Corporate entrepreneurship

The Era of Open Innovation - Chesbrough (2003) A number of factors combined erode the underpinnings of closed innovation. Which ones? (3)

A number of factors combined erode the underpinnings of closed innovation: - There was a dramatic rise in number and mobility of knowledge workers - It is difficult to control proprietary ideas and expertise - There was a growing availability of private venture capital

Christensen and Overdorf (2002) - Meeting the challenge of disruptive change- What happens with an organization's capabilities and disabilities over time? And How does that affect the extent to which it is difficult to change?

The factors that define an organization's capabilities and disabilities evolve over time - they start in resources; then move to visible articulated processes and values; and migrate to culture. When the organization's capabilities reside primarily in its people, changing capabilities to address the new problems is relatively simple. But when the capabilities have come to reside in processes and values, and especially when they have become embedded in culture, change can be extraordinary difficult.

Birkinshaw and Gibson (2004) - Building ambidexterity in an organization Explain the contextual ambidexterity matrix

The more a company emphasizes performance management and social support, the more likely are its employees to behave ambidextrously - aligned and adaptive - and the more likely the organization is to achieve high performance. Look at the image of the matrix!

Why the Best and Brightest Approaches Don't Solve the Innovator's Dilemma - Denning (2005) 1) What are the 6 leading theories of innovation? Explain them and mention their problems and flaws 2) Three alternatives for disruptive innovation are mentioned. What are they? Explain them and mention their risks and flaws.

This article examines what the leading management theorists have to offer to solve the paradox of innovation, with particular emphasis on disruptive innovation. 6 leading theories of innovation: - Create a safe environment for innovation (Christensen and Raynor) o Their main solution is to separate innovation from the existing hierarchy, by creating an independent business unit, which will provide a safe and protected environment for innovation o The approach has several flaws: The approach doesn't address innovation that require organization-wide change. At best the approach works in where the idea is limited in scope and can be launched as a business independent of the parent organization It is doubtful that the separate business unit for innovation will receive all the resources necessary for success Even if the separate innovation business unit is successful, it doesn't follow that the parent organization will adopt the modus operandi developed in the subsidiary o It's not really the innovator's solution, it's more deferring the innovator's solution, because at some point someone has to persuade the parent organization to accept the change, which will be a continuous process. o The solution rests on the hope that if you can build enough commercial success in the marketplace, you have a better chance of eventually winning the battle of persuasion. Unfortunately this is usually nog enough to convince - Fund many innovation projects (Gary Hammel) o Breeding healthy innovation via a decentralized funding system that emulates open markets. So companies should fund many innovation projects and see which ones win out. By giving large numbers of managers the throughout the organization the power to allocate budgets for innovation, Hamel hopes to exploit the wisdom of the many over the blinkered view if a centralized corporate decision making process. o There are three central problems with Hamel's approach: Hamel overlooks the reason why centralized decision making is conservative, it reflects a fear of disruption of entrenched power structures and careers. In fact, middle managers usually have the most to lose in any basic change so they are not likely to use their resources for disruptive innovation Hammel's belief that resources will resolve the problem of innovation isn't borne out of facts -> Research shows that there is no correlation between increased R&D spending and improvement in profitability. So, simply spending more usually leads to a waste of resources of increasingly marginal projects. Hamel's hope was that of the many, the best ideas will be selected and pursued. But, once a disruptive idea starts to flourish, it becomes a threat to threat to the hierarchy who will kill the idea o His diagnosis is wrong, the biggest challenge does not lie in generating more ideas, but in how to make the good ideas actually happen. - Systems thinking and the learning organization (Senge) o His solution is 'systems thinking', a way of looking at systems as a whole that will enable us to see things as complex of causation and so solve complex problems. o Two problems with this approach Convincing a large number of people to adopt systems thinking is a massive challenge of innovation Systems thinking, doesn't inevitably lead to action. Innovation is less about understanding the problem than getting people to act differently. - Use data-driven strategic innovation (Schrage) o The future of innovation will increasingly be determined by the future of data-driven statistical techniques o The problem with this approach is that data-driven statistical analysis will likely be a component of sustaining innovation, but not a very large one of disruptive innovation. So it does not work properly for disruptive innovation - Use open source innovation (Chesbrough) o Solution is open innovation o Open innovation is not a bad idea. But it's a supplement to the steps that are needed to resolve the basic problem of innovation, not a solution itself. The challenge is not to generate more ideas, but to establish an organization that is open to it and can execute them. - Create a chief innovation officer o Create a new special position within the hierarchy that supports innovation. o The main concern is that it is unlikely that the person in this position will actually be able to push the entire organization towards disruptive innovation Three alternatives for disruptive innovation - Consolidate an idea from outside the firm o Most bold disruptive ideas in an organization end up being implemented in another organization. The pioneer and the firm to scale the innovation up are usually different parties. Large firms are bad pioneers, and therefore should accept their own incapacity and let someone else do the pioneering/innovation. When someone else has successfully selected and developed a good new idea, then bring it in the organization and scale up the market. o The main problem with this approach, is that large firms usually don't have the capabilities to manage it because it is disruptive (problems with capabilities that define what you can and cannot do, culture, values, processes etc.) - License the innovation to someone else o License your own good ideas to the marketplace and let somebody else bring them to the marketplace. o But there are important risks: licensing valuable innovations can be a dangerous strategy, unless you have a clear and accurate vision of your future - Stop kissing frogs (Campbell and Park) o Innovations that are a real promise for mature companies are rare. The researchers see the problem not as management's failure to innovate, but as a lack of opportunities to pursue. Companies must be patient and accept their faith of declining revenues. Basically wait until a 'zero-risk' scenario for innovation comes across. That is because the criteria they use to judge innovations are so tough, that almost no innovations are pursued. For example there needs to be an already established and certain market, something which an disruptive innovation almost never has. o Zero-risk scenarios for innovation hardly exist and will come too late for the firm

In the slides of week 3 the mechanistic and the organic structure are discussed. Key elements of both structures are mentioned. What are they?

Mechanistic structure: - Operating styles - must be uniform and restricted - Reluctant adaptation - with insistence on holding fast to tried-and-true management principles despite changes in business conditions - Tight control - through sophisticated control systems Organic structure: - Operating styles - allowed to vary freely - Free adaptation - by the organization to changing circumstances - Loose, informal control - with emphasis on norm of cooperation

In the slides of lecture 2 the concepts of exploration and exploitation are discussed. Also the performance implications of using too much of one of the concepts are discussed. Questions: 1) Describe the core characteristics of exploration and exploitation 2) What are the performance implications of using too much exploitation and using too much exploration? And in general of combining both activities?

Any organization requires the combination of two tasks: - Exploitation - Exploration Exploitation: - Efficiency - Production - Selection - Execution - Incremental innovation Exploration - Pursuing new competences - Involves activities characterized by: o Variation o Experimentation o Flexibility o Risk-taking o Radical innovation Performance: - Too much exploitation: competency trap - Too much exploration: failure of renewal trap - Balancing exploitation and exploration improves financial performance

Managing internal corporate venturing cycles - Burgelman and Valikangas (2005) Three insights are given in how to build leadership capability to manage the ICV cycle. What are they? And explain.

Building leadership capability to manage the ICV cycle - To avoid the pitfalls of unmanaged cyclicality, ICV should be viewed as an integrated and continuous part of the strategy making process, rather than as an insurance policy whose appeal varies according to the prospects of the company's mainstream businesses. - Taking control of the ICV-cycle allows executives to rationalize resource allocation. This will reduce the tendency to flood ICV with resources in good times, which takes away entrepreneurial hunger, and to starve it in bad times, which aborts potential success. - Another key aspects of managing ICV is making ICV a responsibility of all senior executives. In need to make a new venture a corporate success, executives involved in ICV need to be able to sponsor and guide the new venture and to start the process of determining its strategic context within the corporation.

Slides week 4 Corporate entrepreneurs face three major challenges linked to the need for intra-organizational political skills. What are they?

Corporate entrepreneurs face three major challenges linked to the need for intra-organizational political skills: - Achieving credibility or legitimacy for the concept and the entrepreneurial team - Obtaining resources - Overcoming inertia and resistance (politics)

Birkinshaw and Gibson (2004) - Building ambidexterity in an organization Which actions do you have to take in which context in order to achieve the high-performance context?

Escaping from suboptimal contexts When you are in the ... context you have to take the following actions: - The burnout context o Build in social support mechanisms - The country club context o Create a high performance context - Low performance context o First, create a high performance context o Before you end up in the burnout context, build in social support mechanisms

Slides week 4 There are 5 ways to encourage intrapreneurship. Which ones?

Encouraging intrapreneurship Encourage by: - High level sponsor - Space to break the rules - Slack to pursue project - Motivation to pursue project - A culture that 'tolerates' intrapreneurship

One More Time: How do you motivate employees? - Herzberg (1987) What is considered as the hawthorn effect?

Hawthorn effect: productivity and attitudes don't change because of the actions, but because the particular employees noticed that the company was paying more attention to them in doing something different or novel.

Principles are defined that both define the scenario thinking process at Shell and help explain how it has survived for so long. What are they? and explain them. (Wilkinson and Kupers, 2013)

Make it plausible, not probable Shell's scenario practice maintained that scenarios are not predictions but can provide a deeper foundation of knowledge and self-awareness in approaching the future. They also felt that the 'official' view of the future - the business-as-usual outlook - both reflects an optimism bias and is biased on the human tendency to see familiar patterns and be blind to the unexpected. The company has also avoided to express one scenario over another. The trap of having a good versus a bad future is that there is nothing to learn in heaven and no one wants to visit hell. Plausible stories encourage judgment, not just attention to data and other information. By acknowledging that subjective judgment and intuition are an integral part of the leadership process, scenarios create a safe space in which to acknowledge uncertainty. Plausibility can be strengthened by how relevant and memorable the scenario is, as well as by a logical story line. Strike a balance between relevant and challenging Scenarios facilitated dialogue in which managers' assumptions could safely be revealed and challenged. They enabled consideration of unexpected developments and inconvenient truths. To seize and retain attention of all of these constituencies, though, Shell's scenarios have to be more than disruptive and challenging; they had to be relevant to executives. It remains difficult to strike an appropriate balance between relevant and challenging. Relevant can be too familiar, but challenging can go unheard. Tell stories that are memorable yet disposable The problem is that the most stories we tell about the future simply extrapolate from the present. Perhaps the greatest power of scenarios, as distinct from forecasts, is that they consciously break this habit. Storytelling is key to making this process work. A story is not a position, so no one has to be for or against it or line up behind the CEO's opinion. If it's sufficiently vivid and memorable, it allows the executives to discuss difficult issues without having to revisit arguments connected with them: a few words can evoke the world. The scenarios act as temporary scaffolding - rather than a fixed structure - to support strategic conversation. Add number to narrative Shell's scenarios have never been developed from mechanistic modeling, but they have always been associated with quantification to enhance internal consistency, reveal deep story logic and systematic insight, and illustrate outcomes using the language of numbers that characterizes most corporate cultures. Quantification is essential to scenarios. The challenge lies in realizing how, when, and why models linked with them can hide assumptions and constrain thinking rather than refine it. Scenarios open doors Scenarios are valuable in external engagement. Shell has used global scenarios to add color to corporate speeches, to open doors to privileged conversations with resource holders and governments, and build a network of NGO contracts. But more important has been the way scenarios have created value through new business development, joint venturing and new market entry. Building scenarios with key stakeholders in prospective joint projects has enabled an invaluable exchange of perspectives and insights. Manage disagreement as an asset Scenarios redirect attention and encourage dialogue rather than predescribing action, which made them nonthreatening. Fit into broader Strategic Management System Three essential starting points for corporate strategy: - Global scenarios: world of possibility - Competitive positioning: world of relativity - Strategic Vision: world of creativity The challenge in effective scenario work is to go beyond the usual strategic focus on current trends and competitive positioning to find the right scale of observation. The next challenge is to look for some degree of strategic fit between the company's core capabilities and the variety of plausible future conditions. The success of the strategic vision depends on matching capabilities and context. Scenarios can help that vision evolve and become a source of dynamism.

