business filed CORPORATE VENTURING

   Assessment Task Three Assignment Three – Individual Report – Your final assessment has a maximum 2000 word limit and will be structured in the following manner – Introduction, Current Situation, Proposal, Conclusions, Recommendations, References (minimum of 15 references), and Appendices. Scenario You have been contracted by the major shareholders at General Motors (USA) to provide an accurate and current analysis of their Holden subsidiary. You must provide a rescue plan for Holden that focuses on the development of a new venture. The proposed venture must create rapid revenue growth and this venture must have synergies with GM’s core competencies. Your report will briefly analyse competitors/the market to identify an opportunity, then it will explain how this venture will be established (type of Corporate Venturing), the expected impact it will have on the overall organisation, and an analysis of foreseeable problems, as well as proposed solutions, a timeline for implementation, and the expected resources required. This assignment is based on a real organisation and must reflect the reality of the situation in which it currently finds itself. The proposal and recommendations sections are the most important parts of this assignment. The assignment grade will reflect your ability to analyse GM’s situation as well as examining your ability to provide an innovative new venture proposal. Grading Criteria and Feedback 1. Assignment three will be treated as an open-¬¬book examination. 2. This assignment will be graded on your ability to demonstrate deep knowledge of the subject content. 3. Your mark will reflect your familiarity with the case contents as well as your ability to answer the ‘how’ and ‘why’ questions. 4. These cases will be read and discussed during the course of the semester. Your ability to answer the assignment questions wil l be a reflection of your understanding of the material covered during the semester. 5. Do NOT repeat large parts of the case. This assignment requires you to analyse these cases, not repeat their content. 

IBU5COV Ethics Exercise – The ethical reasoning inventory (self assessment) Indicate how well each of the following statements reflects your attitudes or behaviour, using the following scale: Strongly Disagree = SD (5) Disagree = D (4) Neutral = N (3) Agree = A (2) Strongly Agree = SA (1) Statement Score 1. When applying for a job, I would cover up the fact that I had been fired from my most recent job. 2. Cheating just a few dollars in one’s favour on an expense account is OK if a person needs the money. 3. Employees should not inform (tell) on each other for wrongdoing. 4. It is acceptable to give approximate figures for expense account items when one does not have all the receipts. 5. I see no problem with conducting a little personal business on personal time. 6. Just to make a sale, I would stretch the truth about a delivery date. 7. I would fix up a purchasing agent with a date just to close a sale. 8. I would flirt with my boss just to get a bigger salary increase. 9. If I received $100 for doing some odd jobs, I wouldn’t report it on my income tax return. 10. I see no harm in taking home a few office supplies. 11. It is acceptable to read the E-mail messages and faxes of other workers, even when not invited to do so. 12. It is acceptable to call in sick in order to take a day off, even if only done once or twice a year. 13. I would accept a permanent, full-time job even if I knew I wanted the job for only six months. 14. I would not check company policy before accepting an expensive gift from a supplier. 15. To be successful in business, a person usually has to ignore ethics. 16. If I felt physically attracted toward a job candidate, I would hire that person over a more qualified candidate. 17. On the job, it is not important to tell the truth all the time. 18. It is ok to copy Software, even if it is unauthorized by the publisher. 19. I would authorize accepting an office machine on a 30-day trial period, even if I knew we had no intention of buying it. 20. I would accept credit for a co-worker’s ideas. Scoring: Obtain you score by adding the numbers Total Score

Journal of Leadership and Organizational Studies, 2007, Vol. 13, No. 4 Entrepreneurial Leadership in the 21st Century Guest Editor’s Perspective Donald F. Kuratko Indiana University – Bloomington The past thirty years have witnessed the most powerful emergence of entrepreneurial activity in the world. Entrepreneurs are now described as aggressive catalysts for change in the world of business; individuals who recognize opportunities where others see chaos, contradiction, or confusion. They have been compared to Olympic athletes challenging themselves to break new barriers, to longdistance runners dealing with the agony of the miles, to symphony orchestra conductors who balance the different skills and sounds into a cohesive whole, or to top-gun pilots who continually push the envelope of speed and daring. The U.S. economy has been revitalized because of the efforts of entrepreneurs, and the world has turned now to free enterprise as a model for economic development. The passion and drive of entrepreneurs move the world of business forward as they challenge the unknown and continuously create the future (Kuratko, 2002). Several methods have been used to measure the impact of entrepreneurial ventures on the economy—for example, efforts to start a firm (which may not be successful), incorporation of a firm (which may never go into business), changes in net tax returns filed (reflecting new filings minus filings no longer received), and a substantial amount of full-time and part-time self-employment. According to the Small Business Administration, 672,000 new businesses were created in 2005; the largest in US history (even 12% higher than the infamous “dotcom” explosion). More significantly, 74 million Americans stated they plan to start a new venture within the next five years while an additional 199 million Americans plan to start a venture someday. (The Small Business Economy, 2006) Women – owned ventures increased from 5.4 million in 1997 to 7.7 million in 2006. (Center for Women’s Business Research, 2007) The non-profit Tax Foundation reports that entrepreneurs pay more than 54% of all individual income taxes. In addition, 60% of all corporate tax returns are from SCorporations. In the highest individual tax bracket, 37% are current entrepreneurs (The Tax Foundation, 2007). Approximately one new firm with employees is established every year for every 300 adults in the United States. As the typical new firm has at least two ownersmanagers, one of every 150 adults participates in the founding of a new firm each year. Substantially more—one in 12—are involved in trying to launch a new firm. The net result is that the United States has a very robust level of firm creation. These numbers make it clear that entrepreneurial ventures are dominating the US economy…..truly an entrepreneurial economy. Entrepreneurship has become the symbol of business tenacity and achievement. Entrepreneurs’ sense of opportunity, their drive to innovate, and their capacity for accomplishment have become the standard by which free enterprise is now measured. We have experienced an Entrepreneurial Revolution throughout the world. This revolution is becoming more powerful to the twenty-first century than the Industrial Revolution was to the twentieth century. Entrepreneurs will continue to be critical contributors to economic growth through their leadership, management, innovation, research and development effectiveness, job creation, competitiveness, productivity, and formation of new industry. (Kuratko & Hodgetts, 2007) Yet, in the midst of this “revolution,” it is my belief that entrepreneurship is more than the mere creation of business. Although that is certainly an important facet, it’s not the complete picture. The characteristics of seeking 2 Journal of Leadership and Organizational Studies Kuratko opportunities, taking risks beyond security, and having the tenacity to push an idea through to reality combine into a special perspective that permeates entrepreneurs. An entrepreneurial perspective can be developed in individuals and it can be exhibited inside or outside an organization, in profit or not-for-profit enterprises, and in business or nonbusiness activities for the purpose of bringing forth creative ideas. Thus, entrepreneurship is an integrated concept that permeates our society and individuals in an innovative manner. It is this perspective that has revolutionized the way business is conducted at every level and in every country. It is a perspective that has reinvigorated individuals to once again reach into their inner self to find the innovative spirit that resides in all of us. It is, in effect, the essence of entrepreneurial leadership. The Global Impact of Entrepreneurial Leadership The Global Entrepreneurship Monitor (GEM), which is a unique large scale long term project developed jointly by Babson College, London Business School, and the Kauffman Foundation, reaches 40 countries worldwide and provides annual assessment of the entrepreneurial environment of each country. The latest Global Entrepreneurship Monitor divides countries into middle and high-income clusters; findings show a strong variation across clusters both in frequency and quality of entrepreneurial activity. Middle income nations such as Venezuela (25%) and Thailand (20.7%) outperformed high income countries like Japan (2.2%) and Belgium (3.9%) in early-stage entrepreneurial activity. The political, legal, and cultural environment directly impacts their activity and their ability to contribute to the economic development of their country. A major component of GEM is the platform it provides governments to develop more effective entrepreneurial policies and best practices. In general, countries with healthy and diversified labor markets or stronger safety nets in terms of social welfare provisions can be more selective in the kinds of businesses they choose to start….and have higher ratios of opportunity to necessity-driven motivation. Denmark comes in number one with a 27 to 4 ratio of early-stage opportunity to early-stage necessity ventures. Overall, every study continues to demonstrate that entrepreneurs’ ability to expand existing markets, create new markets, and establish entrepreneurial ventures at a breathtaking pace impacts individuals, firms and entire nations. (Minniti & Bygrave, 2004; and Morris & Schindehutte, 2005) The world economy has achieved its highest economic performance during the last ten years by fostering and promoting entrepreneurial activity. This global success has at least three key components. First, large firms that existed in mature industries have adapted, downsized, restructured, and reinvented themselves during the last decade. As these large firms have become leaner, their sales and profits have increased sharply. For example, General Electric cut its work force by 40 percent, from more than 400,000 20 years ago to fewer than 240,000 workers today, while sales increased fourfold, from less than $20 billion to nearly $80 billion over the same period. Many of these larger firms are now thriving because they learned to become more entrepreneurial. Second, while these large companies have been transforming themselves, new entrepreneurial ventures have been blossoming. Twenty years ago, Nucor Steel was a small steel manufacturer with a few hundred employees. It embraced a new technology called thin slab casting, allowing it to thrive while other steel companies were stumbling. Nucor grew to 59,000 employees, with sales of $3.4 billion and a net income of $274 million. Newer entrepreneurial ventures—some of which did not exist 25 years ago—have collectively created 1.4 million new jobs during the past ten years. Third, hundreds of thousands of entrepreneurial ventures have been founded, including many established by women, minorities, and immigrants. These entrepreneurial ventures have come from every sector of the economy and every part of the world. Together these entrepreneurial ventures make a formidable contribution to the global economy, as many firms have hired one or two employees together to
create millions of net new jobs in the last few years. In summary, entrepreneurship makes two indispensable contributions to the world economy. First, it is an integral part of the Entrepreneurial Leadership for the 21st Century Volume 13, Number 4, 2007 3 renewal process that pervades and defines market economies. New and emerging firms play a crucial role in the innovations that lead to technological change and productivity growth. In short, they are about change and competition because they change market structure. The world economy has become a dynamic organic entity always in the process of “becoming,” rather than an established one that has already arrived. It is about prospects for the future, not about the inheritance of the past. Second, entrepreneurship is the essential mechanism by which millions enter the economic and social mainstream of our global society. Entrepreneurial ventures enable millions of people, including women, minorities, and immigrants, to access the “entrepreneurial dream.” The greatest source of economic strength has always been the entrepreneurial pursuit of economic growth, equal opportunity, and upward mobility. In this economic access process, entrepreneurial ventures play the crucial and indispensable role of providing the “social glue” that binds together both high-tech and traditional business activities. Entrepreneurial formations are the critical foundations for any net increase in global employment (Kuratko & Hodgetts, 2007). The Nature of Entrepreneurial Leadership To understand the nature of entrepreneurial leadership, it is important to consider some of the theory development so as to better recognize the emerging importance of entrepreneurship. The research on entrepreneurship has grown dramatically over the years. As the field has developed, research methodology has progressed from empirical surveys of entrepreneurs to more contextual and process-oriented research. Theory development is what drives any field of study. Entrepreneurship theory has been developing over the last 30 years and it is apparent that the field is growing. More important, we need to understand some of that development in order to better appreciate the nature of entrepreneurial leadership. Also, the study of the basic theories in entrepreneurship helps to form a foundation upon which we can build an understanding of the process of entrepreneurship. A theory of entrepreneurship is defined as a verifiable and logically coherent formulation of relationships, or underlying principles that either explain entrepreneurship, predict entrepreneurial activity (for example, by characterizing conditions that are likely to lead to new profit opportunities to the formation of new enterprises), or provide normative guidance, that is, prescribe the right action in particular circumstances (Shane & Venkataraman, 2000; Phan, 2004). As we are now in the new millennium, it has become increasingly apparent that we need to have some cohesive theories or definitions to better understand this emerging field. In the study of contemporary entrepreneurship, one concept recurs: entrepreneurship is interdisciplinary. As such it contains various approaches that can increase one’s understanding of the field (Sarasvathy, 2004). Thus we need to recognize the diversity of theories as the foundation of entrepreneurial leadership. Kuratko & Hodgetts (2007) developed an integrated definition that acknowledges the critical factors needed for this phenomenon. Entrepreneurship is a dynamic process of vision, change, and creation. It requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. Essential ingredients include the willingness to take calculated risks—in terms of time, equity, or career; the ability to formulate an effective venture team; the creative skill to marshal the needed resources; the fundamental skill of building a solid business plan; and, finally, the vision to recognize opportunity where others see chaos, contradiction, and confusion. In the simplest of theoretical forms entrepreneurs cause entrepreneurship. That is, E = f(e), which states that entrepreneurship is a function of the entrepreneur. Thus, the continuous examination