Part I

The Entrepreneurial Mind-Set

in the 21st Century

Chapter 3
The Entrepreneurial
Mind-Set in
Organizations:
Corporate
Entrepreneurship

PowerPoint Presentation by Charlie Cook

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a

publicly accessible website, in whole or in part.
 Learning Objectives
1. To understand the entrepreneurial mindset in
organizations
2. To illustrate the need for entrepreneurial thinking
in organizations
3. To define the term corporate entrepreneurship
4. To describe obstacles that prevent innovation
within corporations
5. To highlight the considerations involved in
reengineering corporate thinking
6. To describe the specific elements of a corporate
entrepreneurial strategy

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–2
 Learning Objectives (cont’d)
7. To examine the methods of developing managers
for corporate entrepreneurship
8. To illustrate the interactive process of corporate
entrepreneurship

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–3
 The Entrepreneurial Mindset in Organizations
• Response to rapid, discontinuous, and significant
changes in companies external and internal
environments in a global economy:
➢ Restructure of operations in fundamental and meaningful
ways.
➢ Introduction of corporate entrepreneurship or
intrapreneurship – dynamic, flexible entities prepared to
take advantage of new business opportunities when they
arise
➢ Continuous innovation which allows for pathways to
accelerate their pace and cope with competition in the
world markets.
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 Corporate Innovation Philosophy
• Important practices for establishing
an innovation-driven organization:
1. Set explicit innovation goals.
2. Create a system of feedback and
positive reinforcement.
3. Emphasize individual responsibility.
4. Provide rewards based on results.
5. Do not punish failures.

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 Assessing Support for Corporate Innovation
• Does the firm encourage entrepreneurial thinking?
• Does the firm provide ways for innovators to stay with
their ideas?
• Are people permitted to do the job in their own way, or
are they constantly stopping to explain their actions and
ask for permission?
• Has the firm evolved quick and informal ways to access
the resources to try new ideas?
• Has the firm developed ways to manage many small and
experimental innovations?

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 Assessing Support for Innovation (cont’d)
• Is the system set up to encourage risk taking and to
tolerate mistakes?
• Are people in the firm more concerned with new ideas or
with defending their turf?
• How easy is it to form functionally complete, autonomous
teams in the firm’s corporate environment?

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 3.1 Rules for an Innovative Environment

1. Encourage action.
2. Use informal meetings whenever possible.
3. Tolerate failure, and use it as a learning experience.
4. Persist in getting an idea to market.
5. Reward innovation for innovation’s sake.
6. Plan the physical layout of the enterprise to encourage
informal communication.
7. Expect clever bootlegging of ideas—secretly working on
new ideas on company time as well as personal time.
8. Put people on small teams for future-oriented projects.
9. Encourage personnel to circumvent rigid procedures and
bureaucratic red tape.
10. Reward and promote innovative personnel.
Source: Reprinted by permission of the publisher from “Corporate Venturing Obstacles: Sources and Solutions,” by Hollister B. Sykes
and Zenas Block, Journal of Business Venturing (winter 1989): 161. Copyright © 1989 by Elsevier Science Publishing Co., Inc.

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 Defining the Concept of Corporate
Entrepreneurship and Innovation
• Corporate Entrepreneurship
➢ A process whereby an individual or a group of
individuals, in association with an existing
organization, creates a new organization or instigates
renewal or innovation within the organization.
• Corporate Entrepreneurship Strategy
➢ 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.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–9
 3.1 Defining Corporate Entrepreneurship

Adding new
Large scale or
business via equity
sequential
investments
innovations

Source: Michael H. Morris, Donald F. Kuratko, and Jeffrey G. Covin, Corporate Entrepreneurship &
Innovation (Mason, OH, Thomson), 2008, p. 81.

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 The Need for Corporate Entrepreneurship
• Rapid growth in the number of new and sophisticated
competitors
• 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
• International competition

• Downsizing of major corporations

• An overall desire to improve efficiency and productivity

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–11
 Table
3.2 Sources of and Solutions to Obstacles in Corporate Venturing

Traditional Management Adverse Recommended

Practices Effects Actions
Enforce standard procedures Innovative solutions blocked, Make ground rules specific
to avoid mistakes funds misspent to each situation
Manage resources for efficiency Competitive lead lost, Focus effort on critical issues
and ROI low market penetration (e.g., market share)
Control against plan Facts ignored that should replace Change plan to reflect new learning
assumptions
Plan for the long term Nonviable goals locked in, Envision a goal, then set interim
high failure costs milestones, reassess after each
Manage functionally Entrepreneur failure and/or Support entrepreneur with managerial
venture failure and multidiscipline skills
Avoid moves that risk Missed opportunities Take small steps, build out from
the base business strengths
Protect the base business Venturing dumped when base Make venturing mainstream,
at all costs business is threatened take affordable risks
Judge new steps from Wrong decisions about competition Use learning strategies,
prior experience and markets test assumptions
Compensate uniformly Low motivation and inefficient Balance risk and reward,
operations employ special compensation
Promote compatible individuals Loss of innovators Accommodate “boat rockers”
and “doers”

