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Part 1

Entrepreneurship in the TwentyFirst Century

CHAPTER 3

Corporate Entrepreneurship: Developing the Entrepreneurial Mindset in Organizations

Entrepreneurship
PowerPoint Presentation by Charlie Cook The University of West Alabama 2007 Thomson/South-Western. All rights reserved.

theory | process | practice


Seventh edition

Donald F. Kuratko Richard M. Hodgetts

Chapter Objectives
Studying this chapter should provide you with the entrepreneurial knowledge needed: 1. To define the term corporate entrepreneurship 2. To illustrate the need for corporate entrepreneuring 3. To describe the corporate obstacles preventing innovation from existing in corporations 4. To discuss the intrapreneurship considerations involved in reengineering corporate thinking 5. To describe the specific elements of an intrapreneurial strategy 6. To profile intrapreneurial characteristics and myths 7. To illustrate the interactive process of intrapreneurship
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The Entrepreneurial Economy


Factors in the emergence of the entrepreneurial economy:
The rapid evolution of knowledge and technology promoted high-tech entrepreneurial start-ups. highstart Demographic trends adding fuel to the proliferation of newly developing ventures.  The venture capital market became an effective funding mechanism.  American industry began to learn how to manage entrepreneurship.


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Who Are Intrapreneurs?


Intrapreneurs are sometimes captured by the description as a dreamer who does.
  

They tend to be action oriented. They can move quickly to get things done. They are goal oriented, willing to do whatever it takes to achieve their objectives. They are also a combination of thinker, doer, planner, and worker. They combine vision and action.

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The Nature of Intrapreneurship


Defining The Concept


Corporate Entrepreneurship Activities that receive organizational sanction and resource commitments for the purpose of innovative results.
A process whereby an individual or a group of individuals, in association with an existing organization, creates a new organization or instigates renewal or innovation within the organization. A process that can facilitate firms efforts to innovate constantly and cope effectively with the competitive realities that companies encounter when competing in international markets.

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The Need for Corporate Entrepreneurship


Rapid growth in the number of new and sophisticated competitors Sense of distrust in the traditional methods of corporate management An exodus of some of the best and brightest people from corporations to become small business entrepreneurs International competition Downsizing of major corporations An overall desire to improve efficiency and productivity

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Table 3.1 Sources Of and Solutions To Obstacles In Corporate Venturing

Source: Reprinted by permission of the publisher from Corporate Venturing Obstacles: Sources and Solutions, by Hollister B. Sykes and Zenas Block, Journal of Business Venturing (winter 1989): 161. Copyright 1989 by Elsevier Science Publishing Co., Inc. 2007 Thomson/South-Western. All rights reserved.

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Successful Innovative Companies


Factors in large corporations that are successful innovators:
     

Atmosphere and vision Orientation to the market Small, flat organizations Multiple approaches Interactive learning Skunkworks

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Reengineering Corporate Thinking


Steps to develop policies that will help innovative people reach their full potential:
1. Set explicit goals 2. Create a system of feedback and positive reinforcement 3. Emphasize individual responsibility 4. Give rewards based on results 5. Do not punish failures.

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Assessing Support for Innovation


Does the firm encourage self-appointed intrapreneurs? selfDoes the firm provide ways for intrapreneurs to stay with their enterprises? Are people permitted to do the job in their own way, or are they constantly stopping to explain their actions and ask for permission? Has the firm evolved quick and informal ways to access the resources to try new ideas? Has the firm developed ways to manage many small and experimental products and businesses?

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Assessing Support for Innovation (cont d)


Is the system set up to encourage risk taking and to tolerate mistakes? Can the firm decide to try something and stick with the experiment long enough to see if it will work, even when that may take years and several false starts? Are people in your company more concerned with new ideas or with defending their turf? How easy is it to form functionally complete, autonomous teams in the firms corporate environment? Do intrapreneurs face monopolies, or are they free to use the resources of other divisions and outside vendors if they choose?
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Innovative Philosophy
1. 2. 3. 4. 5. 6. 7. 8. 9. Encourage action. Use informal meetings whenever possible. Tolerate failure and use it as a learning experience. Persist in getting an idea to market. Reward innovation for innovations sake. Plan the physical layout of the enterprise to encourage informal communication. Expect clever bootlegging of ideassecretly working on new ideas ideas on company time as well as personal time. Put people on small teams for future-oriented projects. futureEncourage personnel to circumvent rigid procedures and bureaucratic red tape.

