Corporate Entrepreneurship and Strategic Renewal

The New Entrepreneurial Imperative (Ch. 1)

Turbulent environments and the embattled corporation
External environment
Everything outside the company including different environments
Technological
Economic
Competitive
Labor
Resource
Customer
Legal and regulatory
Global
Internal environment
The internal environment, then, includes the structures, systems, processes and culture that make
up the climate within which people do the work of a company.

! External change forces internal change
The New Path to Sustainable Competitive Advantage
1. There is no simple formula for success in the new environment
i. It is all about experimentation (in contemporary times)
2. Turbulence within the environment also means opportunity

Traditional competitive advantages cannot be reached anymore. An improvement of quality, costs,
customer service and so on will only guarantee the maintenance of competitiveness.
Sustainable Competitive Advantages are created by
Adaptability
Flexibility
Speed
Aggressiveness
Innovativeness

Dont let change happen, make change happen
! Leading to the term Entrepreneurship, which unifies the five terms before
What is Entrepreneurship?
The process of creating value by bringing together a unique combination of resources to exploit
an opportunity. (Stevensson and Jarillo-Mossi, 1986)

Creation of Wealth
Creation of Enterprise
Creation of Innovation
Creation of Change
Creation of Employment
Creation of Value
Creation of Growth
What is Corporate Entrepreneurship?
Entrepreneurial behavior inside established mid-sized and large organizations.

Reenergizing and enhancing the firm's ability to acquire innovative skills and capabilities.
(Damanpour, 1991)

The process whereby an individual or a group of individuals, in association with an established
company, creates a new organization or instigates renewal or innovation within the current
organization (Sharma and Chrisman, 1999)
Management Vs. Entrepreneurship
Management is the process of setting objectives and coordinating resources, including people, in
order to attain them. ! Facilitator

Effectiveness Doing the right things.
Efficiency Doing things right.

Entrepreneurs think about what can be (not what is now) ! Visionary


Why Companies Loose their Entrepreneurial Way: The Organizational Life Cycle
Evolutionary Process within a company in five stages (Greiner, 1972)
1. Start-Up and Early Growth
Creativity; fast-paced work environment; commitment;
Crisis: Demand for structure, professional management, budget, controls
2. Growth through Direction
Formalization meaning structures, instances as well as professional leadership
Crisis: Demand for autonomy by lower-level managers and employees
3. Growth through Delegation
Delegating tasks to semiautonomous product divisions/strategic business units
Crisis: Freedom results in chaos and loose of control
4. Growth through Coordination
Centralizing operations; head office staff is developed
Crisis: Bureaucracy; more harm then use of complex coordination
5. Growth through Collaboration
Achieving an entrepreneurial company equipped with innovators; simplification
of structures and hierarchies

The Entrepreneurial Imperative: A Persistent Sense of Urgency
Environments have to be created within which there is a constant sense of urgency
Urgency to challenge assumptions
Urgency to change
Urgency to innovate

The Unique Nature of Corporate Entrepreneurship (Ch. 2)
Ten Myths of Entrepreneurship
1. Entrepreneurs are born and not made
2. Entrepreneurs must be inventors; (more Innovators)
3. There is a standard profile or prototype of the entrepreneur
4. All you need is luck to be an entrepreneur
5. Entrepreneurs are extreme risk-takers (Gamblers)
6. Entrepreneurial people are academic and social misfits
7. All entrepreneurs need is money
8. Ignorance is bliss for entrepreneurs
9. Most entrepreneurial initiatives fail
10. Entrepreneurship is unstructured and chaotic
Entrepreneurial Realities: Understanding the Process
The process of entrepreneurship consists of six stages
1. Identifying the opportunity
2. Defining the business concept
3. Assessing the resource requirements
4. Acquiring the necessary resources
5. Implementing and managing the concept
6. Harvesting the venture
How Corporate Entrepreneurship differs
Confusion about the nature of corporate entrepreneurship exists and the question arises, if it is even
possible within a large company



Important differences between Corporate and Start-up Entrepreneurship

Political Factor
Corporate Entrepreneurship is ruled by politics
A corporate entrepreneur has to negotiate about resources with his or her superiors
Innovation makes people in companies skeptical
Convince resource owner to provide resources
Implications of the Differences
CE desire to create something successful, not to get rich
They are moderate risk-takers
Communication of risks to the key managers is critical
Ownership and autonomy has to be created for the CE
Environment has to be open for ideas, support E
Where to find Entrepreneurship within a Company?
Can come from every part in the company implying the bottom as well as the top
The degree of innovativeness varies across the different E-approaches


General Frameworks for understanding CE
How to integrate CE within a company; which factors have to coincide?
A Domain Framework

A Sustaining Framework


A Strategic Integration Framework


Levels of Entrepreneurship in Organizations: Entrepreneurial
Intensity (Ch. 3)
Every organization is entrepreneurial; the question is how high is the extent of the entrepreneurial
behavior within a company
Dimensions of Entrepreneurship
Innovativeness
Concepts or activities that represent a departure from what is currently available. To want extent are
the actions of the company novel, unique or different.

Product and Service Innovation


Process Innovation


Management of innovation has to be achieved ! Traditional management approaches do not work;
Rules have to be reconsidered and broke ! DILEMMA



Risk-Taking
Everything new contains risks. CE focuses on moderate and planned risks (financial, technical,
market personal).
To spread the risks, a company has to try more often in different areas. Results can be more minor
failure, but accompanied by sustainable long-term success. (Hamel and Prahalad)

Type of Innovat i on
Discontinuous innovation
A breakthrough in innovation; A need that was not addressed before
Dynamically continuous innovation
Dynamic improvement over the existing state-of-the-art solution; Not as interrupting as the
discontinuous innovation
Continuous Innovation
Incremental innovation; Performance enhancements and/or new app. Development
Imitation
Copying of adapting innovations of other firms


2 Types of Ri sks
Sinking the Boat
What happens if the entrepreneur pursues a concept and it does not work out?
Missing the Boat
Risk in not pursuing a course of action that would have proven profitable

Proactiveness
Action orientation; Acting on rather than reacting;
Following Vs. leading competitors
Cooperating with competitors Vs. Fighting them
Favoring the tried and true Vs. emphasizing innovation, growth and development
Being persistent; independently acting as well as selling your innovation
The Combination of the Dimensions: The Concept of Degree
Companies apply different degrees of the three dimensions
! Additive conceptualization (preferred) Vs. multiplicative conceptualization of the degree of
entrepreneurship
Entrepreneurial Intensity: Combining degree and frequency of Entrepreneurship

Applying the Grid at the Level of the Individual Manager
Change adaptors (low degree of E) Vs. Change creators (high degree of E) on the grid
The Forms of Corporate Entrepreneurship (Ch. 4)

Corporate Venturing: Bringing New Businesses to the Corporation
The Concept of Corporate Venturing and its Modes
Int ernal Corporat e Vent uri ng
Businesses are created and owned by corporation; maybe located outside the firm, but also inside;
semi-autonomous entities.
Cooperat i ve Corporat e Vent uri ng
Joint corporate venturing including one or more partner outside the company; located outside the
firm; operate beyond organizational boundaries.
Ext ernal Corporat e Vent uri ng
Entrepreneurial activity accompanied by the creation of new businesses outside the corporation.
Afterwards the corporation invests or acquires these businesses.
What is a Business?

Matrix is too limited. Extension of the 2 dimensions is necessary.

