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‘‘Corporate Corporate Entrepreneurship’Entrepreneurship’

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INTRODUCTIONINTRODUCTION

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Business Life Cycle and EntrepreneurshipBusiness Life Cycle and Entrepreneurship

Inception

Survival

Growth

Consolidation Maturity

Entrepreneurial ?

New Entrepreneurialstage needed ?

Sales

Time

EntrepreneurialApproach ?

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Businesses are faced with...Businesses are faced with...

Changing dynamic marketsChanging dynamic markets GlobalisationGlobalisation Shorter product life cyclesShorter product life cycles High rates of technological changeHigh rates of technological change Pressures to reduce costsPressures to reduce costs Changes in business organisation Changes in business organisation

(int. & ext.)(int. & ext.)

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A Possible ResponseA Possible Response

Some large firms responded to the Some large firms responded to the changing environment by addressing their changing environment by addressing their necessary response to working with a necessary response to working with a dynamic environment involving attitudes to:dynamic environment involving attitudes to: riskrisk innovationinnovation flexible, rapid responseflexible, rapid response changes in management and changes in management and

organisationorganisation

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InnovationInnovation

Creativity and Innovation are NOT synonymous.

Innovation = Creativity + Invention + Exploitation

Source: Rosenfeld and Serco. 1990

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Role of InnovationRole 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 InnovationSchumpeterian Innovation

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

Innovation could take different forms:Innovation could take different forms: Creation of a new or alternative productCreation of a new or alternative product A new method of productionA new method of production Opening a new marketOpening a new market Capture of a new source of supplyCapture of a new source of supply A new organisationA new organisation

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DimensionsDimensions

Birkinshaw (2003) identifies four common Birkinshaw (2003) identifies four common themes in corporate entrepreneurship.themes in corporate entrepreneurship. Corporate VenturingCorporate Venturing IntrapreneuringIntrapreneuring Bringing the Market InsideBringing the Market Inside Entrepreneurial TransformationEntrepreneurial Transformation

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Hierarchy of terminology in Corporate Hierarchy of terminology in Corporate EntrepreneurshipEntrepreneurship

Entrepreneurship

IndependentEntrepreneurship

CorporateEntrepreneurship

After: Sharma and Chrisman (1999)

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Hierarchy of terminology in Corporate Hierarchy of terminology in Corporate EntrepreneurshipEntrepreneurship

Entrepreneurship

IndependentEntrepreneurship

CorporateEntrepreneurship

Corp. Venturing Innovation StrategicRenewal

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

After: Sharma and Chrisman (1999)

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Why venture?Why venture?

GrowthGrowth Improved financial returns (e.g. ROI)Improved financial returns (e.g. ROI) Image (Corporate renewal)Image (Corporate renewal) Technology pressureTechnology pressure DiversificationDiversification

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Reasons for venturingReasons 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 - VenturingPolicy Ideas - Venturing

MergerExt. Co.

JointVenture

Contractors

Int.venture

Spin out

Acquisition

Suppliers

Buy stake

EncourageEntrepreneurship

ExternalEnvironment

Customers

Takestake

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IntrapreneursIntrapreneurs

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IntrapreneurIntrapreneur

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

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

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IntrapreneurIntrapreneur

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

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

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

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

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

IntrapreneurIntrapreneur

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IntrapreneursIntrapreneurs

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 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:Intrapreneurs and entrepreneurs share:..

Entrepreneurial Entrepreneurial characteristicscharacteristics

Vision & FlexibilityVision & Flexibility Action OrientatedAction Orientated DedicatedDedicated Persistent / overcome failurePersistent / overcome failure Self determined goal settersSelf determined goal setters

Source: Pinchot 1986.Source: Pinchot 1986. Intrapreneuring. Harper & Row.Intrapreneuring. Harper & Row.

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IntrapreneursIntrapreneurs need in addition need in addition

Source: Pinchot 1986.Source: Pinchot 1986. Intrapreneuring. Harper & Intrapreneuring. Harper &

Row.Row.

An ability in a Multi-disciplinary roleAn ability in a Multi-disciplinary role To understand the environmentTo understand the environment To encourage open discussionTo encourage open discussion Be able to create management Be able to create management

optionsoptions To build a coalition of supporters.To build a coalition of supporters.

