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Organized by Delft Centre for Entrepreneurship
Technology Based Entrepreneurship
Bachelor course for all TU students
3UNCHAIN – Corporate Entrepreneurship
Technology Based Entrepreneurship
Courses in ‘technopreneurship’:• Introduction to entrepreneurship and writing a
business plan (4 ec)• Essentials of technology-based business (4 ec)• Finance for entrepreneurs (3 ec)• Product Development and Innovation (3 ec)• Business Marketing for Engineers (3 ec)• Managing Start-ups (3 ec)• Integrating: Case study in technopreneurship (10
ec)
• Total program of 30 EC
4UNCHAIN – Corporate Entrepreneurship
Technology Based Entrepreneurship
• Block 1: Kick-off and intensive two weeks of introduction course • To get familiar with each other• To work in diverse groups
• Block 1: 5 weeks of 3 individual courses • entrepreneurship essentials/ finance/ product development
• Block 2: 7 weeks of 2 individual courses• Managing start-ups/ business marketing for engineers
• Block 1 & 2: Case study in technopreneurship• Integrates the individual courses in a large assignment• 10 teams of 5 students, student choose their company
• Criteria: 10-75 fte, 5+ years old, technology oriented• First block: understanding the company: technology and markets• After first block students present innovation to all teachers• Second block: implementing innovation in the company and market• After second block students present their innovation to company and external
jury
5UNCHAIN – Corporate Entrepreneurship
Management of Technology
• Master level program at Faculty of Technoloy, Policy and Management
• Technology Management course for engineers
• Open to technical students, 50% Dutch – 50% Foreign
• Focus is on private companies and has a company orientation
• How to remain competitive based on technological innovations
6UNCHAIN – Corporate Entrepreneurship
Management of Technology curriculumFirst year 2010-2011
1st semester 30 ects 2nd semester 30 ects
First course period Second course periodThird course period
Fourth course period
MoT1420
Economic Foundations
(6 ects)
MoT1512
HRM en
Leaderschip
(4 ects)
MoT1001
Integration
Moment I
(4 ects)
MoT9511
Advanced Project
Management
(5 ects)
MoT2420
Innovation
Management
(6 ects)
MoT1002
Integration
Moment II
(4 ects)
MoT 1410
Technology Dynamics
(4 ects)
MoT
Marketing
(4 ects)
MoT1431
Technology and
Strategy
(6 ects)
MoT
Corporate Finance and
Accounting
(4 ects)
MoT2310
Qantitative
Research
Methods
(4 ects)
MoT1440
Philosophy of
Science
(3 ects)
MoT1450
Decision Making
(6 ects)
Managing
Technology
The Corporation Research Methodology Integration Moment
7UNCHAIN – Corporate Entrepreneurship
1st semester 30 ects 2nd semester 30 ects
First course period Second course period Third course period Fourth course period
MoT1601
System Modelling
(5 ects)
MoT2320
Qualitative
Research
Methods
(4 ects)
MoT2001
Preparation for
the Master
Thesis
(4 ects)
MoT2910
MSc Thesis Project
(30 ects)MoT2410
Corporate Social
Responsibility
(3 ects)
Specialisation
(14 ects)
Managing Technology The Corporation Research Methodology Integration Moment
Management of Technology curriculumSecond year 2011-2012
8UNCHAIN – Corporate Entrepreneurship
Specialization Entrepreneurship•The aim is to gain in-depth knowledge and acquire The aim is to gain in-depth knowledge and acquire
practical skills with respect to entrepreneurship. practical skills with respect to entrepreneurship.
•The first part of the specialization is a general part The first part of the specialization is a general part regarding the identification of entrepreneurial regarding the identification of entrepreneurial opportunities and how technology can be used to opportunities and how technology can be used to create value. create value.
• In the second part, students can choose either to In the second part, students can choose either to follow the track on writing a business plan or follow the track on writing a business plan or corporate entrepreneurship. corporate entrepreneurship.
