Corporate Entrepreneurship & Innovation – Summary
ECB3CEI, April 2019
Week 1 – Introduction to corporate entrepreneurship
CHAPTER 1: THE ENTREPRENEURIAL IMPERATIVE IN ESTABLISHED ORGANIZATIONS
New forms of business organization and business relationships are appearing almost daily.
Entrepreneurial thinking and acting are changing the way business is conducted at every level.
Companies cannot be static – they must continually adjust and adapt. In the midst of all this comes
the question of the relevance of the traditional theories and principles that guide managerial
practice.
In this chapter, we explore the changing shape of the managerial challenge in companies. As we shall
see, entrepreneurship represents a unifying framework for successful management practice in the
21st century.
To understand modern corporations, we must consider their external and internal environments.
The external environment today is all about change. Some examples of external environments are
technological, competitive, consumer, economic, legal, resource, and labor environments. Managers
have to make quick decisions, or they will miss opportunities. A corporation is always embattled –
the corporation finds itself at a struggle to survive because they have to deal with so many external
factors. Companies are experiencing a general lack of long-term control over their external
environments.
How are today’s companies reacting to this challenge? It is clearly that traditional models of
bureaucracy, hierarchical management systems do not work in this context. It is all about
experimentation, right leadership style, and the right ways to reward employees. There is also an
upside to changing external environments: turbulence also means opportunity.
The bottom line is that managers have to seek for sustainable competitive advantage. The quest for
competitive advantage requires that companies and managers continually reinvent themselves.
There are five key company capabilities:
1. Adaptability: the ability to adjust, on a timely basis, to changing environments.
2. Flexibility: the ability to design company strategies, processes, and operational approaches
that can simultaneously meet the diverse and evolving requirements of customers, suppliers,
and other stakeholders.
3. Speed: the ability to act quickly on emerging opportunities, to develop new products and
services more rapidly, and to quickly make operational decisions.
4. Aggressiveness: an intense, focused, and proactive approach to eliminating competitors,
delighting customers, and growing employees.
5. Innovativeness: a continuous priority placed on developing and launching new products,
services, processes, markets, and technologies, and on leading the marketplace.
,Summary Corporate Entrepreneurship & Innovation April 2019
These five capabilities come down to one: entrepreneurship. People hold disparate views regarding
who is an entrepreneur and what the nature of entrepreneurial activities looks like. At the center of
all these views is creation. Entrepreneurship is about creating organizations, change, innovation, and
wealth. The best definition is: entrepreneurship is the process of creating value by bringing together
a unique combination of resources to exploit an opportunity. This definition has four key elements:
1. Entrepreneurship involves a process – it is manageable and can be broken down in steps or
stages. Entrepreneurship can be applied in any organization.
2. Entrepreneurs create value where there was none before (in the organization and in the
market).
3. Entrepreneurs put resources together in a unique way. Unique combinations of money,
people, procedures, technologies, etc. represent the means by which entrepreneurs create
value.
4. Entrepreneurship involves opportunity-driven behavior. You need the ability to recognize
opportunities in the external environment.
Corporate entrepreneurship means entrepreneurial behavior inside corporate organizations. It
involves the generation, development, and implementation of new ideas and behaviors. This
perspective centers on innovation. Ling et al. (2008) approach corporate entrepreneurship as the
sum of a company’s innovation, renewal, and venturing efforts.
Entrepreneurship differs from management. Management is the process of setting objectives and
coordinating resources, including people, in order to attain those objectives. Management involves
getting things done by people. Managers are charged with the efficient and effective utilization of the
resources under their control. They tend to be focused on optimizing current operations. Efficiency is
improved when the amount of work being done (the output) remains the same while the cost of
producing this output (the input) declines. The entrepreneur, alternatively, is preoccupied not with
what is, but what can be. Within great organizations, a balance is achieved between disciplined
management and entrepreneurship.
There is an entrepreneurial challenge in established companies. To understand this, we must
understand how companies evolve. Every organization is unique, but there are certain patterns.
Griener (1972) suggests a process whereby companies enter a particular stage, during which they
prosper until they reach crisis point.
- Start up and early growth: the launch of a venture and the initial penetration of the market.
A highly creative stage.
- Growth through direction: companies need to formalize.
- Growth through delegation: delegation takes the form of creating semi-autonomous product
divisions and strategic business units.
