Download - CHAPTER 1 – FOUNDATIONS OF CORPORATE ENTREPRENEURSHIP …€¦ · Entrepreneurship is defined as the process of creating value by bringing together a unique combination of resources

CHAPTER1–FOUNDATIONSOFCORPORATEENTREPRENEURSHIP1.1TurbulentenvironmentsandtheembattledcorporationExternalenvironmentsinfluenceinternalenvironments,it’sallaboutchange!Thischangeiscontinuousandrapidbringingnewchallengesfromexternalenvironments.Changeiscomplexandacombinationoftheenvironmentseffectmanyaspectsoftheexternalandinternalenvironment.Externalenvironmentofembattledcorporation:

1. Technological-accelerateddevelopmentofnewtechnologymakesproductsobsolete,greaterdifficultyinprotectingintellectualproperty.

2. Economic–unpredictabilityofprices,exchangerates,interestrates,taxincentiveandbusinesscycles.3. Competitive-aggressiveandinnovativecompetitionalsofromnon-traditionalsourcesandtactics.Competitors

whoarealsocustomersandpartners.4. Labour-scarcityofskilledworkers,higherlabourcosts,employeesaremoremobileandlessloyal.5. Resource-limitedresources,becomingincreasinglyspecialised,unknownsourcesofsupply.6. Customer-moredemandingandfragmentedmarkets,morenarrowlysegmented,emphasisoninvestmentin

capturingcustomers7. Legalandregulatory–Moreaggressiveregulation.Unlimitedproductliability=youareresponsible8. Global-productsaresoldanywhereanytime“internet”.Realtimecommunicationanddistribution.Therecanbe

competitiveadvantagethroughglobaloutsourcingandinternationalstrategicalliances.

Allthesechangeshaveimplicationsonhowcompaniesaremanaged;themoderncorporationfindsitembattledasitstrugglestosurvive.Thisforcescompaniestoabandonconventionalbusinesspracticesasmanagershave:

• Shorteneddecisionwindows• Diminishingopportunitystreams• Theymustactmorequicklyormissout• Theirclients,suppliers,partners,distributorsarealwayschangingsotheyneedtoperformbetter• Resourcedemandsresultinoutsourcingandleveraging• Technologythreatsmeansthecompanymustdevelopnewproductsandimprovetimetomarket• Existingproductsbecomeobsoletequicker• Nolongerarestrategies“businessasusual”sufficient

Theembattledcorporation–examplesofthewayinwhichtrendsintheenvironmentforcechangesinmanagementpractices:

1. Customers–Fragmentedmarkets,risingcustomerexpectations,costsofhigherlevelofcustomization,sustainablegrowthinnewmarkets.

2. Technology–Newinformation,productionandservicetechnologies,customermanagement,logisticsandinventory,productdevelopmenttechnologies.

3. Competitors–Creatingnewmarketplaces,theymimicanythingnew,playingbydifferentrules,competitioninnarrownichemarketsandavoidcostsassociatedwithbigproductrange.

4. Legal,regulatoryandethicalstandards–Companiesareincreasinglyaccountable1.2Anewpathtosustainablecompetitiveadvantage:howcompaniesreacttothechallenges?Threelessonscanbelearntinsustainingabusinessinacompetitiveenvironment:

1. Externalenvironmentsinfluenceinternalenvironmentsofabusiness.2. Thereisnosimpleformulaforsuccessinthecompetitiveenvironment,theyneedtoexperimentandfindthe

rightapproachtocontrol,rightleadershipstyle,andrightwaytorewardemployees.3. Thereisanupside,turbulencemeanopportunity.Changesintechnology,marketsandsegmentsmeanssome

doorscloseandothersopen.

Toremaininthegame,companiesandmanagersmustcontinuouslyre-inventthemselveswith5keycapabilities:

1. Adaptability:theabilitytoadjusttimelytoexternalenvironmentalforces“canlistthem”2. Flexibility:designcompanystrategies,processesandoperationsthatmeetevolvingrequirements3. Speed:actquicklytoemergingmarkets4. Aggressiveness:proactiveapproachtoeliminatingcompetitorsandpleasingcustomers5. Innovativeness:developingandlaunchingnewproducts/process/services:leadthemarketplace

ThechanginglandscapeCompaniesareoperatinginnewcompetitivelandscapeswithincreasedrisk,lessabilitytoforecast,fluidboundariesbetweenindustries.Strategicinflectionpointsoccurwhentheoldstrategicpicturedissolvesandgiveswaytothenew,allowingadaptiveandproactivebusinessestoascendtonewheights.Thesepointschangetheindustryandtherules,onceit’sreachedthere’snogoingback.Thefourforcesatwork

1. Changeo Largeamountofpressureonmanagementandemployeeso Thegamehaschangedcompletelyo Oldmanagementstylesofhierarchy,rules,traditionalandprocessnolongerapply

2. Complexityo Changecomesfromdifferentdirectionsandatthesametimeo Newmarketsandtechnologyo Customergroupsareshiftingo Competitionisalsoaboutcollaborationo Changeinoneareaaffectsanotherarea

3. Chaoso Chaosisconfusiono Randomeventscauseextremeconsequenceso Thereisasensitivedependenceonconditionsandsmallshockscandisruptthesystemo Incrementalchangesthatseeminsignificantcanhaveamajorimpactontheorganisation

4. Contradictionso Paradoxneedstobemanagedo Thetyrannyoforpushespeopletobelieveit’seitheraorbo Managersshouldembracecontradictionbyreplacingorwithand

1.3WhatisEntrepreneurship.Entrepreneurshipisdefinedastheprocessofcreatingvaluebybringingtogetherauniquecombinationofresourcestoexploitanopportunity.7perspectivesonthenatureofentrepreneurship

1. Creationofwealth–involvesassumingtheriskassociatedwiththefacilitationofproductioninexchangeforprofit

2. Creationofenterprise–entailsfoundingofanewbusinessventurewherenoneexistedbefore3. Creationofinnovation–concernedwithuniquecombinationofresourcesthatmakeexistingmethodsor

productsobsolete4. Creationofchange–creatingchangebyadaptingandadjusting,modifyingonesapproachesandskillstomeet

newanddifferentopportunities.5. Creationofjobs–concernedwithemploying,managinganddevelopingthefactorsofproduction,includingthe

labourforce6. Creationofvalue–processofcreatingvalueforcustomersbyexploitinguntappedopportunities7. Creationofgrowth–definedasastrongandpositiveorientationtowardgrowthinsales,income,assetsand

employment

1.4WhatisCorporateEntrepreneurship(CE)?CorporateEntrepreneurship(CE)“isthesumofacompany’sinnovation,renewalandventuringefforts”.Itistheentrepreneurshipwithinanestablishedbusinessorganisation.Thethreemostcommonphenomenathatareviewedasentrepreneurialinestablishedbusinessesare

1. thesituationswhereanestablishedorganizationentersanewbusiness:2. whenanindividualorindividualschampionnewproductideas3. whenanentrepreneurialphilosophypermeatesanentireorganization’soutlookandoperations.

TheformsCEtakesare:

• Innovation:somethingnewtothemarket• Strategicrenewal:strategicorstructuralchanges• Corporateventuring:creationofnewbusinessorganisationswithinthecorporation

CEisentrepreneurshipwithinestablishedorganisationsandinvolves:• Fosteringinnovativebehaviourinorganisations• Supportprofitmakinginnovationsbyencouragingemployeestothinklikeentrepreneurs• Givingemployeesthefreedomtopursuetheirideaswithouttheredtape• Championsbriningnewproductsorservicestomarket• Establishedorganisationsenternewbusiness• Entrepreneurialphilosophypermeatestheentireorganisationsoutlookandoperations• Corporationsthatradicallychangethemarketsandindustries• Revitalisesandinventsnewwaystoobtaincompetitiveadvantage

1.5ManagementversusEntrepreneurManagementistheprocessofsettingobjectivesandcoordinatingresourcesincludingpeople,inordertoattainthoseobjectives.Inessence,itinvolvesgettingthingsdonethroughotherpeople.Managementisconcernedwithefficiencyandeffectiveness.Itisatransformationprocesswheretechnical,humanandconceptualskillsareusedtotransforminputsintooutputs.Disciplinedmanagementrequiresfocus,attentiontobasicmanagementprinciplesandvaluesandaccountability.Managementfocusincludes:

• Efficientandeffectiveutilizationoftheresourcesundertheircontrol• Optimizingcurrentoperations• Efficiency:sameoutputlesscost• Effectiveness:choosetherightobjectivesandmeansofachievingthem

Entrepreneursarepreoccupiedwithchange,envisioningthefuture,recognisingemergingpatternsandidentifyinguntappedopportunities.Theycomeupwithinnovationstoexploitopportunitiesregardlessofresourcescontrolled.Entrepreneurshiprequiresvision,willingnesstotakerisks,focusoncreationofthefuture.ThetablebelowcanbeusedtocombinethekeyrolestocreateanEntrepreneurialManager.

TheManager • Planner• Strategist• Organiser• Director• Staffer• Motivator• Budgeter• Evaluator• Coordinator• Supervisor

TheEntrepreneur• Visionary• Opportunityseeker• Creator• Innovator• Calculatedrisktaker• Resourceleverage• Guerrillathinker• Changeagent• Adaptiveimplementerof

newideas

1.6WhyCompaniesLoseTheirEntrepreneurialWay:TheOrganisationalLifeCycleOrganisationallifecycle–crisispointsforevolution

Stage1:Startupandearlygrowth• Encompassesthelaunchingofanewventureandtheinitialpenetrationofthemarket.• Highlycreative• Workenvironmentinearlystagesisexciting,stressful,demanding,anduncertain.• Organisationruninformally• Employeesfeeltheypartofsomething• CRISIS:Greatersizerequiresmoreprofessionalisedmanagement

Stage2:Growththroughdirection• CompaniesfailbecausetheywillnotformalisesoManagementputnecessarysystemsandstructuresin

place,andaugmentstheleadershipteamwithfunctionalareaprofessionals• Anotherperiodofsustainedsuccessgrowthensues.• CRISIS:demandforgreaterautonomyonthepartoflowerlevelmanagersandemployees

Stage3:Growththroughdelegation• Delegationtakesformbycreatingsemi-autonomousproductdivisionsandstrategicbusinessunits• Organisationaltargetsaregiventoachieve.• Seniormanagementfocusesonmajorstrategicmovesandacquisitions• CRISIS:Managementlosecontroloverhighlydiversifiedfieldoperation,duplicationofworkefforts

Stage4:Growththroughcoordination• Companiesrespondtothislossofcontrolbycentralisingoperations.• Headofficestaffisdevelopedtoco-ordinateoperations• CRISIS:Centralisationovertimestendstobreedbureaucracyandacrisisofredtapeeventuallyoccurs.• Myridofproceduresandsystemswillbedevelopedthatexceedtheirutility• Procedurestakeprecedenceoverproblemsolving

Stage5:Growththroughcollaboration• Verynatureoftheenterprisehastobereinventedbytransformingthemachinebureaucracyintoan

innovationfactory• Companiesmustsimplifystructuresandprocedures,reducestaff• Creationofmatrixstructures,encourageexperimentationinallfacetsofthebusiness

1.7TheEntrepreneurialImperative:APersistentSenseofUrgencyAnewmodelofmanagementandfivequestionswhyanewmodelofmanagementisneeded:

1. Howmuchmorecostsavingscanthecompanywringoutofitscurrentbusiness?2. Howmuchmoregrowthcanthecompanysqueezeoutofitscurrentbusiness?3. Howmuchlongercanthecompanykeepproppingupitssharepricethroughsharebuybacks,spin-offsandother

formsoffinancialengineering?4. Howmanymorescaleeconomiescanthecompanygainfrommergersandacquisitions?5. Howdifferentarethestrategiesofthefourorfivelargestcompetitorsintheindustryfromthecompany?

Corporateentrepreneurshiprepresentsaframeworkforfacilitatingongoingchangeandinnovationinestablishedorganisationsandincludeseveralstrategiesthatneedtobeimplemented:

• NeedtoallowfreedomandresourcestotheCErequires.• Managementneedstobemoreflexibleandcreativeandmoretolerantoffailure,avitallearningprocess.• CE’smustbestimulated,supportedandprotected.• Companiesmustcreateaconstantsenseofurgencytochallengeassumptions,urgencytochangeandurgency

toinnovate.Innovateordissipatemustbecomethemantra.

1.8AModelofCorporateEntrepreneurshipandAGuidetoComingChaptersThestartingpointistodevelopanin-depthunderstandingofthenatureofentrepreneurshipandhowitcanbeappliedtoestablishedorganisations.Buildingonthisfoundation,companyleadersmustthenbuildaworkenvironmentthatencouragesemployeestorecogniseandactupontheirowninnateentrepreneurialpotential.Fourkeyelementsofthisworkenvironmentincludetheorganisation’s

1. Strategy2. Structure3. Culture4. Humanresourcesmanagementsystem.

Finally,theabilitytoachieveentrepreneurialperformanceonasustainablebasisrequiresaclearunderstandingoftheon-goingobstaclesthatconstrainentrepreneurship,togetherwithspecificfacilitatorsandmeasuresofentrepreneurialoutcomes.

CHAPTER2–HOWCORPORATEENTREPRENEURSHIPDIFFERS2.1IntroductionEntrepreneurshiphappensinorganisationsofallsizesandtypes.Seekingandcapitalisingonopportunity,takingrisks,havingtenacitytopushaninnovativeidea.Itisnotlimitedtoaselectpeoplebutcanbedevelopedinanyindividual.Theyareordinarypeoplewhomakechangehappenwithvision,hardworkandpassion.Ithasbothattitudinalandbehaviouraldimensionsmeaningitisawayofthinkingandacting.2.2.DispellingtheMythsandSidesteppingtheFolklore.TenmythsaboutEntrepreneur’s:1. “Entrepreneursareborn,notmade”-Keytraitsareinfluencedbyenvironmentalconditionsandanyonehasthe

potentialtobeanentrepreneur2. “EntrepreneursmustbeInnovators”-Anyonecancapitaliseonotherpeoplescreativeideas.Innovationscanbe

foundinoperatingprocess,priceapproach,packaging,anywhere3. “ThereisastandardprofileoftheEntrepreneur”-Astandardprofileishardtocompileastheenvironmentand

otherelementsresultinmanydifferenttypesofprofiles4. “AllyouneedislucktobeanEntrepreneur”-Peoplewhoarewellpreparedtoexploitanopportunityseemtobe

lucky5. “Entrepreneursareextremerisktakers”-Theyworkonmoderatecalculatedrisk6. “TheyareacademicandSocialMisfits”-Theyarenormallyveryqualifiedandhavegoodsocialskills7. “Allyouneedismoney”-moneyisnoguaranteetocombinetherightresourcesandproduceinnovationsthat

profit8. “Ignoranceisbliss”-Today’smarketsrequiredetailedplanningandpreparation9. “Mostinitiativesfail”-Astudyhasshownthatabouthalfofthemdon’t10. “Entrepreneurshipisunstructuredandchaotic”-Theyaretypicallywellorganisedindividuals

Theconclusionisthatentrepreneurshipisaplannedactivitythatcanbemanagedasaprocess,involvesriskandrequiresinnovation.Itcanbeappliedtoanyorganisationalcontext,anactivitythatrequiresdedication,perseveranceandadaptability.Anyonecandoit….

2.2EntrepreneurialRealities:UnderstandingtheProcessEntrepreneurshipisaprocessthatoccursinsixstages,namely:

1. Identifytheopportunity.2. Definingthebusinessconcept.3. Assessingtheresourcerequirements.4. Acquiringthenecessaryresources.5. Implementingandmanagingtheconcept.6. Harvestingtheventure.

1. Identifytheopportunity

§ Beginswithanopportunity§ Manyconceptsfailbecausetherewasnoopportunity§ Justbecauseitisbetterdoesnotmeanitisneeded.§ Keyquestionsinclude:source,sizeandsustainabilityofopportunity

2. Definingthebusinessconcept• Withanopportunityclearlyinmind,theentrepreneurspecifiesabusinessconcept.• Opportunitiesrepresentpotentialthatcanbecapitalisedon• ABusinessconceptisdefinedasaninnovativeapproachforcapitalisingonanopportunity• Awellconceptualisedconcepthascertaincharacteristics:

o Obviousbenefittoausero uniqueandnoteasytoimitateo Comprehensiveinthatitrepresentsanentirevaluepropositions.o Itisfeasible.

3. Assessingtheresourcerequirements• Entrepreneurialsuccessisoftenafunctionofotherresources,somewhichmoneycan’tbuy.• Needtoidentifynonfinancialneedsrequireinsight,judgementandpatience.• Obtainingendorsementfromsponsoriskey

4. Acquiringtheresources• Entrepreneursaregreatatresourceleveraging,meaningtheyknowhowtoshareandborrowresources.• Mustbeatrader,barganer,negotiator,networkerandborrower.• Leveragingmeansresourcemightberented,leased,contractedoroutsourced

5. Implementingandmanagingtheconcept.• Itistypicallyhectic,uncertainandambiguouswhencreatingthe“new”• Entrepreneurisfacedwithmyriadofdecisionsthatmustbesolvedquickly.• Obstaclesariseandassumptionscouldbewrong–leadingtoare-think• Keyatthisstageistoleranceofambiguityandadaptability• Mustsettargetandtimeframesforconceptcompletionateachstage

6. Harvestingtheventure• Weliveinageofdiminishingopportunitywindowsandshorterlifecycles.• Thereforemusthaveanexitstrategy• Harvestingisconcernedwithhowreturnswillberealised

2.3HowCorporateEntrepreneurshipDiffers

Individualsareboldandoftenthoughtofasaherowhichdoesn’tsitwellwithcorporations.Characteristicssuchasbold,aggressive,risktakingdoesn’tfitwellincompany.AsaresultthereisconfusionastothenatureofCEandifitisactuallypossiblewithinacompany.TheBasicsapplynomatterwhat.