* New to the Firm
Motives for Corporate Venturing
Regardi ng i nt ernal c orporat e vent ures
When the overall motive is leveraging; Tidd and Taurins, 1999
To exploit underutilized resources
To extract further value from existing resources
To apply competitive pressure on internal suppliers
To spread the risk and cost of product development
To divest noncore activities
When the overall motive is learning; Tidd and Taurins, 1999
To learn about the process of venturing
To develop new competencies
To develop managers
Regardi ng i nt ernal and ext ernal c orporat e vent ures
1. Build an innovative capability as the basis for making the overall firm more
entrepreneurial and accepting of change
2. To appropriate greater value from current organizational competencies or to expand
the firm's scope of operations and knowledge into areas of possible strategic importance
3. To generate quick financial returns.
Corporate Venture Capital
Corporate venture capital investments depend on the stock market
Corporat e Vent ure Capi t al Invest ment s; Chesbrough, 2002
Investments are divided into different categories depend on the following criteria
Objectives: Strategic/financial
Degree to which the new business being invested in has operational capabilities that are
linked to those of the investing corporation
Resulting categories:
Driving investments (strategic rationale for investment and tight operational links between
the start-up and the investing company)
o These investments extend the corporation's presence in product-market or
technological arenas regarded as strategic to the corporation.
Enabling investments (strategic rationale for investment and loose operational links
between the start-up and the investing company)
o These investments complement the strategy of the corporation by stimulating
demand for the corporation's current products through the development of the larger
ecosystem within which the corporation or its businesses operate
Emergent investments (financial rationale for investment and tight operational links
between the start-up and the investing company)
o These investments are targeted toward start-ups whose success may be of strategic
relevance to the corporation (i.e., these start-ups have strategic option value to the
corporation) or toward start-ups for whom the corporation's resources or processes
provide needed and critical value within the start-up's overall business model
Passive investments (financial rationale for investment and loose operational links between
the start-up and the investing company)
o These investments are diversification actions in which the corporation operates as a
money manager or investment intermediary for its shareholders
Satisfaction with Corporate Venturing
Low level of managerial satisfaction, because
o Corporate venturing is often not immediately successful for companies; companies
expect success and therefore rather stick to their core competencies
o Companies wanted to achieve financial success, but failed ! Dotcom Bubble 2000s

Strategic Entrepreneurship: Innovating in Pursuit of Competitive Advantage
The Concept of Strategic Entrepreneurship
Organizationally consequential innovations that are adopted in the pursuit of competitive advantage.
Two possi bl e ref erenc e poi nt s
1. How much the firm is transforming relative to where it was before (e.g., transforming its
products, markets, internal processes, etc.)
2. How much the firm is transforming relative to industry conventions or standards (again, in
terms of product offerings, market definitions, internal processes, and so forth)
Forms of Strategic Entrepreneurship

The Business Model as a Vehicle for Corporate Entrepreneurship
Addresses six basic questions
1. How does the firm create value?
2. For whom does the firm create value?
3. What is our source of internal advantage or core competency?
4. How does the firm externally differentiate itself ill the marketplace?
5. What is the firm's model for making money?
6. What is management's growth ambition and over what time period?

A business model based on the decision regarding the six Qs before, can be characterized on three
different levels
Foundation ! Basic decisions (Generic); What is done?
Proprietary ! Unique implementation of basic decisions (Specific); How implemented?
Rules levels ! Execution of the decisions made within the two levels above based on
rules (Operational); Regulatory Purpose
The Open Innovation Revolution
It is a general approach to innovation. The firm acquires, additionally to its own innovative
resources, critical inputs to innovation from outside sources. Furthermore, the firm may choose to
commercialize its innovative ideas through external pathways that operate beyond the bounds of the
firm's current businesses.

Why are c ompani es i nc reasi ngl y c hoosi ng t o pursue an open i nnovat i on model ? Ri gby and Zook
( 2002) of f er f our reasons
1. Importing new ideas is a good way to multiply the building blocks of innovation.
That is, by accessing external inputs to innovation (e.g., others' technology that is available through
licensing) firms can potentially offer more and better innovative outputs (e.g., new products).
2. Exporting ideas is a good way to raise cash and keep talent.
A company's innovative ideas, such as its proprietary technology, can have market value that is
exploitable through its sale to outside customers. Additionally, by selling internally developed but
unexploited innovative ideas to outside parties, firms can avoid discouraging the people who
generated those ideas.
3. Exporting ideas gives companies a way to measure an innovations real value and to ascertain
whether further investment is warranted.
Offers to sell internally developed innovative ideas to external markets can be litmus tests for the
true value of those ideas (which are often undervalued or overvalued when viewed through purely
internal lenses).
4. Exporting and importing ideas help companies clarify what they do best.
Collaborative efforts, the purchase of innovations or inputs to innovations from others, and offers
to sell the firm's innovations or inputs to innovations to others can reveal where a firm's real bases
for competitive advantage lie and, accordingly, how it should define its business.


ENTREPRENEURSHIP IN OTHER CONTEXTS:
NON-PROFIT AND GOVERNMENT ORGANIZA TIONS (Ch. 5)
Applying Entrepreneurial Concepts to the Non-Profit and Public Sectors
Some criteria of profit organizations can be applied, some cannot and some have to be reconsidered.
There is more involvement of stakeholders and the public.






The Entrepreneurial Degree is different in its three dimensions as well as the frequency. The
Entrepreneurial Grid can also be applied to NPOs.


Exploring Entrepreneurship in Non-Profit Organizations
The Unique Nature of NPOs
Creation of public benefit
Three Groups of NPOs
Phi l ant hropi c Organi zat i ons ( Sc hol arshi p f or i nner- c i t y c hi l dren)
Advoc ac y Organi zat i ons ( Organi zat i on t hat support s envi ronment prot ec t i on)
Mut ual Benef i t Organi zat i ons ( Sc hool f or t he deaf )


The Social Entrepreneurship Concept
To become self-sustaining, NPOs must generate resources that can produce valuable outputs that
then activate additional, sustain- able resource flows.

Social entrepreneurship can be defined as "new and novel mixes of opportunities, challenges, ideas,
and resources in pursuit of potentially explosive (nonfinancial) rewards" (Brooks, 2005)
Overcoming Challenges to Social or Non-Profit Entrepreneurship
(ausgelassen)
Exploring Entrepreneurship in Government Organizations
Unique Characteristics of Public Sector Organizations
1. Do not have a profit motive, and instead are guided by social and political objectives;
typically seek to achieve a multiplicity and diversity of objectives; these objectives and
performance towards them are harder to measure
2. Have less exposure to the market and its incentives for cost reductions, operating economies,
and efficient resource allocation; resources tend to be allocated based on equity
considerations and political pressures
3. Receive funds indirectly from an involuntary taxpayer rather than directly from a satisfied
and voluntary customer
4. Have difficulties in identifying the organization's "customer," as there are typically a number
of different publics being served by a given agency, department, or unit
5. Produce services that have consequences for others beyond those immediately involved;
have greater accountability for the indirect consequences of their actions
Entrepreneurship in the Public Sector
Public sector entrepreneurship is the process of creating value for citizens by bringing together
unique combinations of public and/or private resources to exploit social opportunities.
Challenges and realities for Entrepreneurship in the Public Sector



How Public Sector Managers View Entrepreneurship
(ausgelassen)
Toward Entrepreneurial Government
How to transform a government organization into an entrepreneurial organization?

Rei nvent i ng Government ; Osborne and Gaebl er, 1992

1. Competition
2. Citizen Empowerment
3. Focus on Outcomes
4. Mission over Rules and Regulations
5. Customer Orientation
6. Proactiveness
7. Earning over Spending
8. Decentralization
9. Partnership over Adversarial Relationships
10. Other Market Mechanisms











Cul l an and Cushman, 2000





Human Resources and the Entrepreneurial Organization: The
Creative Individual (Ch. 6)
The Creative Individual in a Company
Creativity
The application of a person's mental ability and curiosity to discover something new; put things
together in novel ways; the capacity to develop new ideas, concepts, and processes.
Creativity in seven different arenas; Miller 1999
Idea Creativity-
Material Creativity
Organization Creativity
Relationship Creativity
Event Creativity
Inner Creativity
Spontaneous Creativity
Three components of creativity; Amabile 1998
1. Expertise
2. Motivation ! Driven by extrinsic and intrinsic factors
3. Creative Thinking Skills
! Components can be influenced by the manager, if he or she is supported
The Creative Process
Creativity involves heuristics (incomplete guidelines or rules of thumb) leading to learning or
discovery, rather than stiffened and constrained algorithms.

