Chapter 1 - The Entrepreneurial Imperative in Established Organizations
Introduction
The development, application, and enhancement of new technologies are occurring at a
breathtaking pace. Entrepreneurship is redefining what you make, how you make it, where
you sell it, and how you distribute it. Companies cannot be static – they must continually
adjust, adapt, and redefine themselves. This is a fundamental principle in a free market
economy. In the midst of all of this comes the question of the relevance of the traditional
theories and principles that guide managerial practice (= new management thinking).
Turbulent environments and the embattled corporation
We use the term “external
environment” to speak of everything
outside the company. The internal
environment includes the structures,
systems, processes, and culture that
make up the climate within which
people do the work of a company.
The external environment today is
all about change. The external
environment contains of eight major
domains; technological, economic,
competitive, labor, resource, legal
and regulatory, customer & global
environment.
The new path to sustainable competitive advantage
There are many different new strategic initiatives, to deal with this challenge. There are
important lessons to be learned from all of this:
- External change forces internal change.
- There are no simple formulas for success in the new competitive environment.
- Turbulence also mean opportunity.
The goal is still to achieve a sustainable competitive advantage. To be successful in any
industry today, companies must continually reduce costs, improve quality, enhance
customer service, and so forth. However, remaining a competitive advantage is very different
from achieving a sustainable competitive advantage.
,We believe advantage derives from five key company capabilities:
- Adaptability à adjust to changes in conditions
- Flexibility à meet requirements of stakeholders
- Speed
- Aggressiveness à intense, focused and proactive approach
- Innovativeness
Companies that are all of those, are more likely to create change in their environment. These
five capabilities ultimately come down to on – entrepreneurship.
What is entrepreneurship?
Entrepreneurship is “the process of creating value by bringing together a unique combination
of resources to exploit an opportunity.”
Seven perspectives on the nature of entrepreneurship:
- Creation of wealth
- Creation of enterprise -> founding of a new business venture
- Creation of innovation
- Creation of change
- Creation of jobs
- Creation of value
- Creation of growth
What is corporate entrepreneurship?
Corporate entrepreneurship is a term used to describe entrepreneurial behavior inside
established mid-sized and large organizations. Corporate entrepreneurship is the sum of a
company’s innovation, strategic renewal, and venturing effort (Ling et al, 2008). Corporate
venturing are entrepreneurial efforts that lead to creation of new business organizations
within the corporation.
Management versus entrepreneurship
Management is the process of setting objectives and coordinating resources, including
people, in order to attain those objectives. The entrepreneur, alternatively, is preoccupied
not with what is, but with what can be. Within great organization, a balance is achieved
between disciplined management and entrepreneurship. Disciplined management requires
focus, attention to basic management principles and values, and a strong sense of
accountability for results. Entrepreneurship requires vision, a willingness to take risks, and a
,focus on creating the future. Achieving this balance suggest that managers must become
entrepreneurs.
Why companies lose their entrepreneurial way: the organizational life cycle
To understand the entrepreneurial challenge in established companies, we must understand
how companies evolve. While every organization is unique, patterns have been identified in
the ways companies evolve. Each growth stage culminates a crisis point where major and
sometimes radical changes must be made in managerial assumptions and approaches to
running the company (Greiner, 1972). The different stages are:
1. S
tart up and early growth. This is a highly creative stage. A crisis eventually
results because the demands of greater size require more professionalized
management, and more formal structure, administrative systems, budgets, and
controls.
2. G
rowth through direction. Over time a crisis develops from demands for greater
autonomy on the part of lower-level managers and employees.
3. G
rowth through delegation. With this crisis, management begins to sense it is
losing control over a highly diversified field operation. There are inefficiencies.
4. G
rowth through coordination. However, centralization over time tends to breed
bureaucracy, and a crisis of red tape eventually occurs. The organization has
become too large and complex to be managed through formal programs and rigid
systems.
5. G
rowth through collaboration. Many companies struggle to overcome the crisis of
red tape. The very nature of the enterprise has to be reinvented. And while
unsure of the next crisis, it will inevitably come. It is likely a crisis related to the
challenge of achieving sustainable entrepreneurship.
Each stage poses different strategic challenges, and each requires a very different
managerial approach. To move ahead, companies must consciously introduce planned
structures that not only are solutions to a current crisis, but also are fitted to the next phase
of growth. One of the great lessons of the organizational life cycle is that, in far too many
companies, the entrepreneurial spirit tends to be systematically destroyed over time.
The entrepreneurial imperative: a persistent sense of urgency
Over the stages of the life cycle, managers become increasingly adept to “producing”,
“administering”, and “integrating”. All the while, managers fail to become adept to
“entrepreneuring”. Hamel (2007) points to the inevitable diminishing returns experienced by
, most organizations using traditional strategies, suggesting that conventional management
practice has simply run its course, and that an entirely new model of management is needed
in our companies. Corporate entrepreneurship provides a blueprint for coping effectively with
the new competitive realities. Management needs to become more flexible and creative, and
more tolerant of failure.
A model of corporate entrepreneurship and guide to coming chapters
Chapter 2 – How corporate entrepreneurship differs
Dispelling the myths and sidestepping the folklore
Ten of the most notable myths:
- “Entrepreneurs are born, not made”. The challenge is to help people recognize
and develop the entrepreneurial characteristics within themselves.
- “Entrepreneurs must be inventors”. While many inventors are also entrepreneurs,
there are numerous entrepreneurs who pursue all sort of innovative activity
beyond formal inventions, and/or who capitalize on the creative ideas of others.
- “There is a standard profile or prototype of the entrepreneur”.
- “All you need is luck to be an entrepreneur”. But luck happens when preparation
meets opportunity.
