NOTES ON THE PRACTICE OF CORPORATE ENTREPRENEURSHIP Charles Kiefer © August 2016 Notes on the Practice of Corporate Entrepreneurship Charles Kiefer © August 2016 If you are someone with the desire to do something innovative, unprecedented, unfamiliar, unusual or simply different within your organization, The Practice of Corporate Entrepreneurship should help you. What you want to do could take many forms. Maybe you have an idea you want to pursue that you think can make a difference to your customers or to your organization, or you might be looking for a way of standing out among your peers to advance your career. Whatever the case, you want to do it safely for all parties involved while maximizing the likelihood of success. Think of this document as a corporate entrepreneur’s survival manual. Although there are no recipes for success, by following the method advanced here, you will be much more likely to succeed (that is, of course, if your idea truly has merit.) The Practice of Corporate Entrepreneurship is a compendium of notes, readings, and other material that have been prepared by Leonard Schlesinger, Baker Foundation Professor at the Harvard Business School, and me for our entrepreneurship students at universities and inside large organizations. It addresses material that is uncovered elsewhere, for example in two excellent textbooks: Corporate Entrepreneurship by Paul Burns and Corporate Entrepreneurship and Innovation by Michael Morris, Donald Kuratko, and Jeffrey Covin, or in two particularly good books for the entrepreneurial individual: Eric Ries’s The Lean Startup and Bill Aulet’s Disciplined Entrepreneurship. Revisions. The corporate entrepreneurship field is developing rapidly and some of this material will likely become obsolete or otherwise need updating over time. You may have other comments, suggestions or requests, or you may simply like to be notified of revisions. If so, please visit http://www.innovationassociates.com/Practice-of-CE. Your email will not be used for other purposes. Rights of Use. Please pass these notes on to your friends and colleagues who can find them helpful. You are permitted and encouraged to make personal, noncommercial use of this work including the right to copy, distribute, and transmit, provided the authors are properly attributed. Not-for-profit educational institutions may use this work for classroom purposes. Please do not use this work in any manner that is intended for or directed toward commercial advantage or compensation such as corporate training or development without explicit permission, which you may obtain here http://www.innovationassociates.com/Practice-of-CE. Acknowledgments. We want to acknowledge and appreciate the contributions of our many students and clients, our co-author Paul B. Brown, our colleagues Wayne Delker, Heidi Neck, Cliff Bolster, and Ned Calder, and our editors Ellyn Kerr and Lauren Brosius. Terminology. As a matter of personal preference only, we will use Entrepreneur Inside (EI) instead of intrapreneur, corporate entrepreneur, internal entrepreneur, and others. And we will generally use New Venture Entrepreneur (NVE) for the classic entrepreneur acting on his or her own behalf instead of external entrepreneur, outside entrepreneur, and others. Table of Contents Introduction ................................................................................................ 1 What is entrepreneurship inside a large organization? ............................................................................ 1 Why corporate entrepreneurship? ............................................................................................................ 2 Part 1: Unprecedented and Unknown ............................................................ 4 ALB within the typical large organization ................................................................................................ 6 Part II: For the Individual—the Entrepreneur Inside ..................................... 8 Act Learn Build (ALB) – Inside a Prediction-Based Organization .......................................................... 8 Your Organization ................................................................................................................................... 19 Four Common Challenges ..................................................................................................................... 21 Your Personal Support System ................................................................................................................ 27 When to Use ALB ................................................................................................................................... 31 Internal Innovator Cost-Benefit Analysis ................................................................................................ 32 Courage ................................................................................................................................................... 34 Part III: For Managers and Executives ......................................................... 35 You’re not “the boss” ............................................................................................................................... 35 Manage Acceptable Loss ......................................................................................................................... 36 Navigate the Organizational System ....................................................................................................... 37 Acknowledge When You Don’t or Can’t Know ..................................................................................... 38 Targeted experimentation and Validated Learning ............................................................................... 39 Mind the Mixed Messages ...................................................................................................................... 39 Storytelling—Legitimize and Cheerlead (But not too much) ............................................................... 40 Desire ...................................................................................................................................................... 41 Develop Wisdom on When to Use Act, Learn, Build ............................................................................ 41 Trust, Trustworthiness, and Psychological Safety .................................................................................. 42 Part IV: Employing Entrepreneurial Thought and Action at the Enterprise Level ................................................................................ 44 Practically – How do you do it? .............................................................................................................. 44 Especially for the Executive .................................................................................................................... 49 Closing Thoughts ....................................................................................... 55 Glossary: Corporate Entrepreneurship Tools & Methods ............................... 56 Introduction In 2008, we began to research, develop, and build upon a set of ideas that seek to explain the logics of thought and action successful entrepreneurs use when creating businesses in conditions of high uncertainty. Over the course of five years, we held seminars and workshops in various settings for hundreds of people who were interested in the subject, and we summarized what we learned from these practitioners in our book Just Start—Take Action, Embrace Uncertainty, Create the Future (Harvard Business Review Press, 2012). That book built on the groundbreaking research of Saras Sarasvathy at the University of Virginia’s Darden School of Business on entrepreneurship as a method. Follow-on research* at Babson College posited that Entrepreneurs Inside (EI) use precisely the same logic, although in different ways, as a consequence of being inside a larger organization of which they’re not owners. Moreover, it became clear that the logic was being widely applied by people trying to do something innovative or unprecedented in an organization even when not in the pursuit of a new business. In Just Start we coined the term Creaction for the logic that entrepreneurs use when they embark on a venture. We've changed the term here to Act Learn Build (ALB) because it emphasizes action and building off the last step taken rather than some previously constructed plan. Entrepreneurial products emerge from the interaction between the entrepreneur and their customers or users. In this way, the entrepreneur is like a painter—the painting emerging from the interaction between the artist, the paint and the canvas. We are convinced that the intelligent understanding and application of the ALB logic can dramatically increase the likelihood of success for any venture into the unknown. The logic in part explains why entrepreneurs do the things that they do and why the myriad tools and methods of corporate entrepreneurship (CE) may or may not be effective in helping you and your organization become more entrepreneur friendly. What is entrepreneurship inside a large organization? For many firms entrepreneurship is now appearing, often reluctantly, on the agenda of executives leading companies and for people joining those firms or advising them. Large organizations and many business schools are trying to learn about it. While there are many definitions of CE it has generally been about