BUS163 (Ch. 10-15, 19-20)

figure 20.1 growth trajectories for two business

(y) revenue x time (x) high vs slow growth trajectory

figure 14.4 Self-reinforcing growth through acquisition of customers. A self-reinforcing loop, R, is assumed to work as long as the economies of scale are actually realized through effective operational processes.

+ + + + + + - - Financial resources Marketing R Acquisition of customers Operational processes Economies of scale Unit costs Price Product attractiveness Sales

Table 10.8 Strategies for corporations to grow new businesses

- Balance trial-and-error strategy formulation with rigor and discipline - Balance operational experience with invention - Balance new business' identity with integration

Table 11.1 Comparison of physical and intellectual property

- Multiuse (physical) Use by one firm precludes simultaneous use by another (intellectual property) Use by one firm does not prevent unauthorized use by another - Physical depreciation (physical) Depreciates, wears out (intellectual property) Does not wear out - Protection and enforcement from encroachment (physical) Generally can enforce and protect ownership (intellectual property) May be difficult or expensive to enforce and protect ownership

Table 10.4 Types of Entrepreneurial Transitions

- Self-employment low: Independent contractor Small business proprietor high innovation and novelty: Venture-backed startup Spin-out - dependent employment low: Conventional employment high innovation and novelty: Entrepreneurship and corporate new ventures

table 15.5 reasons to develop a global strategy for a new venture

- access low-cost labor or materials - obtain economies of scale

figure 12.1 model of an innovative organization

- customer relationship management - operations - product innovation = to create and maintain sustainable competitive advantage

table 15.4 advantages and disadvantages of the four globalization strategies

- multi-domestic - transnational - international - global

table 15.1 five different types of mergers and acquisitions

- overcapacity reduction: to reduce excess capacity an increase efficiencies - geographic extension (roll-up): to extend a company's reach geographically and build economies of scale and scope - product or market extension: to extend the product line or reach a new market segment - technology acquisition: to quickly add new technologies and capabilities - industry convergency: to establish a position during the convergence of an industry or sector

table 20.7 tools for acting ethically in tough situations

- take a brea before making a decision

table 19.6 issues to be resolved within the terms of the deal

- timing of investment - stock options - anti-dilution provisions

Figure 13.1 credibility cycle

-> talent-people -> customers -> sources of financial capital -> suppliers -> sources of capabilities -> physical assets -> ->

Figure 14.11 example of a road map with milestones for a new technology firm

1 Start new firm 2 Legal, Team, Plan 3 Initial product prototype Build sales and service 6 Initial sales Acquire sales force 3 months 3 months 3 m o n t h s 2 months 2 months 5 Launch product 4 Final product and marketing

Table 10.2 Key elements of the five types of legal forms for a new business in the United States

1. Owners' personal liability Unlimited Unlimited Limited Limited Limited 2. Taxation Proprietor's personal tax forms Partners' personal tax forms Profits taxed at corporation and owners pay tax on distributions Profits or losses flow through to owners Profits or losses flow through to owners 3. Continuity of business Terminated by proprietor Dissolved by partners Perpetual Perpetual Varies 4. Cost of formation Very low Low Moderate Moderate Moderate 5. Ability to raise capital Low Moderate High Moderate Moderate

table 12.8 six principles for retaining loyal people and partners

1. Preach what you practice. Communicate the vision, goals, and values of the organization. Practice what you preach is also required. 2. Partners must win also. Enable your vendors and partners to participate in a win-win venture. 3. Be selective in hiring. Select people with values consistent with the firm's. Membership on the team is selective. 4. Use teams of talented people. Use small teams for most tasks and give them the power to decide. Provide simple rules for decision making so teams can act. 5. Provide high rewards for the right results. Reward long-term values and profitability. Provide solid compensation, benefits, and ownership. 6. Listen hard, talk straight. Use honest, two-way communication and build trust. Tell people how they are doing and where they stand.

Figure 12.7 Knowledge creating and sharing activities of a firm

1. Present: shared problem solving 2. implementing processes and tools within the firm 3. future: experimenting and learning 4. acquiring knowledge from outside the firm = core competencies

Table 10.11 extracting value from corporate venturing

1. Protect new ventures from short-term pressures. 2. Recognize that not all employees who volunteer to work with the corporate new venture are a good fit for the new venture. 3. Don't expect the same results from the corporate venture that are expected from the core business. 4. Manage with a portfolio mindset, not a project mindset. 5. Be prepared to learn, since new markets are seldom like existing ones. 6. Set milestones and manage the new venture in stages. 7. Stop failing ventures early—and maximize the lessons learned. 8. Continually evaluate learning-transfer mechanisms to ensure that ideas and lessons are shared.

table 12.11 managing knowledge in a technology ventures

1. Role: Identify and evaluate the role of knowledge in the firm. 2. Value: Identify the expertise, capabilities, and intellectual capital that create value in the form of products and services. 3. Plan: Create a plan for investing in the firm's intellectual capital and exploiting its value while protecting it from leakage to competitors. 4. Improve: Improve the knowledge creation and sharing process within the new venture.

table 12.9 seven principles of trust

1. Trust is not blind. It is unwise to trust people whom you do not know well, whom you have not observed in action over time, and who are not committed to the same goals. 2. Trust needs boundaries. It is wise to trust people in some areas of life but not necessarily in all. 3. Trust requires constant learning. Every member of a team must be capable of selfrenewal and learning. 4. Trust is tough. When trust proves to be misplaced because people do not live up to expectations or cannot be relied on to do what is needed, then those people must go, be reassigned, or have their boundaries severely curtailed. 5. Trust needs bonding. Teams of people need to build their own bonds. 6. Trust needs touch. Personal contact is necessary, and teams need to meet in person to renew their trust and bonds. 7. Trust has to be earned. Organizations that expect their people to trust them must continually demonstrate that they are trustworthy.

table 13.6 questions for selecting value chain activities that will be carried out by the new firm

1. Value Is the activity a primary source of product value for the firm? 2. Rarity Does the activity include a resource or capability controlled by the firm and rarely available to competing firms? 3. Ability to be imitated Do competing firms have a cost disadvantage when imitating the scarce resource or capability held by the new venture firm? 4. Organizational mission Is the activity critical to the mission of the firm, and is the firm organized to exploit this valuable, rare, and costly-toimitate resource or capability?

