IP Jakl Corporate Entrepreneurship

7/31/2019 IP Jakl Corporate Entrepreneurship

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Corporate Entrepreneurship

Prague, 22.06.2010

Martina L. Jakl, PhD & lic.oec. HSG


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Outline of todays lecture:

Corporate Entrepreneurship

Reasons for existing organizations to become entrepreneurial

Corporate Entrepreneurship: Definition Related terms to corporate entrepreneurship

Introducing Corporate Entrepreneurship in a existing

organization


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Business has only two basic functions: marketing

and innovation. Marketing and innovation produceresults. All the rest are costs.

(Peter F. Drucker)

() the last bastion of Soviet-style central planning

can be found in Fortune 500 companies.

(Gary Hamel)


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Reasons for existing organizations

to become entrepreneurial

Most established companies find it hard to maintain the initial

entrepreneurial spirit that helped them to make it throughduring the start-up stage:

How do the excellent innovators do it? managers ask,presuming that excellent innovators exist

What drives the development of new promisingopportunities?

How do we find new ideas?

Source: Thierry Volery


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Corporate entrepreneurship: identifying and

pursuing discontinuous opportunities

Adjacent

Opportunities

Exploit current assets

and capabilities

Status QuoGrow marketshare and profit(business expansion,

not new businessdevelopment)

DiscontinuousOpportunities

Create new markets

and new products

Adjacent

Opportunities

Increase primary

market demand

Existing products/

Technology

New products/

Technology

ExistingMarkets

New

Markets



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which create disproportionate wealth

relative to adjacent opportunities

14%38%

61%

0

50

100

Type of new

Business

launch

Revenues Profits

39%

62%

86%

Source: Chan & Mauborgne (1997)

Adjacentopportunities

Discontinuousopportunities


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Knowledge creation in

corporate entrepreneurship

Opportunities Idea InitiativeNew

capability

Knowledge

base

Existing

capabilities

Weak social

tiesCentral

actors

Emerging

networks

Social

structures

Inertial forces Capability development



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Corporate entrepreneurship:

a tedious process

I haveanidea

ENTHUSI

ASM

It works!

The customerlikes it!

Its not

proprietary

The fieldtrial worked!

Failuresin the field trial

We haveA fix

It works!

New costsLook great

They need allthe sizes?

The bosshates the project

No, heloves it!

The marketestimatewas wrong

We havean order!

DeliveriesAre late

Wellmake it

They like it

We needdocumentation

Several failuresreported

Problems solved

Documentationdone!

We have allthe sizes

and the approvals

and inventory

and orders

Yes

it is!



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Corporate Entrepreneurship: Definition

10 Definitions of corporate entrepreneurship

Corporate entrepreneurship according to Sharma/Chrisman


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10 definitions

of corporate entrepreneurship

Burgelman (1983)Corporate entrepreneurship refers to the process whereby the firms

engage in diversification through internal development. Suchdiversification requires new resource combinations to extend the firm's

activities in areas unrelated, or marginally related, to its current domain

of competence and corresponding opportunity set.

Chung & Gibbons (1997)Corporate entrepreneurship is an organizational process for transforming

individual ideas into collective actions through the management of

uncertainties.

Covin & Slevin (1991)Corporate entrepreneurship involves extending the firm's domain of

competence and corresponding opportunity set through internally

generated new resource combinations.


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10 definitions of


Guth & Ginsberg (1990)Corporate entrepreneurship encompasses two types of phenomena and the

processes surrounding them: (1) the birth of new businesses within existingorganizations, i. e., internal innovation or venturing; and (2) the transformation oforganizations through renewal of the key ideas on which they are built, i. e.strategic renewal.

Jennings & Lumpkin (1989)

Corporate entrepreneurship is defined as the extent to which new products and/or new markets are developed. An organization is entrepreneurial if it develops ahigher than average number of new products and/ or new markets.

Schendel (1990)Corporate entrepreneurship involves the notion of birth of new businesses withinon- going businesses, and . . . The transformation of stagnant, on- goingbusinesses in need of revival or transformation.

Spann, Adams, & Wortman (1988)Corporate entrepreneurship is the establishment of a separate corporateorganization (often in the form of a profit center, strategic business unit, division,or subsidiary) to introduce a new product, serve or create a new market, or utilize

a new technology.


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10 definitions of


Vesper (1984)Corporate entrepreneurship involves employee initiative from below in the

organization to undertake something new. An innovation which is created bysubordinates without being asked, expected, or perhaps even given permission byhigher management to do so.

