Welcome Course – Innovation and New Business Ventures Dr R. K. Sharma MsM Adjunct Faculty Presenter – RK Sharma Course Elements Class Lecture and Interactions Case Studies Informal Discussions Independent Reading Student Presentations/ Assignment Exam (Closed Book/ Closed Handout/ Open Mind) Recommended Books : (depending upon availability) Essentials of Entrepreneurship & Small Business Management, Norman Scarborough Essentials of Entrepreneurship & Small Business Management, Zimmerer & Scarborough Managing Innovation Technology and Entrepreneurship, Fred Philips (MsM Textbook Series)
RK Sharma 1 Cases and Discussions Profiles In Entrepreneurship – Short cases Disney/ Turner/ Fred Smith/ Garden E-Maze Story Bombay Dabba Walas Fortune at BOP / Ben Wallace RK Sharma RK Sharma 2 Venturing – The Ultimate Drive TO DO or TO BE Do I Look Around Do I want to Change Things Do I want to Create a Meaning Am I ready to Change Myself RK Sharma The World Today
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World Business Scenario – – Paradoxes Abundant Globalization Success vs Local Failures Power of Bigwigs vs Constraints of Poor Emerging Powerhouses vs Failing Economies Conflicts & Wars vs Evolving Trade Regimes Cost Controls vs Increased Advertisement Spend Technology Leveraging and Innovation vs Zero Adaptation Modernization vs Climate Changes Newer Job Creation vs Redundancies and Layoffs Human Asset Development vs Human Exploitation RK Sharma 3 The World – Population Growth AD 0 1000 1500 1600 1700 1800 1900 1950 2000 Population (Million) 230 270 440 550 600 1000 1800 2500 6000 2010 est 6800 RK Sharma
World GDP RK Sharma 4 World GDP and PCI scenario (Source – World Bank data 2009) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 GDP (nominal) T$ USA 14. 26 Japan p 5. 07 China 4. 98 Germany 3. 35 France 2. 65 UK 2. 17 Italy 2. 11 Brazil 1. 57 Spain 1. 46 Canada 1. 34 India 1. 31 Russia 1. 23 Australia 0. 9 Mexico 0. 9 South Korea 0. 8 World 58 GDP (ppp) USA China Japan India Germany Russia UK France Brazil Italy Mexico Spain South Korea Canada Turkey World T$ 14. 26 9. 10 4. 14 3. 75 2. 98 2. 69 2. 26 2. 17 2. 02 1. 2 1. 54 1. 49 1. 32 1. 28 1. 04 72 PCI (nominal) 000$ Luxemburg 105 Norway y 79 Denmark 56 Ireland 51 Netherland 47 USA 46 Austria 46 Faroe 45 Finland 44 Sweden 43 Belgium 43 Australia 42 France 41 Germany 41 Japan 40 PCI (ppp) 000$ Luxemburg 84 UAE 57 Norway 56 Singapore 50 USA 46 Ireland 41 Netherland 40 Australia 39 Austria 39 Canada 38 Sweden 38 Iceland 37 Denmark 37 UK 36 Germany 36 RK Sharma The World – What’s been happening World GDP (Nominal) 1980 1990 2000 2009 Max Min 1980 1990 2000 2009 $ 18 T $ 25 T $ 31 T $ 58 T $ 100,000 $ 200 $ 2. 0 T $ 35T 3. 5 $ 6. 5 T $ 19. 5 T
Per capita income (nominal) World Trade Visit – theworldeconomy. org, wto. org RK Sharma 5 The Trillion Dollar Country Club – 2009 GDP (T$) World 1 2 3 4 5 6 7 8 9 USA Japan China Germany France UK Italy Brazil B il Spain 58. 25 14. 26 5. 07 4. 98 3. 35 2. 65 2. 17 2. 11 1. 57 1 57 1. 46 1. 34 1. 31 1. 23 25. 6 8. 7 8. 6 5. 8 4. 6 3. 7 3. 6 2. 7 27 2. 5 2. 3 2. 3 2. 1 1969 1980 1998 1987 1989 1990 1990 2006 2004 2005 2007 2007 RK Sharma World % crossed 1T 10 Canada 11 India 12 Russia RK Sharma 6 RK Sharma Global Companies – Top 10 – 2009 (Forbes Study) Rank Company Revenue (billion $) 1 2 3 4 5 6 7 8 9 10
Wal Mart Royal Dutch Shell Exxon Mobil British Petroleum Toyota Japan Post Holding Sinopec State Grid AXA China Natl Petroleum RK Sharma 408 285 284 246 203 210 201 187 182 178 7 Global Brands – Top 10 – 2010 (Interbrand study) Rank Brand Brand Equity (billion $) 1 2 3 4 5 6 7 8 9 10 Coca Cola IBM Microsoft Google GE McDonald Intel Nokia Disney HP RK Sharma 70 65 51 43 42 33 32 29 28 26 Global Ad Spenders – Top 10 – 2008 (Ad Age study) Rank Company Spent (billion $) 1 2 3 4 5 6 7 8 9 10 Procter & Gamble Unilever L’oreal General Motors Toyota Ford Johnson & Johnson Nestle Coca Cola Co. Honda Motors RK Sharma 9. 3 5. 2 52 3. 4 3. 3 3. 2 2. 2. 3 2. 1 2. 1 2. 0 8 Global Bankruptcies – Top 10 Rank Company (CNN Study) Amount (billion $) 1 2 3 4 5 6 7 8 9 10 Lehman Brothers Washington Mutual Worldcom GM CIT Enron Conseco Chrysler Thornburg Mortgage Pacific Gas & Electric 691 327 103 91 71 65 61 39 36 36 The World – Harsh Global Facts $ 60T World GDP for 6. 8B World Population actually works out to be $ 9,000 per capita 1. 5 billion people live below poverty line p p p y 300 billionaires have as much income as 3 billion people Ad Budgets of some big companies are more than GDP of many countries Is it a world of Corporate Communism, Corporate Animals and Survival of Fittest ??
