’ way (e.g. R&D) Focus on commercializing new technologies for

existing business Make sure it stays under a functional head rather

than become a general ‘innovation fund’

Page 15: On Venturing

Harvest Venturing Convert existing corporate resources into

commercial ventures and then into cash Must not be needed by current or future org

Danger of becoming a ‘new growth’ unit rather than focusing on existing resources

Private Equity Venturing Setting up a VC operation

Need privileged access to deals in early stage of lifecycle and some value-added for new firms

Danger of being bringing nothing special to the table but thinking you do (hubris)

Page 16: On Venturing

Focus on low probability projects Little attention or commitment from core Not given enough time or funds (due to

competition with core business) It’s a tough business

Even VC firms earn below cost of capital on average

Page 17: On Venturing

CONSULTING SKILLS

Page 18: On Venturing

The business of discovery is: Doing layers of analysis Understanding the political climate Resurfacing resistance to sharing information Seeing the interview as an intervention

Page 19: On Venturing

Distinguish between the presenting problem and the underlying problem

Understand the technical problem and how it is being managed (or not)

Ask questions about what others are doing to cause or maintain the problem Ask questions about the client’s own role

Plan the data collection jointly Involve the client in interpreting the data Condense to a limited number of issues Use simple language Develop a clear and simple picture of what is going on

There may be a similarity between how the client manages you and the organization

THE PURPOSE OF DISCOVER IS TO GET ACTION, NOT DO RESEARCH

Page 20: On Venturing

Concentrate on four things beyond the technical considerations: Keep simplifying your inquiry so that is ends up

focusing more and more on the next steps the client can take

Use everyday language Give a great deal of attention to your

relationship with the client Include the client at every opportunity in deciding

how to proceed. Deal with resistance as it arises. Treat technical data as valid and relevant. Also

assess how the problem is being managed.

The presenting problem is never the real problem!

Page 21: On Venturing

Ten steps to launch: Reaffirm the proposal content with the buyer Begin doing something Find and meet the key players Begin co-opting resistance By-pass islands Periodically meet with the buyer Make your successes visible to the

organization Share credit, or even bestow all of it Illustrate closure Visibly make mid-course corrections

Page 22: On Venturing

Challenge basic premises If the internal people had it all figured out, they

wouldn’t need you Seek documented (objective) validation for bald-

faced assertions Ensure you have alternative sources of

information. Don’t talk. Listen.

Cafeteria, the implementers, customers, suppliers, office staff

Ask anyone who volunteers information for examples, frequency, and who else was there

Trust your instincts and history. Search for incongruities.

Page 23: On Venturing

Avoid being intimidated Establish a comfortable first name relationship Never pose as an expert Don’t defend yourself with credentials or

background Try to meet on neutral turf Push back firmly whenever the situation calls for it Never accept a political role or take sides Be proactive Do your homework Face setbacks honestly Understand that tomorrow’s another day THE MORE YOU GIVE IN, THE MORE THEY’LL

EXPECT YOU TO GIVE; THE MORE YOU STAND FIRM, THE MORE THEY’LL RESPECT YOU

Page 24: On Venturing

Avoid intimidating others Don’t start by talking Don’t start with your process/methodology Stop dropping the buyer’s name Join them in the cafeteria Contribute to company causes Observe social mores Dress like everyone else Maintain confidences Don’t take sides Show humility NEVER GIVE AN ORDER TO ANY CLIENT

PERSONNEL

Page 25: On Venturing

CONSULTING TOOLS