1

Corporate Entrepreneurship
and Innovation

Chapter 1
Entrepreneurship – thriving in chaos

CEI
 2

Making an enduring
company is both far
harder and more
important than making
a great product
Steve Jobs, 1955 - 2011
founder Apple Corporation
 3

Causes of change
Global warming
 Environmental & social sustainability (CSR)
Technology
 Shift from industrial to knowledge-based economies
 Global connectivity & communication
• Deconstruction of value chains
• Data monetization & mining
 Decreasing fixed costs in some industries
Competition
 Global competition but increasing concentration & consolidation
in some industries
 Competition from entrepreneurial smaller firms
 Shift from economies of scale to economies of scope & market
niches
Social trends
 Corporate scandals and accountability
 Increasing complexity
 4

CASE
insight
Jack Ma and Alibaba

Can China produce

another Jack Ma or
has the commercial
and political
environment changed
too much?

Ma
 5

Scaling laws
Exponential growth
When
of linearyou double
scaling the
number of cells in an
Size Size
Convergence organism the number of
of growth with capillaries increases by
sub-linear only 75% - sublinear scaling
scaling

Super exponential Collapse characteristics

growth of super-linear of super-linear
scaling scaling when
Size Size
resources
are scarce
 6

Scaling laws
Exponential
growth of linear
Size
scaling

Convergence
of growth with
sub-linear scaling

Super exponential
When you double
Collapse the size of
characteristics
growth of super- a city the infrastructure
of super-linear
scaling by
needed increases when
85%.
linear scaling Size
resources
BUT the number of
are scarce
socioeconomic outputs
(wages, patents, crimes,
restaurants etc.) increases by
115% - super-linear scaling
 7

Scaling laws
Exponential
growth of linear
scaling
Convergence
of growth with
sub-linear
scaling

Super exponential Collapse characteristics

growth of super- of super-linear
linear scaling Size scaling when
resources
are
scarce
 8

The average life expectancy

of a multinational company is
40-50 years
The half-life* of a US publicly
traded company is only
10 years

Geoffrey West

*Time needed for the amount of The Mortality of Companies, Journal

something to fall to half its initial value of the Royal Society Interface, 2016
 9

The life cycle of a company

tends to follow much more
that of an organism, growing
quickly at the beginning &
then turning over & becoming
static … dominated by this
economy of scale
Geoffrey West

The Mortality of Companies, Journal

of the Royal Society Interface, 2016
 10

It’s no accident that when you

become a massive company,
your R&D is a tiny part of the
enterprise

Cities tolerate crazy people

– companies don’t

Cities may live forever

– but companies die Geoffrey West

The Mortality of Companies, Journal

of the Royal Society Interface, 2016

West
 11

Griener’s growth model

Crisis of
Bureaucracy
Crisis of
Control
Crisis of
Autonomy
Crisis of
Leadership Collaboration
Co-ordination
Delegation
Direction
Creativity

Growth
 12

Character traits of entrepreneurs

High drive &
determination

High need for High need for

achievement independence

High acceptance High creativity,

of measured risk innovation &
& uncertainty opportunism
High internal
locus of control
 13

Big Five Model

 Openness – creativity, change, diversity

& new experiences
 Extraversion – outgoing, talkative,
energetic social interaction
 Conscientiousness – self-regulating,
self-disciplined, achievement orientated
 Agreeableness – harmony, altruism,
trusting, not competitive
 Neuroticism – fear, guilt, worry, stress

Big 5
 14

CASE
insight
Kiran Muzumdar-Shaw and Biocon

How typical is this

story? What are the
chances of becoming
a millionaire by
starting your own
business?

Muzumdar-Shaw
 15

CASE
insight
Jim Ratcliffe and Ineos

1. Does Jim Ratcliffe

display entrepreneurial
character traits?
2. Is Ineos an
entrepreneurial
company? Explain
3. Is there a difference?
Explain

Ratcliffe
 16

Informal spider’s web of control

 17

Strategy formulation
Emergent strategy formulation

Growth Crisis

Emergent Deliberate
strategy strategy
formulation formulation

Consolidation

Strategizing
 18

How entrepreneurs manage

 Relationships – strong networks of relationships
inside (‘in-group’) & outside the organization
– building identity & relationships
 Loose control but mitigate risk through information
& knowledge, coming from structures & external
partnerships
– using information & relationships
 Emergent strategies & incremental decision-making,
based on continuous strategizing, generates
strategic options based on information & knowledge
underpinned by strong strategic intent
– building purpose & direction using
information & relationships
 19

Complexity theory

 Seeks to explain how complex systems work

 They are the result of multiple independent
actions – unpredictable & small actions at
one level that can have
large-scale unexpected
consequences elsewhere
 There is no stable
equilibria in these
situations – change
can become continuous
& unpredictable
 20

Complexity theory & the

requirements for self-organization

 Common identity
& purpose
 Free flow of
knowledge &
information
 Strong personal
relationships

Complexity theory
 21

CASE
insight
Steve Jobs & Apple

1. What entrepreneurial
qualities or characteristics
did Jobs exhibit?
2. Why was he so successful?
How much of his success
was just good luck?

Obituaries
 22

Activities
1. Critically analyze the political, economic, societal,
technological, environmental & legal (PESTEL) trends that you
predict over the next 5 years. Discuss with the class which will
have the biggest effect on you & which will have the biggest
effect on companies. Discuss with the class which pose the
biggest threats & opportunities to companies
2. Identify two large organizations that you would describe as
entrepreneurial & explain. Are they commercially successful?
Analyze the reasons for this