Summary of all lectures of the course Corporate Entrepreneurship
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Module
Corporate Entrepreneurship (325081M6)
Institution
Tilburg University (UVT)
This is a complete summary of all lectures and tutorials of the course Corporate Entrepreneurship. All the papers that are discussed during the lectures and tutorials are included in the summary. Course: Corporate Entrepreneurship (-M-6)
Course overview
Course objectives
• Corporate entrepreneurship = study of entrepreneurial behavior in established organizations
• Why do firms need corporate entrepreneurship?
• Which forms of corporate entrepreneurship exist?
• What are challenges that corporate ventures face?
• Which solutions exist?
Course learning goals
• Comprehend core concepts from research in corporate entrepreneurship to assess
organization design and performance.
• Evaluate constraints to corporate entrepreneurship (e.g. culture, structure, size…) in
corporate ventures based on articles, quotes, videos, and cases, and explain why corporate
ventures are (un)successful or fail.
• Formulate an opinion based on critically discussing contemporary research in scientific and
practitioner-oriented journals, and identify theoretical and empirical gaps in the field of
corporate entrepreneurship.
• Based on a real-life problem that an organization faces, come up with an action plan that
addresses the constraints to corporate entrepreneurship that the organization is facing and
proposes a course of action on how to address the problem that the organization faces.
Course map
Part 1: understanding the innovators dilemma
• Week 1: introduction to innovators dilemma
• Week 4: disruptive innovation COVID TiSEM (guest)
Part 2: internal solutions
• Week 2: ambidexterity
• Week 3: managing corporate entrepreneurs
• Week 5: internal corporate venturing
Part 3: external solutions
• Week 6: sourcing external knowledge
• Week 7: entrepreneurship in construction industry (guest)
1
,Questions per week
Week 1: Why do large successful companies sometimes fail when confronted with disruptive changes
in their environment? This week, we will discuss a number of possible reasons, including the idea
that missing the boat can happen because of good instead of poor management.
Week 2: Aside from strategic planning, organizations can also be structured differently. According to
the notion of ambidexterity, successful corporate entrepreneurship requires some degree of
separation in terms of exploitative and explorative business activities. In what way can we realize
such separations?
Week 3: Next to strategies and structures, how do we manage employees such that we best enable
innovation? What leadership style is required? How do we financially reward innovative employees,
and do such rewards matter at all?
Week 5: The process by which employees bring their idea from concept to the market can also be
formalized with the goal of growing new business internally, managed by employees (internal
corporate ventures). How can such a process be managed? What are stages and gates?
Week 6: Innovation does not only need to happen within corporate walls: beyond organizational
boundaries there are ample opportunities too for corporate entrepreneurship. What are the pros and
cons of opening up in terms of innovation? And are some forms of external corporate venturing
better than others? And, on a more general note, do the various forms of corporate entrepreneurship
really help to solve the innovator’s dilemma?
2
,Innovators dilemma
The fall of Nokia
Large firms are missing the boat: especially for big companies it is hard to stay innovated, disruptive
innovation is hard to predict and if you do not adapt to change you fail
Large firms are missing the boat
Typologies of technological change (firms have difficulties with the latter types)
• Old vs new
• Competence-enhancing vs competence-destroying
• Incremental vs radical
• Sustaining vs disruptive
Incremental change: change that occurs in small series
Radical change: change that occurs abrupt and quick
Sustaining innovation: develop existing markets and values by doing the same yet slightly better
Disruptive innovation: generate new markets and values in order to disrupt existing ones by
embracing new technologies and adapting new business models.
Why does this happen: the success syndrome
If you offer a product that matches what the customer want there is a fit. If there is a fit there is
usually also success. What happens next is that the firm is becoming larger and older. If this happens
firms have to put controls in place and this new structure means rigidity (stijfheid) making it more
difficult to make decisions easily (structural inertia). Also longer and older firms can be overconfident
in what they do making them resistant to change while change is already occurring (culture inertia).
This inertia (“inert” = passive) leads to success in stable markets but failure when markets shift.
