1. Managing Innovation Processes (continued) Managing in Information-Intensive Companies Sept 10, 2010 Prof. Morten Hansen

2. Conversion challenge: How to nurture a new business without killing it Integrate with core business Core business -Exploiting -Mechanistic Part of “line” Ex: Intuit Separate from core business New business -Exploring -Organic -New Venture unit -Standalone unit Ex: RR Donnelley Organizational Solutions IntegrateSeparate

3. Conversion challenge: How to nurture a new business without killing it Integrate with core business Core business -Exploit -Mechanistic Ex: Intuit Separate from core business New business -Explore -Organic Ex: RR Donnelley Organizational Solution: Hybrid IntegrateSeparate Part integrated, Part separated -Leverage core -Freedom to explore -Ambidextrous Ex: IBM Hybrid

4. Solution has to achieve two benefits: start-up and corporate leverage Benefits from corporate leverage -finance -services -customers -distribution -operations -technologies -expertise -people Benefits from startup drive -creative -freed from existing frames, autonomy -high risk, high reward -entrepreneurial people High Low Hybrid Solution Integrated Separate

5. Risk: In aiming for both benefits, end up with neither! Benefits from corporate leverage -finance -services -customers -distribution -operations -technologies -expertise -people Benefits from startup drive -creative -freed from existing frames, autonomy -high risk, high reward -entrepreneurial people High Low Hybrid Solution Risk: in trying hybrid, achieves neither! Integrated Separate

6. Hybrid requires a “messy” organization and management solution AreaCorporate LeverageStartup Drive FinancingFreed-up funds (venture budget)If works well, corp. financing alleviates fundraising burden Staffing peoplePeople from existing business (know it, have relations) Outside “entrepreneurial people” (bring outside-in view, new drive) Services (HR, accounting, operations etc.) Access to corporate or divisional services Incentive systemsConstrained by existing systems (favoring seniority, not entrepreneurship) Design with big upside (lower pay, bigger bonus part, to mimic startups) Customer and distribution access Need incentives: shared revenues, get all business if success. Technology and knowledge transfers Need cross-unit networks. Need incentives: shared revenues, get all business if success. OversightSr. executives from existing business should sit on “boards” (commitment) Give managers real autonomy