For your answer use Christensen - The innovator's dilemma Explain: 1) The innovators dilemma 2) the principles of disruptive innovation 3) the relation between the two

Principles of disruptive innovation It can be concluded that the widely accepted principles of good management do not always work well in every situation. This refers to the innovator's dilemma: the logical, competent decisions of management that are critical to success of their companies are also the reasons why they lose their positions of leadership. Therefore the writer developed the principles of disruptive innovation. These principles can be used to decide whether to follow the widely accepted principles of good management or that alternative principles are appropriate. When good companies fail it is either because they ignored or tried to fight these principles. However, if managers can understand and harness these forces, rather than fight them, they can in fact succeed spectacularly when confronted with disruptive technological change. But they must first understand what has caused those circumstances and what forces will affect the feasibility if their solutions. Principles of disruptive innovation: - Companies depend on customers and investors for resources - Small markets don't solve growth needs of large companies - Markets that don't exist can't be analyzed - An organization's capabilities define its disabilities - Technology supply may not equal market demand (1) Companies depend on customers and investors for resources While managers may think they control the flow of resources in their firms, in the end it is really customers and investors who dictate how money will be spent because companies that don't satisfy their customers and investors don't survive. The highest performing companies are those that are best at this, they have well-developed systems for killing ideas that their customers don't want. As a result, these companies find it very difficult to invest adequate resources in disruptive technologies - lower margin opportunities that their customers don't want - until their customers want them. And by then it is too late. The only way in which mainstream firms can successfully establish a timely position in a disruptive technology are those in which the managers of the firm set up an autonomous organization charged with building a new and independent business around the disruptive technology. Such organizations, free the power of the customers of the mainstream company, ensconce themselves among a different set of customers - those who want the product of the disruptive technology. In other words, companies can succeed in disruptive technologies when their managers align their organizations with the forces of resource dependence, rather than ignoring or fighting them. Creating an independent organization, with a cost structure honed to achieve profitability at the low margins characteristic of most disruptive technologies, it the only viable way for established firms to harness this principle. (2) Small markets don't solve growth needs of large companies The larger and more successful a company becomes, the weaker the argument that emerging markets can remain useful engines for growth. Many large companies adopt a strategy of waiting until new markets are large enough to be interesting. But this is not often a successful strategy. Those large established firms that have successfully seized strong positions in the new markets enabled by disruptive technologies have done so by giving responsibility to commercialize the disruptive technology to an organization whose size matched the size of the market. Formal and informal resource processes make it very hard for large firms to focus adequate energy and talent on small markets, even when logic says they might be big someday. (3) Markets that don't exist can't be analyzed Experts' forecasts on emerging markets are usually wrong. In disruptive innovations, we know least about the market. Therefore there are strong first-mover advantages. Companies whose investment processes demand quantification of market sizes and financial returns before they can enter the market will get paralyzed or make serious mistakes when faced with disruptive technologies. They demand market data where non exists. This can be solved by applying a different approach to strategy and planning. Called discovery-based-planning suggests that managers assume forecasts are wrong, rather than right, and that the strategy they have chosen to pursue may likewise be wrong. Investing and managing under such assumptions drives managers to develop plans for learning what needs to be known, a much more effective way to confront disruptive technologies successfully. (4) An organization's capabilities define its disabilities An organization's capabilities reside in two places: - The processes - the methods by which people have learned to transform inputs of labor, energy, materials, information, cash and technology into outputs of higher value. - Values - the criteria that managers and employees in the organization use when making prioritization decisions. Processes and values are not flexible. The very processes and values that constitute an organization's capabilities in one context, define its disabilities in another context. A framework is presented (hoef je niet te kennen) that can help managers understand more about this and what to do about it. (5) Technology supply may not equal market demand In their efforts to stay ahead by developing competitively superior products, many companies don't realize the speed at which they are moving up-market, over-satisfying the needs of their original customers as they race the competition towards higher-performance, higher-margin markets. In doing so, they create a vacuum at lower price points into which competitors employing disruptive technologies can enter. Only those companies that carefully measure trends in how their mainstream customers use their products can catch the points at which the basis of competition will change in the markets they serve.

Birkinshaw and Gibson (2004) - Building ambidexterity in an organization Two forms of ambidexterity are discussed in this article. 1) Which two? 2) Explain the differences

Structural ambidexterity Structural ambidexterity: to create separate structures for different types of activities. Structural ambidexterity is the standard approach. Structural separation is necessary, the argument goes, because the two sets of activities are so dramatically different that they cannot effectively coexist. But separation can also lead to isolation, and many R&D and business-development groups have failed to get their ideas accepted because of their lack of linkages to the core businesses. Contextual ambidexterity Contextual ambidexterity: individual employees make choices between alignment-oriented and adaption-oriented activities in the context of their day-to-day work. In business units that are either solely aligned or solely adaptive, employees have clear mandates and are awarded accordingly. But in a business unit that is ambidextrous, the systems and structures are more flexible, allowing employees to use their own judgment as to how they divide their time between adaptation-oriented and alignment-oriented activities. To foster this sort of ambidexterity on the individual level, a much greater level of attention has to be paid to the human side of the organization. Contextual ambidexterity Contextual ambidexterity: individual employees make choices between alignment-oriented and adaption-oriented activities in the context of their day-to-day work. In business units that are either solely aligned or solely adaptive, employees have clear mandates and are awarded accordingly. But in a business unit that is ambidextrous, the systems and structures are more flexible, allowing employees to use their own judgment as to how they divide their time between adaptation-oriented and alignment-oriented activities. To foster this sort of ambidexterity on the individual level, a much greater level of attention has to be paid to the human side of the organization. Four ambidextrous behaviors in individuals are identified: - Ambidextrous individuals take the initiative and are alert to opportunities beyond the confines of their own jobs - Ambidextrous individuals are cooperative and seek opportunities to combine their efforts with others - Ambidextrous individuals are brokers, always looking to build internal linkages - Ambidextrous individuals are multitaskers who are comfortable wearing more than one hat These four attributes - which collectively describe an ambidextrous employee - have several important commonalities. - They constitute acting outside the narrow confines of one's job and taking actions in the broader interests of the organization - They describe individuals who are sufficiently motivated and informed to act spontaneously, without seeking permission from their superiors - They encourage action that involves adaption to new opportunities but is clearly aligned with the overall strategy of the business Such behaviors are the essence of ambidexterity and they illustrate how dual capacity for alignment and adaption can be woven into the fabric of an organization on the individual level. Still, an individual's ability to exhibit ambidexterity is facilitated by the organizational context in which he or she operates, so contextual ambidexterity can also be diagnosed as and understood as a higher-order organizational capability. At the organizational level contextual ambidexterity can be defined as: the collective orientation of employees toward the simultaneous pursuit of alignment and adaptability. Just as with market orientation, ambidexterity is a potentially important capability for contributing to long-term performance. An ambidextrous organizational context can be achieved through a variety of means, but they all have one thing in common: They enable individuals in the organization to exhibit initiative, cooperation, brokering skills and multitasking abilities. See table with differences for complete answer about differences!

What are according to the slides of week 1 the key characteristics of scenario thinking?

- Scenarios are not forecasts but challenging possible futures - Probability does not play a role in scenario thinking, we rely on factual evidence before we act - The future manifests itself as a combination of scenarios - Hence, the focus is on dynamics and implications - To identify adequate actions, responses, and interventions

In the slides of week 3 structural ambidexterity is discussed. Explain: 1) The Two-cultures problem 2) In what situations structural ambidexterity pays-off

1) Two cultures problem: - Envy - Isolation - Lack of resources 2) When structural ambidexterity pays off: - Changing environments - High levels of competition - Large companies - Resource availability

Birkinshaw and Gibson (2004) - Building ambidexterity in an organization What are the 5 key lessons that emerge from this article?

Conclusion - Pathways to ambidexterity There are 5 key lessons that emerge from the article: - Diagnose your organizational context - Focus on a few levers, and employ them consistently - Build understanding at all levels of the company - View contextual ambidexterity and structural ambidexterity as complements - View contextual ambidexterity initiatives as driving leadership, not as being leadership-driven

Christensen and Overdorf (2002) - Meeting the challenge of disruptive change- Three ways to create a new organizational space where new capabilities can be developed are identified. 1) What are they? And explain. 2) Also a framework was developed for fitting the too to the task. Explain the dimensions and the way the framework works.

Creating capabilities to cope with change Processes are not nearly as flexible or adaptable as resources are - and values are even less so. So whether addressing sustaining or disruptive innovations, when an organization needs new processes and values - because it needs new capabilities - managers must create a new organizational space where those capabilities can be developed. There are three possible ways to do that: - Create new organizational structures within corporate boundaries in which new processes can be developed - Spin out an independent organization from the existing organization and develop within the new processes and values required to solve the new problem - Acquire a different organization whose processes and values closely match the requirements of the new task. Creating new capabilities internally When new challenges require new processes, managers need to pull the relevant people out of the existing organization and draw a new boundary around a new group. New team boundaries facilitate new patterns of working together that ultimately can coalesce as new processes. These teams are named 'heavy weight teams'. These teams are entirely dedicated to the new challenge, team members are located together, and each member is charged with assuming personal responsibility for the success of the entire project. Creating capabilities through a spinout organization A spinout organization is only required: (1) when a disruptive innovation requires a different cost structure in order to be profitable and competitive, or (2) when the current size of the opportunity is insignificant relative to the growth needs of the mainstream organization. How separate does such an effort need to be? Physical separation (a different location) is not always necessary. The primary requirement is that the project is not forced to compete for resources with projects in the mainstream organization. Because then the mainstream organization's projects will be prioritized. Managers actually need to run two businesses in tandem - one whose processes are turned to the existing business model and another that is geared toward the new model. Warning: Only the CEO can ensure that the new organization gets the required resources and is free to create processes and values that are appropriate to the new challenge. CEOs who view spinouts as a tool to get disruptive threats off their personal agendas are almost certain to meet with failure. Creating capabilities through acquisitions Companies that successfully gain new capabilities through acquisitions are those that know where those capabilities reside in the acquisition and assimilate them accordingly. If the capabilities being purchased are embedded in an acquired company's processes and values, then the last thing the acquiring manager should do is integrate the acquisition into the parent organization. Because, once the acquisition's managers are forced to adopt the buyer's way of doing business, its capabilities will disappear. A better strategy is to let the business stand alone and to infuse the parent's resources into the acquired company's processes and values. If, however, the acquired company's resources were the reason for its success and the primary rationale for the acquisition, then integrating it into the parent can make a lot of sense. Often, it seems that financial analysts have a better intuition about the value of resources than they about the value of processes. The reason that innovation often seems so difficult for established companies is that they employ highly capable people and then set them to work within organizational structures whose processes and values were not designed for the task at hand. Ensuring that capable people are ensconced in capable organizations is a major responsibility of management in a transformational age such as ours. By selecting the right team and organizational structure for your innovation - and infusing it with the right resources, processes and values - you heighten your chances of innovating successfully. Managers can do that by asking themselves four questions: - Does my organization have the right resources to support this innovation? - Does my organization have the right processes to innovate? - Does my organization have the right values to innovate? - What team and structure will best support our innovation effort? The frameworks helps by selecting the right structure for your innovation. -> Fitting the tool to the task Framework itself -> see sheets or article!

Slides week 4 What are the characteristics of intrapreneurs?

Intrapreneurship Concerned with: - How individuals may be encouraged to act more entrepreneurial in a large organization - Systems, structure and culture that inhibit entrepreneurship - The character and the personality of the individual behaving this way Intrapreneurs: - Goal oriented - Ambitious - Competitive Questioning - Self-motivated - Dislike bureaucracy - Comfortable with change - Adept to politics - Good at resolving conflict - Able to work with others

Birkinshaw and Gibson (2004) - Building ambidexterity in an organization What were the results of their research?