of entrepreneurs and entrepreneurial efforts does help in the evolving understanding of entrepreneurship (Lichtenstein, Dooley, & Lumpkin, 2006). However, what does it mean to characterize an individual as “entrepreneurial”? The entrepreneurial perspective is not something a person either has 4 Journal of Leadership and Organizational Studies Kuratko or does not have; it is a variable. There is some level of entrepreneurial ability in every individual. The question becomes one of determining how entrepreneurial a certain event or individual is. The answer to this question lies in the three underlying dimensions of entrepreneurship: innovativeness, risk-taking, and proactiveness (Covin & Slevin, 1991). Different combinations of these three dimensions are possible. A particular entrepreneurial event (e.g., a new product, service, or process) might be highly or only nominally innovative, entail significant or limited risk, and require considerable or relatively little proactiveness. Accordingly, the “degree of entrepreneurship” refers to the extent to which events are innovative, risky, and proactive. Of course, the three dimensions of entrepreneurship do not always vary positively and in close unison. Some entrepreneurial events might reflect, for example, high innovativeness, high risk taking, and low proactiveness. An example here might be the case where a manufacturing firm adopts a radically different (high innovativeness) and unproven (high risk taking) production technology, yet lags behind the industry leaders (low proactiveness/high reactiveness) in doing so (Morris, Kuratko, and Covin, 2008). A relevant question pertaining to cases such as this where not all the entrepreneurial dimensions (i.e., innovativeness, risk taking, and proactiveness) exhibit “high” values is to what extent should that event be considered entrepreneurial? In one conceptualization of “entrepreneurial,” the degree of entrepreneurship can be thought of as an additive function of the event’s scores on the three entrepreneurial dimensions; that is, degree of entrepreneurship = the degree of innovativeness + the degree of risk taking + the degree of proactiveness. In general, this “additive” conceptualization of degree of entrepreneurship corresponds to how individuals actually think of entrepreneurial events. Consider again the example offered of the manufacturing firm that adopts a radically new and unproven technology, but does so only after industry leaders have made this move. If this event rates, on a 1-to-5 scale, an innovativeness score of 5, a risk taking score of 5, and a proactiveness score of say 2, it would result in the computation of an entrepreneurial score of 12 (5 + 5 + 2) on a 3 (1 + 1 + 1) to 15 (5 + 5 + 5) scale; in other words, a moderately high entrepreneurial score. Since two of the three entrepreneurship dimensions are defining attributes of this technology adoption event, relatively high entrepreneurial activity is appropriate (adapted from Morris, Kuratko, & Covin, 2008). Just as important is the question of how many entrepreneurial events take place within a company over a given period of time. Morris, Kuratko, & Covin (2008) refer to this as the “frequency of entrepreneurship.” Some companies produce a steady stream of new products, services and processes over time, while others very rarely introduce something new or different. The concept of “entrepreneurial intensity” was developed to assess the overall level of entrepreneurship in a company with degree and frequency considered together. Thus, a firm or a person may be engaging in lots of entrepreneurial initiatives (high on frequency), but none of them are all that innovative, risky or proactive (low on degree). Another company or person may pursue a path that emphasizes breakthrough developments (high degree) that are d
one every four or five years (low frequency). To better understand the entrepreneurial intensity (EI) concept Morris, Kuratko & Covin (2008) created a twodimensional matrix (“entrepreneurial grid”) with the number, or frequency, of entrepreneurial events on the vertical axis, and the extent or degree to which these events are innovative, risky, and proactive on the horizontal axis. It is important to note that amounts and degrees of entrepreneurship are relative; absolute standards do not exist. Further, any given organization or individual could be highly entrepreneurial at some times and less entrepreneurial at others. Therefore, different points on the grid at different periods in time could be applied to the same organization or person depending on their activity. Yet, this concept of “entrepreneurial intensity” provides some measure of an organization’s or individual’s entrepreneurial activity at any point in time. As I stated earlier, an entrepreneurial perspective can be developed in individuals and this perspective can be assessed. It is the level of entrepreneurial Entrepreneurial Leadership for the 21st Century Volume 13, Number 4, 2007 5 activity that forms the basis for assessing entrepreneurial leadership. A Darker Side of Entrepreneurial Leadership The rewards, successes, and achievements of entrepreneurs have been extolled in the literature. However, there is a “darker side” of entrepreneurial behavior that also exists. That is, a potentially destructive element resides within the energetic drive of successful entrepreneurs. In exploring this dual-edge perspective, Kets de Vries (1985) noted specific negative factors that could permeate the personality of entrepreneurs and dominate their behavior. Although each of these factors possesses a positive aspect, it is important for entrepreneurial leaders to understand the potentially destructive aspects. The first component is a confrontation with risk. Entrepreneurial activity entails risk. While they are rarely directly proportional, higher reward usually mean higher risk. Similarly, concepts that are more innovative, or involve bolder breaks with current practice, typically represent higher risk and also higher reward. This is why entrepreneurs tend to evaluate risk very carefully. The manner in which they confront risk is a potential dark side for entrepreneurs. Entrepreneurs face a number of different types of risk. These can be grouped into four basic areas: financial risk where the individual puts a significant portion of his or her savings or other resources at stake; career risk deals with the effect of pursuing an entrepreneurial concept and its subsequent effect on the individual’s career, job advancement, vertical and lateral mobility, job rewards, and general marketability; family and social risk involves the tremendous amount of the individual’s energy and time devoted to entrepreneurial activities and how other commitments may suffer; and psychic risk, which may be the greatest risk as it deals with the leader’s ability to handle any of the previous risks mentioned. How does the entrepreneurial leader who has suffered a setback bounce back? Is the psychological impact too severe for them. The second component of the darker side is entrepreneurial stress. The hazardous potential of entrepreneurial stress has been the focus of a number of research studies (Akande, 1992; Buttner, 1992). In general, stress can be viewed as a function of discrepancies between a person’s expectations and ability to meet demands, as well as discrepancies between the individual’s expectations and personality. If a person is unable to fulfill role demands, then stress occurs. Given the struggle for resources and support, entrepreneurs must bear the responsibility for their mistakes while playing a multitude of roles, such as salesperson, recruiter, spokesperson, and negotiator. These simultaneous demands can lead to role overload. Being entrepreneurial requires a large commitment of time and energy, often at the expense of family and social activities. Finally, entrepreneurs are often working alone or with a small number of employees, even when operating in a large company. Research studies indicate that those who achieve these goals often pay a high price (Rabin, 1996). A majority of entrepreneurs surveyed had back problems, indigestion, insomnia, or headaches. To achieve their goals, however, these entrepreneurs were willing to tolerate stress and its side-effects. The entrepreneurial ego is the final component in the darker side. Here the entrepreneurial leader may experience the negative effects of an inflated ego. In other words, certain characteristics that usually propel entrepreneurs into success also can be exhibited to their extreme. This could include an overbearing need for control, a sense of distrust, an overriding desire for success, or unrealistic optimism (Kuratko & Hodgetts, 2007). These examples do not imply that all entrepreneurial leaders fall prey to the negative side, or that each of the characteristics presented always gives way to dysfunctional behaviors. Yet, entrepreneurial leaders should recognize the idiosyncrasies of entrepreneurial behavior. Entrepreneurial Leadership Inside Organizations Entrepreneurial leadership now permeates the strategies of larger established organizations. As companies have found themselves continually redefining their markets, restructuring their operations, and modifying their business models, learning the skills to think 6 Journal of Leadership and Organizational Studies Kuratko and act entrepreneurially has become the source of competitive advantage. (Ireland & Webb, 2007). The concept of corporate entrepreneurship (CE) has evolved over the last four decades and the definitions have varied considerably over time. The early research in the 1970’s focused on venture teams and how entrepreneurship inside existing organizations could be developed (Hill & Hlavacek, 1972; Peterson & Berger, 1972; Hanan, 1976). In the 1980’s, researchers conceptualized CE as embodying entrepreneurial behavior requiring organizational sanctions and resource commitments for the purpose of developing different types of value-creating innovations (Alterowitz, 1988; Burgelman, 1984; Pinchott, 1985; Kanter, 1985; Schollhammer 1982). CE was defined simply as a process of organizational renewal (Sathe 1989). In the 1990’s researchers focused on CE as re-energizing and enhancing the firm’s ability to develop the skills through which innovations can be created (Jennings & Young, 1990; Merrifield, 1993; Zahra, 1991; Borch et al., 1999). Also in the 1990’s more comprehensive definitions of CE began to take shape. Guth and Ginsberg (1990) stressed that CE encompassed two major types of phenomena: new venture creation within existing organizations and the transformation of on-going organizations through strategic renewal. Zahra (1991) observed that “corporate entrepreneurship may be formal or informal activities aimed at creating new businesses in established companies through product and process innovations and market developments. These activities may take place at the corporate, division (business), functional, or project levels, with the unifying objective of improving a company’s competitive position and financial performance.” Sharma and Chrisman’s (1999, 18) suggested that CE “is the process where by an individual or a group of individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization.” Finally, in this new millennium, researchers have gained a greater specificity on the concept. Covin & Kuratko (2008) describe corporate entrepreneurship as being manifested in companies either through ‘corporate venturing’ or ‘strategic entrepreneurship’ Corporate venturing approaches have as their commonality the adding of new businesses (or portions of new businesses via equity investments) to the corporation. This can be accomplished through three implementation modes – internal corporate venturing, coo
perative corporate venturing, and external corporate venturing. By contrast, strategic entrepreneurship approaches have as their commonality the exhibition of large-scale or otherwise highly consequential innovations that are adopted in the firm’s pursuit of competitive advantage. These innovations may or may not result in new businesses for the corporation. With strategic entrepreneurship approaches, innovation can be in any of five areas – the firm’s strategy, product offerings, served markets, internal organization (i.e., structure, processes, and capabilities), or business model (Ireland & Webb, 2007). Ireland, Covin and Kuratko (2007) define CE strategy as a vision-directed, organizationwide reliance on entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations through the recognition and exploitation of entrepreneurial opportunity. Morris, Kuratko and Covin (2008) contend that when the actions taken in a large firm to form competitive advantages and to exploit them through a strategy are grounded in entrepreneurial actions, the firm is employing an entrepreneurial strategy. Further, when establishing direction and priorities for the product, service and process innovation efforts of the firm, the company is formulating its strategy for entrepreneurship. With all of these various definitions taking shape, it is clear that the 21st century leader understands the importance of entrepreneurial actions with managers at any level to establish sustainable competitive advantages as the foundation for profitable growth (Kuratko, Ireland, Covin & Hornsby, 2005; Kuratko, Ireland & Hornsby, 2001). The message is that continuous innovation (in terms of products, processes, technologies, administrative routines, and structures) and an ability to compete proactively in global markets are the key skills that will determine corporate performance in the twenty- first century. Entrepreneurial leadership is necessary for firms Entrepreneurial Leadership for the 21st Century Volume 13, Number 4, 2007 7 of all sizes to prosper and flourish. The challenge for leaders is to create an internal marketplace for ideas within their companies, and encourage employees to act on these ideas. Ethical Entrepreneurial Leadership No perspective of entrepreneurial leadership would be complete without the acknowledgement of the ethical side of enterprise. Even though ethics present a complex challenge for entrepreneurial leaders (as evidenced by the horrendous scandals of the last few years), the entrepreneurial leader’s value system is the key to establishing an ethical approach. A leader has the unique opportunity to display honesty, integrity, and ethics in all key decisions. The leader’s behavior serves as a model for all other employees to follow. The research on entrepreneurial ethics has been evolving. In one study of 282 entrepreneurial owners, four specific ethical concepts were examined: business development/profit motive; moneyrelated theft; administrative decision making; and accession to company pressure. The researchers found underlying dimensions of these concepts that were broader than simple adherence to the law. The study refuted the stereotypes of “ethics equating only to law” or “the law is ethics’ only guide.” In other words, entrepreneurial owners rely on considerations beyond the legal parameters when making decisions. Their value systems were demonstrated to be a critical component in business decisions. (Hornsby, et.al., 1994; Longenecker, et.al., 2006). In entrepreneurial ventures, the ethical influence of the owner is more powerful than in larger corporations because his or her leadership is not diffused through layers of management. Owners are identified easily and are observed constantly by employees in an entrepreneurial venture. Therefore, entrepreneurial owners possess a strong potential to establish high ethical standards for all business decisions (Humphreys, 1993; Kuratko, Goldsby, & Hornsby, 2004). However, the emphasis on ethical behaviors in corporate entrepreneurship is becoming just as recognized. Longenecker, et.al., (2006) conducted a twenty year longitudinal study on ethical attitudes in smaller firms and large corporations found that ethical decisions are improving across all organizations regardless of size. The researchers also found that over the past twenty years, leaders in entrepreneurial ventures seemed to respond more ethically today than they did when the study began in 1985. Thus, ethical dilemmas could represent a formidable constraint in the development of corporate entrepreneurship. How far should employees be encouraged to “disrupt” or “subvert” established standards? Hamel (2000) calls for employees to become “revolutionaries” in order to move organizations into the new competitive landscape. Yet, to what extent do managers act in a “revolutionary” manner in the name of innovation before ethical standards are compromised? Without an organization providing the proper entrepreneurial environment and ethical guidance, some managers may display rogue behavior in attaining their goals. In other words, they cross the line of good judgment and commit unethical acts with initial intention of being entrepreneurial. Hence, firms must be wary of the “rogue manager” acting under the guise of the corporate entrepreneur (Kuratko & Goldsby, 2004). Chau and Siu (2000) have argued that entrepreneurial organizations by nature will create higher cognitive moral development in their members. That is, entrepreneurial companies frequently set a higher bar in terms of what is acceptable versus unacceptable behavior. While hostile, unpredictable competitive environments may induce unethical decisionmaking, the participative management style and open-minded attitudes inside entrepreneurial organizations can offset the external pressures. However, if a company does not institute and continually reinforce ethical standards and moral principles, the entrepreneurial leader’s work to overcome many of the organizational obstacles may intensify the tenuous balance between corporate entrepreneurial leader and “rogue manager.” Conclusion All of the factors discussed in this article impact the concept of entrepreneurial leadership. It is hoped that this introductory article to the 8 Journal of Leadership and Organizational Studies Kuratko special issue devoted to entrepreneurial leadership provided a background that would allow a greater understanding of the concept. Entrepreneurial leadership is becoming a global necessity and the more we can understand the elements that comprise this concept, the more we can advance the concept itself. The articles that comprise this special issue are evidence that researchers are delving into the different elements that impact entrepreneurial leadership. The Special Issue This special issue of the Journal of Leadership & Organizational Studies (JLOS) is dedicated to the entrepreneruial spirit that has dramatically changed the world today. The goal of JLOS’s special issue was to encourage scholars to think of the ways in which entrepreneurial thinking has permeated the business world in the 21st century. Our intention was to encourage scholars to examine questions such as: How could we determine the impact of an entrepreneurial mindset inside organizations? Has leadership been impacted by the entrepreneurial wave? What current issues in entrepreneurship demonstrate the impact of entrepreneurial leadership? I believe this issue succeeds in those original goals. We have compiled some of the latest research efforts from renowned scholars who have examined interesting aspects of this concept. While each set of researchers examined different concepts in entrepreneurship, the general focus of the articles appeared to divide between the organizational perspective and the individual perspective. As I have outlined below, the researchers clearly examined entrepreneurial leadership from various perspectives but they coalesced into one of the two major categorical areas. From the
“Organizational Perspective,” Michael H. Morris, Susan Coombes, Jeffrey Allen, and Minet Schindehutte research the nonprofit world with “Antecedents and Outcomes of Entrepreneurship in a Non-Profit Context: Theoretical and Empirical Insights.” In this article the role of entrepreneurial leadership in the development, growth and sustainability of non-profit enterprises is examined. The fundamental logic of entrepreneurship is less apparent in this context given the social mission and multiple stakeholders involved. Building on findings regarding entrepreneurial orientation (EO) within for-profit organizations, a model of antecedents, correlates, and outcomes of entrepreneurship in non-profits is developed and tested. The findings demonstrate that entrepreneurship has a legitimate role in nonprofits, and the work climate can be designed to affect levels of entrepreneurship. In the next article Daniel T. Holt, Matthew W. Rutherford, and Gretchen R. Clohessy also research within the non-profit domain but they concentrate on governmental organizations with “Corporate Entrepreneurship: An Empirical Look at Individual Characteristics, Context, and Process.” Using a sample from three government organizations, they test a model of corporate entrepreneurship that is influenced by individual characteristics (represented by the five factor model of personality), context (represented by the firm’s memory and learning orientation), and process (represented by the facets of the Corporate Entrepreneurship Assessment Instrument). Their results indicated that contextual and process variables influenced corporate entrepreneurship while the individual characteristics did not. Finally, Donald F. Kuratko, Jeffrey S. Hornsby, and Michael G. Goldsby develop a framework that examines organizational posture in corporate entrepreneurship with “The Relationship of Stakeholder Salience, Organizational Posture, and Entrepreneurial Intensity to Corporate Entrepreneurship.” In this article a stakeholder theory framework is presented as a guideline for exploring the relationship between stakeholder salience, organizational posture, and entrepreneurial intensity. This article presents the view that if a company is to be more entrepreneurial, it must first consider its stakeholders as a source of opportunity and acceptance of new ideas. From the “Individual Perspective,” Vishal K. Gupta and Nachiket M. Bhawe examined “The Proactive Personality and Stereotype Threat on Women’s Entrepreneurial Intentions.” Their study examined the role of proactive personality in moderating the influence of the widely-held ‘masculine’ stereotype about entrepreneurs on intentions to become an entrepreneur. Manipulating stereotype threat, results from eighty young women indicated that Entrepreneurial Leadership for the 21st Century Volume 13, Number 4, 2007 9 women with more proactive personality were more significantly affected by exposure to the commonly known stereotype about entrepreneurs and had a significant decrease in entrepreneurial intentions compared to women with less proactive personality. In the next article, Saulo Dubard Barbosa, Megan W. Gerhardt, and Jill Richard Kickul focused on “The Role of Cognitive Style and Risk Preference on Entrepreneurial SelfEfficacy and Entrepreneurial Intentions.” Their study addressed the distinctive roles of cognitive style and risk preference on four types of entrepreneurial self-efficacy and entrepreneurial intentions examining how both cognitive style and risk preference separately and interactively contribute to an individual’s assessment of his/her own skills and abilities as well as to his/her own entrepreneurial intentions. Results indicated that individuals with a high risk preference had higher levels of entrepreneurial intentions and opportunity-identification efficacy, whereas individuals with a low risk preference had higher levels of relationship efficacy, and tolerance efficacy. Robert S. D’Intino, Michael G. Goldsby, Jeffery D. Houghton, and Christopher P. Neck explored “Self-Leadership: A Process for Entrepreneurial Success” This article provides a comprehensive examination of recent research into individual differences in order to better understand the future promise of self-leadership as a concept and a research subject for entrepreneurship. The researchers describe and contrast the self-leadership concept relative to other related motivational and self-influence constructs including: optimism, happiness, psychological flow, consciousness, personality models, self-monitoring, the need for autonomy, emotional intelligence, and diversity factors including age, gender, and cultural differences, and the work-life interface. They relate all of these concepts to entrepreneurship Finally, Rebecca J. White, Rodney D’Souza, and John C. McIlwraith introduce the importance of understanding the emphasis placed on key leadership effectiveness in firms seeking venture capital with “Leadership in Venture Backed Companies: Going the Distance.” Venture Capitalists (VCs) report that more than 50% of the time they have to replace the Chief Executive Officer (CEO) in a venture backed company before the investor exit. This process is often painful for the people involved and disruptive to the fledging venture. This article explores the CEO leadership requirements for venture backed companies through in depth interviews with 10 venture capitalists looking at the changing leadership requirements for CEOs in venture backed companies and discuss whether there are signals that can help both CEOs and venture capitalists who fund their companies avoid being surprised by the need for leadership change. In summary, the articles accepted for this special issue of JLOS reflect the depth and breadth of research on the various components of entrepreneurship today. The researchers represent different institutions, at different stages of their academic careers, with different perspectives on entrepreneurship to share. This special issue represents some of the latest exploratory research taking place in the entrepreneurship domain. As guest editor it is my hope that this issue will provoke interest and debate on the articles presented. More importantly, it will spark more researchers to delve into the topics with greater intensity. Let this issue serve as the most recent door to understanding entrepreneurial leadership in the 21st Century. References Akande, A. (1992). Coping with Entrepreneurial Stress, Leadership & Organization Development Journal 13(2): 27–32. Alterowitz, R. (1988). New Corporate Ventures. New York.:Wiley. Borch, O.J., Huse, M., & Senneseth, K. (1999). Resource configuration, competitive strategies, and corporate entrepreneurship: An empirical examination of small firms. Entrepreneurship Theory & Practice, 24(1), 49-70. Burgelman, R. A. (1984). Designs for corporate entrepreneurship. California Management Review, 26: 154-166. 10 Journal of Leadership and Organizational Studies Kuratko Buttner, E.H. (1992). Entrepreneurial Stress: Is It Hazardous to Your Health? Journal of Managerial Issues, summer: 223–240. Center for Women’s Business Research (2007). www.cfwbr.org Chau Lewis Long-Fung and Wai-Sum Siu, (2000). Ethical Decision-Making in Corporate Entrepreneurial Organizations, Journal of Business Ethics, 23: 365-375. Covin, J.G. & Kuratko, D.F. (2008). “Corporate Entrepreneurship” in The Encyclopedia of Strategic Management (Blackwell Publishers, forthcoming). Covin, J.G. and Slevin, D.P. (1991). A conceptual model of entrepreneurship as firm behavior. Entrepreneurship Theory & Practice, 16(1), 7-25. Guth, W. D. & Ginsberg A. (1990). Corporate entrepreneurship. Strategic Management Journal, (Special Issue 11): 5-15. Hamel, G. (2000). Leading the Revolution (Harvard Business School Press: Boston, MA) Hanan, M. (1976). Venturing corporations— Think small to stay strong. Harvard Business Review, 139-148. Hill, R. M. & Hlavacek, J. D. (1972). The venture team: A new concept in marketing organizations. Journal of Marketing, 36: 44-50. Hornsby, J.S., Kuratko,
D. F., Naffziger, D.W., LaFollette, W.R., and Hodgetts, R.M. (1994). The Ethical Perceptions of Small Business Owners: A Factor Analytic Study, Journal of Small Business Management 32 (4): 9-16. Humphreys, N., Robin, D.P., Reidenbach, R.E., and Moak, D.L. (1993). The Ethical Decision-Making Process of Small Business Owner/Managers and Their Customers, Journal of Small Business Management 31 (3): 9-22. Ireland, R.D., Covin, J.G., & Kuratko, D.F. (2007). A Model of Corporate Entrepreneurship Strategy. Best Papers: Special Conference on Strategic Entrepreneurship, Max Planck Institute, Germany. Ireland, R.D., Kuratko, D.F., & Covin, J.G. (2003). Antecedents, Elements, and Consequences of Corporate Entrepreneurship Strategy. Best Paper Proceedings: Academy of Management, Annual Meeting, Seattle Washington. Ireland, R.D. & Webb, J.W. (2007). Strategic Entrepreneurship: Creating Competitive Advantage through Streams of Innovation. Business Horizons, 50: 49-59. Jennings, D. F. & Young, D. M. (1990). An empirical comparison between objective and subjective measures of the product innovation domain of corporate entrepreneurship. Entrepreneurship Theory and Practice, 15: 53-66. Kanter, R. M. (1985). Supporting innovation and venture development in established companies. Journal of Business Venturing, 1: 47-60. Kets de Vries, M.F.R. (1985). The Dark Side of Entrepreneurship, Harvard Business Review November/December: 160–167. Kuratko, D. F. (2002). “Entrepreneurship,” International Encyclopedia of Business and Management, 2nd ed.(London: Routledge Publishers), 168–176. Kuratko, D.F., Goldsby, M.G., and Hornsby, J.S. (2004).The Ethical Perspectives of Entrepreneurs: An Examination of Stakeholder Salience. Journal of Applied Management and Entrepreneurship, 9 (4):19-42. Kuratko, D. F. & Hodgetts, R. M. (2007). Entrepreneurship: Theory, Process, Practice 7th ed. (Mason, OH: Thomson/SouthWestern Publishing) Kuratko, D.F, Ireland, R.D. & Hornsby, J.S. (2001). Improving firm performance through entrepreneurial actions: Acordia’s corporate entrepreneurship strategy. Academy of Management Executive, 15(4): 60-71. Kuratko, D.F., Ireland, R.D., Covin, J.G., & Hornsby, J.S. (2005). A model of middlelevel managers’ entrepreneurial behavior. Entrepreneurship Theory & Practice, 29 (6), 699-716. Entrepreneurial Leadership for the 21st Century Volume 13, Number 4, 2007 11 Kuratko, Donald F. & Goldsby, Michael G. (2004). Corporate Entrepreneurs or Rogue Middle Managers: A Framework for Ethical Corporate Entrepreneurship. Journal of Business Ethics, 55 (1):13-30. Lichtenstein, B. B., Dooley, K. J. and Lumpkin, G.T. (2006). Measuring Emergence in the Dynamics of New Venture Creation, Journal of Business Venturing, 21 (2):153- 176. Longenecker, J.G., Moore, C.W., Petty, J.W., Palich, L.E., and McKinney, J.A. (2006) Ethical Attitudes in Small Businesses and Large Corporations: Theory and Empirical Findings from a Tracking Study Spanning Three Decades. Journal of Small Business Management, 44 (2): 167-183. Merrifield, D. B. (1993). Intrapreneurial corporate renewal. Journal of Business Venturing,8:383-389. Minniti, M. and Bygrave, W. D. (2004). Global Entrepreneurship Monitor (Kauffman Center for Entrepreneurial Leadership) Morris, M.H., Kuratko, D.F., and Covin, J.G. (2008). Corporate Entrepreneurship and Innovation (Mason, OH: Thomson/SouthWestern Publishers). Morris, M. H. and Schindehutte, M. (2005). Entrepreneurial Values and the Ethnic Enterprise: An Examination of Six Subcultures, Journal of Small Business Management, 43 (4): 453-497. Peterson, R. & Berger D. (1971). Entrepreneurship in organizations. Administrative Science Quarterly, 16 (1): 97-106. Phan, P. H. (2004). Entrepreneurship Theory: Possibilities and Future Directions, Journal of Business Venturing 19(5): 617–620. Pinchott, G. (1985). Intrapreneurship. New York: Harper & Row. Rabin, M.A. (1996). Stress, Strain, and Their Moderators: An Empirical Comparison of Entrepreneurs and Managers, Journal of Small Business Management 34 (1): 46–58. Sarasvathy, S.D. (2004). The Questions We Ask and the Questions We Care About: Reformulating Some Problems in Entrepreneurship Research, Journal of Business Venturing 19(5): 707–717. Sathe, V. (1989). Fostering entrepreneurship in large diversified firm. Organizational Dynamics, 18(1), 20-32. Schollhammer, H. (1982). Internal corporate entrepreneurship. In C. Kent, D. Sexton & K.Vesper (eds.), Encyclopedia of Entrepreneurship. Prentice Hall: Englewood Cliffs, NJ. Shane, S. and Venkataraman, S. (2000). The Promise of Entrepreneurship as a Field of Research, Academy of Management Review, 25 (1):217–226. Sharma, P. & Chrisman, J.J. (1999). Toward a reconciliation of the definitional issues in the field of corporate entrepreneurship. Entrepreneurship Theory & Practice, 23(3), 11-28. The Small Business Economy (2006). www.sba.gov/advocacy/research The Tax Foundation (2007). www.taxfoundation.org Zahra, S. A. (1991). Predictors and financial outcomes of corporate entrepreneurship: An exploratory study. Journal of Business Venturing, 6: 259-286.