Is inertia always bad
• Inertia may result from accountability and reliability
• Reliability can be good but for really success a firm need to adapt
• Hard to protect the traditional successful business (past) and engage in radical innovation at
the same time (future)
3
,The innovators dilemma
Innovators dilemma: though choice for firms between sustainable or disruptive innovation
The two dashed lines indicate product performance. The lowest dashed line fits with students that
are not very demanding for a bike and the highest dashed line fits with bike professionals that want
all features. You start in position A making low demanding customers happy, then you grow and end
up in position B making demanding customers happy, then you keep on adding things but nobody
wans to pay for this thus you end up in overshooting situation making nobody happy. You should
keep track on disruptive innovations starting at position C at lower levels of product performance. At
this point the technology is not completely ready yet and customers do not want your product yet.
But over time sustainable technologies bring the product to position D reaching demands at the low
end and finally to position E reaching demands at high end.
1.1 The innovators dilemma: when new technologies cause great firms to fail (Christensen)
RQ: Why do well-managed companies often fail in spite of doing the right thing (e.g. meet their
customer needs?
Q1: What is the innovators dilemma?
Innovators dilemma: the logical competent decisions of management that are critical to the success
of their companies are also the reason why they lose their positions of leadership
Figure 1 shows that the innovators dilemma occurs because technologies (solid lines) can progress
faster than market demand (dashed lines). This means that in the efforts of the firms to provide
better products than their competitors and earn higher prices and margins, suppliers often overshoot
their market: they give customers more than they need or ultimately are willing to pay for. And more
importantly, it means that disruptive technologies that may underperform today, relative to what
users in the market demand, may be fully performance-competitive in that same market tomorrow
4
,Firms not able to spot disruptive innovations because disruptive technologies have (at least initially)
• Small markets: technologies commercialize first in emerging or insignificant markets
• Lower profit margins: products are simpler, cheaper, lower margins and not greater profits
• No reliable market statistics
According to Christensen failure to adapt to disruptive innovation is not the result of bad
management but the result of good management. Firms with good management (often large firms)
listen to their customers and invest aggressively in new technologies that would provide their
customers more and better products of the sort they wanted. However, there are times in which it is
right not to listen to customers pursue small instead of substantial markets and invest in developing
low-performance products that promise lower margins.
Q2: How is sustaining vs disruptive distinction different from incremental vs radical distinction?
Incremental vs radical is about the size of the change whereas sustaining vs disruptive is about the
relation to the firms current business
Incremental: change in small steps
Radical: change in big steps (Shivaram: radical ≠ disruptive since it does not break current situation)
Sustaining: enhancing the perf of your current business (moving up on the line you are already on)
Disruptive: destroying your current business (Shivaram: performance is inferior of what the markets
expects)
Incremental and sustaining: new razor with four ipv three blades
Incremental and disruptive: new production line process for car manufacturing
Radical and sustaining: air fryer
Radical and disruptive: digital photography
Q3: Why do firms not invest in disruptive technologies?
1. Companies depend on customers and investors: say no to disruptive technologies (see 3 char)
➔ Theory of resource dependence: while managers think they control the flow of resources
in their firm, in the end it is really customers and investors who decide how money will
be spent because companies with investment patterns that do not satisfy their customers
and investors do not survive.
2. Small markets do not solve the growth needs of large companies
3. Markets that do not exist cannot be analyzed
4. An organization capabilities determine its disabilities (failure is result of good management?)
5. Technology supply ≠ market demand (does not meet)
1.2 Darwin and the demon (Moore 2004)
RQ: How can firms innovate and survive in the long term? What forces must firms overcome?
Q1: Explain the title of this article.
Darwin = evolution (survival of the fittest)
Demon = inertia (too much reliance on production innovation early on and overshooting later on)
(Shivaram: inertia means not wanting to change, slowness, laziness, non-responsiveness)
Darwin and the demon = to overcome Darwinian selection processes firms need to innovate by
beating the demon
Q2: Which type of innovation should firms focus on?
Innovations need to be aligned with the market-development life cycle. (Shivaram: not every firm in
every stage of the life cycle needs to care about all forms of innovation, some become more
important during specific phases than others. Inertia limits them form engaging in the alignment)
5
,Market-development life cycle
• Early market: the introduced technology attracts the attention of early adopters such as
enthusiasts who see it as cool, visionaries who see it as potentially disruptive and the press
who see it as the next big thing. Pragmatic buyers are curious but make no commitments.