5 Stages within the Creativity Process (not compulsory a linear, stiffened process)
1. Preparation
Asking creative questions, finding out the problem, gathering information
2. Frustration
(In the worst case the creative process stops here)
Trying to find a track, no solution in sight; confusion, desperation
3. Incubation
Stepping away from the problem and finding new insights away from the problem; non-
intentional achievements, Removing key blocks; more data gathering possible
4. Illumination
Piece of a possible solution appears, aha-moment
5. Elaboration
Changes have to be made to sell the idea to the management team
Interplay between divergence and convergence
Di vergenc e
is breaking from familiar, established ways of seeing and doing. It is concerned with generating lots
of options and truly novel ideas, regardless of their practicality.
Convergenc e
is the achievement of some agreement regarding the merits of a given idea and the value in pursuing
that idea. It is a reality check in terms of the implementation issues.
The Creative Blocks
Routines and rules of daily life become the blocks of creativity
10 Critical Blocks of Creativity; Roger von Oech (1998)

Origins of Blocks
1. Empl oyees wrong perc ept i ons of t hemsel ves
2. Di sc ouragement t hrough c o- workers as wel l as f ear t o l ook st upi d i n f ront of t hem
3. Workpl ac e and i t s c ondi t i ons
Creativity Techniques and Creative Quality
An endless list of creativity techniques regarding the different stages of creativity exists.
Examples

High Quantity of ideas is not valuable, if the quality of them is not high. There do exist three
standards to evaluate the quality of ideas
1. Overt benef i t
To what extent does the idea or concept convey a clear benefit or advantage to a user or customer?
In what ways does it create value, and how much value is being created?
2. Reason t o bel i eve
What supporting evidence are you able to provide, and is a user or customer likely to accept, that the
concept or idea will deliver the same level of benefits that you claim?
3. Dramat i c di f f erenc e
How unique or different is your concept or idea from current or conventional solutions? Is it an
incremental or breakthrough advance? Can it be meaningfully differentiated from existing solutions
on a sustainable basis?
The Entrepreneurial Personality
Psychological makeup of entrepreneurs
Ac hi evement mot i vat ed
Driven by the challenge
St rong l oc us of c ont rol
Control their lives; change agents of their environment
Cal c ul at ed ri sk- t akers
Takes reasonable chances of failure; calculate the likelihood of key risk factors + manage the key risk
factors through planning and managerial decision making
Tol eranc e of ambi gui t y
The path of entrepreneurship is unclear, can change after time
Need f or i ndependenc e
Prefer a degree of autonomy while acting;
Tenac i ous and preserve

! Result from individual experiences in work, life, educational, family etc.
! There do exist different types of entrepreneurs implying different characteristics of
psychological makeup
Motivating entrepreneurial behavior
Model of Entrepreneurial Motivation; Naffziger, Hornsby, and Kuratko (1994)

Are Corporate Entrepreneurs Different?
Entrepreneurial action can be thought of in terms of conceptualization (dreaming) and then
implementation (doing).

Categories of Entrepreneurs
A corporate entrepreneur is closer to a normal entrepreneur than to a traditional manager.

Four different types of entrepreneurs; Miner, 1996
1. The Personal Achiever (the classic entrepreneur)
2. The Super-Salesperson (achieves success through networking, selling, and people skills)
3. The Real Manager (strong managerial skills combined with aggressive growth orientation)
4. The Expert Idea Gel1erator (expertise + creativity)
Critical Roles in Corporate Entrepreneurship
Initiator
Triggers a new entrepreneurial event, either by recognizing some external threat or opportunity,
identifying some internal needs, or pursuing some ongoing innovation initiatives. The champion
often, but not always, fills this role.
*Sponsor/Facilitator*
The leader or a major sponsor of the initiative, pushing for its acceptance and completion, playing a
major advising or mentoring role as it unfolds, and protecting it. This high-level person in the
company acts as buffer, protector, and modifier of rules and policies and helps the venture obtain
the needed resources.
*Champion*
Takes the lead in driving and directing the project, overseeing the implementation process, adapting
key aspects of the concept along the way, sustaining the project as obstacles and opposition arise,
and bringing it through to completion.
Innovation Midwife
Serves as a translator between the language, culture, and needs of the sponsor's world and the
language, culture, and needs of the champion's world. The midwife, as identified by Vincent (2005),
nurtures, develops, and integrates innovations that might be rejected by the organization's core.
Supporter
Augments the team, playing a secondary or more minor role, and providing expertise, intelligence,
analysis, and marketing plans/programs on behalf of the initiative.
Reactor
Plays more of a devil's advocate role, providing market intelligence and insight that serve to either
pinpoint weaknesses in the entrepreneurial idea, possible ways in which it should be revised or
refined, and reasons it should or should not be pursued.
Myths about Corporate Entrepreneurs
CEs are not only interested in money
CEs are moderate risk-takers
CEs are fairly analytical and well prepared
CEs are used to work in a company environment and accept rules, hierarchies and so on
CEs are highly ethical and consider their society
CEs want their concept to grow rather than building an empire

Human Resources and the Entrepreneurial Organization: The
Organizational Perspective (Ch. 7)
Understanding the HRM Function
Human resource management is a broad concept that captures the set of tasks associated with
acquiring, training, developing, motivating, organizing, and maintaining the employees of a company.



Human resource management becomes a means for achieving the company's strategic
direction (Hornsby and Kuratko, 2005).
Creating the Work Environment
Creating a work environment that helps employees understand
1. The kinds of entrepreneurial behaviors sought by the organization
2. Their own innate ability to act in an entrepreneurial fashion
3. The incentives for acting in an entrepreneurial fashion/disincentives for failing to do so.
HRM and the Paradox of Creative Abrasion
The aim of HRM is not to create monotonous employees
Paradox
On the one hand, creative organizations demonstrate great teamwork, collaboration, and collegiality.
On the other hand, they feature diversity, debate, argument, and friction.
Creative abrasion
It calls for the development of leadership styles that focus on first identifying and then incorporating
polarized viewpoints. In doing so, the probabilities for unexpected juxtapositions are sharply
increased, as are the levels of mutual understanding. The irony is that out of a process keyed on
abrasiveness, a corporate culture of heightened sensitivity and harmony is achieved; It can adapt
different degrees.
HRM Policies and Entrepreneurship




Some Evidence to Support the Relationships
(ausgelassen)
Motivation and the Critical Role of Reward Systems
Expectancy Model; Porter and Lawler, 1968
Simply stated, this model posits that motivation is determined by
1. How much a person perceives a direct relationship between the effort he or she puts forth
toward some behavior or task and successful performance on the firm's employee appraisal
or evaluation system
2. How much that person perceives a direct relationship between a good performance
appraisal and achievement of rewards,
3. Whether the company is offering the correct rewards

15 possible reasons why employees are not motivated to act entrepreneurial on the job
The f i rst l i nkage i s bet ween empl oyee ef f ort and management ' s eval uat i on of empl oyee
perf ormanc e
Starting with effort, if employees (1) do not understand what management means by "being
entrepreneurial on the job," or (2) believe it is not possible to accomplish entrepreneurial behavior in
this company no matter how hard one tries, or (3) perceive that they are not personally capable of
being entrepreneurial, then they are likely to be unmotivated. Alternatively, employees may believe
that it is possible to be entrepreneurial, but see no linkage between doing so and how they are
evaluated. This can happen because (4) there is no formal appraisal or assessment of employees, (5)
the performance appraisal criteria are unclear, (6) the criteria on which employees are evaluated do
not explicitly include innovativeness, risk-taking, and proactive efforts, (7) other non-entrepreneurial
criteria receive much more emphasis, (8) the evaluations are done in an arbitrary or unfair fashion, or
(9) there are ways to get a good evaluation without actually doing entrepreneurial things (e.g.,
politicking).

The sec ond l i nkage i nvol ves i dent i f yi ng reasons empl oyees mi ght not see a rel at i onshi p bet ween
doi ng wel l on t he perf ormanc e eval uat i on syst em and rec ei vi ng a reward.
Reasons for this could include (10) managers asking for one behavior, but actually rewarding some
quite different behavior, or (11) employees believing the reward will be earned regardless of the
evaluation (e.g., everyone around here gets the same reward), or (12) employees finding other ways to
earn the reward without putting effort towards entrepreneurship (e.g., currying favor with the boss).
Fi nal l y empl oyees may be unmot i vat ed bec ause management i s of f eri ng t he wrong rewards
Examples of problems here could include (13) rewards are being offered that are too small given the
effort that is required to push an entrepreneurial initiative through in the face of internal resistance,
(14) the type of reward being offered is not one to which an employee currently attaches the most
importance, or (15) the reward is considered inequitable or unfair, possibly because of what
employees know other people are receiving, especially when they think these other employees are
performing to a lower standard.