Figure 10.5 Four types of new businesses opportunities and the best business arrangement for each opportunity

1. establish an independent corporate new venture high/high 2. spin off to a new company low/high 3. do no proceed low/low 4. proceed with small exploratory project high/low

table 19.1 four-step method of persuasion

1. establish credibility with investor partner, client, or talent 2. frame the goals of a new venture to be consistent with the goals of the investors or allies; describe the unique benefits of the venture 3. offer solid, compelling evidence to support the plan 4. build a good relationship with investor or ally

table 19.5 four principles of negotiations

1. focusing on describing the problem (task or deal) and take people out of discussion - goal: all participants are solving the problem 2. focus on the interests of the parties not their original positions 3. generate a variety of options or possibilities that advance the interests of the parties goal: several real solutions 4. create a final deal based on fair objective standards - goal: real, measurable standards

table 15.3 four roles of the integration manager

1. inject speed into the process 2. create joint teams 3. make social connections 4. build success

table 20.2 seven steps to building great companies

1. leadership 2. people 3. success 4. organizing principle 5. culture 6. technology 7. momentum

figure 20.4 strategic learning cycle of a learning organization

1. learn from a situational analysis 2. redefine the vision and strategy 3. adjust structure, process, people, culture, and resources 4. execute adjusted business plan

table 19.2 four-part pitch

1. painful problem that customers need to solve 2. many customers can be identified who have this painful problem and have sufficient money to spend on alleviating the pain 3. the venture has a profitable and proven solution for this problem and way to reach the customers 4. the venture team has implemented and planned effectively in the past and they can execute well in the future

table 20.4 four factors of executive succession and the relay race analogy

1. sequence 2. timing 3. baton-passing technique 4. communication

table 19.3 nine questions to answer in the business plan presentation

1. what is the product and problem its solving 3. who is the customer 7. what is the sales price 9. who are the key team members and how are they qualified to build this business

table 10.1 six questions ofr implementation

1. why 2. what 3. how 4. who 5. when 6. where

Table 11.2 U.S. patents issued

1985: 77.2 thousands 1995: 113.8 2005: 157.7 2015: 326.0

11.5 Copyrights

A copyright is the right of an author to prevent others from printing, copying, or publishing any of his or her original works.

table 12.5 leadership of routine and adaptive work

A leader's role in: Routine issues Challenging and adaptive work Direction Define problems and possible solutions. Define the challenge and the issues. Team and individual responsibilities Clarify and define roles and responsibilities. Define and discuss the necessity to adapt roles and responsibilities to changing needs. Conflict Restore order and reduce conflict. Accept useful conflict and use it to define new approaches and strategies. Norms and values Reinforce norms and values. Reshape norms and values. Teaching and coaching Provide training and skill learning for existing employees. Teach and coach new people.

12.8 Learning Organizations

A learning organization is skilled at creating, acquiring, and sharing new knowledge and at adapting its activities and behavior to reflect new knowledge and insights. A technology venture creates and acquires knowledge and shares this knowledge among its people. Process improvement projects can produce two types of learning. Conceptual learning is the process of acquiring a better understanding of cause-andeffect relationships by using statistics and scientific methods to develop a theory. Operational learning is the process of implementing a theory and observing positive results.

12.10 Summary

A new venture depends upon a team of people with complementary capabilities who are committed to a common goal. The team includes a board of directors and a board of advisors to help monitor and enhance the growing firm. Entrepreneurs should design an organization that facilitates effective coordination and collaboration among these team members. The firm's leaders strive to motivate and inspire the team members and to foster an innovative culture. As the firm grows, managers join to build the structure and carry out the detailed tasks of the new firm. The firm also puts together a compensation scheme that emphasizes "buy-in" or ownership—normally achieved by awarding stock options or restricted stock. Effective organizations manage their knowledge assets carefully and strive to continually learn. principle 12: Effective leaders coupled with a good organizational plan, a collaborative, performance-based culture, and a sound compensation scheme can help align every participant with the goals and objectives of the new enterprise.

15.5 summary

A new venture may start as a purchase of an existing company by a team of entrepreneurs. Alternatively, entrepreneurs can start their new venture and acquire other small firms to grow their own company. Most, if not all, acquisitions are justified on the basis of an expected synergy, which is the increased effectiveness of the combined firms. Acquisitions can be used for efficiency improvement, geographic expansion, product or market extension, and technology acquisition. principle 15: all new technology enterprises should formulate a clear acquisition and global strategy most new firms start with a regional or national strategy and later develop a plan to export their product internationally, as these firms grow, they may shift from exposing to establishing a wholly owned subsidiary in other nations

14.7 Summary

A new venture needs to design a set of operational processes that will enable it to build, store, and ship the products provided to the customer. New businesses build a supply chain of partners that add value at each stage of the assembly or manufacture of the product. Companies without physical products establish business processes that establish the methods of developing and delivering their services and/or digital products. The new venture manages its value chain to effectively provide the final product or service to its customer. The firm also needs to effectively manage the logistics of parts and materials. It strives to achieve the best possible coordination of its partners as well as its internal processes. Many firms establish a set of interrelated activities as a network facilitated by a value web. With a common schedule, associated tasks, and synchronization, the venture can manage the value web to maintain an efficient, on-time business process. principle 14: The design and management of an efficient, real-time set of production, logistical, and business processes can become a sustainable competitive advantage for a new enterprise.

11.3 Patents

A patent grants inventors the right to exclude others from making, using, or selling their invention for a limited period of time. In the United States, this is generally 20 years from the date of filing once the patent issues. A patent for an invention is the grant of a property right by the country in which the application is filed. utility patents: are issued for the protection of new, useful, nonobvious, and adequately specified processes, machines, and articles of manufacture. design patents: are issued for new original, ornamental, and nonobvious designs for articles of manufacture. plant patents: are issued for certain new varieties of plants that have been asexually reproduced. business model patent: patent is a type of a utility patent and involves the creation and ownership of a process or method, such as Amazon's "one-click" ordering process.

10.3 Nonprofit and Social ventures

A social entrepreneur is a person or team that acts to form a new venture in response to an opportunity to deliver social benefits while satisfying environmental and economic constraints.

10.7 Building and Managing Corporate ventures

A spin-off unit is an organization that is established within an existing company and then sent off on its own. The parent provides some resources and capabilities and sets the spin-off toward independence.