Zahra (1993)Corporate entrepreneurship is a process of organizational renewal that has two

distinct but related dimensions: innovation and venturing, and strategic renewal. Zahra (1995, 1996)Corporate entrepreneurship -- the sum of a company's innovation, renewal, andventuring efforts. Innovation involves creating and introducing products,production processes, and organizational systems. Renewal means revitalizing thecompany's operations by changing the scope of its business, its competitiveapproaches or both. It also means building or acquiring new capabilities and thencreatively leveraging them to add value for shareholders. Venturing means thatthe firm will enter new businesses by expanding operations in existing or newmarkets.


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10 definitions of

corporate entrepreneurship:

The essence?

Risk Taking

innovativnessProactivness


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So, what is corporate

entrepreneurship?

Independent entrepreneurshipis the process whereby an individual or group of individualsacting independently, create a new organization.

Corporate entrepreneurshipis the process whereby an individual or a group of individuals,in association with an existing organization, create a neworganization or instigate renewal or innovation within that

organization.

Source: Sharma / Chrisman (1999)


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IndependentEntrepreneurship

Entrepreneurship

CorporateEntrepreneurship

Corporate

VenturingInnovation

Strategic

Renewal

Internalcorporate venturing

Potential outcomes: integration new divisions new ventures

External

corporate venturing

Potential outcomes: Joint ventures Spin off Venture capital initiatives

Hierarchy of terminology in



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Strategic Renewal

Refers to the corporate entrepreneurial efforts that result in

significant changes to an organization's business or corporatelevel strategy or structure.

These changes alter pre- existing relationships within theorganization or between the organization and its external

environment and in most cases will involve some sort ofinnovation.

Renewal activities reside within an existing organization andare not treated as new businesses by the organization.



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Corporate Venturing refers to corporate entrepreneurial efforts that lead to the

creation of new business organizations within the corporate

organization.

They may follow from or lead to innovations that exploit newmarkets, or new product offerings, or both.

These venturing efforts may or may not lead to the formationof new organizational units that are distinct from existing

organizational units in a structural sense (e. g., a new

division).



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External vs. internal

corporate venturing

External corporate venturing

refers to corporate venturing activities that result in thecreation of semi-autonomous or autonomous organizationalentities that reside outside the existing organizationaldomain.

Internal corporate venturingrefers to the corporate venturing activities that result in thecreation of organizational entities that reside within anexisting organizational domain.



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Related terms to


Intrapreneurship Internal entrepreneurship

Corporate entrepreneur


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source: Steinle/Draeger (2002)

What is intrapreneurship

Pinchot (1985):Intrapreneuring ... as entrepreneurship inside of the corporation.

Knight (1987.An intrapreneur is a employee who: ... introduces and manages aninnovative project within the corporate environment, as if he or shewere an independent entrepreneur.

Need for achievement, risk orientation, innovativness and need for

autonomy

Innovations are enforced in extreme cases by lone fighters


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source: according to Wunderer (2000)

What is internal entrepreneurship

(internes Unternehmertum, D/CH/AT)

Active support of the strategic orientation of the organization

Through problem solving, social competent and implementing thinkingand actions (core competencies)

From all employees on all hierarchical levels and functional areas

With high own initiative and responsibility

Goal: activation of entrepreneurial potential of all employees with the

background of realizing the goals of the organization

Internal entrepreneurship as a leadership orientation


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Enforcing elements and actions for

internal entrepreneurs

Management by objectives

Own area of responsibility Targeted choice of employees

Style of leadership (participative/delegation)

Development and training of employees

Evaluation of employees

Challenging tasks Reward according to achievement

source: Wunderer (1999)


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Barriers for internal entrepreneurs

source: according to Wunderer (2000)

Internally resigned /overstrained employeesand active brakesman

Employees with lowintrapreneurialcompetencies

Intrapreneurialorientated employees

Internal entrepreneurs

Sub-entrepreneurs

Social competencies

Competencies tocreate sth.

high

low

low high

Targeted qualification and re-motivation;Re-positioning or release of employees

re-motivation, selective qualification,targeted use of employees

Cutback of de-motivational elements.Establishment of a motivationalculture. Strategy, organisation and

