INTRAPRENEURSHIP 2013-2014

PROF DR BART LETEN

- COURSE OUTLINE -

1. COURSE OBJECTIVES AND METHOD ________________________________________________________________________ This course is designed to equip students with state-of-the-art knowledge and best practices on intrapreneurship or the creation of new business in established companies. First, we explain the importance and unique nature of intrapreneurship. We discuss the role of company employees in championing and sponsoring bottom-up innovations. Second, you learn how to create an organizational context in which individuals are stimulated to act entrepreneurial. Third, we explain the processes and tools firms use to create and select exceptional opportunities for new businesses by leveraging in-house and external ideas. Finally, we discuss how firms can design ambidextrous organizations in which entrepreneurial and existing activities coincide and mutually reinforce each other. Special attention is hereby given to the strategic role of corporate venturing. METHOD Throughout the course the case study method is used complemented by plenary discussions. Students should come to class having individually read the cases mentioned under Class preparation for each session. Students can use the preparatory questions to guide their individual reading of the case. No case reports are required. There will be a permanent evaluation (scores between -2 and +2) of class participation (case and plenary discussions). The book chapters and papers mentioned under Reading should NOT be read before the sessions. They provide reading to be done by the student AFTER attending class. The written exam will cover questions from both materials discussed in class (slide set) and the required readings (including case materials).

2. COURSE MATERIALS ________________________________________________________________________ Cases and Reading materials: See under each session.

3. COURSE OVERVIEW ________________________________________________________________________ Session 1: Intrapreneurship: An Introduction

In this session we discuss the importance and unique nature of intrapreneurship by comparing entrepreneurial activities in established firms with start-up entrepreneurship. We explain the essential role of individual champions or entrepreneurs who perceive and pursue new business opportunities to grow their firms into different directions. Further, we discuss the role of innovation bootlegging in firms. Class preparation: Case: Internal entrepreneurship at the Dow Chemical company This case is about internal entrepreneurship at the European headquarters of the Dow Chemical Company (Dow), one of the largest chemicals and plastics firms in the world. The case describes the efforts of Ian Telford, the sales director for Europe in Dows epoxy business, and his efforts at launching a new entrepreneurial venture for the company. Preparation questions: What is your evaluation of Ian Telford, the internal entrepreneur? How did his superiors support Ian Telford? What are some of the challenges in nurturing intrapreneurship in large firms?

Readings: Morris, M., Kuratko, D., Covin, J. (2008). Corporate entrepreneurship and innovation: Entrepreneurial development within organizations . Second edition. South-Western Cengage Learning. Chapters 1- 2 (pp. 1-53). Building a Context for Intrapreneurship

Session 2:

In this session we discuss the systems, controls and incentives organizations put in place to stimulate intrapreneurship and ambidexterity on the level of individual employees. We illustrate that organizations have to find a balance between performance management (discipline and stretch) and social support for autonomous entrepreneurial initiatives. Further, we explain innovation challenges and the roles managers in different levels in an organization (front-line, middle, top) should play to stimulate intrapreneurship. Class Preparation: Case: 3M Optical Systems: Managing Corporate Entrepreneurship The case describes the entrepreneurial context and the management decision processes at different levels in 3M, a highly diversified and successful global company. It focuses on

the history of one small business within 3M the Optical Systems (OS) Business Unit. In particular, the case concentrates on the challenges faced by Andy Wong, the OS Units newly appointed general manager, who is faced with a difficult decision of whether to request $750,000 from his boss, Paul Guehler, the VP of the division to which he reports. Preparation questions: As Andy Wong, how would you handle the authorization for expenditure (AFE) for the relaunch of the privacy screen? As Paul Guehler, would you approve the AFE if Wong set it up to you? What is it about 3M that makes it perhaps the most consistently entrepreneurial large company in the world?

Reading: Birkinshaw, J., Gibson, C. (2004). Building ambidexterity into an organization. MIT Sloan Management Review, Summer, 47-55. Bartlett C., Ghoshal, S. (1997). The myth of the generic manager: New personal competencies for new managerial roles. California Management Review, 40(1), 92-116.

Session 3:

Searching for Entrepreneurial Opportunities

In this session we discuss how firms can create and select exceptional opportunities for new businesses through the creative efforts of individuals and teams. We distinguish between the in-house and external search for opportunities, and illustrate techniques such as (structured) brainstorming, multidisciplinary teams, rapid prototyping, crowdsourcing, and the use of time boxes to generate radically new innovation ideas. Class Preparation: None Reading: Terwiesch, C. and Ulrich, K.T. (2009). Innovation Tournaments: Creating and Selecting Exceptional Opportunities. Harvard Business Press, Boston, Massachusetts, Chapters 1-3 (pp. 19-67).

Session 4: Structuring for Intrapreneurship I: Ambidexterity In this session we discuss how firms can protect and develop entrepreneurial ideas into new businesses by adopting structural ambidextrous designs. In such designs, firms separate existing and entrepreneurial activities in separate organizational units, allowing for different processes, structures and cultures, while at the same time maintaining tight links across the different units at the senior executive level to create synergies.

