corporate entrepreneurship professor alexander settles

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Corporate Entrepreneurship Professor Alexander Settles

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Page 1: Corporate Entrepreneurship Professor Alexander Settles

Corporate Entrepreneurship

Professor Alexander Settles

Page 2: Corporate Entrepreneurship Professor Alexander Settles

The Entrepreneurial Mindset The Entrepreneurial Mindset in Organizationsin Organizations

• Factors in the emergence of the entrepreneurial Factors in the emergence of the entrepreneurial economy:economy:

– The rapid evolution of knowledge and technology The rapid evolution of knowledge and technology promoted high-tech entrepreneurial start-ups.promoted high-tech entrepreneurial start-ups.

– Demographic trends adding fuel to the proliferation of Demographic trends adding fuel to the proliferation of newly developing ventures.newly developing ventures.

– The venture capital market became an effective The venture capital market became an effective funding mechanism.funding mechanism.

– American industry began to learn how to manage American industry began to learn how to manage entrepreneurship.entrepreneurship.

Page 3: Corporate Entrepreneurship Professor Alexander Settles

Reengineering Corporate Reengineering Corporate ThinkingThinking

• Steps that will help innovative people to Steps that will help innovative people to develop an entrepreneurial mindset:develop an entrepreneurial mindset:

1.1. Set explicit goals.Set explicit goals.

2.2. Create a system of feedback and positive Create a system of feedback and positive reinforcement.reinforcement.

3.3. Emphasize individual responsibility.Emphasize individual responsibility.

4.4. Give rewards based on results.Give rewards based on results.

5.5. Do not punish failures.Do not punish failures.

Page 4: Corporate Entrepreneurship Professor Alexander Settles

Assessing Support for Assessing Support for InnovationInnovation

• Does the firm encourage entrepreneurial thinking?Does the firm encourage entrepreneurial thinking?

• Does the firm provide ways for innovators to stay with Does the firm provide ways for innovators to stay with their ideas?their ideas?

• Are people permitted to do the job in their own way, or Are people permitted to do the job in their own way, or are they constantly stopping to explain their actions and are they constantly stopping to explain their actions and ask for permission?ask for permission?

• Has the firm evolved quick and informal ways to access Has the firm evolved quick and informal ways to access the resources to try new ideas? the resources to try new ideas?

• Has the firm developed ways to manage many small and Has the firm developed ways to manage many small and experimental innovations?experimental innovations?

Page 5: Corporate Entrepreneurship Professor Alexander Settles

Assessing Support for Assessing Support for Innovation (cont’d)Innovation (cont’d)

• Is the system set up to encourage risk taking Is the system set up to encourage risk taking and to tolerate mistakes?and to tolerate mistakes?

• Are people in your company more concerned Are people in your company more concerned with new ideas or with defending their turf?with new ideas or with defending their turf?

• How easy is it to form functionally complete, How easy is it to form functionally complete, autonomous teams in the firm’s corporate autonomous teams in the firm’s corporate environment?environment?

Page 6: Corporate Entrepreneurship Professor Alexander Settles

Rules for an Innovative Environment

Source: “Corporate Venturing Obstacles: Sources and Solutions,” by Hollister B. Sykes and Zenas Block, Journal of Business Venturing (winter 1989): 161. Copyright © 1989 by Elsevier Science Publishing Co., Inc.

1.1. Encourage action.Encourage action.

2.2. Use informal meetings whenever possible.Use informal meetings whenever possible.

3.3. Tolerate failure and use it as a learning experience.Tolerate failure and use it as a learning experience.

4.4. Persist in getting an idea to market.Persist in getting an idea to market.

5.5. Reward innovation for innovation’s sake.Reward innovation for innovation’s sake.

6.6. Plan the physical layout of the enterprise to encourage informal Plan the physical layout of the enterprise to encourage informal communication.communication.

7.7. Expect clever Expect clever bootleggingbootlegging of ideas of ideas——secretly working on new secretly working on new ideas on company time as well as personal time.ideas on company time as well as personal time.

