CHAPTER 2 CORPORATE ENTREPRENEURSHIP Causes of Interest In Corporate Entrepreneurship 1.
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On a social level, individuals who believe strongly in their own talents frequently desire to create something of their own. They want responsibility and have a strong need for individual expression and freedom in work environment. Corporate entrepreneurship is one method of stimulating and then capitalizing on individuals in an organization who think that something can be done differently and better. It is important to keep or instill, the entrepreneurial spirit in an organization to innovate and grow. Corporate entrepreneurship is an entrepreneurial action within an established organization. Hypercompetition has forced companies to have an increased interest in such areas as new product, diversification, increased productivity and decreasing costs. New business venturing refers to the creation of a new business within an existing organization. The entrepreneurial activities are creating something new of value either by redefining the company’s current products or services, developing new markets or forming formally autonomous or semiautonomous units or firm. Organizational innovativeness refers to product and service innovation, with an emphasis on development and innovation in technology.
10. Self-renewal is the transformation of an organization through the renewal of the key ideas on which it is built. 11. Proactiveness includes initiative and risk taking, competitive aggressiveness and boldness, reflected in the orientations and activities of top management. Managerial Versus Entrepreneurial Decision Making Strategic Orientation and Commitment to Opportunity 1. Strategic orientation refers to those factors that are inputs into the formulation of the firm’s strategy. 2. The strategy of entrepreneurial management is driven by the presence or generation of opportunities for new entry and is less concerned about the resources that may be required to pursue such opportunities. 3. The strategy of traditional management is to use the resources of the firm efficiently. 4. Entrepreneurially and traditionally managed firms can be distinguished in terms of their commitment to opportunity. 5. Entrepreneurial orientation toward opportunity is a commitment to taking action on potential opportunities. 6. Able to withdraw their resources from a particular opportunity. 7. If initial feedback from the pursuit of an opportunity provides information suggesting that it might not be the right opportunity for the firm.
Commitment of Resources and Control of Resources 1. Entrepreneurial orientation toward the commitment of resources is a focus on how to minimize the resources that would be required in the pursuit of a particular opportunity. 2. The firm must invest to initially pursue an opportunity, the amount of resources at risk if the opportunity does not pan out is also minimized. 3. Entrepreneurial managed firms may test the waters by committing a small amounts of resources in a multistep manner with minimal risk exposure at each step. 4. Traditionally managed firms decide to commit resources to an opportunity, they will do it on a large scale. 5. Traditionally managed firms uses in depth analysis of available information to go for it or not and if they do go for it, the investment of resources cannot be reversed. 6. Entrepreneurially managed firms are less concerned about the ownership of resources and more concerned about having access to others’ resources and operates from the standpoint. 7. Traditionally managed firms focus on the ownership of resources and the accumulation of further resources. 8. If they controlled their own resources, they are selfcontained. 9. The control that comes with ownership means that the resources can be deployed more efficiently for the benefit of the firm.
Management Structure and Reward Philosophy 1. Entrepreneurial orientation toward management structure is more organic focus, it has few layers of bureaucracy between top management and the customer and has multiple informal networks. 2. Entrepreneurially managed firm are able to capture and communicate more information from the external environment and are sufficiently fluid to be able to take quick action based on the information. 3. More structured to make use of both their internal networks and external networks, which provide information and other important resources in discovery and exploitation of opportunities. 4. Traditionally managed firm has a structure well suited for the internal efficiencies of allocating controlled resources. 5. Formalized hierarchy with clear roles and responsibilities, highly routinized work and layers of middle management to employees’ use of the firm’s resources. 6. The structures are more focused on efficiency rather than on detecting and acting on changes in the external environment. 7. Entrepreneurially managed firm is focused on pursuing opportunities for new entry that represent new value of for the firm. 8. Entrepreneurial philosophy toward rewards are one that compensate employees based on their contribution toward the discovery and exploitation of opportunity.