• Basicnatureofentrepreneurshipisuniversal(usedefinitionandexpand).• Entrepreneurshipscanoccurinstart-upstolargecorporations.• Theprocesscanbeappliedanywhere.

SimilaritiesbetweenCorporateandStart-upEntrepreneurship:Bothrequire/involve/have

1. Bothinvolveopportunityrecognitionanddefinition.2. Bothrequireauniquebusinessconcept,i.e.aproduct,serviceorprocess.3. Botharedrivenbyanindividualchampionworkingwithateam.4. Bothrequireentrepreneurialbalancebetweenvision,managerialandentrepreneurialskills5. Bothinvolveconceptsthataremostvulnerableintheformativestageandrequireadaptationovertime6. Bothentailidentifyingthewindowofopportunity7. Botharebasedonvaluecreationandcustomersatisfaction8. Bothfindresistanceandobstaclesrequiringinnovativesolutions9. Bothentailriskandrequireriskmanagementstrategies10. Bothfindcreativewaystoleverageresources11. Bothinvolveambiguity12. Bothrequireharvestingstrategies

Youneedtounderstandthesimilaritiesbecause:

1. CEisnotjustafad.Sustainablecompetitiveadvantageisimpossiblewithoutentrepreneurship.2. Managementandemployeesneedtounderstandtherisksandactlikeentrepreneurs.

3. Mostoftheresearchisonstart-upscontextandexecscanlearnfromthisinformationandwhatweknowaboutthestartupcontext.

Theimportantdifferencesforstart-upandCE’s

Start-up CorporateEntrepreneurship1. Takesalltherisk 1. Companyassumesrisk2. Ownstheconcept 2. Companyownstheconcept3. Ownsthebusiness 3. Mayhavenoequityinthebusiness4. Potentialunlimitedrewards 4. Clearfinanciallimits5. Easytofail 5. Moreroomforerrors6. Vulnerabletooutsideinfluence 6. Moreinsulated7. Independent 7. Interdependenceofchampionwithotherssharingcredit8. Flexibilityinchangingcourse 8. Rulesandprocedures=lessflexible9. Speedydecisionmaking 9. Longapprovalprocesses10. Littlesecurity 10. Jobsecurity11. Nosafetynet 11. Dependablebenefitspackage12. Fewcontacts 12. Extensivenetwork

ThepoliticalfactordifferencewithCEPoliticswithinanorganisationwillbeinstrumentalinthesuccessorfailureofanyentrepreneurialinitiativewithinanestablishedcompany.Threefactorsthatneedtobeovercome:

1. Credibility:fortheconceptandtheindividual.Overcomebygivingothersareasontobelieve,buildinganetwork,gettingagoodsponsor

2. Acquiringresources:Overcomebyidentifyingunderutilisedresources,convincingresourceownerstoshare,borrowandscavengeresources.

3. Overcomingresistance:Thebiggestobstacle,peopleseechangeasathreattojobsecurityandthecurrentstatusquo

ImplicationsofthedifferencesforCE’s

1. Don’thavetostartuptheirownbusiness2. Theirmotivationisadesiretocreatesomethingsuccessfulinanideatheybelievein,puttheirmarkon

something.3. Theyhaveahealthycynicismofcompanysystemsandappreciatetheneedtobepoliticallysavvy.4. Theyenjoythesecurityofgettingasalary5. Theyareself-drivenwithself-imposedtimelinesandperformancebenchmarks6. Theymeasuresofperformanceisnotclearcut,theyneedtoidentifymeasuresthatwillinfluenceandbuildtheir

plansintoreality.Thechallengebecomesoneof:o Performingsatisfactorilyonperformancemeasureso Meetingone’sowngoalsforprojectdevelopmentandcompletiono Ensuringonesgoalsexceedthoseofseniormanagement.

7. TheytendtotakegreaterriskswithinthecompanyWhatcanmanagementdotohelpoutCE?

o Createanenvironmentwhereemployeeshaveasensethatresourcescanbeaccessedo Letanyoneinthecompanyhavetheabilitytochampionanideao Investinthedevelopmentofpeoplefirst,understandthatvaluecreationforcustomersfollows,recognise

productiveemployeesandsatisfiedcustomerscreateswealthforstockholders

RulesforFosteringanInnovativeorganisation

Rule1–Unreasonableexpectations• Whenpeoplesubscribetounreasonablegoals,theysearchforbreakthroughideas.• Therearenomatureideas,onlymanagerswhoacceptadefinitionofwhatispossible

Rule2–Elasticbusinessdefinition• Toomanycompaniesdefinethemselvesbywhattheydo,knowandwhattheyown.Beelasticandflexible.

Rule3–ACause,Notabusiness• Revolutionariesdrawstrengthfromtheirallegiancetoacausebeyondgrowth,profitsandwealth.• Thecouragetostrikeoutandacceptthatchangeisgood.

Rule4–Newvoices• Lettheyouthbeheard,listentoperiphery,letnewcomershavetheirsay.

Rule5–Anopenmarketforideas• Createamarketforentrepreneurialideasinsidethecompany• Newideasarecurrencyoftherealm

Rule6–Createanopenmarketfortalent• Makefundsavailablefornewideasandgivetheresourcesnecessary.

Rule7–Openthemarketfortalent• Provideincentivesforemployeeswhoarewillingtotakerisks.

Rule8–Low-riskExperimentation• Beingrevolutionarydoesnotmeanbeingahigh-risktaker• Cautiousfollowervs.High-risktaker.neitherislikelytopayoffintheageofrevolution.

2.4WheretoFindEntrepreneurshipWithinaCompanyCorporateentrepreneurshiptakesmanydifferentformsintheorganisationanditcanbemanifestedindifferentways.7waysinwhichentrepreneurshipismanifestedinestablishedcompaniesare:

1. TraditionalR&Do Manycompanieshavededicatedstaffwhoaretechnicallyqualifiedthatworkonimprovingexisting

productsanddevelopingnewones.o Anynumbersofprojectsareunderwayatagiventime.o Projectsarecloselytiedtostrategicdirectiono Makesiteasyforeveryoneelseinthecompanytoescaperesponsibilityforinnovation

2. Adhocventureteamo Seniormanagementcommitstoanopportunity,orfindsitselfneedingtorespondtoanimpending

competitivethreat.o Puttogetherateamofemployees,chargethemwithcomingupwithaspecificinnovationandsetthem

upautonomously,outofthemainstream.o Demandingdeadlinebutampleresourceso Goodataccomplishingmissionbutnotsustainedentrepreneurship

3. Newventuredivisionso Permanentunitisestablishedwheretheobjectiveisbreakthroughinnovationandthecreationofnew

markets.o Difficultyingettingmainstreamtoaccepttheinnovation

4. Championsandmainstreamo Entrepreneurshipcanoriginatefromanypersonincompanyo Developconceptsandattempttoselltoseniormanagement

5. Acquisitionso Achieveentrepreneurialgrowththroughacquisitionsofothercompanieso Challengeistoinstilitsvalueandcultureonacquisition

6. Outsourcinginnovationo Companiesbuyingsomeoftheintellectualcapitalofothercompaniesandindividuals

7. Hybridapproacheso Realityisthatorganisationsareexperimentingtodaytospurentrepreneurialperformance.o Tryvariousapproaches

2.5GeneralFrameworksforUnderstandingCorporateEntrepreneurshipTherearethreeintegrativeframeworksforunderstandingcorporateentrepreneurshipintheorganisation.Theseframeworksmakeitclearthatcorporateentrepreneurshipisanorganisation-widephenomenonandthatitshouldbeinterwovenwitheveryaspectoftheorganisation.Togethertheyhelppaintapictureofthekindsoffactorstheymustcometogetherforentrepreneurshiptohappen.Thethreeframeworksare:

1. Thedomainframework2. Thesustainingframework3. Thestrategicintegrationframework.

1. DomainFramework

GuthandGinsburgarguedomainofcorporateentrepreneurshiphastwotypesofprocesses:a. Internalinnovation-venturingtocreatenewbusinesswithexistingorganisationsb. StrategicRenewall–designofcorporateinitiativesthattransformorganisations

TheextentthatCEoccursandhowitismanifestedaredrivenbyfactorsorganizedintofourdomains:a. Externalenvironment:turbulenceisadriverforentrepreneurshipb. Leadershipwithinthecompanyandtheirfocusandcharacteristics.c. Aspectsofworkenvironmentsuchasstrategies,structures,processesandcultures.d. Companyperformanceandtheextentofthatperformancewhichisdrivenbyinnovativebehaviour

2. SustainingFramework

• Organisationsabilitytosustainentrepreneurshiponanon-goingbasis• Dependantonindividualsundertakinginnovativeactivitiesandpositiveperceptionsoftheorganisationand

continuingtopursuetheseinnovations• Theframeworkindicatesthatatransformationtrigger(internalorexternal)initiateneedforstrategicchanges• Themodelcentresonanindividualemployeesdecisiontobehaveentrepreneurially.• Sustainedentrepreneurialbehaviourissustainedbythebeliefthatthereistopmanagementsupport,rewards,

resourcesandflexibleboundaries.3. StrategicIntegrationFramework

• Thefocusisonon-goingintegrationofentrepreneurshipthroughouttheentireorganisationandnotviewedasadiscreteeventorbehaviour.

• Itshouldcapturetheessenceofwhatanorganisationisaboutandhowitoperates• Thismodelismanifestedthroughthepresenceofthreeelements;

1. Aentrepreneurialstrategicvision2. Apro-entrepreneurshiporganisationalarchitecture3. Aentrepreneurialprocessesandbehavioursacrosstheorganisationalhierarchy

• Thismodelhassixlinkageswhichinclude:1. Individualentrepreneurialcognitionoftheorganisationsmembers2. Externalenvironmentconditionthatinviteentrepreneurialactivity3. Topmanagementsentrepreneurialstrategicvision4. Organisationalarchitecturethatencouragesentrepreneurialprocesses.5. Theentrepreneurialprocessthatisreflectedinentrepreneurialbehaviour.6. Organisationaloutcomesthatresultfromentrepreneurialactions.

Thismodelcanbeusedtoillustratetheperspectivethatentrepreneurshipisanoverallorientationinanorganisation.Thefocusisontheintegrationofentrepreneurshipthroughouttheentireorganisation,asopposedtoviewingentrepreneurshipasadiscreteactivityorbehaviour,oraone-offevent.ThemodelillustratesthatEntrepreneurialintensityhasadirectandpositiveinfluenceoncompanyperformance.Itdoesthisbyintegratingorinterweavingthevisionandmissionofthefirm,thestrategies,Objectivesandstructuresoftheorganisation,andtheoverallorganisationalculture.

CHAPTER3–CAPTURINGTHEENTREPRENEURIALORIENTATIONOFTHEFIRMHerewefocusonhowwemeasuretheCEofanorganisationthroughthedimensionsofinnovation,risktakingandproactivenessagainstthefrequencyortimelinesthattheydoitin.Corporateentrepreneurshipisreflectedintopmanagement’srisktakingwithregardtoinvestmentdecisionsandstrategicactionsinthefaceofuncertainty,theextensivenessandfrequencyofproductinnovation,therelatedtendencytowardtechnologicalleadershipandthepioneeringnatureofthefirm,asisevidentinthepropensitytocompeteaggressivelyandproactivelywithindustryrivals.3.1ExploringtheDimensionsofEntrepreneurshipCorporateentrepreneurshipisreflectedintopmanagement’srisktakingwithregardtoinvestmentdecisionsandstrategicactionsinthefaceofuncertainty,theextensivenessandfrequencyofproductinnovation,therelatedtendencytowardtechnologicalleadershipandthepioneeringnatureofthefirm,asisevidentinthepropensitytocompeteaggressivelyandproactivelywithindustryrivals.Thethreedimensionsofcorporateentrepreneurshipare:

1. Innovativeness2. Risktaking3. Proactiveness

3.1.1Dimension:InnovativenessInnovativenessreferstotheextenttowhichanorganization,simplystated,doesthingsinnovel,differentanduniqueways.Arangeofpossibilitiesexist:

1. Neworimprovedproducts2. Neworimprovedservices.3. Processinnovation–newandbetterwaystoaccomplishatasksuchasinnovativeproductiontechniques.

Pressuretoinnovatecomesfrombothinternalandexternalforces.Externalforcesinclude:

• Emergenceofnewandimprovedtechnologies• Theglobalizationofmarketsincreasingcompetitivepressures• Fragmentationofmarketsintensifyingcustomerpressure.• Governmentregulation• Dramaticsocialchange.

Internalforcesinclude:• Pressuretocutcostanddevelopnewcapabilities• Abilitytoattractandretainhigh-qualityemployees

Thepushforinnovationmanifestsinvariousways:

• Anincreaseinthenumberofinnovationprojectsunderwaywithinacompany• Companiesmustbecomefastertoreducetimefromideainnovationtolaunch• Abilitytoinnovatefasterrequiresmoredepartmentsandfunctionalareastobeinvolvedintheprocess

Theheightenedimpactofinnovationactivityonsuccessratesislessclear,onewouldexpectthemoreacompanyinnovates,thebettertheywillgetatit.Thisisnotthecase.Maximizinginnovationsuccessratesmaybelessimportantthanminimizingthecostsofinnovationfailures,thiscanbedonebymakingresourcesavailableinstages.Managementofinnovationmaybeconsideredanoxymoron,managementisaboutcontrol,whileinnovationisunknownandunpredictable.Innovatorsoftenbreakrulestoaccomplishtasks,adilemmainthatemployeeswhobreakrulesdonotlastincompanies.

DilemmasofInnovation1. Notallentrepreneursareinnovatorsbutsuccessfulentrepreneurshipinvolvescontinuousinnovation2. Innovationisabouttheunknown,managementisaboutcontrol3. Innovationbreaksrules,peoplewhobreakrulesdon’tlastincompanies4. Successfulinnovationneedstohavebothfreedomanddiscipline,theissueofbalance5. Failureofinnovationislikely,ifcompaniesdon’tinnovatetheywillfail6. Aninnovationsucceedsbecauseitaddresscustomerneeds.7. Innovationcanberisky,notinnovatingcanberiskyto8. Innovationcanberevolutionaryorevolutionary,thecosts,risksandreturnsdifferforboth.9. Innovatingnewproductsmaymakeexistingproductsobsolete10. Someinnovationsarenotwantedbythecustomers11. Whileassociatedwithbreakingtherulesofthegame,it’saboutanentirelynewgame12. Beingfirsttomarketdoesn’talwaysmeansuccess

Thebestpracticesofcompaniesthatinnovatehavebeenidentifiedintwostudiesofinnovationsuccess:

1. Synectics2. Bestpracticesurvey(ProductDevelopmentandManagementAssociation)

Synectics,ananalysisproducedthreecategoriesoffirms:

1. Stars–High-performingcompaniesthathadsuccessfullyintegratedinnovationandcreativity.2. Seekers–Companiesthatdisplayedanumberofinnovativepracticesbutcameshortininnovative

performance.3. Spectators–Tendtoacknowledgetheimportanceofinnovationbutprovidelittlesupportforit.

Starshaveanumberofcharacteristicsthatdistinguishthemfromtheothers,Synecticsfoundtheyarecrucialsustainedinnovation,theseinclude:

1. CEOfostersinnovation2. Innovationiscriticaltolongtermsuccess3. Conceptofmanagingchange4. Havingwordsinnovationandcreativityinthemissionstatement5. Opennesstooutsideideas6. Formalprogramstoharvestideasandproblemsolving7. Focusoncrossfunctionalcommunications8. Encouragingemployeestotalktocustomers9. Moreinvestmentinresearchanddevelopment10. Creatingbudgetsforinnovation11. Providingrewardsforinnovation12. Havinghighlyproductivemeetings

Bestpracticesurvey(ProductDevelopmentandManagementAssociation)attemptedtoestablishnormsintheacrosscompaniesinthenewproductdevelopmentarea.Theresultsindicatedafewkeyfindings

• Atendencytohaveaformalinnovationstrategy• Relyheavilyoncross-functionalteams• Useformalcriteriatomeasurenewproductperformance• Firmsanticipatedthenumberofnewproductstheywouldintroduceoveratimeperiod,forevery11new

productsonly1waslaunched.

Thestudydifferentiates‘TheBest’fromthe‘TheRest’.• TheBestwereidentifiedas

o Themostsuccessfulortopthirdintheirindustrysuccessratefornewproductdevelopmento Reportedinnovationsuccessrateso Percentageofsalesandprofitsgeneratedfromnewlyintroducedproducts.

• TheRest–allthecompaniesthatfailedtomeetthesecriteria.

3.1.2Dimension:RisktakingRisktakinginvolvesthewillingnessonthepartoftheorganisationtopursueopportunitiesthathaveareasonablelikelihoodofproducinglossesorsignificantperformancediscrepancies.Lossismeasuredintermsoftheprobabilityoflossandthemagnitudeofloss.Incorporateentrepreneurshiptheemphasisisonmoderateandcalculatedrisks.Successfulinnovationsbyorganisationsareafunctionofboththesuccessaverageandthefrequencyofmarketincursions.Riskishighwhencompanies:

IgnorenewPPSopportunitiesanddon’tinnovate.• Companiesthatdon’tinnovatearefacedwithhigherriskof

marketandtechnologyshiftsexploitedbycompetitors.• Withbreakthroughinnovationsthatcreatenewmarkets

Riskislowwhencompanies:• Domoremanageabletrialanderrorexperimentsregularly• Abalancedportfolioofprojectsismanaged

Fromanentrepreneurialstandpointtherearetwosidestotheriskequation:

1. ‘SinkingtheBoat’risk–Whathappensiftheconceptdoesnotwork.Thismaybeasaresultofnotenoughplanning,poorlythoughtoutconcept,badtimingandalreadywell-satisfiedmarketandinappropriatepricelevels.

