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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
Chapter 2 The Unique Nature of Corporate Entrepreneurship

2 Question 1: What are the six (6) steps of the entrepreneurial process?

3 Entrepreneurial Realities: Understanding the Process
This process consists of six stages: Identifying the opportunity Defining the business concept Assessing the resource requirements Acquiring the necessary resources Implementing and managing the concept Harvesting the venture

4 Question 2: What are three (3) key questions that an entrepreneurial manager must consider when looking for opportunities?

5 Entrepreneurial Realities: Understanding the Process
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 Entrepreneurial Realities: Understanding the Process
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

7 Question 3: What are some non-financial resources required or recommended for entrepreneurial success?

8 Entrepreneurial Realities: Understanding the Process
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…

9 Question 4: What is “resource leveraging”
Question 4: What is “resource leveraging”? How can it help entrepreneurs develop a concept?

10 Entrepreneurial Realities: Understanding the Process
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 Entrepreneurial Realities: Understanding the Process
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

12 Question 5: Why is an exit strategy important?

13 Entrepreneurial Realities: Understanding the Process
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 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

15 Question 6: What are some of the similarities between traditional start-up entrepreneurs and corporate entrepreneurs? What are some of the differences?

16 How Corporate Entrepreneurship Differs
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 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 How Corporate Entrepreneurship Differs
Major differences Start-up Entrepreneurship Corporate 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

19 Major differences continued
Start-up Entrepreneurship Corporate 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

20 Question 7: How might these differences help or hinder corporate entrepreneurship? In other words, what differences make CE easier or harder for entrepreneurial managers?

21 Question 8: What role does company politics or political skill play on corporate entrepreneurship?

22 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

23 Question 9: What are the three (3) main reasons successful corporate innovators continue to work for established businesses as opposed to starting their own venture? How can that help managers identify ways to keep entrepreneurial employees and encourage entrepreneurial attitudes and behaviors?

24 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 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 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

27 Question 10: What are the seven (7) primary ways entrepreneurship appears in organizations? Briefly describe them.

28 Where to Find Entrepreneurship within a Company
Seven Ways in Which Entrepreneurship is Manifested in Established Companies Traditional R&D Ad Hoc Venture Teams New Venture Divisions or Groups Champions and the Mainstream Acquisitions Outsourcing Hybrid Forms

29 Question 11: According to the Guth and Ginsburg (1990) model, what two types of processes are within the domain of corporate entrepreneurship? What are the four (4) factors that drive their activity and performance?

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

31 General Frameworks for Understanding Corporate Entrepreneurship
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 Behavior Perceived Activity-Outcome Relationship Perceived Decision Outcome-Relationship Outcomes existence perception (Individual Comparison) (Firm Comparison)

32 Question 12: What are the three (3) main drivers of corporate entrepreneurship activity according to Ireland, Covin, and Kuratko (2009)? And FYI, Duane Ireland is a proud TTU alumni!

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