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Chapter 14 - Innovation and Entrepreneurship
14-1
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
10. Not surprising, many companies are experimenting with new ways to lower risks
and improve chances for failure regardless of the innovation approach they use.
a) For years the idea of product teams and cross-functional groups within the
b) This approach broadens to include several more:
(1) Joint ventures with other firms that have an interest in the possible
innovation share the costs and risks associated with the effort.
(2) Cooperation with lead users is increasingly used in both types of
innovation.
11. That final trend, outsourcing innovation, or at least some forms of it is seen as a
risk to some observers that cuts at the very core of what a company exists to do in
the first place.
a) Product design and incremental innovations to accomplish it, have long been
b) Outsourcing that function puts the whole firm’s existence at risk in the minds
c) An Ideagoras is a web-enabled, virtual marketplace which connects people
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
II. Entrepreneurship
1. Entrepreneurship is the process of bringing together creative and innovative
a) Whether the process is undertaken by a single individual or a team of
(1) Exhibit 14.7, Who Is the Entrepreneur?, illustrates the fundamental
b) Inventors are exceptional for their technical talents, insights, and creativity.
(1) But their creations and inventions often are unsuccessful in becoming
(2) Promoters are in some ways just the opposite—clever at devising
c) Administrators, the good ones, develop strong management skills, specific
business know-how, and the ability to organize people.
(1) They usually take pride in overseeing the smooth, efficient functioning
(2) Their administrative talents are focused on creating and maintaining
d) The ideal entrepreneur has that unusual combination of talent: strength in
both creativity and management.
(1) In a new venture, these strengths enable the entrepreneur to conceive
(2) In a large organization, these talents enable strong players to emerge
(3) Because these strengths so rarely coexist in one individual,
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
(4) Exhibit 14.8, Global Strategy in Action, tells the story of just such a
e) New ventures and small, growth-oriented business entrepreneurs are able to
2. Opportunity
a) The most frequent cause of failure of new ventures, as reported by Dun &
(1) Both causes stem from the lack of appreciation of the necessity for a
(2) In other words, failure among new venture is heavily linked to ventures
b) Entrepreneurs doomed to learn from their all too frequent failure conceive an
idea for a product or service and immediately become enamored of it.
(1) They invest time, money, and energy in developing the idea into a
(2) And, tragically, they make only a minimum investment in identifying
(3) Such entrepreneurs are focused inward, perhaps satisfying their own
(4) The result is often a product or service that few customers will buy.
c) The effective entrepreneur is more likely to assume a marketing orientation
(1) Here the entrepreneur is focused on potential customers and on seeking
(2) The effective entrepreneur seeks to confirm an opportunity defined by
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
d) Another way to determine if an entrepreneur is focused on simply an idea or
(1) It is important to recognize that these criteria are applied by investors
(2) The criteria for smaller ventures would be less demanding in scope
(a) The venture team can clearly identify its customers and the market
3. Entrepreneurial Teams
a) Successful entrepreneurs and entrepreneurial teams bring several
competencies and characteristics to their new ventures.
(1) Technical competence.
b) Technical and business skills being critical, they alone are not enough.
Observers identify several behavioral and psychological characteristics that
are usually associated with successful entrepreneurs:
(1) Endless commitment and determination.
(2) A strong desire to achieve.
(3) Orientation toward opportunities and goals.
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
4. Resources
a) The third element in new venture entrepreneurship involves resources—
money and time.
(1) A vital ingredient for any business venture is the capital necessary to
acquire equipment, facilities, people, and capabilities to pursue the
targeted opportunity.
(2) New ventures do this in two ways.
b) Debt financing is generally obtained from a commercial bank to pay for
property, equipment, and maybe provide working capital.
(1) Family and friends are debt sources, as are leasing companies,
c) Equity financing is usually obtained from one or more of three sources:
friendly sources, informal venture investors, or professional venture
capitalists.
(1) In each case, it is often referred to as “patient money,” meaning it does
not have to be paid back immediately or on any particular schedule.
(2) Friendly sources are prevalent early in many new ventures—friends,
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whole or part.
(5) They have stringent criteria as we have seen, and expect a return of five
d) Regardless of the source, equity capital is money that does not have to be
repaid on an immediate, regular basis as debt capital requires.
(1) So when a firm is rapidly growing and needs to use all its cash flow to
e) The other resource is time—time of the entrepreneur(s) and key players in
the business venture’s chance for success.
(1) The entrepreneur is the catalyst, the glue that holds the fledgling
business together and oftentimes the critical source of energy to make
success happen.
f) Successful entrepreneurs are impressive, growth and value building
innovators.
(1) Their success often comes at the expense of large firms with which they
compete, do business, obtain supplies, and such.
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a webs ite, in
whole or part.
F. Intrapreneurship
1. Intrapreneurship, or entrepreneurship in large companies, is the process of
a) Gordon Pinchot, founder of a school for intrapreneurs and creator of the
phrase itself, suggests 10 freedom factors that need to be present in large
companies seeking to encourage intrapreneurship:
(1) Self-selection. Companies should give innovators the opportunity to
(2) No hand-offs. Once ideas surface, managers should allow the person
(3) The doer decides. Giving the originator of an idea some freedom to
(4) Corporate “slack.” Firms that set aside money and time facilitate
(5) End the “home run” philosophy. Some company cultures foster an
(6) Tolerance of risk, failure, and mistakes. Where risks and failure are
(7) Patient money. The pressure for quarterly profits in many U.S.
(8) Freedom from turfness. In any organization, people stake out turf.
(9) Cross-functional teams. Organizations inhibit cross-functional
interaction by insisting that communication flow upward. That inhibits
from interacting with relevant outsiders.
(10) Multiple options. When an individual with an idea has only one person
2. When you read Pinchot’s 10 freedom factors, they sound very much like
characteristics associated with entrepreneurs or the nature of the types of
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a) And that, obviously, is exactly what intrapreneurship is trying to do—
potential advantage of easier money, expertise, facilities, distribution, and so
forth.
b) Even with all these advantages, it is still a challenge for larger organizations
(1) Designate intrapreneurship “sponsors.”
(2) Allow innovation time.
3. Innovation and entrepreneurship are intertwined phenomena and processes.
a) Organizations seeking to control their destiny, which most all seek to do,
b) And to have that opportunity or chance, organizations need leaders who
