Outline of the Lecture

Corporate Entrepreneurship Short break Video covering a new business development.

Corporate Entrepreneurship

Speaker BARRIE K. CROSSLEY

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Corporate Entrepreneurship
Introduction
(linking with other concepts of entrepreneurship)

Venturing
(company activities)

Intrapreneurs
(individuals, drivers and barriers)
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INTRODUCTION

Business Life Cycle and Entrepreneurship

New Entrepreneurial stage needed ?
Entrepreneurial Consolidation Approach ? Maturity

Sales

Entrepreneurial ?
Survival

Growth

Inception

Time
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Businesses are faced with...

Changing dynamic markets Globalisation Shorter product life cycles High rates of technological change Pressures to reduce costs Changes in business organisation (int. & ext.)
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A Possible Response
Some large firms responded to the changing environment by addressing their necessary response to working with a dynamic environment involving attitudes to:

risk innovation flexible, rapid response changes in management and organisation

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Innovation
Creativity and Innovation are NOT synonymous.

Innovation = Creativity + Invention + Exploitation

Source: Rosenfeld and Serco. 1990

Role of Innovation
An enterprise that does not daily innovate inevitably ages and declines even in a successful business the disease of bureaucracy and complacency is ever present. (Drucker). Firms create competitive advantage by perceiving or discovering new and better ways to compete in an industry and bringing them to market, which is ultimately an act of innovation Michael Porter. The Competitive Advantage of Nations.

Schumpeterian Innovation
Schumpeter (1934). By recombining the factors of production to create something new the entrepreneur creates a demand Innovation could take different forms:
Creation of a new or alternative product A new method of production Opening a new market Capture of a new source of supply A new organisation
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 Birkinshaw (2003) identifies four common themes in corporate entrepreneurship.

Corporate Venturing Intrapreneuring Bringing the Market Inside Entrepreneurial Transformation

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Hierarchy of terminology in Corporate Entrepreneurship

Entrepreneurship
Independent Entrepreneurship Corporate Entrepreneurship

After: Sharma and Chrisman (1999)

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Hierarchy of terminology in Corporate Entrepreneurship

Entrepreneurship
Independent Entrepreneurship Corporate Entrepreneurship

Corp. Venturing

Innovation

Strategic Renewal

Int.. Corp. Venturing

Ext.. Corp. Venturing

After: Sharma and Chrisman (1999)

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Take care!
(Corporate Entrepreneurship / Intrapreneurship) mean different things to different researchers Examples of their use:
The development of an overall entrepreneurial climate Intra-corporate venturing Development initiatives by employees (often without asking permission) Rationalisation of the business
See Carter & Jones-Evans (2000) for further discussion
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Business Level
VENTURING

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Venturing
Venture: Chance, luck, hazard, an undertaking whose issue is uncertain or dangerous; an attempt - Chambers Dictionary. Key Elements: * Risk / uncertainty * Innovation / creativity * requiring striving / reward seeking behaviour. Corporate Venturing: The creation of new businesses * Making smaller, high growth businesses out of large, mature ones * Utilising Internal organic growth, acquisition, joint ventures or alliances.

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Why venture?
Growth Improved financial returns (e.g. ROI) Image (Corporate renewal) Technology pressure Diversification

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Reasons for venturing

Reasons for venturing Maturity of the base business To meet strategic goals To provide challenges to managers To develop future managers US Co. 70 76 46 30 Japanese Co. 57 73 15 17

To survive
To provide employment

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Source: Zenas Block & Ian MacMillan Corporate Venturing, Harvard Business Press 1993 18

Policy Ideas - Venturing

Joint Venture
Merger Int. venture Encourage Entrepreneurship Spin out Acquisition Take stake Ext. Co.

External Environment Suppliers

Contractors Buy stake Customers
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Intrapreneurs

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Intrapreneur
Used by Norman Macrae in an article in the Economist. (Christmas Ed. 1976). Applied term to managers, professionals and artisans who set up small businesses within old and existing organisations. Some texts suggest that Pinchot was the person who first used the term

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Intrapreneur
Developed by Pinchot (1986) An intrapreneur is an entrepreneur within an already established organisation. Used to describe entrepreneurism within a large organisation, rather than establishment of small businesses within a large organisation.