Results research: - The correlation between ambidexterity and performance is highly significant - The correlation between organizational context and ambidexterity is highly significant - The influence of organizational context on performance only occurs through the creation of ambidexterity (full mediation)

Transformational Leadership's Role in Promoting Corporate Entrepreneurship: Examining the CEO-TMT Interface - Ling, Simsek, Lubatkin and Veiga (2008) 1) Explain how the research is done 2) Name the hypothesis and tell whether they were accepted or not 3) Name the additional result/conclusion

Research and results All the relations in the final model are hypothesized and tested with 152 surveys to SMEs. Hypotheses 1. CEO transformational leadership is positively associated with TMT behavioral integration. When a TMT is behaviorally integrated, it is more likely to contribute to a firm's pursuit of corporate entrepreneurship. By sharing decision making, information and effort, behaviorally integrated TMT's are better to shorten the time needed to develop a collective understanding of environmental changes. 2. TMT behavioral integration is positively associated with corporate entrepreneurship. Decentralization of decision making refers to the degree of concentration in decision making with regards to task and operational activities within a TMT. If a TMT is led by transformational CEO, responsibilities for specific key tasks needed to achieve important strategic decisions are more likely to be distributed among TMT members because such leaders seek to encourage self-management and self-development among followers. 3. CEO transformational leadership is positively associated with TMT decentralization of responsibilities In more-responsibility decentralized TMTs, decision-making authority is delegated to those who have greater experience and expertise to diagnose problems and implement solutions in their domain. 4. TMT Decentralization of responsibilities is positively associated with corporate entrepreneurship. A TMT's shared preference for risky growth opportunities is likely to be enhanced by transformational CEOs, because such leaders possess both a vision and a measured degree of optimism about change, and the tend to communicate inspirational messages that both challenge TMT members to think outside the box and to instil in them the confidence that obstacles can be overcome. 5. CEO transformational leadership is positively associated with TMT risk propensity. It would follow that the greater the TMT's shared preferences for risky growth opportunities, the more apt the firm is to engage in corporate entrepreneurship. 6. TMT risk propensity is positively associated with corporate entrepreneurship That what distinguishes transactional leaders from transformational leaders is their choice of performance time horizon. Transactional leaders, because they seek to monitor and control rather than to inspire followers, are more likely to base rewards on immediate, short-term performance. Transformational leaders are more likely to base rewards on longer-term performance. Compared to short-term performance, long-term performance demands that followers place greater trust in their leader, because they are aware of the time lag between initiating action and receiving awards. 7. CEO transformational leadership is positively associated with the extent to which a top management team's compensation is based upon the long-term performance of its firm The proportion of total compensation tied to a firm's long-term performance was positively related to future innovation. 8. The extent to which a top management team's compensation is based upon the long-term performance of its firm is positively associated with corporate entrepreneurship. Results - Transformational leadership of the CEO has a significant positive influence on the following aspects of the management team: o Behavorial integration o Decentralization of responsibilities o Risk taking Propensity o Long-term Compensation - The following constructs have a positive effect on corporate entrepreneurship: o Decentralization of Responsibilities o Risk-Taking propensity o Long-term compensation - The effect of behavioral integration on corporate entrepreneurship could not be proven - Although it was not hypothesized, a direct positive relation was found between transformational leadership and corporate entrepreneurship as well

What are according to Wilkinson and Kupers (2013) the advantages of scenario thinking (7)?

Sustained scenario thinking can: - Make leaders more comfortable with the ambiguity of an open future - Counter hubris - Expose assumptions that would otherwise remain implicit - Contribute to shared and systematic sense-making - Foster quick adaption in times of crisis - Build social capital within the organization - Aid in navigating complexity and conflict -> (managing disagreement while avoiding the extremes of group think and fragmentation) At Shell and elsewhere, scenarios have helped leaders prepare for futures that might happen, rather than the future they would like to create.

According to Christensen (The innovator's dilemma), what is the main task of the innovator?

The innovator's task is to ensure that this innovation - the disruptive innovation that doesn't make sense - is taken seriously within the company without putting at risk the needs the needs of present customers who provide profit and growth. The problem can be resolved only when new markets are considered and carefully developed around new definitions of value - and when responsibility for building business is placed within a focused organization whose size and interest are carefully aligned with the unique needs of the market's customers.

Incentive compensation for corporate venture personnel - Sykes (1992) 1) Which question does this paper address? 2) Two compensation principles apply to venturing within the corporation. Which ones? And explain them. 3) Which parameters are taken into account within this context?

This paper addresses the question of whether key managers in corporate ventures should have special compensation plans similar to stock options in independent venture or whether they should be treated the same as other corporate employees. Two compensation principles apply to venturing within the corporation: equity and equality. Equity: pay should fully reflect performance. Equality: rewards should be distributed equally. The corporate view on the equity concept is that compensation should promote individual effort congruent with achievement of the corporate goals. Some managers interpret this to mean that pay should be used to reinforce desired employee behavior. This behavioral approach can result in negative as well as positive results. An important corollary to the equity concept is that if performance is to determine pay, the employee must have control over the factors that determine performance. Obviously, pay should be competitive with wages offered for similar work in other companies in the same industry. If a negative differential becomes too large, employees will leave for the better paying work. An equality conflict arises when the corporation ventures into a new industry that pays differently from the norms in its base business. This is a common problem for companies that use venturing as a diversification strategy. Within each of the basic concepts, two parameters also need consideration: - Long-term vs short-term compensation - Individual vs group compensation Best performing companies used a combination of short- and long- term pay plans. Successful application of both equity and equality concepts tends to emphasize group versus individual rewards. At the conservative end are the equality plans, those following the standard compensation practices of the base business for all business units including new ventures. At the progressive end are the equity plans, those geared to a venture's financial performance.

Explorative and Exploitative Learning from External Corporate Ventures - Schildt, Maura and Keil (2005) - Four governance modes are used in this research. Name and explain them.

External corporate venturing The definitions are specifically aimed at governance modes aimed on learning. Therefore these definitions might be more tight than you are used to. CVC investments: Investments through your own autonomous investment unit, with financial goals as main goals (also strategic, but less) Non-equity alliance: aims at the development of new businesses together with an external partner Joint venture: refer to partnerships in which a new legal entity and organization is formed by two companies to pursue a business opportunity together. Acquisition: Acquisition of an entrepreneurial venture, an independent or external venture is internalized by the acquisition of the majority of the shares of the venture.

Incentive compensation for corporate venture personnel - Sykes (1992) Multiple guidelines for management are given for: - Equality - Equity - Congruence - Long vs short-term equity plans - Motivation 1) What are these guidelines? 2) If you had to summarize this article in a few sentences, what would it be?

Guidelines for management Equality - Emphasis should be on team versus individual awards. The compensation of the team including not only the venture personnel, but also the others in the corporation who advice or support the venture effort, should not be overlooked. - Compensation mechanics cannot become too involved, otherwise employee focus tends to turn to those details rather than to venture goals - The degree of career risk depends on the corporation's working environment, its attitude toward venture failure, and its policies regarding placement of personnel from failed ventures. - The basic principle of equality is that the perceived reward-to-risk ratio should be the same across job functions - Corporate entrepreneurs often assume that equality means being compensated the same as independent entrepreneurs. However, the degree of financial and career risk is clearly greater for the independent entrepreneur. - Artificial of risk appears to be a negative factor - The degree of control the employee has over the outcome is important factor. At the low end of the employee ladder, salary give-up should not be solely compensated by stock price appreciation. For those workers, it should include bonuses for achievement of their group's goals. - Awarding common stock or an equivalent provides an equal form of treatment to all participating employees. Although the amounts of stock awarded individuals may be different, as are their base salaries, the performance payoff is proportionally equal for us all. This form of compensation also rewards team effort. Equity - Bonuses for achievement of near-term performance goals or milestones should be given more weight at the lower levels of the organization. This ties compensation more closely to achievement of goals over which the employees have control. - To recruit special skills from outside of the corporation may require similar compensation plans as individual entrepreneurs backed-up by venture capitalists. One way to keep the talents who may be targets for the venture capitalists is to create an internal venture capital environment by establishing separate, relatively autonomous ventures with stock-like awards. Congruence - Congruent compensation aligns employee effort with the goals of the corporation - The corporation may have to make some compromises between focusing on corporate goals and the mission of a venture. Because the highly motivated employees in a venture can accomplish much more in a shorter time on less money than through the normal corporate matrix management process. Long-term versus short-term equity plans - Compensation plans dependent on long-term performance work best if the venture is not significantly related to the base firm. To make stock or other firm of long-term compensation work for corporate ventures, the corporation must be willing to treat the ventures like independent companies. - Shorter-term forms of incentive compensation are more appropriate when the product is strategically linked to the main business, and when the venture receives considerable support from the parent company. - Incentive target should be based on realistically achievable, critical venture milestones, and upon near-term group goals. - Long-term plans should include provision for possible employee or venture termination before the time at which any long-term planned incentive targets were to be reached. Motivation - Better than any other form of corporate organization, the start-up venture can provide managers and employees with the kind of environment that motivates. The venture format offer greater independence, autonomy, and challenge, which in turn provides more opportunity for responsibility, achievement and personal growth, advancement and recognition. Creating an entrepreneurial venture environment offering these motivators may diminish the need for special incentive compensation. Summary A venture incentive compensation plan should match reward against achievement as well as personal risk. The plan should be constructed so that there is congruence between the individual, the venture, and corporate goals. The plan should be flexible enough to adapt to changes in corporate strategy. It should emphasize team versus individual awards. And it should be perceived as fair by those outside as well as those in the plan.

Managing internal corporate venturing cycles - Burgelman and Valikangas (2005) What are the implications of the findings for strategi management if ICV?

Implications for strategic management of ICV It is a strategic leadership imperative for top management to learn to better manage the ICV-cycle. Specifically, several important implications for the discipline of ICV strategic management emerge from our analysis: - There is always ICV going on, so manage it - View ICV as a source of insights that can inform the strategic direction - An all-out ICV drive biases the process and often engenders costly mistakes. - If ICV is desperately needed, it may almost be too late

Slides week 5 What are the advantages and disadvantages of creating formal ventures?

Pros and Cons of creating formal ventures Advantages - External sources of finance may be easier to access - Facilitates creation of semi-autonomous units with their own cultures, incentives and business models - Often involves highly motivated staff Disadvantages - Requires investment, normally equity, which can be risky - Requires a long time horizon which can be risky - Requires investment in venture mechanisms that set up venture management and networks that search out, evaluate and generate deal flows

Slides week 6 1) Explain the concepts of single-loop and double-loop learning 2) Besides learning, what can be other motives for external venturing? (4)

Single vs double-loop learning - Single-loop learning: learning that takes place in the external venture - Double-loop learning: Learning how to integrate that knowledge in the parent firm Learning might not be the only motive - Financial motives - Corporate business renewal - Ecosystem renewal - New business expansion

Sheets week 5 What factors is the stage-gate process concerned with? (3)

Stage-gate processes Concerned with: - Structure to encourage and manage entrepreneurial behavior - Market approach to resource allocation and people management - Spinoffs & venture capital operations

What are according to Wilkinson and Kupers (2013) the the reasons why formal strategic foresight efforts add value (4)?

The case is about Shell that is successfully applying scenario thinking since 1965. Formal strategic foresight efforts add value through (1) an enhanced capacity to perceive change, (2) an enhanced capacity to interpret and respond to change, (3) influence on other actors, and (4) an enhanced capacity for organizational learning.

Slides week 4 Which type of leadership is required for successful intrapreneurship? What are the top management characteristics of it?

Type of leadership required - Not: Transactional leadership: "tend to encourage closed cultures, mechanistic structures, rigid systems, and procedures that facilitate the reinforcement and refinement of institutional learning." But: Transformational leadership - Transformational leadership: "tend to encourage open cultures, organic structures, adaptable systems, and flexible procedures - attributes that facilitate the implementation of change and challenge institutionalized learning" - Charismatic - Inspirational - Long-term vision Top management team characteristics: - More cooperative - More autonomy - Members dare to take more risk - Evaluation on long-term performance rather than sectioned on short-term results

Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things - Christensen, Kaufman, and Shih (2008) The following financial measurements are discussed: - The use of discounted cash flow (DCF) and Net Present Value (NPV) - The way that fixed and sunk costs are considered when evaluating future investments - The emphasis on earnings per share Why do these measurements bias decisions to pursue innovative projects?