The Corporate Entrepreneur: Leading Organizational Transformation Sandra Vandermerwe and Sue Birley 0 NCE UPON A TIME, the world was clearly divided between entrepreneurs and corporate executives. No longer. Now we expect entrepreneurs to grow and manage large organizations, and bureaucratic managers to behave entrepreneurially-and all must be competitive for customers. Clearly, we believe that “nurture” can transcend “nature”, that we can change behaviour to fit changing circumstances, that the entrepreneurial bug can be caught at any age. Witness, for example, those executives who have abandoned the apparent safety of corporate employment to become owners through the mechanism of management buyouts and buyins. But they are the tip of the iceberg. Most corporations throughout the world have to find a new type of leader-not the managers of stability or the professional bureaucrats but those who approach problems creatively, who thrive on the management of change and who can take us, their customers, and their organizations into the future. To do this, corporations who are transforming so as to “own” chosen groups of customers-both in existing markets and those emerging and imagined’- need entrepreneurial talent to get them from where they are to where they need to go. This was our hypothesis. To explore it we went to some of the organizations we know well and gathered data from executives who had been chosen to take the lead in implementing key customer transformation projects. We wanted to know: ?? what was it like for these people, many of whom have had to operate in traditional environments; ?? what were the issues which they had to deal with to make the needed customer transformation happen; ?? what were the factors which they think necessary for success; ?? what kinds of people do they think are needed to implement customer transformations; Our sample comprised 100 senior executives who we knew had recently been involved in a particular radical customer transformation in a leading Pergamon PII: soo24-6301(97)00014-9 Long Range Planning, Vol. 30, No. 3, pp. 345 to 352, 1997 0 1997 Elsevier Science Ltd. All rights reserved Printed in Great Britain 0024-6301/97 $17.00+0.00

25/08/15 1 Corporate Venturing IBU5COV Seminar # 5 Corporate Venture Planning Process Understanding How Projects Evolve Idea genera6on Situa6on / Compe66ve Analysis Concept tes6ng Technical feasibility assessment Product tes6ng Financial assessment Market Tes6ng Launch Life cycle management 25/08/15 2 Evalua6ng Opportuni6es for Business Environmental Problems & Uncertainty Resources Opportunity (customer need & 6ming) Entrepreneur & management team Business Plan Environmental Problems & Uncertainty Environmental Problems & Uncertainty The Compe??ve Landscape Ø External Environment: the marketplace in which the organisa?on operates Ø Internal Environment: the unique circumstances of the organisa?on EVALUATING OPPORTUNITIES FOR BUSINESS 25/08/15 3 Analyse External Environment Ø Macro External Environment: – Environmental factors that indirectly affect the organisa?on, such as government legisla?on, demographic and social trends. – Comprises poli%cal, economic, socio-cultural, technological, environmental & legal environmental forces. EVALUATING OPPORTUNITIES FOR BUSINESS – EXTERNAL ANALYSIS Drivers of Industry Compe??on EVALUATING OPPORTUNITIES FOR BUSINESS – EXTERNAL ANALYSIS (Porter 1980) 25/08/15 4 Compe?tor Analysis (Smith 2008) EVALUATING OPPORTUNITIES FOR BUSINESS – EXTERNAL ANALYSIS Compe?tor Analysis (Smith 2008) EVALUATING OPPORTUNITIES FOR BUSINESS – EXTERNAL ANALYSIS 25/08/15 5 SWOT • Assess your organiza?on’s current posi?on rela?ve to compe?tors and poten?al customer needs • Provides insights into market opportuni?es, threats and trends to op?mize returns on investment • Reviews your dependence and value acached to your supply chain as well as the sustainable nature of your compe??ve advantage • Increases the likelihood of successful new product or service launches, partnerships developments and efficient outsourcing EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS SWOT 1. Iden?fy the strengths 2. Determine the weaknesses 3. Consider the opportuni?es 4. Locate the threats 5. Create a balance and holis?c SWOT analysis EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS 25/08/15 6 SWOT – Strengths – Internal Environment (now) Maintain and build these aspects Generally relates to your resources and capabili?es Consider: • What do you do becer than anyone else? • Why should people purchase from you rela?ve to your compe?tors? Example: strong distribu?on systems STEP 1 EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS SWOT – Weaknesses – Internal Environment (now) Reduce or ideally eradicate Consider: • What problems are frequently (re)occuring and possibility losing you sales/members? • What could you improve that would directly affect your business performance? • What are your financial weaknesses? • What are your staff weaknesses rela?ve to your strongest compe?tor? Example: poor quality product or service reputa?on or recall STEP 2 EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS 25/08/15 7 SWOT – Opportuni?es – External Environment (future in the local, macro, & micro) Priori6ze or op6mize Consider: • What changes can you best exploit? • What are the compe?tor vulnerabili?es that you can acack? • What new markets could you enter or further penetrate? Example: these could derive from changes in lifestyle behaviours STEP 3 EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS SWOT – Threats – External Environment (future in the local, macro, & micro) Combat Consider: • What external obstacles are you facing or might you face that would affect key elements of your business (supply chain, economic downturn)? • What new legisla?on might damage current profitable success? • What are your sponsors likely to do in the future? • Could an of your weaknesses or removal of one or more of your strengths threaten your long-term future? Example: new legisla?on may significantly increase your costs STEP 4 EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS 25/08/15 8 Create a balance & holis?c SWOT Analysis The SWOT analysis now needs to be holis6cally considered. This means that balance needs to be created to ensure one quadrant does not dominate the process. Consider: • What strategies might we be able to implement to pursue opportuni?es that align with our strengths? (strengths Vs. opportuni?es) • How can we overcome our weaknesses to pursue high-ranked or high-weighted opportuni?es? (weaknesses Vs. opportuni?es) • How can we use out strengths to reduce the risks of our threats? (strengths Vs. threats) • What mechanisms can we include to reduce the poten?al impact of our weaknesses, thereby avoiding the suscep?bility to out most likely threats? (weaknesses Vs. threats) STEP 5 EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS Each category of the SWOT should be presented in the following way: Strengths Claim Evidence Strong brand awareness • Car sector index indicates Holden is…. (reference, year) • … Long and faithful history in Australia • 66 years since it developed the first all-Australian car (reference, year) • … EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS 25/08/15 9 • The pursuit of entrepreneurship within a company creates new and poten?ally complex sets of challenges on both theore?cal and prac?cal levels. • On a theore?cal level, company-wide entrepreneurship is not included in, or accommodated by, most of the theories, models, or frameworks that have been developed to guide managerial prac?ce. • On a prac?cal level, managers typically find themselves in uncharted territory when it comes to entrepreneurship. They lack guidelines on how to direct or redirect resources towards entrepreneurial strategies. Assessing Corporate Entrepreneurial Performance EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS • In today’s increasingly entrepreneurial corporate environment, managers must assess and track entrepreneurial ac?vity and outcomes • Acen?on must be devoted to evaluate individual projects as well as the organiza?on as a whole • Corporate entrepreneurial ac?vity involves significant uncertainty, ambiguity and risk. • Assessment involves the measuring of process and outcomes. Assessing Corporate Entrepreneurial Performance EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS 25/08/15 10 A Systema7c Approach Before a strategy for entrepreneurship can be formulated or the internal environment can be properly designed, senior execu6ves must have an accurate understanding of: Øthe firm’s current level of entrepreneurial intensity ØThe possible constraints on entrepreneurial performance Measurement at the individual level helps managers: • Examine and refine their own leadership styles Measurement at the organiza6onal level: • Mark and track company-wide entrepreneurial performance, establish norms and draw industry comparisons EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS The Entrepreneurial Health Audit A three stage Entrepreneurial Health Audit, developed by Ireland, Kuratko, and Morris (2006), acempts to measure entrepreneurship within a company Step 1: Assessing the Firm’s Entrepreneurial Intensity (EI) Step 2: Diagnosing the Climate for Corporate Intraprenership Step 3: Create an Organiza6on-wide Understanding of the CE/Innova6on Process EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS 25/08/15 11 The Entrepreneurial Health Audit Step 1: Assessing the Firm’s Entrepreneurial Intensity (EI) (see handout 1 – page 1) The degree of entrepreneurship is assessed with the first 12 ques?ons, while the remaining items focus on frequency. To obtain a score for the overall company, the instrument is typically applied to a large number of mangers represen?ng different func?onal areas within the company. Annual measurements allow the company to first benchmark itself and then track progress over ?me. EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS The Entrepreneurial Health Audit Step 2: Diagnosing the Climate for Corporate Intraprenership (see handout 1 – page
2) The Corporate Entrepreneurship Climate Instrument (CECI) is a diagnos?c tool for assessing, evalua?ng, and managing the internal environment. The aim is to iden?fy organisa?onal systems and structures that are inconsistent with, or represent obstacles to, higher levels of EI. The instrument provides an indica?on of a company’s likelihood of being able to successfully implement a CE strategy. It highlights areas that should be the focus of ongoing design and development efforts and can be used as an assessment tool for evalua?ng corporate training needs in the areas of entrepreneurship and innova?on. EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS 25/08/15 12 Step 3: Create an Organiza6on-wide Understanding of the CE/Innova6on Process A CE employee development program should be established. With these being some suggested elements for such a program: 1. The entrepreneurial experience 2. Entrepreneurial breakthroughs 3. Innova?ve thinking 4. Idea accelera?on process 5. Barriers, facilitators, and triggers to entrepreneurial thinking 6. Sustaining innova?on teams 7. The Corporate Venture Plan The Entrepreneurial Health Audit EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS Focusing on the Right Obstacles at the Right Time It is important for corporate entrepreneurs to think in terms of both the immediate and long term goals of their new projects. Iden?fy and understand the key obstacles, then isolate the key obstacles to accomplishing these goals at differing ?me periods, and priori?ze where efforts should be focused. EVALUATING OPPORTUNITIES FOR BUSINESS – INTERNAL ANALYSIS 25/08/15 13 An effec6ve corporate venture plan will: Developing a Comprehensive Corporate Venture Plan • Describe every aspect of a par?cular venture • Include market/external analysis (this includes opportunity evalua?on – customer need and ?ming) • Analyses the internal environment (SWOT, environment conduc?ve to CE, poten?al management team) • Clarify and outline financial and resources needs • Iden?fy poten?al obstacles and alterna?ve solu?ons • Establish ?melines and milestones for con?nuous and ?mely evalua?ons • Serve as a communica?on tool for all assessments purposes DEVELOPMENT OF THE CORPORATE VENTURE PLAN La Trobe Business School Business Plans 26 VENTURE CAPITAL SURVEY Survey of 74 venture capital firms in the US, found the worst mistakes an entrepreneur can make when comple?ng a firm’s business plan. 1. Lack of marke?ng strategies 2. Lack of clarity 3. Unrealis?c financial projec?ons/assump?ons 4. Lack of details 5. Overly op?mis?c 6. Weak analysis of compe??on Entrepreneurs oen fail to provide the name of anyone in the company to contact aer the VCs finish reading the business plan. Survey conducted by Dee Power and Brian Hill Source: New study shows six cri%cal business plan mistakes, Business Horizons. Greenwich, Jul/Aug 2003. Vol. 46, Iss. 4; pg. 83 DEVELOPMENT OF THE CORPORATE VENTURE PLAN 25/08/15 14 the components of a comprehensive corporate venture plan: 1. Execu?ve Summary 2. Venture Descrip?on Segment 3. Marke?ng Segment 4. Opera?ons Segment 5. Management Segment 6. Financial Segment 7. Cri?cal Risk Segment 8. Harvest Strategy Segment 9. Milestone Schedule Segment 10. Appendix Developing a Comprehensive Corporate Venture Plan (see class handout 3) DEVELOPMENT OF THE CORPORATE VENTURE PLAN Managing Internal CV The venturing process consists of six stages: –Defini6on Stages 1. Establish an environment that encourages the genera?on of ideas and the iden?fica?on of new opportuni?es. 2. Select and evaluate opportuni?es for new ventures 3. Develop a business plan for the new venture 28 DEVELOPMENT OF THE CORPORATE VENTURE PLAN – CONSIDERATIONS FOR INTERNAL CORPORATE VENTURING 25/08/15 15 Managing Internal CV Cont’d –Development Stages 4. Monitor the development of the venture and the venturing process 5. Champion the new venture as it grows and becomes ins?tu?onalized 6. Learn from experience in order to improve the overall venturing process 29 DEVELOPMENT OF THE CORPORATE VENTURE PLAN – CONSIDERATIONS FOR INTERNAL CORPORATE VENTURING Managing Alliances The success of an alliance is a func6on of: • Strategy development • Partner assessment & selec?on • Contract nego?a?on • Alliance structure & opera?on • Alliance termina?on or exit strategy DEVELOPMENT OF THE CORPORATE VENTURE PLAN – CONSIDERATIONS FOR COOPERATIVE / JOINT VENTURING 25/08/15 16 Making Alliances Work A good partner: • helps the firm achieve its strategic goals and has the capabili6es the firm lacks and that it values • shares the firm’s vision for the purpose of the alliance • is unlikely to try to opportunis?cally exploit the alliance for its own ends: that it, to expropriate the firm’s technological knowhow while giving away licle in return DEVELOPMENT OF THE CORPORATE VENTURE PLAN – CONSIDERATIONS FOR COOPERATIVE / JOINT VENTURING Making Alliances Work Cont’d Once a partner has been selected, the alliance should be structured: • to minimize the risk of opportunism by an alliance partner eg. such as technology not meant to be transferred • with contractual safeguards wricen into the alliance agreement to guard against the risk of opportunism by a partner • to allow for skills and technology swaps with equitable gains DEVELOPMENT OF THE CORPORATE VENTURE PLAN – CONSIDERATIONS FOR COOPERATIVE / JOINT VENTURING 25/08/15 17 Aer selec6ng the partner and structuring the alliance, the alliance must be managed • Successfully managing an alliance requires managers from both companies to build interpersonal rela?onships • A major determinant of how much a company gains from an alliance is its ability to learn from its alliance partners Making Alliances Work Cont’d DEVELOPMENT OF THE CORPORATE VENTURE PLAN – CONSIDERATIONS FOR COOPERATIVE / JOINT VENTURING Managing External CV Success is reliant upon: • Research and analysis to ensure the firm does not overpay • Managing change to suit the type of venture (merger, acquisi?on, greenfield, brownfield, or spin-out), culture and obstacles • Considera?on given to the strategic importance and core capabili?es of the organisa?on (horizontal, ver?cal, conglomerate) • The impact of quick business growth • Knowledge of foreign investment • Stakeholder management 34 DEVELOPMENT OF THE CORPORATE VENTURE PLAN – CONSIDERATIONS FOR EXTERNAL CORPORATE VENTURING 25/08/15 18 Suggested Reading For This Seminar Kurakto, D.F. (2014), Entrepreneurship: Theory, process, prac6ce, South-Western, Cengage Learning: Mason, OH. Chapter 12 Kurakto, D.F. & Welsch, H.P. (2004), Strategic entrepreneurial growth, Thomson: Ohio. Chapter 7 Morris M., Kuratko D., Kovin J. (2011). Corporate entrepreneurship and innova7on, South-Western Cengage Learning: Mason. Chapter 13. Tidd, J. & Bessant, J. (2009). Managing Innova6on: Integra6ng technological, market and organisa6onal change, John Wiley & Sons Ltd: Chichester, WS Chapter 8

