The New Entrepreneurial Imperative

E “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

E The changing domain of the external environment TechnologicalTechnological EconomicEconomic CompetitiveCompetitive LaborLabor ResourceResource CustomerCustomer LegalLegal RegulatoryRegulatory GlobalGlobal CustomerCustomer SocialSocial SupplierSupplier “Managers face shortened decision windows and diminishing opportunity streams, meaning they must act quickly or find themselves missing out on opportunities”

E 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 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 Embattled Corporation

E Achieving a sustainable competitive advantage derives from five key company capabilities Adaptability Adaptability Flexibility Flexibility Speed Speed Aggressiveness Aggressiveness Innovativeness Innovativeness Entrepreneurship is the core source of “sustainable competitive advantage”

E Seven perspectives on the nature of entrepreneurship Creation of wealth Creation of wealth Creation of enterprise Creation of enterprise Creation of innovation Creation of innovation Creation of change Creation of change Creation of employment Creation of employment Creation of value Creation of value Creation of growth Creation of growth

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

E  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

E “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

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

E 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

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

E Greiner’s 5 stages of a company’s evolution Creativity Creativity Direction Direction Delegation Delegation Coordination Coordination Collaboration Collaboration

E The evolutionary process of companies: Companies enter a particular growth stage and prosper until reaching a crisis point Crisis Point Next Stage Failure Begin Decline Acquisition Candidate

E  Start up and early growth  Growth through direction  Growth through delegation  Growth through coordination  Growth through collaboration

E Stage 1 Creativity Stage 2 Direction Stage 3 Autonomy Stage 4 Coordination Stage 5 Collaboration Management FocusMake &SellEfficiency of operation s Expansion of market Consolidation of organizatio n Problem solving & innovation Organization Structure InformalCentralized & Functiona l Decentralized & geographic al Line-staff & product groups Matrix of teams Top Management Style Individualistic & entrepreneuri al DirectiveDelegativeWatchdogParticipative Control SystemMarket resultsStandards & cost centers Reports & profit centers Plans & investment centers Mutual goal setting Management Reward System OwnershipSalary & merit increases Individual bonusProfit 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)

E  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

E  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? Managers must ask themselves the following questions to avoid inevitable diminishing returns and refocus on new directives and entrepreneurial avenues:

E 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 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 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?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?

E A Model of Corporate Entrepreneurship