Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
IV. Entrepreneurial Orientation
Entrepreneurial orientation (EO) refers to the strategy-making practices and decision-
making styles that businesses use in identifying and launching corporate ventures. It consists of
EXHIBIT 12.3 summarizes the dimensions of an entrepreneurial orientation.
The SUPPLEMENT below illustrates how Coca-Cola is trying to enhance its entrepreneurial
orientation by pushing entrepreneurs outside the formal boundaries of the firm.
Extra Example: Coca-Cola Becomes More Entrepreneurial by Kicking Entrepreneurs Out of the Firm
If you ask 100 people for the most entrepreneurial large firms, few people, if any, would name Coca-Cola. But Coke
is trying to increase its entrepreneurial orientation in an interesting way. They tell entrepreneurs to leave the firm.
What is the logic behind Coke’s actions? Coke found that trying to foster entrepreneurial ventures inside the firm
was largely unsuccessful. Initially, it tried to offer incentives for current Coke employees to develop innovative
ideas, but that didn’t work. Employees were simply too focused on and too busy with their day jobs, and the culture
inside Coke didn’t wholeheartedly support entrepreneurial thinking. They the firm tried bringing in “entrepreneurs
in residence” but found that these entrepreneurs seemed to be enculturated into the “corporate lifestyle” in Coke.
Now, Coke has decided to tap outside innovation by providing seed capital to technology and business models that
have the potential to offer entrepreneurial solutions that can enhance Coke’s bottom line. For example, Coke helped
fund an Australian start-up, Vending Analytics, that helps Coke make better sense of the usage patterns of its 10
million vending machines. Ironically, some of the start-ups Coke ise working with are headed up by former Coke
employees. For example, Wonolo is a business that is developing a sharing platform for workers. Think of it as
aiming to be Uber for labor. It has the potential to add value to Coke by allowing Coke to flexibly hire workers to
stock shelves or hand out Cokes or other beverages at promotional events. Wonolo is the brain child of AJ Brustein
and Yong Kim, two former Coca-Cola employees. Though Coke saw potential with Wonolo’s concept, it told
Brustein and Kim to leave the firm to develop their business. Brustein saw clear advantages in breaking away.
“Things got in the way of us operating like a true start-up, things like offering employees equity, which is key if
you’re going after the best engineering talent…,” Brustein said, “Now we’re far more agile.”
How does Coke benefit? Coke invests in these start-ups, typically $250,000 to $500,000 which converts to up to
20% ownership if the firm goes public. More importantly, Coke gets to implement the emerging ideas before others.
As David Butler, Coke’s VP of innovation and entrepreneurship, commented, “This is the next wave of innovation
for non-tech companies like us. It’s now about co-creation, about providing seed funding and being their first
customer. We know about soft drinks, but others can help us tech-based solutions to problems in our business that
we couldn’t tackle.”
Source: della Cava, M. 2015. Coke taps into start-up mojo. usatoday.com. May 26: np.
Discussion Question 33. What are the challenges Coke is likely to face as the firm relies
on outside entrepreneurs to help the firm become more entrepreneurial?
In this section, we will describe the five EO dimensions and how they contribute to
internal venture development.
A. Autonomy
Autonomy refers to a willingness to act independently in order to carry forward an
entrepreneurial vision or opportunity. It applies to both individuals and teams. In the context of
EXHIBIT 12.4 highlights two techniques often used to promote autonomy:
1. Using skunkworks to foster entrepreneurial thinking.
Creating autonomous work units and encouraging independent action may have pitfalls
that can jeopardize their effectiveness. Autonomous teams often lack coordination and excessive
Discussion Question 34: How does autonomy help organizational members identify and
develop entrepreneurial opportunities?
The SUPPLEMENT below notes that one of the techniques corporations often use to
achieve autonomy is physical separation.
