ENTP 4350.

001

CORPORATE
ENTREPRENEURSHIP
Dr. Rajiv R. Shah

S08a

Dr. Rajiv R. Shah 1

Course Outline - 2

Dr. Rajiv R. Shah 2

Corporate Entrepreneurship
Reading Assignment for Today’s Session:

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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Outline
Vignette: American Greetings Corporation
1. Introduction
2. Nature of Controlling the Venture
3. Elements of a Management Control System
4. Forms of Control
5. Measures and Strategies of Control in Organizations
6. Characteristics of an Effective Control System
7. Control Philosophy of CE
8. Control Systems for Innovation & Creativity
9. Organizational Control Focus
10. Core Management Control System
11. Methods of Control-Financial, Non-Financial Controls
12. Ingredients of Financial and Nonfinancial Controls in CE
13. Summary
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 Hisrich and Kearney: Chapter-7
Controlling the Venture

Introduction
 Traditionally, Control bureaucracy, rigidity, and conformity to
rules, regulations, policies, and procedures of an organization
 Control needed to ensure organization achieves its goals and
objectives, but too much control can inhibit innovation/creativity
 Control means monitoring and evaluating organizational activities
while anticipating events and determine actions
 3 major aspects of effective control systems -
1. Monitor and regulate organizational activities
2. Develop organizational strategy and structure
3. Monitor and evaluate how strategy & structure are working

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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Nature of Controlling the Venture
 Control can be defined as a systematic process through which
managers make sure that organizational activities are in line
with the goals and objectives established in plans, targets, and
standards of performance
 Control is often associated with delegation – effective
delegation requires decision rules that are consistent with the
organization's philosophy, strategy, and objectives
 A control system consists of rules, regulations, policies,
procedures, objectives, and guidelines that are integrated into
the organization – could be formal or informal – but need to be
simple, so they do not inhibit creativity and innovation
 For effective control, must plan and set realistic but challenging
performance standards & good communications
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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Elements of a Management Control System
1. Planning what is desired – clear goals, objectives
2. Establishing standards of performance – realistic measures
3. Monitoring and evaluating actual performance – need a system
4. Comparing actual results with desired results – why deviations?
5. Rectifying deviations and taking corrective action - adjustments
Forms of Control
Control Systems can measure inputs or outputs –
1. E.g. recruitment and selection, behavior (performance
appraisal, competencies, production, innovation etc.
2. Results of specific actions
3. Evaluate the overall performance

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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Measures and Strategies of Control in Organizations
Various types of controls determine outputs of CE – 4 categories
1. Personal Control – supervision & leadership, rewards & corrections
2. Bureaucratic Control - centralized, well-defined tasks, procedures
3. Output Control – each job/unit responsible for outputs, rewards
4. Cultural Control – shared values, beliefs, norms, etc.
Characteristics of Effective Control Systems
1. Link to strategy 8. Improves efficiency/quality
2. Utilize all the control elements 9. Greater Innovation/Creativity
3. Accepted by employees 10.Provides basis for evaluation
4. Balance objective/subjective data 11.Assesses org. efficiency
5. Accuracy 12.Monitors quality
6. Flexibility 13.Makes org. responsive
7. Timely 14.Optimizes org. success
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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Measures and Strategies of Control in Organizations

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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Control Philosophy of CE
 Defined with effective control elements
 Mgmt. delegate to employees and employee trust
 Empowerment and autonomy
 Understand relationship between empowerment & control
 Promote & reward entrepreneurial behavior
 Open communication & dissemination of information
 Trust and respect at all levels
 Encourage, motivate, and reward innovation & creativity

Many large centralized organizations have such advanced and

formalized control systems that they inhibit creativity/innovation
Examples of companies that have overcome traditional problems -
Amazon, Dell, DuPont, GE, IBM, Lucent, 3M, Nokia, XTV, etc.

