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The Unique Nature of Corporate Entrepreneurship.

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Presentation on theme: "The Unique Nature of Corporate Entrepreneurship."— Presentation transcript:

1 The Unique Nature of Corporate Entrepreneurship

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3 E This process consists of six stages: Identifying the opportunityIdentifying the opportunity Defining the business conceptDefining the business concept Assessing the resource requirementsAssessing the resource requirements Acquiring the necessary resourcesAcquiring the necessary resources Implementing and managing the conceptImplementing and managing the concept Harvesting the ventureHarvesting the venture

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5 E  Identifying the opportunity An opportunity is “a favorable set of circumstances creating a need or an opening for a new business concept or approach” Most new product failures are the result of little to no market demand or need, no matter the innovative, state-of-the-art advances Key opportunity-based questions facing managers: (1) source(s) of opportunity; (2) size of opportunity; and (3) sustainability of opportunity

6 E  Defining the business concept A business concept is “an innovative approach for capitalizing on an opportunity”  New product or service  New process for accomplishing a task A good business concept should:  Fulfill a user’s need(s)  Unique  Not easy to imitate  Reasonably implemented  Profitable

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8 E  Assessing the Resource Requirement Money is necessary, but not sufficient to an entrepreneurial venture Entrepreneurial success if often a function of other resources  Insight/opportunity recognition abilities  Contact network (e.g., customers, suppliers, etc.)  Prior knowledge/skills  Motivated employees/team members  Many other things…

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10 E  Acquiring the Necessary Resources Beyond simply purchasing resources, entrepreneurs obtain resources in novel ways (e.g. resource leveraging) Their unconventional ability to acquire resources without letting go of precious financial capital Resources developed by entrepreneurs are more likely to create advantages (Barney, 1986) Lessens risk and increases the firm’s flexibility

11 E  Implementing and Managing the Concept Typically a hectic, uncertain, and ambiguous proposition Important to have tolerance and adaptability Given a significant time horizon for most innovations, successful entrepreneurs often set intermediate targets to track progress; “firefighting” mentality = loose sight of overall goal

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13 E  Harvesting the venture Product/service life cycles decreasing and resources are becoming more quickly obsolete Threats to business are increasing, but so are opportunities Harvesting a venture involves how returns will be realized, over what time period, and the eventual outcome of the venture  E.g., absorbed/purchased other business entity, spun off, replaced, eliminated, “die”, etc.

14 E How Corporate Entrepreneurship Differs “Entrepreneurship is the process of creating value by bringing together a unique combination of resources to exploit an opportunity.” The Entrepreneurial Context is never defined, thus, entrepreneurship can occur in: Start-up ventures Small firms Mid-sized companies Large conglomerates Non-profit organizations Public sector agencies

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16 E Similarities between start-up and corporate entrepreneurship Both involve opportunity recognition and definition Both require a unique business concept that takes the form of a product, service or process Both are driven by an individual champion who works with a team to bring the concept to fruition Both require that the entrepreneur be able to balance vision with managerial skill, passion with pragmatism, and proactiveness with patience Both involve concepts that are most vulnerable in the formative stage, and that require adaptation over time

17 E Similarities (continued): Both entail a window of opportunity within which the concept can be successfully capitalized upon Both are predicated on value creation and accountability to a customer Both find the entrepreneur encountering resistance and obstacles, necessitating both perseverance and an ability to formulate innovative solutions Both entail risk and require risk management strategies Both find the entrepreneur needing to develop creative strategies for leveraging resources Both involve significant ambiguity Both require harvesting strategies

18 E How Corporate Entrepreneurship Differs Start-up EntrepreneurshipCorporate Entrepreneurship  Entrepreneur takes the risk  Company assumes the risks, other than career- related risk  Entrepreneur “owns” the concept or innovative idea  Company owns the concept, and typically the intellectual rights surrounding the concept  Entrepreneur owns all or much of the business  Entrepreneur may have no equity in the company, or a very small percentage  Potential rewards for the entrepreneur are theoretically unlimited  Clear limits are placed on the financial rewards entrepreneurs can receive  One mis-step can mean failure  Vulnerable to outside influence  More room for errors, company can absorb failure  More insulated from outside influence  Independence of the entrepreneur; although the successful entrepreneur is typically backed by a strong team  Interdependence of the champion with many others; may also have to share credit with any number of people Major differences

19 E Start-up EntrepreneurshipCorporate Entrepreneurship  Flexibility in changing course, experimenting or trying new directions  Rules, procedures and bureaucracy hinder the entrepreneur’s ability to maneuver  Speed of decision-making  Longer approval cycles  Little security  Job security  No safety net  Dependable benefit package  Few people to talk to  Extensive network for bouncing around ideas  Limited scale and scope initially  Potential for sizeable scale and scope fairly quickly  Severe resource limitations  Access to finances, R&D, production facilities for trial runs, an established sales force, an existing brand, distribution channels that are in place, existing databases and market research resources, and an established customer base Major differences continued

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22 E How Corporate Entrepreneurship Differs Corporate entrepreneurs face three major challenges linked to the need for interorganizational political skills: Achieving credibility or legitimacy for the concept and the entrepreneurial team Obtaining resources Overcoming inertia and resistance

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24 E How Corporate Entrepreneurship Differs Corporate entrepreneurs remain in the corporate environment rather than starting their own ventures for three main reasons: The size of the resource base that they can tap into The potential to operate on a fairly significant scope and scale fairly quickly The security they enjoy when operating in an existing company Organizational politics is one of the main reasons corporate entrepreneurs leave the company

25 E How Corporate Entrepreneurship Differs To cultivate an environment of entrepreneurship within an organization, managers must: Create environments where employees have a sense that resources can be accessed if a idea is sound Find ways to reinforce the ability of anyone in the firm to champion an idea and get it implemented Invest in the development of people

26 E Rules for Fostering an Innovative Organization Rule #1 - Unreasonable Expectations Rule #2 - Elastic Business Definition Rule #3 - A Cause, Not a Business Rule #4 - New Voices Rule #5 - An Open Market for Ideas Rule #6 - Create an Open Market for Capital Rule #7 - Open a Market for Talent Rule #8 - Low-Risk Experimentation

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28 E Seven Ways in Which Entrepreneurship is Manifested in Established Companies 1.Traditional R&D 2.Ad Hoc Venture Teams 3.New Venture Divisions or Groups 4.Champions and the Mainstream 5.Acquisitions 6.Outsourcing 7.Hybrid Forms

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30 E ENVIRONMENT Competitive Technological Social Political STRATEGIC LEADERS Characteristics Values/Beliefs Behavior ORGANIZATION CONDUCT / FORM Strategy Structure Process Culture ORGANIZATION PREFORMANCE Effectiveness Efficiency Stakeholder Satisfaction CORPORATE ENTREPRENEURSHIP (1) (2)(3)(4) (5) Innovation / Venturing within Established Corporations Strategic Renewal of Established Corporations Fitting Corporate Entrepreneurship Into Strategic Management Source: William D. Guth and Ari Ginsberg, “Corporate Entrepreneurship,” Strategic Management Journal 11 (Summer 1990): 5-15.

31 E A Model of Sustained Corporate Entrepreneurship External Transformational Trigger Corporate Entrepreneurial Activity Organizational Antecedents Rewards Management Support Resources (i.e. time availability) Supportive Organizational Structure Risk Taking Individual Entrepreneurial Behavior Perceived Activity- Outcome Relationship Perceived Decision Outcome- Relationship Individual Entrepreneurial Outcomes Organizational (Individual Comparison) (Firm Comparison)

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