11.2 Trade Secrets

A trade secret is a confidential intellectual asset that is maintained as a secret by the owner and provides the owner with a competitive business advantage because it is a secret.

11.4 Trademarks and Naming the venture

A trademark is any distinctive word, name, symbol, slogan, shape, sound, or logo that identifies the source of a product or service.

14.1 The value chain

A value chain is a series of activities by the venture itself for transforming inputs into outputs that customers value. A highly integrated company provides most, if not all, of the functions along a value chain. Although each activity in a value chain is important, different activities may be more or less proprietary and more or less profitable for a company to pursue. Each stage of the value chain can be assigned an economic value-added measure (EVA), which accounts for value added in the form of knowledge assets and strategic assets. Logistics is the organization of moving, storing, and tracking parts, materials, and equipment. Logistics can be the basis of competitive advantage since a firm with fast, accurate logistics will be first to respond to customers.

10.4 corporate new ventures

A venture started by an existing corporation for the purpose of initiating and building an important new business unit or organization can be called a corporate new venture. Some people refer to this process as intrapreneurship.

13.5 Innovation and Virtual Organizations

A virtual organization manages a set of partners and suppliers linked by technology to provide a source or product. Companies using outsourcing and networks can pull together resources to address specific projects and objectives without having to build permanent organizations. Virtual organizations use computers and networks to build an integrated system. The creation of virtual organizations brings several challenges with it. Virtual firms often encounter difficulty in building trust, coordination, and cohesion among the partner firms and outsourcing suppliers.

13.3 Location and Cluster Dynamics

Choosing a location can have long-lasting effects on a new venture. Entrepreneurs need to choose their location with their customers, future employees, suppliers, partners, and competitors in mind. A cluster is a geographic concentration of interconnected companies in a particular field. Clusters can include companies, suppliers, trade associations, financial institutions, and universities active in a field or industry. they promote both competition and cooperation A layout is the arrangement of the facility to provide a productive workplace. This can be accomplished by aligning the form of the space with its use or function.

10.6 Incentives for corporate entrepreneurs

Figure 10.4 Resource transfer process and the champion parent corporation resources: financial, physical, intellectual, human champion -> corporate new venture or spin-off

12.7 Managing Knowledge Assets

Knowledge is the awareness and possession of information, facts, ideas, truths, and principles in an area of expertise. The knowledge of a firm encompasses: 1. cognitive knowledge ("know what") or the basic mastery of a discipline, 2. advanced skills ("know how") or the ability to apply knowledge to complex real-world problems, 3. system understanding and intuition ("know why") or deep knowledge of cause-effect relationships, and 4. creativity ("care why") or the will, motivation, and adaptability for success. knowledge management: is the practice of collecting, organizing, and disseminating the intellectual knowledge of a firm for the purpose of enhancing its competitive advantages. Competitive intelligence is the process of legally gathering data about competitors. Competitor intelligence may include securing data about competitors' products, services, channels of distribution, pricing policies, and other facts.

Figure 12.4 Knowledge and learning within a technology firm

Knowledge: Stored, retrieved, and shared Learning process Information Business processes Innovation New knowledge Products and services Marketplace: Customers

12.3 leadership

Leadership is the process of influencing and motivating people to work together to achieve a common goal by helping them secure the knowledge, power, tools, and processes to do so.

11.6 Licensing and University Technology Transfer

Licensing is a contractual method of exploiting intellectual property by transferring rights to other firms without a transfer of ownership. A license is a grant to another firm to make use of the rights of the intellectual property.

12.4 management

Management is a set of processes such as planning, budgeting, organizing, staffing, and controlling that keep an organization running well. Management of a new venture is complex. Managers balance five perspectives: reflection, analysis, contextual dynamics, relationships, and change

Legal form of the firm

corporation is a legal entity separate from its owners 1. regular taxable corporation: C-corporation (double tax corporation): taxation of the corporate profits as well as taxation of any corporate distributions to owners 2. flow-through entities (pass-through entity): all profits or losses corporate through to the owners and are not separately taxed to the firm - sole proprietorship: business that's owned and operated by usually one person - partnership: a voluntary association of two or more person who act as co-owners of a business - S-corporation - Limited liability company (LLC)

figure 20.2 alternative growth strategies for a venture

current business -> high risk

table 15.6 five forms of entry mode into International markets

description + advantages vs disadvantages 1. exporting 2. licensing 3. franchising 4. joint venture 5. wholly owned subsidiary

19.3 negotiations and relationships

due diligence: consists of verifying facts and data provided in a business plan before making a commitment to the terms of an investment deal negotiation may be defined as the decision-making process among interdependent parties who don't share identical preferences

20.1 execution

execution: a discipline for meshing strategy with reality, aligning the firm's people with goals and achieving the results promised one key measure that can help in the early stages of a business is the ratio of revenues to expenditures plus assets employed called a business index (BI) = revenues / [expenses+assets]

Figure 14.9 Balanced scorecard. Each perspective has a question and a set of measures

financial perspective customer perspective learning and growth perspective business operations perspective = vision and strategy

figure 14.6 value web for a firm

firm suppliers, customer service and relationship organizations, customers, sales channels

15.4 Spotlight on Alibaba

founded in 1999 by Chinese entrepreneur Jack Ma, Alibaba was originally created as a portal to connect Chinese manufacturers and foreign buyers alibaba has since expanded beyond china to become a global power with portals in seven languages and customers across the world

figure 15.1 strategies for globalization

global: (high pressures for cost reductions / low pressures for local responsiveness) international (low / low) transnational (high / high) multi-domestic (low / high)

15.3 Global Business

globalization involves the integration of markets, nation-states, and technologies, enabling people and companies to reach around the world to offer and sell their products in any country in the world a local or regional strategy focuses all of a firm's efforts locally since its a pathway to a competitive advantage the multi domestic strategy calls for a presence in more than one nation as resources permit to exploit cost economies while creating differentiated products, a transnational strategy can be used.. which rests on a flow of product offerings created in any one of the countries of operation and transferred between countries an international strategy tries to create value by transferring products and capabilities from the home market to other nations using export or licensing arrangements a global strategy emphasizes worldwide creation of new products, sales, and marketing a meta-national company is one that posses three core capabilities: (1) being first to identify and capture knowledge emerging all over the world (2) mobilizing this globally scattered knowledge to out-innovate competitors (3) Turning this innovation into value by

