On Venturing

1. On Venturing MGT 709 New Venture Creation

2. Determining how entrepreneurial projects will be pursued Corporate Entrepreneurship • Corporate culture • Leadership • Structural features that guide and constrain action • Organizational systems that foster learning and manage rewards • Use of teams in strategic decision making • Whether the company is product or service oriented • Whether the firm’s innovation efforts are aimed at product or process improvements • The extent to which it is high-tech or low-tech

3. Focused Approaches to Corporate Entrepreneurship Autonomous corporate venturing work group • Autonomous corporate venturing (work) group • Frees entrepreneurial team members from constraints imposed by existing norms and routines • Facilitates open-minded creativity • But, does isolate the group from the corporate mainstream • New venture groups (NVGs) • Business incubators

4. Focused approach New Venture Group New Venture Groups(NVGs) • Goal is to identify, evaluate, and cultivate venture opportunities • Typically function as semi-autonomous units with little formal structure • Involvement includes • Innovation and experimentation • Coordinating with other corporate divisions • Identifying potential venture partners • Gathering resources • Launching the venture

5. Focused approach Business Incubators Business Incubators • Business incubators are designed to “hatch” new businesses • Incubators provide some or all of the following functions • Funding • Physical space • Business services • Monitoring • Networking

6. Dedication to principles and practices of entrepreneurship is spread throughout the firm • Ability to change is a core capability • Stakeholders can bring new ideas or venture opportunities to anyone in the organization • Two related aspects of dispersed entrepreneurship • Entrepreneurial culture • Product champions Dispersed Approaches to Corporate Entrepreneurship

7. Dispersed approach Entrepreneurial Culture Entrepreneurial Culture • Culture of entrepreneurship • Search for venture opportunities permeates every part of the organization • Effect is strongest when it animates all parts of the organization • Strategic leaders and the culture generate a strong impetus • To innovate • Take risks • Seek out new venture opportunities

8. Dispersed approach Product Champions Product Champions • Product (or project) champions • Bring entrepreneurial ideas forward • Identify what kind of market exists for the product or service • Find resources to support the venture • Promote the venture concept to upper management • New project must pass two critical stages • Project definition • Project impetus

9. Measuring the Success of Corporate Entrepreneurship Activities • Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives appear doomed • Comparing strategic and financial goals • Are the products or services offered by the venture accepted in the marketplace? • Are the contributions of the venture to the corporation’s internal competencies and experience valuable? • Is the venture able to sustain its basis of competitive advantage?

10. Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives appear doomed • Exit champions • Willing to question the viability of a venture project • Demand hard evidence and challenge the belief system that is carrying an idea forward • Hold the line on ventures that appear shaky • Real options • Managing the uncertainty associated with launching new ventures Measuring the Success of Corporate Entrepreneurship Activities

11. Adams On Corporate Venturing • How can mature companies act like a startup? • Make sure everybody is creating value • Reward great people, give them a voice • Get back to market validation • Every presentation around customer pain • Communicate a common vision • Don’t waste resources on internal competition • Align new products with the sales model • Harness entrepreneurial energy • Reward great ideas, give people autonomy, establish safe havens

12. Adams ctd. • How can mature companies act like a startup? • Make decisions and act fast – speed wins • Cut the bureaucracy, take risks • 50% of time in meetings • Listen to customers or lead people • Stick to your core competency • work with people who will get the job done • Create smaller, dynamic units • 16 person teams in military, minimal org overhead • Keep R&D alive

13. Ambidextrous Organizations

14. Future of Corporate Venturing • Ecosystem venturing • Supports and encourages a network of customers and suppliers • Value of benefits for existing businesses divided by invested capital – don’t lose focus • Innovation venturing • Spend a proportion of an existing functional budget in a ‘venturing’ way (e.g. R&D) • Focus on commercializing new technologies for existing business • Make sure it stays under a functional head rather than become a general ‘innovation fund’

15. Future of Corporate Venturing • Harvest Venturing • Convert existing corporate resources into commercial ventures and then into cash • Must not be needed by current or future org • Danger of becoming a ‘new growth’ unit rather than focusing on existing resources • Private Equity Venturing • Setting up a VC operation • Need privileged access to deals in early stage of lifecycle and some value-added for new firms • Danger of being bringing nothing special to the table but thinking you do (hubris)

16. Why ‘new legs’ venturing fails • Focus on low probability projects • Little attention or commitment from core • Not given enough time or funds (due to competition with core business) • It’s a tough business • Even VC firms earn below cost of capital on average

17. DIAGNOSIS & DISCOVERY CONSULTING SKILLS

18. Block on Diagnosis • The business of discovery is: • Doing layers of analysis • Understanding the political climate • Resurfacing resistance to sharing information • Seeing the interview as an intervention

19. Specific skills • Distinguish between the presenting problem and the underlying problem • Understand the technical problem and how it is being managed (or not) • Ask questions about what others are doing to cause or maintain the problem • Ask questions about the client’s own role • Plan the data collection jointly • Involve the client in interpreting the data • Condense to a limited number of issues • Use simple language • Develop a clear and simple picture of what is going on • There may be a similarity between how the client manages you and the organization • THE PURPOSE OF DISCOVER IS TO GET ACTION, NOT DO RESEARCH

20. Further Steps • Concentrate on four things beyond the technical considerations: • Keep simplifying your inquiry so that is ends up focusing more and more on the next steps the client can take • Use everyday language • Give a great deal of attention to your relationship with the client • Include the client at every opportunity in deciding how to proceed. Deal with resistance as it arises. • Treat technical data as valid and relevant. Also assess how the problem is being managed. The presenting problem is never the real problem!

21. Weiss on Successful Interventions • Ten steps to launch: • Reaffirm the proposal content with the buyer • Begin doing something • Find and meet the key players • Begin co-opting resistance • By-pass islands • Periodically meet with the buyer • Make your successes visible to the organization • Share credit, or even bestow all of it • Illustrate closure • Visibly make mid-course corrections

22. Other Gems for Discovery • Challenge basic premises • If the internal people had it all figured out, they wouldn’t need you • Seek documented (objective) validation for bald-faced assertions • Ensure you have alternative sources of information. • Don’t talk. Listen. • Cafeteria, the implementers, customers, suppliers, office staff • Ask anyone who volunteers information for examples, frequency, and who else was there • Trust your instincts and history. • Search for incongruities.

23. Other Gems for Discovery • Avoid being intimidated • Establish a comfortable first name relationship • Never pose as an expert • Don’t defend yourself with credentials or background • Try to meet on neutral turf • Push back firmly whenever the situation calls for it • Never accept a political role or take sides • Be proactive • Do your homework • Face setbacks honestly • Understand that tomorrow’s another day • THE MORE YOU GIVE IN, THE MORE THEY’LL EXPECT YOU TO GIVE; THE MORE YOU STAND FIRM, THE MORE THEY’LL RESPECT YOU

24. And finally… • Avoid intimidating others • Don’t start by talking • Don’t start with your process/methodology • Stop dropping the buyer’s name • Join them in the cafeteria • Contribute to company causes • Observe social mores • Dress like everyone else • Maintain confidences • Don’t take sides • Show humility • NEVER GIVE AN ORDER TO ANY CLIENT PERSONNEL

25. DIAGNOSING ORGANIZATIONS CONSULTING TOOLS