Ch1 Introduction: Entrepreneurship - thriving in chaos
§1 The new age of change and uncertainty
“As Darwin well understood, it is the species most responsive to change that is the best
equipped for survival”
Economic power has shifted from West to East ➔ US economy has lost its
dynamism, China is experiencing unprecedented growth in non-state-owned
enterprise and driving innovation ➔ trade wars have started.
Uncontrollable migration has characterized much of the turbulence and there has
been a political backlash ➔ Brexit, Donald Trump, economic recession.
Monopoly= the exclusive possession or control of the supply of or trade in a commodity or
service by a company or group of companies.
Echo chambers= a metaphor describing a situation where beliefs are amplified or reinforced by
communication and repetition inside a closed system such as news or social media.
Bankruptcy= when you are unable to pay your debts and a court order is obtained by creditors
to have your affairs placed in the hands of an official receiver.
Oligopoly= a market or industry dominated by a small number of large sellers.
There may be ample opportunities but they only go to those who can spot them first, are swift to
adapt and are open and willing to change.
Competitive advantage= the advantage a firm has over its competitors, allowing it to generate
higher sales or profit margins and/or retain more customers than its competitors.
The old political orthodoxy of global neoliberalism seems to be in decline and populist right-wing
political parties in the ascendancy.
The advances in AI and the trend towards more and more automation could lead to mass
unemployment and wage stagnation.
Gig economy= workers seeking temporary, short-term work ‘gigs’ or projects.
§2 The challenge of entrepreneurship
One response to these winds of change is a realization that security of employment
is a thing of the past ➔ most start-ups are born to stagnate and die.
Gazelles= young high-growth firms.
Unicorns= a high-growth private company valued at over $1 billion.
Entrepreneur= a person who creates and/or exploits change for profit, by innovating,
accepting risk and moving resources to areas of higher return ➔ are seen as
catalysts for economic, and sometimes social, change.
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,§3 Can big companies survive?
The average life expectancy of a multinational company is only between 40 and 50 years, with
wide variations in life expectancy and many dying; much earlier than others.
Sublinear ➔ companies become less efficient as they get bigger.
Economies of scale= the cost advantages obtained due to the scale of operation, where cost
per unit of output decreases with increasing scale.
Initial Public Offering (IPO)= the stock market launch of a company, where shares are sold to
institutional and usually also retail investors.
1. Leadership crisis
2. Autonomy crisis
3. Control crisis
4. Bureaucracy crisis
So, big companies can certainly
extend their lives, but only by
innovation.
To tell the true story of innovation,
we would have to say that
employees conceive of innovations,
communities composed of
corporations and institutions build
them, and then the competitions
takes over to scale them.
§4 Implications for big companies
The focus has shifted from existing and past value to future value.
Industrial economy ➔ knowledge economy.
Focus on risk minimization and a realization that companies need to maximize their flexibility.
Strategic options= actions you might undertake if risks or opportunities materialize.
Economies of scope (synergy)= the term used when less of a resource is used because it is
spread across multiple activities. Often referred to as ‘1+1=3’.
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,Corporate social responsibility (CSR)= the combination of business ethics, social
responsibility and environmental sustainability.
§5 The entrepreneurial mindset
Entrepreneurial character traits
● Need for autonomy and independence
● Need for achievement
● Internal locus of control ➔ belief that they control their own destiny
● Drive and determination
● Creativity, innovation and opportunism
● Acceptance of risk and uncertainty
Intrapreneur= someone developing new products or businesses and operating within a
company that is not owned by them.
Personality traits ➔ entrepreneurs
● Openness ➔ high
● Extraversion ➔ high
● Conscientiousness ➔ high
● Agreeableness ➔ low
● Neuroticism ➔ low
Dominant logic= paradigms or conventions that establish a status quo that is rarely
questioned.
How do entrepreneurs manage risk and develop strategy?
● Many do not produce business plans
● Often claim to have achieved their success through luck rather than strategy
● By creating more strategic options and opportunities they improve their chance of
successfully pursuing at least one
● The management style of entrepreneurs is typically based upon informal personal
relationships rather than authority
● Develop a strong sense of vision
● Understand the firm’s core competences= the skills, multiple resources and
technologies that enable a company to provide benefits to customers and distinguish
them in the marketplace
● Do not wait for perfect knowledge or perfect opportunity, they learn by doing
Emergent strategy= strategy development that is characterized by reactive solutions to
existing problems.