There is a lot of Dis-Equilibrium – WHY ? What can be the Missing Element ? RK Sharma 9 RK Sharma Role of Individuals and Companies Society’s sustenance today depends on a changing role of both Individuals and Companies It is about creating your own Space in a challenging environment 3 As which require resetting – Aspiration, Attitude and Action In the age of so fierce competition at individual, company and country levels, the solution lies in thinking ahead and venturing into newer vistas For Individuals, Companies and Countries alike : to break free, the ultimate solution lies in being – – – Innovative and Entrepreneurial
RK Sharma 10 Innovation is the key At all levels – Individual, Organization, Society and Country – the key to sustenance and growth is Innovation Innovation i about N I ti is b t New Id Ideas, N New W Ways of d i f doing thi things, t to Think and Foresee what others cannot, to Strive to achieve, be Ready to Change and Adapt, to Learn and Collaborate It is a comprehensive process from IDEA to IMPLEMENTATION It is thru Innovation that we see new products, new businesses, new companies, new success stories and overall Growth and Development (both Economic and Social)
And, it is a Process – not a One Time Action RK Sharma Entrepreneurship – more of a Mindset In broader perspective, Entrepreneurship is more of a mindset of Venturing at various levels : Individual level : Innovator, Innovator Entrepreneur or
Intrapreneur Application in normal life or for a new business or at existing job Organization level : Competitive Innovation, Corporate Entrepreneurship towards constant improvement to create tomorrow’s competitive advantage faster than competitors Country level : Innovative Culture, Entrepreneurial Activity, Global Competence, Field Supremacy to establish country’s supremacy in select fields and use them as growth drivers for the economy, and also, to develop newer models for social development RK Sharma 1 Entrepreneurship derived from the French word ENTREPRENDRE meaning Undertaker or Go Between With time the understanding about entrepreneurship has gone thru considerable change : RK Sharma Entrepreneurship – Understanding with time Element of Undertaking something or Going between People undertook to sell the goods of a passive investor thru new trade routes and taking a percentage Endorsement as a Risk Taker
This aspect got viewed first time around 17 century – because merchants, farmers, craftsmen were seen to Buy at certain price and Sell at certain price. Differentiation – Capital Provider and Capital User An entrepreneur is a capital user but may not have his own capital, hence seek it from a capital provider Notion of Innovation Entrepreneurship is not only doing new things but also about doing existing p p y g g g g things in a new way Importance of surviving in Competition became a part
With more entrepreneurial activity, there has been an unprecedented increase in competition Ability to understand all forces at work in environment That’s what it calls for today RK Sharma 12 Entrepreneurs Entrepreneurship is the process of creating something new with value by devoting necessary time and effort, assuming the accompanying risks and receiving the resulting rewards – Hisrich 85 Entrepreneurship is the dynamic process of creating incremental wealth.
The wealth is created by individuals who assume major risks, provide value for products or services for specific gains – Ronstadt 84 Entrepreneurs are Individuals who pursue opportunities regardless of resource availability – Stevenson, Grousbeck, Roberts and Bhide 99 Entrepreneurs are People who enter new or established markets – Lumpkin and Dess 97 Entrepreneurs – Gartner 98 are Individuals who create new organizations Entrepreneurs are Persons who are ingenious and creative in finding ways to add to their own wealth, power and prestige – Boumol 98 RK Sharma
Entrepreneurs A compilation of various definitions can be : Entrepreneur i an i E is innovator or d developer who recognizes and l h i d seizes opportunities; converts those opportunities to marketable ideas; adds value through effort and skills; assumes the risks of competitive marketplace and realizes the rewards RK Sharma 13 Entrepreneurs People who : – create new businesses – in situations of risk and uncertainty – with objective of profit and growth – through resource mobilization and opportunity capitalization RK Sharma Entrepreneurship Boom Factors
Education Success Stories Shift to Service Economy Technological Advancements Globalization Finance Availability Government Support Teaming/ Networking Part-time/ Home-based Opportunities Shakeouts Unemployment RK Sharma 14 Entrepreneurship – New Trends Part Time Activities Home Based Concepts Co preneurs Co-preneurs (teams of two) Immigrant Entrepreneurs Multilevel Marketing Web based Opportunities National / Transnational Networking Franchise Retailing Corporate Dropout Teaming Collegiate Entrepreneurs Social Enterprising Triggers Additional Income, Less Stakes, Easy Moving Out, Time Utilization, Hobby, Fun, Social Commitment RK Sharma
Beliefs/ Myths about Entrepreneurs They are Gamblers and Extensive Risk Takers They are Born not Made Born, They are Academic or Social Misfits They have the Money for Stakes They are simply Lucky They are Day Dreamers They do it for only for Power and Money They are ready to break away and try their own ways They are prepared to fail and fail again RK Sharma 15 Entrepreneurship Model
Entrepreneurship – principally a Utility Maximizing Response Campbell 1992 Individual chooses to be an entrepreneur if the expected NPV of the profit is positive, or it supplies the labor wage otherwise Eisenhover 1995 Utility Models of human decision making postulate, that individuals will select the course of action which promises, in prospect, the greatest utility (or psychic satisfaction).
Since some of the elements of a course of action may involve dis-utility (dissatisfaction), such irksome elements will offset to some degree the utility derived from more pleasurable elements of that course of action RK Sharma Entrepreneurship Model Douglas & Shepherd Decision to be an entrepreneur is a utility maximizing career choice made by an individual.
