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Summary Intrapreneurship
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Summary including all the slides, lectures, cases, and guest lecture from the course Intrapreneurship D0O44A.
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INTRAPRENEURSHIP1. INTRODUCTION TO INTRAPRENEURSHIP
WHAT IS INTRAPRENEURSHIP?
Definition: Intrapreneurship are formal or informal activities aimed at creating new businesses in
established companies through product and process innovations and market developments.
These activities may take place at the corporate, division (business), functional or project
levels, with the unifying objective of improving a company’s competitive position and
financial performance.
WHY IS INTRAPRENEURSHIP IMPORTANT?
It’s essential for any large company because firms operate in turbulent external environments that are
changing all the time.
Technological environment
Customer environment
- Different generations have different requirements.
Competitive environment
- New companies may enter the industry with new products, then you have to react.
Legal and regulatory environment
- A ban on omnium in products, companies had to react.
Resource environment
- Companies such as Shell are not endless, they will need to look for different products.
To survive in the long-run, companies must embrace (reactively and proactively) environmental
change.
Proactively is the better option.
Intrapreneurship is a key driver of corporate growth.
Companies are able to do all of this, are the ones that will survive and even grow.
Example: Nestlé
Very successful in intrapreneurship and in growing in their industry.
They spotted a need in the market and developed a product to fill this need: coffee.
Example: Lego
They really had to re-invent themselves in the early 2000s as they were facing a lot of competition.
At that time, their main target market were children. However, adults were a big untargeted audience.
They decided to build a new line “Lego architecture” aimed at adults.
They understood they had a big fanbase, and started to leverage this.
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,Example: Nintendo – Pokémon GO
They came to understand, quite late, that competition had changed.
They realized they no longer just had competition from other game consolers, but also from mobile
games.
Nintendo decided to also develop mobile games.
They first partnered with companies that already had experience in developing these mobile games,
but gradually they started developing their own.
Example: Amazon
The company was founded not that long ago and is now one of the most valuable ones worldwide.
They mainly did this through diversification and intrapreneurship.
You need to be willing to cannibalize your own business to move forward, many companies are not
willing to do this. But if you’re not doing it, another company will definitely do it.
Amazon did so by developing the Kindle.
AMBIDEXTROUS FIRMS
Definition: Not many companies are good in both exploration and exploitation.
Successful companies are “ambidextrous.”
Exploration of new businesses.
- The growth engine of the future.
Exploitation of existing businesses.
Ambidextrous firms need managers (exploitation) and entrepreneurs (exploration).
You need two types of individuals in your company.
Good managers are often not good
entrepreneurs/intrapreneurs.
Ambidexterity: an empirical test
Hypothesis: best performing firms have a balanced
portfolio of exploration and exploitation activities.
Inverted U-relationship between the share of
technology exploration activities and firms’ long-term financial performance.
Empirical approach:
Panel data (1996-2003) on 168 US, EU and Japanese firms in five sectors (pharma, chemicals,
IT hardware, (non-)electrical machinery.
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, Exploration share = % of firm patents in new technology domains.
- Considered as new when they did not file for a patent in the past.
Financial performance = Tobin’s Q (market value/book value).
Control variables = R&D expenses, patent stock, prior performance.
Exploitation can be thought of as refinement of the existing business.
Technology exploitation: are you improving technologies that you were already working on/with.
Technology exploration: are you developing new technologies.
In model 2: exploration share is added, both the
linear and the quadratic variable.
So, the best performing firms are the moderate ones that both explore and exploit.
Around 20% of R&D invested in exploration, 80% in the current business (exploitation).
Most firms invest less than what is optimal for them in the long run, so that means that most publicly
listed firms are short-sighted.
Example: consulting firms
Successful firms need to conduct activities that address
the three growth horizons.
Horizons for growth framework:
Everything a firm does can be assigned to one of the
horizons.
Horizon 1: Benefits in the short-term, small improvements
of existing way of working/technologies/customer
approaches.
Horizon 2: Benefits in the medium-term. Start with experiencing with new technologies for
existing customers. Sell existing technologies to new markets.
Horizon 3: Benefits in the long-term. New markets, new technologies, etc.
Good companies need to address all of these horizons.
In reality: too much focus on horizon 1 projects!
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, Question asked to companies: how do you divide your
R&D budget over these four activities?
60% of R&D budget is allocated to horizon 1,
27% to horizon 2 and 11% to horizon 3.
Example: Kodak
They reacted way too late to changes in the market and this way they were disrupted.
Disrupted by digital photography, a change in the business model. First it was razer and blade, this
was not possible with digital photography. Kodak didn’t want this to change because they had a
high margin. The technology also changed.
They lost their market leadership position. They are no longer active in the market, however you can
still buy a camera with the Kodak name because they licensed out their name.
ENTREPRENEURIAL ORIENTATION
Good performing firms need to have an entrepreneurial orientation.
They undertake a lot of entrepreneurial activities.
Activities that can be characterized by:
Innovativeness
Risk taking
Proactiveness
Entrepreneurial orientation, does it matter?
The link between entrepreneurial orientation and firm performance is much stronger in one of the two
subsets of industries.
Higher in high-tech because there is more turbulence, you need to be more flexible and proactive.
SOURCES OF ENTREPRENEURSHIP
Top-down initiatives of visionary CEOs. E.g. Steve Jobs.
Rather unique, in most organizations it’s a bottom-up process.
Most companies don’t have visionary CEOs like Steve Jobs.
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