8.8. Put people on small teams for future-oriented projects.Put people on small teams for future-oriented projects.

9.9. Encourage personnel to circumvent rigid procedures and Encourage personnel to circumvent rigid procedures and bureaucratic red tape.bureaucratic red tape.

10.10. Reward and promote innovative personnel.Reward and promote innovative personnel.

Page 7: Corporate Entrepreneurship Professor Alexander Settles

Encouraging an Intrapreneurial Encouraging an Intrapreneurial EnvironmentEnvironment

• Steps to help restructure corporate thinking and Steps to help restructure corporate thinking and encourage an intrapreneurial environment:encourage an intrapreneurial environment:1.1. Early identification of potential intrapreneursEarly identification of potential intrapreneurs

2.2. Top management sponsorship of intrapreneurial Top management sponsorship of intrapreneurial projectsprojects

3.3. Creation of both diversity and order in strategic Creation of both diversity and order in strategic activitiesactivities

4.4. Promotion of intrapreneurship through Promotion of intrapreneurship through experimentationexperimentation

5.5. Development of collaboration between intrapreneurial Development of collaboration between intrapreneurial participants and the organization at largeparticipants and the organization at large

Page 8: Corporate Entrepreneurship Professor Alexander Settles

Benefits of an Entrepreneurial Benefits of an Entrepreneurial PhilosophyPhilosophy

• Leads to the development of new products Leads to the development of new products and services and helps the organization and services and helps the organization expand and grow. expand and grow.

• Creates a work force that can help the Creates a work force that can help the enterprise maintain its competitive enterprise maintain its competitive posture.posture.

• Promotes a climate conducive to high Promotes a climate conducive to high achievers and helps the enterprise achievers and helps the enterprise motivate and keep its best people.motivate and keep its best people.

Page 9: Corporate Entrepreneurship Professor Alexander Settles

The Corporate The Corporate Entrepreneurship ProcessEntrepreneurship Process

Corporate Entrepreneurship

Corporate Entrepreneurship

Corporate Venturing

Corporate VenturingInnovationInnovationStrategic

Renewal

Strategic Renewal

Page 10: Corporate Entrepreneurship Professor Alexander Settles

The Nature of Corporate The Nature of Corporate EntrepreneurshipEntrepreneurship

• Defining The ConceptDefining The Concept– Corporate EntrepreneurshipCorporate Entrepreneurship

• Activities that receive organizational sanction and Activities that receive organizational sanction and resource commitments for the purpose of resource commitments for the purpose of innovative results.innovative results.

– A process whereby an individual or a group of individuals, in A process whereby an individual or a group of individuals, in association with an existing organization, creates a new association with an existing organization, creates a new organization or instigates renewal or innovation within the organization or instigates renewal or innovation within the organization.organization.

– A process that can facilitate firms’ efforts to innovate constantly A process that can facilitate firms’ efforts to innovate constantly and cope effectively with the competitive realities that and cope effectively with the competitive realities that companies encounter when competing in international markets.companies encounter when competing in international markets.

Page 11: Corporate Entrepreneurship Professor Alexander Settles

Defining Corporate Entrepreneurship

Source: Michael H. Morris, Donald F. Kuratko, and Jeffrey G. Covin, Corporate Entrepreneurship & Innovation (Mason, OH, Thomson), 2008, p. 81.

Page 12: Corporate Entrepreneurship Professor Alexander Settles

The Need for Corporate The Need for Corporate EntrepreneuringEntrepreneuring

• Rapid growth in the number of new and sophisticated Rapid growth in the number of new and sophisticated competitorscompetitors

• Sense of distrust in the traditional methods of corporate Sense of distrust in the traditional methods of corporate managementmanagement

• An exodus of some of the best and brightest people from An exodus of some of the best and brightest people from corporations to become small business entrepreneurscorporations to become small business entrepreneurs

• International competitionInternational competition

• Downsizing of major corporationsDownsizing of major corporations

• An overall desire to improve efficiency and productivityAn overall desire to improve efficiency and productivity