People choose to be self-employed if the total utility they expect to derive via income, independence, risk bearing, work effort and perquisites is greater than from their best employment option In context of career choice, an individual expects to gain utility from income (derived from goods/ services he can buy from it) and either Utility or Dis-utility from Work Effort, Risk Bearing, Independence and other Working Conditions g The 3 main attitudes, which differentiate an entrepreneur and an employee are Attitudes towards : Hard Work Financial Risk and Decision Making Autonomy RK Sharma 6 Entrepreneurial Behavior Researches that have greatly influenced the understanding of entrepreneurial behavior : Locus of Control Rotter’s I. E (Internality- Externality) Dimensions nACH McLelland’s Need for Achievement Studies Risk Taking Kogan – Wallach CDQ (Choice Dilemma Questionnaire) Aspects Entrepreneurial Activity GEM Consortium’s TEA (Total Entrepreneurial Activity) Studies RK Sharma Entrepreneurship & Economic Development
It is becoming more and more evident that countries with higher Entrepreneurial activity are showing greater economic growth subsequently Entrepreneurship is the major mechanism leading to economic growth and adaptation in all economies whether developed, in transition or developing. However, the entrepreneurial activity in different countries maybe influenced by different factors – culture, education, societal history, finance availability, location, government policies, institutions, labor market, openness and so on RK Sharma 17
TEA Studies by GEM GEM (Global Entrepreneurship Monitor) Studies tracks the TEA (Total Entrepreneurship Activity) across various countries www. gemconsortium. org www gemconsortium org 2 major reasons why individuals participate in entrepreneurial activity : Electing business as one of the many career options Feeling compelled to get in business as there is no other career option This leads to two kind of entrepreneurs 1. Opportunity Entrepreneurs 2. Necessity Entrepreneurs 2 major factors for prevalence of entrepreneurial endeavors in a country . The Macroeconomic Conditions 2. Cultural/ Social Norms and National Institutions RK Sharma TEA Studies by GEM GEM Survey – % Split Opportunity Entrepreneurs Necessity Entrepreneurs Mixed 52 % 33 % 15 % No. of Owners 1 2 3-5 ;5 61 % 21 % 15 % 3% Age 18 – 24 25 – 34 35 – 44 45 – 54 55 – 64 16 % 31 % 27 % 18 % 8% RK Sharma 18 TEA Studies by GEM Startup Triggers Perceived opportunities Perceived capabilities Entrepreneurial Intentions Excitement ; Fear Good career choice High Status Media attention
Discontinuation Triggers Business not profitable Problem getting finances Personal reasons Offer to sell Other opportunities pp Planned exit/ Retirement RK Sharma Characteristics of Entrepreneurs – Difficult to compile, yet … Drive for Achievement Need for Autonomy y Internal Locus of Control Creativity and Innovation Opportunity Orientation Initiative and Responsibility Self Confidence and Optimism Tolerance for Failure High Energy Levels g e gy e e s Commitment, Determination and Perseverance
Calculated Risk Taking Goal Setting and Focus for Result Integrity and Reliability Team Building RK Sharma 19 Characteristics of Entrepreneurs All Entrepreneurs cannot be categorized under a common profile and it is difficult to include all types of entrepreneurial behavior in b h i i a single d fi iti i l definition However, researchers agree that most of the entrepreneurial behavior do include the following aspects : Initiative taking Organizing/ Reorganizing to turn opportunities to practice Acceptance of risk and failure RK Sharma Core Competencies of Entrepreneurs Proaction
Initiative Assertiveness Opportunity Recognition Preparedness to Adapt and Learn Will to Perform Goal Setting Using Failure to Succeed Implementation Making it Work/ Making it Happen Time Devotion Fight the Challenges Persistence Acceptance of Risk or Rewards Achievement Orientation Commitment RK Sharma 20 Entrepreneurial Attitude as Problem Source Cant Focus, Lots of Ideas, Runs in Circles Not good with Details Feel Odd, Different, Alone, Strange Good at Starting, Bad at Running Live in Chaos Exaggerate and remain too Optimistic Fail and fail again Always at the edge – Financially Sideline Family Do not Listen RK Sharma
Entrepreneurial Attitude – Serves Positively as well as Negatively Control Desire t S D i to Succeed d Confidence Optimism – The Extremes Logical Control Success Building Self Confidence Realistic Optimism Obsessive Autonomy Success Demonstration Distrust in Others Unrealistic Fantasies RK Sharma 21 Entrepreneurial Benefits and Risks Benefits Money Power – Status Recognition – Faith Satisfaction – Independence Self Actualization Risks Financial Risks Career Risks Family and Social Risks Psychic Risks
RK Sharma Entrepreneurship Action Sequence – What came first – Chicken or Egg ?? Do Entrepreneurs scan the macro environment to identify potential market opportunities and th t ti l k t t iti d then create an appropriate t i t new product or service ? OR Do they master a specific technology or process and then seek for a market to apply that knowledge in the form of a product or a service ? OR Do they create a product or service and then pursue towards market opportunity ? The answer to all is YES
RK Sharma 22 Stages of Entrepreneurship Propensity to Enterprise Idea Generation Venture Startup Business Run (Stabilization/ Growth) Business Expansion Moving Out (Harvesting/ Succession) – Stagnation/ Failure can happen at any stage – One stage may not necessary lead to another RK Sharma Entrepreneurial Motivation – Naffziger, Hornsby & Kuratko Personal Characteristics Business Environment IDEA Personal Environment Personal Goals Implementation/ Outcome Perception Decision to behave Entrepreneurally
Expectation vs Outcome Comparison Entrepreneurial Strategy Entrepreneurial Management Firm Outcomes Intrinsic/Extrinsic Rewards RK Sharma 23 Propensity to Enterprise – The first major barrier Depends on an intricate mix of : The Personal factors The Family, Friends and Social factors The Environmental factors It is a complex titration of your history, culture, economic conditions, family background, upbringing, education, self concept, resource availability, past experiences, support programs and so on … Even Luck !
RK Sharma Innovation – the key process Innovation is the means by which the entrepreneur either creates new wealth producing resources or endows existing resources with enhanced potential for creating wealth – Peter Drucker Innovation is about implementing new idea that creates value – Innovation Network Innovation is intersection of invention and insight, leading to creation of social & economic value – US National Innovation Initiative RK Sharma 24 Innovation – the key process
Innovation is the key process by which entrepreneurs convert opportunities into marketable ideas However Innovation process is more than just a good idea Innovation is a combination of a good idea and the perseverance and dedication to remain with it through the implementation and make it work Entrepreneurial Success Key is to blend imagination and creative thinking with a systematic and logical process activity RK Sharma Creative Process Preparation Incubation Insight Evaluation The base of experience and knowledge Conscious effort based on interest and curiosity Involves ‘Mulling ‘ over things Ideas churn below consciousness hreshold Refers to the ‘Eureka’ experience Spontaneous Process where insights are analyzed for viability g y y Ideas may not be a true business opportunity Feasibility Business Planning Implementation RK Sharma Elaboration 25 Creative Process Incubation ^ ? Creative Process Knowledge Accumulation Ideas ^ ? Evaluation Implementation RK Sharma Innovation Types and Triggers Innovation Types Radical Invention Extension Incremental Duplication Synthesis (Drucker) Innovation Triggers Unexpected Occurrences Incongruities Process Needs Industry Changes Demographic Changes Changes in Perception Market Changes Knowledge Concepts