Source: Reprinted by permission of the publisher from “Corporate Venturing Obstacles: Sources and Solutions,” by Hollister B. Sykes
and Zenas Block, Journal of Business Venturing (winter 1989): 161. Copyright © 1989 by Elsevier Science Publishing Co., Inc.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–12
 Successful Innovative Companies
• Factors in large corporations that are successful
innovators:
➢ Atmosphere and vision
➢ Orientation to the market
➢ Small, flat organizations
➢ Multiple approaches
➢ Interactive learning
➢ Skunk Works (small groups)

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–13
 Conceptualizing Corporate
Entrepreneurship Strategy
• Corporate Entrepreneurship Strategy
➢ 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.
➢ It requires the creation of congruence between the
entrepreneurial vision of the organization’s leaders
and the entrepreneurial actions of those throughout
the organization.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–14
 Modeling the Corporate Entrepreneurship
Strategy Process

• Corporate entrepreneurship strategy is

manifested through the presence of three
elements:
➢ An entrepreneurial strategic vision
➢ A pro-entrepreneurship organizational architecture
➢ Entrepreneurial processes and behavior as
exhibited throughout the organization

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–15
 Figure
3.2 An Integrative Model of Corporate Entrepreneurship Strategy

Source: R. Duane Ireland, Jeffery G. Covin, and Donald F. Kuratko, “Conceptualizing Corporate
Entrepreneurship Strategy,” Entrepreneurship Theory and Practice 33, no. 1 (2009): 24.

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 Conceptualizing a Corporate
Entrepreneurship Strategy (cont’d)
• Critical steps of a corporate entrepreneurial
strategy:
1. Developing the vision
2. Encouraging innovation
3. Structuring for an intrapreneurial climate
4. Developing individual managers for corporate
entrepreneurship
5. Developing venture teams.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–17
 Figure
3.3 Shared Vision

Source: Jon Arild Johannessen, “A Systematic Approach to the Problem of Rooting a Vision in the Basic Components of an Organization,” in
Entrepreneurship, Innovation, and Change 3, no. 1 (March 1994): 47. Reprinted with permission from Plenum Publishing Corporation, New
York.
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–18
 Types of Innovation
• Radical Innovation
➢ The launching of inaugural breakthroughs.
➢ These innovations take experimentation and
determined vision, which are not necessarily managed
but must be recognized and nurtured.
• Incremental Innovation
➢ The systematic evolution of a product or service into
newer or larger markets.
➢ Many times the incremental innovation will take over
after a radical innovation introduces a breakthrough.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–19
 Table
3.3 Objectives and Programs for Venture Development

Objectives Programs
Make sure that current systems, Reduce unnecessary bureaucracy, and
structures, and practices do not present encourage communication across
insurmountable roadblocks to the departments and functions.
flexibility and fast action needed for
innovation.
Provide the incentives and tools for Use internal “venture capital” and special
intrapreneurial projects. project budgets. (This money has been
termed intracapital to signify a special fund
for intrapreneurial projects.) Allow
discretionary time for projects (bootlegging
time).
Seek synergies across business areas Encourage joint projects and ventures
so new opportunities are discovered in among divisions, departments, and
new combinations. companies. Allow and encourage
employees to discuss and brainstorm new
ideas.

Source: Adapted by permission of the publisher from Rosabeth Moss Kanter, “Supporting Innovation and Venture Development in
Established Companies,” Journal of Business Venturing 1, no. 1 (Winter 1985): 56–59. Copyright © 1985 by Elsevier Science Publishing
Co., Inc.
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 Table
3.4 Developing and Supporting Radical and Incremental Innovation

Radical Incremental
Stimulate through challenges and puzzles. Set systematic goals and deadlines.
Remove budgetary and deadline constraints Stimulate through competitive pressures.
when possible.
Encourage technical education and exposure Encourage technical education and
to customers. exposure to customers.
Allow technical sharing and brainstorming Hold weekly meetings that include
sessions. key management and marketing staff.
Give personal attention—develop relationships Delegate more responsibility.
of trust.
Encourage praise from outside parties. Set clear financial rewards for meeting
goals and deadlines.
Have flexible funds for opportunities that arise.
Reward with freedom and capital for new
projects and interests.

Source: Adapted from Harry S. Dent, Jr., “Growth through New Product Development,” Small Business Reports (November 1990): 36.

