Skip to main content
main-content
Top

About this book

This leading core textbook, authored by a recognised authority on the subject, covers entrepreneurial transformation in larger organizations and shows how this can be achieved by building an organizational architecture that encourages creativity, innovation and entrepreneurship. Drawing together research from a number of business disciplines and combining this with numerous corporate examples, this innovative text explains how to create an organization that fosters entrepreneurship and how an entrepreneurial organizational structure manifests itself in different industries and companies. Written in a coherent and engaging style, this book offers an accessible combination of theory and practice that encourages students to approach the subject both critically and creatively.
This is an essential textbook for students studying Corporate Entrepreneurship at upper undergraduate and postgraduate level on Entrepreneurship and Business & Management degree programmes. The book also caters for students of Entrepreneurship in Engineering and Technology Management departments, and for all those studying Strategy, Innovation and Leadership.

Table of Contents

Entrepreneurship

Frontmatter

Chapter 1. The Entrepreneurial Revolution

Abstract
The old world order has changed and continues to change. Economic power is moving east from the USA and Europe to China and India. If the most startling evidence of this was the financial crisis of 2008/9, followed by the recession that engulfed the mature western economies, the seeds of the change were sown much earlier. The twenty-first century has seen enormous turbulence and disruption. There have been unpredictable shocks such as the terrorist attack on the twin towers in New York in 2001 followed by attacks in London, Bali, Madrid and Mumbai and the wars in Afghanistan and Iraq. The upheavals caused by the so-called Arab spring’ of 2011 have continued to affect the Middle East. There have been natural disasters like the Icelandic volcano in 2010 and the earthquake and tsunami in Japan in 2011. There have been enormous shocks to the international monetary system precipitated by the financial crisis of 2008/9 which particularly affected Iceland in 2008 and then Portugal, Ireland, Greece and Italy in 2010/11 and subsequently the entire Eurozone. There have also been some spectacular corporate failures from Lehman Brothers in the USA to Royal Bank of Scotland (RBS) in the UK. Corporate integrity has come to be questioned. In the USA the unexpected failure of Enron, one of the most admired firms of the 1990s, in 2001 became a benchmark for management greed and lack of integrity. But such scandals were not confined to the USA. Parmalat in Italy became the largest bankruptcy in Europe in 2003. The Olympus scandal of 2012 in Japan led to prosecutions. Alongside this the twenty-first century has seen unprecedented volatility in just about every market from commodities to exchange rates, from stock markets to bond markets. And underpinning this volatility is the uncertainty surrounding climate change and whether we have reached a ‘tipping point’ in global warming.
Paul Burns

Chapter 2. Entrepreneurial DNA

Abstract
In order to understand the nature of corporate entrepreneurship we need to understand entrepreneurs themselves. We need to analyze their very DNA and be able to replicate it in a larger organization. Entrepreneurs shape the organization they start up. They dominate it to the extent that it takes on many of their personal characteristics through its culture. Entrepreneurs have a particular and characteristic approach to doing business and managing the organization, and their management style also influences the organizational culture. They approach decision-making and strategy formulation differently.
Paul Burns

Organizational architecture

Frontmatter

Chapter 3. Entrepreneurial Architecture

Abstract
The challenge for corporate entrepreneurship is to transplant the entrepreneurial DNA outlined in the previous chapter into a large, established organization, using frameworks appropriate to large organizations. Individuals within the organization need to be infused with this DNA. As we have already noted, the ‘entrepreneurial transformation’ school of thought believes this can be done through appropriate leadership, strategies, systems, structures and cultures. In this chapter we start building this framework into what we call an entrepreneurial architecture.
Paul Burns