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 Gibb (1988) An Intrapreneur is an employee of a large organisation who has the entrepreneurial qualities of drive, creativity, vision and ambition. Gibb goes on to state that these people differ from entrepreneurs as they wish to retain the security of the large organisation.
A number of authors define Intrapreneur and related terms. See Sharma and Chrisman (1999).
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Intrapreneurs
May have these characteristics in common with independent entrepreneurs

Ability to work amidst confusion Ability to anticipate change Ability to make intuitive leaps High energy levels Creativity in problem solving Action orientation
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.. But want ...

BUT may differ .

Want less restrictive but supportive environment Want recognition Want their ideas to be a vehicle for advancement Want the security (pay cheque, pension etc)

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Intrapreneurs and entrepreneurs share:.

Entrepreneurial characteristics Vision & Flexibility Action Orientated Dedicated Persistent / overcome failure Self determined goal setters

Source: Pinchot 1986. Intrapreneuring. Harper & Row.

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Intrapreneurs need in addition

An ability in a Multi-disciplinary role To understand the environment To encourage open discussion Be able to create management options To build a coalition of supporters.

Source: Pinchot 1986. Intrapreneuring. Harper & Row.

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Corporate Entrepreneurs as Change Masters

Change Master A term used by Rosabeth Moss Kanter Three Stages of the journey:
Formulate and Sell, Power to advance, Maintain Momentum.

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Intrapreneurs as Change Masters

A term used by Rosabeth Moss Kanter Three Stages of the journey: Formulate and Sell, Power to advance, maintain Momentum. Skills: Personal and Interpersonal Step outside of conventional thinking Often generalists with kaleidoscopic thinking, vision communicators, persistent individuals, coalition & team builders, willing to share credit
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Rosebeth Moss Kanters View

Corporate entrepreneurs are people who envision something new and make it work. Being a corporate entrepreneur, what I call a change master is much more challenging and fun than being a non-entrepreneur. It requires more of a person, but it gives back more self-satisfaction.
Rosabeth Moss Kanter (1988). Handbook for Creative and Innovative Managers. McGraw Hill.
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Intrapreneurial Behaviour
May be seen as good news High achievement motivation High task commitment

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Intrapreneurial Behaviour

May be seen as mild irritants High levels of informal networking Informal recruitment (This could be a major problem)

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Intrapreneurial Behaviour

May be seen as serious problems Independence Non-acceptance of rules and boundaries Non-compliance with planning and control systems Conflict with authority

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Developing Intrapreneurship
FRAMEWORK CONDITIONS

Encourage Individual Intrapreneurs Encourage Entrepreneurial Enterprise

Encourage General Entrepreneurial Culture

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Barriers to an Intrapreneurial Culture

Barriers Include:
Senior management feel alienated hierarchical nature of the organisation Corporate culture Short term performance requirements Planning procedures
Source Gibb 1990

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Barriers to an Intrapreneurial Culture

Barriers (continued) Include:
Lack of ownership of the problem Mobility of managers lack of flexibility in the organisation methods of compensation
Source Gibb 1990

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An Intrapreneurial culture needs:

Sponsors Continuous involvement Autonomy of the intrepreneurial team Ability to cross boundaries
See Pinchot (1986)

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An Intrapreneurial culture needs:

(needs continued)

A tolerance of risk and failures Long term objectives Making resources available Introducing suitable compensation schemes.
See Pinchot (1986)

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Druckers Entrepreneurial Practices

Druker suggests some key management practices are vital in the development of entrepreneurship in an existing business.
Management focuses on opportunity Generation and maintenance of entrepreneurial spirit Top-down and cross functional interaction
Source Drucker, P. Innovation & Entrepreneurship. Pan 1986

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The final word ..

Intrapreneurs cannot exist if their passionate commitment is ignored and their visions given to people who dont understand them. Without intrapreneurs, innovation flounders
Source Pinchot (1986)

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Video
Consider:
Entrepreneurial characteristics of the characters Involvement of the owners Reactions to change Problems and how they are addressed How networks are used. How learning takes place. Attitude to risk.
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