13/08/15 1 Scenario • You have been contacted by the major shareholders at General Motors (USA) to provide an accurate and current analysis of their Holden subsidiary. • Subsidiaries are a common feature of multinational corporations who generally organise their businesses into national and functional subsidiaries • A subsidiary is a business/organisation that is completely or partly owned (major shareholder) by the parent organisation and thus the parent organisation normally controls the activities and policies of the subsidiary (therefore, Holden is the Australian arm of General Motors). • So you are working as a consultant to suggest a new (internal, external or partnership) venture, (on a based analysis of the Holden subsidiary) which will create rapid growth. • The report should be addressed to/written for the shareholders of GM. A3 – Individual Report IBU5COV • This is a 2000 word report (maximum) • Due Friday 16th October @ 9pm • Submit via the TurnItIn link on LMS • Your file must be saved/uploaded with the following name: A3COV_Campus_Surname_StudentNumber • This report must be presented in a professional academic report manner (cover page, table of contents, use headings/subheadings, include page numbers, be formatted with square paragraphs etc.) 13/08/15 2 #1: Analyse External Environment  Macro External Environment: – Environmental factors that indirectly affect the organisation, such as government legislation, demographic and social trends. – Comprises political, economic, socio-­­cultural, technological, environmental & legal environmental forces. Before you commence the assignment… It is recommended you complete an external, industry, competitor and internal analysis to identify a relevant opportunity. From your analysis you should be able to clearly identify the customer need and timing (opportunity). It is suggested you used the following theories/ models to help… 13/08/15 3 #3: Competitor Analysis (Smith 2008) #2: Drivers of Industry Competition 13/08/15 4 Assessment of the external environment, drivers of industry competition and the competitor analysis provide a basis of information for the SWOT. Competitor Analysis (Smith 2008) 13/08/15 5 SWOT 1. Identify the strengths 2. Determine the weaknesses 3. Consider the opportunities 4. Locate the threats 5. Create a balance and holistic SWOT analysis #4: SWOT • Assess your organization’s current position relative to competitors and potential customer needs • Provides insights into market opportunities, threats and trends to optimize returns on investment • Reviews your dependence and value attached to your supply chain as well as the sustainable nature of your competitive advantage • Increases the likelihood of successful new product or service launches, partnerships developments and efficient outsourcing 13/08/15 6 STEP 2 SWOT -­­ Weaknesses – Internal Environment (now) Reduce or ideally eradicate Consider: • What problems are frequently (re)occurring and possibility losing you sales/members? • What could you improve that would directly affect your business performance? • What are your financial weaknesses? • What are your staff weaknesses relative to your strongest competitor? Example: poor quality product or service reputation or recall STEP 1 SWOT ­­ Strengths – Internal Environment (now) Maintain and build these aspects Generally relates to your resources and capabilities Consider: • What do you do better than anyone else? • Why should people purchase from you relative to your competitors? Example: strong distribution systems 13/08/15 7 SWOT -­­ Threats – External Environment (future in the local, macro, & micro) Combat STEP 4 Consider: • What external obstacles are you facing or might you face that would affect key elements of your business (supply chain, economic downturn)? • What new legislation might damage current profitable success? • What are your sponsors likely to do in the future? • Could one of your weaknesses or removal of one or more of your strengths threaten your long-­­term future? Example: new legislation may significantly increase your costs SWOT -­­ Opportunities – External Environment (future in the local, macro, & micro) Prioritize or optimize Consider: STEP 3 • What changes can you best exploit? • What are the competitor vulnerabilities that you can attack? • What new markets could you enter or further penetrate? Example: these could derive from changes in lifestyle behaviours 13/08/15 8 Each category of the SWOT should be presented in the following way: Strengths Claim Evidence Strong brand awareness • Car sector index indicates Holden is…. (reference, year) • … Long and faithful history in Australia • 66 years since it developed the first all-­­Australian car (reference, year) • … Create a balance & holistic SWOT Analysis STEP 5 The SWOT analysis now needs to be holistically considered. This means that balance needs to be created to ensure one quadrant does not dominate the process. Consider: • What strategies might we be able to implement to pursue opportunities that align with our strengths? (strengths Vs. opportunities) • How can we overcome our weaknesses to pursue high-­­ranked or high-­­weighted opportunities? (weaknesses Vs. opportunities) • How can we use out strengths to reduce the risks of our threats? (strengths Vs. threats) • What mechanisms can we include to reduce the potential impact of our weaknesses, thereby avoiding the susceptibility to out most likely threats? (weaknesses Vs. threats) 13/08/15 9 Based on one of the identified opportunities in the SWOT analysis, you must provide a recommendation for new innovative venture development. This venture must align with the core competencies of GM and aim to create rapid growth. The analysis does not feature in your assignment but may be used as a reference in your appendix. 13/08/15 10 Recommended Report Structure • Introduction (to the report and identify the purpose) • Background of GM (this should be brief but identify the core competencies) • Recommended new venture proposal (give this section the title of your venture) – Venture description statement (including how this venture will be established and create rapid revenue growth) – Marketing (identify target market, market position, market share, your competitive advantage, & pricing strategy to penetrate & maintain the market to produce profits) – Operations (the mode & general operations of the venture should be explained; all resources other than finance should be identified here; consider the impact of the new venture on Holden/GM’s current operations) – Management (identify the key people involved; & added assistance of consultants, directors etc.) – Financials (present & justify a budget; consider operations & stages of financing; identify sources of funds) – Critical risks (analysis of foreseeable problems & suggest solutions – minimum 5 required) – Harvest strategy (outline the plan for continuity or disposal of the business; consider leadership & assets) – Milestone schedule (timetable or chart, with explanation, to demonstrate when each phase of the venture is to be completed; deadlines & milestones must be clear) • Summary • Appendix (if required) • Bibliography

EXECUTIVE FORUM coRPoRAm VENTURING OBSTACLES: SOURCES AND SOLUTIONS HOLLISTER B. SYKES and ZENAS BLOCK New York University T HERE IS A FUNDAMENTAL CONFLICT BETWEEN NEW VENTURE AND MATURE COMpany management requirements. As an enterprise evolves, the focus for success shifts from sensing and seizing opportunity to protecting and utilizing the resources that have been acquired. In surviving companies, management practices change to accommodate this changing need. The conflict arises when the mature company attempts to initiate internal new venture activities. Application of mature company practices to management of new corporate ventures is not only inappropriate, but breeds failure. To succeed with new ventures, top corporate management must first understand the inherent differences in management needs for new ventures versus the mature organization, and must then adapt a pluralistic management style that accommodates both needs. This paper examines the rationale for ten “establishment” practices and the adverse effects they can have on new ventures. From this analysis, alternative “entrepreneurial” management practices are recommended. The ten management practices examined are:( 1) Enforce procedures to avoid mistakes; (2) Manage resources for efficiency and ROI; (3) Control against plan; (4) Plan long term; (5) Manage functionally; (6) Avoid moves that risk the base business; (7) Protect the base business at all costs; (8) Judge new steps from prior experience; (9) Compensate uniformly; and (10) Promote compatible individuals. Some of the adverse effects of these practices include: blockage of innovative solutions, Address correspondence to Hollister B. Sykes, New York University, Graduate School of Business A&inistration, Center for Entrepreneurial Studies, 100 Trinity Place, New York, NY 10006. Journal of Business Venturing 4, 159-167 0 1989 Elsevier Science Publishing Co., Inc., 655 Avenue of Americas, New York, NY 10010 159 160 H.B. SYKES AND Z. BLOCK loss of competitive lead time, entrepreneur failures, high venture failure costs, missed opportunities, fluctuating venture strategies, misread markets, reduced motivation to take risks, and loss of innovative employees. Recommended entrepreneurial management practices include: restricting “standard” procedures to those appropriate for the venture; controlling ventures by milestone planning rather than calendar budgets; being more responsive to market feedback in adjusting plans; focusing on critical issues for early determination of venture viability; assessing and choosing “affordable” risks; and making venturing a “mainstream” function of the business. INTRODUCTION Obstacles to corporate venturing have been described by a number of observers, including Hill and Hlavacek (1977), Fast (1979), Quinn (1985), MacMillan et al. (1986), and Sykes (1986). Block (1983) and Kanter (1985) conclude that many of these obstacles arise because the mature firm’s customary management practices are inappropriate for new ventures. Extending this concept further, we believe that most obstacles to corporate venturing are the result of a fundamental conflict between mature company management practices and those appropriate for new ventures. Business life-cycle theory (Greiner,l972) explains the evolution of corporate management practices as a venture evolves over time into a mature company. The conflict occurs when a new venture is initiated within a mature company. The two different life-cycle stages coincide and result in a confrontation of management practices. Even with this understanding of the genera1 problem, questions persist: what management practices are omnipresent in the mature firm; what effect are they likely to have on venture performance; and what alternative practices should replace them in order to resolve the conflict? In this paper we identify and suggest the origin and rationale for each of ten common management practices. The problems (obstacles) for new venture management that derive from following these practices are described, and alternative practices which appear to have been successful are recommended. Our objective is to provide a rationale for observed behavior at the interface of two different and widely separated business life-cycle stages. The effects described and actions suggested are the result of the authors’ observation and direct experience rather than formal research design. Clearly, more formal research is needed to enrich our understanding of this corporate management issue. OBSTACLE SOURCES As firms develop from their entrepreneurial beginnings, the focus of most shifts from sensing and seizing opportunity to protecting and utilizing the resources that have been acquired. This evolution is not always peaceful since the changes required to accomplish resource protection challenge the customs, practices, and culture which were successful during the early development of the firm. The inevitable evolution from opportunity-driven to resourcedriven management is the root of the two major sources of corporate venturing obstacles. First is the destructive conflict between the formal needs and policies of the established firm and the needs of new ventures. Second is the misdirection of new ventures because of the imposition of irrelevant and often damaging corporate management practices. Described herein are ten management practices omnipresent in mature companies. They stabilize, protect and and maintain the base business, but adversely affect the survival of new ventures. Discussion of the adverse effects is followed by proposed remedial actions CORPORATE VENTURING OBSTACLES 161 TABLE 1 Corporate Management Practices Practice Effect Action Enforce standard procedures to avoid mistakes Manage resources for efficiency and ROI Control against plan Plan long term Manage functronally Avoid moves that risk the base business Protect the base business at all costs Judge new steps from prior experience Compensate uniformly Promote compatible individuals Innovative solutions blocked, funds mis-spent Competitive lead lost, low market penetration Facts ignored that should replace assumptions Non-viable goals locked in, high failure costs Entrepreneur failure and/or venture failure Missed oportunities Venturing dumped when base business threatened Wrong decisions about competition and markets Low motiviation and inef~~ient operations Loss of innovators Make ground rules specific to each situation Focus effort on critical issues, e.g., market share Change plan to reflect new learning Envision a goal, then set interim milestones, reassess after each Support entrepreneur with managerial and multidiscipfine skills Take small steps, build out from strengths Make venturing mainstream, take affordable risks Use teaming strategies, test assumptions Balance risk and reward, employ special compensation Accommodate “boat rockers” and “do-ers” which can be taken by an entrepreneurially oriented management. Table 1 summarizes the practices, adverse effects and recommended remedial actions. Enforce Procedures to Avoid Mistakes In a venture’s earliest stage, the entrepreneur is likely to make most decisions based on continuous sensitivity to new information. For the venture to grow beyond its earIiest stages, institutionalization must occur. Indeed, management of a large company would be chaotic without such institutionaIization. Decision rules must be developed which are applicable at many levels of the organization in order for delegation to occur, while assuring that the firm remains under reasonable control. These decision rules are based on experience in a particular industry and competitive environment. They appear in the form of policies, procedures, communication and reporting methods, control and performance evaluation processes, and reward systems. Mistakes made from not following procedures can have a major impact on the base business with its large multiplier. Top management usually delegates the enforcement of standard procedures to corporate staff personnel, who are held responsible for any mistakes resulting from not following the procedures.
Although adherence to standard procedures in the areas of hiring, purchasing, product development and market testing may be correct for the base business, they can result in delayed responses if applied to the new business. While adherence may avoid some mistakes 162 H.B. SYKES AND Z. BLOCK of commission, progress slows to a crawl, precious competitive time is lost, and mistakes of omission result. Some procedures, e.g., budget planning and expenditure controls, are necessary to a degree, but when applied to the full breadth and depth used by the base business, they reduce flexibility and shift the focus from goals to numbers. Following standard corporate procedures places a new venture under an even greater handicap when entering a business unrelated to the base business. Industry differences, such as capital intensiveness, customer type and rate of technology change, affect the decision making practices and control procedures. The established competitors in the new business area follow different management practices honed from experience to best fit their industry’s needs and timing requirements. It is very time consuming and distracting for venture management personnel to have to argue for exceptions or modifications to procedures as each new situation arises. A practical solution to this problem is to appoint a high level executive to decide which procedural and info~ation requests should apply to the venture. If the procedures are justified, corporate staff should be held responsible for implementation of the procedures (either carrying them out or training and supervising personnel to do so), not merely for checking up. This will help unburden the venture manager so he or she can spend the proper time on operational issues. Manage Resources for Eflkiency and ROI Clearly, in a mature industry, operational efficiency is of survival significance, and return on investment is a measure of management effectiveness. Make versus buy choices, quantity purchasing discounts, and growth capacity pre-investment are key ROI decisions. New business ideas usually require modification and adaptation before they are commercially viable. The focus in early stages of commercialization must be on responding to the changes needed rather than on achieving efficiency, In higher technology industries, the innovation may have limited lead time, thus making market penetration and share a more urgent objective than achieving efficiency or high current return. Attempting to seek economy of scale too early leads to underutilized, high overhead plants, obsolete inventory, and lessened flexibility in meeting competitive threats. Most new ventures have-or should have-limited resources which are best focused on achieving key goals, such as proving a prototype, obtaining a bellwether customer, or testing a major marketing assumption, Unless the key milestones which lead to the business goal are achieved, there will not be a business. The use of milestones as a management tool is discussed next. Control Against Plan Failure to meet plan in a mature business implies managerial failure and foreshadows potential business failure. Comparison of actual results against the plan is a serious and necessary method of attempting to assure that the business is under control. Foremost, meeting plan means meeting the annual financial projections. Under the watchful eyes of the investment analyst, it means meeting quarterly earnings projections. However, such predictability is simply not possible for new ventures. More impo~~t is what is learned in the achievement of specific milestones that may require changes in the plan. As noted by Block and MacMillan (1985), venture financial control is more appropriately managed by funding to achieve milestones and, if the outlook remains viable, each achievement is used to trigger funding for the next step. CORPORATE VENTURING OBSTACLES 163 Plan Long Term Looking beyond the current period is important to business survival. Future financing needs, personnel requirements, and facility expansions must be anticipated. However, for new ventures five- or ten-year financial and facility projections (usually to conform with some central corporate planning process) are meaningless. Worse is investment made in anticipation of future results which have not been demonstrated. A dramatic example was the Time-Life pre-investment in the launching of Cable TV Week (Byron 1987). Aside from some rough numbers to indicate potential, long term planning for new ventures should focus on projections of industry technical and marketing trends and their possible effect on the venture’s potential. One operational issue does need longer term planning-the future organizational positioning of the venture. Should it be merged into an existing division, or be established as a new division? Often neglected in corporate venture planning, this issue affects decisions regarding sources of staffing, sponsorship, and degree of functional independence (e.g., whether the venture should have its own sales force.) Manage Functionally As expertise in the exi:ting business grows and as the business grows larger, it is efficient to subdivide management tasks functionally and by specialty. This horizontal subdivision of tasks means that lower level corporate managers often have very narrow experience. Managers rarely acquire multi-functional experience until they have moved vertically to become managers of a multi-functional project or division. Since authority for decision making (executive level) is measured by amount of resources managed (people, assets or corporate viability), decisions recommended at the venture level must move up the chain of command until they reach a level with the necessary authority and functional span for approval. The consequence of this practice is that when a new venture is small (few employees and few assets), a venture manager with limited functional and managerial experience is appointed. Frequently, the venture manager is the technical entrepreneur who originated the new business idea. This leads to two common problems: functional misjudgements, and venture management failure. Functional misjudgement results when the venture team does not have the necessary mix of disciplines. If the early challenge is in the engineering area, there may be little or no marketing inputs to the venture. This can lead to the classic problem of technical success and market failure. Venture management failure results when the venture’s managerial needs outgrow the original manager’s capabilities. The first crisis usually occurs shortly after the venture enters the commercial arena. Sales projections face realities. Technology is no longer the main game. Organization and management issues grow in complexity. The faster the venture growth, the greater the potential for failure. Replacement by a higher level manager may temporarily solve the problem after a recovery hiatus. The “new broom” will almost certainly reject the goals of their predecessor. The disruption and personnel turmoil weaken ability to cope with the real enemy-competition. So why doesn’t the corporation place more experienced managers as head of new ventures-those to whom greater authority can be delegated? One reason is that the job does not look important enough, at least initially. Another is that the experienced manager on a “fast track” in the existing business is reluctant to take what is perceived to be a significant career risk. Both problems derive from the candidate’s perception of senior management’s 164 H.B. SYKES AND Z. BLOCK attitude. Are they as serious about their commitment to new business development as they are to the existing business? Do they penalize those who take some risks to achieve new business goals?. Everybody acknowledges that management and leadership skills are critical ingredients for new venture success. If the corporation is serious about building significant new businesses, senior management must be willing to (1) place a share of its most talented managers in charge of new ventures at an earlier stage; (2) create an environment conducive to an ent