Chapter 4. Becoming an Entrepreneurial Leader

Abstract
Leading and managing an entrepreneurial organization is a challenge that requires some distinctive skills and capabilities. Leadership and management are different and distinct terms, although the skills and competencies associated with each are complimentary. Management is concerned with handling complexity in organizational processes and the execution of work. It is linked to the authority required to manage, somehow given to managers, within a hierarchy. Back in the nineteenth century Max Fayol defined the five functions of management as planning, organizing, commanding, coordinating and controlling. Today, these sound very much like the skills needed to lead a communist-style command economy. Fayol’s work outlined how these functions required certain skills which could be taught and developed systematically in people. Management is therefore about detail and logic. It is about efficiency and effectiveness.
Paul Burns

Chapter 5. Constructing the Entrepreneurial Culture

Abstract
Culture is an illusive concept. Any group, family, organization, even a nation, has its own culture — all interacting and influencing each other. Culture is about the prevalent norms, basic beliefs and assumptions about behaviour that underpin that group. Culture is important because it manifests itself in the way people are inclined to behave. Hofstede (1980) defines it as the ‘collective programming of the mind which distinguishes one group of people from another’. Culture is therefore based upon hidden and unspoken assumptions about the ‘right’ way to behave. It is a pattern of taken-for-granted assumptions and beliefs shared by individuals collectively about who they are.
Paul Burns

Chapter 6. Building the Organization Structure

Abstract
Chapter 2 highlighted the limitations as well as the advantages of the spider’s web organizational structure, so beloved by entrepreneurs. As an organization grows greater structure becomes vital. It creates order and allows coordination of complex tasks. There is no one ‘best’ structure and with too much structure comes the danger of bureaucracy. As we shall see in this chapter, the most appropriate structure depends on many factors including:
  • The nature of the organization;
  • The strategies it is employing;
  • The tasks to be undertaken;
  • The technology it uses;
  • The cultures it wishes to encourage;
  • The environment in which it operates;
  • The size of the organization.
Paul Burns

Management

Frontmatter

Chapter 7. Managing the Entrepreneurial Organization

Abstract
Warren Bennis (2009) once said ‘Managers are people who do things right whilst leaders are those people who do the right thing’. The reality is that effective leadership is of little use without effective management to complement it and make things happen. Managers have to implement the policies and procedures to make an organization entrepreneurial. In doing that, they will face a number of predictable challenges that characterize the entrepreneurial environment; managing change and managing risk. They will also have to deal with the tension between freedom and control that is inherent in giving staff the autonomy they need in this sort of organization.
Paul Burns

Chapter 8. Encouraging Intrapreneurship and Corporate Venturing

Abstract
Internal corporate venturing is concerned with how to encourage and manage new, entrepreneurial businesses whilst aligning them to the larger company’s existing activities. They might be managed separately from the mainstream activity and eventually they might be ‘spun off’. Internal corporate venturing needs to be distinguished from external corporate venturing which is about acquiring other, usually smaller, companies that have innovations that the acquiring company wishes to own (covered in Chapter 11). Intrapreneurship is one aspect of internal corporate venturing that has gained prominence and, indeed, it is an important strategic tool for the entrepreneurial organization seeking to encourage innovation. It can be practised both individually and in teams.
Paul Burns

Strategy

Frontmatter

Chapter 9. Developing Strategy

Abstract
In many ways how strategy should be developed is the most distinctive feature of an entrepreneurial organization. In Chapter 2 we characterized this approach as developing a strong vision that helps to build a strategic intent within the organization so that it is continually strategizing at all levels, meaning that strategy will often be seen externally as emergent. However, there are always strategic options that the organization will have thought through and developed. Decision-making is then based upon opportunistic circumstances at the time, meaning that it will often be seen externally as incremental.
Paul Burns

Chapter 10. Creating Competitive Advantage in Mature Markets

Abstract
This chapter looks at competitive advantage at the product/market level. To an economist competitive advantage is a temporary state of disequilibrium between competing firms. It is therefore something that is created either by changes in the market or changes in one of the competing firms. At the corporate level entrepreneurial architecture is valuable because it can both create change internally through innovation and create an ability to react to external change in the market. It is able to create and recreate competitive advantage, thereby making it sustainable and difficult to copy. However, even as an entrepreneurial firm might move from one new product/market configuration to another, it leaves behind it an existing market in which it must compete. For many large firms this involves a multi-business form of organization. And in competing within existing markets the factors underpinning competitive advantage need to be understood, even if they are ultimately copiable, because competitive advantage in existing markets can be extended.
Paul Burns

