ENTR 3012 Exam 1
Motive behind Google changing to Alphabet
"Our company is operating well today, but we think we can make it cleaner and more accountable."
Step 5: implementing and managing the concept
-"Launching" is just the beginning, then the entrepreneur must learn on their feet -Often there is no precedent or history to leverage -Remember to stay open minded: learning only occurs if new information is incorporated. -One way to manage the ambiguity is to build in smaller, intermediate steps toward the end goal -Helps evaluate progress and establish learning opps.
Google X Purpose
-"Moonshot" ideas completely unrelated to Google's core operations. -Pursuing invention (basic science) without the pressures of profit or application (applied science)
Step 3: Assessing the resource requirements
-About more than money -Relationships, intellectual property, location, team and supply chains will all matter greatly -In organizations, sponsorship's by higher-ups takes on an important role, especially when proposing new businesses or markets
The world that the firm operates in is constantly changing. Technology:
-Accelerated cycle times leads to rapid obsolesce -Intellectual property tougher to protect
A key question for auto makers is will electric/autonomous cars lead to more sales?
-Autonomous could mean less sales for all, so why do companies do it? -
Competitive Advantage and an example
-Being able to provide goods or services that are superior to the customer's other options -Being able to do something better than the competition -Example: Apple (creativity and functionality), Honda (engines), Southwest (Low cost but highly efficient)
Path dependence
-Circumstances and decisions made in the past cause lock-in to a specific direction, strategy or technology -Due to lock-in, it is tough for organizations to make changes in the short term -This is part of the reason why large organizations have trouble reacting to opportunities as quickly as startups -With no "history" the startup hasn't been locked in to any specific trajectory Examples: - how BR is on a grid map and Boston isn't
Lifecycle: Start Up and Early Growth
-Company launch and make initial market penetration -Leverages creativity in products, processes or business model -Significant ambiguity and flexibility -Extensive intrinsic engagement for employees
Organizational Lifecycle Summary
-Each stage has unique problems and the scope of activities and appropriate responses change -Management style, control systems and structure must be fluid and flexible -Failure to adapt and change behavior may cause organizational decline/death However, knowing the stages and requirements of each, allows you to be proactive
Corporate Entrepreneurship
-Entrepreneurship within mid to large sized companies -Generating, developing and implementing new ideas, processes and behaviors within companies
Internal environment
-Everything happening within the organization that restricts or encourages entrepreneurial action -Processes, systems, structure, culture
External environment
-Everything outside the organization that either restricts or encourages entrepreneurial action -Competitors, customers, technology, legal, etc
Cannibalizing outcome
-Fighting changes to the external environment is a losing battle -Need to accept and react to change, even if it decreases your performance -The alternatives are likely worse -Shrinking pie vs no pie
Management in CE
-Focused on improving current operations -Plan, coordinate, lead, control -Principles and values lead to accountability -Efficiency: doing things better (improve input to output yield) -Effectiveness: doing the right thing; choosing appropriate objective and course of action
The world that the firm operates in is constantly changing Globalization:
-Further fragments customers -Additional, often more focused, "local" competitors -Multiple legal/regulatory regimes -Global supply chains -Information availability and speed of transfer
Lifecycle: Growth through Direction
-Growing beyond startup requires role and structure formalization and professionalization -New employees, SOP's, budgets -But the organization and their management often go too far... -Loss of power/influence forces employees to disengage -Intrinsic motivation is lost
The entrepreneurial process includes what step?
-Identifying an opportunity -Assessing the resources required -Harvesting a venture
Innovativeness in processes
-In processes, the value of an innovation comes from doing something cheaper, quicker, at a better quality or with a better customer experience
Risk Taking
-Infers that risk taking is optimized with a mix of small trials coupled with a few longshots -Don't want to be waiting for the perfect concept -Don't exclusively chase "dingers" (homeruns) -Combine frequent, low risk market experiments with a few high risk options -More "at bats" = testing and trial runs -In addition to potential success from project, provides information that helps improve future decisions
Step 4: Acquiring the required resources
-No matter where you're being entrepreneurial you need resources, and they're expensive and often controlled by others -Be creative! -Why buy or own if you can borrow or share? -Being creative in acquiring resources lessens the financial outlay while increasing flexibility
Entrepreneurship in CE
-Not concerned with current operations, but instead envisions what could be -Analyze patterns and look for emerging opportunities -Identify ways to seize those opportunities
Why do companies cannibalize?
