Analysing Opportunities and Developing a Strategy

8/7/2019 Analysing Opportunities and Developing a Strategy

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2007 John Wiley & Sons Australia, Ltd


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Chapter 16

Corporate entrepreneurship


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Chapter outline

Dimensions of and rationale for corporate

entrepreneurship

The new venture development process The key steps in developing

entrepreneurial spirit


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Learning objectives

Define the concept of corporate

entrepreneurship and its different forms

Explain the importance of corporateentrepreneurship for established

businesses


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Learning objectives

Discuss the process of new venture

development

Identify the key steps in developingentrepreneurial spirit in organisations


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Introduction

Most established companies find it hard

to maintain the initial entrepreneurial spirit

that helped them to make it throughduring the start-up stage.

Corporations have traditionally faced a lot

of difficulties in identifying opportunities

and turning them into new product lines.


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Introduction

Through corporate entrepreneurship,

established organisations attempt to

exploit their internal resources, butprovide an environment more conducive

to innovation.


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Within the realm of existing organisations,

entrepreneurship encompasses three

dimensions:

corporate venturing

corporate entrepreneurial efforts that

lead to the creation of new business

ventures.

Dimensions of and rationale for

corporate entrepreneurship


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Strategic renewal

the new combinations of resources that

result in significant changes to anorganisations strategy or structure.

Innovation

new combinations of resources thatusually lead to new products and

services.

Dimensions of and rationale for

corporate entrepreneurship


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Identifying and pursuing discontinuous

opportunities

Within the terrain of new businessdevelopment, and especially new

business incubation, discontinuous

opportunities generate disproportionate

wealth.

Rationale for corporate

entrepreneurship


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entrepreneurship

Discontinuous opportunities consist of

innovations that move beyond existing

business models to create new productsand enter new markets.


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The new business development

arena


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entrepreneurship

Reasons for corporate entrepreneurship

To grow and diversify the business

To satisfy and retain bright and motivated

staff

To exploit under-utilised resources

in new ways To divest non-core activities


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The new venture

development process

Successful companies have developed a

disciplined, milestone-focused approach

to screening and funding new ventures.


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The new venture

development process

This process is comprised of five main

stages:

idea generation

concept development

business plan development

incubation and commercialisation

value capture


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Source: G. Neilson,

J. Albrinck, J. Hornery

et al., E-Business and

Beyond: Organizing for

Success in New

Ventures, Booz Allen &

Hamilton, New York,

2001, p. 10.

New venture development

process


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Stage 1: Idea generation

At this stage, quantity, rather than quality

matters. Innovative corporations are

those which systematically generateideas and do not let any idea slip away.


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Stage 1: Idea generation

Companies can take the following steps

to unleash the creative potential present

in most people: Allow unofficial activity

Encourage serendipity

Create diverse stimuli


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Stage 2:

Concept development

During this phase, a promising

one-sentence idea is transformed into atwo-page outline of the opportunity

covering such topics as:


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Stage 2:

Concept development

concept description

target market

value for the customer

competition

potential business models

opportunity size


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Stage 3:

Business plan development

The new business is designed and

simulated at this stage, which can last

from 3 to 4 months.

Effective business plans reflect both a

strong grasp of technology and a firm

understanding of the business and market

the new venture is tackling.


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Stage 3:

Business plan development

Moreover, they are reality-tested with

key constituencies, such as customers

and investors.


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Stage 4: Incubation

and commercialisation

During the incubation phase, it is critical

that the technological feasibility of the

venture is fully tested (e.g. prototypes). Resources must also be acquired or

borrowed to establish the validity of the

business model and test its value

proposition.


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Stage 4: Incubation

and commercialisation

Commercialisation marks the point at

which a business plan graduates from

theory into practice.


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Stage 5: Value capture

Contrary to the traditional marketing

approach of product innovation, which

merely focuses on increasing sales ormarket shares, the aim of corporate

entrepreneurship is to create value.


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The following mechanisms can be used:

initial public offerings (IPO)

selling to external bidder

establishing joint ventures


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creating separate subsidiaries or

divisions

integrating new ventures into theparent company


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Four steps for fostering

entrepreneurship


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Step 1: Develop a

vision and a strategy

Members of senior-management change

teams must articulate in the fewest words

possible what they plan to do. Leaders of highly innovative


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Step 1: Develop a

vision and a strategy

Executives, through their words and

actions, can help people to overcome

their fear of failure and, in the process,create a culture of intelligent risk taking

that leads to sustained innovation.


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Step 2: Create a

culture of innovation

Once the vision and the strategy have

been established, companies can start to

work on their corporate culture.


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Step 2: Create a

culture of innovation

An entrepreneurial culture is essentially

one:

which allows divergent thinking which develops supervisory

encouragement, and

which tolerates failure


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Step 3: Develop

organisational support

Three main structures are available to

capture the creativity of employees and

to help in the incubation of newopportunities:

traditional R&D departments

new venture divisions

venture capital funds


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Step 3: Develop

organisational support

Choosing between these structures

consists fundamentally in balancing

partitioning and integration of newactivities.


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Step 4: Reward

according to results

Traditional reward systems are rarely

strong motivators for corporate

entrepreneurs. Corporations need to:

compensate creatively

use a mix of financial and

non-financial rewards

tailor rewards to employees


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Communication

Communication is essential for top

management to share its vision, to

develop an entrepreneurial culture,and to stimulate creativity and

innovation throughout the corporate

structure.


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Communication

Communication should be first and

foremost about facts.

It should target frontline supervisors andother key role-players in the corporation.

An open communication is crucial to

nurture ideas and capabilities.


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Summary

Corporate entrepreneurship can

be defined as the process whereby an

individual or group of individuals, inassociation with an existing organisation,

create a new organisation or instigate

renewal or innovation within that

organisation.


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Summary

Through corporate entrepreneurship,

established organisations attempt to

exploit their internal resources in orderto pursue opportunities which will help to

grow and diversify their business.


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Summary

Other reasons to develop corporate

entrepreneurship encompass:

retaining and motivating the brighteststaff

exploiting under-utilised resources, and

divesting non-core activities.


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Summary

Successful companies have developed a

disciplined, milestone-focused approach

to screening and funding new ventures

that usually encompasses five mainstages:

idea generation

concept development

business plan development

incubation and commercialisation, and

value capture


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Summary

Developing an entrepreneurial spirit

inside an existing organisation requires

four main steps: develop a vision and a strategy

create a culture of innovation

establish appropriate organisational

systems and procedures, and

reward effort accordingly.


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Analysing Opportunities and Developing a Strategy

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