Description
With this brief file regarding entrepreneurship and entrepreneurial management mikkel draebye.
Entrepreneurship & Entrepreneurial Management
Mikkel Draebye
Dept. for Entrepreneurial and
Strategic Management
About Myself
• SDA Professor of Entrepreneurial and Strategic Management. In SDA since 1995.
PhD in entrepreneurship. Studied (and taught) courses on start-up
entrepreneurship for the last 15 years, over the last 3-4 interested in corporate e-
ship. In house training on the subject (Whirlpool, Solvay..)
• My entrepreneurship teaching is influenced
and inspired by the extensive train-the-trainer
courses I did between 2005-2008 at IMD (ITP)
, HBS (ECPCL- Prof. Stevenson), Babson College
(SEE – Prof. Timmons) and
Whitman/Syracuse (EC – Prof. Morris)
Contents
• The course is about Corporate Entrepreneurship: What it is, In which
contextsis it useful and how we can encourage and manage it
• A word of caution: We’ll work on cases and most of the learning is NOT going
to be from the text-book. YOU are going to synthesize the logics
E-ship
Focus on CE
The Entrepreneurial
Imperative
Contexts of E-ship
The Nature of
Entrepreneurship
Creating the entrepreneurial organization
HRM and Control
Systems
Creativity
Management.
Org. Structure
Logical Structure of Contents &
Sessions
Strategy, Leadership
& Cult.
Workflow
• Case based course (with some traditional lectures)
• To work, cases need to be prepared before classes
• In true HBS-style all case discussions will be kicked-off
by cold-calling a participant to introduce the case.
• Case-conclusions and learning synthesis is written up (1
page) . and mailed to me
([email protected]). . REMEMBER to putt
ALL group members names on the presentation
Evaluation
• See syllabus
The Nature of Entrepreneurship
Cases of Entrepreneurial Processes
and Entrepreneurs
R&R
8
October Sky
9
Part 1: Intro and Context
Part 2: Idea & Vision
Part 3: Starting up
Part 4: Team and resources
Part 5: Resource acquisition
Part 6: Perserverance
Part 7: Happy ending
Learning Synthesis
• Prepare and mail me 2-3 slides in which you,
using bullet points, summarizes what
entrepreneurship is , what characterizes
entrepreneurial processes and entrepreneurs
Models and definitions used in
academia
We sometimes define entrepreneurship as an orientation that differs
from a traditional “managerial” approach (Stevenson Perspectives)
Entrepreneur / Promoter Manager / Trustee
Driven by perception of
opportunity
Strategic Orientation Driven by resources
currently controlled
Revolutionary with short
duration
Commitment to
opportunity
Evolutionary with long
duration
Multistaged with minimal
exposure in each stage
Commitment of
resources
Single staged with
complete commitment
upon decision
Episodic use or rent of
required resources
Control of resources Ownership of required
resources
Flat with multiple
informal networks
Management structure Formalized hierarchy
Entrepreneurship is:
• Manifest in certain activities such a
– Starting up new business ventures (start-up entrepreneurship)
– Starting up social ventures (social entrepreneurship)
– Business Development, Innovation, New Product Development within larger
corporations (corporate entrepreneurship)
• Defined academically as:
• “The pursuit of opportunity beyond the resources you currently control”
The entrepreneurial Proces
Idea Generation/
Opportunity identification
Concept Definition
Resource Acquistition
Harvesting
Assessing resource Requirements
But also: Entrepreneurship as work in progress/ a series of
experiments
• New ventures are work in progress; What you start out to do is never what
you end up with doing
• Speed, adroitness of reflex, and adaptability are crucial.
• The key to success is failing quickly and recouping quickly, and keeping the
tuition low
• The best entrepreneurs specialize in making new mistakes only
Traits, desirable and acquirable attitudes of the entrepreneur
• Commitment and determination
• Leadership
• Opportunity obsession
• Tolerance of risk, ambuiguity and uncertainty
• Creativity, self-reliance and adaptability
• Motivation to excel
The Entrepreneurial Imperative
Entrepreneurship & Economic Thought
S
D
S
D
Joseph Schumpeter (1930s) Israel Kirzner (1970s)
“CREATIVE DESTRUCTION”
Entrepreneurship moves market
away from equilibrium
“ENTREPRENEURIAL DISCOVERY”
Entrepreneurship moves market
toward equilibrium.
New combinations: new goods,
methods of production, new markets,
sources of supply, organizations.
Entrepreneur alert to opportunities
that already exist and are waiting to
be noticed.
• Through the process of creative destruction,
independent entrepreneurs create new economic
combinations that enhance productivity growth
and raise living standards (Schumpeter, 1934).
• The contribution of independent
entrepreneurship to living standards, goes beyond
that created by improvements in the way in which
capital, labor and technology are employed by
professionally managed firms.
• The determination of whether independent
entrepreneurship enhances economic growth
above that generated by the activities of
professionally managed firms is not a trivial issue.
• These entrepreneurial profits result from
organizing “the relationship between factors of
production and market opportunities in ways that
create value that would not otherwise have been
generated.”
• The thesis is that individuals are less likely
to create new combinations that generate
surplus value if they are agents in
professionally managed organizations than
they are if they are independent
entrepreneurs (Schumpeter, 1934).
• Agency theory provides a framework for
understanding why this is the case.
• The incentive for individuals with entrepreneurial
ability to act entrepreneurially is greater when
they form their own organizations than when
they work for professionally managed ones.
• This means that when individuals with the ability
to be entrepreneurs leave large organizations to
become principals of their own firms, the
economy has more people in it that are in a
position to create new combinations that add
surplus value.
• Aggregated across the economy this situation
leads to real economic growth.
• Schumpeter argued that new combinations do
not usually come from old firms but from new
firms producing beside them.
• Entrepreneurs and managers require different
incentives, and that the provision of appropriate
incentives through the opportunity to found firms
has enhanced the growth of real income in the
United States since the end of WWII in 1946.
Two Views of the Role of Entrepreneur
1. Disequilibrator (DQ)
Schumpeter: Entrepreneur
as force in “creative
destruction of an equilibrium”
Entrepreneurial
“New Combinations”
Equilibrium
State
2. Equilibrator (EQ)
Austrian School”
Entrepreneur as “discover” of
disequilibrium (niches not served)
Entrepreneurial
Discovery (of niches)
Disequilibrium
State
DQ EQ
Some empirical data
GLOBAL ENTREPRENEURSHIP MONITOR
Countries Involved: 1999, 2000, 2001, & 2002
[34 national teams in 2002]
1999 Teams [10]
• Canada
• Denmark
• Finland
• France
• Germany
• Italy
• Israel
• Japan
• United Kingdom
• United States
2000 Teams [11]
• Argentina
• Australia
• Belgium
• Brazil
• India
• Ireland
• Korea
• Norway
• Singapore
• Spain
• Sweden
• UK: Scotland
• UK: Wales
2001 Teams [8]
• Hungary
• Mexico
• Netherlands
• New Zealand
• Poland
• Portugal*
• Russia
• South Africa
*Portugal was not
involved in 2002.
2002 Teams [9]
• Chile
• China
• Chinese Taipei
(Taiwan)
• Croatia
• Hong Kong
(SAR, China)
• Iceland
• Slovenia
• Switzerland
• Thailand
GEM Program Objectives
• Are there national differences in
entrepreneurial activity?
• Is entrepreneurial activity related to
national economic growth?
• Why are some countries more
entrepreneurial than others?
• What can be done to enhance
entrepreneurial activity?
What is entrepreneurship?
Who or what is entrepreneurial?
• Person
• Business
• Industry
• Entire society
What makes “it” entrepreneurial?
• Special trait
• New and innovative ideas, products, services
• High growth activity
• Exploitation of opportunity, people
• Creation of new markets, new economic sectors
Social,
Cultural,
Political
Context
General National
Framework
Conditions
•Openness (External Trade)
•Government (Extent,Role)
•Financial Markets (Efficiency)
•Technology, R&D (Level, Intensity)
•Infrastructure (Physical)
•Management (Skills)
•Labor Markets (Flexible)
•Institutions (Unbiased, Rule of Law)
Entrepreneurial
Framework
Conditions
•Financial
•Government Policies
•Government Programs
•Education & Training
•R&D Transfer
•Commercial, Legal Infrastructure
•Internal Market Openness
•Access to Physical Infrastructure
•Cultural, Social Norms
Entrepreneurial
Opportunities
Entrepreneurial
Capacity
- Skills
- Motivation
National
Economic
Growth
(GDP,Jobs)
Business
Churning
Micro, Small, and
Medium Firms
(Secondary Economy)
GEM
CONCEPTUAL
MODEL Major
Established Firms
(Primary Economy)
Opportunity vs. Necessity
Are you involved
–To take advantage of a business
opportunity or
–Because you have no better choices for
work?
Willing volunteers or draftees?
