Corporate Entrepreneurship: Oxymoron

From Dilbert, August 30, 2015:

I’ve always thought “corporate entrepreneurship” is an oxymoron, and this nicely captures some of the reasons why.

The OED defines an entrepreneur as

c. Polit. Econ. One who undertakes an enterprise; one who owns and manages a business; a person who takes the risk of profit or loss.

with entrepreneurship defined as what the entrepreneur does.

Some scholars want to define the term as only a subset of this (those that produce high-growth startups). Others want it to be a superset — anyone who innovates and creates new value — including corporate “entrepreneurs” — even though they don’t “own” or “take the risk of … loss.”

The closest that large company employees come to being entrepreneurs — with all the risks and rewards — are when they form spinoff (or spinout) companies. Some of these spinoff companies — like the Xerox spinoffs studied by Henry Chesbrough — start with technology, people, some investment but no products or customers; the founders of these companies are truly entrepreneurs, just ones with an inside track for funding. Other spinoff companies — like Agilent from HP or Avago from Agilent — began life with thousands of customers and millions (if not billions of revenues) — and are larger and more bureaucratic than many decade-old companies; it would be a travesty to call “entrepreneur” someone handed such a business portfolio.

A third example often labelled “corporate entrepreneurship” are those that explore possibilities for new business units that will remain in the company. These examples seem to be best described by the portmanteau of “intrapreneurship” — we want our employees to be entrepreneurial,  but they will remain inside the company and contribute its growth and success.

I have participated in various corporate new venture/new value/new line of business activities, both in industry and academia. I’m also head of my second startup, and I can tell you that the risk, the effort, the lack of support (including bureaucracy) and (hopefully) the potential reward make it completely different than an internal new venture.

So “entrepreneur” is not a synonym for “innovator” or “business model innovator” or the equivalent. That’s why my business card — and that of a few other faculty — says “Professor of Innovation and Entrepreneurship.”

Child entrepreneurs II

One of my dilemmas on this blog is how much it’s about engineering and how much it’s about entrepreneurship. I solve that by sometimes combining both, sometimes focusing on one or another.

Distinctly on the engineering side is the First Lego League, a program for kids 9-14. After experiencing FLL as a coach, the past three years I’ve served as a judge — including last Saturday at St. Lawrence Middle School in Santa Clara. The first round tournament was one of 22 organized this month by NorCalFLL and Playing at Learning.

With a St. Lawrence teacher, I was evaluating the efforts by half of the 18 teams to solve this year’s puzzle: find a biomedical solution to a human health problem. (The project is completely independent of most exciting element of the FLL competition: making a Lego robot to run the maze.)

In the end, our evaluation criteria seemed fairly similar to what an engineering school would use for a business plan competition (or idea fair) for these same kids a decade later:

• A good idea, well researched
• Professional, polished presentation and visual aids
• Balanced team roles in the prepared remarks and Q&A
• Enthusiasm and creativity in engaging the audience

Except for the content, the best teams were as good as the undergraduate teams that I’ve seen in my business school teaching for almost a decade.

The big problem we had in judging was balancing creativity vs. realism in their idea for a biomedical product. Some teams had fanciful ideas that were utterly infeasible. Others had utterly prosaic ideas that were so practical that someone either is implementing them already or will be soon. The best came up with something that might not be feasible today but could be soon.

If I had one piece of advice to give the kids (or parents or teachers) of how to balance this, it’s this: do more research. Understand your problem, customer, competitors better; understand the technology better; think through more details of implementation.

As it turns out, that’s not that different than my advice to b-school seniors for their business plans. Or, for that matter, what many entrepreneurs wish they’d done before they launched their companies.

In other words, this program for developing elementary and middle school engineers is a good predictor of skills they’ll need in college or even the real world. That‘s an impressive testament to the leadership of the FLL program, including founder Dean Kamen (creator of the Segway) and retired MIT professor Woodie Flowers (who essentially created the robot competition at MIT).

I wonder if researchers will follow up on the FLL (or FRC) competitors to see if they are more likely to entrepreneurs 10 or 20 years later.

Note: Although this is my second posting in a week on childhood entrepreneurship, it doesn’t reflect a new emphasis of the blog, just my personal interest in entrepreneurship and K-12 STEM education.

It's not what you know…

The morning papers report the news that Hulu hopes to IPO this fall and raise $2 billion. (The story was first reported in the NY Times on Monday.) As with a lot of tech IPOs, the company is seeking to go public without a lot of revenues.

The company is not a tech startup in the normal sense. Its raison d’être is not its technology, but its connections, specifically its corporate founders — Disney, NBC Universal and News Corp. (who later sold a minority stake to a private equity firm.)

In other words, anyone could have done the technology: what mattered was that it had direct access to three of the four major TV networks: ABC, NBC and Fox. Hulu succeeded — in true Web 2.0 style as measured by traffic rather than profits — not because of its entrepreneurial spunk, but because of its guanxi. (This seems appropriate since supposedly the name was chosen for its Chinese rather than Hawai’ian meaning.)

Because of its connections, Hulu got favorable content deals as the anti-Apple, the distribution channel that Hollywood loves to hate. It is a lot like Orbitz, founded in 2000 by five of the biggest airlines to compete with Travelocity (a venture of the Sabre reservation service) and Expedia (founded by Microsoft).

In these sort of oligopolistic (or oligopsonistic) industries, the opportunities for success are based on industry connections — or in this case, entry by intrapraenurship rather than entrepreneurship.

Still, no alliance is forever. Some wonder if NBC content will remain on Hulu once it’s acquired by Comcast, which would like to destroy the open Internet (at least for video content) and lock everyone into their premium cable TV subscriptions.

Finally, Hulu’s business model has always been hamstrung by the competing goals of the media giants: take market share away from portals they don’t control (iTunes, YouTube) while not cannibalizing the existing TV offerings. As with newspapers, the online per-user revenues are a fraction of the 20th century traditional distribution channel.

So in the end, what will retail shareholders be getting? Is this more or less secure than the IPO of a pure startup like Tesla or Facebook or some solar panel maker? Thanks to its great connections, there is only one Hulu, but that’s no guarantee it will be able to come up with a viable revenue odel.