2. ‘MissingtheBoat’risk-Delayingtheactionsduetoomuchplanningandbeingtoocautiousorconservativeandoftenneedsmoresecurityintermsofadditionalmarketresearch.

3.1.3Dimension:ProactivenessPro-activenessisconcernedwithimplementation,withtakingresponsibilityandwithdoingwhateverisnecessarytobringanentrepreneurialconcepttofruition.Itusuallyinvolvesperseverance,adaptabilityandwillingnesstoassumeresponsibilityforfailure.Itsactingnotreacting,leadingandnotfollowingthemarketandcompetitors.Theproactivenessofanentrepreneurliesinrecognising,properlydefiningandeffectivelycommunicatingthepotentialoftheinventionandtheninachievingacceptancefortheinventionwithinthecompany,gettingitimplemented(ifitisaprocess),launchingit(ifitisaproduct)andachievingcommercialsuccessorfailure.

HomeRunStrategy

Littletonoactivity

INNOVATIVENESS

High

Low

RISK

LotsoftrialsandexperimentsBalancedportfolioofprojects

RELATINGINNOVATIONTORISK

Adistinctioncanbedrawnamong4innovationtypesandtheirrisks:(seerightfigure)

1. Discontinuousinnovation:breakthroughinnovationaddressinganewneedormarkete.g.Cellphone,highrisk

2. Dynamicallycontinuousinnovation:adramaticimprovementoverexistingstate-ofthe-art-solutionthatisnotdisruptivetothebuyer.e.g.Electrictoothbrush,moderaterisk

3. Continuousinnovation:incrementalinnovationenhancesexistingproductswithnewfeatures,e.g.lightbulbthatburnslonger.Companiesdevotetothistypethemost,moderaterisk

4. Imitation–copyingcompetitors,highrisk. TYPEOFINNOVATION

High

Low

RISK

RELATINGTYPEOFINNOVATIONTORISK

Imitation Continuous DynamicallyContinuous

Discontinuous

Reactivenessmanifestsin3keyways1. Seekingnewopportunitiesthatmaynotberelatedtothecurrentlineofoperations2. Introducingnewproductsandbrandsfirst3. Strategiceliminationofoperationsthatareinthematureanddecliningstages

3.1.4CombinationoftheDimensions:TheConceptofDegreeTheextenttowhicheventsareinnovative,riskyandproactive.E.g.afirmadoptsaradicallydifferent(highinnovativeness)andunproven(highrisk)productiontechnology,yetlagsbehindtheindustryleaders(lowProactiveness)Degreeofentrepreneurshipcanbethoughtofastheadditivefunctionofthedimensionsofentrepreneurshipi.e.Degreeofentrepreneurship=thedegreeofinnovativeness+thedegreeofrisk-taking+thedegreeofpro-activeness.Degreeofentrepreneurshipcanbethoughtofasthemulti-plativefunctionofthedimensionsofentrepreneurshipi.e.Degreeofentrepreneurship=thedegreeofinnovativenessxthedegreeofrisk-takingxthedegreeofpro-activeness.3.2EntrepreneurialIntensity:CombiningTheDegreeandFrequencyofEntrepreneurshipThedegreeofentrepreneurshipreferstothelevelorextenttowhicheachofthedimensions,innovativeness,risktakingandproactivenessoccursintheorganisationandcanberelatedtotechnologicalchange.Thefrequencyofentrepreneurshipreferstohowmanyentrepreneurialeventstakeplacewithinagivenperiodoftimeandcanberelatedtotheintensityofcompetition.Ifthedegreeofentrepreneurshipandthefrequencyofentrepreneurshiparecombined,wecanmeasuretheintensityofentrepreneurshipintheorganisation.

• Companiesthatdisplayalowdegreeandfrequencyofentrepreneurshipareperiodic/incrementalinentrepreneurialintensity.

• Companiesthatdisplayalowdegreeandhighfrequencyofentrepreneurshiparecontinuous/incrementalinentrepreneurialintensity.

• Companiesthatdisplayahighdegreebutlowfrequencyofentrepreneurshipareperiodic/discontinuousinentrepreneurialintensity.

• Companiesthatdisplayahighdegreeandfrequencyofentrepreneurshiparerevolutionaryinentrepreneurialintensity.

• Companiesthatdisplayanaveragedegreeandaveragefrequencyofentrepreneurshiparedynamicinentrepreneurialintensity.

Entrepreneurshipismoreevidentincompanieswithflatstructures,controlsystemscontainslack,appraisalsystemsincludeinnovationandrisktakingcriteria,jobsarebroadinscopeandrewardsystemsencourageabalanceofindividualismandgrouporientation DegreeofEntrepreneurship

Innovativeness,risk-taking,proactiveness)

High

Low

FrequencyofEntrepreneurship(numberofevents)

THEENTREPRENEURSHIPGRID

Low High

Continuous/Incremental

Periodic/Incremental

Revolutionary

Periodic/Discontinuous

Dynamic

3.3ApplyingtheEntrepreneurialGridtoOrganisations151Theentrepreneurialgridisausefultoolformanagerswhoareattemptingtodeterminetheroleofentrepreneurshipwithintheorganisation.Theentrepreneurialstrategyofacompanycanbedefinedbyplottingcompaniesonthegrid.Bothinternalandexternalfactorscandeterminewhereacompanyfallsontheentrepreneurialgrid.3.4ApplyingtheEntrepreneurialGridtotheLeveloftheIndividualManagerTheentrepreneurialgridcanbeusedtodeterminetheentrepreneurialintensityofindividualmanagers.Theentrepreneurialintensityofanindividualisnotonlydeterminedbythefrequencyanddegreeofentrepreneurship,butalsobytheindividual’sresponsetoenvironmentalcircumstancesandtheindividual’spersonalitytraits.3.5ThingsWeKnowandDoNotKnowAboutEntrepreneurialIntensity

• Entrepreneurshipinorganisationsmatters,becauseresearchhasproventhatorganisationswithastrongerentrepreneurialorientationperformbetter.Theexhibitionofentrepreneurialintensitygenerallyimprovesthefunctioningandperformanceoftheorganisation.

• Thereisnobestplaceontheentrepreneurialgrid.Theidealpointisindustryandmarketspecific.• Withincompanies,theentrepreneurialorientationcanbeexpectedtodiffersignificantlybetweenvarious

divisions,units,departmentsandareas.• Itisnotknownunderwhatconditionsentrepreneurialdegreeisthestrongestcontributortocompany

performance,orifentrepreneurialfrequencyisthestrongestcontributortocompanyperformance.• Whatisnotknownisthetypesandamountsofcostsassociatedwithentrepreneurialintensity.• Entrepreneurialintensityislikelytoplayaroleindeterminingtherelationshipsbetweenthenatureofthe

externalenvironmentoftheorganisation,thestrategyoftheorganisation,andtheinternalstructureofthecompany.Itwillalsoplayaroleinintegratingthesethreevariables.

• Itisnotclearwhetherhighlevelsofentrepreneurialintensitycanbesustained.

CHAPTER4-HOWENTREPRENEURSHIPTAKESDIFFERENTFORMSHighlevelsofentrepreneurialintensity(degreeandfrequencyofentrepreneurship)canbeachievedinmanyways.Entrepreneurshipismanifestedincompanieseitherthroughcorporateventuringorstrategicentrepreneurship.Eachoftheseconceptsisexplained.ThedifferentformsthatcorporateentrepreneurshipcantakearedelineatedinfigureCorporateventuringincludesvariousmethodsforcreating,addingto,orinvestinginnewbusiness.Strategicentrepreneurshipinvolvesinnovationsforcompetitiveadvantageinanyofthe5areasbeing:strategy,productsoffered,marketsserved,internalorganisationorthebusinessmodel.

CorporateEntrepreneurshipCorporateVenturing Strategicentrepreneurship

• Internalcorporateventuring • Strategicrenewal• Cooperativecorporateventuring • Sustainedregeneration• Externalcorporateventuring • Domainredefinition

• Organizationalrejuvenation • Businessmodelreconstruction

4.1.CORPORATEVENTURING:BRINGINGNEWBUSINESSTOTHEORGANISATION4.1.1Theconceptofcorporateventuringanditsmodes

Corporateventuringincludesvariousmethodsforcreating,addingto,orinvestinginnewbusinessandisdoneinthreeways:

1. Internalcorporateventuring:• NewbusinessisCreatedanownedbytheorganisation• TypicallyResideswithinthecorporatestructure• Occasionallymaybelocatedoutsidethefirm

2. Cooperativecorporateventuring:• Referstoentrepreneurialactivityinwhichnewbusinessesarecreatedandownedbythecorporation

togetherwithoneormoredevelopmentpartners.• Theyexistasexternalentitiesandoperatebeyondtheorganisationalboundaries

3. Externalcorporateventuring:• Entrepreneurialactivityinwhichnewbusinessesarecreatedoutsidetheorganisationandsubsequently

investedinoracquiredbytheorganisation• Newbusinessmightbedevelopedthroughasingle,doubleorallthreeventuringnodes.Afirmstotal

venturingactivityisequaltothesumoftheventuresenacted.

4.1.2.WhatisNewBusiness?Corporateventuringisessentiallythecreationofanentirelynewbusinessintheorganisation,Therearetwowaysofdefininganewbusiness.Thefirstisusingtheproduct/marketgrowthmatrix.

• Growthincurrentmarketwithnewproducts=productdevelopmentstrategy• Growthincurrentmarketwithcurrentproducts=marketpenetrationstrategy• Growthinnewmarketswithcurrentproducts=marketdevelopmentstrategy• Growthinnewmarketswithnewproducts=diversificationstrategy

Thesecond,lessrestrictive,definitionofanewbusinessincludesintermediate-levelvariationsofmarketandproductnovelty.4.1.3.MotivesforCorporateVenturingResearchhasidentifiedtwosetsofmotivesforembarkingoninternalventuring,leveragingandlearning.

1. Leveraging:Toexploitexistingcorporatecompetenciesinnewproductormarketarenas.

a. Exploitunderutilisedresources,buildanewbusinessaroundinternalcapabilitiesb. Extractfurthervaluefromexistingresourcesforproductmarketsnotcurrentlybeingservedc. Applypressureoninternalsuppliers,makenewbusinessthatbecomesthesupplierd. Spreadtheriskandcostofproductdevelopmente. Divestnoncoreactivities,newbusinesstopursueopportunitiesthatthefirmisinagoodpositiontoexploit

2. Learning:Toacquirenewknowledgethatmaybeusefulinexistingproductsandmarketarenas.a. Learnabouttheprocessofventuring,newbusinessisanexperimentb. Developnewcompetencies,newbusinessforgettingskillsandtechnologiesc. Developmanagers,newbusinessisatrainingareaforindividualdevelopments

4.1.4Corporateventurecapital

Internalcapitalfundsareusedtoinvestinexternalnewventuresthatarestrategicallyimportantorfinanciallyattractive.Externalventurefundsareownedandcontrolledbymultiplepartnersthattargetnewbusinessintechnologyproductdevelopmentareas.CVinvestmentsareeitherstrategicorfinancialobjectivesorthedegreeoftheoperationalcapabilitiesofthenewbusiness.Fourtypesofventurecapitalinvestment1. Drivinginvestments:-strategicrationalewithtightoperationallinksbetweenstart-upsandtheinvestingcompany.

Theseinvestmentsextendtheorganisationspresenceinproduct-marketortechnologicalarenas.2. Enablinginvestments:-strategicrationalewithlooseoperationallinksbetweenstart-upsandtheinvesting

company.Theseinvestmentscomplimentthestrategyofthecorporationbystimulatingdemandforitscurrentproductsthroughthedevelopmentoflargerecosystems.

3. Emergentinvestments:-financialrationaleandtightoperationallinksbetweenstart-upsandtheinvestingcompany.Theseinvestmentsaretargetedtowardsstart-upswho’ssuccessmayhavestrategicrelevance.

4. Passiveinvestments:-financialrationaleforinvestmentswithlooseoperationallinksbetweenstart-upsandtheinvestingcompany.Theseinvestmentsarediversificationactionswherethecompanyactsasamoneymanagerorinvestmentintermediary.

4.2.StrategicEntrepreneurship:InnovatinginPursuitofCompetitiveAdvantage.Strategicentrepreneurshipisasecondmajorcategoryofapproachestocorporateentrepreneurship.Essentially,itinvolvesorganisationallyconsequentialinnovationsthatareadoptedinthepursuitofcompetitiveadvantage.Theinnovationscanrepresenteitherfundamentalchangesfromtheorganisation’spaststrategiesorbasedonwhichtheorganisationisfundamentallydifferentiatedfromitsindustryrivals.Strategicentrepreneurshiptakes5forms:

1. Strategicrenewal-Seekstoredefineitsrelationshipwithitsmarketorindustrycompetitorsbyfundamentallyalteringhowitcompetes

2. Sustainedregeneration-Continuouslycreatesnewproductsandservicesorentersnewmarkets.Theyareinconstantpursuitonentrepreneurialopportunities.

3. Domainredefinition-Proactivelycreatesanewproductmarketarenathatothershavenotrecognisedoractivelysoughttoexploit.Firmsmoveintouncontestedmarkets(‘blueoceans’)whichcangiverisetonewindustriesorredefineexistingboundaries.

4. Organisationalrejuvenation–Afirmseekstosustainorimproveitscompetitivestandingbyalteringitsinternalstructureandprocesses.Theobjectiveistocreateasuperiororganizationalvehiclewhichthestrategycanbeimplemented.

5. Businessmodelredefinition-Findsthefirmapplyingentrepreneurialthinkingtothedesignorredesignofitsbusinessmodelinordertoimproveoperationaldeficienciesorotherwisedifferentiateitselfinwaysvaluedbythemarket.

4.3THEBUSINESSMODELASAVEHICLEFORCORPORATEENTREPRENEURSHIPAbusinessmodelcanbedefinedasa“conciserepresentationofhowaninterrelatedsetofdecisionvariablesintheareasofventurestrategy,architectureandeconomicswillbeaddressedtocreatesustainablecompetitiveadvantageindefinedmarkets”Thebusinessmodelshouldaddresssixquestions:

1. Howdoesthefirmcreatevalue?2. Forwhomdoesthefirmcreatevalue?3. Whatisthesourceofinternaladvantageorcorecompetency?4. Howdoesthefirmexternallydifferentiateitselfinthemarketplace?5. Whatisthemodelformakingmoney?6. Whataremanagement’sgrowthambitionsoverwhattime?

Decisionscanbemadeatthreelevelsregardingtheabovequestions:

1. Foundationlevel-managementmakesgenericdecisionsregardingwhatthebusinessisandisnot,andensuressuchdecisionsareinternallyconsistent.Thisleveladdressesbasicdecisionsineachofthesixareas.

2. Proprietarylevel–entailsinnovationthatisuniquetoaparticularentrepreneurandventure.Thislevelisstrategicspecificandtheapproachisnoteasytocopy

3. Rulelevel–Delineatesguidingprinciplesthatgovernexecutionofthedecisionsmadeatlevelsoneandtwo.Theseguidelineshelpensurethemodelsfoundationarereflectedinongoingstrategicactionsofthefirm.

4.4OPENINNOVATIONREVOLUTIONAnopeninnovationrevolutionisageneralapproachtoinnovationthatimpliesthattheorganisationisnotsolelyreliantonitsownresourcesfortechnology,productorbusinessdevelopment.Inputsininnovationareobtainedfromoutsidesources.Fourreasonswhycompaniesareincreasinglypursuinganopeninnovationmodel:

1. Importingnewideasisagoodwaytomultiplythebuildingblocksofinnovation.Externaltechnologyhelpsinnovationoutputs

2. Exportingideasisagoodwaytoraisecashandkeeptalent.Theseideascanbemarketedandcreatevalue3. Exportingideasgivescompaniesawaytomeasureaninnovation’srealvalueandtoascertainwhetherfurther

investmentisrequired.4. Exportingandimportingideashelpscompaniesclarifywhattheydobest.Helpsidentifywherethetrue

competitiveadvantagelies

TOPIC2-DESIGNINGENTREPRENEURIALORGANISATIONSTheworkofcreativeandinnovativeemployees,appropriatehumanresourcespracticesandorganisationalstrategy,structureandculturethatfosterthedevelopmentofinnovationallcontributetothecreationofanentrepreneurialorganisation.CHAPTER6CORPORATESTRATEGYANDENTREPRENEURSHIPOrganisationalstrategyattemptstodeterminewhereafirmwantstogoandhowitisgoingtogetthere.Whenentrepreneurshipisaddedtostrategy,wherethefirmcangoandhowfastitgetstherearegreatlyenhanced.Someofthereasonswhyentrepreneurshipisaddedtostrategyarebecauseofthechanginglandscapes.Theyarefilledwithchaos,complexity,contradictionandchange:

Change

Noorganisationisimmunetoimmensepressureofchange.Inthepasttheplayingfieldwaslevel,ifnottotheiradvantage.Theruleswereobviousandstructurewasthemanager’sfriend.Hierarchyprovidedcontextandorientation.Therewasalwayssufficienttime.Today’senvironmentisnothinglikethepast.Uncertaintyiscommonplace.

Complexity

Complexityisanothercriticalforceinthenewlandscape.Changecomesfrommanydifferentdirections,oftenatthesametime.Therearenewmarkets,technologies,economicrealities,demographicpatternsetc.customergroupingsareshiftingandbecomingmoredifferentiated.Competitorscomeandgo.Further,changeinoneareainteractswithchangeinotherareas.Theneteffectisthatthereismorechangetomanageanditismuchmorecomplex!

Chaos

Thecommonlanguagemeaningoftermchaosisconfusion,andconfusiondescribesthenewbusinesslandscape.Randomeventscancauseextremeconsequencesinbusiness.Smallchangesorshockstothesystem,inwhichthebusinessoperates,canhaveamajorimpactonthebusinessitself.

Contradiction

Finally,thebusinessenvironmentisfilledwithmanycontradictions,anddealingwithparadoxbecomesacriticalaspectofmanagingthenewcompetitivelandscape.