9UNCHAIN – Corporate Entrepreneurship
MOT9555:Opportunity Framing(2 ECTS)
WM0516:Turning
Technology into
Business(6 ECTS)
WM0506: Writing a Business
Plan (6 ECTS)
MOT9556:Corporate
Entrepreneurship(6 ECTS)
Skills(1 ECTS)
MOT
MSc Thesis Project
-Starting a venture-New business development-Corporate Entrepreneurship
Specialization Entrepreneurship
10UNCHAIN – Corporate Entrepreneurship
Specialization Entrepreneurship•Opportunity Framing explores the fundamental principles Opportunity Framing explores the fundamental principles
of identifying and recognizing entrepreneurial of identifying and recognizing entrepreneurial opportunities opportunities
•Turning Technology into Business aims at developing a Turning Technology into Business aims at developing a plan for the commercializing a patentable scientific findingplan for the commercializing a patentable scientific finding
•Writing a Business Plan is about the hands-on skills that Writing a Business Plan is about the hands-on skills that entrepreneurs need to craft a sophisticated business planentrepreneurs need to craft a sophisticated business plan
•Corporate entrepreneurship aims at understanding how to Corporate entrepreneurship aims at understanding how to foster an entrepreneurial culture, initiate strategic renewal foster an entrepreneurial culture, initiate strategic renewal in large established firms and manage corporate venture in large established firms and manage corporate venture programsprograms
12UNCHAIN – Corporate Entrepreneurship
Contents
• The need for new business and paths to grow
• Strategic renewal
• Organising internal corporate venturing
• Organising external corporate venturing
• Discussing the Xerox Technology Ventures case
13UNCHAIN – Corporate Entrepreneurship
The need for new business and paths to grow
Organization Environment
Sustainable competitive advantage
Role of technology innovation
14UNCHAIN – Corporate Entrepreneurship
Discontinuous technological innovation and firm alignment with the environment
1) Firm is aligned with environment ==> Dominant logic prevails
2) Change in environment
3) build-up of stress between changing demands of environment and inert company==> need to unlearn dom. logic
4) Stress is too large, firm renews
5) Firm is aligned with environment
Environment Firm
The need for new business and paths to grow
15UNCHAIN – Corporate Entrepreneurship
Why large firms have difficulty to take up more radical innovations
• Distorted perceptions• Myopia, Arrogance and denial, Grooved thinking
• Dulled motivation• Direct cost of change, Cross subsidy comforts, Installed base, cannibalization costs
• Failed creative response• Reactive mind-set, Inadequate strategic vision
• Political deadlocks• Departmental politics, Incommensurable beliefs, Vested values
• Action blockades and disconnects• Leadership inaction, Embedded routines, Collective action problems, Capability gaps
• Mostly they react by• Downsizing, outsourcing support activities, divesting non-core businesses
The need for new business and paths to grow
16UNCHAIN – Corporate Entrepreneurship
Disruptive technologies
• Initially unattractive
• Different package of performance attributes
• Inferior performance for mainstream market
• New markets or new applications
• Improving over time
• Performance improvement required by mainstream market
• Invasion of mainstream market
The need for new business and paths to grow
17UNCHAIN – Corporate Entrepreneurship
Disruptive technologies are often financially unattractive• small market, difficult to project the long term• is often seen as not meaningful contribution to corporate growth• not worth to invest in
• disruptive: unreliable estimates of the market• traditional: backing projects of which the market is
assured, fulfilling the requirements of profitable customers and reducing risk.
Disruptive technologies need a different management approach.
Source: Bower & Christensen (1995) Disruptive Technologies: Catching the Wave.
The need for new business and paths to grow
18UNCHAIN – Corporate Entrepreneurship
Signaling Disruptive
Innovations
• Technologies at the horizon,
signal disagreements
between marketing, financial
and technology managers.
• Pay attention to lead
customers not the
mainstream customer
• Keep the new activity loosely
coupled from mainstream
activities
• Integration leads to problems
Crossing the chasmGadgets-likes vs pragmatists require a different approach
The need for new business and paths to grow
19UNCHAIN – Corporate Entrepreneurship
Corporate venturing
• Managing new radical innovations using start-up ventures
23UNCHAIN – Corporate Entrepreneurship
Vehicles to grow
Organic growth?
Acquisitions? Alliances?