Entrepreneurial action also has to be awarded and recognized properly.
Link between the desired behaviors and a given award; Rosabeth Kanter, 1994

Subordinates' View of the Entrepreneurial Manager
11 key behaviors that define an entrepreneurial manager
1. Efficiently gets proposed actions through red tape and into practice
2. Displays enthusiasm for acquiring skills
3. Quickly changes course of action when results are not being achieved
4. Encourages others to take the initiative for their own ideas
5. Inspires others to think about their work in new and stimulating ways
6. Devotes time to helping others find ways to improve products and services
7. Goes to bat for good ideas of others
8. Boldly moves ahead with a promising new approach when others might be more cautious
9. Vividly describes how things could be in the future and what is needed to get there
10. Gets people to rally together to meet a challenge
11. Creates an environment where people get excited about making improvements
! An entrepreneurial manager has a positive impact on subordinates satisfaction
The Need for a Champions Program
Such a program encourages ambitious and talented entrepreneurs from throughout the organization
to suggest, develop, champion, and implement new products.

Champions emerge from all parts of the company ! Building an infrastructure that allows
champions to emerge

Corporate Strategy and Entrepreneurship (Ch. 8)
The Changing Landscape
Company environment is comprised of increasing risk, decreased ability to forecast, fluid firm and
industry boundaries
The new landscape can be described in terms of four powerful forces; Hitt and Reed, 2000
Change
The whole environment of a company has changed
Compl exi t y
Influence factors from different sides accompany the change
Chaos
Random events occurs because of the other three powerful forces
Small changes can have an enormous impact
Cont radi c t i on
Dealing with paradoxes
Switch from the thinking of or to the thinking of and
Strategic inflection points
An inflection point occurs when the old strategic picture dissolves and gives way to the new,
allowing the adaptive and proactive business to ascend to new heights ! Redefine the industry
" After the inflection point occurred, there is no way back
Does the Dominant logic fit the Competitive landscape?
The dominant logic attempts to capture the prevailing mindset. It drives the overall focus of the
systems and routines in the company.
The dominant logic must be periodically unlearned and openness to such unlearning should
be an integral aspect of the corporate culture.
" The aim is to create an dynamic dominant logic
The Role of Strategic Management and Corporate Strategy
Dominant logic sets the overall direction of a firm, but corporate strategy and strategic management
define this direction and determine how well it is accomplished.
Strategic Management
Process that guides how the basic work of the organization is approached, ensures the continuous
renewal and growth of the firm, and, more particularly, provides a context for developing and
implementing the strategy that drives the firm's operations (Schendel and Hofer, 1978).
Strategy
A statement regarding what the company wants to be and how it plans to get there.


Integrating Entrepreneurship with Strategy
Two aspects are crucial when it comes to the integration of entrepreneurship with strategy
1. Ent repreneuri al St rat egy
2. St rat egy f or ent repreneurshi p
1. Developing a corporate strategy that is entrepreneurial (external issues)
Ent repreneuri al St rat egy
A vision-directed, organization-wide reliance on entrepreneurial behavior that purposefully and
continuously rejuvenates the organization and shapes the scope of its operations through the
recognition and exploitation of entrepreneurial opportunity.
Corporat e Vent uri ng Vs. Busi ness St rat egy


! Companies, which integrate Corporate Venturing as a part of their strategy, are more likely to get
successful than the ones, which dont.
! Some Companies integrate Entrepreneurship within their structure, but not always as a part of
their strategy.

2. Developing a Strategy for Entrepreneurship (internal issues)
Si x i mport ant dec i si ons t o t ake when c reat i ng a st rat egy
1. Where does the firm want to position itself within the entrepreneurial grid? How risky does it
want to be?
2. How strong is the entrepreneurial emphasizes of the company?
3. In what areas does the firm want to be innovation leader or follower?
4. In what areas does the firm want to achieve lower/higher levels of entrepreneurial activity?
5. What is the relative importance over the next three years of product versus service versus
process innovation? What is the relative importance of new versus existing markets?
6. To what extent is innovation expected to come from senior management, middle
management, or first-level management? Is there clear direction in terms of the types of
innovation expected at each level?
Managing Innovation Strategically: A Portfolio Approach
Strategic innovation - Formulates explicit goals and strategies for innovation, executes those
strategies, monitors innovation performance, and then makes adjustments based on deviations
between the goals and actual performance.

Moving away from project mentality and getting closer to portfolio mentality



A balance within the portfolio has to be found between
Risk/return
Discontinuous/Continuous innovation
Short-term/long-term outcomes
New/old markets
New/old technology
Technology, Entrepreneurship, and Strategy
Technologies are changing and the firms have to change as well
Technology limits and platforms
Technology has a life cycle; as soon as a new technology immerses, the limits of the old technology
will be obvious

Sustaining technologies maintain a rate of improvement, giving customers more or better in the
attributes (e.g., quality, speed, size) they already have. Thus, a currently used technology begins to
reach its limits in terms of enhancement of the firm's product performance on one or two key
attributes (i.e., quality cannot get much better, speed much faster, or size much smaller). New
(sustaining) technologies are employed that allow the firm to continue (or sustain) the of attribute
enhancement. (Longer lasting battery)

Disruptive technologies improve a different set of attributes than the ones in sustaining
technologies. Maybe this attribute that was not important to the customer yet. (Cell phone)

Companies dont have to hesitate using disruptive technologies, since otherwise innovative potential
will be unused. On the other hand sustaining technologies should not be applied exaggeratedly, as
otherwise the aims of the customers will be over-fulfilled and not perceived as added value anymore.
Technology-Push Versus Market-Pull Approaches
Technology-Push
Employees within the firm (usually technically qualified engineers or scientists) see a technical
possibility and strive to capitalize on it. ! Suffers often from the perfection syndrome
Market-Pull
Innovation starts with the customer and are typically driven by marketing people. Market research
plays a critical role. ! Seems easier, but the customer often does not know what he or she wants

! The solution is to integrate both technology-push and market-pull at the same time
Key Strategic Concepts: Entrepreneurship as the Driver
Strategic formulation process consists of different stages
Strategic Advantage
Reach a competitive advantage
Strategy is the set of commitments and actions taken by management to first develop and
then exploit a competitive advantage in the marketplace
Innovation is the key to developing and successfully exploiting competitive advantages
Strategic Positioning
How the firm wants to be perceived in the marketplace
Effective strategic positioning is critical for competitive advantage
Strategic Flexibility and Adaption
Strategic flexibility involves a willingness to rethink continuously and make adjustments to
the firm's strategies, action plans, and resource allocations as well as to the company
structure, culture, and managerial systems.
Strategic Leverage
Leveraging refers to doing more with less ! Leveraging of resources implying stretching, achieving
additional uses, borrowing from others, realizing synergies, using certain resources to new specific
Entrepreneurial Strategy: Some Contributing Factors
Important factors in order to have a well-conceptualized entrepreneurial strategy
Developing an entrepreneurial vision
Increasing the perception of opportunity
Institutionalizing change
Instilling the desire to be innovative
Investing in peoples ideas
Sharing risks and rewards with employees
Recognizing the critical importance of failure

5 Fatal Strategy Implementation Issues (by Porter)
1. Misunderstanding industry attractiveness
2. No real competitive advantage
3. Pursuing an unsustainable competitive position
4. Compromising strategy for growth
5. Failure to explicitly communicate strategy internally

Structuring the Company for Entrepreneurship (Ch. 9)
The Components of Structure
Structuring is interplay between differentiation (distribution) and integration (coordination).
4 Major Policy Areas; Galbraith, 1995
1. Specialization
Specific functions, topics and tasks are distributed
2. Shape
Number of people forming departments
3. Distribution of power
Vertically and horizontally
4. Departmentalization
Forming of people into groups regarding geographic region, function, product
How Structures Evolve
Structure changes during the evolution stages of a company. It adapts to the development
Ent repreneuri al St ruc t ure
Is organic and fairly informal; limited administrative infrastructure; no middle
management.
While growing it gets a bureaucratic structure; more need for administration.
As a reaction to diversified products and market the structure gets divisional.
Subsequently diverse types of matrix structure will be applied.