Not1oranotherbutrather1andanother.Embraceitandacceptambiguity

Dominantlogic–doesitfitthelandscape?

Dominantlogicreferstothewayinwhichmanagersconceptualisetheirbusinessandmakeresourceallocationdecisions.Accordingly,thedominantlogicthatisoptimalforanorganisationtodaymaynotbeappropriateforthatorganisationfiveyearsfromnow.

• It’stheprevailingmind-setofthebusiness• Managersfocusoncurrentclimateandonlyconsiderinformationifitbelievesitfitswiththedominantlogicof

thecompany• Willlimitfuturepotential• Capturesthecurrentcompetitiveadvantage• Mustbeperiodicallyunlearnt

• Onemeansofcreatingadynamicdominantlogicistomakeentrepreneurshipthebasisuponwhichtheorganisationisconceptualisedandresourcesareallocated.

TheroleofStrategicmanagementinCorporateStrategy

EntrepreneurshipmayserveasthedominantlogicoftheorganisationandcanplayanimportantroleinitsstrategyWhiledominantlogicsetsthecontextofthecompany’soveralldirection,strategicmanagementmorespecificallydefinesthatdirectionanddetermineshowitwillbeaccomplished

Strategicmanagementbasicallyinvolvestheformulationoflong-termplansfortheeffectivemanagementofexternalopportunitiesandthreatsinviewofthecompany’sinternalstrengthsandweaknesses.

o Processthatguideshowthebasicworkoftheorganisationisapproachedo Ensurescontinuousrenewalandgrowtho Providescontextfordevelopingandimplementingthestrategythatdrivesoperationso Isacontinuoussearchfornewsourcesofcompetitiveadvantageo Createsasenseofunityandconsistencyofactionthroughouttheorganisationo Peopleworktowardsacommonobjectiveo Seesthebigpicture3to5yearsfromnow

IntegratingEntrepreneurshipwithStrategy

Theintegrationofentrepreneurshipwithstrategyhastwoaspects,namely:• Developingacorporatestrategythatisentrepreneurial–thatis,applyingcreativityandentrepreneurialthinking

tothedevelopmentofacorestrategyfortheorganisation.o Highlyentrepreneurialstrategiesarenotobviouso Theyhaveahighrisko Corporateventuringandstrategyareweaklylinked(onedrivestheother)

• Developastrategyforentrepreneurship–thisreferstodevelopingstrategiesforentrepreneurialactivitiesintheorganisation.

ManaginganInnovationStrategyMostcompaniesdonothaveastrategyforinnovation.Theirinnovationeffortsareirregular,infrequentandoftenreactive.Ifacompanydidhaveastrategyforinnovation,specificgoalsandobjectivesforinnovationwouldexist,andthesegoalsandobjectiveswouldbemonitoredandperformancewouldbemeasured.Adjustmentswouldbemadetokeepthecompanyontrackintermsofitsinnovationstrategiesandgoals.7corecomponentsofaStrategicInnovation

1. Companycommitstofindinganddevelopingnewproducts2. Innovationisacompanywidetask3. Strategiesareformulatedforthenatureofnewproductsandinnovations4. Strategiesareformulatedforthenatureoftechnologiesutilised5. Strategiesareformulatedforthetypeofmarketstobeserved6. Clearsenseofhowaggressiveordefensivetheinnovationeffortsofthecompanyareintendedtobe7. Aplannedapproachforsourcingnewproductideas

Justasacompanymanagesaportfolioofproductsandservicesandbusinessunits,italsoneedstomanageaportfolioofinnovations.Managementshouldattempttobalanceinnovationprojectsbybalancing

o high-risk,high-returnprojectsagainstlow-risk,low-returnprojectso discontinuousordynamicallycontinuousinnovationsagainstcontinuousinnovationandimitationso productsandservicesintendedformarketsthecompanycurrentlyservesagainstonesformarketsthatare

newtothecompanyo projectswithshorterdevelopmentcyclesandpay-offsagainstoneswithlong-termoutcomeso projectsutilisingnewtechnologies

Companiesshouldmoveawayfromaprojectmentalitytoaportfoliomentalitywheninvolvedininnovationprojects.Withaportfolioapproachthecompanyisconcernedabouttheoverallsuccessofinnovationprojects,acceptingthepossibilitythatsomefailuresmayoccur.Theportfolioapproachallowstrade-offsbetweenprojectsandallowsacontinuousstreamofinnovation.Integratingentrepreneurshipandstrategywithinthecorporationrequiresanunderstandingoftheroleoftechnologyasadeterminantoforganisationalsuccess.Technology,entrepreneurshipandstrategy

Inrecentyears,technologyhasplayedabigroleineverybusiness.Infact,thehighlevelsoftechnologicaldevelopmentandproliferationhaveresultedinadriveforthecommercialisationofnewtechnologyandhighlevelsofentrepreneurship.IthasprovidedtheentrepreneurwithbothopportunityandthreatsWecandefinetechnologyasthetools;devicesandknowledgethathelptransforminputsintooutputs.

Technologyisanimportanttriggerforentrepreneurialactivity.Representsopportunityandthreat.

Innovationstrategyshouldbecomplementedbyatechnologystrategy.Technologystrategyconsistsoftheoveralldecisionsandactionsthatrelatetoacompany’sacquisitionandutilisationoftechnology.

Elementsoftechnologystrategyinclude:

• Technologicalchoices:whattypeoftechnology• TechnologicalSources:developedinternallyorboughtexternal• Competitivetiming:doweleadorfollow• Technologicalinvestmentlevel:howmuchR&Datwhatcost• Technologicalpolicies:criteriaforevaluationofR&D• R&Dfocus:whatareweworkingonPPS• Modeloftechnologicalinnovation:isthecompanyproductdriven,marketortechnologicallydriven

TechnologiespushversusMarketPull

Organisationsusuallyhaveatechnology-pushand/ormarket-pullorientationtoinnovation.Withtechnology-push,employeestrytofindtechnologicalpossibilitiesanddevelopproductsbasedonthem.Theyfocusonthetechnologyandassumethatthemarketwillwanttheproduct.Market-pullapproachestoinnovation,ontheotherhand,startwithcustomers’needs.Customersarethesourceofnewproductideasandtheirinputisinstrumentalinthedesignanddevelopmentofproducts.Usuallytechnologypushapproachesresultinbreakthroughinnovation–bothdiscontinuousanddynamicallycontinuousinnovation.Buttheseinnovationsmaynotbewhatcustomerswant.Market-pullapproachesresultinincrementaladvances–bothcontinuousinnovationandimitation.However,theseinnovationsusuallyhaveshort-termpay-offs.Managementshouldensurethatthereisamatchbetweentechnology-pushandmarket-pullinnovation.Technologicalpossibilitieshavetobeexploredwithinthelimitsofunderstandingcustomersegmentsandcustomerneedsnow,andinthefuture.

KeyStrategicConcepts:Entrepreneurshipasthedriver

Innovationisthekeytodevelopingsuccessfulexploitationofcompetitiveadvantage.Coupledwithcontinuouslearningprovidesacompetitiveedge.

Strategicformulation:

• Strategicadvantage.Thisreferstoestablishingincustomers’mindsanenduringvaluedifferencebetweentheproductsandservicesoftheorganisationandthoseofcompetitors.

• Strategicpositioning.Thisreferstothewaytheorganisationwantstobeperceivedinthemarketplace.• Strategicflexibilityandadaptation.Strategicflexibilityinvolvesawillingnesstorethinkcontinuouslyand

makeadjustmentstothecurrentactionplans,strategies,structure,cultureandmanagerialsystemsasneeded,inordertoremaincompetitive.

• Strategicleverage.Leveragingisacreativeprocessthatresultsindoingmorewithfewerresourcesbyfindingandusingresourcesmoreintelligentlyandinamorefocusedmanner.

Entrepreneurialstrategieswillfailifnotaccompaniedbymanagementpracticesthatsupportandreinforcethestrategies.

HowtomakeanEntrepreneurialStrategywork:somecontributingfactors

Developinganentrepreneurialvision

• Greatorganisationsaredrivenbyclearvisions.Itisimportantthatseniormanagementconceptualiseandcommunicateavisionoforganisationwideentrepreneurship

Increasingtheperceptionofopportunity

• Entrepreneurialbehaviourisopportunityseekingbehaviour.Entreprenurialstrategyrepresentsaquesttofindandexploituntappedopportunities.Theorganisationshouldbroadentheopportunityhorizon.

Institutionalisingchange

• Changeisgood.Itenrichespeople,addingexperienceanddeepeninginsights.Itrepresentsnewopportunities.Youmustchallengethestatusquo.

Instillingthedesiretobeinnovative

• Innovationmustbeexpectedfrompeoplewhodonotseethemselvesasinnovators.Thedesiretobeinnovativestemsfromasenseofinvolvementinandresponsibilityforinnovativeprojects.

Investinginpeople’sideas

• Ideas,togetherwithpeople’spersonalcommitmenttothem,representthesinglegreatestassetinacompany.

Sharingriskandrewardswithemployees

• Sustainableentrepreneurshiprequiresthatemployeesexperiencesomeoftheriskandmeaningfullyparticipateintherewards.

Recognisingtheimportanceoffailure

• Failureisasignofexperience,learningandprogress.Newthingsmeanexperimenting.Experimentingmeansriskoffailure.Shouldlearnfromfailure.

ImplementationIssues:FatalVisions

Flaw1:misunderstandingindustryattractiveness

Thereisatendencytoassociateattractivenesswiththoseindustriesthataregrowingrapidly.Attractivenesshasmuchmoretodowithhighbarrierstoentry,theabilitytodifferentiate,theexistenceoffeweffectivesubstitutesandtheabilitytoinfluencesuppliersandcustomers.Themorehightechandglamorousabusinessis,themorelikelytherewillbehighercompetitorsenteringthemarketandtherebymakingitunprofitable.

Flaw2:norealcompetitiveadvantage

Merelycopying,imitating,orslightlyimprovinguponthestrategyofcompetitorsisnotentrepreneurial.Itmayseemeasierandlessriskybutitmeanstheventurehasnorealcompetitiveadvantage.Tosucceed,newventuresmustbeunique.

Flaw3:pursuinganunsustainablecompetitiveposition

Companiestrytobecustomerserviceleaderswhencustomerserviceinnovationsareeasytomimic.Theyattempttobetechnologyleaderswhentheydonothavethenecessaryinternalcapacitytocontinuallyproducedesirabletechnicalinnovations.Alternatively,theypursuestrategiesthatplaceconflictingdemandsondifferentpartsofthecompany.

Flaw4:compromisingstrategyforgrowth

Acarefulbalancemustexistbetweengrowthandthecompetitivestrategythatmakesabusinesssuccessful.Pressureexistforcompaniestomaximisesalesgrowth,whichoftenmeanscapitalizingonshorttermopportunitiesthatdistractmanagementfromthecorestrategy.

Flaw5:failuretoexplicitlycommunicatestrategyinternally

Itisessentialtoclearlycommunicatethecompany’sstrategytoeveryemployee.Theassumptionthatemployeesknowthestrategyandunderstanditsimplicationsforhowtheydealwithparticularissuesordecisionsisadangerousone.Managementmustbeexplicitregardingthestrategyandwhatitmeansforeachfunctionaldepartment.

CHAPTER7-STRUCTURINGTHECOMPANYFORENTREPRENEURSHIP7.1TheComponentsofStructureStructuresarecreatedtobringorderandlogictoacompany’soperations.Start-upsbeginwithverylittlestructure,butasthecompanyevolvesandgrows,thestructurebecomesincreasinglycomplex.Organisationalstructureisdefinedasthearrangementofworkflow,communicationandauthorityrelationshipswithinanorganisation.Itincludestheorganisationofdepartmentsorworkunits.Designingastructuredealswithissuesofdifferentiationandintegration;

• Differentiation-Referstothewaysinwhichdecisionmakingauthorityisdistributed,tasksaregroupedandpeopleassignedtothetasks.

• Integration–ReferstothewaysinwhichpeopleandfunctionsarecoordinatedIndesigningtheorganisationalstructure,fourmajorpolicyareasareconsidered:

1. Specialisation–Isconcernedwiththenumberandtypesofspecialtiestobeusedinperformingtheworkofthecompany.Morespecialisationmeansmorespecifictasksandleadstointegrationissues.Environmentsthatproducediscontinuousordynamicallycontinuousinnovationsrequiremorespecialisationthancontinuousandimitationinnovations

2. Shape-Thenumberofpeopleformingdepartmentsineachareaathierarchicallevels.Morepeopleinadepartmentrequirefewerlevels.Morepeopleimplyabroaderspanofcontrolwhilefewerlevelsmeanstheorganisationisflatter.Flatterstructuresresultinbettercommunicationandfasterdecisionmaking,greaterdelegationofresponsibility.Hierarchicalstructurestendtorelyonpowertosettleissuesratherthandebate

3. Thedistributionofpower-Occursbothverticallyandhorizontally.Vertically,powerisconcentratedinthehigherlevels,suggestingmorecentralisedstructureoritcanbepusheddownintheorganisationempoweringlowerlevelstomakedecisions.Decentralisedstructuresareconsistentwiththeencouragementofindividualinitiative,experimentationandinnovationbutit’shardtocontrolalltheindividualeffortsandseeiftheyareinlinewiththestrategicdirection

4. Departmentalisation-Formingpeopleintodepartment’s,groupsandareasoncetheorganisationreachesacertainsize,normallygroupedaccordingtofunctions

7.2HowStructuresEvolveAnorganizationhastoadjustitsstructurecontinuallytoprovideforexternalpressuresandinternalpriorities.Asanewstructureisincorporatedintotheorganization,newrelationshipsbetweenthestructuralcomponents,thecompanyageandsize,thetechnologyof,theconditionsofindustry,etc.

• Initialstructureishighlyinformal,notitles• afunctionalstructureisputinplacewithcentralisedcontrol• decentralisedandgeographicalorganisationalstructuresbuiltaroundprofitcentres• movementtowardsmergedproductgroupsorstrategicbusinessunitswithcentralisedadminandstaff

functionsatheadoffice• thenmatrixstructures,crossfunctionalteamsandtheprocessofintegration

7.3TypesofStructure:LinkstoanEntrepreneurialStrategyWhenanorganizationalstructureisdesigned,itislinkedtotheorganizationalstrategyandtheexternalenvironmentinwhichtheorganizationoperates.Fourtypesofstructureexist:1. SimpleStructure

• Highlyinformalwithcoordinationoftasksaccomplishedbydirectsupervision• Strategiesdeterminedatthetop• Littlespaceforspecialisationoftasks• Norules,procedures

• Littlebureaucracy,simpleinformationsystemsandlittleintegrationneeds• Workswellinsmallrapidgrowthventuresoperatinginfragmentedindustries

2. MachineBureaucracy• Rigidstructure• Coordinationoftasksachievedthroughstandardisationofwork• Hierarchicalandbureaucratic• Formalguidelinesandplansinplace• Largetechnostructureexiststodesignandplanoperations• Technologyisintegratedintooperations• Powerisamongtopexecutives• Workwellinstablepredictableenvironments,producehighvolumesefficiently

3. Organic• Limitedhierarchyandflexiblestructure• Groupsoftrainedspecialistsfromdifferentworkareascollaboratetodesignandproducerapidlychanging

products• Emphasisisonpersoninteractionandfacetofacecommunications• Decentralisedpowerandauthorityislinkedtoexperts• Fewrules• Facilitatetheabilityofentrepreneurialstrategiestoenhancefinancialperformance

4. Divisional• Self-containedprofitcentreforproductsandmarketinglines• Candifferfromoneanotherinstructure• Pressuretoconformandformalisestandardsandprocedures• Operateindependentlyandbecomebureaucraticovertime• Decisionmakingauthorityatdivisionalmanagers• Controlledbycomplexinformationmanagementsystems• Communicationisviaheadoffice

Structuresthatenhancecorporateentrepreneurship

• Aflatandflexiblestructurewouldallowefficientcommunicationbetweenthedifferentlevelsofmanagementandbetweenstaff.Itwouldalsofacilitatecollaborationbetweenstaff.

• Decentraliseddecision-makingauthoritywouldallowemployeestotakethenecessaryactionstosolveproblemsintheirworkenvironment.

• Astructurethatallowsemployeestoexperimentwithnewproductsandthatdoesnotrequireofthemtoadhererigidlytotheirjobdescriptions.

• Astructureinwhichemployeesareencouragedtoparticipateinentrepreneurialteamsandprojects.7.4AnEntrepreneurialStructureandtheConceptofCycling.Thereisanarttodesigningentrepreneurialstructure,conventionalthoughtshouldbeabandoned.Organisationaldesignsthatfacilitatevariety,change,andspeedaresourcesofcompetitiveadvantage.Beloware20unconventionalapproaches.

1. Insistonamaximumoftwolevelsofmanagement.2. Mostbusinesscanbedoneinindependentoperatingunitsof250orfewpeople.3. Inthenextninemonths,eliminateallfist-linesupervisors4. Withinthenextyear,transferone-thirdofallstaffersatthedivisionlevelorabovetocustomerfocused

operatingunitsandthentransferanotherone-third.Thefollowingyear.5. Withinfouryears,reducecorporatestafftoamaximumoftenpeopleperbilliondollarsofrevenue.6. Requireremainingmembersofallcentralstafftoselltheirservicestolineunitsatmarketrates.7. Destroyallorganisationcharts.8. Alltopdivision/corporatemanagerspledgedaystovisitcustomers,suppliersandoutsideindustries.9. Aimforone-thirdemployeeownershipinfiveyears.