RK Sharma 26 10 Mental Locks limiting Creativity One Right Answer Syndrome Focusing on being Logical (Royce Husted – Bicycles for racing) Blindly following the Rules ( (q-w-e-r-t-y t – Sh l ) Sholes) Constantly being Practical (BioTee – Casey Golden) Viewing Play as Frivolous (Non banquet) Becoming over Specialized (Roll-on, Velcro) Avoiding Ambiguity (Ocean Leathers from Fish) Fearing looking Foolish (Reversing Apple Tree/ Picking machine) Fearing Mistakes and Failures (Edison had 1800 ways not to build a light bulb) Believing that I am not Creative RK Sharma Ways of Business Startup
Acquisition New Independent Venture Enterprise Teaming 3 ways to start business – Buy, Start or Franchise Enterprise Teaming : Gentlemen Agreements Licensing Franchising Strategic Alliance Distributorship Joint Venture RK Sharma 27 Buying Existing Business Advantages Successful existing business may continue to be successful Existing business may have the best location Employees and Suppliers are established Equipment and Inventories are in place Banking and Trade Relations are set Business hits the ground – running New owner can learn from experience of previous owners It may be a bargain
RK Sharma Buying Existing Business Disadvantages Realities may be disguised. Real reasons are not stated ill will might have been created by the previous owner Employees inherited may not be suitable Location might have become un-satisfactory Equipment and Facilities may be obsolete and inefficient Inventory may be outdated or obsolete Accounts receivable may be worse than the face value Change and Innovation are difficult to implement Business may be over priced RK Sharma 28
Buying Existing Business Guidelines The Owner’s Reasons for Selling Physical Conditions of Business Location, Assets, Business Records, Lease Agreements, Contracts Potential for Product and Service Customer Base, Industry Stage, Product Stage, Competition Legal Aspects Transfer of Ownership, Ongoing Litigations, Trademark/ Copyright Issues, Restrictive Convenants (Seller should not start same business) Financial Conditions Profit Potential, Tax Returns, Financial Statements
RK Sharma Starting New Advantages Independence/ Opportunity to be creative and implement ideas in your own way y y Disadvantages Untested Waters No formal support/ backup in Marketing Must address to all startup resources and factors 5M + I Generally the level is Small – M di G ll th l l i S ll Medium External Finance is comparatively difficult Generally needs greater effort – may be as a tradeoff for lesser investment RK Sharma 29 Franchising Advantages
Brand Name Strength Standardized P d t P St d di d Products, Processes, Systems, Procedures S t P d Training and Support Financial Support/ Funding Ease Advertising Leverage Geographical Area Protection Time Tested Concept/ Business Model RK Sharma Franchising Disadvantages Franchise Fee/ Profit Sharing Less Flexibility (Checks, C t l Obli ti L Fl ibilit (Ch k Controls, Obligations) ) Limited Product Line Local Adaptation Problems Pressure of Continuous Investment Expansion Constraints or Obligations Contract Terms & Renewal Market Saturation RK Sharma 30 Franchising Ideals
No/ Low Initial Franchise Fee Low Franchise Fee/ Royalty/ Profit Sharing Payment subsequent to Breakeven Financial Support Equipment/ Material/ Promotional Support Free and Regular Training of Personnel Greater Geographical Area Flexibility for Local Adaptation Expansion Schedule related to Performance Do necessary Research and Review UFOC / FDD thoroughly RK Sharma Global Franchises – Top 10 – 2009 (Franchise direct) Rank 1 2 3 4 5 6 7 8 9 10 McDonald Subway 7 Eleven International Hotels Pizza Hut KFC Burger King A&W Restaurants Ace Hardware Natur House RK Sharma Company 31
Small – Medium Enterprises Need for Categorization – Incentives – Entrepreneurial Activity Measure Definition differs widely amongst countries Common Categorization Bases Sales Number of Employees Capital Employed Investment in Machine & Equipment Geographical Area of Operation Management Control / Ownership Village Cooperatives Household Sectors Product / Service Categories RK Sharma Business Incubators Common Functioning Basis : Facilities or Support for Research, Pilot, Startup Adaptable Space/ Flexible Terms / Reduced Rents Shared Support Services Training Programs Limited Time Frame
Sponsors : Government Go ernment Business Promotion Councils Universities Private Organizations RK Sharma 32 Ownership Categorization Proprietary An individual starting business thru simple registrations Partnership P t hi A group of people coming together for business thru Partnership Agreement Corporation A group of people/ entities forming a company as an entity thru MOA – Memorandum of Articles Special Status A group of people/ entities forming an organization based on special status provisions specific to area of operations and the country RK Sharma
Ownership Categorization Substitute Terms Individual Enterprise / Sole Proprietor Private Limited (Closely Held / Widely Held) Limited / Public Limited Limited Liability / LLC — ‘LLP’ Joint Stock / Open Joint Stock Suffixes Used pte b. v. inc. plc n. v. ltd llc gmbh pvt ltd llp a. g. jsc zao (and many more – specific to countries) RK Sharma 33 Proprietary Characteristics Advantages Simplicity in creation Low cost to establish Owner receives all profits Total decision making authority No special legal restrictions Business income taxed as individual income
Disadvantages Unlimited personal liability Limited skills and capability Limited access to capital Lack of business continuity RK Sharma Partnership Characteristics Advantages Ease in establishment Division of profits/ losses p Larger pool of capital and talent than Proprietary Little government regulations Business income taxed as individual income Disadvantages Unlimited liability of ‘General partners’ Limited access to capital Difficulty in disposing of partnership interests without dissolving partnership deed Lack of continuity Potential for conflicts RK Sharma 4 Corporation Characteristics Advantages Limited liability of stockholders Ability to attract larger amount of capital y g p Larger pool of skill, talent and knowledge Ability to have perpetual life Ease of transfer of ownership Economies of scale Disadvantages Cost/ Time involved in creation Subject to Corporate Taxes/ Double Taxation Potential loss of control by founders Legal restrictions and regulatory red tape RK Sharma Startup Processes and Registrations Proprietary Partnership Corporation C ti
Company Registrations Partnership Deed/ Agreement, Registrations MOA, Board Resolutions, Registrations, O Securities/ Exchange Board Permissions Registration with Other Institutions (Local, Regional, National) Tax Authorities (Vat/ Income) Central Bank Business Promotion Councils Industry Boards/ Associations Subsidy Grant Offices Certification Bodies RK Sharma Customs/ Excise Departments FDI/ Foreign Trade Department Chambers of Commerce/ Industry Stock Exchanges Trademark/ Patent Offices 35 Partnership Success Issues
Keep numbers of partners low Do not leave anything informal Share trust but formalize the understandings Make partnership agreements early Partnership Agreements must include Provisions for continuing in event of death or withdrawal of one or more partners Clear Buy – Sell provisions Initial contributions and profit division Details of partners’ initial salaries and benefits Each partner’s responsibility in business RK Sharma Partner Selection A well chosen Partner Can be a sounding board of ideas Can be a mutual problem solver Can share the work load Can be a source of added expertise Can increase the chances of success
An ‘Inefficient Partner’ is worse than ‘No Partner’ RK Sharma 36 Funding Issue RK Sharma Sources of Startup Capital Personal Savings Friends and Relatives Business Associates Banks Financial Institutions Venture Capitalists Business Angels Corporates / Organizations p g Mutual Community Funds Public Government Grant Donors RK Sharma 37 Ways of Inflow Cash Product / Inventory Equipment Infrastructure / Facilities Services Guarantees Subsidies RK Sharma Seeking External Finance Strength Characteristics