Extra Example: Corporations Use Physical Separation to Encourage Autonomy
One of the key techniques that organizations use to create autonomy is physically separating venture development
work teams from the rest of the organization. This is based on the belief, as some consultants put it, that companies
seeking to develop innovations must “plant seeds in walled gardens so that established business can’t trample them.”
As a result, several major corporations have attempted physical separation as a way to create autonomous
environments. Here are some examples:
Procter & Gamble’s “Corporate New Ventures” division occupied a separate floor with a distinctly
different appearance and a layout that encouraged informal meetings and easy exchange of information.
Raytheon initially housed its “New Product Center” in run down facilities that were physically separated
from the company’s headquarters.
Food processing company Barilla located its “Divisione Prodotti Freschi” in an old building located
several miles away from the firm’s main office.
Spanish shoemaker Camper shields its 35 shoe designers from the influences of the fashion world by
placing its design teams in remote locations such as a 17th-century estate and remove villages surrounded
by mountains.
Sources: Hamner, S. 2005. Thinking outside the shoe box. Business 2.0, September: 68. Chesbrough, H. 2003. Open
innovation: The new imperative for creating and profiting from technology. Cambridge, MA: Harvard Business
School Press. Day, J.D., Mang, P. Y., Richter, A. & Roberts, J. 2001. The innovative organization: Why new ventures
need more than a room of their own. The McKinsey Quarterly, 2: 21-31.
Discussion Question 35: Why do you think it is often necessary for corporations to use
skunkworks and physical separation in order to stimulate entrepreneurial thinking in its
corporate venture teams?
B. Innovativeness
Innovativeness refers to a firm’s efforts to find new opportunities and novel solutions. It
involves creativity and experimentation and requires that firms depart from existing technologies
EXHIBIT 12.5 identifies two methods companies can use to be innovative:
1. Fostering creativity and experimentation.
2. Investing in
new
technology,
Pitfalls associated with innovativeness include potentially wasting resources, failure to
In the SUPPLEMENT below, innovative practices from the domain of social
entrepreneurship are highlighted.
Extra Example: Four Practices of Innovative Social Organizations
Daniel Bornstein writes about the role of innovativeness in the domain of social entrepreneurship. One of his key
points is that, to identify viable solutions, problems have to be conceptualized differently. This stems, in part, from
the fact that social entrepreneurs often work in environments with highly constrained resources.
In his book How to Change the World Bornstein describes four characteristics of innovative organizations that are
valuable in any context, whether “social” or not:
1. Institutionalize learning. Innovative organizations institute systems and guidelines for listening to their clients.
Once you start listening to people, there is no limit to the ideas and opportunities that emerge. Childline, a 24-hour
helpline and emergency response system for children in distress, provides explicit instructions to partner agencies
about how to listen to children.
2. Pay attention to the exceptional. From the standpoint of innovation, the most important insights gained from
listening or observing seem to come from exceptional or unexpected information, particularly unexpected successes.
Muhammad Ynus, founder of the Grameen Bank, found this when the 42 poor villagers he loaned money to—
people who were considered “unbankable”—promptly repaid the loans.
3. Real solutions for real people. One of the hallmarks of social entrepreneurs is that they are realistic about human
behavior. They spend a great deal of time thinking about how to get their clients actually to sue their products. A key
factor is communicating clearly and sensitively to the selected audience.
4. Focus on the human qualities. Organizations whose success hinges on high-quality human interaction generally
pay close attention to soft qualities when recruiting, hiring, and managing staff. Ashoka, an organization that
provides funding and support to social entrepreneurs, looks to hire people who are intrapreneurial, have strong
ethical fiber, and consider themselves “innovators for the public.”
Source: Bornstein, D. 2004. How to change the world. New Delhi, India: Penguin.
Discussion Question 36: How might the innovative practices discussed above be used in
for-profit settings? Are there major differences in how firms act innovatively depending
on whether they are socially-oriented or not?
