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CHAPTER 1 – FOUNDATIONS OF CORPORATE ENTREPRENEURSHIP
1.1 Turbulent environments and the embattled corporation
External environments influence internal environments, it’s all about change! This change is continuous and rapid
bringing new challenges from external environments. Change is complex and a combination of the environments effect
many aspects of the external and internal environment.
External environment of embattled corporation:
1. Technological - accelerated development of new technology makes products obsolete, greater difficulty in
protecting intellectual property.
2. Economic – unpredictability of prices, exchange rates, interest rates, tax incentive and business cycles.
3. Competitive - aggressive and innovative competition also from non-traditional sources and tactics. Competitors
who are also customers and partners.
4. Labour - scarcity of skilled workers, higher labour costs, employees are more mobile and less loyal.
5. Resource - limited resources, becoming increasingly specialised, unknown sources of supply.
6. Customer - more demanding and fragmented markets, more narrowly segmented, emphasis on investment in
capturing customers
7. Legal and regulatory – More aggressive regulation. Unlimited product liability = you are responsible
8. Global - products are sold anywhere anytime “internet”. Real time communication and distribution. There can be
competitive advantage through global outsourcing and international strategic alliances.
All these changes have implications on how companies are managed; the modern corporation finds it embattled as it
struggles to survive. This forces companies to abandon conventional business practices as managers have:
• Shortened decision windows
• Diminishing opportunity streams
• They must act more quickly or miss out
• Their clients, suppliers, partners, distributors are always changing so they need to perform better
• Resource demands result in outsourcing and leveraging
• Technology threats means the company must develop new products and improve time to market
• Existing products become obsolete quicker
• No longer are strategies “business as usual” sufficient
The embattled corporation – examples of the way in which trends in the environment force changes in management
practices:
1. Customers – Fragmented markets, rising customer expectations, costs of higher level of customization,
sustainable growth in new markets.
2. Technology – New information, production and service technologies, customer management, logistics and
inventory, product development technologies.
3. Competitors – Creating new market places, they mimic anything new, playing by different rules, competition in
narrow niche markets and avoid costs associated with big product range.
4. Legal, regulatory and ethical standards – Companies are increasingly accountable
1.2 A new path to sustainable competitive advantage: how companies react to the challenges?
Three lessons can be learnt in sustaining a business in a competitive environment:
1. External environments influence internal environments of a business.
2. There is no simple formula for success in the competitive environment, they need to experiment and find the
right approach to control, right leadership style, and right way to reward employees.
3. There is an upside, turbulence mean opportunity. Changes in technology, markets and segments means some
doors close and others open.
,To remain in the game, companies and managers must continuously re-invent themselves with 5 key capabilities:
1. Adaptability: the ability to adjust timely to external environmental forces “can list them”
2. Flexibility: design company strategies, processes and operations that meet evolving requirements
3. Speed: act quickly to emerging markets
4. Aggressiveness: proactive approach to eliminating competitors and pleasing customers
5. Innovativeness: developing and launching new products/process/services: lead the market place
The changing landscape
Companies are operating in new competitive landscapes with increased risk, less ability to forecast, fluid boundaries
between industries. Strategic inflection points occur when the old strategic picture dissolves and gives way to the new,
allowing adaptive and proactive businesses to ascend to new heights. These points change the industry and the rules,
once it’s reached there’s no going back.
The four forces at work
1. Change
o Large amount of pressure on management and employees
o The game has changed completely
o Old management styles of hierarchy, rules, traditional and process no longer apply
2. Complexity
o Change comes from different directions and at the same time
o New markets and technology
o Customer groups are shifting
o Competition is also about collaboration
o Change in one area affects another area
3. Chaos
o Chaos is confusion
o Random events cause extreme consequences
o There is a sensitive dependence on conditions and small shocks can disrupt the system
o Incremental changes that seem insignificant can have a major impact on the organisation
4. Contradictions
o Paradox needs to be managed
o The tyranny of or pushes people to believe it’s either a or b
o Managers should embrace contradiction by replacing or with and
1.3 What is Entrepreneurship.
Entrepreneurship is defined as the process of creating value by bringing together a unique combination of resources to
exploit an opportunity.
7 perspectives on the nature of entrepreneurship
1. Creation of wealth – involves assuming the risk associated with the facilitation of production in exchange for
profit
2. Creation of enterprise – entails founding of a new business venture where none existed before
3. Creation of innovation – concerned with unique combination of resources that make existing methods or
products obsolete
4. Creation of change – creating change by adapting and adjusting, modifying ones approaches and skills to meet
new and different opportunities.
5. Creation of jobs – concerned with employing, managing and developing the factors of production, including the
labour force
6. Creation of value – process of creating value for customers by exploiting untapped opportunities
7. Creation of growth – defined as a strong and positive orientation toward growth in sales, income, assets and
employment
,1.4 What is Corporate Entrepreneurship (CE)?
