Corporate Entrepreneurship (CE) C18TP Corporate Entrepreneurship (CE) Refer to Burns chapter 18. Enterprise Concepts and Issues © Goodfellow Publishers 2016

The ‘Embattled Corporation’ Corporations are facing dramatic changes in the way they do business. Four dimensions have been recognised through which environmental turbulence has created a need for new management practices: Through customers Through competitors Through technology Through legal, regulatory and ethical standards Source: Morris, Kuratko and Covin (2011: 6) Through customers – where fragmented market does not permit a ‘one size fits all’ approach to serving diverse customer groups and where rising customer expectations place greater emphasis on costly customisation (including investments in relationship and in more elaborate support functions). Through competitors – where competitor's new products tempt existing customers away and place an additional burden on new product development, where the speed of innovation and imitation has improved (an intellectual property becomes less easy to protect), ad where technology changes have permitted small niche players to encroach on the more profitable markets of large diversified firms. Through technology – where technological advance in information search and management, but also in customer management, production, sales, logistics and inventory management, and, perhaps more crucially, in the technologies of innovation, have raised new challenges for executives in large firms. Through legal, regulatory and ethical standards – where increasing oversight has resulted in greater accountability to a wider group of stakeholders, growing litigation has raised the stakes on liability, more stringent regulatory environments have limited choice and forced companies to learn new ways to compete, and most recently, rising affluence in home countries has seen priorities shift amongst home stakeholder groups, leading to more public attempts to hold companies accountable for the social and environmental consequences of their actions. Enterprise Concepts and Issues © Goodfellow Publishers 2016

The Embattled Corporation Legal, Regulatory and Ethical Standards Customers Fragmented markets Increasing customer expectations Higher cost of customisation Sustainable growth means learning new skills in serving global markets Technology To change ways they operate internally and how they compete externally based on: New information management; production and service delivery; customer management; logistics and inventory management; sales force management; and product development technologies The Embattled Corporation Competitors Increased expenditure in product development Difficult to differentiate Increased competition Competitors specialising in narrow, profitable niches Legal, Regulatory and Ethical Standards Increased accountability, visibility and transparency to multiple stakeholders Increased litigious environment and regulatory restrictions Source: Morris, Kuratko and Covin (2011: 6) Enterprise Concepts and Issues © Goodfellow Publishers 2016

What is Corporate Entrepreneurship? Corporate entrepreneurship is the term used to describe entrepreneurial behaviour in an established, larger organisation. It can be defined as: “the development of new business ideas and opportunities within large and established corporations” (Birkinshaw, 2003: 46). The ‘developments’ include innovations of all types and new business through venturing. Enterprise Concepts and Issues © Goodfellow Publishers 2016

Enterprise Concepts and Issues © Goodfellow Publishers 2016 What’s the Difference? Independent entrepreneurship is the process whereby an individual or group of individuals acting independently, create a new organisation. Corporate entrepreneurship is the process whereby an individual or a group of individuals, in association with an existing organisation, create a new organisation or instigate renewal or innovation within that organisation. The ‘developments’ include innovations of all types and new business through venturing. Enterprise Concepts and Issues © Goodfellow Publishers 2016

Characteristics of Corporate Entrepreneurship The creation of new business units by an established firm The development and implementation of entrepreneurial strategic thrusts The emergence of new ideas from various levels in the organisation Enterprise Concepts and Issues © Goodfellow Publishers 2016

A Typology of Approaches to Corporate Entrepreneurship Enterprise Concepts and Issues © Goodfellow Publishers 2016 Source: Wolcott and Lippitz (2007)

Enterprise Concepts and Issues © Goodfellow Publishers 2016 Schools of Thought Birkinshaw (2003) identified four schools of thought in trying to pull together the corporate entrepreneurship literature: Corporate Venturing Intrapreneurship Bringing the market inside Entrepreneurial transformation Enterprise Concepts and Issues © Goodfellow Publishers 2016

Enterprise Concepts and Issues © Goodfellow Publishers 2016 Corporate Venturing Concerned with: The need for larger firms to manage new, entrepreneurial businesses separately from mainstream activity Investment by larger firms in strategically important smaller firms Organisation structures needed to encourage new businesses Enterprise Concepts and Issues © Goodfellow Publishers 2016

Enterprise Concepts and Issues © Goodfellow Publishers 2016 Key to success is good ‘strategic fit’: Strong relationship with core competencies of venturing company - effective synergy or Acquiring skills, technologies or customers that compliment the strategic direction of venturing company - effective knowledge transfer Enterprise Concepts and Issues © Goodfellow Publishers 2016