C. Proactiveness
Proactiveness refers to a firm’s efforts to find and seize new opportunities. Proactive
organizations monitor trends, identify future needs, and anticipate changes in demand that can
The benefit gained by firms that are the first to enter new markets, establish brand
identity, implement administrative techniques, or adopt new operating technologies in an
First movers are not always successful. For one thing, the customers of companies that
EXHIBIT 12.6 illustrates two methods companies can use to be proactive:
1. Introducing new products or technological capabilities ahead of the competition.
Pitfalls associated with proactiveness include launching pioneering products that don’t
Teaching Tip: Although many companies recognize the value of having an
entrepreneurial orientation, not all seem to be able to develop one. Ask students to
speculate on why so many firms have difficulty innovating, acting proactively, and taking
risks. Possible reasons may include failure to recognize why an entrepreneurial
orientation may be needed to effectively pursue opportunities, how to develop the
competencies that support corporate venturing, or problems with culture, structure, and
D. Competitive Aggressiveness
Competitive aggressiveness refers to a firm’s efforts to outperform its industry rivals.
Companies with an aggressive orientation are willing to “do battle” with competitors by slashing
However, unlike innovativeness and proactiveness, which tend to focus on market
opportunities, competitive aggressiveness is directed toward competitors. In terms of SWOT
Strategic managers use competitive aggressiveness to combat industry trends that
threaten their survival or market position. Sometimes firms need to be forceful in defending their
EXHIBIT 12.7 suggests two methods companies use to strengthen their position by being
competitively aggressive:
1. Entering markets with drastically lower prices.
2. Copying the business practices or techniques of successful competitors.
One practice companies use to overcome the competition involves making
A pitfall associated with competitive aggressiveness is damaged reputation due to
E. Risk Taking
Risk taking refers to a firm’s willingness to seize a venture opportunity even though it
does not know whether the venture will be successful. To obtain high returns, firms often assume
Organizations and their executives face three types of risk:
1. Business risk taking Venturing into the unknown without knowing the
probability of success. This is the risk associated with
2. Financial risk taking Borrowing heavily or committing a large portion of
resources in order to grow. Risk is used in this context to
3. Personal risk taking Risks that an executive assumes in taking a stand in favor
of a strategic course of action. Executives who take such
Even though risk taking involves taking chances, it is not gambling. The best run
EXHIBIT 12.8 indicates two methods companies can use to gain competitive advantages
via risk taking:
1. Researching and assessing risk factors to minimize uncertainty.
A pitfall associated with risk taking is acting before the risks of a project are clearly
understood.
The SUPPLEMENT below identifies steps companies can take to reduce risk when the
economy is weak.
Extra Example: Confronting Risks in a Risky Economy
Business is riskier when the economy is stormy. In such times, technology firms often have a particularly difficult
time. But there have been bright stars among tech companies. Many of them were identified in the Business 2.0 list
of the 100 fastest-growing tech companies. Based on an analysis of what these companies had in common, here is a
summary of the actions they have taken to stay afloat during the downturn in the tech business cycle:
1. Do one thing well. If you do one thing better than anyone else, in a downturn your customers will dump
everyone else first.
2. Watch your wallet. In a rough market, protecting cash flow is everyone’s responsibility.
3. Keep innovating. While others protect gains in a slow economy, top performers continue to spend on
continually improving and inventing new products.
4. Buy smart. Acquisitions need to be purposeful, that is, aimed at helping companies become better at what
they already do.
5. Supply the suppliers. Sell to those companies that are working hard to strike it rich. They need things to
keep working.
6. Hitch your wagon to a star. Some winning companies maintain relationships with the powerful; others
make contracts with the federal government, which is all but immune to the business cycle.
7. Have a backup plan. In unpredictable times, you have to be prepared to scramble.
Source: Thomas, O. 2002. Seven Secrets of Success. Business 2.0, October, p. 87.