- Growth through coordination: companies respond to the loss of control by centralizing
operations.
- Growth through collaboration.
See the explanation of the stages in Table 1-4 on page 18.
Hamel (2007) points to the inevitable diminishing returns experiences by most organizations using
traditional strategies, suggesting that conventional management practice has simply run its course.
,Summary Corporate Entrepreneurship & Innovation April 2019
An entirely new model of management is needed in our companies. What does it take to transform a
non-entrepreneurial company into a highly entrepreneurial company?
The beginning point is to develop an in-depth understanding of the nature of entrepreneurship and
how it can be applied to established organizations. Building on this foundation, company leaders
must then build a work environment that encourages employees to recognize and act upon their
own innate entrepreneurial potential. Finally, the ability to achieve entrepreneurial performance on
sustainable basis requires a clear understanding of the ongoing obstacles that constrain
entrepreneurship. This model looks like this:
CHAPTER 2 – HOW CORPORATE ENTREPRENEURSHIP DIFFERS
Entrepreneurship doesn’t only happen in start-up businesses – it happens in every size and type of
business. The purpose is to innovate ideas into organizational realities. Entrepreneurship has both
attitudinal and behavioral dimensions, meaning it is both a way of thinking and acting. However,
there is quite a lot of skepticism around entrepreneurship. For some examples, see page 29.
To understand entrepreneurship in reality, we need to understand the process. This process
generally consists of the following six stages:
1. Identifying the opportunity: this can be described as a favorable set of circumstances
creating a need or an opening for a new business concept or approach. The reality is that
many new concepts fail because there was no opportunity. This is why you need to apply a
test of marketplace.
, Summary Corporate Entrepreneurship & Innovation April 2019
2. Defining the business concept: with an opportunity clearly in mind, the entrepreneur
specifies a business concept. This is defined as an innovative approach for capitalizing on an
opportunity. You have to find administration systems, new production methods, marketing
approaches, managing logistics and so forth.
3. Assessing the resource requirements: of course, financial requirements are important for
your concept, but nonfinancial needs also need a lot of attention. For instance, creative skills,
patents, a great location, a well-constructed and motivated team are important.
4. Acquiring the necessary resources: resources might need to be rented, leased, contracted
for etc. Leveraging allows the entrepreneur to move concepts along the development path
without major financial commitments.
5. Implementing and managing the concept: the entrepreneur is involved in ‘creating the new’.
As a result, no matter how well planned, implementation of an innovative concept is typically
hectic, uncertain, and ambiguous.
6. Harvesting the venture: harvesting is concerned with how returns will be realized, over what
period, and the mannier in which the concept will eventually be absorbed by some other
business entity.
Corporate Entrepreneurship differs from this process. The basic nature of entrepreneurship is
universal, but there is a difference between starting a new company and applying entrepreneurship
in a large company. You need to understand the similarities between start-up and corporate
entrepreneurship because of three reasons:
1. This understanding helps dispense the notion that corporate entrepreneurship is just a
popular management fad, and that interest in it will fade once the consultants move on to
the next new tool, concept or perspective.
2. It is vital that both the senior executives who commit the company to an entrepreneurial
path, as well as the champions within organizations expected to carry out the
entrepreneurial mission, understand the phenomenon with which they are dealing.
Entrepreneurship is real; it entails risks; failure is likely; and the costs can be significant.
3. Virtually all of the research on entrepreneurship has emphasized the start-up context. The
commonalities between start-up and corporate entrepreneurship suggest company
executives can learn much from examining what we know about the start-up context, rather
than discard those insights as irrelevant.
There are some important differences.
Start-Up Entrepreneurship Corporate Entrepreneurship
Entrepreneur takes the risk Company assumes the risks
Entrepreneur owns the concept or idea Company owns the concept and intellectual
rights
One misstep means failure More room for errors
Vulnerable to outside influence More insulated from outside influence
Speed of decision making Longer approval cycles
Little security Job security
No safety net Dependable benefit package
Independence of the entrepreneur (although Independence of the champion with many
there typically is a team behind the others; you have to share credit
entrepreneur)
Few people to talk to Extensive network for bouncing ideas
Limited scale and scope initially Potential for sizable scale and scope fairly
quickly
Severe resource limitations Access to finances, R&D, production facilities,