10. Reward and promote innovative personnel.


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Encouraging an Intrapreneurial Environment


Steps to help restructure corporate thinking and encourage an intrapreneurial environment:
1. Early identification of potential intrapreneurs 2. Top management sponsorship of intrapreneurial projects 3. Creation of both diversity and order in strategic activities 4. Promotion of intrapreneurship through experimentation 5. Development of collaboration between intrapreneurial participants and the organization at large

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Benefits of an Entrepreneurial Philosophy


Leads to the development of new products and services and helps the organization expand and grow. Creates a work force that can help the enterprise maintain its competitive posture. Promotes a climate conducive to high achievers and helps the enterprise motivate and keep its best people.

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Conceptualizing a Corporate Entrepreneurial Strategy


Corporate Entrepreneurship (CE) Strategy


A vision-directed, organization-wide reliance on visionorganizationentrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations through the recognition and exploitation of entrepreneurial opportunity. It requires the creation of congruence between the entrepreneurial vision of the organizations leaders and the entrepreneurial actions of those throughout the organization.

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Conceptualizing a Corporate Entrepreneurial Strategy (cont d)


Critical steps of a corporate entrepreneurial strategy:
   

Developing the vision Encouraging innovation Structuring for an intrapreneurial climate Developing individual managers for corporate entrepreneurship Developing venture teams.

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Figure 3.1 The Corporate Entrepreneurship Strategy Process

Source: Adapted from R. Duane Ireland, Donald F. Kuratko, and Jeffrey G. Covin, Antecedents, Elements, and Consequences of Corporate Entrepreneurship, Best Paper Proceedings: National Academy of Management (August 2003) CD Rom: L1L6; and R. Duane Ireland, Jeffrey G. Covin, and Donald F. Kuratko, Corporate Entrepreneurship Strategy (in press, 2007).

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Model of the Corporate Entrepreneurship Strategy Process


Corporate entrepreneurship strategy is manifested through the presence of three elements:
  

An entrepreneurial strategic vision A proentrepreneurship organizational architecture Entrepreneurial processes and behavior as exhibited across the organizational hierarchy.

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Model of the Corporate Entrepreneurship Strategy Process (cont d)


Linkages in the model:
1. Individual entrepreneurial cognitions of the organizations members 2. External environmental conditions that invite entrepreneurial activity 3. Top managements entrepreneurial strategic vision for the firm 4. Organizational architectures that encourage entrepreneurial processes and behavior 5. The entrepreneurial processes that are reflected in entrepreneurial behavior 6. Organizational outcomes resulting from entrepreneurial actions.

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Figure 3.2 Shared Vision

Source: Jon Arild Johannessen, A Systematic Approach to the Problem of Rooting a Vision in the Basic Components of an Organization, Entrepreneurship, Innovation, and Change (March 1994): 47. Reprinted with permission from Plenum Publishing Corporation. 2007 Thomson/South-Western. All rights reserved.

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Table 3.2 Objectives And Programs For Venture Development

Source: Adapted by permission of the publisher from Supporting Innovation and Venture Development in Established Companies, by Rosabeth Moss Kanter, Journal of Business Venturing (winter 1985): 5659. Copyright 1985 by Elsevier Science Publishing Co., Inc. 2007 Thomson/South-Western. All rights reserved.

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Types of Innovation
Radical Innovation
The launching of inaugural breakthroughs.  These innovations take experimentation and determined vision, which are not necessarily managed but must be recognized and nurtured.


Incremental Innovation


The systematic evolution of a product or service into newer or larger markets.  Many times the incremental innovation will take over after a radical innovation introduces a breakthrough.

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Figure 3.3 Radical Versus Incremental Innovation

Source: Harry S. Dent, Jr., Reinventing Corporate Innovation, Small Business Reports (June 1990): 33. 2007 Thomson/South-Western. All rights reserved.

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Table 3.3

Developing And Supporting Radical And Incremental Innovation

Source: Adapted from Harry S. Dent, Jr., Growth through New Product Development, Small Business Reports (November 1990): 36. 2007 Thomson/South-Western. All rights reserved.

