Corporate Entrepreneurship & Innovation 3rd ed. Michael H Corporate Entrepreneurship & Innovation 3rd ed. Michael H. Morris Oklahoma State University Donald F. Kuratko Indiana University Jeffrey G. Covin Indiana University Copyright (c) 2011 by Donald F. Kuratko All rights reserved.

“Wealth in the new regime flows directly from innovation, not optimization; that is, wealth is not gained by perfecting the known, but by imperfectly seizing the unknown.” ~Kevin Kelly, “New Rules for the New Economy,” Wired Copyright (c) 2011 by Donald F. Kuratko All rights reserved.

Section I Building Blocks for Corporate Entrepreneurship Section I introduces basic concepts, tools and frameworks that help explain how entrepreneurial behavior can occur within established organizations. Chapter One: The New Entrepreneurial Imperative Chapter Two: The Unique Nature of Corporate Entrepreneurship Chapter Three: Levels of Entrepreneurship in Organizations: Entrepreneurial Intensity Chapter Four: The Forms of Corporate Entrepreneurship Chapter Five: Entrepreneurship in Other Contexts: Non-Profit and Government Organizations Copyright (c) 2011 by Donald F. Kuratko All rights reserved.

Building Blocks for Corporate Entrepreneurship Section I Building Blocks for Corporate Entrepreneurship Copyright (c) 2011 by Donald F. Kuratko All rights reserved.

The New Entrepreneurial Imperative Chapter 1 The New Entrepreneurial Imperative

Turbulent Environments and the Embattled Corporation The changing domain of the external environment Technological Economic Competitive Labor Resource Customer Legal Regulatory Global Customer Social Supplier “Managers face shortened decision windows and diminishing opportunity streams, meaning they must act quickly or find themselves missing out on opportunities”

Turbulent Environments and the Embattled Corporation Customers Fragmented markets and rapidly rising customer expectations are forcing firms to customize their products, cultivate longer-term customer relationships and learn new skills in serving global markets Technology Firms have to change the ways they operate internally and how they compete externally based on: -New information management technologies -New production and service delivery technologies -New customer management technologies The Embattled Corporation Competitors Lead customers to entirely new market spaces Quickly mimic which makes it harder to differentiate Attack firms’ most profitable areas of business by specializing in narrow, profitable niches Legal, Regulatory and Ethical Standards Firms are increasingly accountable to multiple forcing management to make difficult choices and deliver results while behaving responsibly Increasingly litigious environment Increasing regulatory restrictions

The New Path to Sustainable Competitive Advantage Achieving a sustainable competitive advantage derives from five key company capabilities Adaptability Flexibility Speed Aggressiveness Innovativeness Entrepreneurship is the core source of “sustainable competitive advantage”

What is Entrepreneurship? Seven perspectives on the nature of entrepreneurship Creation of wealth Creation of enterprise Creation of innovation Creation of change Creation of employment Creation of value Creation of growth

What is Entrepreneurship? The most common key words found in the definition of entrepreneurship Starting / Founding / Creating New Business / New Venture Innovation / New Products / New Market Pursuit of Opportunity Risk-taking / Risk Management / Uncertainty Profit-seeking / Personal Benefit

What is Entrepreneurship? An encompassing definition of entrepreneurship “Entrepreneurship is the process of creating value by bringing together a unique combination of resources to exploit an opportunity.”

What is Entrepreneurship? Entrepreneurship involves a process Entrepreneurs create value where there was none before Entrepreneurs put resources together in a unique way Entrepreneurship is opportunity-driven behavior

What is Corporate Entrepreneurship? “Corporate entrepreneurship is a term used to describe entrepreneurial behavior inside established mid-sized and large organizations.” Other popular related terms Organizational entrepreneurship Intrapreneurship Corporate venturing

Management Versus Entrepreneurship “Management is the process of setting objectives and coordinating resources, including people, in order to attain them.”

Management Versus Entrepreneurship Managers focus more on the current situation and how to improve efficiency and effectiveness Entrepreneurs focus less on the current situation and more on what can be

Management Versus Entrepreneurship The Manager The Entrepreneur Planner Strategist Organizer Staffer Motivator Budgeter Evaluator Coordinator Supervisor Visionary Opportunity-seeker Creator Innovator Calculated Risk-taker Resource Leverager Change Agent Active and Adaptive Concept Implementer The Entrepreneurial Manager

Greiner’s 5 stages of a company’s evolution Creativity Direction Why Companies Lose their Entrepreneurial Way: The Organizational Life Cycle Greiner’s 5 stages of a company’s evolution Creativity Direction Delegation Coordination Collaboration

Why Companies Lose their Entrepreneurial Way: The Organizational Life Cycle The evolutionary process of companies: Next Stage Crisis Point Companies enter a particular growth stage and prosper until reaching a crisis point Begin Decline Failure Acquisition Candidate

Start up and early growth Growth through direction Why Companies Lose their Entrepreneurial Way: The Organizational Life Cycle Start up and early growth Growth through direction Growth through delegation Growth through coordination Growth through collaboration

Why Companies Lose their Entrepreneurial Way: The Organizational Life Cycle Stage 1 Creativity Stage 2 Direction Stage 3 Autonomy Stage 4 Coordination Stage 5 Collaboration Management Focus Make &Sell Efficiency of operations Expansion of market Consolidation of organization Problem solving & innovation Organization Structure Informal Centralized & Functional Decentralized & geographical Line-staff & product groups Matrix of teams Top Management Style Individualistic & entrepreneurial Directive Delegative Watchdog Participative Control System Market results Standards & cost centers Reports & profit centers Plans & investment centers Mutual goal setting Management Reward System Ownership Salary & merit increases Individual bonus Profit sharing & stock options Team bonus (Source: Adapted from Larry E. Greiner, “Evolution and Revolution as Organizations Grow” Harvard Business Review, July-August, 1972 p. 45)

The Entrepreneurial Imperative: A Persistent Sense of Urgency Managers within an organization tend to become reactive by responding to the changes brought about by the external environment but let entrepreneurial fires within the company dwindle and diminish

The Entrepreneurial Imperative: A Persistent Sense of Urgency Managers must ask themselves the following questions to avoid inevitable diminishing returns and refocus on new directives and entrepreneurial avenues: How much more cost savings can the company wring out of its current business? Are managers within the firm working harder and harder for smaller and small efficiency gains? How much more revenue growth can the company squeeze out of its current business? Is the company paying more and more for customer acquisition and market share gains?

The Entrepreneurial Imperative: A Persistent Sense of Urgency How much longer can the company keep propping up its share price through share buybacks, spin-offs, and other forms of financial engineering? Is top management reaching the limits of its ability to push up the share price without actually creating new wealth? How many more scale economies can the company gain from mergers and acquisitions? Are the costs of integration beginning to overwhelm the savings obtained from slashing shared overhead costs? How different are the strategies of the four or five largest competitors in the industry from the company’s strategy? Is it getting harder and harder to differentiate the company from its competitors?

A Model of Corporate Entrepreneurship Copyright (c) 2011 by Donald F. Kuratko All rights reserved.