Digital Business 2: Corporate & Digital Entrepreneurship PDF

Digital Business 2: Corporate & Digital Entrepreneurship 601.922 Dr. Patrick Holzmann Corporate & Digital Entrepreneurship COOPERATION 135 Corporate Entrepreneurship and Cooperation Central connections Incubators / can be done by...

Digital Business 2: Corporate & Digital Entrepreneurship 601.922 Dr. Patrick Holzmann Corporate & Digital Entrepreneurship COOPERATION 135 Corporate Entrepreneurship and Cooperation Central connections Incubators / can be done by Implementation of Company Builders / Corporate Accelerators Entrepreneurship enable can be done through In the style of Kuckertz, 2017 Investment leads to Cooperations with Corporate venture start-ups capital combine start-up innovativeness & Complementary flexibility Resources Corporate resources 136 Corporate Entrepreneurship and Cooperation 137 Start-up Corporate Cooperation Introduction and basics Start-ups expand the cooperation partners (customers, suppliers, universities) of corporates especially with regard to innovative projects (Kuckertz & Allmedinger, 2017) New forms of cooperation emerge and expand classic investments (corporate venture capital) (Weiblen & Chesbrough, 2015) Cooperations aim to create advantages for both partners by bringing in complementary resources – Start-up: Agility, innovativeness – Corporate: Resources, market power Cooperations are becoming more frequent due to low funding and low risk for corporates but potentially high return (Kuckertz & Allmedinger, 2017) Empiricism: Promising framework conditions – A few established companies control access to the market, many new companies with innovative and novel technologies enter the market (Rothaermel, 2002) 138 Start-up Corporate Cooperation Discrepancy between start-ups and corporates Expectations of established companies for Situation of start-ups cooperation partners Proof of technical competence Ideas, know-how or prototypes, no marketable products Existing reference customers None to few customers Schönenberger, 2014 Product samples and specifications available Products still in development Familiarity of the cooperation partner with Little experience with large companies and business processes in established industry practices organizations Stability in financial and corporate terms Uncertainty regarding the further development 139  Start-up Corporate Cooperation Fundamental differences in the cooperation goals Perspective on alliances Start-up Established company Control over technology Strives to maintain control Strives to take control Confidence in the Strong to overconfident Skeptical technology Based on Das & He, 2006 Organizational aspects Decision-makers are executors Decision-makers are not executors Importance of cooperation Cooperation is often a question of Cooperation is often not a question survival of survival Strategic goal of the Survival and growth Sometimes only a prevention cooperation strategy Durability of the voluntary Can change Stable commitment 140  Start-up Corporate Cooperation Expectations and objectives of cooperation Goal Start-up Established company Own presentation based on Kollmann et al. 2015; Baharian & Wallisch, 2017 #1 Use of the customer/market access of the Development of new technologies established company #2 Profit from the reputation or positive image Implementation of product innovations #3 Combine own technology expertise with Opening up completely new markets technology knowledge of the established company #4 Enabling a (later) investment by the corporate Identify and approach highly qualified, potential employees #5 Selling the start-up to the corporate (exit) Developing new business models #6 Enabling access to data Implementing service innovations #7 Enabling financial participation 141  Start-up Corporate Cooperation Matching of objectives and suitable actions Objectives Start-up Generate Utilize Acquire pilot Utilize Find Ensure know-how references customers resources technology growth partner Entrepreneuri- Participation Mentoring Joint concept Joint training Technology Supervisory al thinking in start-up development consulting board events mandate Objectives Corporate Social Training for Joint trade Product tests Sales Delivery of Investment in contribution founders fair by experts cooperation customized VC fund appearance products Innovation Shared use of Technology Prototypes Joint Joint basic Joint Ventures impulses infrastructure discussions and concepts development research projects New Early Joint Pilot projects Patent Innovation- Direct partnerships innovation research licensing Outsourcing participation projects projects Schönenberger 2014 142 Start-up Corporate Cooperation Determinants of successful cooperation Development of a company-wide plan for collaboration (Schönenberger, 2014) Establishing congruence of objectives between the cooperation partners Applying empathy and understanding for each other's situation Discussing at eye level (Weiblen & Chesbrough, 2015) Preparation of fair and transparent contracts (Kuckertz & Allmendinger, 2015) Renouncing the abuse of power – start-up bears sole innovation risk – Corporate follows prevention strategy (Das & HE, 2006) Enticing away employees Taking