10. CEO’sanddivisionmanagersshouldpromoteapositionofsignificantresponsibilityatleastonerabblerouser.11. Nooneservesonastrategicplanningstaffformorethan24months.12. Makesureallworkteamsarelargelyself-contained.13. AllowCEO’sositonamaximumofoneoutsideboard.14. Vacateallfacilitiesmorethanthreestorieshigh.15. In24months,endallphysicalsegregationoffunctionaldepartments.16. Atalloff-sitemeeting,makesureatleast25%ofattendeesareoutsiders.17. Createcorporatevice-presidentsforvariouspositionsincompaniesover$250million.18. In4years,atleastonethirdofdivisionalchiefsshouldbe32oryounger.19. In24monthsmakesurethereisatleastonenon-US/SAboardmember.20. Letnoseniormanagerhaveanofficeofmorethan225squarefeet.

Thetypeofstructurewhereentrepreneurshipshouldflourishinclude:

• Wheretherearefewerlayersorlevelsandspansofcontrolarebroader.• Thegeneraltendencyisforamorehorizontaldesignthanvertical.• Decentralizationandempowermentarethewatchwordsofoperations,whileclearvisionandstrategycome

fromthetop.• Thedominantdirectionintermsofflowofideasisbottom-up,nottop-down.• Smallnessandsimplicitymeaningunitsoperateautonomousandteamsareempowered.• Cross-functionalinteractionsandclashofideasisalsoencouraged.• Thereislessformalizationofrolesandpositionsofthestructures.• Empowermenteffortsaredesignedtobesystematicandconsistent.• Stafffunctionsarekeptlean.

8elementstoenhancecorporateentrepreneurship(ColinandSelvin)–agoodcorporateentrepreneurshipstructure1. Managerscanfreelyvaryoperatingstyles2. Authorityisassignedbasedonindividualexpertise3. Freeadaptationoftheorganisationtochangingcircumstances4. Anemphasisonresultsratherthanprocessandprocedures5. Loose,informalcontrolswithanemphasisonnormofcooperation6. Flexibleonthejobbehaviour,shapedbyrequirementsofsituationsandemployeepersonalities7. Frequentparticipationandgroupconsensus8. Openchannelsofcommunicationwithfreeflowofinformation

Otherelementsofmechanicversusorganicorganisationalstructureinclude:

OrganicStructure MechanicStructure1. Channelsofcommunication

Openwithfreeflowinformation2. Operatingstyles

Allowedtovaryfreely3. Authorityfordecisions

Basedonexpertiseoftheindividual4. Freeadaption

Bytheorganisationtochangingcircumstances5. Emphasisongettingthingsdone

Unconstrainedbyformallylaidoutprocedures6. Loose,Informalcontrol

Emphasisonnormofcooperation7. Flexibleon-jobbehaviour

Permittedtobeshapedbytherequirementsofthesituationandpersonalityoftheindividual

8. Participationandgroupconsensususedfrequently.

1. ChannelsofcommunicationHighlystructured,restrictedinformationflow

2. OperatingstylesMustbeuniformandrestricted

3. AuthorityfordecisionsBasedonformallinemanagement

4. ReluctantadaptionInsistenceonholdingfasttriedandtestedmanagementprinciples.

5. EmphasisonformallaiddownplansRelianceontried-and-truemanagementprinciples

6. TightcontrolThroughsophisticatedcontrolsystems

7. Constrainedon-jobbehaviourRequiredtoconformtojobdescriptions

8. Superiorsmakedecisionswithminimumconsultationandinvolvementofsubordinates.

7.5StructurestoSupportNewProduct/ServiceDevelopmentProjectsStudiesofthenewproductdevelopmentprocessrevealthatfiveindividualandorganisationalrelatedfactorsarerelatedtonewproductsuccess:

1. Across-functionalnewproductdevelopmentteam2. Astrongandresponsibleprojectleader3. Anewproductdevelopmentteamresponsibleforthewholeproject4. Thecommitmentoftheprojectleaderandteammembers5. Intensivecommunicationamongteammembersduringthecourseofthenewproductdevelopmentprocess.

Structuresforproduct/servicedevelopmentTypesoforganisational

structure Description Advantages DisadvantagesNewproductdivision Largeandself-sufficient

divisionCentralisedcoordinationandcontrolTopmanagementattentionassuredResourcesadequateLong-termcommitment

CoordinationwithotherdivisionsInflexibilityduetosizeOpportunityforvestedinterests

Newproductdepartment Departmentwithindivision SpecialisationIntegrationofefforts

FewresourcesLessauthority

Newproductmanager Onemanagerwhoisresponsibleforanewproduct

Simplicity CanoverwhelmonemanagerCooperationfromothersdifficult

Productorbrandmanager Newproductresponsibilityaddedtonormalduties

Bestforlineextensionsormodifications

NotsuitedtotrulyinnovativeproductsManagertornbetweenregularandnewproductduties

Newproductcommittee Standingcommitteewithdiverserepresentation

Severalfunctionalareasinvolved

Dilutesresponsibilityacrossmembers

Cross-functionalprojectteam

Newproductgroupsetupforthedurationofaproject

Flexible,fluid,involvesdiverseperspectives

Oftenhardtogetfunctionaldepartmentsupport

Taskforceoradhoccommittee

Temporarymatrixapproach Tapspecialisedmanagersonfull-orpart-timebasis

Multipledemandsplacedongroupmembers

Ventureteam Internalaswellasexternal Bringsinoutsidersexpertise Maygarnerresources

Patternsdevelopincompaniesovertime.Thereisaneedtofitbetweenmanagementstyleandorganizationstructure.Cyclingoccurswhenthesuccessfulcompanyisabletomovebackandforthbetweencells1and3.Theinferenceisthatcompaniesmovebackandforththroughperiodsofstabilityandconservatismandperiodsofinnovationandchange.Thephenomenonofcyclingrecognisesthatorganicstructuresandmechanicstructurescaneachfacilitatetheaccomplishmentofcertaintasksrequiredforsuccessfulinnovation.

Pseudo-Entrepreneurial

Firms

EffectiveEntrepreneurial

Firms

Efficient

BureaucraticFirms

UnstructuredUnadventurous

Firms

12

43

OrganicMechanistic

Entrepreneurial

Management

Conservative

personnelused greaterthantheworthoftheproject

Outsidesuppliers Contractwithanothercompanytodevelopproduct

Utilisesspecialistsforindependentwork

CanbecostlyCoordinationandcontrolproblems

Multipleorganisationforms Useofhybridformsdependingonnatureofproject

Formdesignedtofitneedsoftheproject

Difficultiesinmanaging,coordinatingandevaluationtheseveraleffortsofseveraluniquestructuralforms.

Indecidingonthestructureoftheorganization,managementis,ineffect,decidingontheextenttowhichthestructurewillbemore:

• Simpleorcomplex• Centralizedordecentralized• Formalorinformal• Autonomousorintegrated• Highlyspecializedormoregeneralist• Fulltimeorparttime

Studiesshow,companiestodayareexperimentingwithnewstructuresandthegreatesttrendappearstobetowardtheuseofmultiplestructuralforms.7.6EntrepreneurialProjects:StructuresWithinStructuresEntrepreneurialprojectsrequireastructureinthemselvesandakeyissueistheconcernabouthowprojectstructureswillfitwithintheoverallorganisationalstructure.Companiesarerecommendedtoadoptanapproachwhereininnovationopportunitiesareproducedthroughthreedifferentinternalchannelsormechanisms.

1. Ray-of-lightprojects• resourcesobtainedinclever,creativeandinformalways• employeesareencouragedtopursuetheirideas• Theemployeeisconcernedwithformulatingtheconceptanddemonstratingtheexistenceofamarket.• Endproductisaplantobesoldtomanagement

2. Emergingpotentialprojects• Conceptsthatarebroughtaboutbyareviewcommittee• Thecommitteereviewsandapprovestheprocessesandallocatesseedcapital.• Theendproductisaformalbusinessplanthatissubmittedtodirectors,ifapproved,theemerging

potentialproductbecomesamainstreamdevelopmentproject3. Mainstreamdevelopmentprojects

• Newproduct,serviceandprocesseffortsprioritizedbyseniormanagement• Formalbudgetsareallocatedandstructureisputinplace• Systematicprocessisfollowedwithkeyperformancebenchmarksmonitoredateachstage• Endproductismajorproductlaunchbymaybedroppedorterminatedalongtheway.

Benefitsofthethreemechanisms:

1. Moreinnovationislikelytoresult2. InnovationisdefinedasacorporatewidetaskandnotjustR&D.3. Interfunctionalinvolvementandcoordinationismuchgreater4. Employeeswilltakeresponsibilityfortheinnovations,championsarelikelytoemergeandaccountabilityforthe

designandimplementation.5. Rayoflightandemergingpotentialapproachesbringmoreflexibilityandspeedtotheinnovationprocessand

costlessmoneythanmainstreamdevelopmentprojects.

7.7StructuringRelationshipsBetweenEntrepreneurialInitiativesandTheCorporation:SomeOrganizationDesignAlternativesHowcancompaniesbestructuredtosupportentrepreneurshipshouldconsidertwofundamentalissues:

1. Whethertheinitiativeshouldbepartoftheinternalorexternalstructureand2. Ifitisinternal,whattypeofstructuraldesigntoemploy.

Ninedistinctdesignpossibilitiesaresuggested,acompanycanuseoneormanyofthemifwarranted,theyare:

1. Directintegration–Highstrategicimportance,strongoperationalrelatedness.Theinitiativeisperusedinmainstreamoperations.

2. Newproduct/businessdevelopment–highstrategicimportance,partialoperationalrelatedness.Aseparatedepartmentfortheinitiativeiscreatedwhereskillsandcapabilitiescanbeshared.

3. Separatebusinessunits–highstrategicimportance,lowoperationrelatedness.Aseparatespeciallydesignedunitiscreated,operationallyanddedicatedlydistinct

4. Micronewventuresdepartment–uncertainstrategicimportance,strongoperationalrelatedness.Anewunitiscreatedwhereautonomouslyemergingentrepreneurialinitiativesareperusedwithoutconstraintofcorporationsstrategy

5. Newventuredivision–uncertainstrategicimportance,partialoperationalrelatedness.Adivisionisdesignedtohouseawiderangeofpotentiallyinterestinginitiativesthatmayormaynotfitwiththecompany.

6. Independentbusinessunits–Uncertainstrategicimportance,lowoperationalrelatedness.Aspeciallydedicatedandindependentiscreatedoutsidethecorporatestructure.

7. Nurturingpluscontracting–lowstrategicimportance,strongoperationalrelatedness.Thecompany’sknowledgeandcompetenciesareleveragedinentrepreneurialinitiativesbyoutsourcingsomepartsandconsistofstrategicassetsfortheinitiative

8. Contracting–lowstrategicimportance,partialoperationalrelatedness.Thecompany’sknowledgeandcompetenciesareleveragedinentrepreneurialinitiativesbycontractingtoanoutsidecompanywheretheknowledgeaddssomevaluetotheinitiative.

9. Completespinoff–lowstrategicimportance,lowoperationalrelatedness.Thetotalseparationoftheentrepreneurialinitiativefromthecorporation.

Akeypremiseisthatnotallentrepreneurialinitiativesarethesameandthusitshouldbereflectedinthestructuresemployedtohousetheinitiatives.Aone-size-fits-allwillnotwork.

CHAPTER8-THEPEOPLEFACTORI:FOSTERINGCREATIVITYWITHINORGANISATIONS8.1TheCreativeIndividualinaCompanyCreativitycanbedefinedastheapplicationofaperson’smentalabilityandcuriositytodiscoversomethingnew.Creativityis,therefore,thecapacitytodevelopnewideas,conceptsandprocesses.Incorporateentrepreneurship,creativityisnecessarytofindnewideasforproducts,findsponsors,obtainmanagementbuyin,formteams,acquireresourcesandovercomeobstacles.Threeperspectivesofsuccessfulcreativityinorganisations:

1. Expertise-Encompasseswhatapersonknowsandcando.Itdefinestheintellectualspaceusedtosolveproblems.

2. Motivation–Canbeextrinsic(desiretoachievecompanyrewards)orintrinsic(internal,intangiblefactors),thelatterbeingmoreimportant.Itisthepersonsinterest,passionanddesiretodosomething.

3. Creativethinkingskills–Thewaysinapproachingproblemsandsolutionsandthetechniquestheyuseforlookingatproblemsdifferently.

Managementcaninfluencetheabovecomponentsofcreativity,managerialpracticesthatresultinemployeesbeingchallenged,providefreedomandgiveaccesstoresources.Well-designedworkteamsandencouragementfromsupervisorsforcreativeoutputsthatarereinforcedbytheorganisationsvalues,systems,structures.8.2TheCreativeProcessIt’seasiertofindacreativesolutionifonefollowsalogicalprocessandthenusessomecreativeproblemsolvingtechniques.Itisafrustrating,learningprocessthatleadstomanydeadends.

Stage1:Preparation-Thecreativeprocessbeginswithaproblemorchallengewheretheindividualgathersinformationandwhereitisdefined.

Stage2:Frustration-Atthisstageasolutiontotheproblemissoughtandproblemismagnifiedbecauseofcreativeblocks.Asolutionmaybedifficulttocomebyandmaysettleforanuncreativesolution.

Stage3:Incubation-Incubationreferstoplacingtheproblem“atthebackofyourmind”oronthe“back-burner”whereyouwouldconsciouslyorunconsciouslyremovesomeofthekeyblocksandtrytofindasolutionorworkthroughtheproblem.

Stage4:Illumination-Thisisthe“aha”momentwhenyoudiscovertheoutlineorcoreofananswerwhichoftenneedstobeadapted,refined,expandedandtestedupon.Stage5:Elaboration-Atthisstagethesolutionor“aha”momentisrefined,adapted,expandedandtested.

However,thecreativeprocessmightnotbequitethatsimpleandstraightforward.Apersoncouldforawhilebestuckinastage,ortherecouldbesometoandfrobetweenthestages.Iftheideaisdiscardedatacertainstage,thepersonhastogobacktothepreviousstage.Theremaybeanumberofproblemsorcreativeblocksthatcanhampertheprocess.8.3CreativeblocksThesametypeofthinkingthatallowsapersontofunctionefficientlyonaday-to-daybasisbecomesamajorconstraintwhentryingtobecreative.Theabilitytomasterthecreativeprocessislinkedtoremovingthesecreativeblocks.

1. Therightanswer Fallacythatthereisonlyonesolution.2. That’snotlogical Thebeliefthatlogickillscreativity.3. Bepractical Theideatoallowpracticalconsiderationshaltssearchfornewideas.4. Followtherules Ignoringthefacttherevolutionaryideasaredisruptive.5. Avoidambiguity Strictadherencetooneperspectiveonasituation.6. Toerriswrong Failuretoseetheconnectionbetweenerrorandinnovation.7. Playisfrivolous Unwillingnesstoacknowledgethecreativepowerofplay.8. That’snotmyarea Restrictionofcreativitythroughthinkingthatisoverlynarrowandfocused.9. Don’tbefoolish Fearoftheunconventionalandofappearingfoolish.

10. I’mnotcreative Theworthblock.Self-condemnationthattrumpstalent,opportunityandintelligence.

Blockstocreativityoriginatefromthreesources:

1. Self-imposedblocks,thatis,theemployeemaybelievethathe/sheisnotcreative2. Creativeblocksimposedbyotheremployees,thatis,otheremployeesmayindicatethatacertainemployee

couldneverberight,orthatwhathe/sheproposesisnotlogical3. Creativeblocksimposedbytheorganisation,forexample,theorganisationmaynottoleratefailure.

Oncethecreativeblocksareremoved,thecreativeemployeecanavailhimself/herselfofanumberofproblem-solvingstylesandcreativetechniquestodevelopnewideas.8.4CreativeTechniquesandQualityThebenefitofusingcreativeproblem-solvingtechniques,suchasbrainstormingandmind-mapping,andunderstandingproblem-solvingstylesisthatitallowsasystematicapproachtoproblemsolving,whichinturnyieldsbettersolutions.Thefollowingthreestandardsforjudgingthequalityofanindividual’sorgroup’screativity:

• Obviousbenefit-Towhatextentdoestheideahaveaclearbenefitoradvantageforthecustomer/user?• Reasontobelieve-Whatsupportingevidenceistheemployeeabletoprovide?Isthecustomer/userlikelyto

believethattheconceptorideawilldeliverthesamelevelofbenefits?• Dramaticdifference-Howdifferentistheideafromconventionalsolutions?

8.5EntrepreneurialPersonalityInadditiontobeingcreativeandfindingthesolutiontoaproblem,thecorporateentrepreneurisresponsibleforimplementingthesolution.He/shehastofindresources,overcomeobstaclesandfindasponsor.Whattraitsandpersonalityshouldthecorporateentrepreneurpossesstobeasuccessintheorganisation?

• Achievementmotivation• Stronginternallocusofcontrol• Calculatedrisktaker• Toleranceofambiguity• Degreeofautonomywhenaccomplishingatask,self-motivated.• Tenaciousanddemonstratesignificantperseverance

Wecanconcludethatnosingleprototypeoftheentrepreneurexistsandthatitispossibletodevelopentrepreneurialcharacteristics.8.6MotivatingEntrepreneurialBehaviour Thedecisiontobeentrepreneurialisbasedonaperson’spersonalcharacteristics,personalgoals,personalenvironment,currentbusinessenvironmentandthenatureoftheidea.Beforeapersonactsonanidea,he/shemakesacomparisonbetweentheprobableoutcomeofsuccessfullyimplementingtheidea(basedonpastexperiencewiththecompany)andthepersonaloutcomeshe/shehasinmind(inotherwords,whathe/shewillgetoutofit).Iftheorganisationrewardsentrepreneurialeffortsandissupportiveofcorporateentrepreneurs,iftheenvironmentisconducivetotheideaandtheentrepreneurialcharacteristicsarepresentinemployees,thencorporateentrepreneurshipandinnovationwillbetheresult.8.7AreCorporateEntrepreneursDifferentCorporateentrepreneursarenotnecessarilytheinventorsofaproduct,buttheyoftenturnideasintoprofitablerealities.Theyarethedriversandteambuildersbehindanidea,i.e.ordinarypeoplewhodoextraordinarythings.Corporateentrepreneurscanbethoughtofconceptualisation(dreaming)andthenimplementation(doing)

Whenfacedwithasetbacktheyemployanoptimisticapproach:1. Theydonotadmittheyarebeaten2. Theyviewthemselvesasresponsiblefortheirowndestiny.