Introduction
The development, application, and enhancement of new technologies are occurring at a
breathtaking pace. Entrepreneurship is redefining what you make, how you make it, where
you sell it, and how you distribute it. Companies cannot be static – they must continually
adjust, adapt, and redefine themselves. This is a fundamental principle in a free market
economy. In the midst of all of this comes the question of the relevance of the traditional
theories and principles that guide managerial practice (= new management thinking).
Turbulent environments and the embattled corporation
We use the term “external
environment” to speak of everything
outside the company. The internal
environment includes the structures,
systems, processes, and culture that
make up the climate within which
people do the work of a company.
The external environment today is
all about change. The external
environment contains of eight major
domains; technological, economic,
competitive, labor, resource, legal
and regulatory, customer & global
environment.
The new path to sustainable competitive advantage
There are many different new strategic initiatives, to deal with this challenge. There are
important lessons to be learned from all of this:
- External change forces internal change.
- There are no simple formulas for success in the new competitive environment.
- Turbulence also mean opportunity.
The goal is still to achieve a sustainable competitive advantage. To be successful in any
industry today, companies must continually reduce costs, improve quality, enhance
customer service, and so forth. However, remaining a competitive advantage is very different
from achieving a sustainable competitive advantage.
,We believe advantage derives from five key company capabilities:
- Adaptability à adjust to changes in conditions
- Flexibility à meet requirements of stakeholders
- Speed
- Aggressiveness à intense, focused and proactive approach
- Innovativeness
Companies that are all of those, are more likely to create change in their environment. These
five capabilities ultimately come down to on – entrepreneurship.
What is entrepreneurship?
Entrepreneurship is “the process of creating value by bringing together a unique combination
of resources to exploit an opportunity.”
Seven perspectives on the nature of entrepreneurship:
- Creation of wealth
- Creation of enterprise -> founding of a new business venture
- Creation of innovation
- Creation of change
- Creation of jobs
- Creation of value
- Creation of growth
What is corporate entrepreneurship?
Corporate entrepreneurship is a term used to describe entrepreneurial behavior inside
established mid-sized and large organizations. Corporate entrepreneurship is the sum of a
company’s innovation, strategic renewal, and venturing effort (Ling et al, 2008). Corporate
venturing are entrepreneurial efforts that lead to creation of new business organizations
within the corporation.
Management versus entrepreneurship
Management is the process of setting objectives and coordinating resources, including
people, in order to attain those objectives. The entrepreneur, alternatively, is preoccupied
not with what is, but with what can be. Within great organization, a balance is achieved
between disciplined management and entrepreneurship. Disciplined management requires
focus, attention to basic management principles and values, and a strong sense of
accountability for results. Entrepreneurship requires vision, a willingness to take risks, and a
,focus on creating the future. Achieving this balance suggest that managers must become
entrepreneurs.
Why companies lose their entrepreneurial way: the organizational life cycle
To understand the entrepreneurial challenge in established companies, we must understand
how companies evolve. While every organization is unique, patterns have been identified in
the ways companies evolve. Each growth stage culminates a crisis point where major and
sometimes radical changes must be made in managerial assumptions and approaches to
running the company (Greiner, 1972). The different stages are:
1. S
tart up and early growth. This is a highly creative stage. A crisis eventually
results because the demands of greater size require more professionalized
management, and more formal structure, administrative systems, budgets, and
controls.
2. G
rowth through direction. Over time a crisis develops from demands for greater
autonomy on the part of lower-level managers and employees.
3. G
rowth through delegation. With this crisis, management begins to sense it is
losing control over a highly diversified field operation. There are inefficiencies.
4. G
rowth through coordination. However, centralization over time tends to breed
bureaucracy, and a crisis of red tape eventually occurs. The organization has
become too large and complex to be managed through formal programs and rigid
systems.
5. G
rowth through collaboration. Many companies struggle to overcome the crisis of
red tape. The very nature of the enterprise has to be reinvented. And while
unsure of the next crisis, it will inevitably come. It is likely a crisis related to the
challenge of achieving sustainable entrepreneurship.
Each stage poses different strategic challenges, and each requires a very different
managerial approach. To move ahead, companies must consciously introduce planned
structures that not only are solutions to a current crisis, but also are fitted to the next phase
of growth. One of the great lessons of the organizational life cycle is that, in far too many
companies, the entrepreneurial spirit tends to be systematically destroyed over time.
The entrepreneurial imperative: a persistent sense of urgency
Over the stages of the life cycle, managers become increasingly adept to “producing”,
“administering”, and “integrating”. All the while, managers fail to become adept to
“entrepreneuring”. Hamel (2007) points to the inevitable diminishing returns experienced by
, most organizations using traditional strategies, suggesting that conventional management
practice has simply run its course, and that an entirely new model of management is needed
in our companies. Corporate entrepreneurship provides a blueprint for coping effectively with
the new competitive realities. Management needs to become more flexible and creative, and
more tolerant of failure.
A model of corporate entrepreneurship and guide to coming chapters
Chapter 2 – How corporate entrepreneurship differs
Dispelling the myths and sidestepping the folklore
Ten of the most notable myths:
- “Entrepreneurs are born, not made”. The challenge is to help people recognize
and develop the entrepreneurial characteristics within themselves.
- “Entrepreneurs must be inventors”. While many inventors are also entrepreneurs,
there are numerous entrepreneurs who pursue all sort of innovative activity
beyond formal inventions, and/or who capitalize on the creative ideas of others.
- “There is a standard profile or prototype of the entrepreneur”.
- “All you need is luck to be an entrepreneur”. But luck happens when preparation
meets opportunity.