Necessity Entrepreneurship as % of Total : GEM 2002
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
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Market Replication vs. Market Expansion
• Market Replication
– Customers know product or service well
– Lots of competition
– Using established technology or procedures
• Market Expansion, Creation
– Customers unfamiliar with product or service
– No competition
– New technology or procedures
Market Impact by Firm Life Course Stage
0
10
20
30
40
50
60
70
80
90
100
Start-ups New Firms Established Firms
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Market Replication Some Market Expansion
TEA Entities - Replication versus Market Expansion by Global Type
0
2
4
6
8
10
12
14
16
Market Replication Some market Expansion
#
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Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
TEA Indices and National Economic Growth
[GEM 2000,2001,2002 Pooled Data; * = statistical significance]
Concurren
t
One-year
lag
Two-year
lag
TEA
Overall
0.19 0.22* 0.42**
TEA
Opportunit
y
0.20 0.22 0.26
TEA
Necessity
0.23 0.35** 0.49**
TEA Overall and National Economic Growth: 2 Yr Lag
R = 0.41 (0.01)
0.000
5.000
10.000
15.000
20.000
25.000
-2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00
% Growth in GDP 2 yrs later
#
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TEA Opportunity and National Economic Growth: 2 Yr Lag
R = 0.27 (0.17)
0.000
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00
% Growth in GDP 2 Yrs Later
#
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TEA Necessity and National Economic Growth: 2 Yr Lag
R = 0.47 (0.01)
0.000
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
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0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00
% Growth in GDP 2 Yrs Later
#
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Entrepreneurial Activity [TEA] by Gender by Global Type
0
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6
8
10
12
14
16
18
Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
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TEA02 - Men TEA02 - Women
Education, Relative HH Income, Labor Force Participation and
Entrepreneurial Activity: 30 GEM 2002 Countries
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Personal Responses and Entrepreneurial Acdtivity: 30 GEM
2002 Countries
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Entrepreneurial Activity by Global Type
0
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4
6
8
10
12
14
16
TEA Necessity TEA Opportunity TEA Overall
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Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
Barriers to New Business Registration by Global Type
0
10
20
30
40
50
60
70
80
90
Number Registration Procedures Number Days to Complete Cost as % of GDP/Capita
Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
Start-Up Financing: Informal and Venture Capital Support
by Global Type
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
VC Domestic Start-ups/GDP Informal Invest SU/GDP Total All SU Funds/GDP Informal Investor Prev Rate(#/100)
P
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r
c
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n
t
Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
Developed Asian
[Chinese Taipei, Hong Kong, Japan, Singapore]
• Opportunity TEA Low
• Necessity TEA Very Low
• Market Expansion TEA Low
• Women low Relative to Men
[32%]
• Small percent adults
– See business opportunities
– Know an entrepreneur
– Think they know how to start
a business
• Low income disparity
• Post-materialism values widely
accepted
• Political System
– Political rights well developed
– Open access to system
– Moderate corruption
– Strong property rights protection
• Low barriers to firm registration
• Low VC, informal financing
• Public sector
– Moderate scope
– Low cost
Eastern European
[Croatia, Hungary, Poland, Russia, Slovenia]
• Opportunity TEA Low
• Necessity TEA Very Low
• Market Expansion TEA Very Low
• Women low Relative to Men [51%]
• Small percent adults
– See business opportunities
– Think they know how to start a
business
• Some know an entrepreneur
• Substantial farm sector
• Very low illiteracy
• Moderate income disparity
• Strong support for materialism values
• Political System
– Political rights undeveloped
– Open access to system
– Very low levels of corruption
– Low property rights protection
• Moderate barriers to firm registration
• Low VC, informal financing
• Public Sector
– Major presence
– Rated as ineffective
European Union + 4
[Belgium, Denmark, Finland, France, Germany, Iceland, Ireland, Israel, Italy,
Netherlands, Norway, Spain, Sweden, Switzerland, UK]
• Opportunity TEA Moderate
• Necessity TEA Very Low
• Market Expansion TEA Moderate
• Women low Relative to Men [47%]
• Many adults
– See business opportunities
– Think they have start-up skill
– Know an entrepreneur
– Have high fear of failure
• Very low illiteracy
• Low income disparity
• High social security costs
• Strong post-materialism values
• Political System
– Political rights well developed
– Open access to system
– Low levels of corruption
– Strong property rights protection
• Moderate firm registration barriers
• Moderate VC, informal financing
• Public Sector
– Massive presence
– Considered effective
– Relatively expensive
Former British Empire (Anglo)
[Australia, Canada, New Zealand, South Africa, United States]
• Opportunity TEA High
• Necessity TEA Low
• Market Expansion TEA High
• Women low Relative to Men [61%]
• Many adults
– See business opportunities
– Think they have start-up skill
– Know an entrepreneur
– Have low fear of failure
• Low illiteracy
– Very high post-secondary emphasis
(CA, US)
• Moderate income disparity
• Low social security costs
• Low support for post-materialism values
• Political System
– Political rights well developed
– Open access to system
– Low levels of corruption
– Strong property rights protection
• Lowest firm registration barriers
• Moderate VC, informal financing
• Public sector
– Moderate scope
– Rated as effective
– Appears to be efficient
Latin America
[Argentina, Brazil, Chile, Mexico]
• Opportunity TEA High
• Necessity TEA High
• Market Expansion TEA High
• Women Approach Equality [68%]
• Many adults
– See business opportunities
– Think they have start-up skill
– Know an entrepreneur
• Low illiteracy
– Less emphasis on secondary and post
secondary education
• Substantial farm sector
• High % unemployed < 25 yrs old
• Highest income disparity
• Moderate social security costs
• Political System
– Some political rights present
– Reduced access to system
– High levels of corruption
– Weak property rights protection
• Highest firm registration barriers
• Moderate VC, informal financing
• Public sector
– Moderate scope
– Considered ineffective
Developing Asian
[China, India, Korea (South), Thailand]
• Opportunity TEA High
• Necessity TEA High
• Market Expansion TEA High
• Women Approach Equality [74%]
• Many adults
– See business opportunities
– Think they have start-up skill
– Know an entrepreneur
• Low illiteracy
– Less emphasis on secondary and post
secondary education
• Substantial farm sector
• High % unemployed < 25 yrs old
• High income disparity
• Almost no social security costs
• High emphasis on materialism
• Political System
– Some political rights present
– Reduced access to system
– High levels of corruption
– Weak property rights protection
• Highest firm registration barriers
• Moderate VC, informal financing
• Public sector
– Substantial scope
– Low cost
– Rated as ineffective
Policy Considerations
• Enormous amount of human effort devoted to starting new
businesses
• Majority of activity in developing countries
• Critical factor associated with economic growth
– Causal role is unclear
• Policy recommendations need to be tailored to the unique
situation of each country
– Best practices may be country—or country type--specific
Developed Economies
• Strong infrastructure
– Medium to high opportunity entrepreneurship
– Low necessity entrepreneurship
• Major aversions to work career uncertainty
– Reflected in substantial social support systems
• Accept Post-Materialism Value System
– Assumes national economic success is assured!
• Dramatic personal career success is “suspect”
– Are young adults encouraged to pursue low risk occupational options?
Developing Economies
• Incomplete infrastructure
– Medium to high opportunity entrepreneurship
– Medium to high necessity entrepreneurship
• Massive waves of draftees
– Less technically sophisticated entrepreneurship
• Helpful structural improvements
– Expand education, general and entrepreneurial specific
– Systematize recognition of property rights
– Enhance access to institutional finance
– Improve efficiency of government, reduce corruption
• May become strong global competitors
How Many People Are Involved?
• 37 GEM 2002 countries
– 3,882 million people
– 2,374 million in labor force age range (18-64 years old)
– 62% of world population
– 92% of world GDP
• Estimate 286 million active in start-ups
– 205 million in India and China
– 18 million in the US
– 11.6 million EU + 4
– 4.0 million Eastern European 5
• 140 million business entities (2 per start-up)
• Estimate 460 million active in the world
– Compare to 132 million new human births each year
– More that total population of North America (415 million)
What arguments has been put forward
to claim that this “entrepreneurship
thing” is actually useful in a corporate
setting
• The turbulent environment argument
• The organizational lifecycle argument
• The “Blue Ocean” argument (or the fallacy of
Porter’s generic strategies)
T
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New “skills”
•Adaptability
•Flexibility
•Speed
•Aggressiveness
•Innovativeness
Traits and characteristics that the
entrepreneurial employee posses
A more dynamic industry environment
necessitates more dynamic employees
and organizations
Turbulent env.
The organizational lifecycle
argument:
CE as a revitalization pill
1.
Entrepreneurial
Stage
2.
Collectivity
Stage
3.
Formalization
Stage
4.
Elaboration
Stage
Crisis:
Need to deal
with too much
red tape
Crisis:
Need for
delegation
with control
Crisis:
Need for
leadership
Creativity
Provision of clear direction
Addition of internal systems
Development of teamwork
Crisis:
Need for
revitalization
Decline
Continued
maturity
Streamlining,
small-company
thinking
S
I
Z
E
Large
Small
Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational
Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary
Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner,
“Evolution and Revolution as Organizations Grow,” Harvard Business
Review 50 (July-August 1972): 37-46.
The “Blue Ocean” argument
• Based on 150 case studies
• Evidence found for the fact
that sustained superior
performance CANNOT be
explained by generic strategy
• Authors argue that we are
better off developing new
value propositions and
creating new market space
than reacting to competition
Red vs. Blue Ocean Strategies
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market Create uncontested market
space
Beat the competition Make the competition
irrelevant
Exploit existing demand Create and capture new
demand
Make the value-cost trade-off Break the value-cost trade off
Align the whole system of a
strategic firm's activities with its
choice of differentiation or low
cost
Align the whole system of a
firm's activities in pursuit of
differentiation and low cost
VALUE INNOVATION
“Blue Ocean” is becoming an umbrella
notion including also the “older” ideas
of “New Game” and “time-based”
competition
SPEED
New
Game
Low
Cost
Diff.
Focus
•Wal-Mart
•Nokia
•Dell
•Zara
•Amazon
•Ryanair
•Swatch
•Nike
•Cirque
du Soleil
•iPod
•Ferrari
•Harley Davidson
•BIC
•Husky
Empirical research supports the idea
that
“entrepreneurial”/”innovative”/”blu
e ocean” companies, outperform
their “traditional” strategy peers:
• Covin & Slevin 1989, 1990 (New Market Development)
• Davis, Morris & Allen 1991 (New Product Development)
• Morris & Sexton 1996 (Entrepreneurial Intensity)
• Shaker 1999 (NMD
• Hornsby 2001 (EI)
• Goosen 2002 (NMD, NPD)
• Hindle 2004 (EI)
• Yiu 2008 (NPD)
• Jaakko Aspara, Joel Hietanen & Petri, 2008 (Blue Ocean)
Conclusion: Interesting, but not an
absolute imperative
• “Entrepreneurial” organizations tends to be
• More aggressive (higher sense of urgency)
• Faster
• More flexible
• More adaptable
• More innovative & creative
• But also
• Less cost efficient
• In function of the key success factors of the
industry, the potential of transforming the
organization towards being more entrepreneurial
varies
Different forms and contexts of
Entrepreneurship
Ikea Case Discussion
• Is this a case of start-up entrepreneurship,
International entrepreneurship, corporate
entrepreneurship or social entrepreneurship.
What are the elements for each?
• What is actually “Entrepreneurial” about the
IKEA start-up history ?
• What is the key to IKEA’s success over time?
77
Start-up Entrepreneurship
78
As similar and different from
independant (start-up e-ship)
79
Some noted similarities between start-up and corporate e-ship
Some noted differencies between start-up and corporate e-ship
Some noted differencies between start-up and corporate e-ship
Source: Sharma / Chrisman (1999)
Independent
Entrepreneurship
Entrepreneurship
Corporate
Entrepreneurship
Corporate
venturing
Innovation
Strategic
Renewal
Internal
corporate venturing
Potential outcomes:
• Integration of new “ventures”
into existing units
• Creation of new organizational
units
External
corporate venturing
Potential outcomes:
• Joint ventures
• Spin off
• Venture capital initiatives
The different forms of entrepreneurship (defined by
outcome)
Potential outcomes:
• Domain Redefinition
• Org. Rejuvenation
• Process Innovation
• Business Model
Redifinition
Organizational “embeddednes” of CE
• R&D Division
• Ad Hoc Venture Teams
• New Venture Groups, Incubators
• Champions and Mainstream
• Through acquisitions
• Through outsourcing
• Mix of the above
Corporate entrepreneurship metrics
Entrepreneurial
Degree
Innovativeness
Risk-Taking
Proactiveness
Frequency
Entrepreneurial
Intensity
The Concept of Entrepreneurial
Intensity
“classroom” metrics
• Size of seed fund
• Funded ideas
• % of sales spend on R&D
• Patent claims filed
• Patents granted
• Cost of marketing x clinical
trial
• NPV for year
• Mkt size in terms of
customers
Degrees of product/service
innovativeness
Process Innovation
Risk Taking: Mapping different type of risks
Linking different type of innovation approaches to risk
Linking different type of innovation approaches to risk
Proactiveness
• Venkatraman:
1. Seeking new opportunities
2. Introducing new products ahead of competititon
3. Strategically eliminating mature or declining
products
Combinations of dimensions
Entrepreneurial Grid Exercise
• Where would you put the following
companies?
