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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
Source: Thierry Volery
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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
Source: Thierry Volery
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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!
Source: Thierry Volery
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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
corporate entrepreneurship
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
corporate entrepreneurship
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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Source: Sharma / Chrisman (1999)
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
corporate entrepreneurship
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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.
Source: Sharma / Chrisman (1999)
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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).
Source: Sharma / Chrisman (1999)
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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.
Source: Sharma / Chrisman (1999)
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Related terms to
corporate entrepreneurship
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
Source: Thierry Volery
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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
Source: Thierry Volery
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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.
Source: Thierry Volery
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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
Source: Thierry Volery
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2. Creating a culture of innovation
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.
Source: Thierry Volery
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2. Creating a culture of innovation
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.
Source: Thierry Volery
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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.
Source: Thierry Volery
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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.
Source: Thierry Volery
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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
Source: Thierry Volery
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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
Source: Thierry Volery
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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
Source: Thierry Volery