Page 13: Corporate Entrepreneurship Professor Alexander Settles

Table3.2Sources of and Solutions to Obstacles in Corporate Venturing

Traditional Management Practices

Adverse Effects

Recommended Actions

Enforce standard procedures to avoid mistakes

Innovative solutions blocked, funds misspent

Make ground rules specific to each situation

Manage resources for efficiency and ROI

Competitive lead lost, low market penetration

Focus effort on critical issues (e.g., market share)

Control against plan Facts ignored that should replace assumptions

Change plan to reflect new learning

Plan for the long term Nonviable goals locked in, high failure costs

Envision a goal, then set interim milestones, reassess after each

Manage functionally Entrepreneur failure and/or venture failure

Support entrepreneur with managerial and multidiscipline skills

Avoid moves that risk the base business

Missed opportunities Take small steps, build out from strengths

Protect the base business at all costs

Venturing dumped when base business is threatened

Make venturing mainstream, take affordable risks

Judge new steps from prior experience

Wrong decisions about competition and markets

Use learning strategies, test assumptions

Compensate uniformly Low motivation and inefficient operations

Balance risk and reward, employ special compensation

Promote compatible individuals Loss of innovators Accommodate “boat rockers” and “doers”

Source: “Corporate Venturing Obstacles: Sources and Solutions,” by Hollister B. Sykes and Zenas Block, Journal of Business Venturing (winter 1989): 161

Page 14: Corporate Entrepreneurship Professor Alexander Settles

Successful Innovative Successful Innovative CompaniesCompanies

• Factors in large corporations that are Factors in large corporations that are successful innovators:successful innovators:

– Atmosphere and visionAtmosphere and vision

– Orientation to the marketOrientation to the market

– Small, flat organizationsSmall, flat organizations

– Multiple approachesMultiple approaches

– Interactive learningInteractive learning

– SkunkworksSkunkworks

Page 15: Corporate Entrepreneurship Professor Alexander Settles

Conceptualizing Corporate Conceptualizing Corporate Entrepreneurship StrategyEntrepreneurship Strategy

• Corporate Entrepreneurship StrategyCorporate Entrepreneurship Strategy

– A vision-directed, organization-wide reliance on A vision-directed, organization-wide reliance on entrepreneurial behavior that purposefully and entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes continuously rejuvenates the organization and shapes the scope of its operations through the recognition the scope of its operations through the recognition and exploitation of entrepreneurial opportunity.and exploitation of entrepreneurial opportunity.

– It requires the creation of congruence between the It requires the creation of congruence between the entrepreneurial vision of the organization’s leaders entrepreneurial vision of the organization’s leaders and the entrepreneurial actions of those throughout and the entrepreneurial actions of those throughout

the organizationthe organization..

Page 16: Corporate Entrepreneurship Professor Alexander Settles

Model of the Corporate Model of the Corporate Entrepreneurship Strategy ProcessEntrepreneurship Strategy Process

• Corporate entrepreneurship strategy is Corporate entrepreneurship strategy is manifested through the presence of three manifested through the presence of three elements:elements:

– An entrepreneurial strategic visionAn entrepreneurial strategic vision

– A proentrepreneurship organizational A proentrepreneurship organizational architecturearchitecture

– Entrepreneurial processes and behavior as Entrepreneurial processes and behavior as exhibited across the organizational hierarchy.exhibited across the organizational hierarchy.

Page 17: Corporate Entrepreneurship Professor Alexander Settles

3–17

Model of the Corporate Model of the Corporate Entrepreneurship Strategy Process Entrepreneurship Strategy Process

(cont’d)(cont’d)• Linkages in the model:Linkages in the model:

1.1. Individual entrepreneurial cognitions of the organization’s Individual entrepreneurial cognitions of the organization’s membersmembers

2.2. External environmental conditions that invite entrepreneurial External environmental conditions that invite entrepreneurial activityactivity

3.3. Top management’s entrepreneurial strategic vision for the firmTop management’s entrepreneurial strategic vision for the firm

4.4. Organizational architectures that encourage entrepreneurial Organizational architectures that encourage entrepreneurial processes and behaviorprocesses and behavior

5.5. The entrepreneurial processes that are reflected in The entrepreneurial processes that are reflected in entrepreneurial behaviorentrepreneurial behavior

6.6. Organizational outcomes resulting from entrepreneurial actions.Organizational outcomes resulting from entrepreneurial actions.