repreneurial style of management (flexible, resourceful, and responsive to new inputs); (3) establish an efficient decision-making process; and (4) provide potential venture managers with the necessary motivation to take such responsibilities by demonstrating that venturing can be a desirable alternative path to advancement, recognition and increased compensation. If inexperienced entrepreneurs are allowed to manage ventures initially, they must be provided with experienced counsel and appropriate functional support, particularly in areas where they may not recognize their own weaknesses. A plan for possible future reassignment should be discussed in advance with the entrepreneur. Avoid Moves That Risk The Base Business Risk aversion is the sine qua non of mature businesses. For the established company, internally developed moves in new directions are not likely unless the firm has a surfeit of available resources or the base business outlook turns dismal. The risk of failure is considered too high. This attitude was reflected by Harold Geneen (1984) who stated that entrepreneurship is impossible in large corporations since they can’t afford to “bet the company.” But it is not necessary to bet the company in order to venture successfully. By replacing old business planning methods with event milestones which test the basic assumptions on which the business is started, losses can be held to affordable levels. To succeed, venturing must be a continuing activity, with a few starts each year, and a practice of early termination of the ventures for which the original technical or marketing assumptions aren’t borne out. Looked at as a program, rather than on a per venture basis, the risk spread should be acceptable. Without such a portfolio approach, venture capital funds could not exist. Protect The Base Business At All Costs Most industries inevitably go through economic cycles of good and bad times. New venture programs are usually launched in the fat years and cut in the lean years. When the base business is threatened, usually by a downturn in earnings, it receives priority in management’s attention and in the utilization of available resources. For long term survival, the base business needs continuing renewal. Venturing activities, such that which produced the IBM PC, can be an effective strategy for evaluating and responding to changes in the market. However, risk strategies that may incur initial losses for longer term gain are under considerable pressure in the current environment of take-over threats. Any identifiable drain on earnings is seen as a handicap that depresses the stock price and becomes an attractive target for elimination. A centralized venture program that groups new ventures under corporate management is highly visible. If it produces red ink, as is likely in early stages, it is vulnerable. Placement of ventures in operating divisions gives less visibility to early stage losses, CORPORATE VENTURING OBSTACLES 165 which can usually be covered by the division overall profit. However, there are more fundamental reasons for locating ventures within existing operating divisions. Operating divisions which have related business interests can provide important support in the form of management, skills, and facilities when needed. In fact, without such “champions” to support a new venture, it may well have a difficult time putting down roots sufficient to nourish its growth. This advice seems to fly in the face of Drucker’s (1985) caution “not to mix managerial units and entrepreneurial ones.” The organizational problem most often cited is that division management is typically held accountable for short term results, not long term growth. Also, day-to-day “fire fights” in the existing business can distract operating management from dealing with the needs of the venture. The real problem is how top management sets its priorities. If part of the division manager’s incentive (promotability and compensation) depends on how actively he or she generates and supports new ventures, the division manager will adjust the day-to-day priorities. From long observation of the performance of centralized corporate venture groups (not good), we are convinced that, to work for the long term, venturing should be an activity of the whole organization. Highly diversified firms such as General Electric and 3M have shifted most new venture development responsibility to their operating divisions. They look for new ventures that can be leveraged by the capabilities of existing divisions. An exception to placing the venturing activities in operating divisions would be when the aim is to diversify into entirely unrelated business areas. Another exception justifying centralized venture development would be to initially develop the necessary skills for managing venture activities in a more protective environment, and then transfer those skills to the operating divisions. Judge New Steps From Prior Experience Committees are the natural consequence of business maturity. One of their main purposes is to bring together people with the components of special knowledge useful in making a particular decision. If the decision concerns the existing business, the committee system assures that the cumulative functional expertise of the corporation is brought to bear on the issue. But what if the decision concerns a totally new business activity in an area unfamiliar to the committee members, or concerns fast changing business conditions which require new strategies? In these circumstances application of prior experience may lead to totally inappropriate decisions or misreading of the competition and market. It is mandatory that the decision makers or performance reviewers have or acquire knowledge of the new area. As suggested by Roberts and Berry (1985), one way to gain direct experience is to begin in a small way through venturing strategies such as strategic alliances and venture capital investment. Turnover of the management responsible for the new area should be avoided until experienced successors are trained. Too often promising managers are moved on to fill other management holes in the existing business. This is another aspect of “protecting the base business.” Another way to gain experience is to recruit people from the target industry. However, it may be very difficult or expensive to attract a proven performer from another company unless it is evident to the candidate that he or she has an even better career opportunity in the acquiring company. 166 H.B. SYKES AND %. BLOCK Compensate Uniformly Uniform compensation policies simplify administration and reduce chances of unequal employee treatment. They also simplify the transfer of employees from one division to another. However, application of a uniform compensation policy can dull individual motivation to initiate a venture or join a venture team. Venture assignments often carry more career risk than a job in the base business, and usually require more individual effort and sacrifice of personal time in order to succeed. Just as there are separate compensation policies for most sales people, consideration should be given to designing appropriate programs for venture employees. The objective of such compensation at the early stages of the venture is to promote the building of a new business as opposed to preserving an old business. However, such programs must take into account several administrative issues cited by Block and Ornati (1987). Does the plan generate resentment or induce non-cooperation by corporate staff or divisional personnel who are needed to provide support for the venture? Will the pian support team building, or hinder it? Is it simple to administer, and is it calculable, realizable and significant? Promote Compatible Individuals In addition to the necessary skills, knowledge and intelligence, requirements for promotion in the established organization often include compatible personality, predictability, communications ability, and a record without notable mistakes. This effectively screens out innovators who display any maverick tendencies or violate accept
ed rules of behavior in getting attention or resources for development of their ideas. To avoid becoming “ingrown,” organizations are repeatedly advised to bring in occasional outsiders with new points of view, and to find ways to accommodate the “boat rockers.” ~PLICATIONS FOR ~ANA~E~E~T Many of the management adjustments that are needed in successfully dealing with new ventures are also the ones needed to cope with the changing business environment. To innovate successfully the corporation must follow pluralistic management practices adapted to the needs of both new and mature businesses. This requires flexibility, responsiveness and resourcefulness. Perhaps the major adaptation challenge is the ability to invent and tolerate a mix of apparently contradictory policies and practices. REFERENCES Block, Z. Fall 1983. Can corporate venturing succeed? Journal of Business Strategy 3(2):21-33. Block, 2. and MacMillan. 1.C. September-October 1985. Milestones for successful venture planning. Harvard Business Review 63(5):4-8. Block, Z.. and Omati, O.A. 1987. Compensating corporate venture managers. Journnl of Business Venruring 2:4 I-5 I . Byron, C. 1986. The Funciest Diva. New York: New American Library. Drucker, P.F. 1985. in~zo~,u~i~n and E~zreprene~r.ship. New York: Harper & Row, p. 174. Fast, N .D. 1979. Key managerial factors in new venture departments. Industrial Markering Mancrgement :221-125. Geneen, H. 1984. Managing. New York: Doubleday and Co., p. 228. CORPORATE VENTURING OBSTACLES 167 Greiner, L.E. July-August 1972. Evolution and revolution as organizations grow. Harvard Business Review 50(4):37-46. Hill, R.M.. and Hlavacek, J.D. Summer 1977. Learning from failure-Ten guidelines for venture management. California Management Review 19(4):5-15. Kanter, R. 1985. Supporting innovation and venture development. Journal of Business Venturing 1:47-60. MacMillan, l.c., Block, Z. and Narasimha, P.N. Subba. 1986. Corporate venturing: Alternatives, obstacles, and experience effects. Journal of Business Venturing I :177-I 91. Quinn, J.B. May-June 1985. Managing innovation: Controlled chaos. Harvard Business Review 63(3):73-84. Roberts, E.B., and Berry, C.A. Spring 1985. Entering new businesses: Selecting strategies for success. Sloan Management Review 26(3):3-l 7. Sykes, H.B. Fall 1986. The anatomy of a corporate venturing program: Factors influencing success. Journal of Business Venturing I (3):275-293.

1 A Diagnostic Tool for Assessing Organisational Readiness for Complex Change Blackman, D., O’Flynn, J. and Ugyel, L. (2013) “A Diagnostic Tool for Assessing Organisational Readiness for Complex Change”, paper presented to the Australian and New Zealand Academy of Management conference, Hobart, 4-6 December. An output from the ANZSOG-funded project Diagnosing readiness: Testing organisational capabilities. ABTRACT Much is made of the best way to manage change, including a large body of work that argues that there is no point in undertaking such programs unless the organisation is actually ready and able to adopt these new ways of working. In this paper we focus, in particular, on the issue of organisations working together in more ‘joined-up’ ways across government – an example of complex change. We contribute to this literature, arguing that in cases of complex change, not only does there need to be readiness in terms of the change itself, but that there also needs to be readiness in the capacity of the organisation to work together, both within and across organisations. The paper outlines the development of a new diagnostic tool that combines macro and micro levels of analysis in order to enable organisations to gauge their preparedness for complex change. Keywords: Change management, Implementing Change, Public Sector Reform, Theories of Change and Development, Reshaping Change INTRODUCTION It is widely accepted that many change programmes fail (Attaran 2000; Beer & Nohria 2000; Grady & Grady 2012; Self & Schraeder 2009, Weiner 2009; Werkman 2009) and that more effective change management would enhance organisational effectiveness. Much is made of the best way to manage change (Kanter 1989; Kotter 1996), including a large body of work that argues that there is no point in undertaking change unless the organisation is actually ready and able to adopt the change (see for example: Armenakis & Harris 2002). This paper contributes to this literature arguing that in cases of complex change, not only does there need to be readiness in terms of the change itself, but that there also needs to be readiness in terms of the capacity of the organisation to work in partnership, both within and across organisations. Building upon research into the effective development of joined-up working in the public sector 2 undertaken within the Australian Public Service (APS) (Blackman 2014; Blackman et al. 2010), this paper outlines the development of a new diagnostic tool that will enable organisations to gauge their preparedness for complex change. In the first section we review the notions of change and organisational readiness. Following this we make the case for why a new model of diagnosing readiness is required. Following discussion of our method, we set out indicators, items, and then discuss implications. WHY ORGANISATIONAL READINESS? Many organisations have been implementing change, the pace, magnitude and importance of which have increased considerably in recent years (Burnes & Jackson 2011; Grady & Grady 2012). Such changes are often targeted at improving the effectiveness of the organisations so that they generate value (Cawsey, Deszca & Ingols 2012; Hayes 2002), having a basic goal of enabling an organisation and its functions cope with a challenging environment (Kotter 1995). The process of organisational change is perceived to be continuous rather than just a movement from one state to another; Pettigrew et al. (2001), for example, refer to sequence of individual and collective events, actions and activities unfolding over time. However, despite the prevalence of change it is widely accepted that the majority of change initiatives are unsuccessful with failure rates of over 70% being regularly reported (see for example: Attaran 2000; Beer & Nohria 2000; Grady & Grady 2012; Self & Schraeder 2009, Weiner 2009; Werkman 2009). In order to improve the likelihood of change success, the literature contains a range of theories used to explain the processes and elements of change including: life-cycle models looking at change as a series of ongoing changes (Cawsey, Deszca & Ingols 2012; Koberg, Uhlenbruck & Sarason 1996; Van de Ven & Poole 1995); teleological models considering change towards a planned goal or end state (Paton & McCalman 2008; Van de Ven & Poole 1995; Kotter 1995); dialectical theory which assumes that change occurs when disparate values, forces or events gain sufficient power to challenge status quo’ (Van de Ven & Poole 1995; Werkman, 2009); evolutionary models which argue change is a recurrent, cumulative and probabilistic progression of variation, selection and retention of organisational entities (Van de Ven & Poole 1995; other refs). In these models a common factor cited as required to overcome the potential for failure is the need for all those involved to have ‘bought in’ to the process (Choi & Rouna 2010), especially as there is a widespread assumption that individuals resist change (Oreg 2003) and that leaders do not prepare the organisation carefully enough (Self, Armenakis & Schaeder 2007). Leaders tend to rush into change initiatives; so much so that they lose focus of the objectives (Beer & Nohria 2000), overlook the importance of communicating a consistent change message (Armenakis & Harris 2002) or fail to understand what is necessary to guide their organisation through the changes (Self & Schraeder 2009). Coping with change initiatives can be difficult and stressful for individuals (Morrison & Milliken 2000; Wanberg & Banas 2000) and employees often view any change with cynicism as a result of the perception of organisational changes as either the ‘latest management fad or quick-fix attempt’ (Self et al. 2007: 212) or as ‘an excuse for lay-offs and plant closures’ (Attaran 2000: 797). Such 3 behaviours and perceptions lead to the employee resistance and is one of the common reasons for the t failure of organisational change (Washington & Hacker 2005). The necessity of overcoming potential disinterest, resistance or inability to change on the part of those involved, has led to an argument that a useful way to conceptualise change is as a set of stages or phases. Lewin (1947) posited the concept of Unfreeze – Change – Refreeze (subsequently revived by Burnes 2004), whereby the organisation prepares for the change, then makes the change and subsequently adopts it as an ongoing state. Kotter (1995) suggests that successful change emerges where the leadership understands that the change process is a series of phases requiring time; a process similar to the concept of “unfreezing”, including phases such as building momentum, warm-up or defrosting activities, or gaining buyin to the change effort. Armenakis, Harris & Mossholder (1993) described this as reflecting the beliefs, attitudes and intentions of the employees regarding the changes that are required and the capacity to undertake the changes successfully; failures of organisational change implementation can be attributed to the organisation’s inability to provide for an effective unfreezing process before attempting the change (Choi & Rouna 2010). Three overlapping phases are suggested: “readiness” where organisational members are prepared for the change, “adoption” which is the period where the change is still on trial, and “institutionalization” which involves efforts to internalise the changes (Armenakis & Harris 2002). In order to overcome resistance to the change for successful implementation, employees must be willing and ready to adopt the change; this is a ‘critical precursor’ to successful implementation (Weiner, Amick & Lee 2008). Studies have shown that where organisational leaders did not undertake a process of creating readiness for change, but instead overestimated the degree of preparedness within the organisation and its employees, the change effort either experienced false starts from which they might or might not recover, the change efforts stalled as resistance increased, or the effort
