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Corporate entrepreneurship

Corporate entrepreneurship. HEMBA February 18, 2012. Market dynamics. Established firms rarely compete with entrepreneurs to develop new products on the early part of the S curve The new product usually begins with inferior performance that hurts the company’s overall performance

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Corporate entrepreneurship

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  1. Corporate entrepreneurship HEMBA February 18, 2012

  2. Market dynamics • Established firms rarely compete with entrepreneurs to develop new products on the early part of the S curve • The new product usually begins with inferior performance that hurts the company’s overall performance • Managers of established companies believe they can always improve the performance of their existing products to compete with new products

  3. Disadvantages to existing companies entering new markets • Core rigidities: companies are only good at things they are used to doing • Tyranny of the current market: companies listen to their customers, who are not a source of ideas for new products in new markets • Use myopia: customers of existing firms see needs or solutions very narrowly (i.e., not the needs of others)

  4. Disadvantages to existing companies entering new markets • Revenues are power for senior management – taking attention away from the mature businesses that generate revenues can be career suicide • Large companies have entirely different approaches to market research for new markets 

  5. Market research techniques

  6. Challenges to corporate entrepreneurship • Strategy challenges • Incentives and organizational challenges • Decision making challenges

  7. 1. Strategy challenges • Lack of integrated decision making (new businesses have few customers and get low priority; potential for cannibalization) • Cyclicality: budgets for entrepreneurial initiatives are the first to be cut during downturns • New business, old lenses (see core ridigities, tyranny of current market, and user myopia)

  8. 2. Incentives and organizational challenges • Risk and failure avoidance (sr mgt focus on short-term performance emphasizes “sure-thing” bets) • “Not invented here” mentality: firms can’t step out of their organizational boundaries for inputs (hubris, user myopia) • Org design problems (i.e., where to put the venture) • Emphasis on org harmony (established routines and compensation schemes not conducive for new ventures)

  9. 3. Decision making challenges • Rigid application of financial metrics • Reliance on traditional market research (see market research techniques slide) • Linear stage gates and cumbersome decision making processes • Performance measures and compensation

  10. Potential remedies • Adapting management practices • Selectively insulating new venture (e.g., “skunk works”) • Alternative support models DISCUSSION

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