1 ‘ Corporate Entrepreneurship’

2 Corporate Entrepreneurship Introduction –(linking with other concepts of entrepreneurship) Venturing –(company activities) Intrapreneurs –(individuals, drivers and barriers)

3 INTRODUCTION

4 Business Life Cycle and Entrepreneurship Inception Survival Growth Consolidation Maturity Entrepreneurial ? New Entrepreneurial stage needed ? Sales Time Entrepreneurial Approach ?

5 Businesses are faced with... Changing dynamic markets Globalisation Shorter product life cycles High rates of technological change Pressures to reduce costs Changes in business organisation (int. & ext.)

6 A Possible Response Some large firms responded to the changing environment by addressing their necessary response to working with a dynamic environment involving attitudes to: –risk –innovation –flexible, rapid response –changes in management and organisation

7 Innovation Creativity and Innovation are NOT synonymous. Innovation = Creativity + Invention + Exploitation Source: Rosenfeld and Serco. 1990

8 Role of Innovation “An enterprise that does not daily innovate inevitably ages and declines … even in a successful business the disease of bureaucracy and complacency is ever present. (Drucker). “Firms create competitive advantage by perceiving or discovering new and better ways to compete in an industry and bringing them to market, which is ultimately an act of innovation” Michael Porter. The Competitive Advantage of Nations.

9 Schumpeterian Innovation Schumpeter (1934). … By recombining the factors of production to create something new the entrepreneur creates a demand… Innovation could take different forms: –Creation of a new or alternative product –A new method of production –Opening a new market –Capture of a new source of supply –A new organisation

10 Birkinshaw (2003) identifies four common themes in corporate entrepreneurship. –Corporate Venturing –Intrapreneuring –Bringing the Market Inside –Entrepreneurial Transformation

11 Hierarchy of terminology in Corporate Entrepreneurship Entrepreneurship Independent Entrepreneurship Corporate Entrepreneurship After: Sharma and Chrisman (1999)

12 Hierarchy of terminology in Corporate Entrepreneurship Entrepreneurship Independent Entrepreneurship Corporate Entrepreneurship Corp. Venturing Innovation Strategic Renewal Int.. Corp. VenturingExt.. Corp. Venturing After: Sharma and Chrisman (1999)

13 Take care! (Corporate Entrepreneurship / Intrapreneurship) mean different things to different researchers Examples of their use: The development of an ‘overall entrepreneurial climate Intra-corporate venturing Development initiatives by employees (often without asking permission) Rationalisation of the business –See Carter & Jones-Evans (2000) for further discussion

14 Business Level VENTURING

15 Venturing Venture: Chance, luck, hazard, an undertaking whose issue is uncertain or dangerous; an attempt - Chambers Dictionary. Key Elements: * Risk / uncertainty * Innovation / creativity * requiring striving / reward seeking behaviour. Corporate Venturing: The creation of new businesses * Making smaller, high growth businesses out of large, mature ones * Utilising Internal organic growth, acquisition, joint ventures or alliances.

16 Why venture? Growth Improved financial returns (e.g. ROI) Image (Corporate renewal) Technology pressure Diversification

17 Reasons for venturing Reasons for venturingUS Co.Japanese Co. Maturity of the base business7057 To meet strategic goals7673 To provide challenges to managers4615 To develop future managers3017 To survive3528 To provide employment 324 Source: Zenas Block & Ian MacMillan ‘Corporate Venturing’, Harvard Business Press 1993

18 Policy Ideas - Venturing Merger Ext. Co. Joint Venture Contractors Int. venture Spin out Acquisition Suppliers Buy stake Encourage Entrepreneurship External Environment Customers Take stake

19 Intrapreneurs

20 Intrapreneur Used by Norman Macrae in an article in the Economist. (Christmas Ed. 1976). Applied term to managers, professionals and artisans who set up small businesses within old and existing organisations. Some texts suggest that Pinchot was the person who first used the term

21 Intrapreneur Developed by Pinchot (1986) –“ An intrapreneur is an entrepreneur within an already established organisation”. Used to describe entrepreneurism within a large organisation, rather than establishment of small businesses within a large organisation.