We'd like to name the misguided application of three financial-analysis tools as an accomplice in the conspiracy against successful innovation: - The use of discounted cash flow (DCF) and Net Present Value (NPV) to evaluate investment opportunities causes managers to underestimate the real returns and benefits of proceeding with investments in innovation - The way that fixed and sunk costs are considered when evaluating future investments confers an unfair advantage on challengers and shackles incumbent firms that attempt to respond and attack - The emphasis on earnings per share as the primary driver of share price and hence of shareholder value creation, to the exclusion of almost everything else, diverts resources away from investments whose payoff lies beyond the immediate horizon These are not bad tools and concepts, but the way they are commonly wielded in evaluating investments creates a systematic bias against innovation. Misapplying Discounted Cash flow and Net Present Value Two problems when it comes to evaluating innovation investments - These methods assess potential investments by whether the firm will be better off than it is now, but because of changing environments and industries that is not the wright comparison. o The method of discounting cash flow to calculate the net present value of an initiative. Discounting a future stream of cash flows into a present value assumes that a rational investor would be indifferent to having a dollar today or having a dollar + the interest in three years from now. In most situations, competitors' sustaining and disruptive innovations put pressure on margins and prices, technology changes, market share losses, sales volume decreases, and a declining stock price. So, the most likely stream of cash flows for the organization is not a continuation of the status quo, but a non-linear decline in performance. It's wrong to assess the value of a proposed investment by measuring whether it will make us better off than we are now. Maybe the investment will make us worse off than we are now, but better than if we would have not made the investment. It should be assessed by projecting the value of innovation against a range of scenarios. - Calculations relate to errors of estimation, because of changing circumstances it is very hard to predict reliable year-by-year cash stream and terminal value. Also terminal value does not take changes in the environment into account as well. Therefore it is very biased. Arguably a root cause of companies' persistent underinvestment in the innovations required to sustain long-term success is the indiscriminate and oversimplified use of NPV as an analytical tool. Using fixed and sunk costs unwisely When evaluating a future course of action, the argument goes, managers should consider only the future marginal cash outlays that are required for an innovation investment, subtract those outlays from marginal cash that is likely to flow in, and discount the resulting net flow to the present. The principle works as long as the capabilities required for yesterday's success are adequate for tomorrow's as well. When new capabilities are required for future success, however, this margining on fixed and sunk costs biases managers toward leveraging assets and capabilities that are likely to become obsolete. The company can be locked into an escalating cycle of commitment to a failing strategy. Executives in established companies bemoan how expensive it is to build new brands and develop new sales and distribution channels - so they seek instead to leverage their existing brands and structures. Entrants, in contrast, simply create new ones. They don't have the dilemma of having to choose between full-cost and marginal cost options. Another common mistake in this method is that s depreciation method for an asset, the usable lifetime is used. However, the economic lifetime can significantly differ and can lead to large write-offs when the economic life-time is over earlier than expected. The solution to this dilemma should be to value strategies, not projects. In order to do that, finance and strategy need to be studied and practiced in an integrated way. Focusing myopically on Earnings Per Share The emphasis on earnings per share as the primary driver of share price and hence of shareholder value creation. Managers are under so much pressure, from various directions, to focus on short-term stock performance that they pay less attention to the company's long-term health than they might - to the point where they're reluctant to invest in innovations that don't pay off immediately. - CEO compensation is highly dependent on EPS - Shareholders hold their shares for a short period of time, so they want short-term results - CEOs are sometimes very concerned about their reputation. Share price and EPS reflect this reputation - Companies that are viewed as failing to maximize value in the short-term are vulnerable for hostile take overs, that is something the CEO fears. Therefore there is a huge focus on EPS and short-term performance. Although on the long-term these are bad decisions.

Christensen and Overdorf (2002) - Meeting the challenge of disruptive change - discuss that organizations themselves - independent of the resources and people within them - have capabilities. Which factors affect what an organization can and cannot do? An explain them

Where capabilities reside The research suggests that three factors affect what an organization can and cannot do: - Its resources - Its processes - Its values Resources Without a doubt, access to abundant, high quality resources increases an organization's chances of coping with change. But resource analysis does not come close to telling the whole story. Processes By processes is meant, the patterns of interaction, coordination, communication, and decision making employees use to transform resources into products and services of greater worth. One of the dilemmas of management is that processes, by their very nature, are set up so that employees perform tasks in a consistent way, time after time. They are meant not to change or, if they must change, to change through tightly controlled procedures. When people use a process to do the task it was designed for, it is likely to perform efficiently. But when the process is used to tackle a very different task, it is likely to perform sluggishly. In fact, a process that creates the capability to execute one task concurrently defines disabilities in executing other tasks. The most important capabilities and concurrent disabilities tend to occur in the less visible, background processes that support decisions about where to invest resources. It is in those processes that many organizations' most serious disabilities in coping with change reside. Values An organization's values are defined as the standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, whether a customer is more important or less important, whether an idea for a new product is interesting or marginal and so on. It is about priorities. Prioritizing decisions are made by employees at every level. The larger and more complex a company becomes, the more important it is for senior managers to train employees throughout the organization to make independent decisions about priorities that are consistent with the strategic direction and the business model of the company. But consistent, broadly understood values also define what an organization cannot do. A company's values reflect its cost structure or tis business model because those define the rules that its employees must follow for the company to prosper. The research focuses on two sets of values that tend to evolve in most companies in very predictable ways. The inexorable evolution of these two values is what makes companies progressively less capable of addressing disruptive changes successfully. 1. The way the company judges acceptable gross margins -> A company's values also reflect its cost structure. E.g. a company's overhead costs require gross profits margins of 40%. -> Projects that result in less margins than 40% are rejected. 2. How big a business opportunity has to be before it can be interesting -> One of the bittersweet results of success, is that as companies become large, they lose the ability to enter small, emerging markets.

In the slides of week 3, a comparison is shown between large companies and small companies in R&D performance. 1) What are the pro's and Con's of large firms in comparison with large firms? 2) In what ways do small firms outperform large firms in R&D? 3) In what ways do large firms outperform small firms in R&D?

1) Pros: - Large firms are able to spread the cost of R&D over a larger volume - Large firms have scale and learning effects - Large firms can spread the risk Cons: - Large firms are not so efficient in R&D - Large firms become inert and do not react to changes - The ICARUS Paradox -> failing because you were being too successful (flying too close to the sun) 2) Small firms outperform large firms in: - Patenting (less R&D costs per patent) - New drug introductions - New product improvements 3) Large firms outperform small firms in: - Incremental innovations - Process innovations - Some industries that are scale intensive

In the sheets in week 3, 4 strategies to effectively manage innovation across borders are discussed. 1) Which strategies? And explain them 2) Two alternatives are mentioned that could replace managing innovation across borders

1) Center-for-global strategy ◦ Tightly Coordinate all R&D activities (both across functions and projects) ◦ Achieve greater specialization and Economies of Scale in R&D activities ◦ Develop and Protect Core Competences ◦ Ensure that innovations are standardized and implemented throughout the company Local-for-Local strategy ◦ Respond fast to the needs of local markets ◦ Customization is important Locally Leveraged Strategy ◦ Take the most creative resources and innovative developments from the divisions ◦ Deploy them across the company Globally Linked Strategy ◦ Decentralized R&D divisions that receive one specific innovation task which serves the whole company 2) Alternative approaches: Downscoping: ◦ Restructuring to focus on the organization's core activities Downscoping: ◦ Restructuring to focus on the organization's core activities Outsourcing: ◦ Subcontracting non-core activities to other firms ◦ Make-or-buy decision ◦ Factors in the decision include cost, availability of reliable outside suppliers, duration of the firm's supply needs, and the need for confidentiality.

He and Wong - Exploration vs. eploitation: An Empirial Test of the Ambidexterity Hypothesis - 1) What is the ambidexterity hypothesis? 2) When is a firm ambidextrous? 3) What were the results? 4) The article suggests three techniques to manage the tension between exploitative and explorative activities in a continuous way. What are they?

1) Exploration vs. exlpoitation construct: (1) An explorative innovation dimension to denote technological innovation activities aimed at entering new product-market domains and (2) an exploitative innovation dimension to denote technological innovation activities aimed at improving existing product-market positions 2) A firm is ambidextrous if it has both explorative and exploitative innovation strategies. 3) - The interaction between explorative and exploitative innovation strategies is positively related to sales growth rate. - The relative imbalance between explorative and exploitative innovation strategies, is negatively related to sales growth rate. - There are limits on the level of ambidexterity, because at some point it becomes unmanageable - Very low levels of exploitation and exploration do not result in prior firm performance, and should not be labeled as ambidextrous. 4) - The development of 'synthesizing capability' to create competitive advanatge out of conflicting forces - The adoption of ambidextrous organizational design principles - The pursuit of semi-structures design to compete on the edge of chaos

In the slides of lecture 2, 7 categories of crypto currencies are discussed. What are they?

7 Categories of crypto: - Store of Value (BitCoin) - Payment (DASH, BCH, LTC) - Anonymity/privacy (XMR) - Platform (ETH, NEO) - Utility Tokens (ERC20) - Fraudulent coins - Free split/ dividend

Moore (2004) - Darwin and he Demon Why did Moore include the product life-cycle in his article? Which phases are included in the product life-cycle? And explain them

A more reliable way to solve the problem of focus is to think of different types of innovation as being privileged at different points in a market's life. The market development life cycle includes the following phases: (1) Early market - Technology is introduced - it attracts attention of early adopters - Pragmatic buyers are curious but make no commitments - The press is fascinated and writes about it as the next big thing (2)The Chasm - Visionaries are no longer making big bets on it - But it's acceptance isn't widespread enough to convince pragmatists - Adoption is stalled - Only way to move forward is targeting a niche market with that suffers from a nasty problem (3) Bowling Alley - Technology is gaining acceptance among pragmatists in one or more niche markets where it solves nasty problems - Within each nice it is building a loyal following and attracting partners who see a market in the making - Outside of the niches it is still largely unknown (4) Tornado - All the pragmatists who were hanging back from committing are rushing into the market to make sure they don't get left behind. - Customers of many types from many fields are making their first purchases of the technology - revenues are growing at double or triple digit rates - Competition is fierce, with investors bidding up the stock of every company that can participate in the category (5) Main street (Early) - Hypergrowth is over, but it is still growing nicely - Customers are focused on seeing systematic improvements in the offering (6) Main street (Mature) - Category growth has flattened, and comoditization is increasing - Market leaders are creating top-line growth both organically and via M&As - Customers now take the category for granted - Market risk is still limited, because no obsoleting technologies are on the horizon yet (7) Main street (Declining) - Market dominators are unresponsive to customer needs - Customers are actively looking for relief, which is attracting entrepreneurs - The next-generation technologies are on the horizon, but none has gone through the tornado yet - The market is ripe for some form of disruption, either via obsolete technology or drastically different business models (8) Fault-line and End-of-Life - Technology obsolescence has struck like an earthquake, exposing the fault-line between what the company sells and what the market now desires - Leveraged buy-outs become an attractive mechanism for monetizing the remaining market opportunity

Birkinshaw and Gibson (2004) - Building ambidexterity in an organization Ambidexterity is about finding the right balance between alignment and adaptability. What do these terms mean and why is it important to find the right balance?

Adaptability: the ability to move quickly toward new opportunities, to adjust to volatile markets and to avoid complacency. Alignment: a clear sense of how value is being created in the short term and how activities should be coordinated and streamlined to deliver that value. Adaptability is becoming more important. But it is not enough. Successful companies are not just nimble, innovative and proactive; they are also good at exploiting the value of their proprietary assets, rolling out existing business models quickly and taking the costs out of existing operations. Therefore alignment is equally important than adaptability. For a company to succeed over the long term, it needs to master both adaptability and alignment - an attribute that is sometimes referred to as ambidexterity. The trouble is, it is difficult to find the right balance between adaptability and alignment. Focus too much on alignment and the short-term results will look good, but changes in the industry will blindside you sooner or later. Similarly, too much attention to the adaptability side of the equation means building tomorrow's business at the expense of today's.