InsertTable8-6page230.8.8CategoriesofCorporateEntrepreneursCorporateentrepreneurstakeonvariousformsandexhibitdifferentstyles.Theydifferintermsoftheirriskprofile,sourcesofmotivation,managerialcapabilitiesandothercharacteristics,theyare:

1. Thepersonalachiever–theclassicentrepreneuro Highneedforachievemento Needforperformancefeedbacko Desiretoplanandsetgoalso Strongindividualinitiativeo Strongpersonalcommitmento Internallocusofcontrolo Workshouldbeguidedbypersonalgoals,notothers

2. Thesupersalesperson–achievessuccessthroughselling,networkingandpeopleskills.o Empathisewithotherso Desiretohelpotherso Believesinsocialprocessandinteractionandrelationshipso Needsstrongpositiverelationswithotherso Believessalesforceiscrucialtocarryingoutstrategyo Backgroundinsales

3. Therealmanager–Strongmanagerialskillscombinedwithaggressivegrowthorientationo Desiretobeacorporateleadero Desiretocompeteo Decisivenesso Desireforpowero Positiveattitudestoauthorityo Desiretostandoutfromthecrowd

4. Theexpertideagenerator–expertisecombinedwithcreativityo Desiretoinnovateo Lovesideas,curious,openmindedo Believesnewproductdevelopmentiscrucialtostrategyo Goodintelligence,thinkingcentresentrepreneurialapproacho Intelligenceasasourceofcompetitiveadvantageo Desiretoavoidtakingrisks

8.9CriticalRolesinCorporateEntrepreneurshipInordertoachievecontinuousinnovationintheorganisation,anumberofkeyroleplayersshouldbeinvolvedforanentrepreneurialeventtooccur.Thesekeyplayersareidentifiedasfollows:

1. Initiator-Triggersthenewentrepreneurialevent,recognisestheopportunityorexternalthreat.Normallyfilledbythechampion

2. Sponsor/facilitator–theleaderormajorsponsoroftheinitiative,pushingforitsacceptanceandcompletion.Isasmajoradvisorandmentoringroleinprotectingtheinitiative.Ahigh-levelpersonthatactsasabufferprotectorandmodifierofrulesandpoliciesthathelptheventureobtainresources

3. Champion–Takestheleadanddrivestheproject,overseesimplementationprocess.Sustainsthroughobstaclesandadaptskeyconceptsalongthewaytobringprojecttocompletion

4. Innovativemidwife-Translatorbetweenthelanguage,cultureandneedsofthesponsorsworldwiththelanguage,cultureandneedsofthechampionsworld.Nurturesinnovationsthatmightberejectedbytheorganisationscore

5. Supporter-Augmentstheteam,playingasecondaryroleprovidingexpertise,marketinsightsfortheinitiative.6. Reactor–Playsdevil’sadvocate.Providesmarketintelligenceandinsightsthatservetoeitherpinpoint

weaknessintheideaorwaysinwhichitshouldberevisedorrefinedOfallthese,thetwomostcriticalarethechampionandthesponsor.However,theycannotbeexpectedtowearallthehats,awell-constructedteamisimportant.Fifteenspecificresponsibilityareasmustbefilled:

1. Research/analyser-Gatherintelligence,assesspotential2. Interpreter/strategist-Identifypatterns,trendsanddrawimplicationsforproject3. Visionary/inventory-Creativeintuitiontorecogniseopportunities4. Catalystorleader-Providemotivation,getprojectofftheground5. Endorser-Lendcredibilitytoprojectchampion6. Teamplayer-Collaborativerolewithothers7. Resourceprovider-Assistwithresourcerequirements8. Problemsolver-Solvesproblemstheinnovationteamcant9. Coordinator-Coordinatesresourcesandinputsovertime10. Negotiator-Bridgedifferencesamountvariouspartiesinvolved11. Politician-Overcomeinternalresistance12. Changemanager-Changemanagementforimpactsofnew13. Missionary-Motivateandinspiremanagementaboutthenewproject14. Opportunist-Reactquicklytoemergingdevelopmentstoprovidedirection15. Critic/judge-Identifiesflaws,downsidesandrisks

8.10MythsaboutCorporateEntrepreneurs. Myths Facts1 Primarymotivationisadesireforwealth.Moneyis

theprimeobjectivePrimarymotivationistheprocessofinnovation,freedomandabilitytoinnovate

2 Theyaregamblersandhigh-risktakers Theyaremoderaterisk-takers.Smalleranalysedandcalculatedrisksarepreferredstepping-stones.

3 Theylackanalyticalskillssohavethephilosophyofluckisallyouneed

Theyarefairlyanalytical.Theyarewellprepared,understandinnovationandperceivemarketneedsverywell.

4 Theydonotactasateamplayer.Theyactlikeabullinachinashop.

Theyoftenhavestrongpoliticalskills,adeptatworkingaroundtherules,proceduresandconstraints.

5 Theylackmoralethicsduetotheirdesiretosucceed.

Theytendtobehighlyethicalandhavehighmoralconvictions.

6 Theyhaveapowerhungryattitudeandonlyinterestedinbuildinganempire.

Mostideasaresmallandrelativelyconservative.Moreinterestedinprofitorgrowthoftheventure.

CHAPTER 10 – BUILDING CULTURES IN ENTREPRENEURSHIPItcanbesaidthatthecultureofanorganisationreferstothepersonalityoftheorganisation.Oneofthe“personality”characteristicsthatweshouldtrytodevelopinorganisationsisentrepreneurship,sothattheymaybedescribedasbeingentrepreneurial.10.1TheNatureofCultureinOrganisationsCultureisasystemofsharedmeaningheldbymembersoftheorganisationthatdistinguishestheorganisationfromotherorganisations.Cultureservesasasteeringmechanismthatguidesandshapestheattitudesandbehaviourofemployees.Itallowsorganisationstodevelopacoresetofassumptions,understandingsandimplicitrulesthatgovernday-to-daybehaviourintheworkplace.Itiscollective,meaningitissharedbymostemployees,emotional.Culturesareacollectionofagroupofpeopleinteractingovertimeandareinherentlysymbolic.Culturesdifferalongsomekeydimensions:

1. Positiveversesnegative–Positiveculturesalignswithorganisationalvision,missionandstrategies.Goodfitwithcultureandcompetitiveenvironment.Turbulentenvironment’srequireculturesbuiltaroundentrepreneurship

2. Strongorweakcultures-dependinghowdeeplyfollowedwithintheorganisation3. Homogeneous(sharedbyall)versusheterogeneous(subcultureswithincultures)4. Consistentorinconsistentcultures-ifelementsconflictsuchasthethingacompanydoestoreinforce

conservatismandavoidanceoffailure.

Theroleofcultureininfluencingemployeebehaviourisincreasinglyimportantintoday’sworkplace.Organisationshavewiderspansofcontrol,flatterorganisationalstructures,empoweredemployeesandteams.Therefore,thesharedmeaningprovidedbyastrongcultureensuresthateveryoneispointedinthesamedirection.10.2PiecesandPartsofCultureClassifyingthemanycomponentsofcultureinvolvesdistinguishingamongthefollowingsixelements.

1. Values-thethingsemployeesthinkareworthhavingordoing,expresspreferenceforcertainbehavioursandoutcomes,entrepreneurialvaluesmightincludecreativity,integrity,perseverance,individualism,accountabilityandchange

2. Rulesofconduct-acceptednormsandrulesinthecompany,thebehavioursrepresentacceptedwaystoattainoutcomes,fromethicalbehaviourtowhatyouwear

3. Vocabulary-thelanguage,acronyms,jargonofthecompany4. Methodology-theperceptionofhowthingsgetdoneinacompany,rationalprocessesorrulebending5. Rituals-ceremoniesincludingrecognitionceremonies6. Mythsandstories-legendsofanorganisation,whothesuperherowas

Culturehassubstanceandform,substancereferstosharedsystemsofvalues,beliefsandnorms.Formsaretheconcretewaysinwhichthesubstancemanifestedintheorganisation.Cultureexistsatthreedifferentlevels:

1. Basicassumptions-peopleareunawareatthislevel.Whatittakestobesuccessfulandtheimportanceorunimportanceofentrepreneurship.

2. Values-peoplemoreconsciousoraware,commonlyheldvaluesandhavemeaningbutnotvisibleortangible.3. Artefactsandcreations-symbolisethecompanyculture,highlyvisibleorobservablemanifestationsofthe

cultureIfthegoalistocreateworkenvironmentsthatsupportentrepreneurship,cultureunderliesalltheothercomponentsoftheworkplace,thatis,rewardsystems,companystructures,controlsystems,thestrategicdirectionofthefirm.

10.3CoreIdeologyandEnvisionedFutureEntrepreneurialorganisationshaveavision;suchorganisationshaveasenseofwhattheyareandwheretheywanttobe.Avisionhastwoparts:

1. Whattheorganisationis–thecoreideologyTheconceptofcoreideology,whichincludescorevalues(whattheorganisationstandsfor)andthecorepurpose(thereasonsfortheorganisation’sexistence).Thecoreideologyshouldnotchangeasproductsmature,marketsevolve,technologyemerges,ortheleadershipofthecompanychanges.

2. Whattheorganisationaspirestobecome–theenvisionedfuture

Entrepreneurialorganisationsalsohaveanenvisionedfuture.Whilethecorepurposecanbeanever-endingquest,theenvisionedfutureisaboutsettingclearandchallenginggoalswhichtheorganisationiscompelledtoachieveoverthefollowingtenortwentyyears.Goalsmotivatepeopleandevokepassionandconviction.

10.4GenericCulturesTypes(prototypes)Companiesaresocialenvironments,withtribalhabits,well-definedculturalrolesforindividuals,andvariousstrategiesfordetermininginclusion,reinforcingidentity,andadaptingtochange.Culturesgenerallyfallintooneoffourprototypes:

1. ProcessCulture:littletonofeedbackwhereemployeesfindithardtomeasurewhattheydo,concentrateonhowitisdone.Tighthierarchyandcautiousemployees,avoidfailureandarebureaucratic

2. ToughguyCulture:competitiveindividualswhoregularlytakehighpersonalrisksandgetquickfeedbackonactions.Fluctuationofstructures,financialstakesofnotsucceedingarehigh,highemployeeturnover

3. Workhardplayhardculture:funandaction,employeestakefewriskswithquickfeedback,encouragesemployeestotakeahighleveloflowriskactivity,muchisdoneinthiscultureasitisactionorientated

4. Thebetthecompanyculture:bigstakesdecisionswhereconsiderabletimepassesbeforeemployeesknowiftheirdecisionspaidoff.Highrisk,slowfeedbackwithaclearcuthierarchy.On-goingpressureandproductionofmajortechnologicalbreakthroughsandhighqualityinventions.

Culturetypesthatfacilitatehighormanagedriskencourageentrepreneurialbehaviour,whileculturesthathaveastrongprocessorientationarelikelytodiscourageentrepreneurship10.5ElementsofanEntrepreneurialCultureWhileitmayappearthatavarietyofelementsareatplay,thereisacommonality.Theentrepreneurialculturehasthefollowingelements:

1. Focusonpeopleandempowerment2. Valuecreationthroughinnovationandchange3. Rewardsforinnovation4. Learningfromfailure5. Collaborationandteamwork6. Freedomtogrowandtofail7. Commitmentandpersonalresponsibility8. Emphasisonthefutureandasenseofurgency

Entrepreneurialcultureiscomplexandisnotonlyaboutidentifyingimportantvalues,butaboutchoosingbetweenvaluesthatconflictwithoneanotherandcoexistwithoneanother.Abalancemustthereforebestruckbetweenvalues.Foranorganisationtobeentrepreneurialthefollowingvaluesshouldbeadheredto:

1. Singularpurpose2. Strongfocusonexcellence3. Commonclass/groupinterests,whilerespectingdifferences4. Guidedmorebyorganisationalgoals/purposesthanpersonalpurpose5. Aleaningtowardsconsensusdecisionmaking

6. Qualitativedecisionmakingbalancedwithempiricaldecisionmaking7. Expediencybalancedbyintegrity8. Drivenmorebyperformance-basedrewardsthantenure-baserewards9. Strongercareerfocusthanjobfocus10. Intimateconcernwiththeorganisation,withoutintrudingintopeople’spersonallives

10.6EntrepreneurialDevelopmentThroughCulture:EliLilly&Co.Tosurvive,EliLillybelievesthatfourmajorelementsdirectlyinspireinnovation:

1. Aninnovativeenvironmentinwhichallstakeholdersarerewardedfortheirinnovations2. ContinuousinvestmentinR&D3. Encouragingtalentedpeoplewiththeirideas.4. World-classfacilitiestofacilitatetheinnovationprocess.

10.7ExploringaKeyValue:IndividualismEntrepreneurshiprequiresachampion–anindividualtokeeptheideaalive,keeptheentrepreneurialprojectgoing,ortofightthroughpoliticsandrejection.However,intheentrepreneurialorganisationtheremaybeadownsidetoindividualism,whichmayresultinentrepreneurspursuingtheirowngoalsattheexpenseofthegroup,projectorOrganisationalgoals.Theabilitytoachievesustainedentrepreneurshipisdependentonabalancebetweenindividualismandcollectivism.Individualism–referstoaselforientation,anemphasisonself-sufficiencyandcontrol,thepursuitofindividualgoalsandavaluesystemderivedfromtheirownaccomplishments.Collectivism–agrouporcollectiveinvolvethesubordinationsofone’sownpersonalinteresttothegoalsofthelargerworkgroup.

PositiveIndividualism Collectivism

1. Moreselfconfidence 2. Greatersynergiesfromcombinedeffortsofpeople

3. Achievementmotivation 3. Incorporatediverseperspectivesforcomprehensiveview

4. Strongersenseofpersonalresponsibility 4. Relationshipsmorepersonalisedandharmonious5. Linagebetweenpersonaleffortandrewards 5. Moreconsensusregardingdirectionandpriority

5. CreditforfailuresandsuccessNegative

1. Personalgainatothersexpense 2. Lossofgroupcollective3. Lesscommitment(loyaltyisforsale) 3. Emotionaldependenceonindividualsingroup4. Differencesamongstindividualsareemphasized 4. Lesspersonalresponsibilityforoutcomes

10.8ACulturewithaDifferentViewonFailureFailureisasteppingstonetosuccess.Althoughaconceptoranewproductorservicemayfailafewtimesbeforesucceeding,failureisalearningcurve.However,manyorganisationsthatpurporttobeentrepreneurialdonotacceptfailureorpromotesafeandtrustedmethods,andmaypunishstaffforfailure.Accordingly,thecultureoftheentrepreneurialcompanywillcelebratefailure.Therearethreetypes:

1. Moralfailure2. Personalfailure3. UncontrollableFailure

10.9CulturesWithinCultureWithinthecultureoftheorganisation,anumberofsubculturesusuallyexist.Oneislikelytofinddifferentculturesindifferentfunctions,businessunitsordivisions.Subculturescanimpactthewaysinwhichentrepreneurshipismanifested.Conflictsmayoccurwithotherpartsbuttheentrepreneurialideasareadaptedandredefinedtomakethemstronger.10.10LeadershipandCultureAdistinctionismadebetweenentrepreneurialleadershipandentrepreneurialculture.Whenanentrepreneurialleaderwhodrivesinnovativeperformanceexitsfromanorganisationthatdidnothaveanentrepreneurialculture,innovativeperformancewillleaveaswell.Visioncoupledwithlearningproducesanentrepreneurialmind-setthroughtheorganisation.Accountabilityandresponsibilityforinnovativeinitiativesisassignedandassumed,asemployeestakeownershipoftheseinitiativesandoftheorganisationitself.

CHAPTER11–DESIGNINGENTREPRENEURIALCONTROLSSYSTEMSControlsystemsinorganizationstendtostartoutsimple.Overtimetheysteadilyevolve,becomingmoresophisticatedandcomplex.Asmoreprocedures,systemsanddocumentationrequirementsareadded,managersareincreasinglyinclinedtomicromanageeachandeveryactivity,andtoestablishquantitativebenchmarksinasmanyactivityareasaspossible.Benchmarkscanbecomeendsinthemselves,whileconveyingalackoftrustinemployees.Thereisalsoanissueofefficiencyversuseffectiveness.Efficiencyisconcernedwithminimizingtheexpenditureorresourcesneededtocompleteatask,whileeffectivenessisconcernedwithensuringthatthecorrecttasksarebeingaccomplished.However,thecontrolsystemsinorganizationshaveplacedtheemphasisonefficiencyandhaveignoredeffectiveness.Controlsystemshaveaneffectonthelevelofentrepreneurshipexhibitedinanorganization.Thecrucialquestionhereishowcancontrolsystemsintheorganizationfacilitatecontroloveritsresourcesandencourageentrepreneurialbehavior?11.1TheNatureofControlinOrganizationsControlsystemscanbedefinedasthoseformalandinformalmechanismsthathelpindividualsregulatetheirjobsandallresources.Controlsensurethatpeopleperformtheirjobsinamannerthatisconsistentwiththeorganizationspurpose.Thethreeareasofcontrol:

1. Inputs-Includesthingssuchashirelingandpurchasingpolicies2. Behaviorsandprocesses–regulationtheactivitiesofmembersthroughoperatingprocedures3. Outputs–Settingtargetsformeasuringachievement,i.e.performancegoals,performancetracking

54Acontrolsystemcancompriseanumberofelements.Thevariouscontrolmeasuresandmechanismscanbegroupedintofourgeneralcategories:

1. Simplecontrol–Directpersonalsupervision2. Technologicalcontrol–Technologybasedcontrolusedinproductionandservicedeliveryprocess3. Bureaucratic/administrativecontrol–Coverstheformalrules,proceduresandpolicies.4. Concretive/culturalcontrol–Controlsbroughtaboutbysharedvalues,normsandconformancetothe

organizationsbeliefs.11.2OrganizationsOutofControl:AStoryofUnintendedConsequencesControlisvitalinorganizationsandcontrolmechanismsmaybewellintended;however,theymayhaveunintendedconsequencessuchasthefollowing:

1. Trustproblem-Employeesmayconcludethattheyarenottrusted,whichmightunderminetheirwillingnesstotaptheircreativeenergiesandcomeupwithinnovativeideas.