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3M s Innovation Rules
Dont kill a project Tolerate failure Keep divisions small Motivate the champions Stay close to the customer Share the wealth

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Structuring for a Corporate Entrepreneurial Environment


Reestablishing the drive to innovate:
Invest heavily in entrepreneurial activities that allow new ideas to flourish in an innovative environment.  Provide nurturing and information-sharing activities. information Employee perception of an innovative environment is critical.


Corporate Venturing


Institutionalizing the process of embracing the goal of growth through development of innovative products, processes, and technologies with an emphasis on longlong-term prosperity.
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Figure 3.4 Intrapreneurial Development: Joint Function of Individual and Organizational Factors

Source: Deborah V. Brazeal, Organizing for Internally Developed Corporate Ventures, Journal of Business Venturing (January 1993): 80. 2007 Thomson/South-Western. All rights reserved.

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Developing Individual Managers for Corporate Entrepreneurship


Corporate Entrepreneurship Training Program (Corporate Breakthrough Training)
1. The Breakthrough Experience 2. Breakthrough Thinking 3. Idea Acceleration Process 4. Barriers and Facilitators to Innovative Thinking 5. Sustaining Breakthrough Teams 6. The Breakthrough Plan

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Corporate Entrepreneurship Assessment Instrument


Key Entrepreneurial Climate Factors
    

Management support Autonomy/work discretion Rewards/reinforcement Time availability Organizational boundary

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Facilitating Intrapreneurial Behavior


Organizations foster intrapreneurial behavior by:
Encouraging Encouragingnot mandatingintrapreneurial activity mandating  Proper control of human resource policies related to selected rotation  Sustaining a commitment to intrapreneurial projects long enough for momentum to occur.  Bet on people, not on analysis.


Rewarding intrapreneuring:
Allow inventor to take charge of the new venture  Grant discretionary time to work on future projects  Make intracapital available for future research ideas

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Table 3.4

The Ten Commandments Of An Intrapreneur

Source: Adapted from Intrapreneuring by Gifford Pinchot III, 1985, 22. Copyright 1985 by Gifford Pinchot III. Adapted by permission of HarperCollins Publishers. 2007 Thomson/South-Western. All rights reserved.

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Developing Venture Teams


Venture Team
A semiautonomous, self-directing, self-managing, selfselfhighhigh-performing group of two or more people who formally create and share the ownership of a new organization.  The leader is called a product champion or an intrapreneur.


Collective Entrepreneurship


Individual skills are integrated into a group; this collective capacity to innovate becomes something greater than the sum of its parts.

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Figure 3.5 An Interactive Model of Corporate Entrepreneuring

Source: Jeffrey S. Hornsby, Douglas W. Naffziger, Donald F. Kuratko, and Ray V. Montagno, An Interactive Model of the Corporate Entrepreneurship Process, Entrepreneurship Theory and Practice (spring 1993): 31. 2007 Thomson/South-Western. All rights reserved.

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Sustaining Corporate Entrepreneurship


Sustained Corporate Entrepreneurship Model
Based on theoretical foundations from previous strategy and entrepreneurship research.  Considers the comparisons made at the individual and organizational level on organizational outcomes, both perceived and real, that influence the continuation of the entrepreneurial activity.  Transformational trigger


Something external or internal to the company (e.g., corporate entrepreneurial activity) that causes a change to take place) initiates the need for strategic adaptation or change.

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Figure 3.6 A Model of Sustained Corporate Entrepreneurship

Source: Donald F. Kuratko, Jeffrey S. Hornsby, and Michael G. Goldsby, Sustaining Corporate Entrepreneurship: Modeling Perceived Implementation and Outcome Comparisons at Organizational and Individual Levels, International Journal of Entrepreneurship and Innovation 5(2) (May 2004): 79. 2007 Thomson/South-Western. All rights reserved.

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Corporate Entrepreneurship at IBM


Emerging Business Opportunity (EBO) Program Key Rules:
Think big . . . really big.  Bring in the A-team.  Start small.  Establish unique measurement techniques.


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Key Terms and Concepts


bootlegging champion collective entrepreneurship corporate entrepreneurship Corporate Entrepreneurship Assessment Instrument (CEAI) entrepreneurial economy incremental innovation interactive learning intracapital intrapreneurship radical innovation skunkworks top management support venture team

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