Incentive compensation for corporate venture personnel - Sykes (1992) Arguments are mentioned in favor of equality (4) and in favor of equity (3). What are the arguments? And explain them.

Arguments for equality - Other corporate, non-venture employees will contribute to the venture's success through supporting roles. Venture employees should not be treated differently. - The entrepreneur in the corporation has no significant financial risk relative to the one who joins the independent venture - Uniform compensation policies simplify transfers of employees in and out of the venture. - The venture employee should focus on the overall good of the corporation, not just on his own special project Equality with support personnel One way to avoid the equality issue is to keep the venture personnel separated from the rest of the corporation. However, this will not work when corporate staff or product line operating people are called on to assist the venture with advice or other services. Limited financial risk One way of providing equality between venture and corporate employees is to offset higher potential rewards with greater risk. However, this seems to be a demotivating factor. Ease of employee transfer Uniform compensation treatment across corporate divisions eases transfer of employees from one job to another without mismatch of pay. Congruence with corporate goals The venture business plan and compensation plan must consider the corporate strategic goals, not merely the financial goals of the venture. Conflict between corporate goals and venture goals can occur when compensation is tied solely to venture stock price. As a result of conflicting activities, the corporation may want to change a venture's business plan. Such change often negatively affects the projected plan payout. Arguments for equity - It is a way to keep or recruit talented and innovative employees - Venture career risk is greater - The hours are longer and more stressful Retention and recruitment of special employees Special incentive plans can also be effective in recruiting specific market or technical experience that the venture may require in entering a new market or technology. However, this type of recruiting incentive can cause adverse consequences as well. Career risk Both career and special compensation are at risk to a significant extent. Even when a venture is 'on plan', another career hazard for the corporate entrepreneur is that corporate strategy, or funding commitment may change after the venture has been launched. The principal risk of the 'fast-track-manager' who joins a corporate venture that later fails is potential loss of promotional opportunities while he is managing the venture. Many managers do not want to accept this risk. Level of effort and stress For those employees dedicated to the success of the venture the hours will be longer and the stress greater. The managers' responsibilities are often greater and success more dependent on their own judgment and skills than on auxiliary corporate support. Because of the more direct responsibility and visibility, effort is greater and stress is more intense.

Slides week 4 1)Multiple barriers (6) for corporate entrepreneurship are mentioned. Which ones? 2) 3 possible solutions for barriers are mentioned. Which ones?

Barriers to corporate entrepreneurship Barriers - Focus on efficiency & return on investment - Plan for long term & control against plan - Enforce standard procedures, rules & regulations - Avoid risk • Make decisions based upon past experience - Manage functionally with rigid job descriptions - Promote those who conform Barriers: solutions: - Ignore them - Work around them - Remove them You can use all three for different types of barriers

Moore (2004) - Darwin and the demon - describes a twofold process to battle and defeat the demon. Answer the following questions: 1) To what phenomenon does the demon refer to? 2) What are the two processes that should be applied in twofold? 3) Elaborate on both processes

Battling inertia (the demon) - Twofold process of construction and deconstruction The implication of the life-cycle model is that enterprises must mutate their core competences over time to sustain attractive returns. But management's efforts to change direction are thwarted by the inertia that success creates. The deeper the enterprise is into the life cycle and the more successful it has been, the greater its tendency to return to its former course. The way to move forward is to aggressively extract resources from legacy processes and organizations and repurpose them to serve the new innovation type, or if that's not possible, take them out of the company altogether. So management must pursue a twofold path of concurrent construction and deconstruction. (1) Challenge of construction For construction the goal is to create the next generation of competitive advantage, so the focus should be on the innovation team. It should be sponsored by someone who is passionate about, and expert in, new innovation. The choice of leader and sponsor will depend on the type of innovation that is pursued. (2) Challenge of deconstruction The challenge of deconstruction is that the legacy work still needs to be done, but because it no longer drives customer purchase preferences, resources deployed in support of it do not improve market results. Legacy deconstruction should therefore be driven by one mantra: productivity, not differentiation. Differentiation that does not drive customer preference is a liability. Once a company's people fully internalize this principle, the path forward is clear in 4 steps: 1. Centralize the function - Legacy processes are typically embedded in each of the enterprise's operating units - Bring them together under a shared-services model and put an operation-focused manager in charge - This will free resources that are performing duplicate functions 2. Standardize the process - A shared-services model retain idiosyncrasies - Invoke the mantra to standardize them into a single process set 3. Simplify the process - Once processes have been standardized they can be simplified in a leveraged way - The goal is to pull resources out, so make sure there is no innovation! 4. Automate or outsource the process - Make the processes go away, either by embedding them into computer transactions or by outsourcing them to another firm It is important to realize that differentiation-creating innovation and productivity-creating deconstruction must be conducted in tandem. By running the two efforts in parallel, and migrating resources from legacy processes to innovation wherever possible, you not only improve your returns in the market place, you renew and rejuvenate the company.

Slides week 5 - What is Bell-Mason method? - What are the 12 dimensions? - What are the 4 stages?

Bell-Mason diagnostic background - A rule-based system to assess new ventures - Developed by Gordon Bell over a 5-year period - Shows health and risk of a new venture: by asking a series of questions in 12 categories, at each stage of 4 stages of growth 12 dimensions: - Business plan - Marketing - Sales - CEO - Team - Board - Cash - Financeability - Control - Technology/engineering - Product - Manufacturing Stages: - Concept - Seed - Product development - Market development - Seed - Concept

Collaboration and Innovation: A Review of the Effects of Mergers, Acquisitions and Alliances on Innovation - De man and Duysters (2005) What are the main conclusion of the paper about: - Alliances? - M&As? - M&A versus Alliances?

Both Mergers & acquisitions and Alliances are examined. The conclusions: Alliances - Alliances increase the innovativeness of firms o There are three qualifications (conditions) that enhance this: Similar knowledge base A higher level of alliance capability Intense relationships in the alliance - Alliances that involving public support or a public partner do not increase innovation, although they do lower the cost of innovation M&A - They have a neutral or negative effect on innovation - They may lead to some scale economies thereby lowering the cost of innovation - Well-managed M&As and M&As among related firms outperform poorly managed and diversifying (unrelated) M&As - Research is too scarce to draw meaningful conclusions about the effects of size, national and sector differences. M&A versus alliances - Overall conclusion: Alliances are outperforming M&As in terms of their effect on innovation. Except for the possibilities offered by M&As to reap some economies of scale in R&D, alliances outperform M&As on almost each conceivable point. - There is just one possible negative exception: which is the network effect: some types of alliance networks perform better than others.

Birkinshaw and Gibson (2004) - Building ambidexterity in an organization How must contextual ambidexterity be build into an organization?

Building contextual ambidexterity Sumantra Ghoshal and Chris Bartlett define context as the often invisible set of stimuli and pressures that motivate people to act in a certain way. Along that line of thinking, top managers shape organizational context through the systems, incentives and controls they put in place, and through the actions they take on a day-to-day basis. Ghoshal and Bartlett argue that four sets of attributes — stretch, discipline, support and trust — interact to define an organization's context. In combination, these attributes create two dimensions of organizational context: The first, performance management (a combination of stretch and discipline), is concerned with stimulating people to deliver high-quality results and making them accountable for their actions; the second, social support (a combination of support and trust), is concerned with providing people with the security and latitude they need to perform. Performance management and social support are equally important and mutually reinforcing. The strong presence of each will create a high-performance organizational context that gives rise to a truly ambidextrous organization. However, if there is an imbalance in these organizational characteristics, or a lack of both, a less than optimal organizational context will exist. The more a company emphasizes performance management and social support, the more likely are its employees to behave ambidextrously - aligned and adaptive - and the more likely the organization is to achieve high performance.

The Era of Open Innovation - Chesbrough (2003) What are the principles of closed an open innvation? (2 x 6)

Closed innovation principles: - The smart people in our field work for us - To profit from R&D, we must discover, develop and ship it ourselves - If we discover it ourselves, we will get to the market first - If we are the first to commercialize an innovation, we will win - If we create the most and best ideas in the industry, we will win - We should control our intellectual property so that our competitors don't profit from our ideas Open innovation principles - Not all the smart people work for us so we must find and tap into knowledge and expertise of bright individuals of outside our company - External R&D can create significant value; internal R&D is needed to claim some portion of that value - We don't have to originate the research in order to profit from it - Building a better business model is better than getting to market first - If we make the best use of internal and external ideas, we will win - We should profit from others' use of our IP, and we should buy others' IP whenever it advances our own business model.

One More Time: How do you motivate employees? - Herzberg (1987) What is the main conclusion Herzberg draws in his paper?

Conclusion Job enrichment will not be a one-time proposition, but a continuous management function. The changes should last for a long period of time. The reasons for this: - The changes bring the job up to the level of challenge in line with the skill that was hired - Those who have more abilities will eventually be able to demonstrate it and get promoted - In contrast to hygiene, job enrichment has a long-term effect, and repeating the process of job enrichment, will not occur as frequently as the need for hygiene. Not all jobs can be enriched, nor have to be enriched. However, if some of the money spend on hygiene will be used for job enrichment efforts, human satisfaction and economic gain would be one of the largest dividends that industry and society have reaped through their efforts in PM. In sum, the argument for job enrichment is: If you have employees on a job, use them. If you can't use them on the job, get rid of them, either via automation or by selecting someone with lesser ability. If you can't use then and you can't get rid of them, you will have a motivation problem.

The Era of Open Innovation - Chesbrough (2003) 1) 3 Modes of innovation are discussed. What are these? 2) Which types organizations (8 in total) fall under which mode of innovation?

Different modes of innovation Many companies have been defining new strategies for exploiting the principles of open innovation, exploring ways in which external technologies can fill gaps in their current businesses and looking at how their internal technologies can spawn the seeds of new businesses outside of the current organization. In doing so, many firms have focused their activities into one of three primary areas: - Funding innovation o Innovation investors VC capital investors, firms etc. o Benefactors Provide new sources of research funding. Unlike investors they focus on the early stages of research discovery. - Generating innovation o Innovation explorers Specialize in performing discovery research function that previously took place primarily within corporate R&D laboratories o Merchants Must also explore, but their activities are focused on a narrow set of technologies that are then codified into intellectual property and aggressively sold to others. Innovating merchants will innovate but only with a specific commercial goal in mind, whereas explorers tend to innovate for innovation's sake o Architects Provide a valuable service in complicated technological worlds. In order to create value for their customers, they develop architectures that partition this complexity, enabling numerous other companies to provide pieces of the system, all while ensuring that those parts fit together in a coherent way o Missionaries Consist of people and organizations that create and advance technologies to serve a cause. Unlike the innovation merchants and architects, they do not seek financial profits from their work (E.g. NASA). - Commercializing innovation o Innovation marketers Marketers often perform at least some of the functions of the other types of organization, but their defining attribute is their keen ability to profitably market ideas, both their own as well as others o One-stop centers Innovation one-stop centers provide comprehensive products and services. They take the best ideas and deliver those offerings to their customers at competitive prices

One More Time: How do you motivate employees? - Herzberg (1987) There are three general philosophies of personnel management (PM). Together they form the triangle of philosophies of PM. - Which philosophies? And explain them - Where in the triangle does Herzberg put the motivation vs hygiene theory?

External triangle There are three general philosophies of personnel management (PM): - Organizational theory -> humans needs are either irrational or varied. Thus, a major function is being as pragmatic as the occasion demands. Organizations should look for the most efficient job structure, and the most favorable attitudes will follow as a matter. - Industrial engineering -> human kind is mechanistically oriented and economically motivated and human needs are best met by attuning the individual to the most efficient work process. Goal of PM therefore should be to create the most appropriate incentive system and design the specific working conditions to facilitate the most efficient use of the human machine - Behavioral science -> The belief is that proper attitudes will lead to efficient job and organizational structure. Therefore PM should focus on group sentiments, attitudes of individual employees and the organization's social and psychological climate. This persuasion emphasizes the various hygiene and motivation needs. The motivation-hygiene theory claims the same angle as industrial engineering, but for opposite goals. Rather than rationalizing the work to increase efficiency, the theory suggests that work can be enriched to bring about effective utilization of personnel. Job enrichment provides the opportunity for the employee's psychological growth.