2. Slownessproblem-Controlscanevolvetothepointwheretheyslowtheorganizationdown.Iftherearedetaileddocumentationrequirementsandelaboratestepsthatemployeesmustfollow,thenactivitiestakelongertocompleteandpeopleworkmoreslowlyaswell.

3. Means–endproblem-Managersmaygetsocaughtupintryingtocreatecontrolmechanismsthattheylosesightofwhatthecontrolsweremeanttoaccomplish.

4. Efficiency–effectivenessproblem-Controlmeasuresmaybeabletoachieveefficiency,buttheyignoreeffectiveness.

Itisclearthatacontrolmechanismcouldbecontrollingthewrongthingornothingatall.Intermsofentrepreneurship,entrepreneurialemployeeswasteaconsiderableamountoftimeandeffortfindingwaysandmeansthroughbureaucraticcontrols;theeffortcouldbebetterspentoninventingnewproducts.

11.3DimensionofControlandEntrepreneurshipAcontrolsystemcanbecharacterizedbyanumberofkeyattributes.Theprincipaloutcomessoughtthroughthecontroleffortare:

1. Riskreduction2. Eliminationofuncertainty3. Highlyefficientoperations4. Goalperformance5. Specificroledefinitions

Tofacilitateentrepreneurship,thefocusofthesecontroloutcomesshouldshiftasfollows:

• Fromriskreductiontorisktolerance–Lessrigiditywithagreaterdegreeofempowermentandautonomy• Fromtheeliminationofuncertaintytothemanagementofuncertainty–Lessformalityandrigidnesson

planningforthefuture.Morefocusedonachievinggoalsratherthanprescribingmeans• Fromhighlyefficientoperationstoenlightenedefficiency–Wherealevelofdiscretionorsackisdeliberately

designedintocostcontrolsandbudgetingandperformanceisnotmeasuredasfixedintervals.• Fromgoalconformancetogoalcongruence–Agreaterdegreeoffreedomandautonomywhereself-control

andsocial-controlplayalargeroleinproceduralcontrols.• Fromspecificroledefinitiontoroleflexibility–Employeesareempoweredtoexercisediscretionandpersonal

initiativeandcontrolsfocusontheouterboundariesforactivitiesandbehaviors.TheEntrepreneurialPhilosophyofControlTwogeneralphilosophiesdominatethetheoryofcontrol,namely:

1. Commandandcontrol2. Nosurprises

55Thereare11elementsinherentinanentrepreneurialphilosophyofcontrol.

1. Controlbasedonnosurprises2. Looserbuteffectivecontrolelements3. Amindsetofgivingupcontroltogaincontrol4. Empowermentanddiscretionthatisbuiltintothejob5. Mutualtrust6. Emphasisonselfcontrol7. Organizationalslackintermsofresourceavailability8. Poolsofinternalventurecapital9. Varyinglevelsofcontrolbasedonthetypesofentrepreneurialbehaviorbeingsought10. Openandsharedcontrolinformation11. Simultaneousloose-tightproperties.

Theprinciplesofanentrepreneurialphilosophyofcontrolincludethefollowing:

1. Asenseoftrust2. Managersmustgiveupcontroltogaincontrolbyaddressingissuessuchasownership,accountabilityand

empowermentTherelationshipbetweenentrepreneurshipandcontrolisnotoneofgettingmoreentrepreneurshipifthereislesscontrol.Therealissueisthenatureandintentofthecontrol,andhowitisused.Furthermore,thedegreeofcontrolcanbeexpectedtovarywiththetypesofentrepreneurshipthecompanyseeks.11.4AParadox:SimultaneousLoosenessandTightnessEntrepreneurshipposesadilemmaforcontroleffortsintheorganization.Intheory,theorganizationdesignscontrolsystemsthatfacilitateeffectiveorganizationaloutcomessuchasefficiency,riskreductionandconformity.Inthe

entrepreneurialorganization,however,werequirethemanagementofuncertainty,risktolerance,empowermentandexperimentation.Giventhesetwoperspectives,itisevidentthattherehastobeabalancebetweenthetightnessandloosenessofcontrolintheorganization.Theconceptofbalanceisillustratedintermsofthreecharacteristicsofcontrolsystems,namely:

1. Administrativeformality/informality–Theextenttowhichtheorganizationreliesuponexplicit,statedordocumentedcontrolmechanisms.

2. Managerialflexibility/inflexibility–Thedegreetowhichdiscretionand/orfreedomisgiventojuniormemberstointerpretorignorerulestoperformtheirjobs.

3. Budgetarytightness/looseness–Theextenttowhichbudgetsimposestrictrestrictionsonhowresourcesareallocatedandhowperformanceisevaluated.

Itwouldseemtherelationshipbetweenthevariousdimensionsofcontrolandentrepreneurshipshouldbecurvilinear,aninverted‘U’.Entrepreneurshipwillbeatthehighestatintermediatelevelsofadministrativeformality,managerialdiscretionandresourceandbudgetarytightness.Levelsofentrepreneurshipwillbelowerwhenthingsaretooinformalorhighlyformalwherethereistotaldiscretionorvirtuallynodiscretionandwherebudgetsareextremelylooseorextremelyrigid.11.5ApproachingControlandEntrepreneurshipasComplementaryThereisatendencytoregardcontrolprocessesastheantithesistotheinterestsofcorporateentrepreneurship.However,theevidencesuggeststhatcontrolsystemscanpositivelycontributetothesuccessfulintroductionofnewproductsandtechnologies.Threeimportantimplicationsformanagingentrepreneurialactivitiesinclude:

1. Managersshoulddesignanddevelopinnovation-facilitatingandcontrol-facilitationmechanismsthatcomplementoneanothersuchthepotentialentrepreneurialpotentialresideswithintheorganization.

2. Managersshouldunderstandinnovationasaprocessthatamenabletotheapplicationsofstructured,disciplinedoversight.

3. Successfulinnovationispartproductororganizationalsystemsinwhichcontrolelementsandentrepreneurshipelementsoperateinconcert.

11.6ExpandingontheConceptofSlackOrganizationshavelimitedresources,anddepartmentsandsectionsintheorganizationcompetefortheseresources.Entrepreneurialorganizationshaveyettofindwaystomakeresourcesavailableforinformalexperimentation.Theconceptoforganizationalslack,whichimpliesadegreeofloosenessinresourcecontrolandavailability.Employeesshouldbeabletotapintoresourceswithoutgoingthroughformalapprovalprocesses.Theyshouldbeabletoborrowexpertise,research,money,materials,equipmentandotherresourcesastheydevelop,testandrefinenewideasandproducts.Waysinwhichtocreateorganizationalslackandfocusonafewissues,namely:

• Managingslackinvolvesafinebalancingact.• Slackistiedtothebudgetingprocessincompanies.• Slackdependsonthetypesofresourceinquestionandthedemandforthoseresources.

11.7InternalVentureCapitalPoolsSimplyhavingslackintheorganizationisnotenoughforentrepreneurialinitiatives;theorganizationhastomakeseedcapitalandventurecapitalavailable,sourcesoffundingforinnovativeprojectsinclude:

• Includeadealstructurewheretheemployeegetsanequitystakeintheconceptonceitdevelopspastacertainpointorsharesinreturns.

• Theemployeemayalsoshareinthedownsiderisk,shouldtheconceptfail.o Intra-capital–aresourcebankaccountawardedtoemployeeswhosuccessfullypursue

entrepreneurshipwithinthecompany.Themostimportantfundingcriterionisthestrategicfitoftheprojectwiththecompany.

11.8ControlandCosts:TheOpen-BookRevolutionTheprevalentbeliefseemstobethatemployeesmustnotknowwhatmoneyisspentoninthecompany.Open-bookmanagementstrivestogetallemployeestothinkandactlikeownersofthebusiness,tofocusonthebottomlineandtotakejointresponsibility.Thefinancialrecordsandallinformationaresharedwithalltheemployees,whoarethenexpectedtoask“why”questionstoincreasetheirunderstanding.Itisanapproachbuiltaroundthefollowingsixprinciples:

1. Everyemployeehasaccesstothecompany’sfinancialsandallothernumbersthatarecriticaltotrackingthecompany’sperformance.

2. Thereisanovertandongoingattempttogettheinformationinfrontofemployees.3. Thecompanyteachesthebasicsofbusinesstoeveryone.4. Employeeslearnthat,whateverelsetheydo,partoftheirjobistomovethenumbersintherightdirection.5. Peopleareempoweredtomakedecisionsintheirjobsbasedonwhattheyknow.6. Employeeshaveastakeinthecompany’ssuccessandshareintheriskoffailure.

11.9TheConceptofProfitPoolsTheprofit-poolconceptinvolvesanalyzingthetotalprofitearnedinanindustryatallpointsalongtheindustry’svaluechain.Allprofitandservicesegmentsinthevaluechainareidentifiedandeachisassessedintermsofitspresentandfutureprofitability.Byanalyzingwhereandhowmoneyisbeingmade,managementcandeterminewheretoconcentrateentrepreneurialefforts.Withtheprofit-poolmethod,newsourcesofrevenuewithinthevaluechaincanbeidentified,prioritiescanbeestablishedforacquisitionsandexpansions,insightcanbeobtainedfortargetingnewcustomergroupsanddistributionchannels,andinternaloperationscanberefocused.Ultimately,profitabilityisimprovedandthebusinessmodelofthefirmisenhanced.

TOPIC3-CONTINUOUSENTREPRENEURIALPERFORMANCECHAPTER13–FORCESWORKINGAGAINSTCORPORATEENTREPRENEURSHIPInthelargetraditionalorganisationmanagementpracticesarefocusedoncontrollingcosts,efficienciesandresources.Assuch,entrepreneurshipclasheswiththemainstreamoperation,becauseitrequiresflexibilityintermsofbudgetsandresourcesandchangestoplans.Therefore,traditionalmanagementandtheoperationsoftheorganisationarebarriersorobstaclestocorporateentrepreneurship,ascompaniestendtodevelopinwaysthatallowthemtomanagethepresentefficiently.Consequently,companiesarenotgearedtocreatingthefutureand,asaresult,entrepreneurshipclasheswiththemainstreamoperationsofthecompany.Whycontrolsystemsarebad?

• Trustproblem-Ascontrolmeasuresevolve,theyintrudefurtherandfurtherintothewayanemployeedoestheirjob.Theeventuallyleadsemployeestobelieveemployersdon’ttrustthemandthisunderminestheirwillingnesstotapintotheircreativeenergies.

• Trustproblem-Controlsevolvetothepointwheretheyactuallyslowtheorganisationdown.Noflexibilityandextremelydetaileddocumentationrequirements.

• Meansendproblem-Controlsystemsaremeanttobeameanstoanend.Thegoalislostandthecontrolsystemjustbecomesanendinitself.Theylookgoodinthecontrolmeasurebuttheactualgoalisnotbeingmet/enhanced.

• Efficiency–effectivenessproblem-Efficiencyisdoingthingsright,whileeffectivenessisdoingtherightthings.Sometimesefficiencyisconsideredmoreimportantthaneffectivenessandignoreshoweffectivethecontrolmeasureis.

13.1AFrameworkforUnderstandingtheObstaclesThecorporateentrepreneurfacesanumberofbarriersorconstraints.Barriersshouldbecriticallyreviewedtodeterminehowtoovercomethem.Thefollowingquestionsshouldbeansweredinthisregard:

• Whichconstraintscanbeignored?• Whichcanbeworkedaround?• Whichcanbeeliminated?• Whichcanbeconvertedintofacilitatorsofentrepreneurship?• Whichmustbeaccepted,eveniftheylimitthescopeorscaleofwhatthecorporateentrepreneurcan

accomplish?Barriersshouldbecriticallyreviewedtodeterminehowtoovercomethem.Therearesixcategoriesofobstaclesorbarriers:

1. Systems-Thereisamisdirectedrewardsandevaluationsystem.Thecontrolsystemsareoppressiveanddisplayalackoftrust.Thebudgetingsystemisinflexible.Overlyrigidplanningsystems

2. Structures-Therearetomanyhierarchicallevelsandtherearenarrowspansofcontrol.Thereisresponsibilitywithoutauthority.Thereisatopdownmanagementandrestrictedcommunicationchannels.Lackofaccountabilityforinnovationorchange.

3. Strategicdirection-Thereisanabsenceofinnovationgoals.Noformalstrategyforentrepreneurship.Novisionfromtopmanagement.Norolemodels

4. Policiesandprocedures-Thereisalongandcomplexapprovalcycle+extensiveredtapeanddocumentationrequirements.Thereareunrealisticperformancecriteria

5. People-Thereisafearoffailure,resistancetochange,turfprotectionandcomplacency.Inappropriateskillandtalentsformakingentrepreneurialchange.

6. Culture-Ill-definedvalues,lackofconsensusovervalueandnormpriorities,valuesthatconflictwithinnovativeness,risktakingandproactiveness

13.2ComingupShort:LimitationsoftheEntrepreneurApartfromthemajorsetsofobstacles,entrepreneurialinitiativescanbehamperedbecauseofanumberofshortcomingsinthecorporateentrepreneur:

1. Lackofpoliticalsavvy:learningtoworkthesystem–Toimplemententrepreneurship,aninnovativeentrepreneurmustattempttoinfluenceandidentifykeystakeholdersonwhomtheconceptdepends.

2. Lackoftime:crisismanagement–Makingtimeduringthedayawayfromthe‘job’tospendon‘petprojects’.3. Lackofincentivestoinnovate:beyondtokenism–Makingsurerewardsandrisksaresuitedtotheconceptor

venture4. Lackoffinancialcredibility:inabilitytoprojectbelievablenumbers–Successfulentrepreneursmusteitherbe

adeptatfinancialprojectionsandcalculationstodevelopaventureplan5. Lackofpeopledevelopmentskills:autocracyrules–Thedifficultyofmanagerstotrustorempoweremployees.6. Lackoflegitimacy:untestedconceptanduntestedentrepreneur–Theinternalscepticismthatisencountered.7. Lackof“seed”capital:theproblemofearlyresources–Securingthenecessaryresources,evenifconceded

withreluctanceandresentment8. Lackofopenownership:protectingturf–Theentrepreneurwilloftenruninto‘powerplays’andbattlefor

controloverdecisionmakingoccurringbetweenkeyresponsiblepeople.9. Lackofasponsor:someonetowatchoveryou–Theactascoaches,buffersagainstbureaucraticinterference

andallowtheentrepreneurtoconcentrateontheirprojectorventure.10. Lackofenergyandsharedenthusiasm:theinertiaproblem-thelackofmovement,support,envyorresistance

oftheidea.Fivecausesoftheproblemofinertia:o Indifference–Smallconceptisnotconsideredsignificantrelativetootherongoingventures.o Distraction–bytheday-to-daypressuresoftheorganisation.o Competition–theircloutdistributorsandsupplierstodenysupporttofledglingventures.o Disaffection–Resistancetotheentrepreneursprogressbecauseofenvyorjealousy.o Directthreat–Canbefrominsideoroutsidetheorganisation.

11. Lackofpersonalrenewal:theissueofreinforceddenial–Notbeingabletoadapttothechangingenvironmentduetopastventuresuccess.Paststrengthsmaynotberelevantanylonger.

12. Lackofurgency:fearasgoodandbad–Treatingfearasapositivetocreateasinceofurgencyandareminderthatfailureisnotanoption.

13. Lackofappropriatetiming:theresourcesshiftdilemma–Thetimingofresourceallocationneedstobebalancedfromtheoldtothenewtoavoidheavycosts.

13.3CorporateInnovatorsorRogueManagers:AnEthicalDilemmaManyinternationalcompaniesthathavegonebankruptinrecentyears(owingtotheunethicalbehaviouroftheirseniormanagers)werealsoentrepreneurial.Therearedistinctionsbetweenentrepreneurialbehaviourandunethicalbehaviour.Somereasonswhymanagersmayactunethicallyare:

• Theyareunethicaltobeginwith.• Theirexcessivedriveovertimeandoverlyambitiouspersonalgoalsmayresultinunethicalbehaviour.• Theydonotclearlygrasptheirprofessionalresponsibilities.• Theauthorsdiscussthreemodelsofmanagementapproachestowardbusinessethics–moral,immoraland

amoralmodels.Thethreemodelsofmanagementapproachestobusinessethics:

1. Moralmanagementmodel–Respectethicalconsiderationsandholdtheorganisationtothehighestmoralstandardsanddemonstrateastrongethicalleadershiptoallstakeholders.

2. Immoralmanagementmodel–Basedonthepremisethateconomicopportunitiesaretobeexploitedwheneverandhoweverpossible.Ethicsareseenasobstacles.

3. Amoralmanagementmodel–Whilenotnecessarilyactingwithmaliciousintent,thebeliefthatrulesofbusinessaredifferentfromthoseofthegreatersociety.

13.4OvercomingtheObstaclesForthecorporateentrepreneurtogethis/heridea/newproductconceptthroughredtapeandbureaucracy,he/sheshoulddevelopanunderstandingofthemethodsthatmaygaininfluenceandshapebehaviour.