Page 18: Corporate Entrepreneurship Professor Alexander Settles

An Integrative Model of Corporate Entrepreneurship Strategy

Source: Duane Ireland, Jeffery G. Covin, and Donald F. Kuratko, “Conceptualizing Corporate Entrepreneurship Strategy,” Entrepreneurship Theory and Practice 33, no. 1

Page 19: Corporate Entrepreneurship Professor Alexander Settles

Conceptualizing a Corporate Conceptualizing a Corporate Entrepreneurial Strategy (cont’d)Entrepreneurial Strategy (cont’d)

• Critical steps of a corporate entrepreneurial Critical steps of a corporate entrepreneurial strategy:strategy:

– Developing the visionDeveloping the vision

– Encouraging innovationEncouraging innovation

– Structuring for an intrapreneurial climateStructuring for an intrapreneurial climate

– Developing individual managers for corporate Developing individual managers for corporate entrepreneurshipentrepreneurship

– Developing venture teams. Developing venture teams.

Page 20: Corporate Entrepreneurship Professor Alexander Settles

Shared Vision

Source: Jon Arild Johannessen, “A Systematic Approach to the Problem of Rooting a Vision in the Basic Components of an Organization,” Entrepreneurship, Innovation, and Change (March 1994): 47.

Page 21: Corporate Entrepreneurship Professor Alexander Settles

Types of InnovationTypes of Innovation

• Radical InnovationRadical Innovation

– The launching of inaugural breakthroughs.The launching of inaugural breakthroughs.

– These innovations take experimentation and These innovations take experimentation and determined vision, which are not necessarily determined vision, which are not necessarily managed but must be recognized and nurtured.managed but must be recognized and nurtured.

• Incremental InnovationIncremental Innovation

– The systematic evolution of a product or service into The systematic evolution of a product or service into newer or larger markets.newer or larger markets.

– Many times the incremental innovation will take over Many times the incremental innovation will take over after a radical innovation introduces a breakthrough.after a radical innovation introduces a breakthrough.

Page 22: Corporate Entrepreneurship Professor Alexander Settles

Objectives and Programs for Venture Development

Source: “Supporting Innovation and Venture Development in Established Companies,” by Rosabeth Moss Kanter, Journal of Business Venturing (winter 1985): 56–59

Objectives Programs

Make sure that current systems, structures, and practices do not present insurmountable roadblocks to the flexibility and fast action needed for innovation.

Reduce unnecessary bureaucracy, and encourage communication across departments and functions.

Provide the incentives and tools for intrapreneurial projects.

Use internal “venture capital” and special project budgets. (This money has been termed intracapital to signify a special fund for intrapreneurial projects.) Allow discretionary time for projects (sometimes referred to as “bootlegging” time).

Seek synergies across business areas so new opportunities are discovered in new combinations.

Encourage joint projects and ventures among divisions, departments, and companies. Allow and encourage employees to discuss and brainstorm new ideas.

Page 23: Corporate Entrepreneurship Professor Alexander Settles

Developing and Supporting Radical and Incremental Innovation

Radical Incremental

Stimulate through challenges and puzzles. Set systematic goals and deadlines.

Remove budgetary and deadline constraints when possible.

Stimulate through competitive pressures.

Encourage technical education and exposureto customers.

Encourage technical education and exposure to customers.

Allow technical sharing and brainstorming sessions.

Hold weekly meetings that include key management and marketing staff.

Give personal attention—develop relationships of trust.

Delegate more responsibility.

Encourage praise from outside parties. Set clear financial rewards for meeting goals and deadlines.

Have flexible funds for opportunities that arise.