-Remember that in new markets there's still unknowns -When evaluating options, you don't know if digital camera profits < camera + film profits -If they don't, someone else may
Dimension 2: Risk Taking
-Risk taking: willingness to pursue a course of action that has a reasonable likelihood of producing losses or which have a high variance in potential performance outcomes -Things are riskier when either the probability of loss, or the size of the loss, are larger* * Note, this may be different than how risk is defined in your finance or economics classes
The world that the firm operates in is constantly changing Resources: Customers:
-Scarcity: population growth, waste and specialization -Less loyal -Fragmented and specialized -Increasingly demand fast and individualized attention
Cannibalizing
-Sometimes a new product will "eat" the sales/profits of the company's other existing products -In essence you're not growing market share, you're just redistributing it -This is especially problematic if the innovation will be less profitable. EX: film vs digital
Lifecycle: Growth through Collaboration
-Structures must be simplified: central office headcount goes down, replaced with consulting field ops, area experts, cross functional teams "Coordination through human capital" -Emphasis is placed on accepting/supporting risky and innovative projects, flexibility -The hardest to obtain: many companies never will... entrepreneurial activity just slowly dies
Lifecycle: Growth through Coordination
-These problems centralize power back in the TMT -Their attention then focuses on how to best coordinate activity across the business to optimize outcomes -Especially in areas with broad application (R&D, HR, IT) -Eventually this breeds bureaucracy and red tape... often the benefits to coordination are less than the costs -Both financial and productivity wise -Company is too large/complex for rigid control systems
Lifecycle: Growth through Delegation
-To reinvigorate engagement and creativity, power and influence is pushed back down to lower levels -Strategy is determined at the top, divisions and units have broad influence on how to achieve it -Such delegation recaptures some of the excitement from the startup stage but... -Management loses a lot of control and inefficiencies, duplication of effort and inconsistent behavior emerges -Synergies?
summary of CE types
-Understand that the various approaches have different levels (and types) of resource requirements and vary in their sustainability -Most organizations employing a hybrid (mix) -The first four types are about how things occur internally, the last two leverage market based solutions
When you don't path dependence, like Tesla:
-Without the burden of path dependence Tesla can employ a radical strategy -Problem: economies of scale in auto and new tech -Solution: Start high end with novel technology refine it and bring down the cost per unit go mass market -Two important implications: 1. Locates a safe place away from competitors 2. "Premiums" don't want to go down market
Dilemma 1 in innovativeness
-do increases to innovation activity increase the success rate as well? -If it's truly novel, how much can/will be leveraged to/from other experiences? -Learn the process of experimentation? -Don't overlook the value of minimizing the cost of failures -This can be learned from experience -May actually be more important for competitiveness
Dilemma 2 in innovativeness
-does being a first mover provide an advantage in the marketplace? -Often yes, especially when network effects exist -Also grants influence over the direction of market evolution - think back to our iPhone discussions -However, second or third entrants can learn from the mistakes of pioneers -At the same time, they benefit from not incurring risk and cost of "legitimizing" the new marketplace
Google X Culture
-encourages and rewards failure -#monkeyfirst
Dimension 1: Innovativeness
-how much, how often, or to what degree a company is doing something unique, new or different -Can occur in products, services or processes
Success of the iPod and iPhone gave Apple:
-important knowledge about customer desires -technical ability to satisfy those desires -influence to shape customer expectations about functionality and experience.
Why are we studying corporate entrepreneurship?
-most new ideas and products come from established companies, not startups -your first job -industry experience is important -corporate entrepreneurship requires a concerted effort that must be nurtured and engrained into the company
Google X Structure
-specifically set outside of Google: Why? -Foundry exists to incubate ideas as business models are developed -successful ideas get spun off into their own subsidiaries. Why -recycles talent into the pipeline
Sustained Competitive Advantage
-systems and capabilities constantly evolve to stay ahead of competition along an important attribute -must be tough for competitors to imitate -traditionally achieved via: 1. Lower costs 2. Higher quality 3. Better performance 4. Selection 5. Customer service
Relying on just an intrapreneur to be creative is dangerous/ineffective because:
-they can leave -they can become disenfranchised -their abilities must be nurtured/developed
Google Culture
-trusts and emboldens the employees -20% "free time" encourages experimentation, but also skill building, creativity, and commitment. -encourages failure: "fail quickly and fail often". plant many seeds and few may grow. 2 byproducts of this culture: 1. people are engaged, excited, and creative: maximizes return from human capital. 2. facilitates radical thinking and hopefully, entrepreneurial outputs.