22 Gibb (1988) An Intrapreneur is an employee of a large organisation who has the entrepreneurial qualities of drive, creativity, vision and ambition. Gibb goes on to state that these people differ from entrepreneurs as they wish to retain the security of the large organisation. A number of authors define Intrapreneur and related terms. See Sharma and Chrisman (1999).

23 Intrapreneurs May have these characteristics in common with independent entrepreneurs Ability to work amidst confusion Ability to anticipate change Ability to make intuitive leaps High energy levels Creativity in problem solving Action orientation

24 ….. But want... BUT may differ …. Want less restrictive but supportive environment Want recognition Want their ideas to be a vehicle for advancement Want the security (pay cheque, pension etc)

25 Intrapreneurs and entrepreneurs share:. Entrepreneurial characteristics Vision & Flexibility Action Orientated Dedicated Persistent / overcome failure Self determined goal setters Source: Pinchot Intrapreneuring. Harper & Row.

26 Intrapreneurs need in addition Source: Pinchot Intrapreneuring. Harper & Row. An ability in a Multi-disciplinary role To understand the environment To encourage open discussion Be able to create management options To build a coalition of supporters.

27 Corporate Entrepreneurs as ‘Change Masters’ ‘Change Master’ A term used by Rosabeth Moss Kanter Three Stages of the journey: –Formulate and Sell, –Power to advance, –Maintain Momentum.

28 Intrapreneurs as Change Masters A term used by Rosabeth Moss Kanter Three Stages of the journey: Formulate and Sell, Power to advance, maintain Momentum. Skills: Personal and Interpersonal Step outside of conventional thinking Often ‘generalists’ with ‘kaleidoscopic thinking, vision communicators, persistent individuals, coalition & team builders, willing to share credit

29 Rosebeth Moss Kanter’s View Corporate entrepreneurs are people who envision something new and make it work. Being a corporate entrepreneur, what I call a ‘change master’ is much more challenging and fun than being a non-entrepreneur. It requires more of a person, but it gives back more self-satisfaction. –Rosabeth Moss Kanter (1988). Handbook for Creative and Innovative Managers. McGraw Hill.

30 Intrapreneurial Behaviour May be seen as good news –High achievement motivation –High task commitment

31 Intrapreneurial Behaviour May be seen as mild irritants –High levels of informal networking –Informal recruitment (This could be a major problem)

32 Intrapreneurial Behaviour May be seen as serious problems –Independence –Non-acceptance of rules and boundaries –Non-compliance with planning and control systems –Conflict with authority

33 Developing Intrapreneurship Encourage Individual Intrapreneurs Encourage General Entrepreneurial Culture Encourage Entrepreneurial Enterprise FRAMEWORK CONDITIONS

34 Barriers to an Intrapreneurial Culture Barriers Include: –Senior management feel alienated –hierarchical nature of the organisation –Corporate culture –Short term performance requirements –Planning procedures Source Gibb 1990

35 Barriers to an Intrapreneurial Culture Barriers (continued) Include: –Lack of ownership of the problem –Mobility of managers –lack of flexibility in the organisation –methods of compensation Source Gibb 1990

36 An ‘Intrapreneurial’ culture needs: Sponsors Continuous involvement Autonomy of the intrepreneurial team Ability to cross boundaries See Pinchot (1986)

37 An ‘Intrapreneurial’ culture needs: (needs continued) A tolerance of risk and failures Long term objectives Making resources available Introducing suitable compensation schemes. See Pinchot (1986)

38 Drucker’s Entrepreneurial Practices Druker suggests some key management practices are vital in the development of ‘entrepreneurship’ in an existing business. –Management focuses on opportunity –Generation and maintenance of entrepreneurial spirit –Top-down and cross functional interaction Source Drucker, P. Innovation & Entrepreneurship. Pan 1986

39 The final word ….. “Intrapreneurs cannot exist if their passionate commitment is ignored and their visions given to people who don’t understand them. Without intrapreneurs, innovation flounders Source Pinchot (1986)