Exploring Corporate Venturing Dynamics: Lessons in Entrepreneurship & Management

1. Entrepreneurship & Small Business ManagementCorporate Venturing Frank MoyesLeeds College of Business University of ColoradoBoulder, Colorado Corporate Venturing

2. Today’s Agenda • Dancing Elephants • Lucent Technologies case • Introduce Part III • Talk to people • Next Week – Spring Break • March 28-29 • Entry Strategies • Jim Sharpe case • April 4-5: Topic to be chosen by the class Corporate Venturing

3. Are Dancing Elephants Possible? • Record of corporate venturing • What are corporations good at? Not so good? • What are entrepreneurs good at? Corporate Venturing

4. Record of Corporate Venturing • Internal ventures • 1965 to 1975 ¼ of Fortune 500 had. 80% disappeared • 1980’s & late 1990’s same fate • Average venture life is 4-5 years. • VC funds average life is 4 years Corporate Venturing

5. Corporate Venture Attempts • GM and Saturn • IBM and PC in Boca Raton • Fleet Street Bank & inner expansion • 3M 15% of time on bootleg projects • Public education & charter schools Corporate Venturing

6. 0 What Are Corporations Good At? • Exploiting well defined, stable markets • Marshalling large resources • Continuous improvement & repetition • Understand profit, cash flow • Developing systems & controls • Maximizing ROI in the short term Corporate Venturing

7. What Criteria Used to Make Investment Decisions? • Tradition & set of shared assumptions • Typically based on technology, not opportunity, eg Corning & fiber optics in the 1960’s • Instinct is to protect existing business, e.g. must purchase from other parts of business Corporate Venturing

8. What is the Process for Making Decisions? • Traditional evaluation techniques (ROI, market share, quick payback)? • Need for control - very structured approval process – Why? • Detailed business plan that must follow – don’t like surprises • Leads to paralysis by analysis Corporate Venturing

9. How Do Corporations Deal With Uncertainty? • Approval levels • Must follow the plan once approved • Short term time horizon • Analysis to point of paralysis • Establish controls – HR, accounting, legal, marketing • Status reports, special reports • Corporate systems & services • Communications Corporate Venturing

10. 0 What Issues Do Corporations Face When They Want to Be Intrapreneurial? • How establish effective reward systems • How treat failure • Types of people who work well in large organizations • Define success as running a larger organization, corner office & corporate kite • Traditional evaluation techniques don’t work (ROI, market share, quick payback)? • Instincts are to protect existing businesses • Is patient capital possible? Phil Knight “Took 18 years to be an overnight success.” Corporate Venturing

11. Definitions of an Entrepreneur • “Entrepreneurs are societies rejects, instead of becoming hobos, criminals or professors, the start their own business.” Thereau • “Traits of entrepreneurs are closest to juvenile delinquents.” • “Progress depends upon unreasonable men.” GB Shaw • “If I’m in control, I’m probably going to slow.” Mario Andretti • “Road less traveled”, Robert Frost: • “If you ain’t makin’ waves, you ain’t kickin’ hard enough.” Corporate Venturing

12. What Have We Learned About Entrepreneurs? • Opportunity driven, which means • Understands competition • Understands market: size, trends, accessibility • Understand customers through direct contact • Tolerance for ambiguity • Locus on control • Take risks • Creative • Impatient • Not tied to conventional approach Corporate Venturing

13. What Are Entrepreneurial Ventures Good At? • Focus all resources & time on creating a successful venture • Trial & error (ready, fire, aim) • Quick decisions • Using OPR’s • Instant communications • Recruiting & motivating world-class employees Corporate Venturing

14. You Work for Large Corporation. How Do You Get Elephants to Dance? Corporate Venturing