Chapter 11. Building Value through Acquisitions and Diversification

Abstract
This chapter is about two related but different things: acquisitions and diversification. As we shall see, corporate acquisitions or mergers can be undertaken for many reasons. However, sometimes they are undertaken for the purpose of diversification and acquisition is the implementation strategy. Internal corporate venturing can also result in diversification. Diversification involves moving from core areas of activity into completely new and unrelated product/market areas. Diversification, as such, is central to the process of corporate evolution. As products come to the end of their natural life cycles, the longevity of any particular organization will depend on its ability to innovate and in so doing eventually redefine the business it is in, applying existing capabilities to developing new products, perhaps new industries and buying in those capabilities when necessary. It is part of the process of corporate entrepreneurship.
Paul Burns

Creativity and innovation

Frontmatter

Chapter 12. Exploiting Innovation

Abstract
Innovation is at the heart of entrepreneurship. Entrepreneurs use it to create change and opportunity. They use it to create competitive advantage. And, occasionally, they use it to create entirely new industries. Firms that grow do so because they innovate in some way. Cannon (1985) points out that ‘the ability of the entrepreneurial mold-maker to break free from bureaucratic rigidities, fan the flames of innovation and create new situations has been the basis of the growth of many of today’s great corporations’. For all firms, of any size, innovation has become something of a Holy Grail to be sought after and encouraged. And the same applies to nations as they strive to see their economies grow. As Michael Porter said in The Competitive Advantage of Nations (1990): ‘invention and entrepreneurship are at the heart of national advantage’. But what is the difference between invention and innovation?
Paul Burns

Chapter 13. Generating Creative Ideas

Abstract
Creativity is a key ingredient in the entrepreneurial architecture. It is part of spotting market opportunities and is essential in generating all innovations. It underpins the development of disruptive innovation. It has been estimated that for every eleven ideas that enter the new product development process, only one new product will be successfully launched (Page, 1993). So, new ideas are at a premium and it is a numbers game: the more you generate the more are likely to see the light of day commercially. Entrepreneurial architecture must encourage creativity. But creativity is essentially an individual activity that relies on tacit knowledge (see Chapter 6). Tacit knowledge is embedded in minds and activities so it is difficult to share and primarily an individual activity. The organizational architecture should therefore stimulate individual creativity and learning — tacit knowledge — and facilitate the translation of this into the products and services that the market values (Grant, 1996). This chapter will therefore look at both of these aspects — encouraging individual creativity and the sort of organizational structures and facilities that will enable this. However, we can get some valuable clues about how to nurture creativity by looking at successful entrepreneurs and how they go about generating new ideas.
Paul Burns

Chapter 14. The Architecture of Corporate Entrepreneurship

Abstract
So just what does an entrepreneurial organization look like? Whilst there is no one-size-fits-all blueprint, there are some elements that mean you really will know one when you see one. To start with, it will be creative and innovative, priding itself on its ability to thrive in a competitive, changing environment. Indeed it will see itself as helping to shape that environment. And it will be successful. But there will be other internal characteristics reflecting an organizational architecture that encourages entrepreneurial, innovative activity at all levels. Remember, however, that not all parts of a multi-business organization may exhibit these characteristics because of differences in their operational needs (for example, the stage in the life cycle of products) and/or their contextual situations (for example, they do not operate in an entrepreneurial environment). We have characterized the entrepreneurial environment as one of rapid change and uncertainty where speed of response and innovation are vital and knowledge and learning are of paramount importance. Where a multi-business has different organizational needs in its various operating divisions or subsidiaries, what is important for it to be entrepreneurial is that the overarching structure linking the operating divisions or subsidiaries has an entrepreneurial architecture.
Paul Burns
Additional information