Reward with freedom and capital for new projects and interests.

Source: Harry S. Dent, Jr., “Growth through New Product Development,” Small Business Reports (November 1990): 36.

Page 24: Corporate Entrepreneurship Professor Alexander Settles

3M’s Innovation Rules3M’s Innovation Rules

• Don’t kill a projectDon’t kill a project

• Tolerate failureTolerate failure

• Keep divisions smallKeep divisions small

• Motivate the championsMotivate the champions

• Stay close to the customerStay close to the customer

• Share the wealthShare the wealth

Page 25: Corporate Entrepreneurship Professor Alexander Settles

Structuring for a Corporate Structuring for a Corporate Entrepreneurial EnvironmentEntrepreneurial Environment

• Reestablishing the drive to innovate:Reestablishing the drive to innovate:– Invest heavily in Invest heavily in entrepreneurial activitiesentrepreneurial activities that allow new ideas to that allow new ideas to

flourish in an innovative environment.flourish in an innovative environment.– Provide nurturing and information-sharing activities.Provide nurturing and information-sharing activities.– Employee perception of an innovative environment is critical.Employee perception of an innovative environment is critical.

• Corporate VenturingCorporate Venturing– Institutionalizing the process of embracing the goal of growth Institutionalizing the process of embracing the goal of growth

through development of innovative products, processes, and through development of innovative products, processes, and technologies with an emphasis on long-term prosperity.technologies with an emphasis on long-term prosperity.

Page 26: Corporate Entrepreneurship Professor Alexander Settles

Intrapreneurial Development: Joint Function of Individual and Organizational Factors

Source: Deborah V. Brazeal, “Organizing for Internally Developed Corporate Ventures,” Journal of Business Venturing (January 1993): 80.

Page 27: Corporate Entrepreneurship Professor Alexander Settles

Preparing for FailurePreparing for Failure

• ““Learning from Failure”Learning from Failure”

– Recognizing the importance of managing the grief Recognizing the importance of managing the grief process that occurs from project failure. process that occurs from project failure.

– Understanding how organizational routines and rituals Understanding how organizational routines and rituals are likely to influence the grief recovery.are likely to influence the grief recovery.

– Ensuring that the organization’s social support system Ensuring that the organization’s social support system can encourage greater learning, foster motivational can encourage greater learning, foster motivational outcomes, and increase coping self-efficacy in outcomes, and increase coping self-efficacy in affected individuals.affected individuals.

Page 28: Corporate Entrepreneurship Professor Alexander Settles

Developing Individual Managers Developing Individual Managers for Corporate Entrepreneurshipfor Corporate Entrepreneurship

• Corporate Entrepreneurship Training Program Corporate Entrepreneurship Training Program (Corporate Breakthrough Training)(Corporate Breakthrough Training)

1.1. The Breakthrough ExperienceThe Breakthrough Experience

2.2. Breakthrough ThinkingBreakthrough Thinking

3.3. Idea Acceleration ProcessIdea Acceleration Process

4.4. Barriers and Facilitators to Innovative ThinkingBarriers and Facilitators to Innovative Thinking

5.5. Sustaining Breakthrough TeamsSustaining Breakthrough Teams

6.6. The Breakthrough Plan The Breakthrough Plan

Page 29: Corporate Entrepreneurship Professor Alexander Settles

Corporate Entrepreneurship Corporate Entrepreneurship Assessment Instrument (CEAI)Assessment Instrument (CEAI)

• Key Internal Climate Factors in an Key Internal Climate Factors in an Organization’s Readiness for Entrepreneurial Organization’s Readiness for Entrepreneurial ActivityActivity

– Management supportManagement support

– Autonomy/work discretionAutonomy/work discretion

– Rewards/reinforcementRewards/reinforcement

– Time availabilityTime availability

– Internal organizational boundariesInternal organizational boundaries

Page 30: Corporate Entrepreneurship Professor Alexander Settles

Facilitating Corporate Facilitating Corporate Entrepreneurial BehaviorEntrepreneurial Behavior

• Organizations foster entrepreneurial behavior by:Organizations foster entrepreneurial behavior by:– Encouraging—not mandating—innovative activityEncouraging—not mandating—innovative activity– Human resource policies for “selected rotation”Human resource policies for “selected rotation”– Committing to projects long enough for momentum to occur.Committing to projects long enough for momentum to occur.– Bet on people, not on analysis.Bet on people, not on analysis.