failed altogether (Self & Schraeder 2009; Weiner, Amick & Lee 2008). There is often considered to be a lack of effort towards creating an environment of readiness for organisational change; reasons include: a failure by the change agents to assess the needs and expectations of the employees (Miller et al. 1994), and a failure to address “organisational silence” where the employees withhold their opinions and concerns about organisational problems through fear, opposition or disinterest (Morrisson & Milliken 2000; Neves 2009). It is, therefore, argued that, for there to be more effective change, managers should focus on understanding if the organisation is ready and able to change. WHY IS A NEW DIAGNOSTIC FOR ORGANISATIONAL CHANGE REQUIRED? Reflecting upon the ‘dismal results of change management’ By (2005, 378) called for new research arguing that the development of current research streams would not change the outcomes; new methods of measurements are required to determine the potential success change initiatives. Burnes & Jackson (2011, 134) posit that the problem with the explanations that have been provided thus far is that they assume ‘one best way’ to manage change and that not adhering to it results in the failure of the change initiative. Others argue that the 4 problem is the unit of analysis: much of the extant theory and research focuses on the organisational (i.e. macro or system-oriented) level and less on the individuals (Neves 2009; Wanberg & Banas 2000); less still considers the two together. Whilst there are a number of researchers beginning to adopt a micro-level perspective on change that emphasises the role of individuals in implementing change (Choi & Rouna 2010), Neves (2009) claims that further attention should be provided to micro-level processes and that future theories and research should combine the macro as well as the micro-levels of analysis into a comprehensive model of change. At the macro-level, Burke & Litwin (1992) suggest that to determine the causes of organisational change it is important to firstly understand how organisations function (i.e. what leads to what), and secondly understand how organisations might be deliberately changed. Whilst there is considerable discussion around this, ways of assessing organisational readiness for change are not yet available. Conversely, at the micro-level, employees’ willingness to participate is often given as a key determinant for the successful implementation of the change (Miller et al. 1994). Armenakis & Harris (2002) contend that five message domains, i.e. discrepancy, efficacy, appropriateness, principal support and personal valence, apply to all transformation efforts regardless of the intervention model; these five domains ‘combine to shape an individual’s motivations, positiveness (readiness and support) or negative (resistance) toward the change’ (Armenakis & Harris 2002). However, despite extant diagnostics for these, so far, there has been no marked improvement in change success. In this paper, we present the development of a new quantitative diagnostic tool which can be used in determining organisational readiness for change. We combine micro and macro levels of analyses to present a diagnostic which will enable those undertaking change to consider whether the organisation, as well as those within it, are ready to implement the change. METHOD Based upon the change literature and the gaps identified we have developed a change diagnostic tool that can work to capture both the macro and the micro level. The objective was to create a survey instrument which can be administered either prior to a change, or during if there are concerns, to determine whether, first, the organisation and its members are ready for a change and, second, if not which areas need to be addressed to overcome the problems. The diagnostic tool has been developed in two stages. Stage 1: Developing Macro Level indicators An original qualitative study was undertaken which sought reasons for success or failure of complex government change initiatives, in particular the adoption of joined-up, interorganisational ways of working (see Blackman et al. 2010 and Blackman 2014 for details; see O’Flynn et al. 2011 for an overview of the broader joined-up government notion). Case study work conducted in five agencies: the Australian Government Information Management Office, Australian Public Service Commission, the Department of Agriculture, Fisheries and Forestry, Department of Families, Housing, Community Services and Indigenous Affairs, Department of Health and Ageing and the Department of the Prime Minister and Cabinet, led to the 5 development of a force field approach using barriers and enablers of joined-up approaches at the macro level identified within the cases (Figure 1). Figure 1: A Generic Model of Enabler/Inhibitor Elements of Whole of Government Working Source: Blackman (2014). Modelled upon Lewin’s (1947) model Figure 1 illustrates that there are two distinct aspects of the macro environment which work independently of each other. Therefore, only concentrating on barriers or enablers will not work – it is the overall impact of the combination of the forces that will, ultimately determine the success or otherwise of the change. It became apparent that these forces were equally applicable to any of the changes studied and were fundamental to the potentiality of the change success. Moreover, the research showed that asking the right questions of individuals clarified what was occurring at the macro level. We, therefore, proposed that a quantitative instrument could be developed which combined macro and micro change readiness indicators. Stage 2: Developing the instrument The next stage in the tool development was to clarify the definitions of each term for changes in general so that, where possible, extant survey instruments could be found to provide already validated questions for both the macro and the micro levels of the diagnostic. Figure 2 identifies the elements to be tested by level and whether they will enable or prevent the change. 6 Figure 2: A Multi-Level Readiness Model reflecting Barriers and Enablers As can be seen there are already instruments for the individual level so the priority for our diagnostic was to identify how they could be seen as predictors at the macro level, by linking them to a macro diagnostic. The argument is that we need to be able to use micro indicators in this way as only by surveying the employees can we an accurate prediction of change potential be established. Next we define the macro terms to be assessed and then the choice of items that are to be used. MACRO DIAGNOSTIC DEFINITIONS The original qualitative research revealed that there were key barriers and enablers to change at the macro level of the organisation (Figure 1 above). What was critical about these elements were that they could prevent effective change even where those involved were ready and willing 1. Programmatic Focus & Core Business 2. Decision-making 3. Operational Structure 4. Capability to work across boundaries 5. Ministerial Constraints 6. Staff Turnover 7. Misalignment of Evaluation & Accountability ORGANIZ ATIONAL LEVEL INDIVIDU AL LEVEL ENABLERS BARRIERS 1. Central Leadership 2. Clear Mandate 3. Patter-breaking Behaviour 4. Shared Understanding Readiness for Organizational Change (Holt et al. 2007):  Self-Efficacy  Personal Valence  Senior Leader Support  Organizational Valence  Discrepancy Commitment to Organizational Change (Herscovitch & Meyer 2002):  Affective Commitment  Continuance Commitment  Normative Commitment Resistance to Change (Oreg 2003):  Routine Seeking  Emotional Reaction  Short-term Thinking 7 to change. In one case example there were four units undertaking a particular change initiative based upon exactly the same formal framing documents and operating within the same system but there were major differences (see O’Flynn et al. 2011). There were two units achieving excellent outcomes who argued that what was required of them was very cle
ar, although the other units used the same notions to explain why they could not achieve good outcomes. In all four cases those involved in the units espoused a willingness to change, and it is likely that an individual readiness diagnostic would have had a positive outcome. However, they had different macro organisational contexts and capacities which were either supporting or preventing the effectiveness of the change. The seven elements identified as making a difference for all of the cases were: Enablers: Clear Mandate and Central Leadership, Pattern Breaking Behaviour and Shared Understanding of Objectives and Outcomes; and Barriers: Organisational Focus, Operational Structure and ‘Core Business’, Staff Turnover, Decision Making and Capabilities, and Misalignment of Evaluation and Accountability (see Blackman 2014 for a full discussion). The qualitative research demonstrated that the strength of the barriers and enablers could be determined and that this would give the organisation a plan as to how to prepare the organisation for the change where major barriers were identified. For example where the senior management support was perceived as lacking success is unlikely. This is widely accepted but the difference between what senior leaders saw as support and what was recognised as actually providing support was very distinct in some of the cases studied; Figure 3 is an example of the elements. Figure 3: An example qualitative diagnostic analysis Figure 3 demonstrates that, at the time of the data collection in this particular case, barriers were stronger than enablers. The strongest enabler, identified by the majority of participants was mandate, followed by pattern-breaking behaviour. Leadership also featured, but the complexity of being a facilitator needing to overcome strong program boundaries led to the mandate discussion predominating. A range of inhibitors was highlighted emphasising a status 8 quo focus and flagging considerable difficulty in getting the appropriate decision makers together. Structure was identified as a barrier, but potentially overcome by the enablers present. This case was a good example of where either removing the barriers or developing the enablers would not be enough. The elements all needed to be worked on together if the forces were to swing to enablers being stronger. This qualitative analysis was considered by those involved as useful but very time consuming to develop, leading to the proposition that a quantitative diagnostic at the macro level might enable more change success. We will now define each and then explain the instrument developed. Clear Mandate and Central Leadership Where there is clarity at ministerial level which has been translated into policy in terms not only of what is required, but why it is required and by whom. The importance of the change is evident through the high levels of senior support being given to the change proposal; without powerful champions initiatives any change is likely to fail. The diagnostic will need to establish whether there is enough legitimate power in place to enable the change. Pattern-breaking Behaviour For there to be a real change, the traditional patterns of behaviour need to be amended, ignored or actively put aside; individuals will recognise, support and seize opportunities to implement change in an innovative way. This is a macro issue as, not only must opportunities for novelty be identified, but changes to accepted practice supported throughout the change. The diagnostic will identify if pattern breaking is encouraged and/or supported. Shared Understanding of Objectives and Outcomes The need for clearly articulated, shared outcomes is critical to any change. The change proposal clearly identifies the objectives and how it is expected to work for all those involved and at all levels. All those involved will be able to recognise when the change has been implemented effectively. A diagnostic will identify practices used for developing shared understandings and interrogate perceptions of their usefulness. Ministerial Constraints This is where those involved felt that the political situation made change unlikely. This has not been included in the quantitative diagnostic at this stage as it was considered hard to assess objectively. Programmatic Focus, Operational Structure and ‘Core Business’ The initial research identified that even where there is a clear mandate, inappropriate structures and systems can prevent effective working. The proposed change needs to be seen as an important part of ‘core business’ and the potential benefits clearly articulated. If the change is seen as ‘an extra’ or if it challenges currently entrenched systems in a way that is not seen by those as adding value it has little chance to work. The diagnostic will determine whether those involve see an actual value for the organisation in the change. This is different from valence as that looks at value for the individual, this looks at whether those involved can see it as actually useful for the organisation. Staff Turnover High staff turnover of key individuals during a change will undermine likely effectiveness. Whilst a diagnostic can determine intention to leave, this turnover is often triggered by the 9 organisations, often through reorganizing. This item, therefore, could not be established at the micro level. Decision Making and Capabilities This element refers to the capacity, location and level of those involved in the initiative; all those involved need access the appropriate level of decision making in terms of knowledge, skills and legitimacy to act. When there are project meetings those in the room must have the delegated authority to take decisions related to the proposed changes in order to ensure that timeframes are not too slow. The instrument will establish where and when decisions are taken, as well as by whom. For effective macro change the instrument will need to demonstrate short, timely decision chains. Misalignment of Evaluation and Accountability Where there is either, an organisational tendency to over-evaluation or measurement of a change before it can have delivered the potential outcomes, or the outcomes being measured are inappropriate to effect the change. Such misalignment may drive the change either in the wrong direction or into stagnation. Where there is a history of this the organisation is less ready for effective change. The instrument will need to establish what forms of measurement are common within the organisation and the impact this has upon action. CHOICE OF ASSESSMENT ITEMS The items for the diagnostic tool (Appendix 1) have been generated from a combination of three extant micro models which measure organisational readiness and resistance to change which have been mapped to the macro level elements. The first two models are: Readiness for Organisational Change developed by Holt et al. (2007) and Commitment to Change developed by Herscovitch & Meyer (2002). These two models are selected based on an extensive systematic review of the literature on the instruments to measure “organisational readiness for change” conducted by Weiner, Amick & Lee (2008). In their review they identified 43 instruments for organisational readiness for change, and seven instruments were identified that met all the criteria set (see Weiner, Amick & Lee 2008, 422-424 for more details of each of the instruments). The third model that is included is the Resistance to Change Scale designed by Oreg (2003) which assesses the disposition to resist change. Resistance to change has been included so as to cover aspects of organisational change that the first two models overlook. Some researchers argue that “resistance” is quite distinct from “readiness” for change; according to Armenakis, Harris & Mossholder (1993) readiness for change pre-empts resistance to change. They also claim that distinguishing readiness and resistance helps in the discussions of implementation of change efforts. Each of the three models requires a closer examination to get an idea the scope and the area of coverage in order to see how the m
