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

Corporate Entrepreneurship I Corporate Entrepreneurship Revised Schedule  Week 5 Obstacles to corporate entrepreneurship  Week 6 You as an Intrapreneur  Week 7 Innovation in corporations Switch Week 6 & Week 7 Topics & Assignments

Corporate Entrepreneurship I Today’s Agenda  Corporate Entrepreneurship  Is this a good market?  Entrepreneurial market research –Gene Hayworth

Corporate Entrepreneurship I Next Week’s Schedule  Corporate Entrepreneurship – Creativity & Innovation  Case: Emerging Business Opportunities at IBM  Read  Bringing Silicon Valley Inside  Feasibility: M-4 Is This a Good Industry?  Read a magazine you would never, ever read & identify a business opportunity  Entrepreneurship Interview  Hand in paper  Be ready to discuss in class

Corporate Entrepreneurship I What is Corporate Entrepreneurship?  “Formal or informal activities aimed at creating new businesses in established companies through product and process innovations and market developments.” Zahra  “…centers on reenergizing and enhancing the firm’s ability to acquire innovative skills and capabilities.” Morris & Kuratko  “Cost-effective innovation or intrapreneurship” Pinchot

Corporate Entrepreneurship I How Do Corporations Deal With Uncertainty?  Thorough analysis  Approval levels  Must follow the plan once approved  Short term time horizon  Establish controls – HR, accounting, legal, marketing  Rules

Corporate Entrepreneurship I Why Do Companies Need Rules?  Consistent actions  Guide behavior  Help make decisions  Treat employees fairly  Provide consistent quality & service

Corporate Entrepreneurship I Obstacles to Corporate Entrepreneurship  Systems  Organization structures  Policies & Procedures  Strategic directions  People  Culture Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I Systems Obstacles?  Reward & evaluation systems  Rigid planning & budgeting systems  Don’t like changes or surprises  Inflexible budgeting systems  Arbitrary cost allocation systems Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I Organizational Obstacles?  Too many hierarchical levels  Responsibility w/o authority  Top down management  Restricted communication channels  Lack of accountability  Lack of commitment Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I Policies & Procedures Obstacles?  Long, complex approval cycles  Extensive documentation requirements  Corporate requirements  Accounting  HR  Brand use  SOX  Traditional evaluation techniques don’t work (ROI, market share, quick payback)?  Management reporting requirements Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I Strategic Direction Obstacles?  Lack of commitment from senior execs  No innovation goals  No strategy for E  No vision  No E role models at top  Instincts are to protect existing businesses Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I People Obstacles?  Definition of success: promotion every 3 years, corner office, corporate kite  Fear of failure/risk taking  Human nature: resistance to change, turf protection, complacency  Skills  Inappropriate skills/talents  Entrepreneurial ventures attract mavericks & risk takers Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I Culture Obstacles?  Ill-defined values  No consensus on priorities  Experimentation not encouraged  Values that conflict with E requirements Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I Personal Obstacles?  Too busy with current job  Fear of failure  Managerial skills needed  Selling skills  Financial dynamics  Style of management  Old dog who can’t learn new tricks  Political savvy  Sense of urgency Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I What is the Problem?

Corporate Entrepreneurship I Definitions of an Entrepreneur  “Entrepreneurs are societies rejects, instead of becoming hobos, criminals or professors, the start their own business.” Thereau  “Traits of entrepreneurs are closest to juvenile delinquents.”  “Progress depends upon unreasonable men.” GB Shaw  “If I’m in control, I’m probably going to slow.” Mario Andretti  “Road less traveled”, Robert Frost:  “If you ain’t makin’ waves, you ain’t kickin’ hard enough.”

Corporate Entrepreneurship I Entrepreneurs Are  Opportunity driven, which means  Understands competition  Understands market: size, trends, accessibility  Understand customers through direct contact  Tolerance for ambiguity  Locus on control  Take risks  Creative  Impatient  Not tied to conventional approach

Corporate Entrepreneurship I Entrepreneurial Ventures Good At  Focus all resources & time on creating a successful venture  Trial & error (ready, fire, aim)  Quick decisions  Using OPR’s  Instant communications  Recruiting & motivating world-class employees

How Start-up Actually Happens Inspiration Goals Plan Fooling Around Doing Plans Mistakes Failure Goals Some Other Action Plan Action Goals Inspiration Success Pinchot & Pellman, Intrapreneurship in Action

Corporate Entrepreneurship I Differences Between Start-up & Corporate Entrepreneurs  Entrepreneur takes the risk  Entrepreneur owns concept  Unlimited rewards  One error may mean failure  Independence of entrepreneur  Experimentation & flexibility  Quick decision making  Resource limitations  Corporation assumes risk  Corporation owns; no equity  Clear limits  More room for errors  Interdependence of entrepreneur  Rules, procedures, bureaucracy  Long approval cycles  Access to finances, R&D, sales force, distribution channels Start-up Corporate

Corporate Entrepreneurship I Similarities Between Start-up & Corporate Entrepreneurs  Opportunity recognition with a defined window  Driven by passionate individual who uses a team to commercialize a concept  Encounter resistance & obstacles requiring persuasiveness  Must convince people to “invest”  Leverage resources  Ambiguity

Corporate Entrepreneurship I How Can Corporations Be Intrapreneurial?

Corporate Entrepreneurship I Conclusion – Challenges to Intrapreneurship  How encourage experimentation  How treat failure  Types of people who work well in large organizations  How establish effective reward systems  Definition of success - corner office & corporate kite  Traditional evaluation techniques don’t work (ROI, market share, quick payback)?  Instincts are to protect existing businesses  Is patient capital possible? Phil Knight “Took 18 years to be an overnight success.”

Corporate Entrepreneurship I Building Breakthrough Businesses Within Established Organizations  Emphasis is on execution  Strategic experiments are highest risk and return  Require unique approach – Forgetting, Borrowing & Learning Govindarajan & Trimble, HBR, “Building Breakthrough Businesses Within Established Organizations”

Corporate Entrepreneurship I Forgetting  Forget core business model  Changing behavior – institutional memory  Hiring, compensation, status, manufacturing, sales, marketing, R&D, new product development milestone driven, purchasing (supply chain)  Planning  Falling short was perceived failure  Informed estimates Govindarajan & Trimble, HBR, “Building Breakthrough Businesses Within Established Organizations”

Corporate Entrepreneurship I Borrowing I  Complete separation not practical, nor desirable.  Resources are too valuable  NYTD needed branded content & access to exist Times advertisers  Objective - Gain competitive advantage  Not to get cost reduction  Avoid IT & HR links

Corporate Entrepreneurship I Borrowing II  Requires proactive senior management  Manage the interactions – we vs. them  Performance review stressed collaboration, willingness to cooperate  Make it painless to core.  Replenish resources  Set transfer price high enough to make it a priority

Corporate Entrepreneurship I Learning I  Strategic experiments  Must have a structured learning process to reduce uncertainty  Make mistakes early  Evaluate leader on ability to learn & make good decisions

Corporate Entrepreneurship I Learning II  Lean to predict outcomes  By analyzing the disparities between forecast and outcome  Frequent, candid, open, fast  Predictions can’t become too rigid  Aggressive investment, followed by abandonment  Guardrail to guardrail decision making  Plans should be easy to revise  Avoid lots of detail

Corporate Entrepreneurship I Conclusions: Building Breakthrough Businesses  Strategic experiments are highest risk and return  Emphasis is on execution  Require unique approach – Forgetting, Borrowing & Learning  Commitment & active involvement of top management Govindarajan & Trimble, HBR, “Building Breakthrough Businesses Within Established Organizations”