Profitability Pay back Period Tangible Assets NPV / IRR DE Ratio Business Plan —Industry USP Technology Business Partners Entrepreneur’s Experience/ Background RK Sharma 38 Forms of External Financing Debt Debt D bt or Equity — Loans – Short Term, Long Term — Fixed Deposits — Others – Trade Credit, Factoring Equity qu ty — Shares / Stoc s S a es Stocks Thru : IPOs or Private Placements or a Combination of Both RK Sharma Debt Advantages No Relinquishing of Ownership Quickest Source Less Procedural Requirements
Disadvantages Securities, Guarantees, Mortgage, Hypothecation, Collateral Paybacks not related to p y performance Payment Schedules Cash Flow Pressures Debt Trap RK Sharma 39 Equity (External) Advantages Cheapest Source and only option for Large Sums Paybacks related to Performance Image and Valuation Possibility Liquidity/ Easy Transferability Disadvantages Relinquishing of Ownership Procedural Costs Pressure Groups and Takeover Possibilities Paperwork and Organization Answerability, Obligation and Disclosures RK Sharma
Loan – Specific Questions Loans are the most common method of external finance Require Securities, Collateral, Hypothecation Lender will ask specific questions p q – What for it is required ? – When is it required ? – When and How it will be paid back ? – How much is required ? – How long it is required ? – What if the plan fails ? Or in short Quantum and Requirement Schedule Utilization Plan Repayment Plan Contingency Plan RK Sharma 40 Investors and Risks 3 types of investors Risk Averse Risk Neutral Risk Lover
Most of the investors are Risk Averse Levels of Risk Aversion may be different Investor2 Return Investor 1 Risk RK Sharma Investment Elements Financial Elements Analysis of Relevant Risks Products – Revolutionary, Innovative, Evolutionary, Substitution Business Stage – Startup, Development, Commercialization, Expansion ROR – Most Risky, Risky, Moderate Risk, Low Risk Determination of Time Horizon Time between original investment and cash out Pricing the Deal (Basis’ example) FV of Investment % of Ownership p
Non Financial Elements Piggyback Rights, Voting Trusts, Sinking Fund The Investment Agreement RK Sharma 41 Startup Resource Management Men Money Machines Materials Management Partners, Employees, Associates (Selection and Relation Building) Financing (Mobilization and Utilization Pros & Cons) Technology, Equipment, Self Expertise (Selection and Application) Raw Materials, Inputs (Sources and Cost Benefits) Location, Forecasting, Business Plan, Operations, Leveraging, Liaison, Legalities Gathering, Handling, Utilization
Information the new organizational resource RK Sharma Abilities and Skill Set Required Time Devotion and Time Management Mobility and Fitness Planning and Budgeting Correspondence and Interactions Negotiations and Convincing Choice Selection and Judgment Product Knowledge Employing Business Tools Direction and Leadership Managing People Stress Relieval Selling Dreams RK Sharma 42 Business Run and Growth
After a successful startup – the issues don’t vanish, they just change Growth/ Expansion – More Customers – More Products – More Employees – More Paperwork – More Competitors – No Funds ?? v/s Sustenance/ Negative Growth – Decreasing Customers – Failing Products – Inefficient Employees – Ill organized Paperwork – Stronger Competitors – No Funds ?? It becomes a wild wild world out there and the only way out is : Alertness, Pro-action, Thinking Ahead It is (always) time to Innovate and Evolve RK Sharma Transformation – Startup to Growth
New Ventures may survive the initial phase because of unique product or service; technical superiority; location advantage or limited geographical coverage However, Success seldom goes unnoticed by competitors and the profitable market created by the firm is guaranteed to attract competitors The competition from new players, bigger players in same category or substitutes will start threatening the firm’s position. The consumers’ expectations will also become upswing. consumers Just when there is feeling of ‘WIN’ – the market changes the rules It is time for Entrepreneur to Transform …
RK Sharma 43 Transformation Entrepreneur has to cease being a ‘Doer’ and graduate to be a successful planner The entrepreneurial role becomes that of a leader, an empowerer, a conflict resolver, a motivator and a strategic manager He has to relinquish the decision making at operational level and delegate the responsibility He has to focus on the forces within the industry and gear up to tackle them He has to prepare himself to face the marketing challenge and has to find and exploit new competitive advantages He has to plan and implement the strategic directions for the firm
The process is indeed Difficult …. RK Sharma Transformation – Keep focus Alive Customers Competitors Company Offers Resources RK Sharma 44 Transformation A successful entrepreneur has to adapt through the stages of the venture through modifying his ability utilization 2 Distinct Abilities : Entrepreneurial Ability Ability to recognize a new profit opportunity and exploit it Managerial Ability Ability to maintain the profitability of current operation The equilibrium between the two abilities must change with the transition from one stage to other
RK Sharma Transformation – Adaptation Developing Philosophy Reinforcing Philosophy Innovation Managing Innovation Resource Mobilization Resource Utilization Team Selection Team Building Product Strength Marketing Strength Centralized Control Delegation / Succession Speaking Out Listening In Revolutionary Mindset Evolutionary Mindset Value Generation Value Harvesting RK Sharma 45 Transformation – Adaptation
Change gear with changing times and changing situations Don’t be locked in defensive mindset (Business as usual, Survival, Reactive, Orientation on past, Zero Sum game) Reinforce the principles – Dream, Discover, Design and Deliver Keep in focus – Product, Price, Positioning and People Apply some models, concepts, Imbibe a culture of effectiveness Induce a process of Scenario Based Strategic Thinking (Reframe the Issues, Understand Predictability and Uncertainty, Think new Perspectives and Get Alternatives) RK Sharma Knack for Finance
Excess Money may not lead to Success BUT Less Money definitely leads to Failure An unprofitable organization maybe Cash Rich BUT A profitable organization may be Bankrupt Therefore, Liked or Disliked an entrepreneur must possess, acquire or develop a KNACK towards finances – figures, comparisons, estimations, analysis, interpretation, utilization, Inferences, presentations, reports, models RK Sharma 46 Knowledge Areas Capital Budgeting Financial Statements Estimation of Operational / Marketing Expenses Cost Analysis and Pricing Sales Forecasting Break Even Analysis Ratio Analysis DSS RK Sharma
Basic Knowledge Areas Cost Analysis Pricing Markup and Markdown implications VAT Duties and Tariffs BEP Profitability / Cash Flows Budgeting RK Sharma 47 Cash Flow Management Forecast, Adherence, Tracking and Control of Cash Ins and Cash Outs The Big 3 – Ac Receivable, Ac Payable, Inventory Sales, Efficiencies, Cost Controls Additional Funding, Stimulus, Bailouts Activity or Asset Dilution RK Sharma Entrepreneurial Management refers to the overall force within a new venture that assures that the people know what they are doing, where they are going and what results are expected of the enterprise. p It is the glue that holds the enterprise together and makes sure that the new venture develops into a managed business. Competencies of Entrepreneurial Managers for success of Venture : Focus on Market, Not on Technology/ Product Financial foresight to avoid under- funding of the venture Building a Management Team, Not a ‘One Man Show’ Determine a specific role for the founding entrepreneur, and sticking to what that person does best RK Sharma 48 Market Driven Strategies for Small Business Customer Orientation Better Quality – Price Equilibrium Speed and Convenience Service and Customer Satisfaction Innovation (Changing with Life Cycle)