Corporate Entrepreneurship (CE) “is the sum of a company’s innovation, renewal and venturing efforts”. It is the
entrepreneurship within an established business organisation.
The three most common phenomena that are viewed as entrepreneurial in established businesses are
1. the situations where an established organization enters a new business:
2. when an individual or individuals champion new product ideas
3. when an entrepreneurial philosophy permeates an entire organization’s outlook and operations.
The forms CE takes are:
• Innovation: something new to the market
• Strategic renewal: strategic or structural changes
• Corporate venturing: creation of new business organisations within the corporation
CE is entrepreneurship within established organisations and involves:
• Fostering innovative behaviour in organisations
• Support profit making innovations by encouraging employees to think like entrepreneurs
• Giving employees the freedom to pursue their ideas without the red tape
• Champions brining new products or services to market
• Established organisations enter new business
• Entrepreneurial philosophy permeates the entire organisations outlook and operations
• Corporations that radically change the markets and industries
• Revitalises and invents new ways to obtain competitive advantage
1.5 Management versus Entrepreneur
Management is the process of setting objectives and coordinating resources including people, in order to attain those
objectives. In essence, it involves getting things done through other people. Management is concerned with efficiency
and effectiveness. It is a transformation process where technical, human and conceptual skills are used to transform
inputs into outputs. Disciplined management requires focus, attention to basic management principles and values and
accountability. Management focus includes:
• Efficient and effective utilization of the resources under their control
• Optimizing current operations
• Efficiency: same output less cost
• Effectiveness: choose the right objectives and means of achieving them
Entrepreneurs are preoccupied with change, envisioning the future, recognising emerging patterns and identifying
untapped opportunities. They come up with innovations to exploit opportunities regardless of resources controlled.
Entrepreneurship requires vision, willingness to take risks, focus on creation of the future.
The table below can be used to combine the key roles to create an Entrepreneurial Manager.
The Manager The Entrepreneur
• Planner • Visionary
• Strategist • Opportunity seeker
• Organiser • Creator
• Director • Innovator
• Staffer • Calculated risk taker
• Motivator • Resource leverage
• Budgeter • Guerrilla thinker
• Evaluator • Change agent
• Coordinator • Adaptive implementer of
• Supervisor new ideas
, 1.6 Why Companies Lose Their Entrepreneurial Way: The Organisational Life Cycle
Organisational life cycle – crisis points for evolution
Stage 1: Start up and early growth
• Encompasses the launching of a new venture and the initial penetration of the market.
• Highly creative
• Work environment in early stages is exciting, stressful, demanding, and uncertain.
• Organisation run informally
• Employees feel they part of something
• CRISIS: Greater size requires more professionalised management
Stage 2: Growth through direction
• Companies fail because they will not formalise so Management put necessary systems and structures in
place, and augments the leadership team with functional area professionals
• Another period of sustained success growth ensues.
• CRISIS: demand for greater autonomy on the part of lower level managers and employees
Stage 3: Growth through delegation
• Delegation takes form by creating semi-autonomous product divisions and strategic business units
• Organisational targets are given to achieve.
• Senior management focuses on major strategic moves and acquisitions
• CRISIS: Management lose control over highly diversified field operation, duplication of work efforts
Stage 4: Growth through coordination
• Companies respond to this loss of control by centralising operations.
• Head office staff is developed to co-ordinate operations
• CRISIS: Centralisation over times tends to breed bureaucracy and a crisis of red tape eventually occurs.
• Myrid of procedures and systems will be developed that exceed their utility
• Procedures take precedence over problem solving
Stage 5: Growth through collaboration
• Very nature of the enterprise has to be reinvented by transforming the machine bureaucracy into an
innovation factory
• Companies must simplify structures and procedures, reduce staff
• Creation of matrix structures, encourage experimentation in all facets of the business
1.7 The Entrepreneurial Imperative: A Persistent Sense of Urgency
A new model of management and five questions why a new model of management is needed:
1. How much more cost savings can the company wring out of its current business?
2. How much more growth can the company squeeze out of its current business?
3. How much longer can the company keep propping up its share price through share buybacks, spin-offs and other
forms of financial engineering?
4. How many more scale economies can the company gain from mergers and acquisitions?
5. How different are the strategies of the four or five largest competitors in the industry from the company?
Corporate entrepreneurship represents a framework for facilitating ongoing change and innovation in established
organisations and include several strategies that need to be implemented:
• Need to allow freedom and resources to the CE requires.
• Management needs to be more flexible and creative and more tolerant of failure, a vital learning process.
• CE’s must be stimulated, supported and protected.
• Companies must create a constant sense of urgency to challenge assumptions, urgency to change and urgency
to innovate. Innovate or dissipate must become the mantra.
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