! The company has to adjust continuously to external pressures and internal priorities
! Well-coordinated set of relations between structural design, company age and size, the
technology of the firm and the conditions of the industry
Types of Structures: Links to an Entrepreneurial Strategy
Structure follows strategy
Simple Structure
Highly informal with coordination of tasks accomplished by direct supervision and all strategies
determined at the top. Little specialization of tasks exists, and there is very limited formalization in
terms of programs, rules, or regulations. There is a low degree of bureaucracy, and information
systems are unsophisticated. Little need exists for integrating mechanisms, and power is concentrated
at the top.
Machine Bureaucracy
A mechanistic and rigid structure in which coordination of tasks is achieved through standardization
of work. The structure is hierarchical and very bureaucratic. The need to follow formal guidelines
and plans is stressed. A large technostructure exists in the firm to design and plan operations.
Technology is somewhat automated and integrated into operations. Well-developed information
systems exist, but they focus on internal reporting and output tracking rather than on market
developments. Power is concentrated among top executives and those who design workflow
processes, with little disseminated to middle- or lower-level management.
Organic
Limited hierarchy and highly flexible structure. Groups of trained specialists from different work
areas collaborate to design and produce complex and rapidly changing products. Emphasis is on
extensive personal interaction and face-to-face communication, frequent meetings, use of
committees, and other liaison devices to ensure collaboration. Power is decentralized and authority is
linked to expertise. Few bureaucratic rules or standard procedures exist. Sensitive information-
gathering systems are in place for anticipating and monitoring the external environment.
Divisional
Self-contained profit centers exist for producing and marketing different product lines or groups.
Divisions can differ significantly from one another in terms of their structures, with some being
more organic and others more bureaucratic. There is overall pressure for divisions to conform, and
for formalization and standardization of procedures and methods. While divisions tend to become
more bureaucratic with time, they operate somewhat independently, with a fair amount of
decision-making authority delegated to divisional managers. Control is facilitated by sophisticated
management information systems. Coordination across divisions is achieved via inter-unit
committees and a staff infrastructure at the head office.
Different structure categories; Miller, 1986, 1996



Innovation has need for communication
! Organic Culture is the best for entrepreneurship; mechanic structure the worst.
! Simple structure contains too primitive technology; power is centralized to the CEO
! Within the divisional structure the degree of entrepreneurship can vary, since they are comprised
of the organic, simple or bureaucracy culture; leads rather incremental innovation; more new venture
divisions that will emerge
Boundary-less organization
The idea is to take people out of boxes and eliminate artificial barriers that slow things down and
create pockets of resistance to change. Boundaries are eliminated both within the organization and
between the organization and key outside players.
An Entrepreneurial Structure and the Concept of Cycling
Fewer layers in the structure of a company
The entrepreneur makes all the important decisions
General orientation:
o More horizontal design
o Less vertical design
Decentralization and empowerment essential for operations
Dominant direction for flows of ideas is bottom-up
Orientation for clear visions and strategic direction is top-down

! The whole structure emphasizes simplicity and smallness!






Selvin and Covin (1990) Management Style Vs. Organization Structure


Effective entrepreneurial firms and efficient bureaucratic firms
Cycling between the cells of the matrix is possible
It is also possible to get caught within the non-ideal cells (2 or 4), which can result a
dysfunctional company
Structures to Support New Product/Service Development Projects

Decision factors regarding the right type of organizational structure
Simple versus Complex
Centralized versus Decentralized
Formal versus Informal
Autonomous versus Integrated
Highly Specialized versus More Generalist
Full-time versus Part-time
Entrepreneurial Projects: Structures within Structures

Ray of Light projects are bootstrapped, meaning resources are obtained in clever, creative
and informal ways
Emerging potential projects (which might have begun as either ray of light or emerging
potential projects) involve concepts that are brought to some type of review committee,
which we shall call the Opportunity Review Board
Mainstream development projects are where the new product, service and process
efforts that have been prioritized by senior management are developed.

Structuring Relationships between Entrepreneurial Initiatives and the Corporation:
Some Organization Design Alternatives

Direct integration
The entrepreneurial initiative is pursued within the mainstream operations of the corporation.
New product/business department
A separate department for the entrepreneurial initiative is created in that part of the corporation
(division or group) where significant potential exists for sharing capabilities and skills.
Separate business units
A specially dedicated and operationally distinct unit is created inside the corporate structure to house
the entrepreneurial initiative.
Micro new ventures department
An organizational unit is created where autonomously emerging entrepreneurial initiatives are
pursued without the constraint of currently having to fit with the corporation's strategy.
New venture division
An organizational division is designed to house a wide range of potentially interesting entrepreneurial
initiatives that are of ambiguous fit with the corporation.
Independent Business Units
A specially dedicated and operationally distinct unit is created outside the corporate structure to
house the entrepreneurial initiative.
Nurturing and Contracting
The corporation's knowledge and competencies are leveraged in entrepreneurial initiatives that are
moved outside the corporate structure (e.g. outsourcing some part of the entrepreneurial project)
and in which that knowledge or those competencies constitute strategic assets for the initiative.
Contracting
The corporation's knowledge and competencies are leveraged in entrepreneurial initiatives that are
moved outside the corporate structure (by contracting to some outside organization) and in which
that knowledge or those competencies add some value to the initiative's operations.
Complete spin off
Total separation of the entrepreneurial initiative from the corporation.
Developing an Entrepreneurial Culture (Ch. 10)
The Nature of Culture in Organizations
Culture can be defined as an organization's basic beliefs and assumptions about what the company is
about, how its members should behave, and how it defines itself in relation to its external
environment (Trice and Beyer, 1993).

A positive culture is in line with the companys vision/mission/strategy; there is a fit
between culture and competitive environment. (Opposite: negative culture)
A strong culture is deeply and thoroughly permeating (Opposite: weak culture)
A homogenous culture is shared by all employees (Opposite: heterogeneous culture)
A consistent culture contains no conflicting elements (Opposite: inconsistent culture)
The Pieces and Parts of Culture
Values (Level 2)
The things that employees think are worth having or doing, or are intrinsically desirable; values
express preferences for certain behaviors and outcomes; entrepreneurial values might include
creativity, integrity, perseverance, individualism, achievement, accountability, ownership, and change,
among others.
Rules of Conduct (Level 3)
Accepted norms and rules in the company; the behaviors that represent accepted ways to attain
outcomes; the general understanding regarding everything from ethical behavior to how one dresses,
who one speaks to, and appropriate behavior styles in a meeting.
Vocabulary (Level 3)
The language, acronyms, jargon, slang, signs, slogans, metaphors, gestures, gossip, and even songs
that are common1y used in the company; can include proverbs such as 3M's "never kill a product
idea."
Methodology (Level 3)
The perception of how things actually get accomplished in the company, such as the reliance on
rational processes, politicking, or rule-bending. For instance, having a sponsor and preparing a
business plan with certain key ingredients might be part of the methodology for innovating in a
company.
Rituals (Level 3)
Rites, ceremonies, and taboos, including random recognition ceremonies, annual off-site
conferences, Christmas parties as well as how employees are welcomed, let go, and retire. The
awarding of a pink Cadillac at Mary Kay Cosmetics is a ritual.
Myths and Stories (Level 3)
The histories, sagas, mythologies, and legends of an organization; includes a sense of "who are the
heroes in this company." Entrepreneurial companies not only have legends and ways to continually
retell stories of how past heroes did unusual things, but they create new heroes and role models all
the time.