Internal growth
External growth
If unrelated than it requires a different management approach:
Field of corporate entrepreneurship
24UNCHAIN – Corporate Entrepreneurship
Inverted u-shape relation between scope and performance
Company performance
Company scope
25UNCHAIN – Corporate Entrepreneurship
Bounded rationality
Herbert Simon (1955)
• Individuals have limits:• In formulating the problem• In solving complex models• In processing (receiving, storing, retrieving, transforming)
information
26UNCHAIN – Corporate Entrepreneurship
Bounded Rationality• Agents with bounded rationality look for satisfying answers, which means that
agents deliberate only long enough to come up with good enough course of actions.
• It will be difficult for managers to focus on exploiting current business and exploit new emerging business
• Mechanisms to solve the exploitation exploration dilemma
• Alternating between different roganizational designs (i.e. organic and mechanistic structures) (Hedberg et al., 1976)
• Creating loosely coupled organizations (Levinthal, 1997)
• Separating distinct units (Christensen, 1998)
27UNCHAIN – Corporate Entrepreneurship
Corporate entrepreneurship
Strategic Renewal Innovation Corporate Venturing
Internal Corporate Venturing
External Corporate Venturing
•Struct. Autonomy•Degree of relatedness•Extent of innovation•Sponsorship
•Semi-autonomous•Less related•Pioneering innov.•Outside the corp.
New organizational forms: Joint ventures & Spin-offs
New Mindset Corporate ventures
28UNCHAIN – Corporate Entrepreneurship
Corporate entrepreneurship
• Strategic renewal• Significant changes in strategy or structure (Sharma and Chrisman, 1999) • Implementation of a new strategy (Covin and Miles, 1999)
• Altering the firm’s resource base (Stopford and Baden-Fuller, 1994)
• Changes in organizational structure (Guth and Ginsberg, 1990)
• Corporate venturing• Creation of new business organizations• Focus on new innovations• External corporate venturing
• Semi-autonomous entities outside the existing organizational domain
• Internal corporate venturing• New organizational entities within the organizational domain.
29UNCHAIN – Corporate Entrepreneurship
Leica
2002 2003 2004 2005 2008
Sales 144 mln 119 mln 98 mln +15.7% 155mln
Operating result
2.8 mln 3.0 mln -15.5 mln 0.6 mln 2.0 mln
Net income 1.5 mln -3.4 mln
Cash flow 13.3 mln 5.5 mln
30UNCHAIN – Corporate Entrepreneurship
LEICA
• Three Independent Global Companies Share the Leica Brand
Leica Camera AG: cameras, lenses, binoculars, projectors
Leica Geosystems AG: capture, model, and visualize spatial reality and to support bi-directional data flow
Leica Microsystems AG: vision, measurement, lithography and analysis of micro structures.
31UNCHAIN – Corporate Entrepreneurship
Leica: how to renew?
1. Focus on analogue photography2. Focus on digital photography3. Focus on producing parts, like lenses4. Stop, milk, and sell the camera business5. Something else??
32UNCHAIN – Corporate Entrepreneurship
Leica today
• Focus on Lenses • Collaboration between Leica and Panasonic
• Nurtures other global companies and Allows further growth
• Acquisition of Sinar in 2006
33UNCHAIN – Corporate Entrepreneurship
Organization Designs for Corporate Entrepreneurship
Special business
unit
Independent
business unit
Spin off
New business
department
New venture
division
Contracting
Direct integration Micro New
Ventures
department
Nurturing &
contracting
Strategic importance
Operational relatedness
Source: Burgelman, 1984
Unrelated
Partly related
Strongly related
Very important Not importantUncertain
34UNCHAIN – Corporate Entrepreneurship
Assessing Operational Relatedness
• What are the key capabilities to make this project successful?• Where, how, and when are we going to get them if we do not
have them yet, and at what cost?• Who else might be able to do this, perhaps better?• How will these new capabilities affect the capacities currently
employed in our mainstream business?Source: Burgelman, 1984
• Advantages• Sharing and leveraging resources
and capabilities• Economies of scope, scale, and
experience effects
• Disadvantages• Intrusion• Cannibalization• Less potential for radical
innovation
Issues:• More related and it can be assessed better upfront• More unrelated => less economies of scale• More unrelated => What is the benchmark? (BU/ division/ firm)
35UNCHAIN – Corporate Entrepreneurship
Assessing Strategic Importance
• How does this initiative maintain our capacity to move in areas where major current or potential competitors might move?