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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Measures and Strategies of Control in Organizations

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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Control Systems for Innovation & Creativity
 Companies need processes for identifying real opportunities and
control systems that allow for addressing & monitoring them
 Examples of companies that missed out on such opportunities in
the past – IBM (impact of PC OS, μP); AT&T in Internet-early days;
Barnes & Noble in its early response to Amazon
 3 dimensions that are tied to strategic/operational aspects of org.’s
1. Administrative formality/informality – clearly defined rules
2. Managerial flexibility/inflexibility – managerial discretion/freedom
3. Budgetary tightness/looseness – how restrictive

 3M’s 15 % “bootlegging rule”

 Google’s emulation of 3M’s rule
 Lucent, AT&T, HP have created separate CE/NV organizations
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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Organizational Control Focus
 Control systems are focused on both human & financial resources
1.Feed Forward Control – for resources flowing into the org.
2.Concurrent Control – monitoring ongoing activities in the org.
3.Feedback Control – focused on outputs of the org.
Core Management Control Systems
 Most companies have core mgmt. control systems that consist of:
 Strategic plans – in-depth analysis of company/industry
 Financial forecasts- 3-5 year projection of company financials
 Operating budgets – annual projection of expenses for each dept.
 MBO – Management By Objectives (MBO)- rating scales,
performance goals for each employee
 Ops. mgmt. systems- inventory, purchasing, distribution etc.
 MIS – data on personnel, orders, sales, returns, etc.
 etc.
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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Methods of Control
 Financial Control
1.Budgetary Control
 Types of Budget
a.Rev., Costs, Sales
b. Time, space, material, production
c. Capital expenses
d.Cash budget
2.Break-Even (BE) Analysis
 P*N = FC +VC*N  Non-Financial Controls (contd.)
 N is the BE volume
 P is price/unit, VC & FC are
2.Management Audits
 Internal: evaluate conflicts internally
variable cost/unit & fixed costs
 External: use ext. org. for audits
3.Ratio Analysis
3.Inventory Control
 Non-Financial Controls
4.Production Control
1.Project Controls  TQM, JIT, SPC, SQC
 MS-Project, Gantt & PERT Charts
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 Hisrich and Kearney: Chapter-7
Controlling the Venture
Ingredients for Financial & Nonfinancial Controls in CE
 For CE, a key in Financial and Non-financial controls is to motivate
and facilitate employees to be innovative and creative
 What’s needed is –
 Open communications
 Training & Development
 Ensuring employees understand how their work fits into the
organizations overall strategy
 Empowerment
 Ensuring that employees have a stake in the success/failure of the
organization
 Examples: DuPont, GM, IKEA, Walmart, Whole Foods, Globus
(Germany), Nokia, Apple

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Corporate Entrepreneurship
Reading Assignment for Today’s Session:

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INTRAPRENEURING IN ACTION

George Pinchot and Ron Pellman

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 Intrapreneuring In Action

Today’s Reading Assignment

 Chapter Eight: Intrapreneuring within a Structured

Development Process

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 The Basics of Intrapreneuring
Chapter 8: Intrapreneuring Within a Structured
Development Process
Why Have A Structured Innovation Process?
 A process enables management to choose a mix of projects likely to achieve
long range objectives and also to allocate resources appropriately among
these projects
 It helps intrapreneurs address “ Is winning worth it?” issue
Key Aspects Of Supportive Innovation Processes:
 The process must serve the people who drive innovation, not vice-versa
 The process must recognize the value of early-stage mistakes for the lessons
they teach
 Innovation processes contain several models, choose the one that closely fits
circumstances and then modify as needed
 An effective process recognizes that good ideas and intrapreneurial talent
exists through out the organization and pulls them from all corners
 A good process creates and sanctions many breeding grounds for new ideas
and recognizes every manager as a potential sponsor of innovation
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 The Basics of Intrapreneuring
Key Lessons:
 Management must have “checkpoints” and “stages” in its overall
business initiatives portfolio
 The key to structuring is in achieving integration of the various
elements of a new business development, in a way that helps
managers and team visualize the opportunity as a whole system
 Systems Thinking and Sound Business Management are the key
attributes of successful intrapreneurs
 Think beyond the “home run syndrome”- Most big companies
start out as small businesses
 “Get smart quick”- Plan for an early launch strategy
 Winning does not only mean “getting through the gate”- need to
demonstrate outstanding business judgment, development work
and experience based learning
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Corporate Entrepreneurship