15.2 Acquisitions as a Growth Strategy

merger refers to the fusing together of two companies. (50/50) acquisition is when one buys another. (dominant partner) oligopoly is an industry characterized by just a few sellers horizontal merger is a merger between firms that make and sell similar products in a similar market vertical merger is the merger of two firms at different places on the value chain

figure 15.2 forces and consequences

opening of and deregulation of markets ... rise of global firms and ventures -> organizational challenges

Table 20.5 characteristics of successful CEOs

prone to failure: 1. arrogant, hubris, 4. rely on what worked in past more likely to succeed: 1. humble, open-minded 4. challenge every decision and look for wise challenges and opportunities to learn

Table 15.2 Rules for acquiring firm and the acquired firm

rules for acquiring: - use your highly valued stock as payment - decide whom to keep and build relationships fast rules for acquired: - demand cash, not stock as payment from the acquiring firm - avoid signing a noncompete agreement or keep its duration short

Table 10.3 Five types of new ventures

small business: as a sole proprietorship, partnership, or corporation owned by a few people nice business: seeks to exploit a limited opportunity or market to provide the entrepreneurs with independence and a slow-growth buildup of the business high-growth business: aims tor build a important new business and requires a significant initial investment to start up. A business based upon a radical innovation seeks to commercialize a technology or process innovation to build a special kind of high-growth business nonprofit organization: a corporation or a member association initiated to serve a social or charitable purpose. corporate new venture (CNV): Another type of venture is started by existing corporations for the purpose of building a new business unit as a solely owned subsidiary or a spin-off. independent venture is a new venture not owned or controlled by an established corporation, which includes the first four types in Table 10.3.

first steps of establishing a new corporation

start. ∙ Select founding team; Choose board and officers and choose legal form and select business attorney then ∙ choose name and perhaps logo, secure domain name and trademark and choose state of incorporate and file papers name directors then ∙ select IP attorney and develop man preparers then ∙ file for patents copyrights etc and choose accounting firm

table 20.3 stages and respective goals of a business

startup - design, make, and sell: exploit the opportunity take-off - efficiency of operations growth - expand product lines slowing growth - leadership required maturity - new innovation

20.2 stages of an enterprise

startup, take-off, growth, slowing growth, maturing

Figure 14.3 common business process

submitted Order generated Order received Credit checked Invoice prepared Order and invoice shipped Assembly and Shipping Dept. Order entered Sales Dept. Customer

20.3 adaptive enterpisse

successful entrepreneurs have a deep knowledge of their customers and products and they know a great deal about what priorities matter to their customers at particular historical junctures strategic learning is a cyclical process of adaptive learning using four steps: learn, focus, align, and execute learning organization captures, generates, shares, and acts on knowledge by revising its strategy as new knowledge becomes available. this type of firm is an adaptive enterprise - one that changes its strategy or business model as the conditions of the marketplace require residence is a skill that can be learned and increased

19.4 term sheets

term sheet: all terms of an investment agreement that should be reviewed by the new venture's firm's attorney professional investors will normally want preferred stock which has claims on dividends if ever paid and assets before common stock owners

20.4 ethics

the business leader finds it difficult to be fair to others without sacrificing customers or profits integrity can be defined as truthfulness, wholeness, and soundness

14.2 business alignment

theory of business: vision statement strategy, customers, people and their competencies: the team, core business processes

19.1 The presentation

venture team will be expected to verbally present its vision, story, and plan to investor groups and angels as well as potential employees, partners, and suppliers.

Table 12.2 comparison of board of directors for ventures and public firms

ventures vs public firms Board as internal governance mechanism Yes Yes Principal-agent alignment High Low Firm maturity, overall uncertainty, slack resources Low, High, Low High, Low, High Directors' financial incentives High Low Directors' knowledge of the sector High Low Directors' diversity of interests, conflicts of interest High, High Low, Low

figure 20.3 technology drives most competition toward excellence and lower life-cycle cost of ownership. in this figure automobiles are used to illustrate the principle

y: life cost of ownership x: product excellence

Table 12.1 Characteristics of an effective team

■ All members share leadership and ownership of the team's tasks. ■ Communication is continuous among members in an informal atmosphere. ■ Tasks and purposes are well understood. ■ People listen to each other and are comfortable with disagreements within the team. ■ Most decisions are reached by consensus. ■ Feedback on performance is frequent. ■ The division of tasks and work effort is clear. ■ A collaborative effort is the norm. ■ Members set their own, shared interim deadlines for project stages. ■ Team members rely on each other and hold each other accountable. ■ Teams learn and share their learning.

table 12.6 seven traits of leaders

■ Authenticity: consistent actions and words ■ Decisiveness: willing to act on limited, imperfect information ■ Focus: create a priority list and stick to it ■ Care: build relationships and social capital ■ People skills: offer helpful feedback and good coaching to all team members ■ Communication: stimulate conversation and communicate vision ■ Continuous improvement: keep learning and energy flowing in the firm, retain optimism

Table 13.3 Criteria for Location selection

■ Availability of potential employees and consultants ■ Availability of complementary firms ■ Road and airplane transportation ■ Quality of life—education, culture, recreation ■ Costs of doing business ■ Availability of suitable facilities ■ Proximity to markets ■ Availability of support services ■ Affordable housing

Table 11.4 Ten Mistakes with legal matters

■ Failing to secure legal assistance ■ Delaying the handling of legal issues ■ Delaying the intellectual property management process ■ Issuing founder shares without vesting provisions ■ Failing to incorporate early ■ Disclosing intellectual property without a nondisclosure agreement ■ Starting a business while employed by a potential competitor ■ Overpromising and exaggerating claims in the business plan ■ Failing to register the name of the firm early in the startup process ■ Failing to develop confidentiality, nondisclosure, and non-compete agreements

table 13.5 cluster characteristics that support innovation

■ High-quality human resources ■ Research in local universities ■ Availability of investment capital ■ Representative customers ■ Rule of law ■ Sufficient infrastructure ■ Acceptance of globalization ■ Successful role models ■ Moderate regulation and taxes ■ Suppliers and complementors ■ Competitors ■ Consultants, attorneys, and accountants

Table 10.10 establishing conditions for corporate new ventures

■ Increase the sources for innovation: New ideas tend to evolve and expand through conversation. The more people you can get involved, the more high-quality ideas you will generate. ■ Establish a process for collecting and evaluating ideas: Establish a forum for assessing the merits of various proposals to ensure that the most worthy ideas receive funding. ■ Do not let traditional executives control the budget: Many executives are protecting their own departments and are unwilling to risk small amounts of resources on new and untested ventures.