The Era of Open Innovation - Chesbrough (2003) False positives and false negatives are discussed. 1) What are false positives and false negatives? 2) Which type of innovation (open or closed) recognizes which of those two? And why?

False positives and false negatives Closed and open innovation model both are adept to weeding out false positives (bad ideas that initially look promising), but open innovation also incorporate the ability to rescue false negatives (Ideas that are initially seem to lack promise, but turn out to be surprisingly valuable. A company that is too internally focused is likely to miss out on such opportunities (false negatives), because many of them will fall out of the organization's current scope of businesses or will need to be combined with external technologies to unlock their potential.

Managing internal corporate venturing cycles - Burgelman and Valikangas (2005) Which forces (3, but 2 main forces) determine the length of the ICV cycle?

Forces determining the length of the ICV cycle To some extent corporate venturing may follow the ups and downs of the economy. When cash is readily available, corporations invest in new-venture programs; when cash becomes short, the programs are terminated. However, economic growth variations explains the cyclicality only for a small part. Corporate strategic and administrative factors likely have a greater bearing on the length of the venturing cycle. Organizations often reorganize to meet challenging environmental demands or to keep thing fluid. An ICV program may create interference with the new organizational structure. A newly appointed executive to the ICV program may not be committed to the course of action taken by the prior manager and may want to leave a mark by changing things. The combination of such administrative issues in combination with a general lack of understanding of the role of ICV-programs in the long-term strategy may lead to what experts call the weakness of will: is about the inability to sustain commitment.

Birkinshaw and Gibson (2004) - Building ambidexterity in an organization 1) Four types of behavior in ambidextrous individuals (contextual) are identified. What are they? 2) These four attributes - which collectively describe an ambidextrous employee - have several (3) important commonalities. What are they?

Four ambidextrous behaviors in individuals are identified: - Ambidextrous individuals take the initiative and are alert to opportunities beyond the confines of their own jobs - Ambidextrous individuals are cooperative and seek opportunities to combine their efforts with others - Ambidextrous individuals are brokers, always looking to build internal linkages - Ambidextrous individuals are multitaskers who are comfortable wearing more than one hat These four attributes - which collectively describe an ambidextrous employee - have several important commonalities. - They constitute acting outside the narrow confines of one's job and taking actions in the broader interests of the organization - They describe individuals who are sufficiently motivated and informed to act spontaneously, without seeking permission from their superiors - They encourage action that involves adaption to new opportunities but is clearly aligned with the overall strategy of the business

Slides week 6 Alliances and M&As are discussed in relation to innovation. 1) In general, what are possible motives for alliances? (4) Specifically on alliances and innovation theory: 2) Why are alliances innovation enhancing? 3) Why are alliances also innovation inhibiting? 4) What are the main qualifications related to alliances for innovation? Next questions are about M&As 5) Why can M&As be innovation enhancing? 6) Why can M&As be innovation inhibiting? 7) What are the main qualifications related to M&As for innovation?

Four possible motives for alliances - Access to knowledge - Access to new markets - Efficiency - Clients do not want products, but tailored solutions Theory on alliances and innovation: Innovation enhancing - Lower risk of innovation - Combination of competences - Exchange of ideas stimulates creativity - Radar function - Speed of innovation Innovation inhibiting - Transfer of knowledge across organizational boundaries is difficult - Competition between partners - High rates of alliance failure in general Majority of studies report positive relationship alliances and innovation Qualifications - Joint knowledge base improves performance - Alliance experience improves performance - Intensive collaboration performs better than less intensive - PPP and government sponsored R&D is neutral/negative - In networks the relation is less straightforward Theory on M&A and innovation Innovation enhancing - Increased R&D budget allows for larger projects to be tackled - Complementary in knowledge can stimulate creativity - R&D productivity can increase because of diffusion of best practices Innovation inhibiting - In the short run M&A draw attention away from innovation - Post merger integration is notoriously difficult: knowledge exchange may become stuck in differences in capabilities, routines, processes Qualifications - Companies with no or little overlap in their knowledge base perform worse than companies with overlap - Post merger integration processes improve performance - M&As do create possibilities to economize on R&D

Making Sense of Corporate Venture Capital - Chesbrough (2002) 1) Explain the four ways to invest that can be derived from the framework. Mention: - The objective and to what extent there is a link in operational capabilities - What purpose the way to invest serves - The main limitation of the way to invest 2) Shortly explain the conclusion of the article

Four ways to invest - Driving investments o Objective: strategic; Link to operational capability: Tight o Advancing the current strategy o Limit: A driving investment can only be used to advance a corporate strategy. The tight links of these investments with the company's current processes means that the investment will sustain the current strategy. They will be unlikely to help a corporation cope with disruptive strategies or to identify new opportunities when company must go beyond its current capabilities to respond to a change in the environment. If a corporation wants to transcend current strategy and processes, it should not rely on driving investments. - Enabling investments o Objective: strategic; Link to operational capability: loose o The idea is that a successful investment will enable a company's own businesses to benefit but that a strong operational link between the start-up and the company isn't necessary to realize that benefit. o Very often it's about complementarity. If you invest in a standard with complementary products, it is likely to enhance the demand for your products as well. o Limitation: is related to market share. The investments will only be justified when your firm can capture a substantial portion of the market growth your investment has stimulated. - Emergent investments o Objective: financial; Link to operational capabilities: tight o The investments are not made for enhancement of the strategy. Nevertheless, if the business environment shifts of if a company's strategy changes, such a new venture might suddenly become strategically valuable. This gives an option-like strategic upside beyond whatever financial return it generates. Managing these investments require financial discipline with strategic potential. Emergent business are besides financial gain very much related to 'growing your future business'. - Passive investments o Objective: financial; Link to operational capabilities: loose o Solely in it for financial returns. If financial investment returns are not, no potential strategic benefit remains to compensate for financial losses. Conclusion - While corporate investments have generated decidedly uneven financial returns, they should not be judged primarily in that basis. They should be thought of as important ways for a company to fuel the growth of its business. - Driving, enabling and emergent investments can, in different ways, each foster the growth of its current businesses. Emergent investments can identify and spark the growth of future businesses. - The parameters of this framework should be taken into account in the process of building a sufficient investment portfolio

Slides week 4 3 theories are mentioned about how to motivate corporate entrepreneurs. 1) Describe these theories 2) 3 factors are named that enhance motivation. What are they?

How to motivate corporate entrepreneurs - Maslow's hierarchy of needs: o physiological needs, safety needs, social needs, esteem, self-actualization needs - Job characteristics model o Experiencing meaningfulness o Experiencing responsibility o Knowledge of results - Herzberg's motivator-hygiene theory Motivating is enhanced by: - Autonomy - Purpose - Mastery

Incentive compensation for corporate venture personnel - Sykes (1992) Why do most long-term special incentive plans fail in corporate ventures

Long-term versus short-term plans Only one of five ventures at corporations using long-term special incentive plans resulted in meaningful payout to the venture employees. (1) The main reason for that was that the ventures failed to perform as expected. (2) Almost as frequent a reason for not meeting the long-term special incentive plans was that corporate strategy changed and the venture program was discontinued before the ventures matured. This is about conflicts between the corporate and venture environments. However, focus on compensation misses a larger issue. The larger issue is motivation, not compensation.

One More Time: How do you motivate employees? - Herzberg (1987) The Hygiene vs Motivators theory is discussed 1) Explain the thoery 2) What are the growth/motivator factors that are discussed? 3) What are the dissatisfaction-avoidance /hygience factors that are discussed? 4) What does Herzberg conclude about it?

Hygiene vs motivators Relevant are: factors that lead to job satisfaction and factors that lead to job dissatisfaction. Since these factors are different, the opposite of job satisfaction is no job satisfaction and not job dissatisfaction. This applies also vice versa. Two different needs of human beings are involved here: - Human kind's animal nature - the built-in drive to avoid pain from the environment, plus all the learned drives that become conditioned to the basic biological needs. For example, hunger, which leads to the need to earn money. -> job environment -> Hygiene (KITA) - The ability to achieve and, through achievement, to experience psychological growth. The stimuli for growth needs are tasks that induce growth; -> job content -> Motivators The growth/Motivator factors that are intrinsic to the job are: - Achievement - Recognition for achievement - The work itself - Responsibility - Growth or advancement The dissatisfaction-avoidance or hygiene (KITA) factors that are extrinsic to the job include: - Company policy and administration - Supervision - Interpersonal relationships - Working conditions - Salary - Status - Security Employees are satisfied by the motivating factors, so within the job content. Whereas most job dissatisfaction was caused by hygiene factors (working environment).

Explorative and Exploitative Learning from External Corporate Ventures - Schildt, Maura and Keil (2005) 1) What were the hypotheses? 2) Which hypotheses were accepted and which ones were rejected? 3) What were the main results/conclusions of the paper?

Hypotheses - Hypothesis 1 -> supported, only no statistically significant difference between alliances and JVs o 1a. Corporate venture capital investments are more likely to lead to explorative (verses exploitative) learning than non-equity venturing alliances. o 1b. Non-equity venturing alliances are more likely to lead to explorative (verses exploitative) learning than joint ventures. o 1c. Joint ventures are more likely to lead to explorative (verses exploitative) learning than acquisitions. The idea behind these hypotheses is that the less integrated the mode is, the more flexible the venture will be, which is good for explorative learning - 2 - Industry relatedness is negatively related to explorative (versus exploitative) learning -> rejected o More overlap in knowledge if the industry is related - 3 - Downstream vertical relatedness is negatively related to explorative (versus exploitative) learning -> partly accepted o More focus on current activities when the partner for innovation is your current customer - 4 - Technological relatedness is negatively related with explorative (versus exploitative) learning -> strongly accepted o More technical relatedness means more overlap in knowledge base Results/conclusion - The less integrated the governance mode, the more explorative the learning. In other words, non-equity venturing alliances are likely to be more suitable for explorative learning than joint ventures and acquisitions. This can be explained by two mechanisms: o Is related to risk management in corporate decision making. Less integrated governance modes are the least expensive modes and therefore most suitable for the risky explorative ventures. o Relates to differences in the organizational integration of ventures employing different governance modes. Less integration means more flexibility and being less constraint by current corporate agendas, that foster explorative learning. - Previous studies argued that acquisitions and JVs are the most suitable governance modes to achieve a maximum level of learning. This research adds to that, that those governance modes will lead to maximization of exploitative learning. For explorative learning, different modes are more suitable.

Collaboration and Innovation: A Review of the Effects of Mergers, Acquisitions and Alliances on Innovation - De man and Duysters (2005) 1) Explain what is meant by the indigestibility problem as a disadvantage of an M&A for innovation. 2) Explain what is meant by the radar function of alliances as an advantage of alliances for innovation

In M&As knowledge that is not required at all is also acquired. Cherry picking is not possible. This may also cause the indigestibility problem: a company may acquire more knowledge than it can use in a meaningful way. Radar-function of alliances: Alliances enable firms to scan their environment for promising new technologies at low cost. It makes it possible for a firm to have a sneak preview of a technology without fully committing to them

Slides week 5 Internal vs external corporate venturing are disucussed 1) What is the definition of internal corporate venturing? 2) What are the advantages of interal corporate venturing and external corporate venturing? 3) What factors are important in managing corporate ventures according to the slides?