RK Sharma Market Driving Strategies for Small Business Huge Leaps in Customer Value Focus on Future and Unexpressed Needs Galvanize and Develop Sustainable Competitive Advantage Break Away from Traditional Business Mindset Devise New Approaches and New Business Models RK Sharma 49 Venture Life Cycle Profit/ Productivity/ Revenue Innovation Or Decline Failure New Venture Development Startup Activities Growth of Venture Business Stabilization Expansion Extension Diversification Decline RK Sharma Expansion – Wots up Matrix Opportunities Strengths Threats Offensive Shield Weaknesses Also ran
Defensive RK Sharma 50 Expansion – Types of Diversification Strong Strong Competitive Position Weak Investment Attractiveness Support Branch out Weak Survival RK Sharma Succession / Harvesting (Moving Out) Succession Family y Non Family Harvesting – Direct Sale ESOP (Employee Stock Option Plan) Management Buyout RK Sharma 51 Succession Plan Create a Survival Kit Critical Documents (will, insurance, guarantees, loans) Critical Lists (key individuals, bankers, government contacts) Critical Information (secret plans, hidden information) Groom a Successor (Family or Non Family Professional)
Promote an Environment of trust and respect Cope with Financial Realities and Settlements – life time gifting – buy-sell agreements – trust – ESOPs RK Sharma Business Plan Written document that details the proposed venture black & white picture describing all aspects of the venture : the project, the product/ service, uniqueness, t operations, marketing, competition, financing, management, milestones, critical risks contingencies document that clearly demonstrates : what the venture is, where is it projected to go and how the entrepreneur proposes to get there p p p g
It is the entrepreneur’s roadmap to a successful enterprise in his own words RK Sharma 52 Writing a Winning Business Plan A sound business plan can mean difference between a company that prospers and one that flounders A good business plan communicates accuracy and credibility, and generates enthusiasm for business An effective business plan should be thorough, professional and realistic A winning business plan must act as a guidebook for the organization to flourish and also attract potential investors RK Sharma
Business Plan Presentation Where is the Magic and Why You Make it Visually Appealing Highlight Opportunities and Anticipated benefits No Details and Technicalities (keep it as backup) Show Enthusiasm and Be Thorough Be prepared for Tough Questions Think Win – Win RK Sharma 53 Business Plan – General Rules
Should be concise (20-40) pages Should be easy to read and understand Should Sh ld provide clarity of thought & purpose id l it f th ht Should convey profitable market opportunities Should cover all aspects of business Should highlight risks, challenges and coping Should persuade investors A good strategy is : st ategy s — to make a reality check amongst friends and — to even prepare a mini business plan with key points only — To prepare a effective Business Plan Presentation RK Sharma Business Plan Donts
Don’t make unrealistic assumptions Don’t under-estimate the difficulties in growing a business Don’t under-estimate the competitors Don’t assume that reader knows the industry technical jargon Don’t include long tedious and overly technical information Don’t include highly confidential or proprietary information Don’t avoid discussing the risks of business RK Sharma 54 Business Plan Components Cover and Title Page Executive Summary Table of Contents Business Description Marketing and Sales Product Development / R&D Manufacturing / Operations Organization and Management Financials (incl. nvestment proposal) Critical Risks Achievement Schedule Appendices / Bibliography RK Sharma Business Plan Details Cover Page Name of the Company Address and Contact Details Time Period Covered by Plan Date of Preparation Firm and its environment Business Model and Competitive edge Product and services / Customer benefits Objectives – financial /non financial Financial Highlights Funding Requirements Investor Benefits Headings and Sub-headings Description of Venture Business and Industry Profile Company Details / history Product / Service description, USPs Market Potential / Goals RK Sharma
Executive Summary Table of Contents Business Description 55 Business Plan Details – contd. Marketing and Sales Sales and Revenue Objectives Marketing Details Market Size, Trends, Competition, USPs, Market Share, Distribution, Pricing, Adpro Marketing and Sales Organization Product Development Operations R&D, Needs, Objectives, Plans, Costs Location Analysis Inputs Description Technology, Equipment, Raw Materials, Labor Supply, Facilities Operating Policies Inventory Management, Maintenance, Purchasing, Storage, Transportation, Subcontracting Capital Expenditure C it l E dit Organization and Management
Organizational Structure Management Team Key Associates/ Advisors/ Consultants Memberships/ Registrations Management Policies Organizational Philosophy, Recruitment, Training, Development, Compensation RK Sharma Business Plan Details – contd. Financials Funding Requirements and Sources Financing Stages Projected Statements & Analysis Financial statements, Break Even Details, Performance Ratios, Summary Finance Policies Debt management, Investment, Use of Earnings, Profit sharing, Cost Controls, Supplier Payment Departmental Budgets Loan or Investment Proposal Critical Risks
Potential Problems / Obstacles Non Achievement Risks Contingency Plan Objectives Deadlines, Timing, Event Relationships Detailed Statements Technical Terms/ Abbreviations Used RK Sharma Achievement Schedule Appendices and Bibliography 56 Small Business Failure – Common Reasons Poor Location Lack of Capital Lack of Financial Control Lack of Experience Ad-hoc Operations Poor Partners / Employees Inventory Mis-Management No Comparison Standards Interest Trap Ineffective Transition through Phases Imbalanced Growth / Unplanned Expansion Dependence on Single Buyer Mental Stress Life Style Adaptation / Over Spending RK Sharma
Why Business Plans fail Plan is incomplete, overlooking or ignoring functional parts that vital Plan is constructed around strategies that are inaccurately defined Plan is substantial enough but cannot be clearly and properly defined by management Plan is not covering the contingencies Plan is not addressing the issue of unexpected growth Plan is having an illogical time horizon Plan is not revised RK Sharma 57 Bankruptcy
Failure is not Uncommon in new ventures Entrepreneurs usually fear it but rarely understand it It is indeed painful Entrepreneurs should be sensitive to the bankruptcy signals and prepare for a action plan Needs intricate decisions to shut down or to take challenge of turnaround RK Sharma Bankruptcy – Warning Signs Major transactions are unexplained Taxes are not paid Suppliers insist on cash payment against delivery Extra Discounts to generate cash Lack of Inventory Non extension of credit limits by banks Orders not met in time and increase in complaints Key People leaving the company RK Sharma 58
Bankruptcy – Acceptance Options Mutual Agreement and Payment Plan – Prepackaged Bankruptcy Extended Payment Plan – Chapter 13 Bankruptcy Chance to Reorganize and then Pay – Chapter 11 Bankruptcy Sell Part/ Full (Dilution/ Liquidation) and Pay – Chapter 7 Bankruptcy RK Sharma Entrepreneurial Nutshell Do something that you know best Do something that others cannot do Do something that others do not want to do Do something that others are not doing E = mc2 (E – entrepreneurial spirit, m – money, c – commitment) 5Cs (Cash, Competence, Confidence, Commitment, Contacts) Business Plan No Business Plan >> >> Stress Crisis
