The Development of the Entrepreneurs Corporate Venture - Essay Example

Corporate Venturing Student’s Name: Instructor’s Name: Course Code: Date of Submission: 1.0 Introduction In many years, companies have been operating using traditional practices to access growth through use of new technology, acquisitions, corporate Research and Development (R&D) and Venture capital invesment. With the advent of new technology, many businessese were witnessed taking very early strides towads growing businesses by taking its advantage. However, this was never the case as many could not achieve what they wanted to as most of these initiatives did not fit well in the prevailing market value chains (Ireland et al 2006). The purpose of this report is therefore to take take a critical analysis on the concept of corporate venturing and how it is being applied in different organisations in the contemporary society. 2.0 The development of the entrepreneur’s corporate venture Despite the fact that corporate venturing being considered an opportunity for many businesses both small and large to explore and exploit different opportunities on their way by making use of the available competencies, this for over years has never been the case with large companies (Hornsby et al 2002). This is because many companies seem to be content with their achivement and product growth and the steady expansion of the business that provide prospect for long-term gain with very little caution that, that might never be the case in the long-run especially when the product or the busisness reaches its maturity. The stand by many managers in large companies not to embrace corporate venturing, is the paradox surrounding the trade-offs that exist between the benefits that could be accrued from exploiting the different opportunities and the capacity to exploit them. However, with the emerging competition in the world of businesses, the only way that a buisness can be ahead of others is by eencouraging innovation. Innovation in many businesses today is being promoted by the intrapreneuship culture which is a strategy to encourage and promote entrepreneural talents among individuals and that can be used by the business to develop more competitive and successful products and services in the market. It is from this perspective that different managers are now taking a very different stand which encourages and promotes innovation for the business (Ireland et al 2006). Commonly praticed approaches to creating an intrapreneural culture for the business include listening always to the innovative ideas from individuals, acting with speed in enacting a given innovative idea, sharing credits, breaking the precedent traditions and igniting the entrepreneurs. The development of the entrepreneur’s corporate venture today is at a stage where clear articulation of mandate, envisioning new opportunities, connecting with other people’s needs, roadmap the system of solutions and crafting viable and effective business plans (Kenney & Mujtaba 2007). Different companies have applied the new approach to corporate venture which is intrapreneurship and seemed to record very good results in terms of growth and market competitiveness. Among those companies that have been put on the limelight and that are being considered as very stable environment for entrepreneurship is the B-schools 3M Company under the leadership of L.D DeSimone who is the Chairman and the CEO. Unlike other many other companies, the 3M Company is considered one of the most innovative companies. This is after allowing flexibility in research, creativity and innovation. For example its researchers are allowed to take about 15 percent of their time to work on unapproved projects. This has continued to help the company innovate more businesses and growing the businesses in general (Gnyawali & Grant 1997). The other case that has demonstrated new approach to corporate venture is the Intuit Company under Bill Harris has its president and CEO. After the Intuit business had grown from $5 million to $500 million, like the case of Thermo Electron Company, the CEO decided to break the business into eight core-product units headed by respective managers. However, to realize the company market objective, innovation was considered paramount. With this regard therefore entrepreneurial thinking and reasoning was encouraged in the business so as to help the company respond accordingly to the market needs. 3.0 Corporate ventures and traditional organization approaches Corporate venturing is an aspect of the business today. This is because it entails the process of using the available business assets and capabilities in order to help start new business ventures with the primary objective being to enhance the company growth while creating value for the investors’ money. Corporate venturing nowadays as applied in by different business is quite different from the traditional business practices and more often tend to present some organisational challenges to the managers. Corporate venturing being of the strategies being used by business to create value for the company shareholders by allowing exploitation of new business ventures by the company makes it almost inevitable despite the underlying challenges related