Personal structure


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Introducing Corporate Entrepreneurship

in a existing organization

The key steps in developing entrepreneurship inside acorporation

Develop a vision and strategy

Create a culture of innovation

Develop organizational support

Reward according to results

Communicate


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The key steps in developing

entrepreneurship

inside a corporation

1. Develop a vision

and strategy Mission statement Welcome new ideas Set up a framework that

allows prudent risk taking

2. Create a culture of

innovation Allow divergent thinking Supervisory encouragement Tolerate failure, learn from

mistakes

3. Develop organisationalsupport

Traditional R&D

New venture division Venture capital fund

4. Reward according

to results Fair and flexiblecompensation

Financial rewards Non-financial rewards

Communicate

Face to face Tell powerful stories

Brief supervisors

Meetings / events

Groupware

Intranets



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1. Developing a vision and strategy

mission

A mission statement is an enduring statement of purpose foran organisation that identifies the scope of its operations in

product and market terms, and reflects its values andpriorities

Essentially, the mission statement defines the company andprovides an answer to the question: What kind of companydo we want to be?

Not all executives like to conceive their companys futurethrough strategic-planning exercises. Jack Welch had his

business units envision how the future could hurt them -Destroy Your Business



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1. Developing a vision and strategy

welcoming new ideas

Leaders of highly innovative companies demonstrate in everydecision, action, and communication that innovation propels

profitability

The emphasis is on developing whole new business concepts,product platforms, and systematically destroying ones own.Continual innovation is their soul business.

Be a failure-tolerant leader: The fastest way to succeed,IBMs Thomas Watson once said, is to double your failurerate.



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2. Creating a culture of innovation

Allowing divergent thinking

Convergent thinkingfocuses on clear problems and provides well-known solutionsquickly. Order, simplicity, routine, clear responsibilities andpredictability are the bedrock of convergent thinking

Divergent thinkingfocuses on broadening (or diverging) the context of decisionmaking. Divergent thinking essentially requires three central

skills conversation, observation, and reflection to identifynew business ideas



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Supervisory encouragement

Top management play a central role in developing the visionand sharing it with the rest of the organisation. Leaders of

successful, continually innovative companies create a sense ofcommunity across the organisation.

Find, empower, and champion middle managerentrepreneurs - frontline supervisors who assume the careerrisk of pursuing a new idea within the corporation, and whoserve needed resources, run interference for the idea so itcan germinate, and endure the flack of institutional inertiaand resistance.



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Tolerating failures

Employees must be given permission to occasionally fail andlearn from failure. Dead ends can sometimes be very

enlightening - knowing what doesnt work can be as useful asknowing what does.

Creating a culture in which people feel comfortable withfailure also requires abandoning traditional ideas aboutpersonal competition.

3M has encouraged idea sharing for decades, from thecoffee-and-donut sessions years ago to todays more formal

tech forums and in-house trade shows.



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3. Developing organisational support

balancing partitioning and integration

Separation is no doubt the model of choice when the new andthe old differ greatly, but

The simple injunction to cordon off new business is toonarrow. Although ventures do need space to develop, strict

separation prevents them from obtaining invaluable

resources and robs their parents of the vitality they cangenerate.

A delicate blend of separation and co-operation is aprerequisite for achieving both focused performance and

faster growth.



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3. Developing organisational support

New Venture Divisions (NVDs)

NVDs are separate organisational units under the corporateumbrella, tasked with incubating mainly discontinuous

opportunities from idea conceptualisation throughcommercialisation and final value capture.

The NVD model combines traditional corporate businessdevelopment and venture capital principles.

NVDs provide business ventures with a customised level ofcorporate sponsorship and support, along with the flexibilityand autonomy of an entrepreneurial environment.



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4. Reward according to result

The importance of rewarding All efforts are not of equal value

Intrapreneurs are achievers; and achievers are not equal to other people, not evento each other

What sort of reward ? Financial rewards: bonus, incentive stock options

Avoid using money to bribe individuals who come up with new ideas

Non-financial rewards: holiday, promotion, awards and other types of personalrecognition

Promote open communication Role-based incentives (inventor, organiser, etc.)

Incentives for team work Based on event milestones

Simple and realistic



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4. Communicate Communication type and content

Focus on face-to-face communication

Other types of communication can be used: meetings, events, emails, Intranet

Tell powerful stories

Who should be targeted ? Frontline managers their support is crucial

Key elements in informal networks throughout the company

Promote open communication Develop alternative communication channels

Provide employees who do not meet normally to interact: communal areas,

informal gathering



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Your task: Form small groups of three to four persons.