Internal corporate venturing Definition: entrepreneurial initiatives that originate within the corporate structure that are intended from inception as new businesses Corporate venturing - Internal versus external corporate venturing: building vs. investing Advantages internal venturing - Easier to integrate into the existing company - Direct access to mother company's technology and other resources - Full ownership and control Advantages external venturing - Speed to market - Broader window on new developments - Easier to withdraw Managing corporate ventures - Portfolio management - Most-widely used tool: stage gate process - What to do when corporate venture does not function well: o People o Business model o Resources - Exit strategies

One More Time: How do you motivate employees? - Herzberg (1987) There are two types of job loading. 1) What is job loading 2) Which types are there? And explain

Job loading often reduces the personal contribution of employees rather than giving them opportunities for growth in their accustomed jobs. Job loading merely enlarges the meaninglessness of the job. Examples are (horizontal loading): Increase workload, adding meaningless tasks to the job, rotations in assignments and removing the most difficult part of the assignment. Besides horizontal loading, there is vertical job loading: - Removing some controls while retaining accountability - Increasing the accountability of individuals for own work - Giving a person a complete natural unit of work (module, division, area etc.) - Granting additional authority to employees in their activity; job freedom - Making periodic reports directly available to the workers themselves rather than to supervisors - Introducing new and more difficult tasks not previously handled - Assigning individuals specific or specialized tasks, enabling them to become experts

One More Time: How do you motivate employees? - Herzberg (1987) The concept of KITA was explained. 1) Which forms of KITA are there? And explain them 2) Whcih exxamples does he give for positive KITA and what are the problems with it? 3) What does Herzberg conclude about KITA?

Motivating with KITA There are various forms of KITA: - Negative physical KITA (pull)-> e.g. slaves who were beaten with a whip in order to do the job - Negative psychological KITA (pull) -> E.G. blackmailing, discriminating etc. - Positive KITA (push) -> giving incentives such as monetary rewards, or promotions or days off etc. Negative psychological does not make you motivated, it only makes you move. So it does not lead to motivation, but only to movement. Motivation is about whether you really want to do something. 9 ways of positive KITA are discussed: - Reducing time spent at work - Spiraling wages - Fringe benefits - Human relations training - Sensitivity training - Communications - Two way communication - Job participation - Employee counselling Since KITA only results in short-term movement, it is safe to predict that the costs of these programs will increase steadily and new varieties will be developed as old positively KITAs reach their satisfaction points. So, KITA does not work to create motivation.

When does Corporate Venture Capital Investment create Firm Value? - Dushnitsky and Lenox (2006) - Established firms may be well positioned to gain direct financial benefits from CVC due to what? - However, such benefits can be diminished due to what? - What was exactly researched? - What were the results/conclusions?

Over the past decade, billions of dollars have been invested by established companies in entrepreneurial ventures, yet there is little systematic evidence that such investment referred to as CVC creates value for investing firms. Established firms may be well positioned to gain direct financial benefits from CVC due to: - privileged knowledge in selecting valuable ventures - the possession of complementary assets that enhance the value of their portfolios - a valuable window of technology provided by CVC, as it provides an effective means of scanning the environment for novel technologies that either be complement or threaten core business However, such benefits can be diminished due to: - Internal conflicts o Political game in the corporate structure - Lack of incentives for fund managers o (CVCs have to take the salaries of the corporate managers into account as well, therefore the salary (especially the variable part of the salary) is higher at normal venture capital investors, which could lead to CVC-managers leaving to VC-investors. - Information asymmetries leading to potential adverse selection o Large firm could be a competitor for a venture, therefore ventures start-ups will be very careful in giving information to the investor. Proposition: All else being equal, strategically focused CVC investment will create greater value than financially focused CVC investment. Results/conclusion - CVC is associated with the creation of firm-value measured as the firm's Tobin's q, but this relationship is conditional on both sector-specific and firm-specific factors. o Sector specific: In particular, the positive relationship between firm value and CVC is the greatest within the devices, semiconductor and computer sectors. o Firm specific: The contribution of corporate venture capital to firm value is greater when firms explicitly pursue CVC to harness entrepreneurial inventions. - Thus, variance in CVC performance may best be explained by differences in the underlying objectives of the programs. We conclude that in those industries where entrepreneurial ventures are an important source of innovations, corporate venture capital can be a vital part of a firm's innovation toolkit.

Moore (2004) - Darwin and the demon Which types of innovation are suitable for which stages and phases of the product-life cycle?

Phase: Technology adoption Types of innovation suitable: - Disruptive innovation - Application innovation - Product innovation Stages of the life-cycle: - Early market - The chasm - Bowling alley - Tornado Phase: Mature Types of innovation suitable: - Process innovation - Experiential innovation - Marketing innovation Stages of the life-cycle: - Main street (Early) - Main street (mature) Phase: Declining Types of innovation suitable: - Business model innovation - Structural innovation Stages of the life-cycle: - Main street (declining) - Fault line and end-of-life

Innovation Killers: How Financial Tools Destroy Your Capacity to Do New Things - Christensen, Kaufman, and Shih (2008) Two processes are discussed that can support innovation. - - Which processes are these? And explain them

Processes that support (or sabotage) innovation Two processes are mentioned that can support innovation: - Stage-gate process o Companies start by considering a broad range of innovations; they winnow out the less viable ideas step by step. The stages are separated by gates: review meetings at which projects teams report to senior managers what they have accomplished. The key decision criteria at each gate are financial measurements like the size of projected revenues etc. Proposals for exploiting potential disruptive innovations are more difficult to quantify than incremental innovations. Therefore this usually leads to more incremental innovations. o The process itself has two serious drawbacks: Project teams generally know how good projections need to look and they will tweak the assumptions until they look good enough The stage-gate process assumes that the proposed strategy is the right one. However, with difficult disruptive innovations it is hard to access immediately how the customer will use it - Discovery-driven-planning o Reverses sequence of stage gate process. It shines the spotlight on the place where senior management needs illumination - the assumptions that constitute the key uncertainties

Slides week 4 1) Explain the key roles and their activities in the project-champion-sponsor model 2) Explain the 'project-champions myths mentioned in the slide

Project-champion-sponsor model Key roles Project champion: - Takes the lead in driving and directing the project - Overseeing the implementation process - Adapting key aspects of the concept along the way - Sustaining the project as obstacles arise - Bringing it through completion Sponsor: - Pushes for the initiative's acceptance and completion - Playing a major advising or mentoring role as it unfolds - Acts as a buffer, protector, and modifier of rules and policies - Helps the venture obtain needed resources Project champions myths - Are more likely to be successful o Reality: success is beyond the champion's control - Champions get involved because they are excited about the project, not out of self-interest o Reality : champions are self-interested - Champions are more likely to be involved with radical innovation projects o Reality : they are equally likely to be involved with incremental innovations - Champions are more likely to be from high levels o Reality : they can be found throughout the whole organization - Champions are more likely to come from marketing o Reality : they come from different departments

Slides week 6 Which 5 requirements are mentioned for open innovation?

Requirements for open innovation - Ability to evaluate external knowledge - Ability to integrate external knowledge - Clear vision of company direction - Strengths in business planning - Strong external sources of knowledge who will cooperate

Stage-Gate Controls, Learning Failure, and Adverse Effect on Novel New Products - Sethi and Iqbal (2008) 1. What was researched? 2. What were the hypotheses? 3. Which hypotheses were accepted and which were rejected? 4. Explain the results/conclusion

Research Summarizing - The effect of the degree of rigor in gate review criteria on project inflexibility - The mitigating influence of gate conditionality on the adverse effect of rigorous gate criteria - The effect of project inflexibility on post-approval learning failure - The moderating influence of market and technological turbulence on the effect of inflexibility - The effect of learning failure on the new product's performance for different levels of product novelty Project inflexibility: refers to the extent to which project parameters become rigid and unchangeable when the project is approved after review at initial gates. Hypotheses (10) - The more strictly the gate review criteria are enforced, the greater is the inflexibility of the new product development project -> Accepted - The more objective the gate review criteria, the greater is the inflexibility of the new product development project -> Accepted - The more frequent the evaluation of the project at gates, the greater is the inflexibility of the new product development project -> Accepted - The greater the gate conditionality, the weaker is the impact of strictly enforced gate review criteria on the inflexibility of the new product development project -> rejected - The greater the gate conditionality, the weaker is the impact of objective gate review criteria on the inflexibility of the new product development project -> rejected - The greater the gate conditionality, the weaker is the impact of frequent gate evaluations on the inflexibility of the new product development project -> rejected - The higher the project inflexibility, the greater is the post-approval learning failure -> Accepted - The greater the turbulence in the technological environment, the stronger is the impact of project inflexibility on post-approval learning failure -> Accepted - The greater the turbulence in the market environment, the stronger is the impact of project inflexibility on post-approval learning failure -> rejected - The greater the product novelty, the stronger is the adverse effect of post-approval learning failure on the market performance of a new product -> Accepted Results Results are based on a survey of 120 projects that used Stage-Gate processes The research suggests that when gate review criteria are more strict, objective and frequently applied, they increase the inflexibility of the new project. The attempt to mitigate the adverse effect of rigorous criteria on project inflexibility through adoption of conditional gates does not work. In turn, project inflexibility increases learning failure in the product-development team. This adverse effect on project inflexibility on learning is worsened when there is turbulence in the technological sector of the environment. Learning failure due to Stage-Gate evaluation adversely affects the market performance of new products. In conclusion, the research highlights certain problems that are associated with the rigorous application of gate criteria, especially when the product is novel or when there is turbulence in the technological environment. Managers should take these context into account.

One More Time: How do you motivate employees? - Herzberg (1987) What are the 10 steps for job enrichment? And explain

Steps for job enrichment These are the steps that managers should take in instituting the principles with their employees: 1. Select those jobs in which (a) the investment in industrial engineering does not make changes too costly, (b) attitudes are poor, (c) hygiene is becoming very costly, and (d) motivation will make a difference in performance. 2. Approach these jobs with the conviction that they can be changed. Years of tradition have led managers to believe that the content of the jobs is sacrosanct and only scope of action that they have is in ways of stimulating people. -> Also job context can be changed 3. Brainstorm a list of changes that may enrich the jobs, without concern for their practicality. 4. Screen the list to eliminate suggestions that involve hygiene, rather than actual motivation 5. Screen the list to avoid generalities, such as 'give them more responsibilities' or 'make them grow' or 'challenge them'. . 6. Screen the list to eliminate any horizontal loading suggestions 7. Avoid direct participation by the employees whose jobs are being enriched. The job is to be changed and the content will provide motivation, not the attitudes about being involved. 8. In the initial phase, set up a controlled experiment. At least to equivalent groups should be chosen, one control unit and one experiment unit. Motivators are systematically introduced over a period of time (in the test unit). Throughout the time, measure the group performance and attitudes towards the job (both groups) 9. Be prepared for a drop in performance in the experimental group in the first part of the experiment 10. Expect your first-line supervisors to experience some anxiety (fear of change) and hostility (because of his decline in responsibility) over the changes that you are making After the experiment supervisors become aware of managerial functions they have neglected, or which were never theirs because of all their time was given over to checking the work of their subordinates. Employee-centered style of supervision will not come through education, but by changing the jobs that they do.

Christensen and Overdorf (2002) - Meeting the challenge of disruptive change- 1) Explain sustaining innovation and disruptive innovation 2) Explain what type of companies are suitable for pursuing sustaining innovation and which ones for disruptive innovation and why?

Successful companies are good at responding to evolutionary changes in their markets (sustaining innovation). Where they run into trouble is in handling or initiating revolutionary changes in their markets, or dealing with disruptive innovation. Sustaining technologies: are innovations that make a product or service perform better in ways that customers in the mainstream market already value. Disruptive innovations: create an entirely new market through the introduction of a new kind of product or service, on that is actually worse, initially, as judged by the performance metrics that mainstream customers value. Sustaining innovations are nearly always developed and introduced by established industry leaders. But those same companies never introduce - or cope well with - disruptive innovations. That is mainly because disruptive innovations occur so intermittently that no company has a routine process for handling them. Furthermore, because disruptive products nearly always promise lower profit margins per unit sold and are not attractive to the company's best customers, they are inconsistent with the established company's values. The reason that large companies often surrender to emerging growth markets is that smaller, disruptive companies are actually more capable of pursuing them. Their values can embrace small markets, and their cost structures can accommodate low margins. Their market research and resource allocation processes allow managers to proceed intuitively. All these advantages add up to the ability to embrace and even initiate disruptive change.