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 Reading 7: Sustainable CE: Evolving & Connecting with the
Organization, by Donna Kelley

 CE entails risk & uncertainty; mature businesses typically cautious and function via
routine progress; this hinders attempts to inject innovative ideas into mature co.’s
 Hence, need conscious effort to build sustainable CE in established companies
 Author suggests companies need – (1) strategic objectives to guide CE, (2) a mgmt.
structure that supports CE, (3) processes that inform assessment/decision-making
 Author proposes an Evolve & Connect Model to adjust the above three items in
response to changes in (a) external environment, and (b) internal organization
 Managers need to maintain a link between entrepreneurial activities & the
organization’s mainstream activities
 CE based on innovation: a new technology, product category or business model
 Author’s work based on study of CE program evolution over 4 yrs. in 12 industry-
leading organizations: 3M, Air Products, Albany International, Corning, DuPont, GE,
IBM, J&J, Kodak, Mead-Westvaco, Sealed Air and Shell Chemical
 3 distinct ways in which companies’ abilities in CE developed – (a) enduring, (b)
progressing, (c) cycling; - the 1st two show 2 trends – (1) CE context (stgy., struct. or
process) changed in response to ext. environ.; (2) need to connect to broader environ.
 Hence the Evolve & Connect Model – aimed at organizations with currently low CE
capabilities; designed to help them build and sustain these abilities
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 Reading 7: Sustainable CE: Evolving & Connecting with the
Organization by Donna Kelley
1. Evolving & Connecting the CE Strategy
a. Evolve: Identify actual business domains or platforms that can evolve and lead to
new businesses: Ian Telford at DuPont Epoxy created a new distribution channel;
3M – RFID drug delivery; Nokia-9 domains; Air Products CE initiative
b. Connect: Articulate a strategy for thinking into the future but that has a logical
connection to the organization: Roomba from iRobot; LoJack in cargo/Alzheimer’s
2.Evolving flexible & connected Structures
a. Evolve: match structure to current conditions
Entp. Structure
and evolve it as change impacts the organization Entp. Processes
Entrep. Entrep.
and as CE grows; NV groups: Nortel, Lucent Processes Structure

b. Connect: accompany dedicated structures with

a high level of integration with the org., pull
mechanisms from the business; IBM EBO, GE IB
3.Adapting broadly understandable Process Tools
Organizational
a. Evolve: Use simple and flexible process tools that Mainstream
Org. Mainstream
can adapt and evolve; need early recognition
b. Connect: Use process tools as an information and communication vehicle to
inform decision making and connect CE initiatives to the organization ; e.g.
Samsung’s Value Innovation Program (VIP); IBM, HP: hands-on managerial help
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 Reading 7: Sustainable CE: Evolving & Connecting with the
Organization, by Donna Kelley
Managerial Implications for Strategy, Structure and Process

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Course Outline - 2

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Corporate Entrepreneurship

Maverick Book: Team Sign-up Sheet

Team-3

Team-1

Team-2

Team-4

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 Teams
Team-1 Team-2 Team-3
1. Tim Chan 1. Jennifer Lopez 1. Melvin Alvarenga
2. Rachel Hughes 2. Ryan Magavi 2. Nick Balley
3. Peter Kim 3. Jonathan Pacione 3. Amina Kikic
4. Mariah Mackey 4. Sarah Romanko 4. Ian Ouellet
5. Nick Ragle 5. Coraima Saavedra 5. Rigoberto Rodriguez
6. Mollie Streit 6. Wendy Velasquez 6. Akshat Sharma
7. Aman Siddiqui
Team-4 Team-5
1. Jacob Andrade 1. Lydia Gomez
2. Miguel Casas 2. Neal Vaghani
3. Ruhi Deshmukh 3. Carmen Mejia Gonzalez
4. Josh Moore 4. Chad Delay
5. Chris Noel 5. Adam Emerich
6. Bijal Patel 6. Michael Gosnell
7. Rushi Patel
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Break

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