over the realization of ideas without the partner (Weiblen & Chesbrough, 2015) 143 Start-up Corporate Cooperation Central aspects of strategy development for Corporates Creating an understanding for current trends and developments – Establishing a well structured screening of the start-up ecosystem to better understand the needs of start-ups Clarification of which values the company wants and is able to share – Cooperations can be designed in different ways depending on the needs of the start-up and the willingness of the Corporate Clarification of the basic cooperation goals – Definition of primary and secondary cooperation objectives – Outside-In strategy: Revitalization of the company through creativity and innovation of the start-up – Inside-Out strategy: commercialization of new technological developments that do not fit into the core business by the start-up (Weiblen & Chesbrough, 2015) 144 Corporate & Digital Entrepreneurship CORPORATE VENTURING 145 Corporate venturing Basics Established companies usmore and more use structured programs for cooperation with spin-offs and start-ups The overall goal is to use the resources of the Corporate – To increase the probability of success of start-ups – to support the own strategic and financial goals The type of cooperation can take different forms, particularly significant: – Incubators: Corporates support start-ups with their resources in a strategically motivated manner and create a temporary (6-12 months) protected space for development – Company Builder: Corporates direct internal/external entrepreneurial talents to predefined start-up projects (e.g. Rocket Internet) – Accelerators: Corporates support start-ups with small financial contributions and a structured support process (curriculum) for a limited time (3-6 months) to accelerate their development (Kuckertz, 2017) 146  Corporate venturing Spectrum of possible involvement Description Distinguishing features Corporate Intense collaboration of diverse teams Offer more substantial and longer-term Hackathons within a restricted time limit to solve a engangement with participants. corporate innovation challenge. Business Company-supported flexible working Selection of start-ups is competitive and Incubators space with additional value-added clyclical, cohorts of start-ups with shorter time services such as centralized legal or duration and limited or no equity stake. marketing support. Corporate Provides a path to market for corporate Internal efforts fall short of full capability of Based on Kohler, 2016 Incubation non-core innovations. corporate accelerators to tap into external innovators. Corporate Permits corporations to participate in Focus on innovation and business development venturing the success of external innovation and rather than predominantly pursuing financial helps to gain insights into non-core investments in external companies. markets and access to capabilities. Engagement with a larger number of start-ups is possible thanks to more standardized approach than any single engagement. Mergers & Quick and impactful way of buying Allow selection and pilot programs with larger Acquisitions complementary technology or number of start-ups to select potential targets capabilities that solve specific business for M&A. problems and enter new markets. 147 Corporate Accelerators Definition & characteristics Definition – "Corporate accelerators are company-supported programs of limited duration that support cohorts of start-ups during the new venture process via mentoring, education, and company-specific resources." Kohler, 2016 Common characteristics of corporate accelerators – An open application process – Focus on small teams instead of single founders – Temporary support in the form of interaction and mentoring – Support of start-up cohorts instead of individual companies (Kohler, 2016) 148 Corporate Accelerators Strategic goals of Corporates Building knowledge about current market developments, trends and technologies Development and integration of new products and services Evaluation of potentially disruptive products and services Gain and retain entrepreneurial talents Transfer of founding spirit into the company Creation of a creative and innovative image to improve the external presentation (Kanbach & Stubner, 2016; Kohler, 2016) 149 Corporate Accelerators Different characteristics and central advantages Corporate supports start-up pilot project – Financing of innovative solutions and products enables the reduction of costs, acceleration of the process and reduction of risks Corporate becomes a customer – Corporates get to know solutions and can select them; start-up wins important reference customers, can test product-market fit and scaling possibilities Corporate becomes distribution partner – Corporate provides distribution channels for start-ups, enables pooling of resources by using common channels and networks Corporate invests in start-up (CVC) – Enables Corporates to enter new markets and capabilities faster and at lower cost; start- ups usually get better terms than traditional VCs Corporate buys start-up – Enables Corporates to solve specific problems and develop new markets quickly and effectively; an attractive exit scenario