Class Preparation: Case: Innovation and Renovation: The Nespresso Story The case examines the development of the innovative Nespresso system (machine, coffee capsules, club membership services) in the large, Swiss coffee maker Nestl. Nespresso has enabled Nestl to create and dominate a highly profitable niche in the gourmet segment of roast and ground coffee. Rather than only a technological novelty, the Nespresso system is also a remarkable marketing innovation in one of the most traditional sectors of the food business, i.e. coffee. The case discusses how Nestl has grown Nespresso from an entrepreneurial idea into a sizeable new business. Preparation questions: What is Nespresso, and what made it a successful product? Review the history of Nespressos development and commercialization by Nestl. What were the important strategic decisions? Which strategic actions (innovation, marketing) would you recommend for growing Nespressos turnover to the corporate target of Sfr. 1 billion?

Reading: Burgelman, R. (1984). Designs for corporate entrepreneurship in established firms. California Management Review, Spring, 26(3), 154-166. OReilly, C. and Tushman, M. (2004). The ambidextrous organization. Harvard Business Review, April, 74-81.

Session 5: Structuring for Intrapreneurship II: Corporate Venturing In this session we discuss the practice of corporate venturing, whereby firms set-up a separate organizational unit, the corporate venturing unit (CVU), and provide it a mandate to invest in new opportunities arising within or outside the boundaries of the firm. We discuss the different venturing strategies and their respective success factors. Further, we provide a process view on venturing, discuss performance metrics for ventures, and explain the role of CVUs in the external sensing networks of firms. Class Preparation: Case: Intel Capital: The Berkeley Networks Investment The case explores Intels use of corporate venture capital to learn about a new market outside of Intels traditional personal computing space. The Berkeley Networks investment is one of Intel Capitals earliest forays into the networking and communications market. The case shows the strategic rationale for the venture capital investment, how Intel managed this investment, what it learned from the investment, some of the barriers to learning that Intel encountered, and the tensions that existed between the entrepreneur at Berkeley Networks and Intel. Preparation questions: Why did Intel decide to invest in Berkeley Networks? Why did Berkeley Networks invite Intel to invest? What is Intel learning from its investment in Berkeley Networks? What is Berkeley Networks learning from Intel? What should Keith Larson do?

Reading: Leten, B. and Van Dyck, W. (2012). Corporate venturing: Strategies and success factors. Review of Business and Economic Literature, December, 242-256. Campbell, A., Birkinshaw, J., Morrison, A. and van Basten Batenburg, R. (2003). The future of corporate venturing. MIT Sloan Management Review, Fall, 30-37. Mc. Grath, R. and Mac Millan I. (1995). Discovery-driven planning. Harvard Business Review, July-August, 1-12. Negotiating Access to Business Opportunities

Session 6:

The objective of this session is to explain how external venturing can be used by established companies to learn about, or develop new applications on, technologies of start-up companies. The goal is to develop an understanding how a small start-up and a large company can negotiate a memorandum of understanding when a technology is in an early stage of development and market launch is only expected within a few years. Class Preparation: Case: Sanus ACE: Negotiating an MOU in External Corporate Venturing The case describes the situation in which an investment manager in a large chemical company (ACE) has to decide about a corporate investment in a small high-tech start-up (Sanus). To win board approval for this investment, an ACE business unit (in this case, ACE Food Specialties) must write a letter of commitment. Before an investment can be made, all parties need to agree about how to cooperate to the mutual benefit of all stakeholders. Therefore, the investment manager of ACE Venturing cannot invest in the start-up without a memorandum of understanding (MOU) between the start-up and the business unit of ACE that will further develop and commercialize the technology. The case provides the required information for a negotiation exercise between the investment manager, the business unit manager and the CEO of the start-up Sanus. Preparation questions: How do you evaluate an investment in Sanus as business manager of ACE Food Specialties? What are the advantages for your business unit? What are the potential drawbacks and risks related to the investment? How do you evaluate an investment by ACE as manager of Sanus? What are the advantages for your start-up? What are the risks of the cooperation?

Reading None

4. ASSESSMENT ________________________________________________________________________ There is an individual written exam covering the content of all lectures and required readings (including cases). The written exam will consist of a multiple choice part (25% of total mark) and a critical reflection part open questions (75% of total mark). Class participation during case discussions and the negotiation game is an important component of your evaluation. Your final grade on the course will be adjusted within a range of -2 to +2 points on a total score of 20 based on your class participation.

5. CONTACT PERSONS Prof. Dr. Bart Leten Professor Innovation Management Department of Managerial Economics, Strategy and Innovation KU Leuven E-mail: bart.leten@kuleuven.be Jelle Braes Teaching Assistant Department of Managerial Economics, Strategy and Innovation KU Leuven E-mail: jelle.braes@kuleuven.be