MBAX 6100 Entrepreneurship

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MBAX 6100Entrepreneurship Small Business
Management

• Frank MoyesLeeds College of Business
• University of ColoradoBoulder, Colorado

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Corporate Entrepreneurship Revised Schedule

• Week 5 Obstacles to corporate entrepreneurship
• Week 6 You as an Intrapreneur
• Week 7 Innovation in corporations

Switch Week 6 Week 7 Topics Assignments
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Todays Agenda

• Corporate Entrepreneurship
• Is this a good market?
• Entrepreneurial market research Gene Hayworth

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Next Weeks Schedule

• Corporate Entrepreneurship Creativity
  Innovation
• Case Emerging Business Opportunities at IBM
• Read
• Bringing Silicon Valley Inside
• Feasibility M-4 Is This a Good Industry?
• Read a magazine you would never, ever read
  identify a business opportunity
• Entrepreneurship Interview
• Hand in paper
• Be ready to discuss in class

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What is Corporate Entrepreneurship?
Innovation

• Formal or informal activities aimed at creating
  new businesses in established companies through
  product and process innovations and market
  developments. Zahra
• centers on reenergizing and enhancing the
  firms ability to acquire innovative skills and
  capabilities. Morris Kuratko
• Cost-effective innovation or intrapreneurship
  Pinchot

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How Do Corporations Deal With Uncertainty?

• Thorough analysis
• Approval levels
• Must follow the plan once approved
• Short term time horizon
• Establish controls HR, accounting, legal,
  marketing
• Rules

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Why Do Companies Need Rules?

• Consistent actions
• Guide behavior
• Help make decisions
• Treat employees fairly
• Provide consistent quality service

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Obstacles to Corporate Entrepreneurship

• Systems
• Organization structures
• Policies Procedures
• Strategic directions
• People
• Culture

Morris Kuratko, Corporate Entrepreneurship
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Systems Obstacles?

• Reward evaluation systems
• Rigid planning budgeting systems
• Dont like changes or surprises
• Inflexible budgeting systems
• Arbitrary cost allocation systems

Morris Kuratko, Corporate Entrepreneurship
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Organizational Obstacles?

• Too many hierarchical levels
• Responsibility w/o authority
• Top down management
• Restricted communication channels
• Lack of accountability
• Lack of commitment

Morris Kuratko, Corporate Entrepreneurship
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Policies Procedures Obstacles?

• Long, complex approval cycles
• Extensive documentation requirements
• Corporate requirements
• Accounting
• HR
• Brand use
• SOX
• Traditional evaluation techniques dont work
  (ROI, market share, quick payback)?
• Management reporting requirements

Morris Kuratko, Corporate Entrepreneurship
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Strategic Direction Obstacles?

• Lack of commitment from senior execs
• No innovation goals
• No strategy for E
• No vision
• No E role models at top
• Instincts are to protect existing businesses

Morris Kuratko, Corporate Entrepreneurship
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People Obstacles?

• Definition of success promotion every 3 years,
  corner office, corporate kite
• Fear of failure/risk taking
• Human nature resistance to change, turf
  protection, complacency
• Skills
• Inappropriate skills/talents
• Entrepreneurial ventures attract mavericks risk
  takers

Morris Kuratko, Corporate Entrepreneurship
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Culture Obstacles?

• Ill-defined values
• No consensus on priorities
• Experimentation not encouraged
• Values that conflict with E requirements

Morris Kuratko, Corporate Entrepreneurship
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Personal Obstacles?

• Too busy with current job
• Fear of failure
• Managerial skills needed
• Selling skills
• Financial dynamics
• Style of management
• Old dog who cant learn new tricks
• Political savvy
• Sense of urgency

Morris Kuratko, Corporate Entrepreneurship
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What is the Problem?
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Definitions of an Entrepreneur

• Entrepreneurs are societies rejects, instead of
  becoming hobos, criminals or professors, the
  start their own business. Thereau
• Traits of entrepreneurs are closest to juvenile
  delinquents.
• Progress depends upon unreasonable men. GB Shaw
• If Im in control, Im probably going to slow.
  Mario Andretti
• Road less traveled, Robert Frost
• If you aint makin waves, you aint kickin
  hard enough.

