MBAX 6100 Entrepreneurship & Small Business Management

1. MBAX 6100Entrepreneurship & Small Business Management Frank MoyesLeeds College of Business University of ColoradoBoulder, Colorado Corporate Entrepreneurship II

2. Today’s Agenda • Corporate Entrepreneurship II – Creativity & Innovation • Feasibility: Is this a good industry? • Case: Emerging Business Opportunities at IBM • Read • Bringing Silicon Valley Inside • Feasibility: M-4 Is This a Good Industry? • Entrepreneurship Interview Corporate Entrepreneurship II

3. Next Week’s Schedule • Corporate Entrepreneurship III – You as an Intrapreneur • Case: Lucent Technologies • Feasibility: Sustainable competitive advantage • Speaker: Aaron Kennedy of Noodles • How has Noodles been innovative? • What problems does Noodles face to be innovative in the future? • What are your recommendations for Kennedy? Corporate Entrepreneurship II

4. Is this a Good Industry? • Five forces – Michael Porter • Ease of entry • Supplier power • Buyer power • Threat of substitutes • Competitive rivalry • Define your industry broadly • Good industries are competitively forgiving Corporate Entrepreneurship II

5. Corporate Entrepreneurship • Week 5 Obstacles to corporate entrepreneurship • Week 6 Innovation in corporations • Week 7 You as an Intrapreneur Corporate Entrepreneurship II

6. Some Notes on Corporate Entrepreneurship • Opportunity driven • Not a lack of ideas – execution is key • Experimentation • Iterative innovation process • Learning from failure • “A team with B plan” • Sharing risks & rewards Corporate Entrepreneurship II

7. Some Notes on Corporate Entrepreneurship II • Venture teams – self-directed, self-managing & high performance • Support from top management • Forget, borrow, learn • Resource attraction • Do not use corporate services to save money; only when it gives you a competitive advantage Corporate Entrepreneurship II

8. What Are the Obstacles to Corporate Entrepreneurship? • Systems • Organization Structure • Strategic directions • Policies & Procedures • People • Culture Morris & Kuratko, Corporate Entrepreneurship Corporate Entrepreneurship II

9. Systems Obstacles • Reward & evaluation systems • Oppressive Control systems • Inflexible budgeting systems • Arbitrary cost allocation systems • Rigid planning system Corporate Entrepreneurship II

10. Systems Decisions • Reward systems • Division managers • Corporate entrepreneurship group • Intrapreneurs • Planning systems • Controls on capital • How provide sustained funding? How get patient capital? • How avoid decisions that could sink the company? Corporate Entrepreneurship II

11. Organizational Structure Obstacles • Too many hierarchical levels • Responsibility w/o authority • Top down mgmt • Restricted communication channels • Lack of accountability Corporate Entrepreneurship II

12. Organizational Structure Decisions • Spin-off; separate from divisions; part of divisions • Who responsible top management? How handle change at top? • Where locate? • How measure performance? • Drive existing divisions out of business? Corporate Entrepreneurship II

13. Strategic Direction Obstacles • No innovation goals • No strategy for Entrepreneurship • No vision • Lack of commitment from senior execs • No Entrepreneur role models at top Corporate Entrepreneurship II

14. Strategic Direction Decisions • Time frame for success • Focus is on short term results • Profit per share growth vs. higher P/E • Criteria for success • Innovation goal • How choose the ventures? • IBM: cross-IBM resource needs, maturity of their strategies and business plans, potential market size, valued to be added by corporate insight • Outside validation? Corporate Entrepreneurship II

15. Policies & Procedures Obstacles • Long, complex approval cycles • Extensive documentation requirements • Unrealistic performance criteria Corporate Entrepreneurship II

16. Policy & Procedures Decisions • Restrictions on hiring – number & compensation • Accounting systems • Reports – environmental, equal opportunity Corporate Entrepreneurship II

17. People Obstacles • Fear of failure • Resistance to change • Turf protection • Short-term orientation • Inappropriate skills/talents Corporate Entrepreneurship II

18. People Decisions • Hire entrepreneurs from outside? • How train intrapreneurs to provide skills? • Assign experienced leaders or train young people? • What skills are needed – traditional entrepreneurial or ability to navigate the organization, secure cooperation or support • How handle turf protection? • 15% rule Corporate Entrepreneurship II

19. Culture Obstacles • Ill-defined values • No consensus on priorities • Values that conflict with Entrepreneur's approach (innovation, calculated risk taking, pro-activeness) • Definition of success: promotion every 3 years, corner office, corporate kite • Entrepreneurial ventures attract mavericks & risk takers Corporate Entrepreneurship II

20. Culture Decisions • How to not trigger the corporate immune system? • How deal with failure? Corporate Entrepreneurship II

21. Corporate Entrepreneurship II

22. Why Is It So Hard to Predict the Future? "I think there is a world market for maybe five computers. Thomas Watson, chairman of IBM, 1943 "This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." Western Union internal memo, 1876. Corporate Entrepreneurship II

23. Why Is It So Hard to Predict the Future? "The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible." "Heavier-than-air flying machines are impossible." Lord Kelvin, president, Royal Society, 1895. Corporate Entrepreneurship II

24. Why Is It So Hard to Predict the Future? "So we went to Atari and said, 'Hey, we've got this amazing thing, even built with some of your parts, and what do you think about funding us? Or, we'll give it to you. We just want to do it. Pay our salary, we'll come work for you.' And they said, 'No.' So, then, we went to Hewlett-Packard, and they said, 'Hey, we don't need you. You haven't got through college yet.” Corporate Entrepreneurship II

25. Develop Corporate Innovation Strategy • Morris & Kuratko: Obstacles • “Building Breakthrough Businesses” – Forget, Borrow, Learn • “Bringing Silicon Valley Inside” – resource attraction • IBM case – EBO’s Corporate Entrepreneurship II