Summary Corporate Entrepreneurship
Exam information
- Objective type questions
- Minimum grade 5.0
- Articles, guest lectures and Agilent case included.
,Lecture 1: The Innovators Dilemma
Typologies of technological change
- Old vs new
- Competence-enhancing vs competence-destroying
- Incremental vs radical
- Sustaining vs disruptive
→ Large established firms have difficulties coping with the latter types of
change.
Success Syndrome refers to the tendency to stop pursuing excellence and customer
satisfaction with the same rigor as when the business first started. After achieving a bit of
success, the business may pass through a phase where they let things slide that they
ordinarily would not have allowed during the start of the business.
Three phases of success syndrome
1. Business is starting out, you provide exemplary service and your business starts to
gain traction.
2. Business is growing, you or an employee might be rude to a customer but you don’t
mind it too much since you have other customers. The success syndrome kicks in.
3. Due to diminishing service, customers are moving on in search of better service.
Businesses start chasing shadows instead of solving the internal problem. If not dealt
with it will become a hard time for the business.
The Innovator’s Dilemma
- Clayton Christensen: failure to adapt to disruptive innovation is not the result of bad
management, but good management.
- Large companies depend on their customers & investors for resources. They listen
closely to these customers & investors and kill ideas for which there is little need.
Disruptive Technologies typically have (initially)
- Lower profit margins
- Small markets
, - No reliable market statistics
Lecture 2: Ambidexterity
‘Agile’ definition according to IBM: small teams that constantly iterate on projects and use
data to make decisions.
Google → Alphabet change:
1. Allows each individual unit to deploy the right approach to strategy and execution.
2. Makes it easier to build the required capabilities in each individual business.
3. Lowers the hurdles to acquiring and growing companies.
4. Easier structure, different leadership teams.
Size & structural dimensions of the firm
Pro’s
- Large firms can spread R&D costs over a larger volume
- Large firms have scale and learning effects
- Large firms can spread the risk
Con’s
- Large firms are not efficient in R&D
- Large firms become inert & do not react to changes
- ICARUS Paradox: Very successful companies become successful doing something,
but this makes them overconfident and blind to the dangers that other developments
pose to them. It is about blindness to the dangers of continuing a previously
successful course of action for too long.
Empirical Findings
Small firms outperform large firms in;
- Patenting (less R&D costs per patent)
- New drug introductions
- New product improvements
Large firms outperform small firms in;
- Incremental innovations
- Process innovations
- Some industries that are scale intensive
→ Large firm response: imitate small firm behavior in structure & culture.
How can we organize the company to retain revenue streams from traditional business as
well as anticipate new business arising from possibly disruptive innovation?
→ requires the combination of 2 tasks;
1. Exploitation → requires Mechanistic approach
- Refinement of old capabilities.
- Involves activities characterized by; efficiency, production, selection,
execution, and process innovation.
2. Exploration → requires Organic approach
, - Pursuing new competencies
- Involves activities characterized by; variation, experimentation, flexibility, risk-
taking, and product innovation.
Mechanistic Structure
- Operating style: uniform & restricted
- Reluctant adaption: holding onto tried-and-true management principles despite
changes in business conditions
- Tight control → sophisticated control systems
→ More stable or controllable external environment? Conservative management
style is more appropriate → Mechanistic/Bureaucratic structure is effective.
Organic Structure
- Operating style: allowed to vary freely
- Free adaption: by the organization to changing circumstances
- Loose, informal control → emphasis on norm of cooperation
→ More hostile & changing external environment? Management style must be more
entrepreneurial → Organic structure is needed to facilitate entrepreneurship
Ambidexterity = combining both mechanistic & organic structures in one single organization.
Exploitative learning = single-loop learning.
Ambidexterity = double-loop learning (requires a change of the underlying mental model.
Double loop learning is about understanding the causality and fixing it)
Structural Ambidexterity: creating separate spaces within the firm
- By level: Top Management Team (TMT) usually explores, lower operating levels
exploit.
- By function or location: a separate department explores, and the rest of the firm
exploits.
Four organizational Designs
, Example
Structural Ambidexterity may lead to two-cultures problem due to;
- Envy
- Isolation
- Lack of resources
Structural Ambidexterity pays off when;
- Changing environments
- High levels of competition
- Large companies
- Resource availability
Many firms give some control over central research to the business units.
An ideal R&D Organization is:
Managing R&D thus means managing tensions between;
- Pure technology focus vs pure market focus
- The long and the short term
- ‘Basic’ & ‘Applied’ research
- Managing by results & managing by effort
Exam information
- Objective type questions
- Minimum grade 5.0
- Articles, guest lectures and Agilent case included.