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Corporate Entrepreneurs as ‘Change Masters’Corporate Entrepreneurs as ‘Change Masters’

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

Three Stages of the journey: Three Stages of the journey: Formulate and Sell, Formulate and Sell, Power to advance, Power to advance, Maintain Momentum.Maintain Momentum.

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Intrapreneurs as Change MastersIntrapreneurs as Change Masters

A term used by Rosabeth Moss KanterA term used by Rosabeth Moss Kanter Three Stages of the journey: Formulate Three Stages of the journey: Formulate

and Sell, Power to advance, maintain and Sell, Power to advance, maintain Momentum.Momentum.

Skills: Personal and InterpersonalSkills: Personal and Interpersonal Step outside of conventional thinkingStep outside of conventional thinking Often ‘generalists’ with ‘kaleidoscopic Often ‘generalists’ with ‘kaleidoscopic

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

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Rosebeth Moss Kanter’s ViewRosebeth Moss Kanter’s View

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

Innovative Managers. McGraw Hill.Innovative Managers. McGraw Hill.

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Intrapreneurial BehaviourIntrapreneurial Behaviour

May be seen as good newsMay be seen as good news High achievement motivationHigh achievement motivation High task commitmentHigh task commitment

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Intrapreneurial BehaviourIntrapreneurial Behaviour

May be seen as mild irritantsMay be seen as mild irritants High levels of informal networkingHigh levels of informal networking Informal recruitment (This could be a Informal recruitment (This could be a

major problem)major problem)

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Intrapreneurial BehaviourIntrapreneurial Behaviour

May be seen as serious problemsMay be seen as serious problems IndependenceIndependence Non-acceptance of rules and boundariesNon-acceptance of rules and boundaries Non-compliance with planning and Non-compliance with planning and

control systemscontrol systems Conflict with authorityConflict with authority

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Developing IntrapreneurshipDeveloping Intrapreneurship

EncourageIndividualIntrapreneurs

Encourage GeneralEntrepreneurialCulture

EncourageEntrepreneurialEnterprise

FRAMEWORK CONDITIONS

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Barriers to an Intrapreneurial CultureBarriers to an Intrapreneurial Culture

Barriers Include:Barriers Include: Senior management feel alienatedSenior management feel alienated hierarchical nature of the organisationhierarchical nature of the organisation Corporate cultureCorporate culture Short term performance requirementsShort term performance requirements Planning proceduresPlanning procedures

Source Gibb 1990 Source Gibb 1990

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Barriers to an Intrapreneurial CultureBarriers to an Intrapreneurial Culture

Barriers (continued) Include:Barriers (continued) Include:

Lack of ownership of the problemLack of ownership of the problem Mobility of managersMobility of managers lack of flexibility in the organisationlack of flexibility in the organisation methods of compensationmethods of compensation

Source Gibb 1990 Source Gibb 1990

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An ‘Intrapreneurial’ culture needs:An ‘Intrapreneurial’ culture needs:

SponsorsSponsors Continuous involvementContinuous involvement Autonomy of the intrepreneurial teamAutonomy of the intrepreneurial team Ability to cross boundariesAbility to cross boundaries

See Pinchot (1986)See Pinchot (1986)

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An ‘Intrapreneurial’ culture needs:An ‘Intrapreneurial’ culture needs:

(needs continued)(needs continued)

A tolerance of risk and failuresA tolerance of risk and failures Long term objectivesLong term objectives Making resources availableMaking resources available Introducing suitable compensation Introducing suitable compensation

schemes.schemes. See Pinchot (1986)See Pinchot (1986)

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Drucker’s Entrepreneurial PracticesDrucker’s Entrepreneurial Practices

Druker suggests some key management Druker suggests some key management practices are vital in the development of practices are vital in the development of ‘entrepreneurship’ in an existing business.‘entrepreneurship’ in an existing business. Management focuses on opportunityManagement focuses on opportunity Generation and maintenance of entrepreneurial spiritGeneration and maintenance of entrepreneurial spirit Top-down and cross functional interactionTop-down and cross functional interaction

Source Drucker, P. Innovation & Entrepreneurship. Pan 1986Source Drucker, P. Innovation & Entrepreneurship. Pan 1986

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The final word …..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)