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‘Corporate Entrepreneurship’

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Corporate Entrepreneurship

• Introduction – (linking with other concepts of

entrepreneurship)

• Venturing – (company activities)

• Intrapreneurs – (individuals, drivers and barriers)

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INTRODUCTION

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Business Life Cycle and Entrepreneurship

Inception

Survival

Growth

Consolidation Maturity

Entrepreneurial ?

New Entrepreneurialstage needed ?

Sales

Time

EntrepreneurialApproach ?

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Businesses are faced with...

• Changing dynamic markets

• Globalisation

• Shorter product life cycles

• High rates of technological change

• Pressures to reduce costs

• Changes in business organisation (int. & ext.)

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A Possible Response

• Some large firms responded to the changing environment by addressing their necessary response to working with a dynamic environment involving attitudes to:

– risk

– innovation

– flexible, rapid response

– changes in management and organisation

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Innovation

Creativity and Innovation are NOT synonymous.

Innovation = Creativity + Invention + Exploitation

Source: Rosenfeld and Serco. 1990

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Role of Innovation

“An enterprise that does not daily innovate inevitably ages and declines … even in a successful business the disease of bureaucracy and complacency is ever present. (Drucker).

“Firms create competitive advantage by perceiving or discovering new and better ways to compete in an industry and bringing them to market, which is ultimately an act of innovation” Michael Porter. The Competitive Advantage of Nations.

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Schumpeterian Innovation

• Schumpeter (1934). … By recombining the factors of production to create something new the entrepreneur creates a demand…

• Innovation could take different forms:– Creation of a new or alternative product

– A new method of production

– Opening a new market

– Capture of a new source of supply

– A new organisation

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• Birkinshaw (2003) identifies four common themes in corporate entrepreneurship.– Corporate Venturing

– Intrapreneuring

– Bringing the Market Inside

– Entrepreneurial Transformation

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Hierarchy of terminology in Corporate Entrepreneurship

Entrepreneurship

IndependentEntrepreneurship

CorporateEntrepreneurship

After: Sharma and Chrisman (1999)

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Hierarchy of terminology in Corporate Entrepreneurship

Entrepreneurship

IndependentEntrepreneurship

CorporateEntrepreneurship

Corp. Venturing Innovation StrategicRenewal

Int.. Corp. Venturing Ext.. Corp. Venturing

After: Sharma and Chrisman (1999)

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Take care!

• (Corporate Entrepreneurship / Intrapreneurship) mean different things to different researchers

• Examples of their use:• The development of an ‘overall entrepreneurial climate

• Intra-corporate venturing

• Development initiatives by employees (often without asking permission)

• Rationalisation of the business– See Carter & Jones-Evans (2000) for further discussion

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Business Level

VENTURING

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Venturing

Venture: Chance, luck, hazard, an undertaking whose issue is uncertain or dangerous; an attempt - Chambers Dictionary.

Key Elements:* Risk / uncertainty* Innovation / creativity* requiring striving / reward seeking behaviour.

Corporate Venturing: The creation of new businesses* Making smaller, high growth businesses out of large, mature ones* Utilising Internal organic growth, acquisition, joint ventures or alliances.

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Why venture?

• Growth

• Improved financial returns (e.g. ROI)

• Image (Corporate renewal)

• Technology pressure

• Diversification

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Reasons for venturing

Reasons for venturing US Co. Japanese Co.

Maturity of the base business 70 57

To meet strategic goals 76 73

To provide challenges to managers 46 15

To develop future managers 30 17

To survive 35 28

To provide employment 3 24

Source: Zenas Block & Ian MacMillan ‘Corporate Venturing’, Harvard Business Press 1993

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Policy Ideas - Venturing

MergerExt. Co.

JointVenture

Contractors

Int.venture

Spin out

Acquisition

Suppliers

Buy stake

EncourageEntrepreneurship

ExternalEnvironment

Customers

Takestake

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Intrapreneurs

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Intrapreneur

• Used by Norman Macrae in an article in the Economist. (Christmas Ed. 1976). Applied term to managers, professionals and artisans who set up small businesses within old and existing organisations.

• Some texts suggest that Pinchot was the person who first used the term

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Intrapreneur

• Developed by Pinchot (1986)– “ An intrapreneur is an entrepreneur within an

already established organisation”. Used to describe entrepreneurism within a large organisation, rather than establishment of small businesses within a large organisation.