icro can be mapped to the macro. Readiness for Organisational Change The term readiness for organisational change is used in different ways (Choi & Rouna 2010; Weiner, Amick & Lee 2008). For instance, some refer to the term to mean the necessity of the change initiative and the capacity to implement it successfully, whilst others emphasise the employees’ belief in the benefits from the change. Nevertheless, Choi & Rouna (2010, 51) note 10 that most definitions agree on a common understanding of the term which relates to the ‘individual readiness for organisational change’ that involves an individual’s evaluation about the individual and organisational capacity for making a successful change, the need for a change, and the benefits the organisation and its members may gain from a change. Another term that is closely matched to readiness for change is “openness to change” which Miller et al. (1994, 60) defined as ‘support for change, positive affect about the potential consequences of the change, and it is considered a necessary, initial condition for successful planned change. For the purposes of our study, we used the concept of “readiness for organisational change” as defined by Holt et al (2007, 235): A comprehensive attitude that is influenced simultaneously by the content (i.e., what is being changed), the process (i.e., how the change is being implemented), the context (i.e., circumstances under which the change is occurring), and the individuals (i.e., characteristics of those being asked to change) involved. In the development of a measure for Readiness for Organisational Change, Holt et al. (2007, 236) sought to satisfy rigorous psychometric properties that would enable the measurement of ‘readiness for system-wide changes that affect many facets of organisations’. In doing so they followed a comprehensive procedure of item development, questionnaire administration, item reduction, scale evaluation and replication with an independent sample. An 18-item questionnaire was developed that was scored on a 7-point Likert scale and categorised under the factors appropriateness, management support, change efficacy, and personally beneficial. These four factors are based on the themes of self-efficacy, personal valence, senior leader support, organisational valence and discrepancy and these themes are aligned with the content (i.e., organisational valence), process (i.e., management support), context (i.e., discrepancy), and individual attributes (i.e., self-efficacy and personal valence) were represented. The organisational as well as individual focus of the instrument meant we could map micro elements to the macro enablers. Commitment to Change Herscovitch & Meyer (2002, 474) argued that ‘commitment’ was one of the most important factors involved in employees’ support for change initiatives, and that it has been incorporated into various theoretical models. They define “commitment to change” as a force or the mind-set that binds an individual to a course of action deemed necessary for the successful implementation of a change initiative. And this mind-set that binds an individual to this course of action can reflect: (i) a desire to provide support for the change based on a belief in its inherent benefits (affective commitment to change); (ii) a recognition that there are costs associated with failure to provide support for the change (continuance commitment to change); and (iii) a sense of obligation to provide support for the change (normative commitment to change). Herscovitch & Meyer’s model of commitment to organisational change is based on general theory of workplace commitment. Meyer et al. (2007, 186) explain that the model was administered in two sample of hospital nurses. The model identifies six-item measures under the broad themes of affective, normative and continuance commitment to change. The responses were based on a 7-point Likert-type scale ranging from 1 (strongly disagree) to 7 (strongly agree). As can be seen in Appendix 1, because this instrument is also focused upon the individual’s attitudes to the organisational change, we were able to map micro elements to identify macro indicators. 11 Resistance to Change Assessing whether or not there is resistance to change is beneficial to an organisation. Oreg (2003) notes that the reasons for the resistance to changes are often because the benefits to the organisation are not necessarily in line with the interests of the individuals being asked to make the change. He identifies six sources of resistance that derive from an individual’s personality: reluctance to lose control, cognitive rigidity, lack of psychological resilience, intolerance to the adjustment period involved in change, preference for low levels of stimulation and novelty and reluctance to give up old habits. In his study Oreg establishes the existence of a disposition to resist change and to reveal its underlying structure. A 16-item scale was developed under four broad factors which can be conceptualised as reflecting behavioural, affective and cognitive aspects of resistance to change: routine seeking, emotional reaction to imposed change, short-term focus and cognitive rigidity. The items were based on a six-point Likert scale ranging from strongly agree to strongly disagree. IMPLICATIONS AND CONCLUSION Appendix 1 demonstrates that in all but two cases (Ministerial Alignment and Staff Turnover) it has been possible to map extant micro level change instruments to macro level change predictors. Undertaking the diagnostic would enable an organisation to determine: first, whether the enablers or the barriers are stronger for a proposed or existing change and, second, which of the barriers or enablers are strongest and are most likely to be able to change current status quo. In the case of the two missing elements these would need to be identified to the organisation as potentially undermining any change initiative and as requiring management by the senior leadership. The diagnostic will, therefore, become a combination of prediction and prescription if an organisation wishes to improve its chances of change success. An advantage of this proposed diagnostic is that it will be relatively quick to undertake and can be used during a time of change if there are unexpected problems. Specific areas of concern can then be addressed. In this paper we have presented the development of a diagnostic for readiness for change at a macro level which can be used in conjunction with looking at readiness of individuals. Our argument is that, even where there are individuals ready for change, there can be macro level organisational elements that prevent the adoption of the change. Based upon previous research, we have developed a quantitative diagnostic which will enable organisations to consider whether the changes they are proposing are likely to be successful. Moreover, the areas of likely problem can be identified and action taken to increase the likelihood of change success. 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Readiness for Organisational Change Central Mandate and Central Leadership 3 Management has sent a clear signal this organisation is going to change. Readiness for Organisational Change Central Mandate and Central Leadership 4 Our organisation’s top decision makers have put all their support behind this change effort. Readiness for Organisational Change Central Mandate and Central Leadership 5 Our senior leaders have encouraged all of us to embrace this change. Readiness for Organisational Change Central Mandate and Central Leadership 6 This organisation’s most senior leader is committed to this change. Readiness for Organisational Change Central Mandate and Central Leadership 7 I would feel guilty about opposing this change. Commitment to Change Decision Making Capabilities 8 I would not feel badly about opposing this change. Commitment to Change Decision Making Capabilities 9 If my boss changed the criteria for evaluating employees, it would probably make me feel uncomfortable even if I thought I’d do just as well without having to do any extra work. Resistance to Change Decision Making Capabilities 10 It would be irresponsible of me to resist this change. Commitment to Change Decision Making Capabilities 11 Once I’ve come to a conclusion, I’m not likely to change my mind. Resistance to Change Decision Making Capabilities 12 Once I’ve made plans, I’m not likely to change them. Resistance to Change Decision Making Capabilities 13 Resisting this change is not a viable option for me. Commitment to Change Decision Making Capabilities 14 When someone pressures me to change something, I tend to resist it even if I think the change may ultimately benefit me. Resistance to Change Decision Making Capabilities 15 When this change is implemented, I don’t believe there is anything for me to gain. Readiness for Organisational Change Misalignment of Evaluation and Accountability 16 It would be too costly for me to resist this change. Commitment to Change Misalignment of Evaluation and Accountability 16 17 There are some tasks that will be required when we change that I don’t think I can do well. Readiness for
Organisational Change Misalignment of Evaluation and Accountability 18 Management has sent a clear signal this organisation is going to change. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 19 This change makes my job easier. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 20 This change matches the priorities of our organisation. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 21 This change will improve our organisation’s overall efficiency. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 22 I do not anticipate any problems adjusting to the work I will have when this change is adopted. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 23 I do not feel any obligation to support this change. Commitment to Change Organisational Focus, Operational Structure and Core Business 24 My future in this job will be limited because of this change. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 25 My past experiences make me confident that I will be able to perform successfully after this change is made. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 26 Things would be better without this change. Commitment to Change Organisational Focus, Operational Structure and Core Business 27 This change is not necessary. Commitment to Change Organisational Focus, Operational Structure and Core Business 28 This change will disrupt many of the personal relationships I have developed. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 29 When we implement this change, I feel I can handle it with ease. Readiness for Organisational Change Organisational Focus, Operational Structure and Core Business 30 This change is a good strategy for this organisation. Commitment to Change Organisational Focus, Operational Structure and Core Business 31 It would be risky to speak out against this change. Commitment to Change Pattern-Breaking Behaviour 32 Changing plans seems like a real hassle to me. Resistance to Change Pattern-Breaking Behaviour 33 I am worried I will lose some of my status in the organisation when this change is implemented. Readiness for Organisational Change Pattern-Breaking Behaviour 17 34 I do not think it would be right of me to oppose this change. Commitment to Change Pattern-Breaking Behaviour 35 I don’t change my mind easily. Resistance to Change Pattern-Breaking Behaviour 36 I feel pressure to go along with this change. Commitment to Change Pattern-Breaking Behaviour 37 I generally consider changes to be a negative thing. Resistance to Change Pattern-Breaking Behaviour 38 I have the skills that are needed to make this change work. Readiness for Organisational Change Pattern-Breaking Behaviour 39 I have too much at stake to resist this change. Commitment to Change Pattern-Breaking Behaviour 40 I like to do the same old things rather than try new and different ones. Resistance to Change Pattern-Breaking Behaviour 41 I often change my mind. Resistance to Change Pattern-Breaking Behaviour 42 I sometimes find myself avoiding changes that I know will be good for me. Resistance to Change Pattern-Breaking Behaviour 43 I’d rather be bored than surprised. Resistance to Change Pattern-Breaking Behaviour 44 I’ll take a routine day over a day full of unexpected events any time. Resistance to Change Pattern-Breaking Behaviour 45 If I were to be informed that there’s going to be a significant change regarding the way things are done at work, I would probably feel stressed. Resistance to Change Pattern-Breaking Behaviour 46 My views are very consistent over time. Resistance to Change Pattern-Breaking Behaviour 47 Often, I feel a bit uncomfortable even about changes that may potentially improve my life. Resistance to Change Pattern-Breaking Behaviour 48 When I am informed of a change of plans, I tense up a bit. Resistance to Change Pattern-Breaking Behaviour 49 When I set my mind to it, I can learn everything that will be required when this change is adopted. Readiness for Organisational Change Pattern-Breaking Behaviour 50 When things don’t go according to plans, it stresses me out. Resistance to Change Pattern-Breaking Behaviour 51 Whenever my life forms a stable routine, I look for ways to change it. Resistance to Change Pattern-Breaking Behaviour 52 I think that management is making a mistake by introducing this change. Commitment to Change Shared Understanding of Objectives and Outcomes 53 I think that the organisation will benefit from this change. Readiness for Organisational Change Shared Understanding of Objectives and Outcomes 54 In the long run, I feel it will be worthwhile for me if the organisation adopts this change. Readiness for Organisational Change Shared Understanding of Objectives and Outcomes 18 55 It doesn’t make much sense for us to initiate this change. Readiness for Organisational Change Shared Understanding of Objectives and Outcomes 56 The time we are spending on this change should be spent on something else. Readiness for Organisational Change Shared Understanding of Objectives and Outcomes 57 There are a number of rational reasons for this change to be made. Readiness for Organisational Change Shared Understanding of Objectives and Outcomes 58 There are legitimate reasons for us to make this change. Readiness for Organisational Change Shared Understanding of Objectives and Outcomes 59 I feel a sense of duty to work toward this change. Commitment to Change Shared Understanding of Objectives and Outcomes 60 I have no choice but to go along with this change. Commitment to Change Shared Understanding of Objectives and Outcomes 61 I believe in the value of this change. Commitment to Change Shared Understanding of Objectives and Outcomes 62 I would feel guilty about opposing this change. Commitment to Change Shared Understanding of Objectives and Outcomes 63 My future in this job will be limited because of this change. Readiness for Organisational Change Shared Understanding of Objectives and Outcomes 64 This change serves an important purpose. Commitment to Change Shared Understanding of Objectives and Outcomes

01/09/15 1 Seminar # 6 Change management & management of the status quo Corporate Venturing IBU5COV The Only Constant Is Change • Change is a moving target. • Today’s managers need new mind-set. • Flexibility. • Speed. • Innovation. • Constantly changing conditions. 01/09/15 2 Successful Firms Share These Traits • Faster. • Quality conscious. • Employee involvement. • Customer oriented. • Smaller. • ‘Stars’ Primary Goals of Change Programs • Change the corporate culture. • Become more adaptive. • Increase competitiveness. • To make $. 01/09/15 3 Readiness of Organization for change Key personnel first decide if change needed by asking the following: • Goals? • Cultural state of client ready for OD? • Key people involved? • Members prepared and oriented to OD? Haphazard V.s Planned Change • Change programs do not happen accidentally. • Initiated with purpose and require leadership. • OD practitioner deals proactively with changing forces. 01/09/15 4 Two Types of Change in Organizations • Random or haphazard change. – Forced on organization by external environment. – Not prepared for. • Deliberate attempts to modify organization. Changes on an Organizational Level • Policies. • Procedures. • Organization structures. • Manufacturing processes. • Work flows. 01/09/15 5 An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall Figure 7.3 Integrated Approach to Change Figure 1.6 Organization Development’s Five Stages 01/09/15 6 Five-stage Model for OD Process Stage One Anticipating Need for Change. • Someone recognizes need for change. • Must be felt need for change. Five-stage Model for OD Process Stage Two Develop Practitioner-Client Relationship. • Practitioner/Change Leader (CL) enters system. • Good first impressions important. • Practitioner establishes trust and open communication. 01/09/15 7 Five-stage Model for OD Process Stage Three The Diagnostic Phase. • CL and organisation gather data. • Objective to: – Understand organisation’s problems. – Identify causes. – Select change strategies. Five-stage Model for OD Process Stage Four Action Plans, Strategies, and Techniques • Series of interventions, activities, or programs. • Aimed at increasing effectiveness. • Programs apply OD techniques. 01/09/15 8 Five-stage Model for OD Process Stage Five Self-Renewal, Monitor, and Stabilize. • As program stabilizes, need for CL decreases. • Monitor results. • Stabilize change. • Gradual disengagement of CL. Organizational Dimensions Affecting Performance • Managerial effectiveness. – Accomplishing goals and objectives. • Managerial efficiency. – Ratio of results to resources (process). • Motivational climate. – Employee attitudes that influence performance. • Tools for change 01/09/15 9 Tools for Change – Information • Provide information to people. • Provide ability to gather information. • One method is open-book management. Tools for Change – Support • Support and collaboration from other departments. • Management support to provide climate of risk taking. 01/09/15 10 Tools for Change – Resources • $$$ • Staff • Equipment • Materials • Change leader role in intervention • Operates on belief that team is basic building block. • Concerned with how processes occur. • Does not take control. • Believes that assisting client leads to lasting solution. 01/09/15 11 An Experiential Approach to Organization Development 8th edition Copyright ©2011 Pearson Education, Inc. Publishing as Prentice Hall Figure 4.3 CL Skills Profile Dilemma Interactions Result from questions by the change leader about the: • Organisation’s definition of problem. • Organisation’s awareness of need for change. • Organisation’s unrealistic expectations. • Organisation’s misuse of power. • Value differences 01/09/15 12 This is why an understanding of Perception is important • Initial intervention is: – An evaluation by client and practitioner of each other. • First impressions important. • Relationship based on mutual trust and openness. Changes on Personal Level • Set patterns of behavior. • Defined relationships with others. • Work procedures and job skills. 9/04/15 13 La Trobe Business School Entrepreneurs don’t just exploit change they manage it! 25 Increase Ending Transi.on Zone New Beginnings Decrease Time Advocacy Performance gain resulting from implementing Commitment change Acceptance Understanding Awareness Performance Anxiety Forces Blocking Change • Uncertainty regarding change. • Fear of unknown. • Disruption of routine. • Loss of benefits. • Threat to security. • Threat to position power. • Redistribution of power. • Disturb existing social networks. • Conformity to norms and culture. 01/09/15 14 Creating Climate for Change • Challenge of managers is: – Create renewing system. – Develop long-term efforts. • Culture often key to success. • Cultural change result of complex strategy. • Change leader must “practice what he or she preaches.” • Create climate of: – Openness. – Authenticity. – Trust. Cultural changes are likely to be more successful when: • The old culture is understood • There is a model to follow • Employees are encouraged • Employees are involved • There is a vision • It is recognised change takes time • When the new culture is lived – Actions not words 01/09/15 15 Cultural changes are likely to be more successful when: • Reward systems. • Negotiation, agreement, and politics. • Power strategies. • Climate conducive to change. • Effective communications. • Leadership of managers. Other Criteria for Organizational Effectiveness • Adaptability. • Sense of identity and vision • Capacity to test reality. • Team development 01/09/15 16 Purpose of Team Development • To integrate goals of individual and group with goals of organization. Team Development Goals • Identify objectives, set priorities. • Examine team performance. • Analyze group process. • Improve communications. • Improve problem-solving ability. • Increase cooperation. • Work more effectively with other teams. • Increase respect of other team members. 01/09/15 17 Adjustment to Cultural Norms • Rebellion. – Rejection of all values and norms. • Conformity. – Acceptance of all values and norms. • Creative individualism. – Acceptance of pivotal values. – Rejection of others. Suggested Reading For This Seminar Brown, D.R. 2011. An Experien+al Approach to Organiza+on Development 8th edi+on, Pearson EducaDon, Inc. Publishing as PrenDce Hall. Chapter 1 & 6

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