to organisational arrangements (Nies 2008). Some of the traditional practices are difficult are difficult to have start-ups for certain new business ventures. This is more often than not, seems to be conflicts between the existing business traditions, cultures and practices that cannot support or sustain new business initiatives because of the tension between them as shown in appendices 1and 2 below which shows how different forces conflict. This is the reason as to why different business today, are opting to have separating business units dealing with corporate venture efforts that are different from the core business that are different from larger traditional organisation (Birol 2012). For any business to continue growing and remain successful in any given industry and also create value for the stakeholder, corporate entrepreneurship is almost a must. This is because nurturing an environment that encourages creative and innovative thinking opens doors for new business ventures and hence increases the chances of helping the business make good returns from its endeavours (Pech 2002). While some organisations choose to incorporate corporate entrepreneurship into an organisational culture, others opt to establish separate corporate venturing efforts and a good example being the General Electric Company (GE). The company has been recognized globally for its major innovations in the world of electronics as shown in appendices 3 below. The company’s success has been attributed to its CE strategy. The company for instance is estimated to be spending an average of $5 billion every year to sponsor research and innovation activities. Despite the numerous strides that have been made by the company, still the question arises on how a very large and complex company like GE manages its creativity and innovation (Nies 2008). The biggest secret lies on the company organisation design and the strategic processes it uses. For example the establishment of different Strategic Business Units (SBUs) which act independently of company bureaucracies. Even though these SBUs operate independently they subscribe to report directly to the CEO to ensure transparency, accountability and attention. This approach has proved to be very successful at GE more especially in the development commercial craft engines and industrial diamond as well as plastic business. Although this strategy of separation seem to be creating conflicting forces between the traditional practices and the new ventures, it is appropriate in large corporations where bureaucracies might prove to be a major hindrance corporate entrepreneurship and venturing (Birol 2012). 4.0 Obstacles to successful corporate venturing While enacting corporate venture, there are numerous challenges that the entrepreneurs face and this case be demonstrated from various. Such problems as cost of venture, organisational culture, lack of adequate skills and competencies and organisational design and structures are some of the common obstacles that many of the businesses have continued to face. The other obstacles that may have continued to face in corporate venturing include differences in shared values, organisational processes and systems. Any failure to manage any of these obstacles can be equated to a business that is likely to experience retarded growth after maturity and thereafter collapse for failing to expand by identifying new opportunities (Nies 2008). It is therefore that all obstacles that exist be managed accordingly. Some of the ways various obstacles can be managed include establishing different business units, using convertible ventures to finance innovation activities, designing employee recruitment policies and change in organisational culture as shown in appendix 4 below. 5.0 Factors for success and failure to corporate venturing This assessment has established various factors which can positively contribute to the success of corporate venturing and more especially in terms of the efforts being made to encourage corporate venturing and they include clear organizational goals and objectives, good leadership, positive organizational values, processes, culture and system. Skills and competencies as well as good capital base and harmonized stakeholders’ interests, are also important in ensuring corporate venturing efforts. On the other hand, various factors can also contribute to failure in corporate venturing efforts and they include conflicting interests motivated by the need to create own wealth by the stakeholders, varying interests and opinions, high cost of actualizing an idea and rigid organizational structure (Kenney & Mujtaba 2007). All these factors have been overcome using different ways as shown in appendix 4 below. 6.0 Gaining of corporate venture effort The primary objective of an entrepreneur to engage in corporate venture is to identify new business opportunities that would be exploited using available company resources and competencies in order to enhance the stakeholders’ value. This can be illustrated by the case involving Intuit Company that opted use the corporate venture approach of starting numerous small business units that could be managed in order to safeguard and continue growing the market. Further, corporate venture as used by the stakeholder allows for creation of new products and services that can outdo those of the rivals at market place. This can be demonstrated in the case of General Electric Company and the Intel Corporation both of which made major strides in discovering different products for the market (Pech R 2009). 