1. Corporate entrepreneurship HEMBA February 18, 2012

2. Market dynamics Established firms rarely compete with entrepreneurs to develop new products on the early part of the S curve –The new product usually begins with inferior performance that hurts the company’s overall performance –Managers of established companies believe they can always improve the performance of their existing products to compete with new products

3. Disadvantages to existing companies entering new markets Core rigidities: companies are only good at things they are used to doing Tyranny of the current market: companies listen to their customers, who are not a source of ideas for new products in new markets Use myopia: customers of existing firms see needs or solutions very narrowly (i.e., not the needs of others)

4. Disadvantages to existing companies entering new markets Revenues are power for senior management – taking attention away from the mature businesses that generate revenues can be career suicide Large companies have entirely different approaches to market research for new markets 

5. Market research techniques Existing marketNew market Philosophy of market research Deductive data analysis Intuition Techniques for gathering customer information Focus groups, surveys, mail studies Industry experts, trend extrapolation, future scenarios ExamplesNew types of toothpaste, new car models Social media exchange markets

6. Challenges to corporate entrepreneurship 1.Strategy challenges 2.Incentives and organizational challenges 3.Decision making challenges

7. 1. Strategy challenges Lack of integrated decision making (new businesses have few customers and get low priority; potential for cannibalization) Cyclicality: budgets for entrepreneurial initiatives are the first to be cut during downturns New business, old lenses (see core ridigities, tyranny of current market, and user myopia)

8. 2. Incentives and organizational challenges Risk and failure avoidance (sr mgt focus on short- term performance emphasizes “sure-thing” bets) “Not invented here” mentality: firms can’t step out of their organizational boundaries for inputs (hubris, user myopia) Org design problems (i.e., where to put the venture) Emphasis on org harmony (established routines and compensation schemes not conducive for new ventures)

9. 3. Decision making challenges Rigid application of financial metrics Reliance on traditional market research (see market research techniques slide) Linear stage gates and cumbersome decision making processes Performance measures and compensation

10. Potential remedies Adapting management practices Selectively insulating new venture (e.g., “skunk works”) Alternative support models DISCUSSION