Entrepreneurial Venturing Inside a Corporation

Chapter 14

What is a Corporate Venture?

A project that is new to the company and carries a much higher risk of failure than other project.

Due to the level of uncertainty, it is often managed separately

Corporate ventures undertaken to move the company in new directions

Benefits of Corporate Venturing

Effective way to create new revenue streams Entrepreneurial activities stimulate

product/process innovation CV is a source of organizational growth Entrepreneurial activities spur the company to

take risks and pioneer, making it more competitive

Entrepreneurial activities help the company overcome resource limitations.

The Reality of Corporate Venturing

Not easy to get senior management commitment

Venture champions endure significant risk

Less than 20% of new product introductions succeed

70% of all new international ventures fail

Risk to the financial health of the parent company

The Difference Between CVs and Entrepreneurial Ventures

The gestation period for a corporate venture is nearly twice as long as that for an independent start-up.

CVs are insulated from the external environment by the parent company

CVs, therefore, can tolerate a longer period of negative cash flow

The development project moves more slowly

CVs subject to success hurdles imposed by the parent

CVs often inherit the rigid hierarchies of the parent

The New Role of the CEO in the World of Corporate Venturing Champion

Personally drives the project

Patron Financial support from top level executive

Provocateur Leads the charge for innovation

Shaper of culture Creates the environment

What does it take to be a Venture Champion?

Types of Champions

Project Champion Interface with organization

Technical champion Inventors and discoverers

Business Unit Champions Manage the transition to operations

Paths to Corporate Venturing

Skunk works – giving some independence to the project

Strategic Integration – balancing the core with various resources and opportunities

Entrepreneurial immersion – create an entrepreneurial culture

Why You Need an Entrepreneurial Mindset

New Resource Equation(Geoffrey Moore, Living on the Fault Line}

Scarce Resources Plentiful Resources

Time

Talent

Management attention

Money

Computing capability

Service providers

Entrepreneur V. Manager: Different Goals and Motivations

Opportunity Driven Resource driven

Action oriented-moves quickly

Constituency oriented-evolutionary

Multistage process with minimal exposure

Single-staged process with firm commitment

Bootstrap resources Own resources

Flat Org Structure with informal networks

Formalized hierarchy

Value-based Resource-based

Most Compelling Reason

Empirical Evidence that Corporate entrepreneurship improves company performance

Increases firm’s pro-activeness and willingness to take risks

Helps pioneer the development of new products, processes, and services

Achieving Success

As a Corporate Entrepreneur

Success as a Corporate Entrepreneur

Disclose idea to a trusted colleague

Put the idea into a short memo with a

compelling story

Ask for resources to achieve a specific goal

Seek a champion or leading blocker

Learn to improvise

Structure

Discipline

Chaos

FreedomE

ntrep

reneu

rship

/C

orporate V

entu

ring

Develop a Semi-Coherent StrategyBased on Brown & Eisenhardt

Unpredictable

Uncontrolled

Inefficient

Proactive

Continuous

Diverse

Example: NikeOn the Edge of Chaos Core: cutting-edge design and technology They innovate at the core

Air to Air Max to Air Zoom technology Attack strong niche players like Speedo with

novel products Take advantage of unexpected opportunities

(Tiger Woods) Superior execution Superior brand building

Example: 3M - Improvising

Balancing freedom to explore with the discipline of the marketplace.

Policies & procedures promote personal freedom and trust.

Failure is not punished.

New products:

skunk works (Post-it Notes),

pacing programs (Scotch-Brite),

traditional development (derivatives)

Entrepreneurial Guerrilla Tactics

Work under the radar; then ask forgiveness

Move people around and out of their comfort zone.

Establish employee-flight incentives

Define challenges in creative ways

Turn managers into sponsors

Build to Last – Jim Collins

Religiously preserve your core values

Don’t play it safe – BHAGs

Create a cult-like environment - only those who fit

Make your best moves from experimentation, trial & error,& accident

Focus on beating yourself

Don’t make either/or choices. Go for it all.

Summary Corporate Entrepreneurship

Who you are –

A believer in change

An accepter of intelligent failure

Customer driven

A believer in empowered teams

Summary

What you do –

Focus on customer needs

Create a series of strategic alliances

Don’t limit the company to existing competencies or resources

Summary

Why you do it –

Individual measurement and reward systems where associates and company share risk and rewards – Tom O’Malia, USC