• How does this help us to find out where not to go?• How does this help us create new defensible niches?• To what extent could it put the firm at risk?Source: Burgelman, 1984
• Advantages• Direct top management support• Urgency of the venture is visible
• Disadvantages• Needs control• Battle for scarce resources• Organizational change is needed
Issues:• Need to have a clear strategic direction
• Difficult to assess upfront
37UNCHAIN – Corporate Entrepreneurship
Organizing for ICV: Process model
Definition ImpetusStrategic
context
Structural
context
Corp mgt
NVD mgt
Venture
mgr
Source: Burgelman, 1983
Techn and need linking
Strategic forcing
Strategic building
Org championing
Delineating
Rationalizing StructuringStructuring
Product
championing
SeSelectingecting
CoachingCoaching NegotiatingNegotiating
QuestioningQuestioningGatekeepingGatekeeping
AuthorizingAuthorizingMonitoringMonitoring
38UNCHAIN – Corporate Entrepreneurship
Issues in managing ICV
• Domain and synergy: potential for overlapSolution: a master strategy; common interests and top management
involvement
• Rewards: • Size of business is important• Successful venturing leads to neglect of quality• Who is going to run the business when it is successful
Solution: reward system should reflect the special nature of the NVD
• Lack of corporate diversification strategy• How does if affect the corporate image
Solution: Create a strategy delineated in new business fields
39UNCHAIN – Corporate Entrepreneurship
How to control entrepreneurial behavior in ICV
Ground rule 1: give up control to gain control• Empowerment
• Accountability
• Goal congruence
Ground rule 2: create organizational slack• Creates space to try new things
• Must not undermine operational needs
• Staged investments
Source: Morris and Kuratko, 2002
40UNCHAIN – Corporate Entrepreneurship
Exxon’s Two-fold Corporate Venturing Program
External financial investment alongside private VC
18 ventures
• Air pollution control
• Health care
• Advanced materials 2
• Energy conversion and storage 3
• Information systems 11
Internal ventures by special internal unit: Exxon Enterprises
19 ventures
Advanced materials, components, systems 7
Energy conversion and storage 5
Information systems and system components 7
41UNCHAIN – Corporate Entrepreneurship
The Failure of Exxon Enterprises
Internal ventures by special unit Exxon Enterprises
18 projects in ICV:successful(IRR 51 %)
none break even, all terminated and special ICV unit dissolved
What had happened?Source: Chesbrough, 2000
42UNCHAIN – Corporate Entrepreneurship
From traditional to current
Not all Internal Venturing activities are successful
More open approach to venturing is important
Emerging business requires a fundamental shift of generating and commercializing new ideas
Innovation changed from a closed approach to a open approach
43UNCHAIN – Corporate Entrepreneurship
ICV and Closed Innovation• Successful innovation requires control
• Attract the best and brightest scientists
• Develop and manufacture yourself
• Market and distribute yourself
• Take profits and reinvest yourself (circle of innovation)
• Control your own IP and protect it from others
• High R&D investments
44UNCHAIN – Corporate Entrepreneurship
Closed Innovation in Industrial R&D
Research ProjectsResearch Projects
Development ProjectsDevelopment Projects
Company BoundaryCompany Boundary
Current MarketCurrent Market
45UNCHAIN – Corporate Entrepreneurship
Open innovation
• Problem with closed innovation:• Not all the smart people work for us
• Commercialization of own ideas as well as from other firms
• Bring inhouse ideas outside the current business
• No lock up of IP but use in licensing, joint ventures and corporate
ventures
• Porous boundaries of the firm
46UNCHAIN – Corporate Entrepreneurship
Open Innovation in Industrial R&D
Current MarketCurrent Market
New MarketNew Market
47UNCHAIN – Corporate Entrepreneurship
fromfrom….….