,Lecture 1: The Innovators Dilemma
Typologies of technological change
- Old vs new
- Competence-enhancing vs competence-destroying
- Incremental vs radical
- Sustaining vs disruptive
→ Large established firms have difficulties coping with the latter types of
change.
Success Syndrome refers to the tendency to stop pursuing excellence and customer
satisfaction with the same rigor as when the business first started. After achieving a bit of
success, the business may pass through a phase where they let things slide that they
ordinarily would not have allowed during the start of the business.
Three phases of success syndrome
1. Business is starting out, you provide exemplary service and your business starts to
gain traction.
2. Business is growing, you or an employee might be rude to a customer but you don’t
mind it too much since you have other customers. The success syndrome kicks in.
3. Due to diminishing service, customers are moving on in search of better service.
Businesses start chasing shadows instead of solving the internal problem. If not dealt
with it will become a hard time for the business.
The Innovator’s Dilemma
- Clayton Christensen: failure to adapt to disruptive innovation is not the result of bad
management, but good management.
- Large companies depend on their customers & investors for resources. They listen
closely to these customers & investors and kill ideas for which there is little need.
Disruptive Technologies typically have (initially)
- Lower profit margins
- Small markets
, - No reliable market statistics
Lecture 2: Ambidexterity
‘Agile’ definition according to IBM: small teams that constantly iterate on projects and use
data to make decisions.
Google → Alphabet change:
1. Allows each individual unit to deploy the right approach to strategy and execution.
2. Makes it easier to build the required capabilities in each individual business.
3. Lowers the hurdles to acquiring and growing companies.
4. Easier structure, different leadership teams.
Size & structural dimensions of the firm
Pro’s
- Large firms can spread R&D costs over a larger volume
- Large firms have scale and learning effects
- Large firms can spread the risk
Con’s
- Large firms are not efficient in R&D
- Large firms become inert & do not react to changes
- ICARUS Paradox: Very successful companies become successful doing something,
but this makes them overconfident and blind to the dangers that other developments
pose to them. It is about blindness to the dangers of continuing a previously
successful course of action for too long.
Empirical Findings
Small firms outperform large firms in;
- Patenting (less R&D costs per patent)
- New drug introductions
- New product improvements
Large firms outperform small firms in;
- Incremental innovations
- Process innovations
- Some industries that are scale intensive
→ Large firm response: imitate small firm behavior in structure & culture.
How can we organize the company to retain revenue streams from traditional business as
well as anticipate new business arising from possibly disruptive innovation?
→ requires the combination of 2 tasks;
1. Exploitation → requires Mechanistic approach
- Refinement of old capabilities.
- Involves activities characterized by; efficiency, production, selection,
execution, and process innovation.
2. Exploration → requires Organic approach
, - Pursuing new competencies
- Involves activities characterized by; variation, experimentation, flexibility, risk-
taking, and product innovation.
Mechanistic Structure
- Operating style: uniform & restricted
- Reluctant adaption: holding onto tried-and-true management principles despite
changes in business conditions
- Tight control → sophisticated control systems
→ More stable or controllable external environment? Conservative management
style is more appropriate → Mechanistic/Bureaucratic structure is effective.
Organic Structure
- Operating style: allowed to vary freely
- Free adaption: by the organization to changing circumstances
- Loose, informal control → emphasis on norm of cooperation
→ More hostile & changing external environment? Management style must be more
entrepreneurial → Organic structure is needed to facilitate entrepreneurship
Ambidexterity = combining both mechanistic & organic structures in one single organization.
Exploitative learning = single-loop learning.
Ambidexterity = double-loop learning (requires a change of the underlying mental model.
Double loop learning is about understanding the causality and fixing it)
Structural Ambidexterity: creating separate spaces within the firm
- By level: Top Management Team (TMT) usually explores, lower operating levels
exploit.
- By function or location: a separate department explores, and the rest of the firm
exploits.
Four organizational Designs
, Example
Structural Ambidexterity may lead to two-cultures problem due to;
- Envy
- Isolation
- Lack of resources
Structural Ambidexterity pays off when;
- Changing environments
- High levels of competition
- Large companies
- Resource availability
Many firms give some control over central research to the business units.
An ideal R&D Organization is:
Managing R&D thus means managing tensions between;
- Pure technology focus vs pure market focus
- The long and the short term
- ‘Basic’ & ‘Applied’ research
- Managing by results & managing by effort