– Ryan Air
– MTV
– Sony
– Apple
– …..
Use and Implications
• Where does your company position itself on the
entrepreneurial grid ?
• Where would you like to be?
• Are there indications that Entrepreneurial Frequency is
important in the industry?
• Are there indications that Entrepreneurial Degree is
important in the industry?
• How many entrepreneurial events did your company
record last year? How innovative?
• What could you do the next 3 years to increase the
Entrepreneurial Intensity?
Drivers of Corporate Entrepreneurship
Factors that can influence the entrepreneurial activity in a
company: The Corporate Entrepreneurship Value Chain
Entrepreneuri
al
Individuals
Creativity
Management
Innovation
Process
Management
Organizational Structure
Control Systems
Corporate Culture
Strategy & Leadership
Corporate
Venture
Management
HR Systems
Source: Draebye, Forthcoming
Strategy, Leadership & Culture
Strategy & Leadership
• It’s obviously important that the company has a
strategy for entrepreneurship and innovation
• Strategy is defined as actions and decisions aimed
at obtaining a specific goal. Without clear goal
and objectives a strategy can not be crafted
• Companies can (should) as themselves a number
of guiding questions that can help them define
entrepreneurship & innovation goals (see next
slides)
Towards a strategy for
entrepreneurship
Towards a strategy for Innovation
Innovation Portfolio Goals
• Portfolio goals is an alternative to the more
undifferentiated “project” approach
• With a portfolio approach, projects are
classified to manage the innovation pipeline in
terms of
• Risk/degree of innovativeness
• Development stage/Lead Time/Project Time
• Industries (Business Units)
• Investment/Costs
• Expected Returns
Innovation Portfolio (Development
Projects)
Innovation Portfolio – Risk Profiles 1
Innovation Portfolio – Risk Profiles 2
Setting goals and objectives: Example
Best Innovation Practises -1
• CEO Support
• Giving Priority to Innovation
• Change Management Skills
• Innovation and creativity in mission statement
• Openness to outside ideas
• Formal programs for idea generation and problem solving
• Cross functional communication
• Encouraging employees to talk to customers
• R&D budgets and focus on product development
• Having an innovation budget
• Providing rewards for individual creativity and innovation
• Productive meetings
Some other findings (not best
practises). Survey of 189 large US
active product innovators
• Average project development time: 2.95 years
• Only 56% of companies adopted a portfolio / goal approach
• Tracking of financial performance of development projects
in place in 76% of companies
• Average idea-to-development project ratio is 7:1
• Average yearly new product launch for sample was 37.5
(median 12). Number expected to increase to 45 (20)
• 30% of revenues in sample stemmed from products
launched in last 5 years
• 56% of projects met financial succes-criteria
Source: Page: “Assesing NPD practises and performance”
Journal of Product Innovation Management
In addition to hard objectives an
entrepreneurship and innovation
friendly environment also rely on
culture
Levels of culture
Traits of E-Culture
Individualism vs Collectivism
• Good or bad for e-ship
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Balance is needed
Other important element:
Failure tolerance
Vs.
Creativity management
What do you think?
• What is creativity really?
• Who are creative, who are not?
Creativity in a company setting
One perspective on creativity (Brabandere)
• Creativity is seeing reality through a different
“lense”
• It’s not thinking “outside the box”, it’s creating
new boxes to think in
• We all think in “standard” boxes and try to fit
reality into these boxes
• Creative thinkers “invent” new lenses
Conclusion
• The mind “wants” us to interpret reality in
pre-determined ways.
• Creative thinking is about getting away this
predetermined way of thinking
Improving the Creative Process
• Preparation
– Try to understand the “real question” or be sure that you really
understand the problem
– Reinterpret the problem
– Break assumptions
• Frustration
– Don’t make it a problem (“yes and” rule)
• Incubation
– Remove creative blocks
– Use formal creative techniques (Brainstorming, Mind-Mapping…)
• Illumination
• Elaboration
Creative Blocks
The Most Common Idea Stoppers
1. “Naah.”
2. “Can’t” (said with a shake of the head and an air of finality)
3. “That’s the dumbest thing I’ve ever heard.”
4. “Yeah, but if you did that . . .” (poses an extreme or unlikely disaster
case)
5. “We already tried that – years ago.”
6. “We’ve done all right so far; why do we need that?”
7. “I don’t see anything wrong with the way we’re doing it now.”
8. “That doesn’t sound too practical.”
The Most Common Idea Stoppers
9. “We’ve never done anything like that
before.”
10. “Let’s get back to reality.”
11. “We’ve got deadlines to meet – we don’t
have time to consider that.”
12. It’s not in the budget.”
13. “Are you kidding?”
14. “Let’s not go off on a tangent.”
15. Where do you get these weird ideas?”
Diversity as a tool
• If you wish to improve creativity, it helps to
look for different or unorthodox relationships
among the elements and people around you
• Use different types of “intelligence”
– Right brain, Left Brain
– Hermann Brain
– Different type of people in the team
Processes Associated with the
Two Brain Hemispheres
Left Hemisphere
• Verbal
• Analytical
• Abstract
• Rational
• Logical
• Linear
Right Hemisphere
• Nonverbal
• Synthesizing
• Seeing Analogies
• Nonrational
• Spatial
• Intuitive
• Imaginative
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Different roles
Source: Strategos
Innovation Lab
Framework for forcing Ideation
• Client need perspective
– Unmet
– Unsolved problems
– Unarticulated
• Client experience perspective
– Tool: Describe-Value-Appreciate
(adopt)
• IKEA
• Benetton
• Swatch
• Amazon
• Challenging Industry orthodoxies
– Tool: Identify – Appreciate
• Trends
– Tool: Identify - Appreciate
• |Core competencies
Source: Strategos Innovation Lab
Agenda day 3
• Mid-way pop quiz on chapters 1-7 + 14 and cases
– NOT, but I would like us to do a half-way recap of what we
have established so far
• Strategy, Leadership, Culture Lecture – Follow up
questions & comments
• Creative processes : Strategos Innovation Lab add-on
• Theme of the day: How HRM and OD can affect the
entrepreneurship and innovation climate of an
organizations
– Brain-cell warm-up break-out session
– 2 lectures (theory, research findings and examples)
– Oticon case study discussion
• Whirlpool Guest Speakers
Factors that can influence the entrepreneurial activity in a
company: The Corporate Entrepreneurship Value Chain
Entrepreneuri
al
Individuals
Creativity
Management
Innovation
Process
Management
Organizational Structure
Control Systems
Corporate Culture
Strategy & Leadership
Corporate
Venture
Management
HR Systems
Source: Draebye, Forthcoming
Human Resource Management
Examples of HR activities
Classification (grouping of activities)
Small Break-Out session (30 min).
Plenary debriefing on point 2
• For each of the 5 groups of HR activities:
1. Share your company’s practises and reflect on
their relation with creating and entrepreneurship
“friendly” work-environment. Be ready to share
“friendly” and “unfriendly” practises (we’ll leave
“neutral” alone)
2. If the purpose was to “increase friendliness”, do
you have any ideas / suggestions on practises
that could be implemented?
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Motivating and encouraging Entrepreneurial Behavior
Obstacles
• Effort
1. Employee does not understand what e-ship means
2. Believe it’s not possible
3. Percieve he/she is not capable
• Performance evaluation
4. No appraisal system
5. Performance criteria unclear
6. No innovativeness in criteria
7. More emphasis on non entrepreneurial activities
8. Arbitrary evaluations
9. Good evaluations obtainable without e-ship
• Reward
10. Reward independant from e-ship (get bonus anyway)
11. Other ways to get reward
12. Rewards too small
13. Rewards not relevant to employee
14. Unfair rewards
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Exercise: What’s Hot and was is Not?
• Pick your top 3 hotties from the previous table
• Pick your top 3 notties from the previous table
What the Gurus Say:
9 general principles for e-ship friendly
HR
Not just output -1
• Pearce (1997) asked 1500+ employees evaluate their bosses on 11
variables that had been identified as characteristic for the
“entrepreneurial manager”:
Not just output -2
• 6 months after the evaluation, Pearce surveyed job satisfaction and found that high levels of job
satisfaction was found in 62% of subordinates working with entrepreneurial managers – 3 times
higher the level found in subordinates working with non-entrepreneurial managers. Levels of high
levels dissatisfaction was reversely three times higher in this group (69%)
Agenda day 4
• Whirlpool follow-up
– Some more detail on their (old) metrics and stage-gate
model
– Presentation of Strategos’ Innovation Lab approach
• Oticon “theory”: Organizational Systems and Structure
• From general context conditions (generic drivers of e-
ship) to specific management tools and choices
– Stage-gates, planning tools and organization of innovation
projects in Lego
• Amplifon Guest Speaker
• Stage-gates, planning tools and organization of innovation projects in IBM
Whirlpool Innovation performance indicators
• 1. Customer loyalty index
• 2. Revenues generated by new, innovative products
• 3. New products gross margins and ROI
1
6
5
The Innovation Process
Structured Brainstorming to Generate
Ideas
1
6
6
Action Lab
Domain Expansion
• Benefit Exploration
• Migration Path
• Dreamspace
• Expanding
Opportunities
• Expanding the
Business Model
Opportunity
Development
• Business Plan
Skeleton
• Opportunity Planning
Framework
• Economic Engine
• Opportunity Sizing
100 Day Plans
• Validating Assumptions
• Design of Experiments
Discovery Realization Synthesis
The tools are just tools – their real power comes from
the dialogue and the ideas they stimulate.
Experiment Divergent Convergent
Divergent Convergent
Customer Experience
Discontinuities
Orthodoxies
Economic Engine
Core Competencies
Research
Looking at
the world
through
different
lenses
Innovation Lab
Idea
Creation &
Domaining
I-Pipe measurements
1
6
7
Business
concept
?# Ideas
?Qualitative
measure
?Ideas will be
measured in
2008, not
goaled
Idea
Screen
Tollgate
Ideas
Metrics:
Split the
measure
ment
C2C
Process:
?12-month average
of projected steady
state revenue
?Portfolio view
Conversion
Concept
Evaluation
Tollgate
Business
Evaluation
Tollgate
Concept
Selection
Milestone
Concept Execution
Project
s
Products
?I-revenue
?EOP lift
?Portfolio
View
In order to monitor the health of the Innovation pipeline, a new indicator was added:
„potential revenues of products under development?.