for start-ups (Kohler, 2016) 150  Corporate Accelerators Typology of different programs Type Listening Value chain Test Unicorn Post Investor Laboratory Hunter Goal Strategic Strategic Strategic Financial Origin of the External External Internal/external External opportunity Strategic Logic Exploration Exploration Exploration Exploitation In the style of Kahnbach & Stubner, 2016 Alignment Industry Focus Easy reference to Strong relation to Weak relation to Broad industry the mother the mother the mother diversification company company company Participation No Yes Yes Yes Phase Early and Later Later Stage Early Stage Early and Later Stage Stage External partners No Partly No Partly Organization Relationship to the Part of the mother Part of the mother Legally Legally mother company company company independent entity independent entity Management Internal/external Internal/external Internal External experience Corporate Accelerators Critical success factors Clear alignment of activities to a clear superior goal (Kanbach & Stubner, 2016) Support of the activities by top management Long-term nature of the efforts and focus on the value creation of the start-up (Kuckertz & Allmendinger, 2017) – Providing access to corporate resources – Increase credibility and legitimacy – Facilitate market access – Financing of the projects (Kohler, 2016) 152 Corporate & Digital Entrepreneurship CORPORATE VENTURE CAPITAL 153 Corporate Venture Capital (CVC) Introduction and basics Inspired by activities of independent venture capital companies (VC) – Difference: CVC pursues not only financial interests, but also strategic ones Corporate venture capital is defined as the "temporary equity participation by means of the provision of equity or similar funds and management know- how or other support to young, technologically oriented, unlisted SMEs by established industrial companies that have both financial and strategic motives for investing. (Fueglistaller et al., 2012) Basis: Theory of financial intermediation (Denis, 2004) – Special types of investors (VC) may exist because they have superior monitoring capabilities (understand investment objects better than fund investors) 154 Corporate Venture Capital Advantages for start-ups Image: CVC helps overcome "Liability of Newness" and "Liability of Smallness" and expresses seriousness and professionalism Market access: start-up uses sales channels or Corporate becomes a customer of the start-up Network: Corporate provides access to its own network Knowledge: Corporate usually has good knowledge of the industry (e.g. customer needs). start-up can acquire this knowledge faster Administrative resources: Relief of the start-up in daily business, concentration on value creation (Kuckertz, 2017) 155 Corporate Venture Capital Goals of established companies Financial goals – Realization of a high interest rate (ROI), – Spreading risks across balanced portfolios Social and image effective goals – Creation of an entrepreneurial and innovative external image – Improvement of reputation and image for stakeholders (e.g. employer branding) – Support of the regional ecosystem Strategic goals – Observation of promising technologies & access to experts – Promotion of own company growth – Creation of access to knowledge about new markets – Strengthening the internal entrepreneurial spirit - perspectives for intrapreneurs (Kuckertz, 2017) 156 Corporate Venture Capital Major barriers Lack of a clear mission and direction (Röhm et al., 2018) Finding suitable investment managers Remuneration of the investment managers (Kuckertz, 2017) 157 Corporate Venture Capital Central determinants of success Structure of the program – Two-dimensional target system that balances financial and strategic goals - focus should be primarily strategic – Engaging of investment managers with experience as entrepreneurs and/or investors and negotiating an appropriate remuneration – Ensuring the structural independence of the CVC company (Kuckertz, 2017) 158 Corporate Venture Capital Key success determinants (continued) Selection of start-ups – Young companies with a unique value proposition, active in large and fast- growing markets – Entrepreneur and team with experience and competence and high potential for success (Kollmann & Kuckertz, 2010 & Kuckertz, 2017) – Proven business model without the need for further adaptation – Product is highly developed - enables efficient satisfaction of customer needs – Corporate culture is similar so that it allows later integration of the start-up – start-up managers have management or corporate experience – Company development copes with the loss of founders and managers (Schloss, 2013) 159 Key Learnings A variety of strategic instruments (incubators, accelerators, etc.) are available for Start-up-Corporate cooperations. start-ups contribute innovation & flexibility and corporates contribute extensive resources. Through corporate venture capital companies Corporates can achieve financial, strategic and social or image-enhancing goals. Key advantages of investing in start-ups are the identification of innovative technologies and markets, the realization of growth potential and the activation of entrepreneurial spirit within the Corporate. 160