Cultures consist of substances and forms. Substance (invisible) refers to shared systems of values,
beliefs and norms. Forms (visible) are the concrete ways in which the substance is manifested in the
organization.
Levels of Culture; Schein, 1999

Level three and two belong to substance, whereas level one belongs to forms
Core Ideology and the Envisioned Future
Vision starts with a core ideology; Collins and Porras, 1994
Thereby the term core implies entrenched core values that have to be sustained
The core values are accompanied by the core purpose of a company, which is a source of
guidance and inspiration
Additionally a vision contains an image of the envisioned future (comprises a time frame)
Generic Culture Types

The Process Culture
A world of little or no feedback, where employees find it hard to measure what they do. Instead, they
concentrate on how it is done. The hierarchy is tight and employees are cautious "fence sitters."
Avoidance of failure is important. Processes themselves can stifle the company and become quite
bureaucratic. (Government)
The Tough Guy/Macho Culture
A world of competitive individualists who regularly take high personal risks and get quick feedback
on whether their actions were right or wrong. The structure fluctuates. Financial stakes of not
succeeding can be high, as can rewards from succeeding. Orientation is more short term, and
employee turnover can be high. (Investment Banking)
The Work Hard/Play Hard Culture
Fun and action are the rule here, and employees take few risks, all with quick feedback. To succeed,
the culture encourages employees to maintain a high level of relatively low-risk activity. Much gets
done in this culture, as it is very action-oriented. Orientation here is also fairly short term. Often a
strong customer focus and sales orientation. (Sales)
The Bet-the-Company Culture
An environment of big-stake decisions, where considerable time passes before employees know
whether decisions have paid off. It is a high-risk, slow-feedback environment with a clear-cut
hierarchy. Decisions are deliberate because of the risk. Pressure is ongoing. They often produce
major technological breakthroughs and high-quality inventions. (Aerospace, Oil Industry)
Elements of an Entrepreneurial Culture
Focus on people and empowerment
Value creation through innovation and change
Attention to the basics
Hands-on management
Doing the right thing
Freedom to grow and to fail
Commitment and personal responsibility
Emphasis on the future and a sense of urgency
Exploring a Key Value: Individualism
A company has to weigh the positive and negative aspects of both individualism and collectivism. It
has to find the balance between both.

A Different View of Failure
Failures do not have to be punished, since this behavior would decrease innovation as well
as entrepreneurial activity within the company. (Nevertheless a company can offer rewards
for good and flawless projects in order to trigger employees)
Failures have to be celebrated within an entrepreneurial company.
Costs of failure are unclear or rather psychological. Hence they can be reduced by
revealing the good sides of failure like learning outcomes and new opportunities
Types of Failure
Moral f ai l ure
! Zero tolerance
Personal f ai l ure
! Personal counseling, coaching, training
Unc ont rol l abl e f ai l ure ( Most l y oc c ur assoc i at ed wi t h ent repreneurshi p)
! Celebration, learning, systematic documentation

In case of entrepreneurship success and failure can occur at the same time. Thus avoiding failure
is warrant for success.
Cultures within Cultures
Subcultures emerge, coexist and clash with one another
Multiple divisions
Operating units widely spread geographically
Different functional areas
Mergers & Acquisitions
! Where subcultures prevail diverging degrees of entrepreneurship may result


Constraints on Entrepreneurial Performance (Ch. 11)
A Framework for Understanding the Obstacles
There do exist six general groups of obstacles

Coming Up Short: Limitations of the Corporate Entrepreneur
1. Lack of Political Savvy: Learning to Work the System
2. Lack of Time: Crisis Management
3. Lack of Incentive to Innovate: Beyond Tokenism
4. Lack of Financial Credibility: Inability to Project Believable Numbers
5. Lack of People Development Skills: Autocracy Rules
6. Lack of Legitimacy: Untested Concept and Untested Entrepreneur
7. Lack of Seed Capital: The Problem of Early Resources
8. Lack of Open Ownership: Protecting Turf
9. Lack of Sponsor: Someone to Watch over You
10. Lack of Energy and Enthusiasm: The Inertia Problem
Caused by: Indifference, Distraction, Competition, Disaffection, Direct threat
11. Lack of Personal Renewal: The Issue of Reinforced Denial
12. Lack of Urgency: Fear as Good and Bad
13. Lack of Appropriate Timing: The Resource Shift Dilemma
Corporate Innovator or Rogue Managers: An Ethical Dilemma
In an environment (company), which is not entrepreneurial, corporate entrepreneurs act
as revolutionaries
May lead to rogue behavior as well as unethical acting ! Rogue Mangers
Entrepreneurship evokes even in bureaucratic hierarchies, which indicates that corporate
entrepreneurs are used to overcome obstacles

! The entrepreneurial manager must carefully distinguish creative problem solving from
immoral behavior.
Management Model approaching business ethics; Carroll, 2000
Moral Management Model (ethical acting)
Immoral Management Model (deliberate intent to act unethically)
Amoral Management Model (believe that personal ethics are different compared to
business ones; Ethical boarders are pushed to their limits ! occurs in Corporate
Entrepreneurship)

Solution for unethical behavior ! Ethical Corporate Entrepreneurship
Right incentives have to be set by the management to act ethical towards stakeholders
Overcoming the Obstacles and Constraints
1. Building Social Capital
2. Gaining Legitimacy
3. Political Tactics (Rule oriented, rule evading, personal-political, educational and organizational-
interactional)
4. Resource Acquisition (Borrowing, Begging, Scavenging, Amplifying)
An Ethical Component in Training Entrepreneurs
Holistic change of the company towards ethics; Creation of an ethics committee.
Focusing on the Right Obstacles at the Right Time
Obstacles have to be prioritized
Afterwards opponents and supporters will be identified
Win-win-Solutions have to be pursued
o Who, what against which opponent?
o Key steps and when (timing)?
o Success or not of the actions?
o Plan B + what will encourage the plans?

Leading the Entrepreneurial Organization (Ch. 12)
Top-level Managers in the Entrepreneurial Organization
1. Create an entrepreneurial strategic vision
2. Embed a pro-entrepreneurial architecture is necessary
3. Engage the right human resources
Pro- ent repreneuri al arc hi t ec t ure
The workplace exhibits structural, cultural, resource, and system attributes that encourage
entrepreneurial behavior, both individually and collectively.
The Entrepreneurial Imperatives of Strategic Leadership
Entrepreneurial imperatives are those aspects of strategic leadership that are inherently
entrepreneurial in that they relate to the recognition and/or exploitation of opportunity.
Link Entrepreneurship and Strategy
Nouri sh an Ent repreneuri al Capabi l i t y
Invest in the development of an institutionalized organizational capacity for innovation and
entrepreneurship.
Prot ec t Di srupt i ve Innovat i ons
Selectively protect the innovations that seem disruptive or threatening to the organization's
mainstream operations by "cocooning" them in their infancy.
Make Opport uni t i es Make Sense f or t he Organi zat i on
Expand the opportunity "radar screen" such that personnel can recognize and appreciate the hidden
opportunities associated with their jobs.
Quest i on t he Domi nant l ogi c
Challenge conventional strategic practices, norms, and mindsets such that innovation is not
hampered by tradition or other social or psychological constraints.
Revi si t t he "Dec ept i vel y Si mpl e Quest i ons"
Identify growth opportunities through re-asking basic questions such as "What business are we in?"
and "What do our customers value?"
Li ke Ent repreneurshi p and Busi ness St rat egy
Integrate the entrepreneurial and strategic processes of the organization to facilitate the recognition
and exploitation of strategically significant opportunities for innovation.
Managing Ambidextrously: Balancing the Old and the New
Ambidextrous organizations are those that effectively balance the appropriation of value from
current business activity (mainstream) and the search for new value as realized through innovation
(newstream) ! Coordinating exploration and exploitation activities

Creation of ambidexterity requires an integration of innovation in the core of the firm
o Separation of mainstream and newstream ! spatial separation
o Periodical performing newstream within mainstream ! temporal separation

Middle-level Managers: linchpins in the Entrepreneurial Organization
The role of middle-level managers is to effectively serve as a conduit between those at the top and
those at the operating level or front-line.
! Facilitating information flows between top and operating level in ways that support project
development and implementation efforts.