Screening for Innovation – the I-Box Tool
1
6
8
0
3
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6.5
6.5 S
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Customer Loyalty Relevance
Protect
Growth
Innovation
Growth
Growth
5 4 3 2 0 1
Offering Delivers
Benefits for the Main
Brand Attribute (star)
Offering Delivers
Benefits for the
Supporting
Brand Attributes
(circles)
Offering Delivers
Benefits for Points of
Parity (squares)
x I. Compelling Solution Aligned to our
Brands (5 pts)
5 4 3 2 0 1
Disruptive or Drastic Advance
(no competitive comparison
or step change above
competition)
Significant Advance
(clearly above or
generally outperforms
competition)
Nominal Advance
(generally meets
competition or
competitive offering not
met)
x II. Unique Customer Value (5 pts)
4 3 2 0 1
Dominant,
defensible
long-term
protection
Strong or Good
medium-term
protection
Defensive or Weak
short-term
protection
y III. Competitive Advantage /
Sustainable Migration Path (4
pts)
y IV. Differentiated Shareholder
Value (6 pts)
Steady-state annual inno net sales:
Regional brand / category net sales :
% of total branded product group
sales:
Margin %:
Regional brand / category margin %:
Tollgate financial EVA:
1
6
9
Innovation Product project launches
0
5
10
15
20
25
2003 2004 2005 2006 2007 2008
1
7
0
0
100
200
300
400
500
600
700
1 2 3 4 5
WER innovation revenues
(M€ and % of Net Sales)
2004 2005 2006
2007 2008
3%
6%
12%
18%
21%
Framework for forcing Ideation
• Client need perspective
– Unmet
– Unsolved problems
– Unarticulated
• Client experience perspective
– Tool: Describe-Value-Appreciate
(adopt)
• IKEA
• Benetton
• Swatch
• Amazon
• Challenging Industry orthodoxies
– Tool: Identify – Appreciate
• Trends
– Tool: Identify - Appreciate
• |Core competencies
Source: Strategos Innovation Lab
Basic concepts and theories linking
structure and control-systems to CE
(Oticon theory)
In addition to “classical” HR Functions,
also control systems can affect the
degree to which employees engage in
entrepreneurial events
• Elements to consider
• What do we control
• Input
• Output
• Process
• Behavior
Some examples of Control Systems
Some consequences of excessive
control
• Trust Problem (“Don’t they trust me”, Do they
think I’m Stupid”)
• Slowness Problem (Excessive control
procedures will slow down responsiveness)
• Go-after-the-man-not-the-ball Problem
(control becomes a mean in itself)
Towards more e-ship friendly control
systems
What the Gurus Say
(Stevenson/Jarillo):
Entrepreneurial Philosophy of control
The Give-up to Gain Control Paradox
• Some scholars and managers believes that you
have to give-up control to gain control. Does
that make sense?
Linking degree of control to degree of needed e-ship
What the Gurus Say (Gadiesh/Gilbert):
Organizational Slack as a mean to free
up initiative
• Some free time (15% bootleg rule in 3M,
Google 20% personal projects)
• Pool of non-allocated resources (venture fund)
Designing appropriate organizational
structures
What characterizes different
organizational structures?
• Levels
• Span of control
• Degree of centralization
• Degree of formalization
• Degree of specialization
• Degree of control
• Degree of flexibility
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Summary
187
Planning/managing entrepreneurial
ventures
(fromcontext conditions to
management tools)
Factors that can influence the entrepreneurial activity in a
company: The Corporate Entrepreneurship Value Chain
Entrepreneuri
al
Individuals
Creativity
Management
Innovation
Process
Management
Organizational Structure
Control Systems
Corporate Culture
Strategy & Leadership
Corporate
Venture
Management
HR Systems
Source: Draebye, Forthcoming
Lego
197
Break-out session (30 Min)
• On page 4 of the case it is stated “ The results were
impressive. The revamped process, coupled with the
separation of revolutionary new play experiences
(now assigned to the Concept Lab), shortened the
development time for new product variants from 36 to
12 months. And Hjuler saw the new process also
greatly boosted the percentage of ideas that made it
to the market and satisfaction of designers”
WHY IS THAT? WHAT ARE THE ELEMENTS OF THE “NEW”
INNOVATION MANAGEMENT SYSTEM; AND WHY ARE
THEY IMPORTANT. (SEE ALSO HANDOUTS)
198
Why does it work (better)
1. Go-To-Market Project Portfolio forces “market”
thinking and allows for better resource planning and
stage-gate screening
2. Innovators (designers) are now assigned to product
groups and is co-measured on P/L (create
interdependencies)
3. Breakthrough project and subprojects (Redefine) are
managed by different people (concept lab) than
incremental changes (Adjust) that are managed in the
product groups.
4. Extensive use / integration / leverage on outside
inputs (Steve Hassenplug, communities like Lego
factory and ad-hoc events)
199
IBM Emerging Business Opportunities
200
Agenda Day
• Close IBM EBO Discussion
• 2 slides on stage -gates and project lifecycles +
Corporate Venture Plan Structure
• Business Model Innovation
– I-mode discussion
– Lecture on BMs
• Continuum session (11.30-13.30, they need 2
hours so let’s be in class on time)
• Afternoon
– 30 minutes of individual “meditation” time on lessons
learned and action-implication
– Q&A, Help with assignment structuring, free chatting
201
EBO at IBM Discussion Questions
1. Why do large companies like IBM find it so difficult to create new
businesses? What are the primary barriers to success
2. What is your evaluation of the “horizons of growth” model? What are the
distinguishing features of emerging, H3 businesses
3. How did the EBO management system evolve over time? What was
accomplished during
• The Thompson era
• The Corporate Strategy era
4. What are the key elements of the current EBO management system?
What is your evaluation of the system
5. How should Harreld
• Deal with those businesses now reaching H2 status
• Increase the number of EBOs?
Evaluation
• Diagnostically: Super. It nails the problem
• Structurally: Simple, Well aligned. Ex H3: Encourages
experimentation and creativity while providing oversight and
strategic advice. EBO leader ARE pushed to meet milestones.
Metrics are aligned with lifecycle and controlled. Resources are
secured..
• Separation vs Integration: separation bias with some integration
elements (division head, in principle, are responsible for staffing
and sourcing H3 projects, though lead by Corporate Strategy. If
“undernurtured” fingers are slapped – so separation
• H3 bias. Focus is on developing H3. Not so much on the specific
requirements of H2 projects.
• No transistion system. 2 EBO has +1bn in sales –
• Not scalable (Corp strategy is exhausted with 7 EBOs)
2 different levels of venture
management and planning
1. Project level: Guidelines and formats for
• Concept plans (what is the idea, who is the customer, what problem
is solved, how big and growing is the target market, wherein lies the
competitive advantage)
• Business case (revenue forecast, capex forecast, opex forecast)
• Corporate venture plans (see next slide)
2. Corporate level: Procedures, Rules and
structures for
• Stages, procedures and requirements for project approval and
financing
• Venture team composition
• Approval committees
Corporate Venture Plan (BP)
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Stage-Gates and Project Development
Cycles
Managing the process: Using stages
and gates
Development Project Lifecycle
Corporate Strategy:
Formulate Innovation
portfolio goals and
targets
Generation of Ideas
and identification
of Opportunities
incentive &
Reward Systems
that encourage
and motivate
entrepreneurial
behavior
Structure and
culture that
support
Information
sharing &
Communication
Organizational
Slack and
openness to
outside ideas
Failure tolerance
Creative /
Entrepreneurial
Individuals
(processes)
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Project Incubation
&
Management
Stage gate
approval
systems
Innovation
portfolio
monitoring
Incubation
Structures
&
Systems
Performance, Monitoring and
management systems
Sustainable Entrepreneurial
Performance
Strategic Renewal: Special focus on
Business Model Innovation
i-mode
I-mode discussion
• What is a Business Model?
• How would you describe I-modes BM?
• Is it innovative ? (“Value innovation at NTT
DoCoMo) ?
• Is I-modes “Mobile Internet” BM innovative?
Business Models
The operator-do-it-all model
Ex: Scriptim
Content
aggregator
Network service
provider
Content
provider
Pays for content
Consumer
Pays for access to
content
Operator
domain
Revenue flow
Business Models
The operator-portal model
Ex: DoCoMo
Content
aggregator
Network service
provider
Pays for access to
users
Content
provider
Pays for channel
Pays for
channel
Pays for payment
services
Consumer
Pays for content
Pays for access to
content
Operator
domain - may
act as portal
Financial services
provider
Pays for
channel
as content
provider
Revenue flow
Master CP
i-mode BM
Chesbrough’s Definition
Source: Chesborough, 2006
Example of Business Model
Source: Chesborough, 2006
Ryan Air Business Model -1
Source: Chesborough, 2006
Ryan Air Business Model -2
Source: Chesborough, 2006
Changing Business Models -1
Cam ltd
Vs.
AdShell
Changing Business Models - 2
Classical (generic)
Business Model
VS.
Segmented
Business Model
Are some business models better than
others?
• Chesbrough: YES – There is an absolute
hierarchy
Chesbroughs Business Model
Hierarchy and Typology
• Type 1: Undifferentiated business model
• Type 2: Some differentiation in business model
• Type 3: Company develops a segmented business model
• Type 4: Company has an externally aware business model
• Type 5: Company integrates its innovation process with its business model
• Type 6: Company’s business model is build around platform leadership
For Chesbrough the degree of openness is what makes
a BM better than another
The Economic Logic behind the
argument
1. Cost of R&D is Sky-Rocketing
2. Shortening lifecycle of new products
The argument is in line with what
several scholars has concluded
Eco System / Platform Models
Examples
A known example discussion (pre-
itunes)
1. What are the business models adopted by
Microsoft, Apple and OSI in developing and
marketing windows, apple os and linux
respectively
2. What are the pro’s and cons of the 3
different models
Summary
Apple OS
(SAP, Unix..)
Linux Windows
Ownership of IP Proprietary Open Mixed (proprietary
kernel, but API and
SDKs available to 3°
party developers)
Size, dynamism and
costs of ecosystem
Limited and costly Large and free Large and costly
Pro Control, All value can
be appropriated by
company
Dynamic community,
quality of OS
WTA platform, good
nurturing of
ecosystem, good
possibility of value
appropriation
Cons Cost, time of
development
Richness of
complementary
products and services
Value appropriation
Sustainability of model
if going towards more
commercial models
Quality
Desktop OS
“INTEL” CPU
AT BUS
PC OEM
Apps/ISVs
PC
Distribution
ISP Search
Applets
Browser Middleware
End User
Value
Processing Value
Connectivity Value
IBM/Clone
Open architecture
Other Examples
• Barilla ?
• Academia Barilla?
• Oticon?
• Lego?
• IBM ?
• I-mode ?
• ............ Mention a few
Steps in Business Model Innovation
(Value-Net approach )
1. Map existing Value-Net
2. Analyse net and identify key nodes
3. Focus on nodes that are key to the system
4. Engage in strategies to grow network
doc_931192143.pdf
With this brief file regarding entrepreneurship and entrepreneurial management mikkel draebye.
Entrepreneurship & Entrepreneurial Management
Mikkel Draebye
Dept. for Entrepreneurial and
Strategic Management
About Myself
• SDA Professor of Entrepreneurial and Strategic Management. In SDA since 1995.
PhD in entrepreneurship. Studied (and taught) courses on start-up
entrepreneurship for the last 15 years, over the last 3-4 interested in corporate e-
ship. In house training on the subject (Whirlpool, Solvay..)