Organization is not about initial success of product or idea – it is about continued profitable success through innovations RK Sharma 59 Location Decision Factors Proximity to the Market Vicinity to Materials/ Suppliers Wage Rates Labor Availability Workforce Expertise Regulations Competition Demographic Trends Business Climate Facilities/ Utiliti F iliti / Utilities External Investor’s Requirements Tax Benefits / Support / Subsidies Outsourcing Possibilities / Objectives Expansion Plans RK Sharma Protection Focus
Finance Legal g Personal Liquidity, Losses, Penalties Guarantees, Employee Liabilities, Business Conflicts p y Health, Time, Family/ Social Protection Aid Restrict Personal Stakes Separate Home and Office Keep Time for Fitness Seek Help/ Services Insurance, Legal Advisors, Auditors, Consultants, Friends RK Sharma 60 Business Responsibility Areas Consumers Employees Investors Community Environment Safety, Knowledge, Value for money, Choice, Service Freedom, Training, Fair wage, Security, Development Fairness, Information, Dues
Jobs, Community development activities Cleanliness, Anti pollution activities, Plantations, Recycling RK Sharma Trademark, Copyrights, Patents Trademark is any distinctive word, symbol, name, logo, slogan or trade dress that a company uses to identify and distinguish itself from others. Symbols of ™ and ® are used to convey the y y registered trademarks Patent is a grant to the inventor of a product or a process giving exclusive right to make, use or sell the invention for a set period of time. It is depicted thru a Patent Number.
Copyright is an exclusive right that protects the creator of the original works of authorship such as literary, dramatic, musical and artistic works. Every work is automatically copyrighted when it is created. However, to preserve the right, all published copies of the work must carry the © symbol, the year of publication and authors name or abbreviation RK Sharma 61 Ethics v/s Benefits One of the most common misconceptions about business is the contradiction between Ethics and Profits. People argue that doing what is Right is somehow contrary to doing what is Good for the business.
Although behaving ethically has value in itself, there are several other benefits to ethical companies : Unethical businesses usually gain only short-term advantages but over the long run, unethical business practices do not pay. the company earns the respect of two essential groups – customers and employees. The ethics factor is intangible and virtually impossible to quantify. Yet it is something that customers and employees clearly recognize RK Sharma Ethical Standards – Levels The Law It defines for the society as a whole, which actions are permissible and which are not.
The law merely establishes the minimum standard of behavior. Actions that are ‘legal’ however, may not be ‘ethical’ however These serve as specific guidelines for the people as they make daily decisions. Many colleges and universities have established honor codes, and companies rely on policies covering everything from harassment to gift giving. This is, what an individual takes when faced with a is decision that is not governed by formal rules. The values that people learn from early age through school, religion, family and friends are the key ingredients.
Training is also a major determinant at this level The Policies & Procedures of the organization The Moral Stance RK Sharma 62 Ethical Principles Ethical principles that differentiate between the right and wrong, thereby offering a guideline for ethical behavior – Honesty – Integrity – Promise Keeping – Fidelity – Fairness – Caring for Others – Respect for Others – Responsible Citizenship – Pursuit of Excellence – Accountability The Argument of No Ethics v/s Ethical Deficit ? RK Sharma Establishing Ethical Standards
There is no single standard for ethical behavior; nevertheless, employees must be encouraged and familiarized with various ethical tests : The utilitarian p principle p Kant’s categorical imperative The professional ethic The golden rule The television test The family test Choose the option that offers the greatest good for the greatest number of people Act in such a way that the action taken under the circumstances could be a universal law or rule of behavior Take only those actions that a disinterested panel of professional colleagues would view as proper Treat other people the way you expect them to treat you Would you and your colleagues feel comfortable explaining your actions to a national television audience Would you be comfortable explaining to your children, y p g y , spouse or your parents why you took a certain action
Although these tests do not offer universal solutions to ethical dilemmas, they do help employees identify moral implications of decisions they face (Study of history, philosophy and religion reveals strong consensus about certain universal and timeless values that are central to the ethical life) RK Sharma 63 Maintaining Ethical Standards Create a Company Credo Develop and Update Code of Ethics Enforce the Code Firmly, Fairly and Consistently Hire the Right People Conduct Ethical Training Perform Periodic Ethical Audits Set an Impeccable Ethical example at all times Create a Culture of Open Communications Involve Employees in establishing Ethical Standards RK Sharma Women Entrepreneurs Challenges :
Home – Work Role Conflict Psychological Barriers in Associates/ Employees Country/ Culture Profile Specific Opportunities : Support Programs (Banks, Government, Institutions) Societal Acceptance Specific Business/ Work Categories Home Based Options RK Sharma 64 Social Entrepreneurship Compelling Social Challenges exist today Global initiatives like MDG or Climate Change are still in Debate Mode Few countries have the experience, resources or possibility to successfully tackle on their own the societal challenges Innovation and Entrepreneurship can be used as model towards social change as well Problem Sustainable Solution Social – Environmental Change RK Sharma Social Entrepreneurship
Concept is confusing to some and impressive to others Gaining momentum Clean, Green and Social are new mantras Addressing social and environment issues Problems as opportunities and theory of change Innovative solutions touching lives Sustainable venture that can address to people and planet profitably RK Sharma 65 Social Entrepreneurship Spectrum Social / Environment Return Social E t Entrepreneurship hi Economic Return RK Sharma Social Entrepreneurs Social Entrepreneurs recognise that the social needs cannot be left onto governments alone. They believe that Scial Enterprising can be a major engine towards social innovation and change besides creting jobs and economic growth Social entrepreneur identifies and implements practical solutions to social problems through innovation, resourcefulness and persistence. Alastair Wilson Social entrepreneur is someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to make social change. – Wokipedia Social S i l entrepreneur presents id t t ideas th t are user-friendly, understandable, that f i dl d t d bl ethical, and engage widespread support in order to maximize the number of local people that will stand up, seize the idea, and implement with it. Social Entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to take new leaps. – Ashoka RK Sharma 66 Corporate Entrepreneurship
Also called Intrapreneurship The entrepreneurial climate within the organization Utilizes the entrepreneurial skills of the managers Allows to be ‘Near Entrepreneur’ with ‘Lesser’ risk A dedicated team effort towards Innovation & Ideas Need Rapidly R idl growing new and sophisticated competitors i d hi i d i Sense of distrust in traditional methods Exodus of bright people RK Sharma Intrapreneurship Macrae, in 1976, predicted a trend for businesses that: The dynamic corporations of the future should simultaneously be trying alternative ways of doing things in competition within themselves, by way of entrepreneurial activity within organization organization.