Middle-level managers can champion ideas from those below (low-level) and provide them to
the one above (top-level) ! intermediary function
Distinction between top- and low-level management: The Former determine strategy and the
latter implement it

Middle-level managers endorse, refine, and shepherd entrepreneurial opportunities and identify,
acquire and deploy resources needed to pursue those opportunities.
Endorse
Endorse the entrepreneurial initiative by advocating its pursuit to important resource providers and
other stakeholders.
Ref i ne
Refine the entrepreneurial initiative to fit the organization's strategy, structure, and resources.
Shepherd
Shepherd the entrepreneurial initiative through the provision of developmental direction and
sustained support.
Ident i f y
Identify the resources needed to pursue the entrepreneurial initiative. .
Ac qui re
Acquire the resources needed to pursue the entrepreneurial initiative.
Depl oy
Deploy the acquired resources to make the innovative idea a reality.
First-level Managers and Non-Managerial Personnel: Entrepreneurship at the
Grassroots level
First-level managers, as well as non-managerial personnel that work on the front lines, engage in
entrepreneurial behaviors that are principally framed for them through interactions with others, both
inside and outside the firm.

First-level managers act in experimenting (entrepreneurial project), adjusting (implementation
challenges) and conforming (rules and norms) roles. They are order-takers as well as autonomous
actors at the same time.

First-level manager recognize entrepreneurial opportunities easier for the following reasons
1. Work at the front line spots, where everything takes place in the company.
2. Boundary-spanning roles ! Interaction with key stakeholders inside and outside their
daily tasks
Entrepreneurial Outcomes
Individuals and the organization have to weigh the benefits and costs of acting entrepreneurial.
Individual-Level Outcomes and Consequences
Outcomes can be intrinsic (psychological) and extrinsic (tangible).
People tend to compare their own rewards and performance with the one of their co-workers
(perceived equity). If an entrepreneurial manger is now equity sensitive, he or she will expect to
get better rewards compared to his non-entrepreneurial co-workers.
Organizational-Level Outcomes and Consequences
Financial aspects play a crucial role for organization
But also:
Organizational learning
Enhancement of manager skills
Impact on general employee moral
Reduction of employee turnover

Managers have to emphasis that there is a positive relationship between entrepreneurial action
and the favorable organizational outcomes

! As a result entrepreneurship will be embedded in the company as a process

Assessing Entrepreneurial Performance
Assessing Entrepreneurial Activity in Companies
Assessing involves measuring of processes and outcomes. In entrepreneurial companies
assessment programs are embedded in the culture. It is very hard to assess entrepreneurship, as it is
too messy, not linear, shows high fluctuation and is unpredictable.

Entrepreneurship is a way of thinking (cognition) and a way of acting (behavior)
Management and measurement systems in entrepreneurial firms have to deal with
ambiguity absorption
! Approached with measurement systems that deal with cognition as well as behavior
A Systematic Approach: The Entrepreneurial Health Audit
A measurement process is required to understand the current entrepreneurial level of the company,
before measuring its future level.
Entrepreneurial Health Audit; Ireland et al., 2006
Step I: Assessing the Firms Entrepreneurial Intensity (EI) ! How is the firm?
Assessing the performance.
(Keep in mind that the industry and the environment of the assessed companies impact its EI)
1. Degree of Ent repreneurshi p
Measures for risk-taking, innovativeness, proactiveness
2. Frequenc y of Ent repreneurshi p
Step II: Diagnosing the Climate for Corporate Entrepreneurship ! Why is the firm?
Assessing the internal climate.
The Corporate Entrepreneurship Climate Instrument (CECI) is a diagnostic tool for assessing,
evaluating and managing the internal environment of the firm in a manner that supports
entrepreneurship.
5 key ant ec edent s of t he CECI t o det ermi ne Ent repreneuri al Heal t h
1. Management support
2. Work discretion/autonomy
3. Reinforcement
4. Time availability
5. Organizational boundaries
Step III: Create an Organizational-Wide Understanding of the CE/Innovation Process
Ensuring a good relationship between stakeholders and CE by continuous CE training.
CE empl oyee devel opment program el ement s
1. Introduction to Entrepreneurship
2. Entrepreneurial Breakthroughs
3. Creative Thinking
4. Idea Development Process
5. Barrier, Facilitators and Triggers to Entrepreneurial Thinking
6. Venture Planning: The Intra-Plan
Assessing Individual Entrepreneurial Projects
The beginning point is solid analysis and critique of project feasibility, followed by detailed
evaluations of progress as a project evolves through key stage-gates.
Understanding how Projects Evolve
Innovation as a linear process
1. Idea Generation
2. Concept Testing
3. Technical feasibility assessment
4. Product Testing
5. Financial assessment
6. Test marketing
7. Launch
8. Life cycle management
! But: Entrepreneurship is not a linear process (requires iteration and feedback)


With the stage-gate system, creative activities that move the project forward are separated
from evaluation activities.
Reliance on 4 to 6 stages, multiple activities in a stage, and a go/no go decision after
each stage ! Practical use
Measuring Innovation Performance in Projects
Consistent with a portfolio approach to new product development activity, there is a need to
establish multiple performance targets (Amount of new products; their stake in company revenues
etc.). BUT: The success of the multiple performance targets has to be tracked.

Therefore the right performance measures have to be identified
Kuczmarkis (1996): Ten Indices measures for assessing innovation performance
o Including process, financial and non-financial outcome
measure

Another tool for evaluating innovative projects
Balachandra (1984): Yellow Light Variables Approach ! (go/no go-decisions)
o Yellow light Not critical, but too many will bad results will
cause problems
o Red light Can cause the termination of a project
Asking the Right Questions for a New Project
Many important evaluation-related questions should be asked.
The results of a "feasibility criteria approach" enable the corporate entrepreneur to judge the
idea's business potential.
Discovery-Driven Planning
Four essential documents of planning; McGrath ad MacMillan, 1995
A reverse i nc ome st at ement
Bottom up approach; required profitability = required revenue (base) allowable costs
Pro f orma operat i ons spec s
All activities, which are necessary to deliver the product/service from alpha to omega
! Allowable costs
A key assumpt i ons c hec kl i st
Ensuring the validity of the key assumptions of the project
A mi l est one pl anni ng c hart
Track the actual stage of the project; Allow continue, if pervious stages have proven as successful
Developing a Comprehensive Corporate Venture Plan
An effective corporate venture plan venture will:
Describe every aspect of a particular venture
Include a marketing plan
Clarity and outline financial need
Identify potential obstacles and alternative solutions
Establish milestones for continuous and timely evaluations
Serve as a communication tool for all assessments purposes
Sustainable Entrepreneurship: A Dual Focus
Sustainability implies some level of consistency in the levels of innovativeness, risk taking, and
proactiveness that a firm is able to achieve over a number of years ! Challenge to achieve

Ironically, consistency in levels of entrepreneurship involves a paradox companies must move both
incrementally and boldly at the same time.
" Continuous improvement - incremental and additive (easy to assess)
" Radical Innovation - explosive and market defining advances (hard to assess)

Control and Entrepreneurial Activity (Ch. 14)
The Nature of Control in Organizations
A control system can be defined as those formal and informal mechanisms that help managers
ensure that resources are obtained and used effectively and efficiently in the accomplishment of the
organization's objectives (Anthony and Govindarajan, 2001).
Conceptualize the application of controls to inputs, processes or behaviors and outputs.
Control measures and mechanisms grouped into four general categories; (Cirka, 1997)
1. Simple control (direct control of mangers over their subordinates)
2. Technological control (control over technological techniques)
3. Bureaucratic/administrative control (rule, procedures, policies within the firm)
4. Concertive/cultural control (control of values and norms)
Organizations out of Control: A Story of Unintended Consequences
Control can feed on itself meaning that more control can evoke out of recent control and harm the
company in four different areas
1. Trust problem (regarding employees)
2. Slowness problem (regarding flexibility and bureaucracy)
3. Means-End problem (real goal gets lost; control becomes an end in itself)
4. Efficiency-Effectiveness Problem (a balance has to exist between both regarding control)
! Do not overcontrol a business, since it will lead to a loose of control.
Dimensions of Control and Entrepreneurship
The principal outcomes sought through control efforts include risk reduction, elimination of
uncertainty, highly efficient operations, goal conformance and specific role definitions.

Entrepreneurship seeks more for risk tolerance, management of uncertainty, enlightened
efficiency, goals congruence and role flexibility.

