1. Corporate Entrepreneurship II MBAX 6100 Entrepreneurship & Small Business Management Frank Moyes Leeds College of Business University of Colorado Boulder, Colorado

2. Corporate Entrepreneurship II Today’s Agenda  Corporate Entrepreneurship II – Creativity & Innovation  Feasibility: Is this a good industry?  Case: Emerging Business Opportunities at IBM  Read  Bringing Silicon Valley Inside  Feasibility: M-4 Is This a Good Industry?  Entrepreneurship Interview

3. Corporate Entrepreneurship II Next Week’s Schedule  Corporate Entrepreneurship III – You as an Intrapreneur  Case: Lucent Technologies  Feasibility: Sustainable competitive advantage  Speaker: Aaron Kennedy of Noodles  How has Noodles been innovative?  What problems does Noodles face to be innovative in the future?  What are your recommendations for Kennedy?

4. Corporate Entrepreneurship II Is this a Good Industry?  Five forces – Michael Porter  Ease of entry  Supplier power  Buyer power  Threat of substitutes  Competitive rivalry  Define your industry broadly  Good industries are competitively forgiving

5. Corporate Entrepreneurship II Corporate Entrepreneurship  Week 5 Obstacles to corporate entrepreneurship  Week 6 Innovation in corporations  Week 7 You as an Intrapreneur

6. Corporate Entrepreneurship II Some Notes on Corporate Entrepreneurship  Opportunity driven  Not a lack of ideas – execution is key  Experimentation  Iterative innovation process  Learning from failure  “A team with B plan”  Sharing risks & rewards

7. Corporate Entrepreneurship II Some Notes on Corporate Entrepreneurship II  Venture teams – self-directed, self-managing & high performance  Support from top management  Forget, borrow, learn  Resource attraction  Do not use corporate services to save money; only when it gives you a competitive advantage

8. Corporate Entrepreneurship II What Are the Obstacles to Corporate Entrepreneurship?  Systems  Organization Structure  Strategic directions  Policies & Procedures  People  Culture Morris & Kuratko, Corporate Entrepreneurship

9. Corporate Entrepreneurship II Systems Obstacles  Reward & evaluation systems  Oppressive Control systems  Inflexible budgeting systems  Arbitrary cost allocation systems  Rigid planning system

10. Corporate Entrepreneurship II Systems Decisions  Reward systems  Division managers  Corporate entrepreneurship group  Intrapreneurs  Planning systems  Controls on capital  How provide sustained funding? How get patient capital?  How avoid decisions that could sink the company?

11. Corporate Entrepreneurship II Organizational Structure Obstacles  Too many hierarchical levels  Responsibility w/o authority  Top down mgmt  Restricted communication channels  Lack of accountability

12. Corporate Entrepreneurship II Organizational Structure Decisions  Spin-off; separate from divisions; part of divisions  Who responsible top management? How handle change at top?  Where locate?  How measure performance?  Drive existing divisions out of business?

13. Corporate Entrepreneurship II Strategic Direction Obstacles  No innovation goals  No strategy for Entrepreneurship  No vision  Lack of commitment from senior execs  No Entrepreneur role models at top

14. Corporate Entrepreneurship II Strategic Direction Decisions  Time frame for success  Focus is on short term results  Profit per share growth vs. higher P/E  Criteria for success  Innovation goal  How choose the ventures?  IBM: cross-IBM resource needs, maturity of their strategies and business plans, potential market size, valued to be added by corporate insight  Outside validation?

15. Corporate Entrepreneurship II Policies & Procedures Obstacles  Long, complex approval cycles  Extensive documentation requirements  Unrealistic performance criteria

16. Corporate Entrepreneurship II Policy & Procedures Decisions  Restrictions on hiring – number & compensation  Accounting systems  Reports – environmental, equal opportunity

17. Corporate Entrepreneurship II People Obstacles  Fear of failure  Resistance to change  Turf protection  Short-term orientation  Inappropriate skills/talents

18. Corporate Entrepreneurship II People Decisions  Hire entrepreneurs from outside?  How train intrapreneurs to provide skills?  Assign experienced leaders or train young people?  What skills are needed – traditional entrepreneurial or ability to navigate the organization, secure cooperation or support  How handle turf protection?  15% rule

19. Corporate Entrepreneurship II Culture Obstacles  Ill-defined values  No consensus on priorities  Values that conflict with Entrepreneur's approach (innovation, calculated risk taking, pro-activeness)  Definition of success: promotion every 3 years, corner office, corporate kite  Entrepreneurial ventures attract mavericks & risk takers

20. Corporate Entrepreneurship II Culture Decisions  How to not trigger the corporate immune system?  How deal with failure?

21. Corporate Entrepreneurship II

22. Why Is It So Hard to Predict the Future? "I think there is a world market for maybe five computers. Thomas Watson, chairman of IBM, 1943 "This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." Western Union internal memo, 1876.

23. Corporate Entrepreneurship II Why Is It So Hard to Predict the Future? "The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible." "Heavier-than-air flying machines are impossible." Lord Kelvin, president, Royal Society, 1895. Lord Kelvin, president, Royal Society, 1895.

24. Corporate Entrepreneurship II Why Is It So Hard to Predict the Future? "So we went to Atari and said, 'Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or, we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said, 'No.' So, then, we went to Hewlett-Packard, and they said, 'Hey, we don't need you. You haven't got through college yet.”

25. Corporate Entrepreneurship II Develop Corporate Innovation Strategy  Morris & Kuratko: Obstacles  “Building Breakthrough Businesses” – Forget, Borrow, Learn  “Bringing Silicon Valley Inside” – resource attraction  IBM case – EBO’s