MBAX 6100 Entrepreneurship & Small Business Management

1. MBAX 6100Entrepreneurship & Small Business Management Frank MoyesLeeds College of Business University of ColoradoBoulder, Colorado Corporate Entrepreneurship I

2. 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 Corporate Entrepreneurship I

3. Today’s Agenda • Corporate Entrepreneurship • Is this a good market? • Entrepreneurial market research –Gene Hayworth Corporate Entrepreneurship I

4. Next Week’s 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 Corporate Entrepreneurship I

5. 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 firm’s ability to acquire innovative skills and capabilities.” Morris & Kuratko • “Cost-effective innovation or intrapreneurship” Pinchot Corporate Entrepreneurship I

6. 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 Corporate Entrepreneurship I

7. Why Do Companies Need Rules? • Consistent actions • Guide behavior • Help make decisions • Treat employees fairly • Provide consistent quality & service Corporate Entrepreneurship I

8. Obstacles to Corporate Entrepreneurship • Systems • Organization structures • Policies & Procedures • Strategic directions • People • Culture Morris & Kuratko, Corporate Entrepreneurship Corporate Entrepreneurship I

9. Systems Obstacles? • Reward & evaluation systems • Rigid planning & budgeting systems • Don’t like changes or surprises • Inflexible budgeting systems • Arbitrary cost allocation systems Morris & Kuratko, Corporate Entrepreneurship Corporate Entrepreneurship I

10. 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 Corporate Entrepreneurship I

11. Policies & Procedures Obstacles? • Long, complex approval cycles • Extensive documentation requirements • Corporate requirements • Accounting • HR • Brand use • SOX • Traditional evaluation techniques don’t work (ROI, market share, quick payback)? • Management reporting requirements Corporate Entrepreneurship I Morris & Kuratko, Corporate Entrepreneurship

12. 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 Corporate Entrepreneurship I

13. 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 Corporate Entrepreneurship I

14. Culture Obstacles? • Ill-defined values • No consensus on priorities • Experimentation not encouraged • Values that conflict with E requirements Morris & Kuratko, Corporate Entrepreneurship Corporate Entrepreneurship I

15. Personal Obstacles? • Too busy with current job • Fear of failure • Managerial skills needed • Selling skills • Financial dynamics • Style of management • Old dog who can’t learn new tricks • Political savvy • Sense of urgency Morris & Kuratko, Corporate Entrepreneurship Corporate Entrepreneurship I

16. 0 What is the Problem? Corporate Entrepreneurship I

17. 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 I’m in control, I’m probably going to slow.” Mario Andretti • “Road less traveled”, Robert Frost: • “If you ain’t makin’ waves, you ain’t kickin’ hard enough.” Corporate Entrepreneurship I

18. 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 Corporate Entrepreneurship I

19. Entrepreneurial Ventures Good At • Focus all resources & time on creating a successful venture • Trial & error (ready, fire, aim) • Quick decisions • Using OPR’s • Instant communications • Recruiting & motivating world-class employees Corporate Entrepreneurship I

20. Goals Inspiration Inspiration Fooling Goals Plan Action Around Plans Doing Plan Mistakes Some Other Failure Action Goals Inspiration Success How Start-up Actually Happens Pinchot & Pellman, Intrapreneurship in Action

21. 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, R&D, sales force, distribution channels Differences Between Start-up & Corporate Entrepreneurs Corporate Start-up Corporate Entrepreneurship I

22. 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 Corporate Entrepreneurship I

23. 0 How Can Corporations Be Intrapreneurial? Corporate Entrepreneurship I

24. 0 Conclusion – Challenges to Intrapreneurship • 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 don’t 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.” Corporate Entrepreneurship I

25. 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” Corporate Entrepreneurship I

26. Forgetting • Forget core business model • Changing behavior – institutional memory • Hiring, compensation, status, manufacturing, sales, marketing, R&D, 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” Corporate Entrepreneurship I

27. 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 Corporate Entrepreneurship I

28. 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 Corporate Entrepreneurship I

29. 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 Corporate Entrepreneurship I

30. Learning II • Lean to predict outcomes • By analyzing the disparities between forecast and outcome • Frequent, candid, open, fast • Predictions can’t become too rigid • Aggressive investment, followed by abandonment • Guardrail to guardrail decision making • Plans should be easy to revise • Avoid lots of detail Corporate Entrepreneurship I

31. 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” Corporate Entrepreneurship I