Venture Concept

The venture concept is the more fundamental part of the business idea. Broadly speaking, the business idea has two parts,
The venture concept & The business model associated with the venture concept.

For the venture concept to be effective and valid, the key elements of the must fit and blend together, to make a powerful result. Each of the elements must make sense individually and together.

Cont..
The venture concept includes the following elements;
Insight into the customer and users The primary problems or activities of the customers that the venture seeks to solve improve or otherwise address The ventures basic commercial offerings; that is its products, systems, services etc The competitive positioning of the venture and its commercial offerings

Capturing strategic value of the Venture

Value creation and value capture are the manner in which the firms create and maintain sustainable competitive advantages.
Value capture is the process of ensuring that the innovations which the firm has made (or industry innovations), becomes a sustainable advantage for the company. That is the manner in which the firm safe-guards and monetizes the innovations. Value creation is the process of developing innovations and synergies that has the potential of being the firms sustainable competitive adv.

Cont..
If the strategic value created is not captured, it will not become a sustainable competitive advantage for the company. It will mostly result only in increase in industry revenues and no profits for the company.

The value creation & capture matrix

Value Creation High Low
Nightmare Hell Heaven Dream

Low

High

Value Capture

Companies Capturing and Not capturing Strategic Value

Captured Strategic Value GE (Recording Industry under Thomas Edison) Dell Schwab Cisco Apple Google Face book 3M Not Captured Strategic Value Napster Netscape version of Mosaic Browser

Venture Vision
The top management should not only have a clarity on the venture vision but should also clearly articulated, because its success depends strongly on the creative talents within the organisation. The employees then develop specific objectives based on this vision. This shared vision is a critical element of the strategy.

Cont..
The shared vision creates the following advantages;
Belonging: Having a purpose beyond the daily work. Relationships: Mutual trust and a supportive basic attitude prevail. Structure: Local initiative and central synthesis Commitment: Active and committed participation of employees.

Product development-testing-release of technology products

Pre-alpha stage Alpha stage and testing Beta stage and testing Release candidates (RC1, RC2, RC3) Release Versions

Intrapreneurship
Vinod Joseph Lecturer KJC

Intrapreneurship
Intrapreneurship can be defined as entrepreneurship within an existing business structure/ organisation and it tries to develop the entrepreneurial spirit within the existing organisation.

Cont..
Independent venture capital based start-ups by entrepreneurs tend to out perform Corporate start ups significantly. On an average these independents become profitable twice as fast and end up twice as profitable. However having an organisational back-up has both advantages and disadvantages for the intrapreneurial activities.

Organisational Setup for Intrapreneurship

Advantages
Strong financial resources Business Skills Marketing and Distribution systems to commercialise the innovation successfully

Disadvantages
The bureaucratic structure Emphasis on short term profits Highly structured organisation

Establishing Intrapreneurship in Organisations

1. Secure commitment of top, upper and middle management 2. Identification of ideas and general areas of interest to top management 3. Use of technology 4. Training of the employees and develop entrepreneurial teams 5. Get closer to the customer

Cont..
6. Become more productive oriented 7. Establish a support structure for intrapreneurship 8. Make the reward systems 9. Implement an evaluation system

Developing Intrapreneurial Climate in Organisations

For developing an Intrapreneurial Climate, the organisation should lay emphasis on all any of the following New Business Venturing Innovativeness Self-Renewal Pro-activeness

New Business Venturing

Also called Corporate Venturing Refers to creation of new business within existing organisation It provides value by redefining the companies current products or services, by developing new markets or by forming autonomous and semi-autonomous units.

Innovativeness
Refers to product or service innovation with emphasis to innovation in technology It includes new product development, product improvements, new production methods and procedures.

Self Renewal
Transformation of the organisation through renewal of the key ideas on which they are built It has a strategic and organisational change connotation It includes redefining business concept, reorganisation and introduction of system wide changes to increase innovation

Pro-activeness
Tries to build the pro-active spirit in the organisation and be market leaders than followers. Therefore the organisation is market leaders in introduction of new product/services, operating technologies and administrative techniques. Encourages initiative and risk taking and does a lot of experiments The top management are aggressive and bold in pursuing oppurtunities

Best Intrapreneurial Firms

3M HP IBM Xerox

3M
3M: Minnesota Mining and Manufacturing 3M allows its employees to devote 15% of their time to independent projects. Its goal is to generate a significant percent of its sales form new products Eg, Post It notes: 800 million dollars business developed out of a failed product. [Very low sticking adhesive]

HP
Learned to be entrepreneurial after bitter experience of rejecting Steve Jobs and Woznaiks proposal for Personal Computer. Made the innovative high quality video monitors used for manned moon landings. Expected sales was 30 units, but sold 17000 units at 35 million dollars.

IBM
IBM has decided that Intrapreneurship should spur Corporate growth. Developed the concept of independent business units working as a separate organisation with its own mini board of directors with decision making authority in manufacturing and marketing issues. These have developed products such as ATM, Industrial Robot and IBM Personal Computer. IBM Personal Computer division was given a blank cheque.

Xerox
Has formed the XTV [Xerox Technology Ventures] The company generates profit by investing in promising technologies, and was started by a 30 million dollar fund. It has developed more than 30 products of which only two have failed.