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Entrepreneurs Are

• Opportunity driven, which means
• Understands competition
• Understands market size, trends, accessibility
• Understand customers through direct contact
• Tolerance for ambiguity
• Locus on control
• Take risks
• Creative
• Impatient
• Not tied to conventional approach

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Entrepreneurial Ventures Good At

• Focus all resources time on creating a
  successful venture
• Trial error (ready, fire, aim)
• Quick decisions
• Using OPRs
• Instant communications
• Recruiting motivating world-class employees

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How Start-up Actually Happens
Pinchot Pellman, Intrapreneurship in Action
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Differences Between Start-up Corporate
Entrepreneurs
Corporate
Start-up

• Entrepreneur takes the risk
• Entrepreneur owns concept
• Unlimited rewards
• One error may mean failure
• Independence of entrepreneur
• Experimentation flexibility
• Quick decision making
• Resource limitations

• Corporation assumes risk
• Corporation owns no equity
• Clear limits
• More room for errors
• Interdependence of entrepreneur
• Rules, procedures, bureaucracy
• Long approval cycles
• Access to finances, RD, sales force,
  distribution channels

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Similarities Between Start-up Corporate
Entrepreneurs

• Opportunity recognition with a defined window
• Driven by passionate individual who uses a team
  to commercialize a concept
• Encounter resistance obstacles requiring
  persuasiveness
• Must convince people to invest
• Leverage resources
• Ambiguity

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0
How Can Corporations Be Intrapreneurial?
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Conclusion Challenges to Intrapreneurship
0

• How encourage experimentation
• How treat failure
• Types of people who work well in large
  organizations
• How establish effective reward systems
• Definition of success - corner office corporate
  kite
• Traditional evaluation techniques dont work
  (ROI, market share, quick payback)?
• Instincts are to protect existing businesses
• Is patient capital possible? Phil Knight Took 18
  years to be an overnight success.

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Building Breakthrough Businesses Within
Established Organizations

• Emphasis is on execution
• Strategic experiments are highest risk and return
• Require unique approach Forgetting, Borrowing
  Learning

Govindarajan Trimble, HBR, Building
Breakthrough Businesses Within Established
Organizations
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Forgetting

• Forget core business model
• Changing behavior institutional memory
• Hiring, compensation, status, manufacturing,
  sales, marketing, RD, new product development
  milestone driven, purchasing (supply chain)
• Planning
• Falling short was perceived failure
• Informed estimates

Govindarajan Trimble, HBR, Building
Breakthrough Businesses Within Established
Organizations
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Borrowing I

• Complete separation not practical, nor desirable.
• Resources are too valuable
• NYTD needed branded content access to exist
  Times advertisers
• Objective - Gain competitive advantage
• Not to get cost reduction
• Avoid IT HR links

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Borrowing II

• Requires proactive senior management
• Manage the interactions we vs. them
• Performance review stressed collaboration,
  willingness to cooperate
• Make it painless to core.
• Replenish resources
• Set transfer price high enough to make it a
  priority

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Learning I

• Strategic experiments
• Must have a structured learning process to reduce
  uncertainty
• Make mistakes early
• Evaluate leader on ability to learn make good
  decisions

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Learning II

• Lean to predict outcomes
• By analyzing the disparities between forecast and
  outcome
• Frequent, candid, open, fast
• Predictions cant become too rigid
• Aggressive investment, followed by abandonment
• Guardrail to guardrail decision making
• Plans should be easy to revise
• Avoid lots of detail

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Conclusions Building Breakthrough Businesses

• Strategic experiments are highest risk and return
• Emphasis is on execution
• Require unique approach Forgetting, Borrowing
  Learning
• Commitment active involvement of top management

Govindarajan Trimble, HBR, Building
Breakthrough Businesses Within Established
Organizations