Strategizing= continuous assessment of the options about how to make the most of
opportunities or avoid risks as they arise.
First-mover advantage= the competitive advantage gained by being the first into a market.
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,Lean start-up= the launch of a minimum viable product then using customer feedback in an
iterative fashion to tailor it further to the specific needs of customers.
Entrepreneurs approach decision making in a risky, uncertain and rapidly changing
environment, through intuition, judgement, wisdom, experience and insight with holistic
knowledge of operations and a strong vision of what they want to achieve.
§6 Complexity theory and managing in chaos
Complexity theory seeks to explain how complex systems work.
Complex adaptive systems are the result of multiple independent actions.
There are three requirements to create effective self-organization
● A common identity and purpose
● A free flow of knowledge and information
● Strong personal relationships
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,Ch2 Corporate entrepreneurship
§1 Entrepreneurial intensity
Corporate entrepreneurship is the broad term
used to describe entrepreneurial behaviour in an
established, larger organization.
Entrepreneurial intensity= an increase in both
the degree (or scale) and the frequency of
entrepreneurial activity within an
organization ➔ better able to cope with
change, better able to innovate and
therefore better able to gain competitive
advantage.
Culture= in an organization this is about the web
of unspoken, prevalent norms, basic beliefs and assumptions about the ‘right’ way to behave.
Sometimes simply described as ‘how it is around here’.
“Corporations have to dismantle bureaucracies to survive. Economies of scale are giving way to
economies of scope, finding the right size for synergy, market flexibility and, above all, speed.” -
John Naisbitt (1994)
Traditional management focuses on efficiency and effectiveness rather than creativity and
innovation - control rather than empowerment - uniformity rather than diversity - stress discipline
rather than motivation
§2 Defining corporate entrepreneurship
Strategic renewal / Entrepreneurial transformation / Strategic entrepreneurship= changing
the strategic direction of the organization so as to better cope with change and innovation. Often
linked to a company attempting a turnaround.
“Corporate entrepreneurship is seen as the sum of a company’s innovation, strategic renewal
and venturing efforts.” - Zahra (1996)
Corporate venturing can be viewed simply as a series of tools or techniques that can help
bring about or maintain strategic renewal and encourage innovation.
Internal corporate venturing= organizational structures needed to encourage new businesses
to develop internally whilst aligning them with the company’s existing activities.
Disruptive innovation= introducing radically new products or services into existing markets.
Innovation or venture teams= a group developing new products or businesses and operating
within a company that is not owned by them.
External corporate venturing= strategic partnerships, alliances, etc. and the investment and
acquisition by large companies in strategically important smaller firms.
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,Entrepreneurial orientation= organizations involved in processes to encourage
entrepreneurship and that have exhibited a sustained pattern of entrepreneurial behaviour over
time.
Organizational architecture= the infrastructure needed to build processes that deliver an
organization’s vision. It comprises:
● Leadership and management
● Culture
● Structure including systems
● Strategies
Entrepreneurial architecture= organizational architecture that encourages entrepreneurship
and innovation on a sustainable basis.
§3 Entrepreneurial orientation
3 broad dimensions of ‘organizational climate’
● Innovativeness
● Risk-taking
● Pro-activeness
Further 2 dimensions to broaden the scope of entrepreneurial orientation
● Competitive aggressiveness
● Internal autonomy
Entrepreneurial orientation has been linked not only to new venture creation but also to
improved financial performance.
Input measures - representing the organizational climate within a firm - ought to be used to
measure entrepreneurial orientation.
Output measures should reflect the effect entrepreneurial orientation has on entrepreneurial
intensity - the scale and frequency of entrepreneurial events.
Innovativeness dimension had been retitled as innovative orientation defined as ‘composed of
learning philosophy, strategic direction and transformational beliefs that, in turn, guide and direct
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,all organizational strategies and actions… to promote innovative thinking and facilitate
successful development, evolution and execution of innovation’.
§4 Entrepreneurial architecture
Complexity theory tells us that, when it comes to managing unpredictable change, the critical
challenge is how to create an environment within an organization that encourages self-
organization by creating systems, structures and leadership that facilitate it.
§5 Architecture, relationships and organizational learning
Relational contracts= the strong, long-term relationships between stakeholders. Based on
trust, despite being unwritten, they form tacit contracts concerning how to behave.
Strong organizational architecture is difficult to copy because it is informal in nature, not based
on legal contracts and not written down anywhere. Instead it relies on the complex network of
personal relationships throughout the organization.