Table 10.5 Characteristics of corporate new ventures

■ Newness and novelty of the product relative to the firm's existing products ■ Independence or semiautonomy from existing corporate structure ■ High potential for significant innovation ■ Unique entrepreneurial team leadership capabilities

table 14.1 understanding the customer

■ Preferences ■ Purchase criteria ■ Decision-making process ■ Buyer behavior ■ Functional needs

Table 13.1 sources of legitimacy

■ Regulatory: legal actions, accreditation, credentials ■ Social: fair treatment, endorsements, networks, image ■ Industry: attractive, respected industry, known and understood business model ■ Talent: known, respected people ■ Location: within an industry cluster, favorable location, visible ■ Intellectual property: trade secrets, patents, copyrights

table 12.7 four elements of emotional intelligence

■ Self-awareness of one's emotions, emotional strengths and weaknesses, and self-confidence; the ability to read one's own emotions ■ Self-management of honesty, flexibility, initiative, optimism, and emotional selfcontrol; the ability to control one's emotions and act with honesty and integrity ■ Empathy and social awareness of organizational currents; recognition of the needs of associates and clients ■ Relationship management achieved by inspiration, influence, catalytic actions, conflict management, and collaboration

Table 10.9 Incentives for corporate entrepreneurs

■ Support for and recognition of employees who create and champion new ideas and opportunities ■ A culture that favors individual or team initiative to create new ideas ■ Slack time for exploring not-yetapproved projects ■ Significant degree of autonomy ■ Effective rewards such as promotion, stock ownership, or bonuses

Table 10.12 elements of a business as practiced by the parent firm and the corporate new venture

Element Parent firm Corporate new venture Assets Protect and use Leverage Revenues and growth Growth of existing revenue stream Create new revenue stream Management Adhere to policies and procedures Act decisively with flexibility Rewards Maintain fairness and equity Reward entrepreneurship and performance Talent—people and knowledge Retain talent and knowledge Attract the top talent and transfer the best knowledge from the parent company to the CNV

Table 13.7 conditions that favor an activity operating internally within the new venture

Factor Internal activity favored due to: Costs Total cost to produce internally is lower Demand forecast High uncertainty Number of suppliers Few powerful suppliers Proprietary, nonpatented technology Need to keep secret Value-added function Source of the firm's future sustainable competitive advantage

figure 19.1 integral nature of the business plan and venture

business plan and story - business model and strategy, leadership and resources - intellectual property, financial returns

table 20.6 obstacles to ethical decision making

complacency self-delusion rationalization survival mentality

Figure 13.2 value chain from concept to customer

concept -> technology development -> product design -> logistics and manufacturing -> marketing -> sales/distribution -> service -> customer

Figure 10.2 Corporate new venture model

context: ∙ Dynamic markets ∙ Competitive rivalry ∙ Need for new products -> corporate new ventures: ∙ Innovation ∙ Novelty ∙ Self-renewal ∙ Proactiveness -> performance: ∙ Growth ∙ Profitability

Table 10.14 Eight types of innovation for periods of the market life cycle

1. Disruptive Very early Technological discontinuity 2. Application Early Technology application creates new market— Killer app 3. Product Start of growth Improved performance, dominant design 4. Process Later growth More efficient and/or effective processes 5. Experiential Mature Improved customer experience 6. Marketing Mature Improved marketing relationships 7. Business model Declining Reframes the value proposition or value chain 8. Structural Declining Responds to structural changes in the industry

table 12.3 six goals for an effective board process

1. Engage in constructive conflict—especially with the CEO. 2. Avoid destructive conflict. 3. Work together as a team. 4. Work at the appropriate level of strategic involvement—avoid micromanagement. 5. Address decisions comprehensively. 6. Act as a shock absorber, not an amplifier—serving as a steady hand and not overreacting.

table 13.8 seven key characteristics of a new basic technology

1. Functional performance: an evaluation of the performance of the basic function 2. Acquisition cost: initial total cost 3. Ease of use: use factors 4. Operating cost: cost per unit of service provided 5. Reliability: service needs and useful lifetime 6. Serviceability: time and cost to restore a failed device to service 7. Compatibility: fit with other devices within the system

Table 10.12 five-step process for establishing a corporate new venture

1. Identify and screen opportunities. Create a vision. Designate a venture champion and an entrepreneurial team. 2. Refine the concept and determine feasibility. Prepare the concept and vision statement. Draft a brief business plan summary or outline for review and to gather support. 3. Prepare a complete business plan. Identify the person to lead the new venture. 4. Determine the best form of the corporate new venture: internal new venture unit, spin-off, subsidiary, or internal project. 5. Establish the corporate new venture with talent, resources, and capabilities transferred from the parent company.

Table 11.3 Developing a patent strategy

1. Identify the goals of a patent portfolio. 2. Identify the intellectual assets and gather supporting documents. 3. Identify those assets most suitable for patent applications. 4. Draft invention disclosures and patent applications. 5. Develop a plan for licensing, enforcing, and enhancing patents.

Table 12.12 Entrepreneurial learning process

1. Identify the problem or opportunity What do we want to change? Desired specific result 2. Analyze the problem or opportunity What is the key cause of the problem? Key cause identified 3. Generate potential solutions How can we make a positive change? List of possible solutions 4. Select a solution and create a plan What is the best way to do it? Establish criteria, select the best solution, and make a plan to accomplish it 5. Implement the selected plan How do we implement the plan effectively? Monitor the implementation 6. Evaluate the outcome and learn from the results How well did the outcome match our desired result? Verify that the problem is solved. Why did it work?

table 12.10 four principles of a performance based culture

1. Inspire everyone to do their best. 2. Reward achievement with praise and pay-for-performance, and keep raising the performance goals. 3. Create a work environment that is challenging, rewarding, and fun. 4. Establish, communicate, and stick to clear values.

