MGT 709 New Venture Creation

Determining how entrepreneurial projects will be pursued  Corporate culture  Leadership  Structural features that guide and constrain action  Organizational systems that foster learning and manage rewards  Use of teams in strategic decision making  Whether the company is product or service oriented  Whether the firm’s innovation efforts are aimed at product or process improvements  The extent to which it is high-tech or low-tech

 Autonomous corporate venturing (work) group  Frees entrepreneurial team members from constraints imposed by existing norms and routines  Facilitates open-minded creativity  But, does isolate the group from the corporate mainstream  New venture groups (NVGs)  Business incubators Focused Approaches to Corporate Entrepreneurship Autonomous corporate venturing work group

 Goal is to identify, evaluate, and cultivate venture opportunities  Typically function as semi-autonomous units with little formal structure  Involvement includes  Innovation and experimentation  Coordinating with other corporate divisions  Identifying potential venture partners  Gathering resources  Launching the venture Focused approach New Venture Group

 Business incubators are designed to “hatch” new businesses  Incubators provide some or all of the following functions  Funding  Physical space  Business services  Monitoring  Networking Focused approach Business Incubators

 Dedication to principles and practices of entrepreneurship is spread throughout the firm  Ability to change is a core capability  Stakeholders can bring new ideas or venture opportunities to anyone in the organization  Two related aspects of dispersed entrepreneurship  Entrepreneurial culture  Product champions

 Culture of entrepreneurship  Search for venture opportunities permeates every part of the organization  Effect is strongest when it animates all parts of the organization  Strategic leaders and the culture generate a strong impetus  To innovate  Take risks  Seek out new venture opportunities Dispersed approach Entrepreneurial Culture

 Product (or project) champions  Bring entrepreneurial ideas forward  Identify what kind of market exists for the product or service  Find resources to support the venture  Promote the venture concept to upper management  New project must pass two critical stages  Project definition  Project impetus Dispersed approach Product Champions

 Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives appear doomed  Comparing strategic and financial goals  Are the products or services offered by the venture accepted in the marketplace?  Are the contributions of the venture to the corporation’s internal competencies and experience valuable?  Is the venture able to sustain its basis of competitive advantage?

 Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives appear doomed  Exit champions  Willing to question the viability of a venture project  Demand hard evidence and challenge the belief system that is carrying an idea forward  Hold the line on ventures that appear shaky  Real options  Managing the uncertainty associated with launching new ventures

 How can mature companies act like a startup?  Make sure everybody is creating value  Reward great people, give them a voice  Get back to market validation  Every presentation around customer pain  Communicate a common vision  Don’t waste resources on internal competition  Align new products with the sales model  Harness entrepreneurial energy  Reward great ideas, give people autonomy, establish safe havens

 How can mature companies act like a startup?  Make decisions and act fast – speed wins  Cut the bureaucracy, take risks  50% of time in meetings  Listen to customers or lead people  Stick to your core competency  work with people who will get the job done  Create smaller, dynamic units  16 person teams in military, minimal org overhead  Keep R&D alive

 Ecosystem venturing  Supports and encourages a network of customers and suppliers  Value of benefits for existing businesses divided by invested capital – don’t lose focus  Innovation venturing  Spend a proportion of an existing functional budget in a ‘venturing’ way (e.g. R&D)  Focus on commercializing new technologies for existing business  Make sure it stays under a functional head rather than become a general ‘innovation fund’

 Harvest Venturing  Convert existing corporate resources into commercial ventures and then into cash  Must not be needed by current or future org  Danger of becoming a ‘new growth’ unit rather than focusing on existing resources  Private Equity Venturing  Setting up a VC operation  Need privileged access to deals in early stage of lifecycle and some value-added for new firms  Danger of being bringing nothing special to the table but thinking you do (hubris)

 Focus on low probability projects  Little attention or commitment from core  Not given enough time or funds (due to competition with core business)  It’s a tough business  Even VC firms earn below cost of capital on average

CONSULTING SKILLS

 The business of discovery is:  Doing layers of analysis  Understanding the political climate  Resurfacing resistance to sharing information  Seeing the interview as an intervention

 Distinguish between the presenting problem and the underlying problem  Understand the technical problem and how it is being managed (or not)  Ask questions about what others are doing to cause or maintain the problem  Ask questions about the client’s own role  Plan the data collection jointly  Involve the client in interpreting the data  Condense to a limited number of issues  Use simple language  Develop a clear and simple picture of what is going on  There may be a similarity between how the client manages you and the organization  THE PURPOSE OF DISCOVER IS TO GET ACTION, NOT DO RESEARCH

 Concentrate on four things beyond the technical considerations:  Keep simplifying your inquiry so that is ends up focusing more and more on the next steps the client can take  Use everyday language  Give a great deal of attention to your relationship with the client  Include the client at every opportunity in deciding how to proceed. Deal with resistance as it arises.  Treat technical data as valid and relevant. Also assess how the problem is being managed. The presenting problem is never the real problem!

 Ten steps to launch:  Reaffirm the proposal content with the buyer  Begin doing something  Find and meet the key players  Begin co-opting resistance  By-pass islands  Periodically meet with the buyer  Make your successes visible to the organization  Share credit, or even bestow all of it  Illustrate closure  Visibly make mid-course corrections

 Challenge basic premises  If the internal people had it all figured out, they wouldn’t need you  Seek documented (objective) validation for bald-faced assertions  Ensure you have alternative sources of information.  Don’t talk. Listen.  Cafeteria, the implementers, customers, suppliers, office staff  Ask anyone who volunteers information for examples, frequency, and who else was there  Trust your instincts and history.  Search for incongruities.

 Avoid being intimidated  Establish a comfortable first name relationship  Never pose as an expert  Don’t defend yourself with credentials or background  Try to meet on neutral turf  Push back firmly whenever the situation calls for it  Never accept a political role or take sides  Be proactive  Do your homework  Face setbacks honestly  Understand that tomorrow’s another day  THE MORE YOU GIVE IN, THE MORE THEY’LL EXPECT YOU TO GIVE; THE MORE YOU STAND FIRM, THE MORE THEY’LL RESPECT YOU

 Avoid intimidating others  Don’t start by talking  Don’t start with your process/methodology  Stop dropping the buyer’s name  Join them in the cafeteria  Contribute to company causes  Observe social mores  Dress like everyone else  Maintain confidences  Don’t take sides  Show humility  NEVER GIVE AN ORDER TO ANY CLIENT PERSONNEL

CONSULTING TOOLS