§6 Architecture and organizational learning
Learning organizations
● Encouraging systematic problem-solving
● Encouraging experimentation and new approaches
● Learning from past experience and history
● Learning from best practice and outside experience
● Being skilled at transferring knowledge in the organization
Double-loop learning= a learning cycle that moves from ‘knowing-how’ to ‘knowing-
why’. Often called the wheel of learning ➔ change dominant logic (mindset with
which an organization or industry collectively sees itself and the world it inhabits.
Real learning is about application, continuous problem-solving, and understanding the root
cause of problems rather than being distracted by the symptoms.
Requires a more collectivist culture - a belief that the interests of the organization and the
individual are the same, with shared values and a sense of being part of a team or an ‘in-group’,
an approach typically cultivated by the entrepreneurs.
§7 Matching architecture with environment
Business model= a plan for how a business competes, uses its resources, structures its
relationships, communicated with customers,creates value and generates profit.
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,Commercial environments that an entrepreneurial architecture is designed to cope with:
● Markets where new technologies are important
● Markets that value creativity
● New or changing markets
● Interconnected markets
● Markets where information and knowledge are important
● Price-sensitive markets
● Markets coming to an end of their life-cycle
Conglomerate= a diversified company with interests in a range of different industries.
§8 Building entrepreneurial architecture
The personal character traits of the entrepreneur need to be reflected in the entrepreneurial
architecture of an organization. Also the key characteristics of the entrepreneur’s approach to
management and decision-making.
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,Ch3 Innovation
§1 The purpose of innovation
Innovation ➔ key to market entry, growth and survival for an enterprise and the way
entire industries change over time. Used to create
● Change and opportunity
● Profit and sustain competitive advantage
● Entirely new industries
Innovation can contribute just as much to social and environmental well-being.
Mission= the formal statement of business purpose - what the business aims to achieve and
how it will achieve it.
§2 Defining and measuring innovation
Types of innovation emphasizing newness
● Introduction of a new or improved good or service
● Introduction of a new process
● Opening up of a new market
● Identification of new sources of supply of raw materials
● Creation of new types of industrial organization. This would include organizational
architecture, where the components are configured in new ways
Product/service innovation= a completely new product or
service or improvements in its design and/or functional
qualities.
Process innovation= revisions to how a product or service
is produced so that it is better or cheaper.
Marketing innovation= improvements in the marketing of an
existing product or service, or even a better way of
distributing or supporting an existing product or service.
➔ Linking these dimensions is business model
innovation.
Radical innovation= the creation of radically new products
or services, including market paradigm shift.
Marketing strategy= how the value proposition is delivered to customer segments.
Business model innovation= plans for how a business competes, uses its resources,
structures its relationships, communicates with customers, creates value and generates profit.
§3 Radical product/service innovation
Radical innovation= mould-breaking development of a new-to-the-world product or process.
Can be disruptive - changing markets, industries, even societies.
Market demand for a radically new product or service can be difficult to determine because
potential customers have no experience of it and how it might be used.
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, Organizational ambidexterity= the ability to both explore and exploit innovations
simultaneously.
Entrepreneurs seem able to link technologies to market opportunities and in so doing make the
technology more usable for, and therefore more attractive to, consumers.
§4 Business model innovation
Market paradigm shift= changes in established market conventions associated with the
creation of radically new markets. Are made possible by
● Developments in technology
● Emergence of new environmental conditions
● Untapped markets with different value expectations
● Changes in legal requirements
Paradigm shift happens when the things customers value from a product or service are
challenged.
In established companies resources are often targeted at defending their
dominance in their market rather than exploring disruptive innovations ➔ they fail
to see the long-term potential of newly emerging markets.
§5 Challenging market paradigms
Blue ocean strategy= the strategy of finding uncontested market space and creating new
demand - essentially market paradigm shift.
Service-dominant logic= the implications for the idea that, rather than the product, customers
buy the services it delivers.
§6 Creativity and innovation
New, technology-based organizations thrive in locations that combine three elements
● Technology
● Talent
● Tolerance
Knowledge and the exposure to different ideas encourage creativity, invention and radical and
incremental innovation. Connectivity is on of the key driver of creativity - the connection we
have with a wide range of different people and ideas.
§7 Innovation intensity
Innovation intensity= an increase in both the degree (or scale) and the frequency of innovation
within an organization.
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