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• Gibb (1988) An Intrapreneur is an employee of a large organisation who has the entrepreneurial qualities of drive, creativity, vision and ambition.

• Gibb goes on to state that these people differ from entrepreneurs as they wish to retain the security of the large organisation.

• A number of authors define Intrapreneur and related terms. See Sharma and Chrisman (1999).

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Intrapreneurs

May have these characteristics in common with independent entrepreneurs

Ability to work amidst confusionAbility to anticipate changeAbility to make intuitive leapsHigh energy levelsCreativity in problem solvingAction orientation

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….. But want ...

BUT may differ ….

Want less restrictive but supportive environmentWant recognitionWant their ideas to be a vehicle for advancementWant the security (pay cheque, pension etc)

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Intrapreneurs and entrepreneurs share:.

• Entrepreneurial characteristics• Vision & Flexibility• Action Orientated• Dedicated• Persistent / overcome failure• Self determined goal setters

• Source: Pinchot 1986.

• Intrapreneuring. Harper & Row.

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Intrapreneurs need in addition

• Source: Pinchot 1986.

• Intrapreneuring. Harper & Row.

• An ability in a Multi-disciplinary role• To understand the environment• To encourage open discussion• Be able to create management options• To build a coalition of supporters.

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Corporate Entrepreneurs as ‘Change Masters’

• ‘Change Master’ A term used by Rosabeth Moss Kanter

• Three Stages of the journey: – Formulate and Sell,

– Power to advance,

– Maintain Momentum.

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Intrapreneurs as Change Masters

• A term used by Rosabeth Moss Kanter• Three Stages of the journey: Formulate and Sell,

Power to advance, maintain Momentum.• Skills: Personal and Interpersonal• Step outside of conventional thinking• Often ‘generalists’ with ‘kaleidoscopic thinking,

vision communicators, persistent individuals, coalition & team builders, willing to share credit

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Rosebeth Moss Kanter’s View

• Corporate entrepreneurs are people who envision something new and make it work. Being a corporate entrepreneur, what I call a ‘change master’ is much more challenging and fun than being a non-entrepreneur. It requires more of a person, but it gives back more self-satisfaction.– Rosabeth Moss Kanter (1988). Handbook for Creative and Innovative

Managers. McGraw Hill.

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Intrapreneurial Behaviour

• May be seen as good news– High achievement motivation– High task commitment

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Intrapreneurial Behaviour

• May be seen as mild irritants– High levels of informal networking– Informal recruitment (This could be a major

problem)

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Intrapreneurial Behaviour

• May be seen as serious problems– Independence– Non-acceptance of rules and boundaries– Non-compliance with planning and control

systems– Conflict with authority

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Developing Intrapreneurship

EncourageIndividualIntrapreneurs

Encourage GeneralEntrepreneurialCulture

EncourageEntrepreneurialEnterprise

FRAMEWORK CONDITIONS

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Barriers to an Intrapreneurial Culture

• Barriers Include:– Senior management feel alienated– hierarchical nature of the organisation– Corporate culture– Short term performance requirements– Planning procedures

• Source Gibb 1990

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Barriers to an Intrapreneurial Culture

• Barriers (continued) Include:

– Lack of ownership of the problem– Mobility of managers– lack of flexibility in the organisation– methods of compensation

• Source Gibb 1990

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An ‘Intrapreneurial’ culture needs:

• Sponsors• Continuous involvement• Autonomy of the intrepreneurial team• Ability to cross boundaries

• See Pinchot (1986)

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An ‘Intrapreneurial’ culture needs:

• (needs continued)

• A tolerance of risk and failures• Long term objectives• Making resources available• Introducing suitable compensation schemes.

• See Pinchot (1986)

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Drucker’s Entrepreneurial Practices

• Druker suggests some key management practices are vital in the development of ‘entrepreneurship’ in an existing business.– Management focuses on opportunity

– Generation and maintenance of entrepreneurial spirit

– Top-down and cross functional interaction• Source Drucker, P. Innovation & Entrepreneurship. Pan 1986

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The final word …..

“Intrapreneurs cannot exist if their passionate commitment is ignored and their visions given to people who don’t understand them. Without intrapreneurs, innovation flounders

Source Pinchot (1986)