A new set of determinants for Sustained Competitive Advantage and what 2 results do these determinants create?
1. Adaptability: adjusting to the external environment 2. Flexibility: strategize and operate to satisfy multiple stakeholders 3. Speed: make operational decisions and seize opportunities quickly 4. Aggressiveness: a focus on beating competitors, serving customers and growing the firm 5. Innovativeness: prioritize developing and launching new products, processes or markets 2 Results: 1. React: Better ability to adjust to dynamic, complex and threatening environment 2. Proactively create change in the environment
3 additional constraints that Corporate Entrepreneurs face and Entrepreneurs don't:
1. Cannibalization 2. Path dependence 3. Market Scrutiny (if public)
3 Forms of Corporate Entrepreneurship (objectives of CE)
1. Innovation: introducing something new to the market 2. Corporate Venturing: creating new business units within an organization 3. Strategic Renewal: renewing/reinventing the company through major structural/strategic change
3 dimensions of entrepreneurship
1. Innovativeness 2. Risk taking 3. Proactiveness
Differences between CE and E: Difference 5:
Ability to scale E: -Low -A function of organic growth rate CE: -High -Entire company's arsenal at your disposal Especially important in markets with first mover advantage or no established dominant design
What is the 4th step in the Entrepreneurial Process?
Acquiring the required resources
CE in action Type 5:
Acquisitions (market based) -The organization purchases other companies to incorporate their innovative ideas -Want access to technology, products or people -Reinforces the company's current strategy or competencies The concerns with this approach: -Not clear if it is a sustainable model -While technology risk is lower since things have been proven there is a huge integration risk -What are you buying and is it portable? -EA games and pharmaceutical company example
CE in action Type 2:
Ad-hoc venture teams (internal) -Cross functional group of individuals put together with a specific innovation goal -Clear objectives and budgets -Removed from corporate mainstream -Drawback: One hit wonders vs sustainability
What is the 3rd step in the Entrepreneurial Process?
Assessing the resource requirements
Differences between CE and E: Difference 4:
Availability of resources E: -Low CE: -High -trade off: corporate priorities may shift
One of the immediate problems of CE?
Balancing management and entrepreneurship
What kind of risks do entrepreneurs typically take?
Calculated risks. -Experience and analysis allows the individual to take calculated risks. -Planning and preparation are important tools to mitigate the risk.
CE in action Type 4:
Champions & the mainstream (internal) Champions: the entrepreneur advocating for their ideas and opportunities -Keeps people engaged /excited about their activities Sponsor: higher level advocate -Advocates and brings excitement to the decision makers; Conduit between work and management
What represents a radical innovation in the advertising space? Why is it radical?
Companies like Google and Facebook matching content providers and advertisers to consumers and data. -new technology enables better targeting and tracking -decreases consumer's search efforts -It's radical because, data driven insights: who, what, how much, what next?
All of the following are dimensions of entrepreneurship except: - risk taking -innovativeness -proactiveness -competitiveness
Competitiveness
Differences between CE and E: Difference 3:
Control E: -High -Own the idea, concept -Large influence over what happens -Entrepreneur "did it" CE: -Low -Company owns idea -Company can/will alter concept -Shared accomplishment
The process of creating value by bringing together a unique combination of resources to exploit an opportunity is called
Entrepreneurship
Successful innovation is a function of matching products/services to the _____________ environment.
External
"Sinking the boat" occurs when the entrepreneur chooses not to pursue a course of action that would have been profitable. T or F
False
Entrepreneurs are born, not made. T or F
False
Entrepreneurs are charged with doing things effectively and efficiently. T or F
False
Google X's objective is to solve challenges in Google's core business. T or F
False
Most car companies make their own batteries for their electric cars. T or F
False
The share price of Tesla went up (spiked) following Elon Musk's August 7th tweet. T or F
False
Entrepreneurs must be inventors. T or F
False -Changes to processes (and most elements of a business model) don't involve formal invention -Often the opportunity involves rearranging the inventions of others
All entrepreneurs needs is money. T or F
False -Money doesn't guarantee things are put together or opportunity is approached the "right" way -Most important things often can't be purchased -Lack of money often a symptom, not the cause
A measure of how many entrepreneurial events take place within a period of time is called
Frequency of entrepreneurship
Google Structure
Google employed structures and developed a culture that facilitated entrepreneurial activity. They had cash to "play with". Structure (company and external environment): As the matchmaker platform: -a lot of content/development is handled by other parties. -Google still gets to view all of the flowing information. -Google can conduct experiments. -All of the data above ^ can inform internal innovation efforts. Structure (company and internal environment): -Removed traditional roles and teams -"campus" community encourages people to stay at office -^This encourages communication/interaction across groups--> spurs "outside the box" thinking
The creation of semi-autonomous product divisions and strategic business groups occurs in which growth stage?