7.0 Conclusion In conclusion its is important to note that as mentioned earlier the objective of this report was to study the concept of corporate venturing and how it is applied in various organizations. This analysis has established that with the increasing need to expand the business and have a competitive advantage, the strategy to do so lacks. However, with the emergency of intrapreneurship, different organizations, can now be able to break encourage creativity and innovation so as to come up with new strategies. However, most important is how the business can structure itself so as to encourage creative thinking. References Birol AJ 2012, Intrapreneur or Entrepreneur? Retrieved 24th August 2012, available at: http://entrepreneurs.about.com/cs/makingthechoice/a/intrapreneur.htm Gnyawali, D R & Grant, J H. 1997. Enhancing corporate venture performance through organizational learning. The International Journal of Organizational Analysis, 5(1). Pp. 74 – 98. Hornsby JS, Kuratko DF & Zahra SA 2002, Middle managers' perception of the internal environment for corporate entrepreneurship: Assessing a measurement scale. Journal of Business Venturing, 17, 49-63. Ireland RD, Kuratko DF & Morris MH 2006, A health audit for corporate entrepreneurship. Journal of Business Strategy, 27(1), 37-47. Kenney M & Mujtaba BG 2007, Understanding corporate entrepreneurship and development: a practitioner view of organizational entrepreneurship. Journal of Applied Management and Entrepreneurship, 12(3), 73-88. Nies T 2008, Create an Intrapreneurial Culture, 24th August 2012, available at: http://www.refresher.com/mindfulnetwork/articlelive/articles/55/1/Create-an-Intrapreneurial- Culture/Page1.html Pech R 2009, Entrepreneurial courage, audacity, and genius, Pearson Education, Sydney. ISBN: 9781442510524 Pech RJ 2002, Making waves: Innovation in business, Auckland, NZ, Prentice Hall. Unrated Appendices Appendix 1: Tensions between new business ventures and core business activities Core business wants …. Tension New ventures need to… protect core assets (brand, Channels, alliances, networks, etc.) Core assets Leverage assets keep top talent Human resources attract experienced personnel from core to bring knowledge and linkages maintain fairness in reward systems Rewards encourage entrepreneurship and to recognize and reward risk-taking sustain focus on core business Leadership receive strategic guidance and expertise from core business executives grow traditional revenue streams Revenues and growth create new revenue streams, which may compete with core business continue investment in core business Financial resources redirect core’s financial resources into new venture adhere to established policies and procedures and to manage risk Speed and flexibility encourage rapid decision-making and high risk tolerance control new ideas Idea sharing have core business contribute ideas Appendix 2: Roles of various teams in corporate venturing Function Composition Role Corporate Board Committee Parent company board members in a board subcommittee Increasingly joined by directors, who bring technology and e-business expertise Ensures the company has an e-business or new-venture strategy and maintains it as an imperative Keeps board members abreast of new-venture issues and progress New-Ventures Group Board or Steering Committee Senior management of the new ventures group Executives from the core business Possibly outsiders (e.g., VC firms, strategic partners) Ensures consistent and mutually beneficial linkages with the core business Helps set and agree upon high-level policies, processes, and criteria Individual Venture Board or Advisory Committee Venture group management team Representatives from the core business External experts Provides oversight and guidance to specific venture and provides active strategic counsel Appendix 3: Major innovations by the General Electric Company 1. The carbon filament incandescent light bulb (1879), 2. the first practical x-ray technology (1920), 3. the first commercial home television programming (1928), 4. the first successful jet aircraft (1942), 5. providing the basic technology for fiber optic communications (1981), 6. magnetic-resonance guided therapy technology (1993) for medical diagnosis 7. leading edge technologies of today such as breakthroughs on holographic data storage that can allow up to 40 high definition movies to be stored on a single DVD (2007) Appendix 4: Company Obstacle/Failure factor Obstacle/failure management strategy used Intel company High cost of corporate venture Convertible debentures financing Starlight communications Rigid organizational culture Resignation 3M Lack of adequate skills and competencies among the staff Redesigning the recruitment and hiring process to attract the most competitive workers who are innovative General Electric Company Organizational design and structure Establishing separate strategic business units (SBUs) Read More