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MGT 709 New Venture Creation
Determining how
entrepreneurial projects will be
pursued
Corporate culture Leadership Structural features that guide and
constrain action Organizational systems that foster
learning and manage rewards
Use of teams in strategic decision makingWhether the company is product or service orientedWhether the firm’s innovation efforts are aimed at product or process improvementsThe extent to which it is high-tech or low-tech
Autonomous corporate venturing (work) groupFrees entrepreneurial team members from constraints imposed by existing norms and routinesFacilitates open-minded creativityBut, does isolate the group from the corporate mainstreamNew venture groups (NVGs)Business incubators
Focused Approaches to Corporate Entrepreneurship
Autonomous corporate venturing
work group
Goal is to identify, evaluate, and cultivate venture opportunitiesTypically function as semi-autonomous units with little formal structureInvolvement includes
Innovation and experimentationCoordinating with other corporate divisionsIdentifying potential venture partnersGathering resourcesLaunching the venture
Focused approachFocused approachNew VentureNew Venture
GroupGroup
Business incubators are designed to “hatch” new businessesIncubators provide some or all of the following functions
FundingPhysical spaceBusiness servicesMonitoringNetworking
Focused approachFocused approachBusiness Business
IncubatorsIncubators
Dedication to principles and practices of entrepreneurship is spread throughout the firm
Ability to change is a core capabilityStakeholders can bring new ideas or venture opportunities to anyone in the organization
Two related aspects of dispersed entrepreneurship
Entrepreneurial cultureProduct champions
Culture of entrepreneurshipSearch for venture opportunities permeates every part of the organizationEffect is strongest when it animates all parts of the organizationStrategic leaders and the culture generate a strong impetus
To innovateTake risksSeek out new venture opportunities
Dispersed approach Dispersed approach Entrepreneurial Entrepreneurial
CultureCulture
Product (or project) championsBring entrepreneurial ideas forwardIdentify what kind of market exists for the product or serviceFind resources to support the venturePromote the venture concept to upper management
New project must pass two critical stages
Project definitionProject impetus
Dispersed approach Dispersed approach ProductProduct
ChampionsChampions
Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives appear doomed
Comparing strategic and financial goals
Are the products or services offered by the venture accepted in the marketplace?
Are the contributions of the venture to the corporation’s internal competencies and experience valuable?
Is the venture able to sustain its basis of competitive advantage?
Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives appear doomed
Exit championsWilling to question the viability of a venture projectDemand hard evidence and challenge the belief system that is carrying an idea forwardHold the line on ventures that appear shaky
Real optionsManaging the uncertainty associated with launching new ventures
How can mature companies act like a startup? Make sure everybody is creating value
Reward great people, give them a voice Get back to market validation
Every presentation around customer pain Communicate a common vision
Don’t waste resources on internal competition Align new products with the sales model Harness entrepreneurial energy
Reward great ideas, give people autonomy, establish safe havens
How can mature companies act like a startup? Make decisions and act fast – speed wins
Cut the bureaucracy, take risks 50% of time in meetings Listen to customers or lead people
Stick to your core competency work with people who will get the job done
Create smaller, dynamic units 16 person teams in military, minimal org overhead
Keep R&D alive
Ecosystem venturing Supports and encourages a network of
customers and suppliers Value of benefits for existing businesses
divided by invested capital – don’t lose focus Innovation venturing
Spend a proportion of an existing functional budget in a ‘venturing’ way (e.g. R&D) Focus on commercializing new technologies for
existing business Make sure it stays under a functional head rather
than become a general ‘innovation fund’
Harvest Venturing Convert existing corporate resources into
commercial ventures and then into cash Must not be needed by current or future org
Danger of becoming a ‘new growth’ unit rather than focusing on existing resources
Private Equity Venturing Setting up a VC operation
Need privileged access to deals in early stage of lifecycle and some value-added for new firms
Danger of being bringing nothing special to the table but thinking you do (hubris)
Focus on low probability projects Little attention or commitment from core Not given enough time or funds (due to
competition with core business) It’s a tough business
Even VC firms earn below cost of capital on average
CONSULTING SKILLS
The business of discovery is: Doing layers of analysis Understanding the political climate Resurfacing resistance to sharing information Seeing the interview as an intervention
Distinguish between the presenting problem and the underlying problem
Understand the technical problem and how it is being managed (or not)
Ask questions about what others are doing to cause or maintain the problem Ask questions about the client’s own role
Plan the data collection jointly Involve the client in interpreting the data Condense to a limited number of issues Use simple language Develop a clear and simple picture of what is going on
There may be a similarity between how the client manages you and the organization
THE PURPOSE OF DISCOVER IS TO GET ACTION, NOT DO RESEARCH
Concentrate on four things beyond the technical considerations: Keep simplifying your inquiry so that is ends up
focusing more and more on the next steps the client can take
Use everyday language Give a great deal of attention to your
relationship with the client Include the client at every opportunity in deciding
how to proceed. Deal with resistance as it arises. Treat technical data as valid and relevant. Also
assess how the problem is being managed.
The presenting problem is never the real problem!
Ten steps to launch: Reaffirm the proposal content with the buyer Begin doing something Find and meet the key players Begin co-opting resistance By-pass islands Periodically meet with the buyer Make your successes visible to the
organization Share credit, or even bestow all of it Illustrate closure Visibly make mid-course corrections
Challenge basic premises If the internal people had it all figured out, they
wouldn’t need you Seek documented (objective) validation for bald-
faced assertions Ensure you have alternative sources of
information. Don’t talk. Listen.
Cafeteria, the implementers, customers, suppliers, office staff
Ask anyone who volunteers information for examples, frequency, and who else was there
Trust your instincts and history. Search for incongruities.
Avoid being intimidated Establish a comfortable first name relationship Never pose as an expert Don’t defend yourself with credentials or
background Try to meet on neutral turf Push back firmly whenever the situation calls for it Never accept a political role or take sides Be proactive Do your homework Face setbacks honestly Understand that tomorrow’s another day THE MORE YOU GIVE IN, THE MORE THEY’LL
EXPECT YOU TO GIVE; THE MORE YOU STAND FIRM, THE MORE THEY’LL RESPECT YOU
Avoid intimidating others Don’t start by talking Don’t start with your process/methodology Stop dropping the buyer’s name Join them in the cafeteria Contribute to company causes Observe social mores Dress like everyone else Maintain confidences Don’t take sides Show humility NEVER GIVE AN ORDER TO ANY CLIENT
PERSONNEL
CONSULTING TOOLS