• My entrepreneurship teaching is influenced
and inspired by the extensive train-the-trainer
courses I did between 2005-2008 at IMD (ITP)
, HBS (ECPCL- Prof. Stevenson), Babson College
(SEE – Prof. Timmons) and
Whitman/Syracuse (EC – Prof. Morris)
Contents
• The course is about Corporate Entrepreneurship: What it is, In which
contextsis it useful and how we can encourage and manage it
• A word of caution: We’ll work on cases and most of the learning is NOT going
to be from the text-book. YOU are going to synthesize the logics
E-ship
Focus on CE
The Entrepreneurial
Imperative
Contexts of E-ship
The Nature of
Entrepreneurship
Creating the entrepreneurial organization
HRM and Control
Systems
Creativity
Management.
Org. Structure
Logical Structure of Contents &
Sessions
Strategy, Leadership
& Cult.
Workflow
• Case based course (with some traditional lectures)
• To work, cases need to be prepared before classes
• In true HBS-style all case discussions will be kicked-off
by cold-calling a participant to introduce the case.
• Case-conclusions and learning synthesis is written up (1
page) . and mailed to me
([email protected]). . REMEMBER to putt
ALL group members names on the presentation
Evaluation
• See syllabus
The Nature of Entrepreneurship
Cases of Entrepreneurial Processes
and Entrepreneurs
R&R
8
October Sky
9
Part 1: Intro and Context
Part 2: Idea & Vision
Part 3: Starting up
Part 4: Team and resources
Part 5: Resource acquisition
Part 6: Perserverance
Part 7: Happy ending
Learning Synthesis
• Prepare and mail me 2-3 slides in which you,
using bullet points, summarizes what
entrepreneurship is , what characterizes
entrepreneurial processes and entrepreneurs
Models and definitions used in
academia
We sometimes define entrepreneurship as an orientation that differs
from a traditional “managerial” approach (Stevenson Perspectives)
Entrepreneur / Promoter Manager / Trustee
Driven by perception of
opportunity
Strategic Orientation Driven by resources
currently controlled
Revolutionary with short
duration
Commitment to
opportunity
Evolutionary with long
duration
Multistaged with minimal
exposure in each stage
Commitment of
resources
Single staged with
complete commitment
upon decision
Episodic use or rent of
required resources
Control of resources Ownership of required
resources
Flat with multiple
informal networks
Management structure Formalized hierarchy
Entrepreneurship is:
• Manifest in certain activities such a
– Starting up new business ventures (start-up entrepreneurship)
– Starting up social ventures (social entrepreneurship)
– Business Development, Innovation, New Product Development within larger
corporations (corporate entrepreneurship)
• Defined academically as:
• “The pursuit of opportunity beyond the resources you currently control”
The entrepreneurial Proces
Idea Generation/
Opportunity identification
Concept Definition
Resource Acquistition
Harvesting
Assessing resource Requirements
But also: Entrepreneurship as work in progress/ a series of
experiments
• New ventures are work in progress; What you start out to do is never what
you end up with doing
• Speed, adroitness of reflex, and adaptability are crucial.
• The key to success is failing quickly and recouping quickly, and keeping the
tuition low
• The best entrepreneurs specialize in making new mistakes only
Traits, desirable and acquirable attitudes of the entrepreneur
• Commitment and determination
• Leadership
• Opportunity obsession
• Tolerance of risk, ambuiguity and uncertainty
• Creativity, self-reliance and adaptability
• Motivation to excel
The Entrepreneurial Imperative
Entrepreneurship & Economic Thought
S
D
S
D
Joseph Schumpeter (1930s) Israel Kirzner (1970s)
“CREATIVE DESTRUCTION”
Entrepreneurship moves market
away from equilibrium
“ENTREPRENEURIAL DISCOVERY”
Entrepreneurship moves market
toward equilibrium.
New combinations: new goods,
methods of production, new markets,
sources of supply, organizations.
Entrepreneur alert to opportunities
that already exist and are waiting to
be noticed.
• Through the process of creative destruction,
independent entrepreneurs create new economic
combinations that enhance productivity growth
and raise living standards (Schumpeter, 1934).
• The contribution of independent
entrepreneurship to living standards, goes beyond
that created by improvements in the way in which
capital, labor and technology are employed by
professionally managed firms.
• The determination of whether independent
entrepreneurship enhances economic growth
above that generated by the activities of
professionally managed firms is not a trivial issue.
• These entrepreneurial profits result from
organizing “the relationship between factors of
production and market opportunities in ways that
create value that would not otherwise have been
generated.”
• The thesis is that individuals are less likely
to create new combinations that generate
surplus value if they are agents in
professionally managed organizations than
they are if they are independent
entrepreneurs (Schumpeter, 1934).
• Agency theory provides a framework for
understanding why this is the case.
• The incentive for individuals with entrepreneurial
ability to act entrepreneurially is greater when
they form their own organizations than when
they work for professionally managed ones.
• This means that when individuals with the ability
to be entrepreneurs leave large organizations to
become principals of their own firms, the
economy has more people in it that are in a
position to create new combinations that add
surplus value.
• Aggregated across the economy this situation
leads to real economic growth.
• Schumpeter argued that new combinations do
not usually come from old firms but from new
firms producing beside them.
• Entrepreneurs and managers require different
incentives, and that the provision of appropriate
incentives through the opportunity to found firms
has enhanced the growth of real income in the
United States since the end of WWII in 1946.
Two Views of the Role of Entrepreneur
1. Disequilibrator (DQ)
Schumpeter: Entrepreneur
as force in “creative
destruction of an equilibrium”
Entrepreneurial
“New Combinations”
Equilibrium
State
2. Equilibrator (EQ)
Austrian School”
Entrepreneur as “discover” of
disequilibrium (niches not served)
Entrepreneurial
Discovery (of niches)
Disequilibrium
State
DQ EQ
Some empirical data
GLOBAL ENTREPRENEURSHIP MONITOR
Countries Involved: 1999, 2000, 2001, & 2002
[34 national teams in 2002]
1999 Teams [10]
• Canada
• Denmark
• Finland
• France
• Germany
• Italy
• Israel
• Japan
• United Kingdom
• United States
2000 Teams [11]
• Argentina
• Australia
• Belgium
• Brazil
• India
• Ireland
• Korea
• Norway
• Singapore
• Spain
• Sweden
• UK: Scotland
• UK: Wales
2001 Teams [8]
• Hungary
• Mexico
• Netherlands
• New Zealand
• Poland
• Portugal*
• Russia
• South Africa
*Portugal was not
involved in 2002.
2002 Teams [9]
• Chile
• China
• Chinese Taipei
(Taiwan)
• Croatia
• Hong Kong
(SAR, China)
• Iceland
• Slovenia
• Switzerland
• Thailand
GEM Program Objectives
• Are there national differences in
entrepreneurial activity?
• Is entrepreneurial activity related to
national economic growth?
• Why are some countries more
entrepreneurial than others?
• What can be done to enhance
entrepreneurial activity?
What is entrepreneurship?
Who or what is entrepreneurial?
• Person
• Business
• Industry
• Entire society
What makes “it” entrepreneurial?
• Special trait
• New and innovative ideas, products, services
• High growth activity
• Exploitation of opportunity, people
• Creation of new markets, new economic sectors
Social,
Cultural,
Political
Context
General National
Framework
Conditions
•Openness (External Trade)
•Government (Extent,Role)
•Financial Markets (Efficiency)
•Technology, R&D (Level, Intensity)
•Infrastructure (Physical)
•Management (Skills)
•Labor Markets (Flexible)
•Institutions (Unbiased, Rule of Law)
Entrepreneurial
Framework
Conditions
•Financial
•Government Policies
•Government Programs
•Education & Training
•R&D Transfer
•Commercial, Legal Infrastructure
•Internal Market Openness
•Access to Physical Infrastructure
•Cultural, Social Norms
Entrepreneurial
Opportunities
Entrepreneurial
Capacity
- Skills
- Motivation
National
Economic
Growth
(GDP,Jobs)
Business
Churning
Micro, Small, and
Medium Firms
(Secondary Economy)
GEM
CONCEPTUAL
MODEL Major
Established Firms
(Primary Economy)
Opportunity vs. Necessity
Are you involved
–To take advantage of a business
opportunity or
–Because you have no better choices for
work?
Willing volunteers or draftees?