Intrapreneur term was coined by Macrae (1982) and developed by Pinchot (1985). The concept, however, has been in existence since long. Intrapreneurs are ‘dreamers who do’, those who take hands-on responsibility for creating innovation of any kind within an organization – Pichot Intrapreneur is a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation – American heritage Dictionary Intrapreneur is an employee developing new business activity for his employer including establishing new outlets/ subsidiaries, new products/ services and new market combinations – GEM RK Sharma 67 Intrapreneurs
Self determined goal setters ready to go beyond the call of duty and willing to do whatever it takes to achieve the objective combine Vision and Action combination of thinker, doer, planner, worker able to work cross-functionally and leverage available resources fish for opportunities that can converted to profitable reality put new ideas into action within established businesses Future leaders of new business divisions RK Sharma Intrapreneur Bridges Vision and Action Intrapreneur Planner Line Manager V Vision Worker Action Adapted from “Intrapreneuring”, by Gifford Pinchot 68 Intrapreneurship Model Hornsby, Naffziger, Kuratko & Montagno Individual Characteristics Risk Taking Propensity Desire for Autonomy Need for Achievement Goal Orientation Organizational Characteristics Participating Event Management Support Work Discretion Rewards/ reinforcements Time Availability Organization Boundaries Decision to act Intrapreneurally Business Feasibility Planning Ability to overcome Barriers Idea Implementation Resource Availability RK Sharma Intrapreneurship he concept of enhancing value creation capabilities of an organization by helping foster individual excellence, group synergy and collective transformation y gy integrated team work by a determined diversity of people towards finding and profitable implementation of ideas Can increase productivity, add value, help avoid stagnation, achieve growth and be a leader Makes work more interesting for employees Self Renewal Key for Organizational Longevity RK Sharma 69 Corporate Innovation Platforms Individual Intrapreneur Intrapreneurial Team Intrapreneurial Organization Product P d t Service Process Behavior Collaboration C ll b ti Market Efficiency Innovation Evolutionary Innovation Revolutionary Innovation RK Sharma Intrapreneurship Development
Guidelines for developing Innovative Philosophy Provide climate of innovation Use multiple approaches Encourage action by using informal meetings Expect clever sourcing and merger of ideas Reward innovation for innovation sake Put people on small teams for Future Oriented Projects Be Persistent in getting Idea to Market Tolerate and Celebrate Failures RK Sharma 70 Innovation Push (Philosophy) 3M – the 15% free time system – Genesis Grant to private innovators Caterpillar – Cross-discipline teams P&G Nokia Toyota Tata T t Hyundai HP – Connect & Develop Model – One third workforce is involved in R&D – Don’t think conservative in Conservative Industry – I Innometer ( t communicate urgency of Innovation) i t fI ti ) – Multiple Country Research and cross ideas – Leadership framework Strategy, Structure & Processes, Metrics & Rewards, Values and Behaviors RK Sharma Innovation Push (Projects) Walmart HP GE Hyndai BMW IBM – Reduce packaging by 5% – IT Ecosystem Lab (energy e c e t susta ab e cities) cosyste ab (e e gy efficient sustainable c t es) – Project Connectome (wiring map of human brain) – I-flow (greatly reduce greenhouse gas emissions) – Night Alert (infrared for distant objects on screen) – Toronto Hospital Collaboration (to minute gauge premature babies) RK Sharma 71 Intrapreneurial Strategy – Critical Steps Developing Vision
Identify specific objectives for venture development Make programs to achieve these objectives Communicate vision through actions Nurture experimentation Tolerate failures and learn from them Remain focused on customers Keep small divisions Motivate champions Share the wealth of knowledge Identify potential intrapreneurs early Provide autonomy and work discretion Incorporate flexibilities Provide time for trying new things Break organizational boundaries Extend rewards and reinforcements Designate a leader Set budget Provide support RK Sharma Encouraging Innovation Climate Structuring Developing Venture Teams Being an Intrapreneur Ten Commandments for Intrapreneurs : 1. 2. 3. Come to work each day willing to be fired. Circumvent any orders aimed at stopping your dream. y pp g y Do any job needed to make your project work, regardless of your job description. Find people to help you. Follow your intuition about people and work only with the best. Work underground as long as you can. Publicity triggers the corporate immune system. Never bet on a race unless you are running in it. Remember, it is easier to ask for forgiveness than for permission.
Be true to your goals, but be realistic about the ways to achieve them. Honor your sponsors. 4. 5. 6. 7. 8. 9. 10. RK Sharma 72 Corporate Venturing Obstacles Chemical Reaction of Corporate Immune system (-Pinchot) Standard Procedures Inflexible Long Term Planning Excessive Control Immediate ROI Concerns Inflexibility of Thought Uniform Compensation Promoting Compatible Individuals No Budgets for trying new things RK Sharma What Innovative Companies Do Diverse Portfolio of projects that help weather bad ideas and bad times Nurture culture of support Value and encourage creative people Focus on Product innovation, Process Innovation and Customer Experience Innovation Market Driving