Organisational Entrepreneurship
Can be studied as under ;
Corporate

Entrepreneurship Intrapreneurship Corporate Venturing

Corporate Venturing Definition

1) The practice of a large company, taking a minority equity position in a smaller company in a related field, or establishing a joint venture with a smaller business to benefit from the smaller organisation. Or 2) The undertaking of an investment initiative by a commercial organisation to gain experience of a new technology or an unfamiliar market.

Organisational designs for Corporate Entrepreneurship

STRATEGIC IMPORTANCE
VERY IMPORTANT UNCERTAIN NOT IMPORTANT

UNRELATED

OPERA TIONAL RELATE DNESS

PARTLY RELATED

Special Independent Business Units Business Units New Product/ New Venture Business Division Department
Direct Integration Micro New Ventures Department

Complete Spin Off Contracting

STRONGLY RELATED

Nurturing & Contracting

Corporate Entrepreneurship Definition

Corporate Entrepreneurship is the process whereby an individual or a group of individuals in association with existing organisation, creates a new organisation or instigates renewal or innovation within that organaisation.

Necessity of Corporate Venturing

Corporate Renewal Shaking up Core rigidities Better utilization of resources Entrepreneurial Culture Tax Relief [Investment, Deferred, Loss] Start new businesses Implements strategy of Co New growth avenues Minimizes Risk Doesnt lose focus on present business Absorb new technology Better exploitation of Intellectual Property New Revenue streams for the company Exit present business in phased manner

Misconception and excuses of Corporate Venturing

Misconceptions

The idea of venturing is irrelevant to the business The idea that venturing is too expensive The idea that venturing is too risky

Misconception and excuses of Corporate Venturing

Excuses for not undertaking Corporate Venturing
Applicable only for disruptive technologies Is not for Mature or Brick & Mortar Companies Value is difficult to measure and tough to Capture Instead in house R & D is better Affordable only in Bull Market The CV bubble burst along with internet bubble burst Already tried (once) and did not work Fail too often to be viable

Environment for Corporate Venturing

Three essentials are required in the corporate environment to foster corporate venturing;
Leadership that communicates a unifying vision and strategy for achieving it. An organisational culture that encourages and supports initiative and innovative behavior The skills and management practices required for managing both individual ventures and organisations overall venturing activity

Cont..
The six stages given below constitute the venturing process model and these need to be adopted to the corporate environment to design and mange the venturing process;
Laying the ground work for venturing Choosing the ventures Plan, organize and start the venture Monitor and control the venture Champion the venture Learn from experience

Cont...
Do not try to imitate other companies success environment and practices, they need to be adopted by respecting the character of each (your) individual company Other aspects to promote CV are flexibility in planning, inter departmental co-operation, avoid multiple approval levels and inappropriate controls, compensation-performance & evaluation which promote corporate venturing.

Comparison of Traditional Mangers, Entrepreneurs, Intrapreneurs

S/N Features Traditional Mangers Entrepreneurs Intrapreneurs

Primary Motives

Promotion and other awards of office, power etc Short term- Meetings, budgets, weekly, monthly, yearly planning horizons Delegates and supervises more than direct involvement

Independence and Oppurtunity to make money Survival and achieving 5-10 years of busniess growth Direct Involvement

Independence & ability to advance in Corporate rewards Between the twoDepends on urgency and corporate t Direct involvement more than delegation Moderate risk taker. Not concerned about traditional status symbols. Desires Independence Attempts to hide risky projects from view until ready Able to get others to agree to help achieve dream Self, Custtomers and Sponsors Entrepreneurial, Small business, professional or Farm background Transactions within hierarchy

Time orientation

Activity

Risk Status

Careful. Cocerned about status

Moderate risk taker. No concern about status symbols Deals with mistakes and Failures Follows dream with decisions Self and Customers Entrepreneurial, Small business, professional or Farm background Transactions and Deal Making.

Failure & mistakes

Tries to avoid mistakes and surprises Usually agrees with those in Upper Management positions Others Family members worked for large organisations Hierarchy as basic relationship

Decisions

Who Serves

Family History Relationship with others

Corporate Vs Intrapreneurial Culture

S/N
1

Feature
Decision Making

Traditional Corporate Culture

Conservative approach.Based on large amounts of data. Risky decisions are postponed Adhere to instructions. Do not make mistakes. Do not fail. Do not take initiative but wait for instructions. Stay within your environment Not conducive for creativity, flexibility, independence and risk taking Hierarchial structure with procedures, reporting systems, instuctions, lines of authority. Discourages entrepreneurship Employees build barriers to protect their turf. Distrust is developed between them. Develops traditional managers whose mangement style is that of administration

Intrapreneurial Culture
Initiative in approach. Based on personnel responsibility. Emphisis on experimentation Develop vision and goals. Develop action plans and rewards. To suggest try and experiment. To create and develop regardless of area. To take responsibility and ownership Conducive for creativity, flexibility, independence and risk taking Flat stucture with emphasis on networking, team work, sponsors and mentors. Encourages entrepreneurship Trust and counsel. Tasks viewed as fun events and not work. Employees gladly put long hours. Develops intrapreneurs who are less beurocratic and more market oriented

Guiding Principles/ Directives

Conduciveness

Organisational Structure

Atmosphere

Result on Individuals