Develop a program for a corporation tointroduce corporate entrepreneurship (see

examples) in the next 30 minutes

Present your results briefly in the audience


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What would you do?

Procter &Gamble

Procter & Gamble has over 300 and 10000 employees in 80 countries, worldleader in consumer products

Alan Lafley, the CEO at P&G, sees the revival of an entrepreneurial culture asessential to rekindling growth

The last big innovation Always - was launched back in 1983, the company haslost some 10% in market share in the past five years. In 2000, volumes decreasedby 2% and in 2001 grew only by 3%.

Problem says that employees are very creative, but their ideas are usually sharedwith other colleagues during the coffee break, and then we tend to forget aboutthem.

The firm has also stifled innovation and prevented new ideas from getting to

market quickly. But some new categories and products like Febreze or Swifferhave been created and put on the market.


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What would you do?

Berther Bauunternehmung Berther Bauunternehmung AG was founded in 1978. Headquarters are located in Disentis/Mustr in the

canton of Grison (Switzerland).

The company employs about 80 people and is active in the area of building, construction and specialconstruction, also in the high mountains (more than 3000 m above sea level).

Owner and managing director of the company is Heinrich Berther. His central leadership principal is: byexemplary! He is politically active as a member of the cantons parliament (legislation). Since he

originally learnt the profession of a bricklayer he is an operational expert of construction and

emphasizes on being able to understand the progress of work on the different construction sites. In

addition he shows the craftsmen how to work.

Berther Bauunternehmung AG has grown continually. This was possible with internal growth withoutinvestments in other companies. This huge growth led to new requirements with respect to

organizational and managerial capacities. Nowadays it is simply impossible for Heinrich Berther to run

his company as if it had only three bricklayers and an apprentice. Core problems of the growing

company are the following:

Strategic questions are neglected.

Managerial capacities do not grow with the company. They have to be adapted to the newsituation. The entrepreneur has to delegate. But how?

Declining motivation of employees. Without any responsibility and participation in the decisionmaking process they feel like execution orders.

The tasks in the grown company become increasingly more complex and partially more specific

The entrepreneur has no longer the knowledge needed and has to hire specialists.


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What would you do?

The cantonal centre for education and

post education of the communities

The CEC is part of the cantonal administration, but is organized in its internal structures like a SME. The CEC is operating onits own account. Structured like an SME, the centre as a player on the free market is free to analyse customer needs, to

develop education programs, to fix prices and to sell the products according to its performance contract. The CEC offers professional education programs for all levels of employees in communities as well as for politicians who

manage those communities. The most important programs are:

(1) a course of 140 lessons for functionaries in communities,

(2) an education program of 500 lessons for head of administration in communities and

(3) a post-diploma education program of 320 lessons to obtain a cantonal diploma for community managers,comparable to the concept of city managers, but which is adapted to the needs of small and middle sized

communities. In addition to the education programs, the centre offers also consulting services for communities as well as for partsof the cantonal public administration.

All products and services offered by the CEC are subject to fees and the CEC has to be completely self-financed throughthese services. The centre is situated inside the public administration of the Canton. The centre is operating on a single legalbasis, the regulation for professional education and post-education for the communities sector (Regolamento sullaformazione professionale di base e continua per il settore degli Enti locali).

The first years were highly successful due to structured courses by the CEC that are focused exactly on the community's

needs as well as a market with a great demand and small offers. The small and dynamic team has been proven as anadditional success factor.

In the last 12 months, competitors like the University of Applied Sciences of the Canton Ticino, the University of SouthernSwitzerland or private SMEs started to offer similar courses and study programs like the CEC. Therefore, the CEC is nowconfronted with the situation of a growing number of competitors in a limited market.

F b


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From bureaucracy to

internal entrepreneurs

Change as a threat Fear of failure

Questioning of new ideas

Instruction and rules

control

Inside orientation

Big-Bang innovation

Change as a chance Openness to commit faults and tolearn from them

Supporting new ideas

Sense making through diversity

Freedom and trust

Customer orientation Rewarding also small innovations

Source: Wunderer (1999)


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Wrap up

Corporate entrepreneurship can be defined as the

process whereby an individual or group ofindividuals, in association with an existingorganization, create a new organisation or instigate

renewal or innovation within that organisation Other reasons to develop corporate

entrepreneurship are among others retaining andmotivating the brightest staff


Documents

IP Jakl Corporate Entrepreneurship