9. The employees have the freedom to experiment with potential opportunities and are rewarded accordingly. 10. Traditionally managed firm rewards management and employees based on their responsibilities. Growth Orientation and Entrepreneurial Culture 1. Entrepreneurial orientation of growth is a focus on rapid growth. 2. Traditionally managed firms prefer growth to be slow and at a steady pace. 3. Culture is the environment of a particular organization. 4. Entrepreneurial orientation toward culture encourages employees to generate ideas, experiment and engage in other tasks that might produce creative output. 5. This output is often the source of opportunities for new entries. 6. Traditionally managed firms begin with an assessment of the resources that it controls, and this is reflected in its organizational culture. 7. It only interested in ideas that revolve around controlled resources. Establishing a Culture for Corporate Entrepreneurship 1. Characteristics of an entrepreneurial environment: Organization operates on frontiers of technology New ideas encouraged Trial and error encouraged Failures allowed No opportunity parameters Resources available and accessible
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Multidiscipline teamwork approach Long time horizon Volunteer program Appropriate reward system Sponsors and champions available Support of top management First, the organization operates on frontiers of technology. Research and development are key sources for successful new product ideas, the firm must operate on the cutting edge of the industry’s technology, encouraging and supporting new ideas. Second, trial and error. Successful of new products or services do not appear fully developed, they evolve. Establish an environment that allows mistakes and failures in developing new and innovative products. Third, the organization should make sure that there are no initial organizational obstacles that inhibit creativity in new product development. Fourth, the resources of the firm need to be available and easily accessible. Insufficient funds are allocated not to creating something new, but to solve problems that have an immediate effect on the bottom line. Fifth, a multidiscipline team approach needs to be encouraged. This open approach, with participation by needed individuals regardless of area, is the antithesis of the typical corporate organizational structure.
10. An evaluation of successful cases of corporate entrepreneurship indicated that one key to success was the existence of skunkworks involving relevant people. 11. A team member’s promotion and overall career within the corporation are based on their job performance in the current position. 12. Establish a long time horizon for evaluating the success of the overall program and the success of an individual venture. 13. This patient toward money in the corporate setting is no different from the investment/return time horizon used by venture capitalists and others when invest in an entrepreneurial effort. 14. Sixth, the spirit of corporate entrepreneurship cant be forced. 15. An individual willing to spend the excess hours and effort to create a new venture needs the opportunity and the accompanying reward of completing the project. 16. A corporate entrepreneur falls in love with the newly created internal venture and will do almost anything to help ensure its success. 17. Seventh, reward system. Rewards based on the attainment of established performance goals. 18. The corporate entrepreneur needs to be appropriately rewarded for all the energy, effort and risk taking expended in the creation of the new venture. 19. Eighth, sponsors and champions throughout the organization supports the creativity and the planning flexibility to establish new objectives and directions.
20. Corporate structures frequently measure managers on their ability to come close to objectives, regardless the quality of performance. 21. Ninth, must be supported by top management, both by their physical presence and making sure that the necessary personnel and financial resources are available. Leadership Characteristics of Corporate Entrepreneurs 1. Leadership characteristics: Understands the environment Visionary and flexible Creates management options Encourages teamwork Encourages open discussion Builds a coalition of supporters Persists 2. To establish a successful corporate venture, the individual must be creative and have a broad understanding of the internal and external environments of the corporation. 3. Be a visionary leader, a person who dreams great dreams. 4. To establish a successful new venture, the corporate entrepreneur must have a dream and overcome obstacles to achieving it by selling the dream to others. 5. A corporate entrepreneur does not mind the store but open to and encourages change. 6. In forming a new venture, putting together a variety of skills requires crossing established departmental structure and reporting systems.
7. To minimize disruption, the corporate entrepreneur must be a good diplomat. 8. Open discussion must be encouraged to develop a good team for creating something new. 9. A successful new venture within an established firm can be formed only when the team involved feels free to disagree and to critique idea to reach the solution. 10. The corporate entrepreneur must encourage and affirm each team member, especially during difficult times. 11. Only through the corporate entrepreneur’s persistence will a new venture be created and successful commercialization result. Establishing Corporate Entrepreneurship in the Organization 1. The first step is to secure a commitment to corporate entrepreneurship in the organization by top, upper and middle management levels. 2. Top management commitment is managers in an organization strongly supporting corporate entrepreneurship. 3. Without top management commitment, the organization will never go through all the cultural changes for implementation. 4. Second, ideas and general areas that top management is interested in supporting should be identified, along with amount of risk money that is available to develop the concept further. 5. These should specify the time frame, volume and profitability requirements for the new venture.