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 3M’s Innovation Rules
• Don’t kill a project
• Tolerate failure
• Keep divisions small
• Motivate the champions
• Stay close to the customer
• Share the wealth

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 Structuring the Work Environment

• Reestablishing the drive to innovate:

➢ Invest heavily in entrepreneurial activities that allow
new ideas to flourish in an innovative environment.
➢ Provide nurturing and information-sharing activities.
➢ Employee perception of an innovative environment is
critical.
• Corporate Venturing
➢ Institutionalizing the process of embracing the goal of
growth through development of innovative products,
processes, and technologies with an emphasis on
long-term prosperity.

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 Preparing for Failure
• “Learning from Failure”
➢ Recognizing the importance of managing the grief
process that occurs from project failure.
➢ Understanding how organizational routines and rituals
are likely to influence the grief recovery.
➢ Ensuring that the organization’s social support system
can encourage greater learning, foster motivational
outcomes, and increase coping self-efficacy in
affected individuals.

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 Developing Individual Managers
for Corporate Entrepreneurship

• Corporate Innovation Training Program:

1. The Entrepreneurial Experience
2. Innovative Thinking
3. Idea Acceleration Process
4. Barriers and Facilitators to Innovative Thinking
5. Sustaining Innovation Teams (I-Teams)
6. The Innovation Action Plan

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 Corporate Entrepreneurship
Assessment Instrument (CEAI)

• Key Internal Climate Factors in Determining an

Organization’s Readiness for Entrepreneurial
Activity:
➢ Top management support
➢ Autonomy/work discretion
➢ Rewards/reinforcement
➢ Time availability
➢ Internal organizational boundaries

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3–26
 Facilitating Corporate Entrepreneurial Behavior
• Organizations foster entrepreneurial behavior by:
➢ Encouraging—not mandating—innovative activity
➢ Human resource policies for “selected rotation”
➢ Committing to projects long enough for momentum to
occur.
➢ Bet on people, not on analysis.

• Rewarding Entrepreneuring:
➢ Allow inventor to take charge of the new venture
➢ Grant discretionary time to work on future projects
➢ Make intracapital available for future research ideas

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 Table
3.5 Corporate Innovator’s Commandments

1. Come to work each day willing to give up your job for the innovation.
2. Circumvent any bureaucratic orders aimed at stopping your innovation.
3. Ignore your job description–do any job needed to make your innovation work.
4. Build a spirited innovation team that has the “fire” to make it happen.
5. Keep your innovation “underground” until it is prepared for demonstration to
the corporate management.
6. Find a key upper-level manager who believes in you and your ideas and will
serve as a sponsor to your innovation.
7. Permission is rarely granted in organizations, thus always seek forgiveness
for the “ignorance” of the rules that you will display.
8. Always be realistic about the ways to achieve the innovation goals.
9. Share the glory of the accomplishments with everyone on the team.

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 Developing Innovative (I) Teams
• Innovative (I) Team
➢ A semi-autonomous self-directing, self-managing,
high-performing group of two or more people who
formally create and share the ownership of a new
organization.
➢ The leader is called a “innovation champion” or a
“corporate entrepreneur.”
• Collective Entrepreneurship
➢ Individual skills are integrated into a group; this
collective capacity to innovate becomes something
greater than the sum of its parts.

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 Sustaining a Corporate Entrepreneurship
Strategy
• Sustained Corporate Entrepreneurship Model
➢ Based on theoretical foundations from previous
strategy and entrepreneurship research.
➢ Considers the comparisons made at the individual and
organizational level on organizational outcomes, both
perceived and real, that influence the continuation of
the entrepreneurial activity.
➢ Transformational trigger
• Something external or internal to the company that initiates
the need for strategic adaptation or change.

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 Critical Strategic Entrepreneurship Roles

Senior-level Middle-level First-level

Managers Managers Managers

Have ratifying, Endorse, refine, and Experiment with

recognizing, and guide entrepreneurial change, promote
directing roles that in opportunities, and adjustment to change,
turn are associated identify, acquire, and and foster conformity in
with particular deploy resources the development of
managerial actions needed to pursue competencies needed
opportunities to execute the strategy

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 Figure
3.4 A Model of Sustained Corporate Entrepreneurship

Source: Donald F. Kuratko, Jeffrey S. Hornsby, and Michael G. Goldsby, “Sustaining Corporate Entrepreneurship: Modeling Perceived Implementation
and Outcome Comparisons at Organizational and Individual Levels,” International Journal of Entrepreneurship and Innovation 5, no. 2 (May 2004): 79.

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 Key Terms and Concepts
• bootlegging • incremental innovation
• champion • innovation team (I-team)
• collective • interactive learning
entrepreneurship • intracapital
• corporate • intrapreneurship
entrepreneurship • radical innovation
• Corporate
• Skunk Works
Entrepreneurship
• strategic entrepreneurship
Assessment Instrument
(CEAI) • top management support
• corporate venturing

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