Table 13.2 principles of persuasion

1. Liking ■ People like those who like them. ■ Uncover shared bonds and offer sincere praise and compliments. 2. Reciprocity ■ People respond in kind to others. ■ Give to others what you want to receive. 3. Social proof ■ People respond to a display of endorsements by people they trust. ■ Use testimonials and endorsements from trusted leaders. 4. Consistency ■ People adhere to their verified commitments. ■ Ask for voluntary, public commitments. 5. Authority ■ People highly regard experts. ■ Show and state your expertise. 6. Scarcity ■ People want scarce products. ■ Describe unique benefits.

table 12.4 nine elements of an organization

1. Mission and vision 2. Goals and objectives 3. Strategy 4. Capabilities and resources 5. Processes and procedures 6. Talent 7. Leadership team and management 8. Shared values and culture 9. Structure and style

15.1 Acquisitions and the Quest for Synergy

An acquisition is when one firm purchases another. Usually the acquired company gives up its independence, and the surviving firm assumes all assets and liabilities. Acquisitions are one form of corporate entrepreneurship that can be particularly useful as an established company tries to innovate and infuse the organization with more entrepreneurial behavior or new product lines. three main steps for acquiring a company: (1) target identification and screening, (2) bidding strategy, (3) integration or transition to the acquirer we can expect synergy (Syn) defined as Syn = Vn - V; the synergy is expected value added by the acquiring party three common methods of valuation of a firm used by (1) book value: is the net worth equity of the firm which is the total assets minus intangible assets (patents, goodwill) and liabilities (2) price-to-sales ratio: (3) price-to earnings ratio

14.2 Processes and Operations Management

An operation is a series of actions, and operations management is the supervising, monitoring, and coordinating of the activities of a firm carried out along the value chain. Operations management deals with processes that produce goods and services. A process is any activity or set of activities that takes one or more inputs, transforms and adds value to them, and provides one or more outputs Ergonomics is a specific kind of process for making physical tasks easier and less stressful to accomplish. Processes bring value to customers and stakeholders. Business success comes, in large part, from a company's process performance. Therefore, a firm should strive for superior process design. Quality is a measure of a product that usually includes performance and reliability. Performance is the degree to which a product meets or exceeds certain operating characteristics Reliability is a measure of how long a product performs before it fails. On-time speed measures the pace of lead time, on-time delivery, and product development. Flexibility is a measure of a firm's ability to react to a customer's needs quickly. Supply-chain management is the management of supplier activities, including the flow of materials, execution of supplier processes, and dissemination of information, sufficient to meet customer demands as well as the management of internal firm processes (e.g., legal) necessary to meet business needs, including cost, schedule, and quality. Operations systems that are designed to create efficient processes by using a total systems perspective are called lean systems. Flexible systems can quickly respond to changes in demand, supply, or processes with little cost or time penalty. They often use a just-in-time (JIT) approach that focuses on reducing unnecessary inventory and removing non-value-added activities. This system may use a pull method in which the customer activates production. The method uses the term noise to describe uncontrolled variations, and it holds that a quality product should be robust to noise factors. opportunity. In value networks, firms focus on their core competencies and use others for complementary capabilities. Operational throughput efficiency (TE) may be measured by the formula TE = VA/(VA+NVA) where VA = value-adding time and NVA = non-value-adding time. Examples of NVA are waiting in a queue or system downtime. The goal is to reduce NVA.

10.5 The innovator's dilemma

Another problem for all successful firms is cannibalization, which is the act of introducing products that compete with the company's existing product line.

11.7 Spotlight on Apple

Apple, Inc. was founded on April 1, 1976, and incorporated in early 1977. The startup was established to sell the Apple I computer kit, designed by founders Steve Jobs and Steve Wozniak and sold for $666.66. Over time, Apple has carefully designed an intellectual property strategy that covers each product through a variety of design patents, utility patents, trademarks, copyrights, and trade secrets.

Figure 14.1 value chain and information flow

Applied research Product design Process design Logistics Manufacturing Marketing and sales Distribution Sales and service Customer = information flow

figure 14.7 value web of Cisco systems

Assemblers Component suppliers Sales channels Legend: Goods, payment, orders, parts, solutions Communication, information, CRM Customers Orders Orders Payment Payment Payment Payment Parts Parts and modules Integrated solutions Products

Table 10.7 Contrasts between independent ventures and corporate ventures

Dimension Independent venture Corporate venture Team Best in industry Best available in firm Scope Entire company focused Development team hands to corporate operations Culture Driven, team-oriented Company's culture "Contract" Explicit—business plan Increasingly explicit Incentives Oversight Who? When? Equity (entire team) Varies: bonus, career growth Board Monthly Upper management Design reviews External feedback Customers, new investors Customers Financial goal IPO or M&A value versus investment Breakeven date, return on investment Changes to plan Quick action by the board Multiple levels for approval

19.5 spotlight on circle

Dublin and Boston-based circle internet financial aka circle was founded in 2013 by Jeremy allaire and Sean neville the company now finds itself at the intersection of social messaging, global payments and new forms of retail bank accounts delivered as software apps and services on phones

13.2 Influence and Persuasion

Influence and persuasion play a role in the entrepreneur's acquisition of resources. They are part of the process of selling, acquiring resources, and structuring deals for acquisitions and investments.

11.1 Protecting Intellectual Property

Intellectual property (IP), which is distinguishable from real (or physical) property, is valuable intangible property owned by persons or companies.

12.9 spotlight on intuit

Intuit provides software for personal finance, small business finance, and accounting. Intuit has adopted a company-wide method of ongoing product reinvention. The company encourages all employees to find new opportunities.

13.7 Spotlight on NVIDIA

NVIDIA was founded by Jen-Hsun Huang, Chris Malachowsky, and Curtis Priem in 1993, and over the next two decades it became a leader in GPU production. A GPU, which means graphics processing unit, is a special circuit that can quickly manipulate memory; it has applications in computers, phones, and video game consoles. This helped NVIDIA launch the NV1, its first mainstream processor. This critical relationship, along with superior design, led to the NV1's success, establishing the company's credibility. This allowed NVIDIA to attract its first round of financing from the venture capital firm Sequoia.