Opening up the R&D Value Chain
100%100%
R&DR&D
Spin-out oftechnology, e.g.
Lasers
to….to….
Spin-in of ventures, e.g.
Systemonic
R&DR&D
48UNCHAIN – Corporate Entrepreneurship
Internal and External Venturing
Internal Corporate Venturing:
• Corporate venturing activities that
result in the creation of
organizational entities that reside
within an organizational domain.
External Corporate Venturing:
• Corporate venturing activities that
result in the creation of semi-
autonomous or autonomous
organizational entities that reside
outside the existing organizational
domain.
Source: Sharma & Chrisman, 1999
49UNCHAIN – Corporate Entrepreneurship
External Corporate Venture Process
• How to control ventures when external corporate venturing?
• If• Internal control is too tight• And you know little about managing start-ups?
50UNCHAIN – Corporate Entrepreneurship
External or Venture Capital
“Money provided by professionals who invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors.”
Source: National Venture Capital Association, 2001
51UNCHAIN – Corporate Entrepreneurship
Value-added Support by VCs I
1. Serving as a sounding board for the entrepreneur team
2. Helping the firms obtain alternative further sources of equity funding
3. Interfacing with the investor group
4. Monitoring financial performance
5. Helping their portfolio companies attract alternative sources of debt financing
Source: MacMillan et al., 1988
52UNCHAIN – Corporate Entrepreneurship
Value-added Support by VCs II
1. Help with additional financing
2. Strategic planning
3. Management recruitment
4. Operational planning
5. Introductions to potential customers and suppliers
6. Resolving compensation/ rewarding issues
Source: Gorman and Sahlman, 1989
53UNCHAIN – Corporate Entrepreneurship
Comparison of CVC and VC Organizational Attributes
Corporate Venture Capital (CVC)
Venture Capital (VC)
Incentive intensity Weaker Strong
Financial discipline on downside
Weaker Strong
Monitoring Internal External
Discovering alternative business models
Constrained Unconstrained
Source: Chesbrough, 2000
54UNCHAIN – Corporate Entrepreneurship
Comparison of CVC and VC Potential Advantages
Corporate Venture Capital (CVC)
Independent Venture Capital (IVC)
Time horizon Indefinite Tied to fund length
Scale of capital invested
Potentially large Smaller
Coordination of complementarities
Extensive Limited
Retention of group learning
Strong Weak
Source: Chesbrough, 2000
55UNCHAIN – Corporate Entrepreneurship
Comparison of CVC and IVC Advantages and Objectives
Corporate Venture Capital (CVC)
Independent Venture Capital (IVC)
Complementary assets / synergy
Yes No
Cannibalization conflict potential
Yes No
Objectives Strategic and financial
Financial
Source: Chesbrough, 2000
56UNCHAIN – Corporate Entrepreneurship
Best of Both Worlds
• Internal corporate venture• Time horizon
• Scale of capital invested
• Coordination of
complementarities
• Retention of group learning
• Venture capital
• Incentive intensity
• Financial discipline on
downside
• Monitoring
• Discovering alternative
business models
Source: Chesbrough, 2000
57UNCHAIN – Corporate Entrepreneurship
Best of both worlds
• Unilever and Langholm
• Shell, Kenda capital and Collar Capital
58UNCHAIN – Corporate Entrepreneurship
Xerox Tech Ventures1. PARC was set up to invent the technology of the future. Most observers would agree
that it succeed in this endeavor. Many of the most important developments in the
field of computers were profoundly influenced by the work done at PARC. However,
Xerox, which funded the research, was unable to take advantages of the commercial
potential of most these innovations. What was the reason for Xerox’s failure to
capitalize on its innovations?
2. Would you argue, despite the problems, that the XTV partnership does make sense?
Which terms and conditions seem the most interesting or problematic?
3. Do you consider the XTV an effective means for limiting the departures of existing
employees, if not what else would you propose?
4. In being spun-off as a subsidiary of Xerox, PARC is attempting to break away from a
history of missed chances. How would you think that the incorporation of PARC as a
Xerox subsidiary will allow it to better commercialize its innovations. Would you
suggest other organizations to adopt this model as well or would you propose
modifications?