Discussion Question 37: How might the suggestions made in the example above be
applied to your personal career planning and efforts?
IV. Issue for Debate
In addition to computers and cell phones, increasingly cars, appliances, automobiles,
thermostats, and other devices are connected to the web. The internet of things is upon us, but it
Discussion Question 38: Is the “Internet of things” a market with tremendous growth
potential or just a bunch of hype?
Since this is an emerging market, there are likely to be a range of opinions on the market
potential here. Some students may be very excited about the prospects for this market while
raise is the timing of this market. What is the potential now? Is there likely to be greater value in
five or ten years?
While this question triggers potentially valuable debate, it is the implications from this
type of debate that offers the greatest value. Firms across a wide range of industries are faced
Discussion Question 39: What types of products are likely to be successful in this
market? What characteristics enhance the potential for Internet-enabled products?
One way to get at this question is to have the students, in groups, identify three Internet
enabled products they see great potential for and identify why they believe they have the most
One other point to keep in mind with this discussion is that it is not necessary for most
consumers to see value with the product for it to be a winner. If only a portion of potential
Discussion Question 40: How much of a concern is privacy with these products?
Students are likely very aware that firms, such as Google, Facebook, and Apple, collect
large volumes of data on their internet behavior, such as usage, search, communication, location,
One issue to keep in mind with Internet enabled products is that, while users can adjust
their privacy ratings with Google and Facebook if they wish to do so, it is not clear that the
VI. Reflecting on Career Implications
Below, we provide some suggestions on how you can lead the discussion on the career
implications for the material in Chapter 12.
Innovation: Identify the types of innovations being pursued by your company. Do they
tend to be incremental or radical? Product-related or process-related? Are there ways in
which you can add value to such innovations, no matter how minor your contributions
are?
Ask students to identify specific innovation initiatives in their companies. Some may not be able
to, and that lack of awareness is an issue to be addressed. Instructors can supplement the
discussion by noting the constant stream of new product innovations across all industries that
Awareness of their companies’ innovations is the first step in students’ efforts to contribute to the
innovation effort. The ways to contribute are as varied and numerous as there are employees.
Cultivating Innovation Skills: Exhibit 12.2 describes the five traits of an effective
innovator (associating, questioning, observing, experimenting, and networking). Assess
Ask students to self-assess their innovation skills. It may be useful to ask students what their
strongest trait is, and defend their choice with a personal anecdote. Ask students if these
People with strong innovation skills tend to question everything and bring new approaches to
their activities. In organizations that are considered high on innovation, these traits may tend to
be recognized and appreciated. Students who exhibit these skills in the interview may have an
Real Options Analysis: Success in your career often depends on creating and exercising
career “options.” However, creation of options involves costs as well, such as learning
In today’s business environment, most executives have careers that involve multiple paths. And
many successful people end up in rewarding careers that they did not intend on pursuing when
they were in school. (Perhaps the instructor has a similar career story.) Ask students how these
Ask students how they can choose between a desirable and an undesirable career decision. What
information will they need to consider? What trends would help them in their new career
trajectory? Rewarding career options can take many forms. It is not always so simple to just
The costs of deciding to take a challenging new job, such as an expatriate posting, are significant
and worth considering. Such a posting may take the employee away from headquarters and a
seemingly stable career path. The major cost is the risk that the posting will not pay off in career
Entrepreneurial Orientation: Consider the five dimensions of entrepreneurial
orientation. Evaluate yourself on each of these dimensions (autonomy, innovativeness,
proactiveness, competitive aggressiveness, and risk taking). If you are high on
On way to begin the discussion is to emphasize that entrepreneurs are the lifeblood of economic
growth, so they are an important part of the economy. Then ask students if they want to be an
Ask students to evaluate themselves on the five parts of the entrepreneurial orientation. Ask them
which part is their strength, and support their claim with a personal anecdote. This exercise will
establish that students understand the concept and can apply it to themselves. The next step may