Necessity Entrepreneurship as % of Total : GEM 2002
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
F
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Market Replication vs. Market Expansion
• Market Replication
– Customers know product or service well
– Lots of competition
– Using established technology or procedures
• Market Expansion, Creation
– Customers unfamiliar with product or service
– No competition
– New technology or procedures
Market Impact by Firm Life Course Stage
0
10
20
30
40
50
60
70
80
90
100
Start-ups New Firms Established Firms
P
e
r
c
e
n
t
o
f
B
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i
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e
s
s
E
n
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s
Market Replication Some Market Expansion
TEA Entities - Replication versus Market Expansion by Global Type
0
2
4
6
8
10
12
14
16
Market Replication Some market Expansion
#
/
1
0
0
A
d
u
l
t
s
1
8
-
6
4
Y
e
a
r
s
O
l
d
Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
TEA Indices and National Economic Growth
[GEM 2000,2001,2002 Pooled Data; * = statistical significance]
Concurren
t
One-year
lag
Two-year
lag
TEA
Overall
0.19 0.22* 0.42**
TEA
Opportunit
y
0.20 0.22 0.26
TEA
Necessity
0.23 0.35** 0.49**
TEA Overall and National Economic Growth: 2 Yr Lag
R = 0.41 (0.01)
0.000
5.000
10.000
15.000
20.000
25.000
-2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00
% Growth in GDP 2 yrs later
#
/
1
0
0
1
8
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6
4
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p
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n
e
u
r
s
h
i
p
TEA Opportunity and National Economic Growth: 2 Yr Lag
R = 0.27 (0.17)
0.000
2.000
4.000
6.000
8.000
10.000
12.000
14.000
16.000
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00
% Growth in GDP 2 Yrs Later
#
/
1
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p
TEA Necessity and National Economic Growth: 2 Yr Lag
R = 0.47 (0.01)
0.000
1.000
2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00
% Growth in GDP 2 Yrs Later
#
/
1
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Entrepreneurial Activity [TEA] by Gender by Global Type
0
2
4
6
8
10
12
14
16
18
Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
#
/
1
0
0
A
d
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1
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4
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d
TEA02 - Men TEA02 - Women
Education, Relative HH Income, Labor Force Participation and
Entrepreneurial Activity: 30 GEM 2002 Countries
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
N
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TEA_Opportunity TEA_Necessity TEA_Other
Personal Responses and Entrepreneurial Acdtivity: 30 GEM
2002 Countries
0.00
5.00
10.00
15.00
20.00
25.00
K
n
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w
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6
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TEA_Opportunity TEA_Necessity TEA_Other
Entrepreneurial Activity by Global Type
0
2
4
6
8
10
12
14
16
TEA Necessity TEA Opportunity TEA Overall
#
/
1
0
0
1
8
-
6
4
Y
e
a
r
s
O
l
d
Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
Barriers to New Business Registration by Global Type
0
10
20
30
40
50
60
70
80
90
Number Registration Procedures Number Days to Complete Cost as % of GDP/Capita
Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
Start-Up Financing: Informal and Venture Capital Support
by Global Type
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
VC Domestic Start-ups/GDP Informal Invest SU/GDP Total All SU Funds/GDP Informal Investor Prev Rate(#/100)
P
e
r
c
e
n
t
Asian Advanced Former Centralized EU Europe + 4 Former British Latin American Asian Developing
Developed Asian
[Chinese Taipei, Hong Kong, Japan, Singapore]
• Opportunity TEA Low
• Necessity TEA Very Low
• Market Expansion TEA Low
• Women low Relative to Men
[32%]
• Small percent adults
– See business opportunities
– Know an entrepreneur
– Think they know how to start
a business
• Low income disparity
• Post-materialism values widely
accepted
• Political System
– Political rights well developed
– Open access to system
– Moderate corruption
– Strong property rights protection
• Low barriers to firm registration
• Low VC, informal financing
• Public sector
– Moderate scope
– Low cost
Eastern European
[Croatia, Hungary, Poland, Russia, Slovenia]
• Opportunity TEA Low
• Necessity TEA Very Low
• Market Expansion TEA Very Low
• Women low Relative to Men [51%]
• Small percent adults
– See business opportunities
– Think they know how to start a
business
• Some know an entrepreneur
• Substantial farm sector
• Very low illiteracy
• Moderate income disparity
• Strong support for materialism values
• Political System
– Political rights undeveloped
– Open access to system
– Very low levels of corruption
– Low property rights protection
• Moderate barriers to firm registration
• Low VC, informal financing
• Public Sector
– Major presence
– Rated as ineffective
European Union + 4
[Belgium, Denmark, Finland, France, Germany, Iceland, Ireland, Israel, Italy,
Netherlands, Norway, Spain, Sweden, Switzerland, UK]
• Opportunity TEA Moderate
• Necessity TEA Very Low
• Market Expansion TEA Moderate
• Women low Relative to Men [47%]
• Many adults
– See business opportunities
– Think they have start-up skill
– Know an entrepreneur
– Have high fear of failure
• Very low illiteracy
• Low income disparity
• High social security costs
• Strong post-materialism values
• Political System
– Political rights well developed
– Open access to system
– Low levels of corruption
– Strong property rights protection
• Moderate firm registration barriers
• Moderate VC, informal financing
• Public Sector
– Massive presence
– Considered effective
– Relatively expensive
Former British Empire (Anglo)
[Australia, Canada, New Zealand, South Africa, United States]
• Opportunity TEA High
• Necessity TEA Low
• Market Expansion TEA High
• Women low Relative to Men [61%]
• Many adults
– See business opportunities
– Think they have start-up skill
– Know an entrepreneur
– Have low fear of failure
• Low illiteracy
– Very high post-secondary emphasis
(CA, US)
• Moderate income disparity
• Low social security costs
• Low support for post-materialism values
• Political System
– Political rights well developed
– Open access to system
– Low levels of corruption
– Strong property rights protection
• Lowest firm registration barriers
• Moderate VC, informal financing
• Public sector
– Moderate scope
– Rated as effective
– Appears to be efficient
Latin America
[Argentina, Brazil, Chile, Mexico]
• Opportunity TEA High
• Necessity TEA High
• Market Expansion TEA High
• Women Approach Equality [68%]
• Many adults
– See business opportunities
– Think they have start-up skill
– Know an entrepreneur
• Low illiteracy
– Less emphasis on secondary and post
secondary education
• Substantial farm sector
• High % unemployed < 25 yrs old
• Highest income disparity
• Moderate social security costs
• Political System
– Some political rights present
– Reduced access to system
– High levels of corruption
– Weak property rights protection
• Highest firm registration barriers
• Moderate VC, informal financing
• Public sector
– Moderate scope
– Considered ineffective
Developing Asian
[China, India, Korea (South), Thailand]
• Opportunity TEA High
• Necessity TEA High
• Market Expansion TEA High
• Women Approach Equality [74%]
• Many adults
– See business opportunities
– Think they have start-up skill
– Know an entrepreneur
• Low illiteracy
– Less emphasis on secondary and post
secondary education
• Substantial farm sector
• High % unemployed < 25 yrs old
• High income disparity
• Almost no social security costs
• High emphasis on materialism
• Political System
– Some political rights present
– Reduced access to system
– High levels of corruption
– Weak property rights protection
• Highest firm registration barriers
• Moderate VC, informal financing
• Public sector
– Substantial scope
– Low cost
– Rated as ineffective
Policy Considerations
• Enormous amount of human effort devoted to starting new
businesses
• Majority of activity in developing countries
• Critical factor associated with economic growth
– Causal role is unclear
• Policy recommendations need to be tailored to the unique
situation of each country
– Best practices may be country—or country type--specific
Developed Economies
• Strong infrastructure
– Medium to high opportunity entrepreneurship
– Low necessity entrepreneurship
• Major aversions to work career uncertainty
– Reflected in substantial social support systems
• Accept Post-Materialism Value System
– Assumes national economic success is assured!
• Dramatic personal career success is “suspect”
– Are young adults encouraged to pursue low risk occupational options?
Developing Economies
• Incomplete infrastructure
– Medium to high opportunity entrepreneurship
– Medium to high necessity entrepreneurship
• Massive waves of draftees
– Less technically sophisticated entrepreneurship
• Helpful structural improvements
– Expand education, general and entrepreneurial specific
– Systematize recognition of property rights
– Enhance access to institutional finance
– Improve efficiency of government, reduce corruption
• May become strong global competitors
How Many People Are Involved?
• 37 GEM 2002 countries
– 3,882 million people
– 2,374 million in labor force age range (18-64 years old)
– 62% of world population
– 92% of world GDP
• Estimate 286 million active in start-ups
– 205 million in India and China
– 18 million in the US
– 11.6 million EU + 4
– 4.0 million Eastern European 5
• 140 million business entities (2 per start-up)
• Estimate 460 million active in the world
– Compare to 132 million new human births each year
– More that total population of North America (415 million)
What arguments has been put forward
to claim that this “entrepreneurship
thing” is actually useful in a corporate
setting
• The turbulent environment argument
• The organizational lifecycle argument
• The “Blue Ocean” argument (or the fallacy of
Porter’s generic strategies)
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New “skills”
•Adaptability
•Flexibility
•Speed
•Aggressiveness
•Innovativeness
Traits and characteristics that the
entrepreneurial employee posses
A more dynamic industry environment
necessitates more dynamic employees
and organizations
Turbulent env.
The organizational lifecycle
argument:
CE as a revitalization pill
1.
Entrepreneurial
Stage
2.
Collectivity
Stage
3.
Formalization
Stage
4.
Elaboration
Stage
Crisis:
Need to deal
with too much
red tape
Crisis:
Need for
delegation
with control
Crisis:
Need for
leadership
Creativity
Provision of clear direction
Addition of internal systems
Development of teamwork
Crisis:
Need for
revitalization
Decline
Continued
maturity
Streamlining,
small-company
thinking
S
I
Z
E
Large
Small
Sources: Adapted from Robert E. Quinn and Kim Cameron, “Organizational
Life Cycles and Shifting Criteria of Effectiveness: Some Preliminary
Evidence,” Management Science 29 (1983): 33-51; and Larry E. Greiner,
“Evolution and Revolution as Organizations Grow,” Harvard Business
Review 50 (July-August 1972): 37-46.
The “Blue Ocean” argument
• Based on 150 case studies
• Evidence found for the fact
that sustained superior
performance CANNOT be
explained by generic strategy
• Authors argue that we are
better off developing new
value propositions and
creating new market space
than reacting to competition
Red vs. Blue Ocean Strategies
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market Create uncontested market
space
Beat the competition Make the competition
irrelevant
Exploit existing demand Create and capture new
demand
Make the value-cost trade-off Break the value-cost trade off
Align the whole system of a
strategic firm's activities with its
choice of differentiation or low
cost
Align the whole system of a
firm's activities in pursuit of
differentiation and low cost
VALUE INNOVATION
“Blue Ocean” is becoming an umbrella
notion including also the “older” ideas
of “New Game” and “time-based”
competition
SPEED
New
Game
Low
Cost
Diff.
Focus
•Wal-Mart
•Nokia
•Dell
•Zara
•Amazon
•Ryanair
•Swatch
•Nike
•Cirque
du Soleil
•iPod
•Ferrari
•Harley Davidson
•BIC
•Husky
Empirical research supports the idea
that
“entrepreneurial”/”innovative”/”blu
e ocean” companies, outperform
their “traditional” strategy peers:
• Covin & Slevin 1989, 1990 (New Market Development)
• Davis, Morris & Allen 1991 (New Product Development)
• Morris & Sexton 1996 (Entrepreneurial Intensity)
• Shaker 1999 (NMD
• Hornsby 2001 (EI)
• Goosen 2002 (NMD, NPD)
• Hindle 2004 (EI)
• Yiu 2008 (NPD)
• Jaakko Aspara, Joel Hietanen & Petri, 2008 (Blue Ocean)
Conclusion: Interesting, but not an
absolute imperative
• “Entrepreneurial” organizations tends to be
• More aggressive (higher sense of urgency)
• Faster
• More flexible
• More adaptable
• More innovative & creative
• But also
• Less cost efficient
• In function of the key success factors of the
industry, the potential of transforming the
organization towards being more entrepreneurial
varies
Different forms and contexts of
Entrepreneurship
Ikea Case Discussion
• Is this a case of start-up entrepreneurship,
International entrepreneurship, corporate
entrepreneurship or social entrepreneurship.
What are the elements for each?
• What is actually “Entrepreneurial” about the
IKEA start-up history ?
• What is the key to IKEA’s success over time?
77
Start-up Entrepreneurship
78
As similar and different from
independant (start-up e-ship)
79
Some noted similarities between start-up and corporate e-ship
Some noted differencies between start-up and corporate e-ship
Some noted differencies between start-up and corporate e-ship
Source: Sharma / Chrisman (1999)
Independent
Entrepreneurship
Entrepreneurship
Corporate
Entrepreneurship
Corporate
venturing
Innovation
Strategic
Renewal
Internal
corporate venturing
Potential outcomes:
• Integration of new “ventures”
into existing units
• Creation of new organizational
units
External
corporate venturing
Potential outcomes:
• Joint ventures
• Spin off
• Venture capital initiatives
The different forms of entrepreneurship (defined by
outcome)
Potential outcomes:
• Domain Redefinition
• Org. Rejuvenation
• Process Innovation
• Business Model
Redifinition
Organizational “embeddednes” of CE
• R&D Division
• Ad Hoc Venture Teams
• New Venture Groups, Incubators
• Champions and Mainstream
• Through acquisitions
• Through outsourcing
• Mix of the above
Corporate entrepreneurship metrics
Entrepreneurial
Degree
Innovativeness
Risk-Taking
Proactiveness
Frequency
Entrepreneurial
Intensity
The Concept of Entrepreneurial
Intensity
“classroom” metrics
• Size of seed fund
• Funded ideas
• % of sales spend on R&D
• Patent claims filed
• Patents granted
• Cost of marketing x clinical
trial
• NPV for year
• Mkt size in terms of
customers
Degrees of product/service
innovativeness
Process Innovation
Risk Taking: Mapping different type of risks
Linking different type of innovation approaches to risk
Linking different type of innovation approaches to risk
Proactiveness
• Venkatraman:
1. Seeking new opportunities
2. Introducing new products ahead of competititon
3. Strategically eliminating mature or declining
products
Combinations of dimensions
Entrepreneurial Grid Exercise
• Where would you put the following
companies?