! Balance has to be found between both, administrative and entrepreneurial domain.
The Entrepreneurial Philosophy of Control
Two philosophies for control exist; Stevenson and Jarillo-Mossi (1989)
Command and Cont rol
Orders coming from above with the expectation that they will be executed exactly as they are given.
Decisions are made as if superiors are present. Extensive control measures are used to track whether
commands are executed and to provide detailed feedback to management.
No Surpri ses
Adequate information on a timely basis for all who really "need to know." No one is subject to
surprises because of a lack of information. The principal link is between control and company
performance. Prevent problems, before they occur.
Principle in entrepreneurial Philosophy
1. Create trust
2. Give up control, to gain control
Empower employees meaning the delegation of authority

Two final points
Less control does not mean more entrepreneurship
o Control is vital for sustained entrepreneurship. The real issue is the nature and
intent of the controls and how they are used.
Level of control depends on the type of entrepreneurship

Concept of Balance: Simultaneous Looseness and Tightness
A paradox results, in that contemporary organizations risk failure if employees operate with few
constraints, but they also risk stagnation and ultimate demise if they don't free up the creative talents
of their employees ! Need for a balanced approach
Characteristics of the companys control system regarding loose-tight properties
Admi ni st rat i ve f ormal i t y/i nf ormal i t y
The extent to which the organization relies upon explicit, stated, and/or documented mechanisms
(e.g., rules, procedures, policies) in guiding resource allocation and employee behavior.
Manageri al f l exi bi l i t y /i nf l exi bi l i t y
The degree to which discretion and/or freedom is given to junior managers to interpret or ignore
rules and procedures in performing their jobs.
Budget ary t i ght ness/l ooseness
The extent to which budgets impose strict restrictions on how resources are allocated and how
performance is evaluated.
Expanding on the Concept of Slack
Entrepreneurs have to experiment with resources in order to achieve innovation. They also need fast
access and freedom to act related to resources.
! There has to be looseness regarding resource availability meaning slack
Nevertheless access to resources still has to be hard (challenged; encounter resistance)
Internal Venture Capital Pools
There is a need to provide financial support for entrepreneurial initiatives through special seed and
venture capital (VC) funds that are separate from operational budgets.
Different funds have to be created dependent on size, scope and innovativeness of the project.
Intracapital; Pinchot and Pellman (1999)
A resource bank account awarded to employees, who successfully pursue entrepreneurship within
the company.
Control and Costs: The Open Book Revolution
If there is one thing senior executives seem intent on controlling, it is access to the numbers.
Open Book Management; Case, 1997
Rather than motivating employees to pay attention to quality, efficiency, good customer service, or
some other operational concern, open book management gets them to focus on the bottom line - the
success of the business over time
! Focus on why doing things in a company, rather on what to do; Employees think like owners
Introduction of department, business unit and corporate scorecards to employees
Employees can track their entrepreneurial actions by numbers
The Concept of Profit Pools; Gadiesh and Gilbert (1998)
A profit pool is the total profits earned in an industry at all points along the industry's value
chain. All the product or service segments in the value chain are identified and each is assessed in
terms of its current and potential profits (focus not on revenues).
Each segment of the industry value chain can be broken down again into individual products,
customer groups, geographical markets and distribution channels
Profit pools can also be applied to companies revealing potential unexploited resources

Sustaining Entrepreneurial Performance in the 21
st
Century
Organization (Ch. 15)
Developing a Personal Approach to the Entrepreneurial Process
The following eight principles represent a foundation around which the corporate entrepreneur can
design his or her personal model:
Solidify a relationship with a sponsor
Build a flexible team structure
Insulate the project and keep it quiet as long as possible
Become a guerrilla
Promise less but deliver more
Experiment and produce early wins
Manage project momentum
Attempt to set the parameters
The Importance of Sponsors
Sponsors are corporate managers at the higher levels willing to protect entrepreneurial individuals by
building environments of safety around them.
Consideration three project characteristics, before deciding for a sponsor
Nonf i nanc i al resourc es
Time, facilities, equipment, advice and personnel needed by the champion to successfully complete
the innovative project.
Invest ment
Venture money needed to keep the project moving along and avoid needless delays.
Cri t i c s
The extent of political opposition likely to be encountered by the champion; the sponsor must be
willing and able to defend the corporate entrepreneur and deter the critics.
The Dark Side of Entrepreneurship
The Confrontation with Risk
Financial Risk
Career Risk
Family and Social Risk
Psychic Risk
Entrepreneurial Stress
In general, stress can be viewed as a function of discrepancies between a person's expectations and
ability to meet demands, as well as discrepancies between the individual's expectations and
personality.
The Entrepreneurial Ego
In addition to the challenges of risk and stress, the entrepreneur also may experience the negative
effects of an inflated ego.
Four c harac t eri st i c s of t he ent repreneuri al ego
1. An Overbearing need for control
2. A Sense of Distrust
3. An Overriding Desire for Success
4. Unrealistic Optimism
Recognizing and Managing the Triggering Events
The decision to act entrepreneurially occurs as a result of interactions among organizational
characteristics, individual characteristics, and some kind of precipitating event named trigger.
Triggers can be grouped
Trigger occurred by internal/external development?
Is entrepreneurship based on an opportunity/threat?
Based on a market-pull/technology-push?
Is the event base on top-down/bottom-up?
Did the entrepreneurial event occur by systematic search/opportunism?
Creating a Sense of Urgency
The problem is sustainable innovation - making innovation happen on an ongoing basis and
throughout the company. BUT: Managers and employees see no need to innovate/change
Urgency is only perceived during a crisis

Entrepreneurial companies instill in their employees a burning desire to make things better. People
demonstrate a combination of
Paranoia (someone is out there right now figuring a superior way to do this)
Competitiveness (we can out-innovate anyone)
Pride (with our people and passion, magic is possible)
Obsession (we are focused and will not quit before we reach the top of the mountain).
The Adaptive Organization
Much emphasis is placed today on the "learning organization" and the "learning manager."
Underlying the learning process is the organization's ability to find or generate information,
organize or code it, process it, store it, generate reports from it, interpret it, share it, and act on it.
Reasons for stagnant learning
Key people involved with the project may have left the firm.
The champion responsible for the project may have been reassigned to a distant location.
A number of individuals may have participated, with each having been involved with a
different aspect of the experience at a different time.
Few records may have been kept.
Accounting figures are not always consolidated and readily accessible.
! Detailed archiving and tracking of entrepreneurial activity

An adaptive firm increases opportunity for its employees, initiates change, and instills a desire to be
innovative.

Rules to for an organization to adapt entrepreneurially
1. Share the Entrepreneurial Vision
2. Increase the Perception of Opportunity
3. Institutionalize Change as the Organizations Goal
4. Instill the Desire to be Innovative (Reward System; Environment that Allows Failure;
Flexible Operations; Development of Venture (V)-Teams)
The New Strategic Imperatives: Embracing Paradoxes
The entrepreneurial organization of tomorrow will be one filled with paradoxes, and will require
managers who are adept at managing them.
New strategic imperatives; Nadler and Tushman (1999)
1. Increase Strategic Clock Speed
2. Focus Portfolios with Various Business Models
3. Abbreviated Strategic Life Cycles
4. Create "Go-to-Market" Flexibility
5. Enhance Competitive Innovation
6. Manage Intra-Enterprise Cannibalism
Resulting Paradoxes out of new strategic imperatives
Paradox of Size and Scope
Paradox of Risk and Return
Paradox of Individual and Team
Paradox of Flexibility and Control
Paradox of Constructive and Destructive Behavior
Paradox of Success and Failure
The Entrepreneurial Mindset

In order to maintain this entrepreneurial mindset, the manager must assume certain
ongoing responsibilities; McGrath and MacMillan, 2000
Framing the challenge
Absorb uncertainty
Define gravity (What will be accepted/not accepted)
Clearing obstacles
The Entrepreneurial Firm: A Dynamic Incubator

Entrepreneurial organizations will be built around four major portfolios
1. Portfolio of competencies
2. Portfolio of resources
3. Portfolio of innovations
4. Portfolio of ventures
! Organization becomes a dynamic incubator