Growth through Delegation
What is the 5th step in the Entrepreneurial Process?
Implementing and managing the concept
Why is the nature of sustained competitive advantage changing?
Increasingly difficult to sustain. Items in external environment discussion earlier make them more imitable
Examples of radical innovation
Netflix, Nokia to iPhone
CE in action Type 3:
New Venture Divisions (internal) -Individual team-->division with goal of creating breakthrough innovation and new markets -Formal, removed and "permanent" -Focus on innovation that moves away from core capabilities and strategy -Tradeoff: find it difficult to get buy in from other units when products are ready for testing/launch
CE in action Type 6:
Outsource (market based) -Contracting someone to do your innovative products for you -Saves money/time required to build innovation infrastructure Key concerns -Sustainability -How important is the function or technology to your future strategy?
Differences between CE and E: Difference 2:
Reward E: -High -High ownership % -Nearly unlimited upside CE: -Low -Minimal ownership -May receive a bonus -May actual risk future bonuses
Differences between CE and E: Difference 1:
Risk E: -High -Person bears the risk -Personal wealth and future tied to endeavor -Low salary CE: -Low to moderate -Company bears the risk -Will likely still get paid following failure -Comfortable income
The world that the firm operates in is constantly changing. Labor:
Scarcity: because of both both demand and supply Expensive: both salary and benefits Mobility / loyalty decreasing Contracting
How do we measure/assess innovativeness?
Some metrics of interest: -Number of concurrent projects -How quickly projects are started, deployed or trimmed -How much time is needed from idea to launch -Innovation specific resource commitments: people, space, money, equipment -Success rate?
Customers, the economy, suppliers, and competitive pressures are all examples of
The external environment
Innovativeness in services
The intangible nature and adoption of technology in services makes it easier for imitation by competitors - reason why the sector exhibits continuous and frequent improvement
The individual employee's decision to be entrepreneurial is the focus of which framework
The sustaining framework
CE in action Type 1:
Traditional R&D (internal) -Organizational unit with technically skilled staff improving or producing new products -Often focuses on overcoming technical challenges -Note that this is different than the market challenges -Closely tied to current strategic direction
After missing profit expectations for the fourth quarter of 2013, Google's stock price was up over 50% from the prior year. T or F
True
Entrepreneurial intensity is a function of both the degree and frequency of entrepreneurship in an organization. T or F
True
Entrepreneurs are NOT extreme risk takers. T or F
True
The authors advocate that Tesla's advantage in selling a pickup may come from focusing on making a luxurious version of the vehicle. T or F
True
GM plans to stop investment into which automobile.
Volt
Since 1992, General Electric has had a permanent business unit tasked with radical innovation and creating new markets. This would be an example of:
a new venture division
Incremental innovation also allows companies to:
develop capabilities, brand, customer insights, and market influence that improve probability of the next radical innovation.
Examples of incremental innovation
iPhones
Incremental Innovation
minor enhancements to existing products, services, or markets. -cheaper, less risky, easier -but... also less valuable -tends to maintain the status quo of marketplaces in terms of companies, solutions and technology.
Lifecycle
organizations constantly ebb and flow between control and decentralization; Different stages require different levels
Incremental innovation allows companies to:
reap reward from radical innovations and finance the next radical innovations.
Thinking
recognizing opportunities, healthy skepticism/dissatisfaction of the status quo, embracing change, optimism
Acting
taking calculated risks, overcoming hurdles, bootstrapping/reassembling resources
What is path dependence usually caused by?
the lock-in is often caused by things outside of the firm's control: -Customers associate the company with specific attributes or among specific peer groups within the industry -Supply chain relationships -Employee skill sets -Ecosystems exist
At Google X, the following occurs if teams decide to kill their projects:
the team receives a financial bonus
Google Purpose
to identify and exploit opportunities
Radical Innovation
using either new technology or a business model to create a new market. - expensive and uncertain -lots of failure -can be very valuable for company and society -tends to "rewrite the rules" of technology, companies, etc.