– Ryan Air
– MTV
– Sony
– Apple
– …..
Use and Implications
• Where does your company position itself on the
entrepreneurial grid ?
• Where would you like to be?
• Are there indications that Entrepreneurial Frequency is
important in the industry?
• Are there indications that Entrepreneurial Degree is
important in the industry?
• How many entrepreneurial events did your company
record last year? How innovative?
• What could you do the next 3 years to increase the
Entrepreneurial Intensity?
Drivers of Corporate Entrepreneurship
Factors that can influence the entrepreneurial activity in a
company: The Corporate Entrepreneurship Value Chain
Entrepreneuri
al
Individuals
Creativity
Management
Innovation
Process
Management
Organizational Structure
Control Systems
Corporate Culture
Strategy & Leadership
Corporate
Venture
Management
HR Systems
Source: Draebye, Forthcoming
Strategy, Leadership & Culture
Strategy & Leadership
• It’s obviously important that the company has a
strategy for entrepreneurship and innovation
• Strategy is defined as actions and decisions aimed
at obtaining a specific goal. Without clear goal
and objectives a strategy can not be crafted
• Companies can (should) as themselves a number
of guiding questions that can help them define
entrepreneurship & innovation goals (see next
slides)
Towards a strategy for
entrepreneurship
Towards a strategy for Innovation
Innovation Portfolio Goals
• Portfolio goals is an alternative to the more
undifferentiated “project” approach
• With a portfolio approach, projects are
classified to manage the innovation pipeline in
terms of
• Risk/degree of innovativeness
• Development stage/Lead Time/Project Time
• Industries (Business Units)
• Investment/Costs
• Expected Returns
Innovation Portfolio (Development
Projects)
Innovation Portfolio – Risk Profiles 1
Innovation Portfolio – Risk Profiles 2
Setting goals and objectives: Example
Best Innovation Practises -1
• CEO Support
• Giving Priority to Innovation
• Change Management Skills
• Innovation and creativity in mission statement
• Openness to outside ideas
• Formal programs for idea generation and problem solving
• Cross functional communication
• Encouraging employees to talk to customers
• R&D budgets and focus on product development
• Having an innovation budget
• Providing rewards for individual creativity and innovation
• Productive meetings
Some other findings (not best
practises). Survey of 189 large US
active product innovators
• Average project development time: 2.95 years
• Only 56% of companies adopted a portfolio / goal approach
• Tracking of financial performance of development projects
in place in 76% of companies
• Average idea-to-development project ratio is 7:1
• Average yearly new product launch for sample was 37.5
(median 12). Number expected to increase to 45 (20)
• 30% of revenues in sample stemmed from products
launched in last 5 years
• 56% of projects met financial succes-criteria
Source: Page: “Assesing NPD practises and performance”
Journal of Product Innovation Management
In addition to hard objectives an
entrepreneurship and innovation
friendly environment also rely on
culture
Levels of culture
Traits of E-Culture
Individualism vs Collectivism
• Good or bad for e-ship
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Balance is needed
Other important element:
Failure tolerance
Vs.
Creativity management
What do you think?
• What is creativity really?
• Who are creative, who are not?
Creativity in a company setting
One perspective on creativity (Brabandere)
• Creativity is seeing reality through a different
“lense”
• It’s not thinking “outside the box”, it’s creating
new boxes to think in
• We all think in “standard” boxes and try to fit
reality into these boxes
• Creative thinkers “invent” new lenses
Conclusion
• The mind “wants” us to interpret reality in
pre-determined ways.
• Creative thinking is about getting away this
predetermined way of thinking
Improving the Creative Process
• Preparation
– Try to understand the “real question” or be sure that you really
understand the problem
– Reinterpret the problem
– Break assumptions
• Frustration
– Don’t make it a problem (“yes and” rule)
• Incubation
– Remove creative blocks
– Use formal creative techniques (Brainstorming, Mind-Mapping…)
• Illumination
• Elaboration
Creative Blocks
The Most Common Idea Stoppers
1. “Naah.”
2. “Can’t” (said with a shake of the head and an air of finality)
3. “That’s the dumbest thing I’ve ever heard.”
4. “Yeah, but if you did that . . .” (poses an extreme or unlikely disaster
case)
5. “We already tried that – years ago.”
6. “We’ve done all right so far; why do we need that?”
7. “I don’t see anything wrong with the way we’re doing it now.”
8. “That doesn’t sound too practical.”
The Most Common Idea Stoppers
9. “We’ve never done anything like that
before.”
10. “Let’s get back to reality.”
11. “We’ve got deadlines to meet – we don’t
have time to consider that.”
12. It’s not in the budget.”
13. “Are you kidding?”
14. “Let’s not go off on a tangent.”
15. Where do you get these weird ideas?”
Diversity as a tool
• If you wish to improve creativity, it helps to
look for different or unorthodox relationships
among the elements and people around you
• Use different types of “intelligence”
– Right brain, Left Brain
– Hermann Brain
– Different type of people in the team
Processes Associated with the
Two Brain Hemispheres
Left Hemisphere
• Verbal
• Analytical
• Abstract
• Rational
• Logical
• Linear
Right Hemisphere
• Nonverbal
• Synthesizing
• Seeing Analogies
• Nonrational
• Spatial
• Intuitive
• Imaginative
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B
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Different roles
Source: Strategos
Innovation Lab
Framework for forcing Ideation
• Client need perspective
– Unmet
– Unsolved problems
– Unarticulated
• Client experience perspective
– Tool: Describe-Value-Appreciate
(adopt)
• IKEA
• Benetton
• Swatch
• Amazon
• Challenging Industry orthodoxies
– Tool: Identify – Appreciate
• Trends
– Tool: Identify - Appreciate
• |Core competencies
Source: Strategos Innovation Lab
Agenda day 3
• Mid-way pop quiz on chapters 1-7 + 14 and cases
– NOT, but I would like us to do a half-way recap of what we
have established so far
• Strategy, Leadership, Culture Lecture – Follow up
questions & comments
• Creative processes : Strategos Innovation Lab add-on
• Theme of the day: How HRM and OD can affect the
entrepreneurship and innovation climate of an
organizations
– Brain-cell warm-up break-out session
– 2 lectures (theory, research findings and examples)
– Oticon case study discussion
• Whirlpool Guest Speakers
Factors that can influence the entrepreneurial activity in a
company: The Corporate Entrepreneurship Value Chain
Entrepreneuri
al
Individuals
Creativity
Management
Innovation
Process
Management
Organizational Structure
Control Systems
Corporate Culture
Strategy & Leadership
Corporate
Venture
Management
HR Systems
Source: Draebye, Forthcoming
Human Resource Management
Examples of HR activities
Classification (grouping of activities)
Small Break-Out session (30 min).
Plenary debriefing on point 2
• For each of the 5 groups of HR activities:
1. Share your company’s practises and reflect on
their relation with creating and entrepreneurship
“friendly” work-environment. Be ready to share
“friendly” and “unfriendly” practises (we’ll leave
“neutral” alone)
2. If the purpose was to “increase friendliness”, do
you have any ideas / suggestions on practises
that could be implemented?
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Motivating and encouraging Entrepreneurial Behavior
Obstacles
• Effort
1. Employee does not understand what e-ship means
2. Believe it’s not possible
3. Percieve he/she is not capable
• Performance evaluation
4. No appraisal system
5. Performance criteria unclear
6. No innovativeness in criteria
7. More emphasis on non entrepreneurial activities
8. Arbitrary evaluations
9. Good evaluations obtainable without e-ship
• Reward
10. Reward independant from e-ship (get bonus anyway)
11. Other ways to get reward
12. Rewards too small
13. Rewards not relevant to employee
14. Unfair rewards
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Exercise: What’s Hot and was is Not?
• Pick your top 3 hotties from the previous table
• Pick your top 3 notties from the previous table
What the Gurus Say:
9 general principles for e-ship friendly
HR
Not just output -1
• Pearce (1997) asked 1500+ employees evaluate their bosses on 11
variables that had been identified as characteristic for the
“entrepreneurial manager”:
Not just output -2
• 6 months after the evaluation, Pearce surveyed job satisfaction and found that high levels of job
satisfaction was found in 62% of subordinates working with entrepreneurial managers – 3 times
higher the level found in subordinates working with non-entrepreneurial managers. Levels of high
levels dissatisfaction was reversely three times higher in this group (69%)
Agenda day 4
• Whirlpool follow-up
– Some more detail on their (old) metrics and stage-gate
model
– Presentation of Strategos’ Innovation Lab approach
• Oticon “theory”: Organizational Systems and Structure
• From general context conditions (generic drivers of e-
ship) to specific management tools and choices
– Stage-gates, planning tools and organization of innovation
projects in Lego
• Amplifon Guest Speaker
• Stage-gates, planning tools and organization of innovation projects in IBM
Whirlpool Innovation performance indicators
• 1. Customer loyalty index
• 2. Revenues generated by new, innovative products
• 3. New products gross margins and ROI
1
6
5
The Innovation Process
Structured Brainstorming to Generate
Ideas
1
6
6
Action Lab
Domain Expansion
• Benefit Exploration
• Migration Path
• Dreamspace
• Expanding
Opportunities
• Expanding the
Business Model
Opportunity
Development
• Business Plan
Skeleton
• Opportunity Planning
Framework
• Economic Engine
• Opportunity Sizing
100 Day Plans
• Validating Assumptions
• Design of Experiments
Discovery Realization Synthesis
The tools are just tools – their real power comes from
the dialogue and the ideas they stimulate.
Experiment Divergent Convergent
Divergent Convergent
Customer Experience
Discontinuities
Orthodoxies
Economic Engine
Core Competencies
Research
Looking at
the world
through
different
lenses
Innovation Lab
Idea
Creation &
Domaining
I-Pipe measurements
1
6
7
Business
concept
?# Ideas
?Qualitative
measure
?Ideas will be
measured in
2008, not
goaled
Idea
Screen
Tollgate
Ideas
Metrics:
Split the
measure
ment
C2C
Process:
?12-month average
of projected steady
state revenue
?Portfolio view
Conversion
Concept
Evaluation
Tollgate
Business
Evaluation
Tollgate
Concept
Selection
Milestone
Concept Execution
Project
s
Products
?I-revenue
?EOP lift
?Portfolio
View
In order to monitor the health of the Innovation pipeline, a new indicator was added:
„potential revenues of products under development?.