• Rewarding Entrepreneuring:Rewarding Entrepreneuring:– Allow inventor to take charge of the new ventureAllow inventor to take charge of the new venture– Grant discretionary time to work on future projectsGrant discretionary time to work on future projects– Make intracapital available for future research ideasMake intracapital available for future research ideas

Page 31: Corporate Entrepreneurship Professor Alexander Settles

Corporate Innovator’s Commandments

1. Come to work each day willing to give up your job for the innovation.

2. Circumvent any bureaucratic orders aimed at stopping your innovation.

3. Ignore your job description, do any job needed to make your innovation work.

4. Build a spirited innovation team that has the “fire” to make it happen.

5. Keep your innovation “underground” until it is prepared for demonstration to the corporate management.

6. Find a key upper level manager who believes in you and your ideas and will serve as a sponsor to your innovation.

7. Permission is rarely granted in organizations, thus always seek forgiveness for the “ignorance” of the rules that you will display.

8. Always be realistic about the ways to achieve the innovation goals.

9. Share the glory of the accomplishments with everyone on the team.

10. Convey the innovation’s vision through a strong venture plan.

Page 32: Corporate Entrepreneurship Professor Alexander Settles

Sustaining Corporate Sustaining Corporate EntrepreneurshipEntrepreneurship

• Sustained Corporate Entrepreneurship ModelSustained Corporate Entrepreneurship Model

– Based on theoretical foundations from previous Based on theoretical foundations from previous strategy and entrepreneurship research.strategy and entrepreneurship research.

– Considers the comparisons made at the individual Considers the comparisons made at the individual and organizational level on organizational outcomes, and organizational level on organizational outcomes, both perceived and real, that influence the both perceived and real, that influence the continuation of the entrepreneurial activity.continuation of the entrepreneurial activity.

– Transformational triggerTransformational trigger

• Something external or internal to the company that initiates Something external or internal to the company that initiates the need for strategic adaptation or change.the need for strategic adaptation or change.

Page 33: Corporate Entrepreneurship Professor Alexander Settles

Developing Innovative (I) Developing Innovative (I) TeamsTeams

• Innovative (I) TeamInnovative (I) Team– A semi-autonomous self-directing, self-managing, A semi-autonomous self-directing, self-managing,

high-performing group of two or more people who high-performing group of two or more people who formally create and share the ownership of a new formally create and share the ownership of a new organization.organization.

– The leader is called a “product champion” or an The leader is called a “product champion” or an “corporate entrepreneur.”“corporate entrepreneur.”

• Collective EntrepreneurshipCollective Entrepreneurship– Individual skills are integrated into a group; this Individual skills are integrated into a group; this

collective capacity to innovate becomes something collective capacity to innovate becomes something greater than the sum of its parts.greater than the sum of its parts.

Page 34: Corporate Entrepreneurship Professor Alexander Settles

A Model of Sustained Corporate Entrepreneurship

Source: Donald F. Kuratko, Jeffrey S. Hornsby, and Michael G. Goldsby, “Sustaining Corporate Entrepreneurship: Modeling Perceived Implementation and Outcome Comparisons at Organizational and Individual Levels,” International Journal of Entrepreneurship and Innovation 5(2) (May 2004): 79.

Page 35: Corporate Entrepreneurship Professor Alexander Settles

Corporate Entrepreneurship Corporate Entrepreneurship at IBMat IBM

• Emerging Business Opportunity (EBO) Emerging Business Opportunity (EBO) Program’s Key Rules:Program’s Key Rules:– Think big . . . really big.– Bring in the A-team.– Start small.– Establish unique measurement

techniques.