1. Buildingsocialcapital-Corporateentrepreneursneedtorelyontheiringenuityandpersistencetobuildsocialcapital–aninventoryoftrust,gratitudeandobligationthatcanbecashedinwhenthenewproductisindemand.Socialcapitalcanbedevelopedbysharinginformation,creatingopportunitiesforpeopletodemonstratetheirskillsandcompetencebuildingandusinginfluencenetworks

2. Gaininglegitimacy-Forprojectstogainlegitimacy,thecorporateentrepreneurcanusepersonalinfluenceorinfluencenetworks,his/herexperienceorsmallsuccessestoconvincethenecessarypeopleofhis/herviabilityandcredibility.

3. Politicaltactics-Somepoliticaltacticsthattheentrepreneurcouldusetoovercomeinertiaorresistanceinclude:

• rule-orientedtactics()• rule-evadingtactics(dealingwithunreasonablerequestsfromdepartments)• personal-politicaltactics(adversesituations)• educationaltactics(explain,persuadeunreasonableviews)• organisational-interactionaltactics(gaingreaterautonomy)

4. Resourceacquisition-Byhookorbycrook,thecorporateentrepreneurhastoacquiretheresourcesneededtodevelopthenewconcept.Thefollowingstrategieshavebeenidentifiedforacquiringtheseresources:

• Borrowing-tempuseofresource• Begging-appealingtotheownersgoodwill• Scavenging-extractusagefromresourcesotherswouldnotuse• Amplifying-getmorevalueoutofexistingresource

5. Anethicalcomponentintrainingcorporateentrepreneurs-Aholisticapproachshouldbeusedtoaddressethicsintheentrepreneurialorganisationandthatethicsshouldbewovenintotheentirefabricoftheorganisation.

Examplesofobstacles1. Employeesmaynotbeinterestedinhelpingyoudevelopandimplementthenewsystem,becausetheyare

rewardedandpromotedonhowwelltheydotheirjobs,meettheirgoalsandmanageresources.2. Theremaynotbetheresourcesavailabletodevelopyournewsystemiftheorganisationrigidlyadherestoset

budgets.3. Thedevelopmentandimplementationofthenewsystemwillrequirecross-functionalcommunicationand

collaboration.Iftheorganisationalstructureisveryhierarchicalandrigid,thencross-functionalcommunicationmaynotbepossible.

4. Ifmanagersdonotbuyintoyourideaandsupportandchampionit,yourideamayneverbecomeareality.Youneedthesupportofmanagement.

5. Organisationalpoliciesandproceduresthatarebureaucraticwillhinderthedevelopmentandimplementationofthenewsystem.Therewillbelotsofdelaysandredtapetomanoeuvrethrough,whichwouldbefrustratingtoanyentrepreneur.

6. Peoplemaybepreoccupiedwiththeirday-to-daytasksandmayresistbeinginvolvedinsomethingdifferent.13.5FocusingontheRightObstaclesattheRightTime.Corporateentrepreneursshouldconsiderboththeimmediateandlong-termobjectivesoftheirnewprojects.Obstaclesthattheprojectfaceswithinthedifferenttimeframescanbeidentifiedandthentheentrepreneurcanprioritizeeffortsandsaywheretheyshouldbefocused.Itisessentialforpeopleorpartiesinvolvedintheentrepreneurialprojecttoagreeonwhattheirrespectivetaskswillbe.Theparticularissuesthatmustbeaddressedare:

1. Whowilltakewhatspecificactionagainstwhichopponent2. Whatkeyimplementationstepsmustbetaken,andhowshouldthosestepsbetimed.3. Howcanwetellifthingsarenotgoingasplanned?4. Whatmajorcontingencyplansareneeded,andwhateventwilltriggerthoseplans.

CHAPTER15–SUSTAININGTHEENTREPRENURIALCOMPANYINTHETWENTY-FIRSTCENTURYEntrepreneurshipcanbeincorporatedinthestrategy,cultureandstructureofanorganisation.Wealsofindthatentrepreneurshipvariesacrossdepartmentsandacrosstime.Organisationsgothroughcyclesandsomearecharacterisedbyagreatdealofinnovation,whileothershavenone.Someorganisationshavemasteredtheartofbeingcontinuallyentrepreneurialandothersbattletoincorporateentrepreneurship.15.1APersonalApproachtotheEntrepreneurialProcessTherearemanywaysinwhichaprojectmaybeimplementedandsuccessful.Theeffectivenessdependsontheapproachandscope,scaleoftheproject,theteam,natureoftheorganisationandconditionsintheenvironments.Thereareafewprinciplesthatapplytoallentrepreneursandchampions:8principlesrepresentingafoundationaroundapersonalmodel

1. Solidifyrelationshipswithasponsor-someonewithpowerandcredibility.2. Buildaflexibleteamstructure-useyoursocialskillstogetateamthatbelieveintheconcept.3. Insulatetheprojectandkeepitquietforaslongaspossible-vulnerableinearlystages,threateningto

stakeholders,protectedfromdetailedscrutiny,placeprojectoutsidethemainstream.4. Becomeaguerrilla-gainaccesstoresources5. Promiselessanddelivermore-manageexpectations6. Experimentandproduceearlywins-timehorizonsforentireproject,buildonsmallwins,produceevidence

thatitsworkingincrementally,getmoresponsorsonboard.7. Manageprojectmomentum8. Attempttosettheparameters-influencetherulesofthegame,workinginsomeoneelse’srulesisharderto

succeed,negotiateotherwaystowin

Asthecorporateentrepreneurdevelopsapersonalmodelorprocessformanagingentrepreneurialinitiatives,theymaywanttorefertotheCorporateInnovatorCommandmentsTheTenCommandments

1. Cometoworkeachdaywillingtogiveupyourjobforinnovation2. Circumventanybureaucraticordersaimedatstoppingyourinnovation3. Ignoreyourjobdescription4. Buildaspiritedinnovationteamthathasthefiretomakeithappen5. Keepyourinnovationundergrounduntilitispreparedfordemonstration6. Findakeyupperlevelmanagerwhobelievesinyouandyourideas,i.e.asponsor7. Permissionisrarelygranted,thusalwaysseekforgiveness8. Sharetheglory9. Conveytheinnovationsvisionthroughstrongventureplanning

15.2TheImportanceoftheSponsorHighendcorporatemanagersarewillingtoprotectchampions.Theyaidingainingaccesstoresourcesandinformation,believeinthecorporateentrepreneur’svisionandcapabilities.Theyhelphidetheprojectandprotecttheentrepreneurfrombeingfiredifrulesareviolated.Questionstoaskwhenselectingasponsor

• hasthepersonbeenchallengedandproceededanyway• doesthepersonhaveacommitmenttoinnovation• canyougaintheirrespect• howimportantisastepupintheladderforthisperson• doesthepersonknowwhentofightandwhentobegraceful• doesthepersonunderstandthecorporatedecisionmakingstructure• doesthepersonhaverespectofotherkeydecisionmakingpeople

Establishingmutualtrustwiththesponsorismostimportant.Threeaspectsoftheprojectitselfthattheentrepreneurshouldconsiderwhenchoosingasponsor

• nonfinancialresources(time,equipment)• investmentsneeded(venturemoney)• critics(politicalopposition)

15.3BewareOfThe“DarkSide”OfEntrepreneurshipThebenefitsofbeinganentrepreneurareknownbyall.Wehearofsuccessfulentrepreneursinthemediaallthetime.However,thereisadownsidetobeinganentrepreneur.Threepotentiallydestructiveaspectsthatcouldpermeatethepersonalityoftheentrepreneur:Theconfrontationwithrisk-Theentrepreneurisfacedwithvaryingcategoriesofrisk,theserisksinclude

• Financialrisk-companyknowsentrepreneurisresponsibleforlosingmoney)• Careerrisk-couldloseoutonthatsecurity• Familyandsocialrisk-notimeforfamilyorfriends• Psychicrisk-thefailurecouldbetoohardtohandle

Entrepreneurialstress-Theentrepreneurcanexperiencestressasaresultofastruggleforresources,roleoverload,timeconstraintsandworkingalone.Entrepreneurialego-Inadditiontothechallengesofriskandstress,theentrepreneurmaybecomeoverconfident.Thishasthefollowingnegativeeffects:

• anoverbearingneedforcontrol-desiretocontrolventureanddestiny,becomeobsessedforcontrolanddoingthingsontheirterms

• asenseofdistrust-distrustthemotivesofothers• anoverridingdesiretosucceed-egoandbeliefthattheyareindispensable,theprojectwillnotsucceed

withoutthem• unrealisticoptimism-toomuchthanks,Ithinkyouarefake

Thedecisiontoactentrepreneuriallyoccursasaresultofinteractionbetweenorganisationalcharacteristics,individualcharacteristics,andsomekindofprecipitatingeventortrigger.Inordertosustainentrepreneurship,theorganisationshouldbeabletoidentifyandmanagethesetriggeringevents.15.4RecognisingandManagingtheTriggerEventsTriggerEventsareeventsthattriggercorporateentrepreneurshipcanbeofeitherexternalorinternalorigin:

• Externaltriggers-Entrepreneurialmanagementandentrepreneurialideasareforthcomingwhenorganisationsfacediminishingopportunities,rapidchangesintheexternalenvironmentsandincreasinglyshortdecisionwindows.Thetriggerforcorporateentrepreneurshipinanorganisationcouldbeaggressivecompetitormoves,orchangesintheindustryormarketstructure.

• Internaltriggers-Employeessometimessaythattheypursueanideawhenitintriguesthemandtheybelieveinit,orwhentheytakeexceptiontothefactthatoneoftheirideashasbeenrejected.

Triggeringeventscanbegroupedintofivebroadcategories,namely:

1.internal/externaltriggers2.opportunity-driven/threat-driventriggers3.technology-pushed/market-pulledtriggers4.top-down/bottom-uptriggers5.Systematicordeliberatesearch/chanceoropportunism

ImplicationsofsustainableentrepreneurshipManagersneedtoidentifythetriggersinthecompanyfirstanddetermineifanykeytriggersarenotoccurringforaparticularreason.Thereisaneedtosystematicallyreviewbothsuccessfulandunsuccessfulppsthathavebeenpursuedbythecompanyoverthepast5years.Managersshouldlookforthegroupingsgivenandassociatethemwithprojectsandtheiroutcomes.Ifmanagementunderstandsthesetriggeringevents,itwillknowwhichtriggerstoemphasisegivenspecificcircumstances,howresourcesandincentivescanbeallocatedtofacilitatecertaintriggeringevents,andhoworganisationsshouldbestructuredtotakeadvantageofcertaintriggeringevents.15.5BuildinganAdaptiveOrganisationOrganisationsthatoperateincontinuouslychangingexternalenvironmentshavetoadaptcontinually,whichrequiresvariousformsofinnovation.Ultimately,adaptationandinnovationdependontheorganisation’sabilitytolearn..Learningorganisationsareorganisationsthatcontinuallyimprovethroughtheircapacitytolearnfromtheirexperiences.Learning,inthiscontext,referstotheacquisitionofnewknowledgebyemployeeswhoarewillingtoapplytheknowledgeinmakingdecisionsorinfluencingothersintheorganisation.10criticalareasthatshouldbefocusedonforlearning:

1. Stylesofchampionsthatworkanddon’t2. Ventureteamstructuresthataremosteffectivefortypesofinnovation3. Modelsofsuccessfulprojectsintermsofkeystepsofstages4. Approachestogoalsettingandmonitoringthatkeptprojectontrack5. Methodsofopportunityidentificationthattookplace6. Wayofachievingbalancebetweenautonomyandcontroloninnovation7. Venturefundingapproaches8. HRMpolicies9. Techniquesofoptimallymanagingtheallocationofresources10. Changemanagementforadoptionofinnovation

Four“rules”thatenhanceanorganisation’schancesofremainingadaptiveandinnovativeboththroughandbeyondthegrowthstage:

1. Sharetheentrepreneurialvision.2. Increasetheperceptionofopportunity.3. Institutionalisechangeastheorganisationalgoal.4. Instilthedesiretobeinnovative.

15.6CreatingaSenseofUrgencyWhenthereisacrisis,employeesfeelasenseofurgency,managementmustcreateanenvironmentwhereasenseofurgencyisfeltallthetime.Itisbuiltintothecorevaluesofthecompanyandthesurvivalofthecompanydependsonit.It’sacallforimmediateaction,pressingneedtodothingsdifferentlyandabeliefthattimeisrunningout.Thechallengeforanyorganisationthatwishestoachievesustainableentrepreneurshipandtocounteractcomplacencyistocreateanon-goingsenseofurgencythroughouttheorganisation.increatingasenseofurgency,itisimportanttorethinkthefundamentalassumptionsthatunderpinbusiness.Companieshavetoreprogramthemselvestothink:

• Ourbestemployeesandevenourgoodemployeeshaveprofessionaloptionsthatdonotinvolveourcompany.• Customerloyaltiesarefleeting–creatinga“wowexperience”forcustomersisimpossibleifwearenot

continuallyfindingnewandbetterapproaches.• Thegapbetweenusandthecompetitionissmallerthanwethinkinthosesituationswhereweareahead,and

itislargerthanwethinkinthosesituationswherewearebehind.• Thelatest,greatesttechnologyhasproblems,butwecannotaffordtoignoreit.• Ourbusinessmodelisworking,andyetitneedstobefixed.Thefirmcouldbeoutofbusinessin24months.

15.7TheNewStrategicImperative:EmbraceParadoxesInthissectionweshalllookattheparadoxesfoundinanentrepreneurialorganisation.Throughoutthetextbookwehavecomeacrossmanysuchparadoxes,forexampletheneedfortheorganisationtobeflexibledespitetheneedforcontrolintheorganisation.Wehavecomeacrosstheimportanceoftheindividualisticcharacteristicsoftheentrepreneuringettinghis/herideaacceptedanddevelopedintoamarketableproduct;yetwehavealsostudiedtheimportanceoftheventureteam(collectivism)indevelopingthenewidea.Therearenumerousotherparadoxesinmanaginganentrepreneurialorganisation.Theimperativesorchallengesthatanorganisationfaces,theseinclude:

• Theparadoxofsizeandscopeo smallercompaniesarequickandflexible,innovateontheflyo thetechnologyrevolutionhasallowedthemtooperateonalargerscaleo asaresultlargecompaniesaretransformingthemselvesintoconfederationsofsmallindependentfirmso theparadoxofeconomiesofscale

• Theparadoxofriskandreturno doingsomethinghighlyinnovativemaynotproducereturns

• Theparadoxoftheindividualandtheteamo Adedicatedteamofspecialistandgeneralistsarealsoneededaswellasavisionarychampiono TheCorporateentrepreneurwillhavetobelossofadictatorandmoreofateamplayero Theobjectistobuildaprojectbasedoncorecompetenciesandfocusoncontinueddevelopment

• Theparadoxofflexibilityandcontrolo largecompanieshavedownsizedandrestructuredtobecomefasterandflexibleo it’shardtomaintainflexibilityandasufficientlevelofcontrol

• Theparadoxofconstructiveanddestructivebehaviouro CErequiresbothstabilityandturbulenceo Entrepreneurshipisbothconstructiveanddestructivemakingexistingoperationsobsoleteo Newinnovativeproductsreplaceoldestablishedones

• Theparadoxofsuccessandfailureo entrepreneursarereplacingconventionalmanagerswhohaveaneedforsuccessbutsomeinnovations

failo withinfailurearetheseedsforsuccess

15.8TheEntrepreneurialMindsetEvenentrepreneurialmanagersmaylosetheirentrepreneurialedge.Thedemandsofday-to-dayadministrationandorganisationalpolicies,proceduresandsystemstendtoforcetheentrepreneurtobecomemoreadministrativelyoriented.Inordertomaintaintheentrepreneurialmindset,themanagermustassumefourongoingresponsibilities.Theseinclude;

• framingthechallenge-cleardefinitionofthespecificchallengeseveryoneintheinnovativeprojectshouldaddress

• absorbingtheuncertainty-makeuncertaintylessdaunting• defininggravity-whatisacceptedandwhatisnotaccepted• clearingobstacles-internalcompetitionforresources,mustsecurethem

15.9TheTwenty-FirstCenturyEntrepreneurialCompany:ADynamicIncubatorThecapabilitiesthattheorganisationsoftomorrowshouldhave.Theydifferentiatebetweenstrategicmanagementandentrepreneurship,butpointoutthatstrategicmanagementprovidesthecontextwithinwhichentrepreneurialactionsarepursued.

Theorganisationsoftomorrowwillbetheonesthatwillbecapableofmergingstrategicactionswithentrepreneurialactionsonanon-goingbasisinsixdominantdomains:

• Innovation-innovationeffortsmustbemanagedstrategically• Networks-networksofcooperationbetweenorganisations• Globalisation/internationalisation-exploitationofglobalnetworksandopportunities• Organisationallearning-strategiccommitmenttolearning• Thetopmanagementteamandgovernance-musthaveasharedentrepreneurialvision• Growthopportunities-changesinenvironments

Entrepreneurialorganisationsinthetwenty-firstcenturywillbeconceptualisedasacollectionoffourmajorportfolios:

• Portfolioofcompetencies-skillsandcapabilitieswithintheorganisationthatthestrategicdirectionwillbebuiltaround.theabilitytoinnovate,adaptandmanagechange

• portfolioofresources-financial,physical,humanrelationalandintellectualresourcesthatareinnovatingandenabling

• Portfolioofinnovations-balancebetweennewpps.Pursuemultipleinnovationsandlearnsystematically.Cyclesofrapidevolutionandperiodicrevolution

• Portfolioofventures-devolutionofthecompanyintosmalleronesthatcanbeseamlesslycoordinatedFromaportfolioperspective,theorganisationbecomesadynamicincubatorforconcepts,productsandventures.

Download - CHAPTER 1 – FOUNDATIONS OF CORPORATE ENTREPRENEURSHIP …€¦ · Entrepreneurship is defined as the process of creating value by bringing together a unique combination of resources

Top Related