Slides week 7 1) Gives the definitions of: Outside equity investors, sweat equity, private equity, and venture capital 2) Describe the 4 stages of venture capital financing described in the slides 3) Name the 4 exit strategies 4) Name advantages and potential disadvantages of CVC

Terminology - Outside equity investors: invest money in your business in return for a share in the venture. - Sweat equity: entrepreneur's contribution to the venture in terms of time and effort - Private equity: equity capital not quoted on a public exchange Venture capitalist Venture Capital is a sub-set of Private Equity investment that focuses on the launch and early stages of new ventures. Typically: - High risk - High return - Close involvement of investor Venture capital stages of financing - Various stages: o Early stage / Seed financing (initial capital to develop concept) o Series A / First round financing (BP is written, product is under development) o Series B / Second round financing (paying customers, but not yet profitable) o Series C / Third round financing (expansion capital, preparing for IPO) Exit strategies - Exit through Initial Public Offering (IPO) - Trade Sale - Other VCs or PEs - Management (MBOs) Advantages of CVC - Complementary assets (expertise) - Endorsement (When a large firm invests in your start-up, it enhances the start-ups reputation) - CVC-backed ventures tend to be more successful Potential disadvantages of CVC - Dependence of mother organization - Slow deals - quick death (time is money) - Cannibalizing investor competition (scares away other investors)

According to Christensen (The innovator's dilemma), what are the three findings that the failure framework is built upon? And explain them.

The failure framework The failure framework is built upon three findings from this study: - Strategically important distinction between sustaining technologies and disruptive technologies - Pace of technological progress can, and often does, outstrip what markets need - Customers and financial structures color heavily the sorts of investments that appear to be attractive to them, relative to certain types of entering firms Sustaining and disruptive technologies: Sustaining technologies: New technologies foster improved product performance (can be incremental or drastically). They improve performance of established products, along the dimensions of performance the mainstream customers in major markets have historically valued. Rarely have even the most radically difficult sustaining technologies prevented the failure of leading firms. Disrupting technologies: innovations that result in worse product performance, at least in the near-term. Ironically, in each of the instances that are investigated, it was disruptive technology that prevented the leading firm's failure. Generally, disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value. Products based on disruptive technology are typically cheaper, simpler, smaller, and frequently, more convenient to use. Trajectories of market needs versus Technology Improvement The second element of the failure framework, the observation that technologies can progress faster than market demand, means that in their efforts to provide better products than their competitors and earn higher prices and margins, suppliers often overshoot their market: They give customers more than that they are willing to pay for. And more importantly, it means that disruptive technologies that may underperform today, relative to what users in the market demand, may be fully performance-competitive in that same market tomorrow. Disruptive technologies versus rational investments The last element of the failure framework, the conclusion by established companies that investing aggressively in disruptive technologies it not a rational financial decision for them to make, has three bases: - Disruptive products are simpler and cheaper; they generally promise lower margins, not greater profits - Disruptive technologies typically are fist commercialized in emerging or insignificant markets - Leading firms' most profitable customers generally don't want, and indeed initially disruptive can't use, products based on disruptive technologies. A disruptive technology is initially embraced by the least profitable consumers in a market. Hence, most companies with a practiced discipline of listening to their best customers and identifying new products that promise greater profitability and growth are rarely able to build a case for investing in disruptive technologies until it is too late.

Making Sense of Corporate Venture Capital - Chesbrough (2002) - Shortly explain the framework and its parameters (axes)

The framework A framework is developed that can help companies evaluate their existing and potential VC investments and determine when and how to use corporate VC as an instrument of strategic growth. The framework is exists of two dimensions: - Objective - Link to operational capability Objective: Can take two forms - Strategic o They are made primarily to increase the sales and profits of the corporation's own business. A company making a strategic investment seeks to identify and exploit synergies between itself and the new venture. - Financial o Company is mainly looking for attractive returns Link to operational capability can be: - Tight o Similar resources or processes - Loose o Different resources or processes

Transformational Leadership's Role in Promoting Corporate Entrepreneurship: Examining the CEO-TMT Interface - Ling, Simsek, Lubatkin and Veiga (2008) Describe a transformational leader and its attributes.

Transformational leaders Transformational leaders are drawn by the need to transform individuals, teams, and firms by going beyond the status quo and, in doing so, affect their firms' ability to innovate and adapt. Transformational leadership consists of exhibition of four interdependent and mutually reinforcing attributes: - Charisma: creating and presenting an attractive vision of the future - Inspirational motivation: energizing followers to go beyond your self-interest - Intellectual stimulation: stimulating followers to challenge assumptions and view problems from new perspectives - Individualized consideration: focusing on follower development by providing support, encouragement, and coaching. CEOs who are transformational leaders are believed to induce organizational members to constantly anticipate and adapt to environmental change.

Moore (2004) - Darwin and the demon What are the 8 types of innovation? and explain them

Type of innovation: Disruptive innovation Explanation: Markets appear from nowhere, creating massive new sources of wealth. It tends to have its roots in technological discontinuities Examples: Like the first generation of cell phones, or fast-spreading fads like the collector card game Pokemon Type of innovation: Application innovation Explanation: Takes existing technologies into new markets to serve new purposes Example: Computer companies providing computers to the banking industry for creating ATMs Type of innovation: Product innovation Explanation: Take established offers in established markets to the next level Examples: Focus can be on: performance increase, cost reduction, usability improvement and any other product improvement Type of innovation: Process innovation Explanation: Makes processes for established offers in established markets more effective or efficient Examples: Dell's streamlining of its PC supply chain or Walmart's refinement of its inventory process Type of innovation: Experiential innovation Explanation: Makes surface modifications that improve customers' experience of established products of processes Examples: Delighter: You've got mail Reassurers: Package tracking from FedEx Satisfiers: superior line management in Disney land Type of innovation: Marketing innovation Explanation: Improving customer-touching processes, bye they marketing communications or consumer transactions Example: Use of the web and trailers for viral marketing of the Lord of the Rings movie triology; or Amazone's e-commerce mechanisms and Ebay's online auctions Type of innovation: Business model innovation Explanation: Reframes an established value proposition to the customer or company's established role in the value chain or both Example: Gillette moving from razors to razor blades; or Apple's expansion to consumer retailing Type of innovation: Structural innovation Explanation: Capitalizes on disruptive innovation to restructure industry relationships Example: Using deregulation of financial services to offer broader arrays of products and services to consumers under one umbrella.

Collaboration and Innovation: A Review of the Effects of Mergers, Acquisitions and Alliances on Innovation - De man and Duysters (2005) - Give the advantages and disadvantages of alliances for enhancing innovation - Give the advantages and disadvantages of M&As for enhancing innovation

Whereas mergers and acquisitions and strategic alliances are primarily known for their ability to facilitate entry into new markets and their effectiveness in achieving scale and scope economies, this research focuses on their effects on the innovative performance of companies involved. Theory on M&A and alliances on innovation M&A's Advantages M&A's for innovation - Technological know-how is often tacit and can therefore not be easily transmitted from one firm to another. In order to avoid high transaction costs, firms may have to be inclined to engage in an acquisition in order to solve problems related to the transmission of tacit knowledge - M&As may raise the overall R&D budgets of companies involved. This allows them to reap economies of scale and enables them to tackle larger R&D projects than each individual firm could have done. - A larger budget enables spreading risk of innovation. - Firms having complementary knowledge can combine their specific strengths and developed new technologies or products that each partner on its own would not have been able to create. This may have two effects: o An innovation emerges that would not have been possible without the collaboration o Or an innovation is realized much faster than when the partners would not have collaborated - Companies are rarely efficient at all aspects of innovation management. Companies are likely to employ different innovation management techniques. An exchange of best practices within the merged entity will raise R&D productivity: i.e. with the same budget more technologies can be developed. Disadvantages/ grave barriers to innovation - Mergers require so much time of so many individuals involved that it diverts management attention away from innovation. - The failure rate of mergers in general is high. Even if the integration of the R&D departments is a success, in other business areas the merger may not be a success. - It involves entire companies whereas the advantages for knowledge exchange may be limited to only a small part of the companies involved. In M&As knowledge that is not required at all is also acquired. Cherry picking is not possible. This may also cause the indigestibility problem: a company may acquire more knowledge than it can use in a meaningful way. Alliances Advantages Alliances for innovation - When asset specificity is intermediate, alliances are considered to be the governance mode of choice. - Lower risk of large research projects may also increase innovation through alliances. - The integration of complementary knowledge may also increase innovation through alliances. - Teaming up with a competent partner may also lead to a significant reduction in lead times - Radar-function of alliances: Alliances enable firms to scan their environment for promising new technologies at low cost. It makes it possible for a firm to have a sneak preview of a technology without fully committing to them - A wider variety of technology opportunities become available to the company - Alliances can aim at a very specific piece of knowledge. All other knowledge and technology can be excluded from the alliance. So, cherry picking is possible. Disadvantages alliances - Knowledge transfer across organizations is notoriously difficult. Differences in corporate culture, processes and knowledge base may impede a smooth transition of knowledge - Alliance partners are often competitors. Then the fear of helping a competitor to develop a new technology may be an incentive to hold back in the alliance. - Firms often enter alliances with a secret agenda. These firms do not participate for mutual benefit but try to absorb the partner's knowledge, skills and other assets. - Although the failure rate of alliances is lower than of M&A's, with around 50% the failure rate is still high (can ofcourse also be because of other reasons, for example strategic, operational etc.).

in the slides of week 4, problems with the entrepreneurial trait approach for entrepreneurial research are discussed. 1) What characterizes the entrepreneurial trait approach? 2) Which problems do occur in research because of the traits approach? 3) Researchers are shifting from traits to what way of research/thinking? Explain

Who is an entrepreneur? Entrepreneurial traits - different researchers - trait approach - Need for achievement, autonomy and leadership - Self-discipline and perseverance, desire to succeed, energy level - Interest in money or fame, locus on control, risk propensity, creativity, achievement - Openness for innovation, self-esteem, locus of control Problems with this approach - Does not always seem to fit reality o E.g. some entrepreneurs are risk averse while others are risk seeking - May lead people to think that entrepreneurial skills is only something that one is born with - Easy to be tempted by selection bias o Only the successful entrepreneurs survive long enough to be included in databases in be part of scientific research. Therefore the stories of failed entrepreneurs are not or hardly included in research Entrepreneurship is moving from trait approach (who is an entrepreneur?) to the behavioral approach (studying what entrepreneurs do, instead of who they are). -> Skills and competences are more important than personality characteristics.

Managing internal corporate venturing cycles - Burgelman and Valikangas (2005) Why do Internal Corporate Venture cycles persist? (describe four scenarios based on two dimensions)

Why Internal Corporate Venture cycles persist The interplay between the prospects of a company's mainstream businesses and the availability of uncommitted financial resources created a strong force driving ICV cyclicality. There are four common results that can result from their interplay: Situation 1: ICV orphans - If a company has uncommitted financial resources, it can afford to support internal-venturing projects. If, however, the prospects of the mainstream business are sufficient to meet the company's profitable growth objectives, there is little motivation to support ICV actively. A number of entrepreneurial projects that nevertheless have managed to get started are likely to drift along in 'orphan' projects. In this case, the ICV cycle has started even though top management is not actively managing it. Situation 2: all-out ICV drive - If the company has uncommitted financial resources and the growth prospects of the mainstream businesses are expected to be insufficient for meeting corporate objectives for profitable growth, top management is motivated to support ICV projects actively. The top management is likely to form a new-venture division or new-business group. Such a structural arrangement then becomes the home for all existing ICV orphan projects and also serves as the implementation tool for starting an ambitious top driven ICV-program. Situation 3: ICV irrelevance - If there are few uncommitted financial resources available, but the prospects of the mainstream business at the moment look sufficiently promising, top management is likely to consider ICV largely irrelevant. All attention is to be focused on exploiting opportunities in the core business. Situation 4: Desperately seeking ICV - A lack of uncommitted financial resources combined with a mainstream business with inadequate growth prospects is likely to lead top managers to latch on desperately to the first reasonable looking ICV project that comes in their way. Given the limited choice of ICV projects that executives face in this situation and the substantial uncertainty associated with the ICV project, the likelihood of failure is high.