20.5 spotlight on Netflix

Netflix inc. is a provider of DVDs by mail and of on-demand streaming media. in highly competitive market for streaming media, Netflix has tried to acquire and deploy new technologies.. it incorporated and stressed the strategic importance of understanding big data, allocating significant resources to hire industry leading data scientists

14.4 digital technologies and operations

New enterprises regularly exploit online and other digital technologies to synchronize their activities through different channels, through different stages of the value experience, and across different offerings Personalization is the provision of content specific to a user's preferences and interests. It uses software programs to find patterns in customer choices and to extrapolate from them. Customization is providing a product customized to a user's preferences. Counsyl offers health-risk profiles customized to the genetics of its users. Versioning is the creation of multiple versions of a product and the sale of these modified versions to different market segments at different prices. Some customers prefer having a choice of online or physical channels. The hybrid model, sometimes called "bricks and clicks," utilizes the best of online technologies as well as other channels.

what forms do new businesses, take, and what are corporate ventures

New ventures can range from small business or consulting services to high-growth, high-impact enterprises. When entrepreneurs establish a new enterprise, they must make some critical decisions about these matters. See, for example, the first steps in the United States to establishing a new corporation in Figure

12.5 recruiting and retention

New ventures serious about obtaining profits through people need to ensure that they recruit the right people in the first place. Stock options are offered in a plan under which employees can purchase, at a later date, shares of the company at a fixed price (strike price). Stock options take on value once the market price of a company's stock exceeds the exercise (strike) price. An alternative to stock options is restricted stock, which is stock issued in an employee's name and reserved for his or her purchase at a specified price after a period of time—say, one, two, or three years. Some call this type of stock "reserved stock."

10.8 Spotlight on OpenAg

OpenAg, also known as the Open Agriculture Initiative, was founded by Caleb Harper in 2015 as part of the MIT Media Lab, a prominent research laboratory based out of MIT. OpenAg is a type of social venture, as it aims to create sustainable change in the future of food without focusing on financial returns. OpenAg imagines a future where anyone will be able to grow food anywhere, and the open source software that OpenAg supports will create a comprehensive database that maps out the conditions needed for high-quality food.

12.6 Organizational culture and social capital

Organizational culture is the bundle of values, norms, and rituals that are shared by people in an organization and govern the way they interact with each other and with other stakeholders. Organizational values are beliefs and ideas about what goals should be pursued and what behavior standards should be used to achieve these goals. Organizational norms are guidelines and expectations that impose appropriate kinds of behavior on members of the organization. Norms (informal rules) include how employees treat each other, flexibility of work hours, dress codes, and use of various means of communication such as e-mail. Organizational rituals are rites, ceremonies, and observances that serve to bind together members of the organization. Trust is a firm belief in the reliability or truth of a person or an organization. It is critical that we can trust those with whom we work. Social capital consists of the accumulation of active connections among people in a network. Social capital can be described as consisting of three dimensions: (1) structural, (2) relational, and (3) cognitive.

12.2 Organizational design

Organizational design is the design of an organization in terms of its leadership and management arrangements; selection, training, and compensation of its talent (people); shared values and culture; and structure and style. the talent consists of the people or employees of an organization. The leadership team and the firm's managers are responsible for communicating and leading the firm in the appropriate direction. Flexible organizations that effectively adapt to change are often called organic organizations. Relational coordination (RC) describes how people act as well as how they see themselves in relationship to one another A new venture normally starts out as a collaborative structure that primarily consists of teams with few underlying functional departments. A self-organizing organization structures itself to maximize the benefits from the diversity of its members and the robustness of their network of interactions.

figure 14.5 a business process is a series of activities

Product development and management Business process development and manufacturing Business results Customer and market knowledge Leadership

Figure 14.8 Coordinated systems of product, processes, and supply chain

Product: ∙ Performance ∙ Architecture ∙ Manufacturability Business and manufacturing processes: ∙ Technology ∙ System flow ∙ Quality ∙ Throughput supply chain: ∙ Make versus buy decision ∙ Logistics ∙ Manufacturing system

14.6 Spotlight on Samsung

South Korean conglomerate Samsung was founded in 1938 by Lee Byung-chul as a trading company, dealing with fish and other groceries. After some initial success, the company diversified into many different verticals, moving to electronics in the 1960s. Samsung began incorporating parts of design thinking, giving increased status and power to its designers in the company. This meant more innovative products that established Samsung as a market leader in many verticals. Samsung now employs more than 1,600 designers, and its product cycle begins with research conducted by writers, engineers, designers, and marketers who fuse their experience to best understand the user.

14.5 Strategic control and operations

Strategic control is the process used by firms to monitor their activities, evaluate the efficiency and performance of these activities, and take corrective action to improve performance, if necessary. To evaluate the effectiveness of their strategies, some companies develop a balanced scorecard, a set of measurements unique to a company that includes both financial and operational metrics. A Gantt chart is a way to depict the sequence of tasks and the time required for each. Gantt charts, by using shaded bars on a grid, compare what was done with what was planned over time. Timelines are a visual means of comparing the actual and planned progress of a project or activity.

Table 10.6 Strengths and weaknesses of a corporate new venture

Strengths: - Ready access to capital Access to capabilities of corporate employees Suppliers willing to help in the design process Emphasis on the marketing plan Gain from brand equity of the parent firm Access to processes and technologies of the parent Weaknesses: - May be subjected to a corporate budget process Multiple control and review levels Limited autonomy compared to an independent venture Limited access to strong entrepreneurial talent Risk-reward may be less attractive than for an independent entrepreneur Limited to parent firm's technologies and processes

13.8 Summary

Successful entrepreneurs are good at finding and acquiring the resources they need to start and build their firms. They need capital, people, and intellectual and physical assets to launch and grow their businesses. They do this by building credibility and legitimacy with the sources of these scarce resources. Typically, they are good at telling persuasive stories about their vision and its potential. They use their skills of persuasion to acquire the required resources in a timely way. Entrepreneurs also create a plan for outsourcing some functions while retaining critical functions, such as product design and marketing. They use advanced telecommunication technologies to help communicate and manage their relationships with their partners and suppliers in a virtually integrated firm. principle 13: Effective new enterprises use their persuasion skills, credibility, and location advantages to secure the required resources for their firm in order to build a well-coordinated mix of outsourced and internal functions.

