The Forms of Corporate Entrepreneurship Chapter 4 The Forms of Corporate Entrepreneurship Copyright (c) 2007 by Donald F. Kuratko All rights reserved.

Introduction Entrepreneurship manifests in companies in two ways: Corporate Venturing – addition of new businesses to the corporation Strategic Entrepreneurship – highly consequential innovations that are adopted in the firm’s pursuit of competitive advantage

Corporate Entrepreneurship Introduction Delineating Different Forms that Corporate Entrepreneurship Can Take Corporate Entrepreneurship Corporate Venturing Internal corporate venturing Cooperative corporate venturing External corporate venturing -corporate venture capital Strategic Entrepreneurship Strategic renewal Sustained regeneration Domain redefinition Organizational rejuvenation Business model reconstruction

Modes of Corporate Venturing Internal corporate venturing – new businesses created and owned by the corporation Cooperative corporate venturing – new businesses are created and owned by the corporation together with one or more external development partners External corporate venturing – new businesses are created by parties outside the corporation and subsequently invested in or acquired by the corporation

Corporate Growth Strategy Matrix Corporate Venturing What is a new business? Corporate Growth Strategy Matrix New Markets Market Development Strategy Diversification Strategy Market Penetration Product Development Market Focus Current Markets Product Focus “When a company finds itself dealing with new categories of customers and selling them products or services that are new to the firm”

Corporate Venturing New Business The Domain of a New Business Market Creation New Business Existing Business *New Market Market Focus of the Entrepreneurial Initiative Market Extension Existing Market Product Extension in Current Industry *New Product in Current Industry Existing Product in Current Industry New Industry Entry and/or Creation Product Focus of the Entrepreneurial Initiative * The point of reference for new is new to the firm

Motives for Corporate Venturing Leveraging – to exploit existing competencies in new product or market arenas Learning – to acquire new knowledge and skills that may be useful in existing product or market arenas

Leveraging Corporate Venturing To exploit under-utilized resource To extract further value from existing resources To introduce competitive pressure onto internal suppliers To spread the risk and cost of product development To divest non-core activities

Learning Corporate Venturing To learn about the process of venturing To develop new competencies To develop managers

Corporate Venturing Corporate venturing – directly investing corporate funds into external business start-ups Chesbrough’s framework for linking corporate venture capital investments with a company’s larger strategic agenda can be sorted into categories according to: 1.) their objectives (strategic or financial) 2.) the degree to which the new business being invested in (typically as a start-up) has operational capabilities

Corporate Venturing Four pure types of corporate venture capital investment: 1.) Driving investments 2.) Enabling investments 3.) Emergent investments 4.) Passive investments

Strategic Entrepreneurship: Innovating in Pursuit of Competitive Advantage Form of Strategic Entrepreneur Focus of the Entrepreneurial Initiative* The Entrepreneurial Event Typical Frequency of the Entrepreneurial Event Strategic Renewal Strategy of the firm Adoption of a new strategy Low Sustained Regeneration Products offered by the firm or markets served by the firm Introduction of a new product into a pre-existing product category or introduction of an existing product into a new (to the firm) but pre-existing market High Domain Redefinition New competitive space Creation of new or reconfiguration of existing product categories or market space Organizational Rejuvenation Organization structure, processes, and/or capabilities of the firm Enactment of a major, internally-focused innovation aimed at improving strategy implementation Low-to-moderate Business Model Reconstruction Business model of the firm Design of a new or redesign of an existing business model *The focus of the entrepreneurial event can be the entire firm or, in the case of multi-business firms, one or more of its businesses

The Business Model as a Vehicle for Corporate Entrepreneurship A Firm’s Business Model: “a concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics will be addressed to create sustainable competitive advantage in defined markets”

The Business Model as a Vehicle for Corporate Entrepreneurship A business model should address six basic questions: 1.) How does the firm create value 2.) For whom does the firm create value 3.) What is our source of internal advantage or core competency 4.) How does the firm externally differentiate itself in the marketplace 5.) What is the firm’s model for making money 6.) What is the management’s growth ambition and over what time period

The Business Model as a Vehicle for Corporate Entrepreneurship Decisions in these six areas can be made at three levels: 1.) Foundation level 2.) Proprietary level 3.) Rules level

The Open Innovation Revolution Open innovation – “a firm is not solely reliant upon its own innovative resources for new technology, product, or business development purposes. Rather, the firm acquires critical inputs to innovation from outside sources.”

The Open Innovation Revolution Four reasons companies are increasingly choosing to pursue open innovation models: 1.) Importing new ideas is a good way to multiply the building blocks of innovation 2.) Exporting ideas is a good way to raise cash and keep talent 3.) Exporting ideas gives companies a way to measure an innovation’s real value and to ascertain whether further investment is warranted 4.) Exporting and importing ideas helps companies clarify what they do best