• The Chasm: the technology is caught betwixt and between (midway position) because it has
been in the market for same time and has lost its novelty. Visionaries are o longer making big
bets and the acceptance is not widespread enough to convince pragmatists that it would be a
safe purchase. Only way to survive is to target a niche market that suffers from a problem for
which the technology is the sole solution.
• Bowling Alley: the technology is gaining acceptance among pragmatists in one or more niche
markets where it enables a solution to problem. Then the bowling pin metaphor arises: when
one niche adopts the technology, closely related niches also become sensitive. Outside the
niches it is still largely unknown.
• Tornado: technology has past the test of usefulness and is now perceived as necessary and
standard for many applications. All the pragmatists who were hanging back from committing
are rushing into the market to make sure they do not get left behind. Customers are making
their first purchases, big growth revenues, strong competition, and investors are bidding.
• Main Street (Early): it is still growing nicely but the era of hypergrowth has diminished. First
consolidation end customers are focused on systematic improvements in the offering.
• Main Street (Mature): the growth has flattened and commoditization (products have
economic value and can differentiate based on attributes). Second wave of consolidation,
customers take the product for granted, and the press no longer writes about it. No
obsoleting technologies on the horizon so market risk is low.
• Main Street (Declining): the product has become ossified (verstard) and market dominators
do not react to customer needs anymore. The next generation technologies are on the
horizon but none has gone through the tornado yet. The market is ripe for disruption
• Fault Line and End of Life: technology obsolescence exposes the fault line between what a
company sells and what the market now desires. The next generation tornado is detrimental
for the established vendors. There is not path forward for companies that produce the
obsolete technology apart from leveraged buyouts (acquisition of firm financed by a loan)
Innovation types
• Disruptive innovation: markets appear as if from nowhere creating new sources of wealth.
It tends to have its roots in technological discontinuities
• Application innovation: takes existing technologies into new markets to serve new purposes
• Production innovation: takes established offers in established markets to the next level with
the focus on cost reduction, usability improvements (easier use), product performance or any
other product enhancement (bv Intel releases a new processor)
• Process innovation: makes process for established offers in established markets more
effective or efficient (bv inventory process)
• Experiential innovation: surface modifications that improve customers experience of
established products or processes (bv delighters: you’ve got mail, satisfiers: superior line
management at Disneyland, reassurers: packaging tracking from DHL)
• Marketing innovation: improves customer-touching processes such as marketing
communications or customer transactions
• Business model innovation: reframes an established value proposition to the customer or
reframes a company established role in the value chain or both (bv Gillette moves from razors
to razors blades)
• Structure innovation: capitalizes on (gains advantage from) disruption to restructure industry
relationships
6
, Combining
• Technology adaption life cycle: interoperate use of (separately or together)
disruptive, application, product innovation
• Main street (early and mature): interoperate use of process, experiential, marketing
➔ Using the previous innovations in this phase would result in overshooting
• Main street (declining) and fault line and end of life: business model and structure
Q3: How can inertia be overcome?
The implication of the life-cycle model is that enterprises must mutate their core competences over
time to sustain attractive returns. But management’s efforts to change direction are thwarted by the
inertia that success creates. The deeper the enterprise is into the life cycle and the more successful it
has been, the greater its tendency to return to its former course.
Ways to overcome inertia
• Introduce new types of innovation while deconstructing old processes and organizations by
extracting resources from old processes and organizations and repurpose them to serve
innovation type or take them out of company if that is the only option (common mistake:
leaving old structures untouched)
• Drive deconstruction by productivity ipv differentiation: centralize the function, standardize
the process, simplify the process, automate or outsource the process
• Differentiation-creating innovation and productivity-creating deconstruction must be
conducted at the same time
Summary article
Shivaram: Darwin is about survival of the fittest and competition and Demon is the inertia. And in
order to remain fit to survive you have to align the market-development life cycle with different types
of innovation and therefore you have to beat inertia which you do by deconstructing the organization
7
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