Figure 10.3 Four models of corporate entrepreneurship

The Enabler: dedicated/diffused The Opportunist: ad hoc/ diffused The Producer: dedicated / focused The Advocate: ad hoc/ focused

20.6 Summary

The execution of a creative, well-defined plan is essential to the success of a new enterprise. Good execution depends on the logical alignment of the firm's strategy with its goals and the efforts of its people. Turning a concept into a successful reality depends on goals, deadlines, teamwork, and focus on achieving the desired outcomes. Choosing the right people for the right jobs and helping them see where to go and how to get there are critical elements of building a great company. With the right people and a great strategy, a startup can successfully execute the plan. A new business grows from fledgling startup to growth to maturity in stages. Managing a new business through the stages requires varying skills and organizational arrangements. Startups need to have talented, multiskilled people in place as they move through the stages of growth. Emerging firms are constantly subject to challenge and to change. Organizing a firm capable of a resilient response to these challenges calls for building an adaptive corporation. The ability to adapt to change may be a firm's primary sustainable advantage. Furthermore, a firm needs to sustain its ethical principles through difficult times. principle 20: ability to continuously and ethically execute a plan and adapt that plan to changing conditions provides long term success

13. 1 Acquiring Resources and Capabilities

The founders of a new venture try to acquire resources and capabilities by contacting key organizations and people and asking them to support their venture.

13.6 Acquiring Technology and Knowledge

The new venture needs to identify which tasks are core and which are context. A task is core when its outcome directly affects the firm's competitive advantage. Everything else is context [Gottfredson et al., 2005]. The ratio of what is core and what is context can be a good measure of effectiveness at generating shareholder value.

11.8 Summary

The plan to acquire, build, and protect the intellectual property of the new venture should be clear to all the participants. The proper array of trade secrets, patents, trademarks, and copyrights can come together as a strong set of valuable proprietary assets. For high-growth, technology-based companies, intellectual property can be used to build a competitive advantage. Well-protected intellectual property can be licensed to others as a source of revenue. Alternatively, ventures based upon university-developed technology will need to obtain a license. Entrepreneurs should avoid the 10 mistakes with legal matters described in Table 11.4. Principle 11: The intellectual property and name of a new enterprise can provide a proprietary advantage, leading to success in the marketplace.

19.6 summary

The potential for a successful new business is typically communicated through a presentation. Through this presentation of the entrepreneur's story, the potential investor, new employee, or partner begins to understand the opportunity and to evaluate the competencies of the team members. As investors become interested in the new enterprise, negotiations about valuation and performance milestones will commence. Conducting negotiations that retain and enhance the long-term alignment and collaboration with the investor is essential. The entrepreneur is negotiating until the moment of formally signing the definitive agreements that trigger the transfer of funds to the company. All the negotiations continuously address issues surrounding product, team, processes, business model, financial return, and ownership. principle 19: the presentation of a compelling story about an enterprise followed by skillful negotiations with investors is a critical activity for all new enterprises

Figure 12.2 four leadership styles

The supporting style is used when a leader does not focus exclusively on goals but uses supportive behaviors that bring out the employees' skills around the task to be accomplished. The directing leader gives instructions about what and how goals are to be achieved by the subordinates and then supervises them carefully. The coaching style calls for a leader to focus on goal achievement and give encouragement to subordinates. The delegating style occurs when the leader is less directive and facilitates employee confidence. Finally, the leader is a venture's emotional guide. Emotional intelligence (EI) is a bundle of four psychological capabilities that leaders exhibit: self-awareness, self-management, social awareness, and relationship management, as described in

13.4 Vertical Integration and Outsourcing

The value chain of a firm is a sequence of business activities for transforming inputs into outputs that customers value, Vertical integration is the extent to which a firm owns or controls all the value chain activities of a business. Many companies are operating in a hypercompetitive global market where there is overcapacity in most industries. In such an environment, they are being called upon to achieve profitability by relentless cost cutting. This often entails heavy outsourcing to lower-cost labor and moving business abroad.

10.9 Summary

There are five types of new ventures: (1) small business, (2) niche, (3) high-growth, (4) nonprofit, and (5) corporate. Important contributions have been made by small and niche businesses, especially when they later grow and extend their mission globally. High-growth ventures including radical innovation start-ups are very important to creating growth and jobs as well as providing an important service or product that makes a difference. A special form of new venture, called a nonprofit, enables an organization to meet an important social purpose. Finally, corporate new ventures make important contributions of novelty and creativity that provide new vigor for existing large enterprises. The pursuit of innovation and the creation of a new venture independent of the existing structures often provide a sense of optimism and positive renewal for the entire enterprise. A corporate new venture needs the right amount of slack, independence, and resources to successfully create a novel business. Principle 10: An important, vigorous new business venture can emerge from a large and established organization when afforded the appropriate balance of independence, resources, and people to respond to the opportunity.

12.1 The New Enterprise Team

We define a team as a few people with complementary capabilities who are committed to a common objective, goals, and approach for which they hold themselves mutually accountable. The new venture team is a small group of individuals who possess expertise, management, and leadership skills in the requisite areas. Often we call the lead entrepreneurs the founders. A board of directors is a group composed of key officers of a corporation and outside members responsible for the general oversight of the affairs of the entity.

14.3 the value web

Webs are grids with no center that allow open communication and movement of items and ideas. In a web, each participant focuses on a limited set of core competencies [Tapscott et al., 2000]. A value web is usually based on digital infrastructure that manages operations dispersed across many firms or work groups. The value web is a way of visualizing/conceptualizing the extended enterprise as a network of interrelated stakeholders that create, sustain, and enhance its value-creating capacity.

Table 13.4 Selected centers of entrepreneurial activity in technology

Western United States: Boulder, Los Angeles, Portland, Salt Lake City, San Diego, San Francisco and Silicon Valley, Seattle Eastern and Southern United States: Atlanta, Austin, Boston, New York, Pittsburgh, Raleigh-Durham, Washington, D.C. Asia: Bangalore, Beijing, Shanghai, Singapore, Sydney, Taipei Europe/Middle East: Berlin, Helsinki, London, Tel Aviv South America: Santiago

Figure 10.6 eight types of innovation and the life cycle of a market

X: time -> Y: Revenue Growth: 1. Disrupted 2. Application 3. Product 4. Process Mature Period: 5. Experimental 6. Marketing Declining Model: 7. Business model 8. Structural