LECTURE NOTES FOR CHAPTER THREE

I.The Entrepreneurial Mind-Set in Organizations

Corporate strategy has shifted to a focus on innovation with an emphasis on entrepreneurial thinking

Entrepreneurship as the major force in American businesshas led to a desire for this type of activity inside enterprises. The infusion of entrepreneurial thinking inside large bureaucratic structures is referred to as corporate entrepreneurship, corporate innovation, orintrapreneurship.

II.Corporate Innovation Philosophy

To establish an entrepreneurial mindset, organizations need to provide the freedom and encouragement required for employees to develop their ideas.Top managers often find it difficult to provide this type of freedom to others in the organization.

Five steps encourage new thinking:

  • Set explicit innovation goals
  • Create a system of feedback and positive reinforcement
  • Emphasize individual responsibility
  • Provide rewards for innovative ideas
  • Do not punish failures

III.Corporate Entrepreneurship and Innovation

The major thrustof corporate innovation is to develop the entrepreneurial spirit within organizationalboundaries, thus allowing an atmosphere of innovation to prosper.

Defining the Concept of Corporate Entrepreneurship and Innovation

Definitions of corporate entrepreneurship have evolved over 30 years. Examples include:

  • Corporate entrepreneurship as centering on reenergizing and enhancing thefirm’s ability to acquire innovative skills and capabilities.
  • Corporate entrepreneurship as formal or informal activities that create newbusinesses in established companies through product and process innovations and market developments.
  • Corporate entrepreneurship as corporate venturing—adding new business to the corporation
  • Internal Corporate Venturing
  • Cooperative Corporate Venturing
  • External Corporate Venturing
  • Corporate entrepreneurship as strategic entrepreneurship—transformation of organizations via large-scale or otherwise highly consequential innovations adopted in the firm’s pursuit of competitive advantage
  • Strategic Renewal
  • Sustained Regeneration
  • Domain Redefinition
  • Organizational Rejuvenation
  • Business Model Reconstruction

The Need for Corporate Entrepreneurship and Innovation

A companymust always be ready and willing to accept innovations or it will quicklybecome obsolete.The modern corporation must develop in-house entrepreneurship or facestagnation, loss of personnel, and decline.

This need for corporate entrepreneurship has arisen in response to a number of pressing problems:

  • rapidgrowth in the number of new and sophisticated competitors
  • a sense of distrust in the traditional methods of corporate management
  • an exodus of some of the best and brightest people from corporations to become small-business entrepreneurs (being an entrepreneur is becoming more of a status symbol; many companies are losing their best people, who are going out on their own;venture capital is becoming more widely available for those who wish to go out on their own, thus making entrepreneurship more attractive)
  • international competition
  • downsizing of major corporations
  • an overall desire to improve efficiency andproductivity.

Obstacles to Corporate Entrepreneurship and Innovation

The obstacles to corporate entrepreneurship are usually due to ineffectivetraditional management techniques.

The adverse effects of traditional management principles applied to new venture development must be considered and corrected.

Table 3.2 (Sources of and Solutions to Obstacles in Corporate Innovation) provides a complete list of thesources and solutions to obstacles to corporate entrepreneurship and innovation.

The following factors exist in large corporations that have exhibited successful innovations:

  • Atmosphere and vision
  • Orientation to the market
  • Small, flat organizations
  • Multiple approaches
  • Interactive learning
  • Skunk Works

IV.Corporate Entrepreneurship Strategy

A corporate entrepreneurship (CE) strategy is manifested through the presence of anentrepreneurial strategic vision, a pro-entrepreneurship organizational architecture, andentrepreneurial processes and behavior exhibited across the organizational hierarchy.
CE strategy is about creating self-renewing organizations through the unleashing andfocusing of entrepreneurial potentialthat exists throughout those organizations.

The five critical steps of a corporate entrepreneurship strategy are:

  • developing the vision
  • encouraging innovation
  • structuring for an entrepreneurial climate
  • preparing individual managers for corporate innovation
  • developing venture teams

Developing the Vision

The first step in planning a strategy of corporate entrepreneurship issharing the vision of innovation that corporate leaders wish to achieve.

The vision must be clearly articulated by the organization’s leaders;however, specific objectives are developed by managers and employees.

Encouraging Innovation

Two distinct types of innovation exist:

  • Radical innovation—This type of innovation takes experimentation and determined vision, which are not necessarily managed.
  • Incremental innovation—This type of innovation refers to the systematic evolution of a product or service into newer markets.

Both types of innovation require vision and support.There needs to be a champion who has the ability to develop and share a vision as well as top management support of the innovative activities.
3M follows a set of innovation rules that encourages employees to foster ideas, which are as follows:

  • Don’t kill a project.
  • Tolerate failure.
  • Keep divisions small.
  • Motivate the champions.
  • Stay close to the customer.
  • Share the wealth.

Structuring the Work Environment

Employee perception of an innovative environment is critical for stressing management’s commitment to innovative projects.Melding individual attitudes,values, and behavioral orientations with the organizational factors of structure and reward is important.

Five factors critical to the internal environmentof an organization seeking to have its managers pursue innovative activity:

MANAGEMENT SUPPORT—the extent to which the management structure itself encourages employees to believe that innovation is, in fact, part of the role set for all organization members

AUTONOMY/WORK DISCRETION—the extent to which workers are able to make decisions about performingtheir own work in the way they believe is most effective

REWARDS/REINFORCEMENT—the extent to which rewards are contingent on performance,providing challenges, increasing responsibilities, and making the ideas of innovativepeople known to others in the organizational hierarchy

TIME AVAILABILITY—the extent to which individuals have time to incubate ideas

ORGANIZATIONAL BOUNDARIES—the extent to which people are encouraged to look at the organization from a broad perspective

Control versus Autonomy

The encouragementof corporate entrepreneurship can and often does result in counterproductive,rogue behavior.

Deliberate design and developmentof organizational systems reflecting the organizational dimensions for an environment conduciveto corporate innovation is critical.

Preparation for Failure

“Learning from failure” is an axiom in the corporate entrepreneurial community.Failure in a project may causegrief; the organization should have social support mechanisms in place to help with coping with failure.

Better coping skills build self-efficacy in corporate entrepreneurs and promote continued corporate entrepreneurial behavior in the future

Preparing Management

Key decision makers must find ways to explainthe purpose of using a corporate innovation process to those from whom entrepreneurialbehaviors are expected.

CE training programs can induce the changes needed in the work atmosphere to develop more entrepreneurial activity.The Corporate Entrepreneurship Assessment Instrument (CEAI) provides an instrument for measuring five key elements of an organization’s entrepreneurial climate:

Developing I-Teams

Innovation teams and the potential they hold for producing innovative results are recognizedas a twenty-first century productivity breakthrough.

An I-Team is composed of two or more people who formally create and share the ownership of a new organization.The unit has a budget plus a leader who has the authority to make decisions within broad guidelines.If the unit proves successful, it is later integrated into the larger organization.

V.Sustaining a Corporate Entrepreneurship Strategy

An organization’s sustained effort in corporate entrepreneurship is contingent upon individual members continuing to undertake innovative activities and upon positiveperceptions of the activity by the organization’s executive management, which willin turn support the further allocation of necessary organizational antecedents.Figure 3.4 (A Model of Sustained Corporate Entrepreneurship) illustrates the importance of perceived implementation/output relationships at the organizational and individual levels for sustaining corporate entrepreneurship.