6. A sponsor system and an entrepreneurial training need to be established. 7. Third, a company needs to use technology to be more flexible. 8. Fourth, the organization should be a group of interested managers who will train employees and share their experiences. 9. This will require the entrepreneurial team to develop a business plan, obtain customer reaction and some initial intentions to buy, and learn how to coexist within the organizational structure. 10. Fifth, the organization needs to develop ways to get closer to its customer. 11. Sixth, an organization must learn to be more productive with fewer resources. 12. Seventh, the organization needs to establish a strong support structure for corporate entrepreneurship. 13. These ventures require flexible, innovative behavior with the corporate entrepreneurs having total authority over expenditures and access to sufficient funds. 14. Eighth, support must involve tying the rewards to the performance of the entrepreneurial unit. 15. This to encourage the team members to work harder and compete more effectively. 16. Ninth, the organization needs to implement an evaluation system that allows successful entrepreneurial units to expand and unsuccessful ones to be eliminated.
Problems and Successful Efforts 1. one study found that new ventures started within a corporation performed worse than those started independently by entrepreneurs. 2. The corporation’s difficulty in maintaining a long-term commitment, a lack of freedom to make autonomous decisions and a constrained environment. 3. Minnesota Mining and Manufacturing (3M) allows employees to devote a percentage of their time to independent projects. 4. An important goal : to generate a significant percent sales from new products introduced within the last five years. 5. The most successful entrepreneurial activities was the development of Post-it Notes by entrepreneur Arthur Fry. 6. Hewlett-Packard (HP) failed to recognize the potential of Steven Wozniak’s proposal for a personal computer. 7. The case of Charles House, an engineer who went far beyond his entrepreneurial duty when he ignored an order from David Packard to stop working on a high-quality video monitor. 8. IBM developed the independent business unit concept. 9. Each unit is a separate organization with its own miniboard of directors and autonomous decision-making authority on many manufacturing and marketing issues. 10. Corporate entrepreneur Philip Estridge led his group to develop and market the PCs through both IBM’s sales force and the retail market, breaking some of the most binding
operational rules of IBM at that time. Learning from Failure 1. By learning why an entrepreneurial initiative failed, entrepreneurs can avoid such mistakes in the future and do a better job by managing the uncertainties associated with entrepreneurial action. 2. Dual process model of coping with negative emotions involves oscillation between loss orientation and a restoration orientation. 3. Individuals who use a dual process model of coping with negative emotions or grief recovery can be more quickly recover from the negative emotions generated by the failure of an entrepreneurial initiative. 4. Entrepreneurs with a loss orientation might seek out friends, family or psychologists to talk through the event and their negative emotions. 5. Loss orientation is an approach to negative emotions that involves working through and processing some aspect of the loss experience and as a result of this process, breaking emotional bonds to the object loss. 6. Restoration orientation is an approach to negative emotions based on both avoidance and a proactiveness toward secondary sources of stress arising from a major loss. 7. This orientation involves distracting oneself from thinking about the failure and focusing one’s energy on addressing other problems that have arisen as result of the failure. 8. Practical implications :
Knowledge that the feelings and reactions being experienced by the entrepreneur are normal for someone dealing with such a loss may help to reduce feelings of shame and embarrassment. There are psychological and physiological outcomes caused by the feelings of loss. A process of recovery from failure to learn, which offers entrepreneurs some comfort that their current feelings of loss, sadness and helplessness will eventually diminish. The recovery and learning process can be enhanced by some degree of oscillation between a loss orientation and a restoration orientation. Recovery from loss offers and opportunity to increase one’s knowledge of entrepreneurship.S