Screening for Innovation – the I-Box Tool
1
6
8
0
3
3
10
10
6.5
6.5 S
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Customer Loyalty Relevance
Protect
Growth
Innovation
Growth
Growth
5 4 3 2 0 1
Offering Delivers
Benefits for the Main
Brand Attribute (star)
Offering Delivers
Benefits for the
Supporting
Brand Attributes
(circles)
Offering Delivers
Benefits for Points of
Parity (squares)
x I. Compelling Solution Aligned to our
Brands (5 pts)
5 4 3 2 0 1
Disruptive or Drastic Advance
(no competitive comparison
or step change above
competition)
Significant Advance
(clearly above or
generally outperforms
competition)
Nominal Advance
(generally meets
competition or
competitive offering not
met)
x II. Unique Customer Value (5 pts)
4 3 2 0 1
Dominant,
defensible
long-term
protection
Strong or Good
medium-term
protection
Defensive or Weak
short-term
protection
y III. Competitive Advantage /
Sustainable Migration Path (4
pts)
y IV. Differentiated Shareholder
Value (6 pts)
Steady-state annual inno net sales:
Regional brand / category net sales :
% of total branded product group
sales:
Margin %:
Regional brand / category margin %:
Tollgate financial EVA:
1
6
9
Innovation Product project launches
0
5
10
15
20
25
2003 2004 2005 2006 2007 2008
1
7
0
0
100
200
300
400
500
600
700
1 2 3 4 5
WER innovation revenues
(M€ and % of Net Sales)
2004 2005 2006
2007 2008
3%
6%
12%
18%
21%
Framework for forcing Ideation
• Client need perspective
– Unmet
– Unsolved problems
– Unarticulated
• Client experience perspective
– Tool: Describe-Value-Appreciate
(adopt)
• IKEA
• Benetton
• Swatch
• Amazon
• Challenging Industry orthodoxies
– Tool: Identify – Appreciate
• Trends
– Tool: Identify - Appreciate
• |Core competencies
Source: Strategos Innovation Lab
Basic concepts and theories linking
structure and control-systems to CE
(Oticon theory)
In addition to “classical” HR Functions,
also control systems can affect the
degree to which employees engage in
entrepreneurial events
• Elements to consider
• What do we control
• Input
• Output
• Process
• Behavior
Some examples of Control Systems
Some consequences of excessive
control
• Trust Problem (“Don’t they trust me”, Do they
think I’m Stupid”)
• Slowness Problem (Excessive control
procedures will slow down responsiveness)
• Go-after-the-man-not-the-ball Problem
(control becomes a mean in itself)
Towards more e-ship friendly control
systems
What the Gurus Say
(Stevenson/Jarillo):
Entrepreneurial Philosophy of control
The Give-up to Gain Control Paradox
• Some scholars and managers believes that you
have to give-up control to gain control. Does
that make sense?
Linking degree of control to degree of needed e-ship
What the Gurus Say (Gadiesh/Gilbert):
Organizational Slack as a mean to free
up initiative
• Some free time (15% bootleg rule in 3M,
Google 20% personal projects)
• Pool of non-allocated resources (venture fund)
Designing appropriate organizational
structures
What characterizes different
organizational structures?
• Levels
• Span of control
• Degree of centralization
• Degree of formalization
• Degree of specialization
• Degree of control
• Degree of flexibility
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Summary
187
Planning/managing entrepreneurial
ventures
(fromcontext conditions to
management tools)
Factors that can influence the entrepreneurial activity in a
company: The Corporate Entrepreneurship Value Chain
Entrepreneuri
al
Individuals
Creativity
Management
Innovation
Process
Management
Organizational Structure
Control Systems
Corporate Culture
Strategy & Leadership
Corporate
Venture
Management
HR Systems
Source: Draebye, Forthcoming
Lego
197
Break-out session (30 Min)
• On page 4 of the case it is stated “ The results were
impressive. The revamped process, coupled with the
separation of revolutionary new play experiences
(now assigned to the Concept Lab), shortened the
development time for new product variants from 36 to
12 months. And Hjuler saw the new process also
greatly boosted the percentage of ideas that made it
to the market and satisfaction of designers”
WHY IS THAT? WHAT ARE THE ELEMENTS OF THE “NEW”
INNOVATION MANAGEMENT SYSTEM; AND WHY ARE
THEY IMPORTANT. (SEE ALSO HANDOUTS)
198
Why does it work (better)
1. Go-To-Market Project Portfolio forces “market”
thinking and allows for better resource planning and
stage-gate screening
2. Innovators (designers) are now assigned to product
groups and is co-measured on P/L (create
interdependencies)
3. Breakthrough project and subprojects (Redefine) are
managed by different people (concept lab) than
incremental changes (Adjust) that are managed in the
product groups.
4. Extensive use / integration / leverage on outside
inputs (Steve Hassenplug, communities like Lego
factory and ad-hoc events)
199
IBM Emerging Business Opportunities
200
Agenda Day
• Close IBM EBO Discussion
• 2 slides on stage -gates and project lifecycles +
Corporate Venture Plan Structure
• Business Model Innovation
– I-mode discussion
– Lecture on BMs
• Continuum session (11.30-13.30, they need 2
hours so let’s be in class on time)
• Afternoon
– 30 minutes of individual “meditation” time on lessons
learned and action-implication
– Q&A, Help with assignment structuring, free chatting
201
EBO at IBM Discussion Questions
1. Why do large companies like IBM find it so difficult to create new
businesses? What are the primary barriers to success
2. What is your evaluation of the “horizons of growth” model? What are the
distinguishing features of emerging, H3 businesses
3. How did the EBO management system evolve over time? What was
accomplished during
• The Thompson era
• The Corporate Strategy era
4. What are the key elements of the current EBO management system?
What is your evaluation of the system
5. How should Harreld
• Deal with those businesses now reaching H2 status
• Increase the number of EBOs?
Evaluation
• Diagnostically: Super. It nails the problem
• Structurally: Simple, Well aligned. Ex H3: Encourages
experimentation and creativity while providing oversight and
strategic advice. EBO leader ARE pushed to meet milestones.
Metrics are aligned with lifecycle and controlled. Resources are
secured..
• Separation vs Integration: separation bias with some integration
elements (division head, in principle, are responsible for staffing
and sourcing H3 projects, though lead by Corporate Strategy. If
“undernurtured” fingers are slapped – so separation
• H3 bias. Focus is on developing H3. Not so much on the specific
requirements of H2 projects.
• No transistion system. 2 EBO has +1bn in sales –
• Not scalable (Corp strategy is exhausted with 7 EBOs)
2 different levels of venture
management and planning
1. Project level: Guidelines and formats for
• Concept plans (what is the idea, who is the customer, what problem
is solved, how big and growing is the target market, wherein lies the
competitive advantage)
• Business case (revenue forecast, capex forecast, opex forecast)
• Corporate venture plans (see next slide)
2. Corporate level: Procedures, Rules and
structures for
• Stages, procedures and requirements for project approval and
financing
• Venture team composition
• Approval committees
Corporate Venture Plan (BP)
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Stage-Gates and Project Development
Cycles
Managing the process: Using stages
and gates
Development Project Lifecycle
Corporate Strategy:
Formulate Innovation
portfolio goals and
targets
Generation of Ideas
and identification
of Opportunities
incentive &
Reward Systems
that encourage
and motivate
entrepreneurial
behavior
Structure and
culture that
support
Information
sharing &
Communication
Organizational
Slack and
openness to
outside ideas
Failure tolerance
Creative /
Entrepreneurial
Individuals
(processes)
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Project Incubation
&
Management
Stage gate
approval
systems
Innovation
portfolio
monitoring
Incubation
Structures
&
Systems
Performance, Monitoring and
management systems
Sustainable Entrepreneurial
Performance
Strategic Renewal: Special focus on
Business Model Innovation
i-mode
I-mode discussion
• What is a Business Model?
• How would you describe I-modes BM?
• Is it innovative ? (“Value innovation at NTT
DoCoMo) ?
• Is I-modes “Mobile Internet” BM innovative?
Business Models
The operator-do-it-all model
Ex: Scriptim
Content
aggregator
Network service
provider
Content
provider
Pays for content
Consumer
Pays for access to
content
Operator
domain
Revenue flow
Business Models
The operator-portal model
Ex: DoCoMo
Content
aggregator
Network service
provider
Pays for access to
users
Content
provider
Pays for channel
Pays for
channel
Pays for payment
services
Consumer
Pays for content
Pays for access to
content
Operator
domain - may
act as portal
Financial services
provider
Pays for
channel
as content
provider
Revenue flow
Master CP
i-mode BM
Chesbrough’s Definition
Source: Chesborough, 2006
Example of Business Model
Source: Chesborough, 2006
Ryan Air Business Model -1
Source: Chesborough, 2006
Ryan Air Business Model -2
Source: Chesborough, 2006
Changing Business Models -1
Cam ltd
Vs.
AdShell
Changing Business Models - 2
Classical (generic)
Business Model
VS.
Segmented
Business Model
Are some business models better than
others?
• Chesbrough: YES – There is an absolute
hierarchy
Chesbroughs Business Model
Hierarchy and Typology
• Type 1: Undifferentiated business model
• Type 2: Some differentiation in business model
• Type 3: Company develops a segmented business model
• Type 4: Company has an externally aware business model
• Type 5: Company integrates its innovation process with its business model
• Type 6: Company’s business model is build around platform leadership
For Chesbrough the degree of openness is what makes
a BM better than another
The Economic Logic behind the
argument
1. Cost of R&D is Sky-Rocketing
2. Shortening lifecycle of new products
The argument is in line with what
several scholars has concluded
Eco System / Platform Models
Examples
A known example discussion (pre-
itunes)
1. What are the business models adopted by
Microsoft, Apple and OSI in developing and
marketing windows, apple os and linux
respectively
2. What are the pro’s and cons of the 3
different models
Summary
Apple OS
(SAP, Unix..)
Linux Windows
Ownership of IP Proprietary Open Mixed (proprietary
kernel, but API and
SDKs available to 3°
party developers)
Size, dynamism and
costs of ecosystem
Limited and costly Large and free Large and costly
Pro Control, All value can
be appropriated by
company
Dynamic community,
quality of OS
WTA platform, good
nurturing of
ecosystem, good
possibility of value
appropriation
Cons Cost, time of
development
Richness of
complementary
products and services
Value appropriation
Sustainability of model
if going towards more
commercial models
Quality
Desktop OS
“INTEL” CPU
AT BUS
PC OEM
Apps/ISVs
PC
Distribution
ISP Search
Applets
Browser Middleware
End User
Value
Processing Value
Connectivity Value
IBM/Clone
Open architecture
Other Examples
• Barilla ?
• Academia Barilla?
• Oticon?
• Lego?
• IBM ?
• I-mode ?
• ............ Mention a few
Steps in Business Model Innovation
(Value-Net approach )
1. Map existing Value-Net
2. Analyse net and identify key nodes
3. Focus on nodes that are key to the system
4. Engage in strategies to grow network
doc_931192143.pdf