Advantages of Corporate Venturing Facilitates innovation and knowledge import External sources of finance may be easier to access Facilitates creation of semi-autonomous units with their own cultures, incentives and business models Often involves highly motivated staff Enterprise Concepts and Issues © Goodfellow Publishers 2016

Disadvantages of Corporate Venturing Requires investment, normally equity, which can be risky Requires investment in venture mechanisms that set up venture management and networks that search out, evaluate and generate deal flows Investing company will not be in complete control of innovation Enterprise Concepts and Issues © Goodfellow Publishers 2016

Enterprise Concepts and Issues © Goodfellow Publishers 2016 Intrapreneurship Concerned with: How individuals may be encouraged to act more entrepreneurially in a large organisation Systems and structures that inhibit initiative Challenge those systems and act in entrepreneurial ways Enterprise Concepts and Issues © Goodfellow Publishers 2016

Enterprise Concepts and Issues © Goodfellow Publishers 2016 Pinchot (1985): “Intrapreneuring ... as entrepreneurship inside of the corporation.” Knight (1987): “An intrapreneur is a employee who:... introduces and manages an innovative project within the corporate environment, as if he or she were an independent entrepreneur.” Need for achievement, risk orientation, innovativeness and need for autonomy Innovations are enforced in extreme cases by lone fighters Intrapreneuring, first espoused by Pinchot (1985), is an attempt to take the mindset and behaviors that external entrepreneurs use to create and build businesses, and bring these characteristics to bear inside an existing and usually large corporate setting. Start-up entrepreneurs are often credited with being able to recognise and capture opportunities that others have either not seen or not thought worth pursuing. Companies wishing to spur innovation and find new market opportunities are most often interested in trying to inculcate some of these entrepreneurial values into their culture by creating “intrapreneurs”. In an attempt to improve shareholder value, Mott’s, the well-known food manufacturer, tried to create a cadre of internal entrepreneurs to spur innovation and new business development. They selected 18 candidates who were carefully screened to serve in this capacity. Enterprise Concepts and Issues © Goodfellow Publishers 2016

Enterprise Concepts and Issues © Goodfellow Publishers 2016 Intrapreneurs Result orientated Ambitious Competitive Questioning Self motivated Comfortable with change Dislike bureaucracy Adept at politics Clarity of direction Good at resolving conflict Able to work with others Enterprise Concepts and Issues © Goodfellow Publishers 2016

Needs of Intrapreneurs Buffer to break rules High level sponsor Protection during difficult times Motivation to pursue project A culture that ‘tolerates’ intrapreneurship Sponsor-intrapreneur mutual trust and respect Enterprise Concepts and Issues © Goodfellow Publishers 2016

Bringing the Market Inside Concerned with: Structural changes needed to encourage entrepreneurial behaviour Market approach to resource allocation and people management Spin offs and venture capital operations Enterprise Concepts and Issues © Goodfellow Publishers 2016

Entrepreneurial Transformation Concerned with: The need form large firms to adapt to an ever-changing environment Changes in systems, structures and cultures that encourage entrepreneurship – entrepreneurial architecture Leadership and strategies that encourage entrepreneurship Enterprise Concepts and Issues © Goodfellow Publishers 2016

Enterprise Concepts and Issues © Goodfellow Publishers 2016 Types of CE Outcomes New corporate strategies New ventures New business models New markets New product or services New internal processes Enterprise Concepts and Issues © Goodfellow Publishers 2016

Corporate entrepreneurial work environment Structure Culture Resource Controls Human Resource Management Entrepreneurial Work Environment Source: Morris et al. (2009: 432) Enterprise Concepts and Issues © Goodfellow Publishers 2016

Enterprise Concepts and Issues © Goodfellow Publishers 2016 References Birkinshaw, J. (2003). The Paradox of Corporate Entrepreneurship: Post-Enron Principles for Encouraging Creativity without Crossing the Line. Strategy and Business Wolcott, R.C. and Lippitz, M. J. (2007). The Four Models of Corporate Entrepreneurship. MIT Sloan Management Review 49(1): 75-82. Knight, R.M. (1987). Corporate Innovation and Entrepreneurship: A Canadian Study. Journal of Product Innovation Management. 4(4): 284-297. Morris, M. H., Kuratko, D. F. and Covin, J. G. (2011). Corporate Entrepreneurship and Innovation (3rd ed.). USA: Cengage Learning. Morris, M. H., van Vuuren, J., Cornwall, J. R. and Scheepers, R. (2009). Properties of balance: A Pendulum Effect in Corporate Entrepreneurship. Business Horizons 52 Pinchot, G. (1985). Intrapreneuring: Why You Don’t Have to Leave the Corporation to Become an Entrepreneur. New York: Harper & Row. Enterprise Concepts and Issues © Goodfellow Publishers 2016