Ignacio de la Vega
29 January 2003
Enterprise creation is a process, whether it involves an individual or a corporate entrepreneur. The author dissects this process into four elements: entrepreneur, idea, viability analysis and resources.
In recent years, particularly following the emergence of what everyone calls the New Economy, a lot of attention has been directed toward the field of Enterprise Creation and the entrepreneurial movement. Those who believe the economy moves in cycles, of similar duration and intensity, argue that interest in the creation of new companies and the emergence of sectors attractive to investors has occurred before. They say it is a well-known phenomenon that has been extensively studied: the railways (end of the 19th century), the automobile sector (mid- 20th), household computer products (the 80s), biotechnology (the 90s), and so on. It would appear that interest in enterprise creation was a cyclical phenomenon throughout the last century in the most developed economies.
As the individual entrepreneur developed throughout the 20th century, the market also evolved its own characteristics. These have had significant effects on the activity of firms, producing greater dynamism, globalization and competition that call for increasingly flexible organizations that can offer innovative solutions and respond rapidly to changes. We shall call such entities “entrepreneurial organizations”.
Hereafter, when we refer to Corporate Venturing (CV) –the entrepreneurial management of projects within organizations – to distinguish it from the habitual activity of any enterprise, we refer to activities that:
· are “new” to the company.
· are initiated and developed internally.
· contain greater risk than that involved in the company’s habitual activity.
· support more uncertainty than the core business.
· at some point of their evolution as a project will be managed independently.
· are carried out in order to grow, by increasing sales, profits, productivity, quality, innovation or competitiveness, generating new challenges for executives.
Enterprise creation is a process, whether we are dealing with an individual or corporate entrepreneur. We can break this process into four essential elements:
- VIABILITY ANALYSIS
This outline lets us reach certain conclusions about the creation process. These conclusions are applicable to the act of undertaking new enterprises - again referring to both individual and corporate entrepreneurs:
· CV is a process: team, idea, viability analysis and resources. Whenever these elements come together, the resources must be managed in order to initiate the project (start-up), get it to survive, flourish (development) and grow (expansion).
· The corporate environment is critical for the success of a CV program. Without support from above, the cultural and management change involved in a CV program proves impossible to implement.
· Entrepreneurs are risk managers. Corporate activity involves an increased risk factor, though sound management of the project contributes significantly to reducing it. A diligent viability analysis, correct assignation of resources and rational project management are the ideal ingredients for managing the risk.
· The entrepreneurial process can, and must, be managed. At this stage, it is evident that any new resultant business projects must be soundly managed. The process itself must also be adequately managed.
· Optimizing the use of resources discourages the search for new opportunities. ”Business as usual” does not help when successfully developing an enterprising management program for projects within organizations.
[*D Logic model *]
We shall now outline a logic model for those organizations that decide to introduce CV programs.
1. Laying the foundations. At this stage, senior management designs the most appropriate process for the organization and establishes the most suitable conditions in the given context. Companies that have successfully developed CV strategies show us, through their experience, the importance of internal communication in this process.
2. Searching for opportunities and choosing the business idea. A vital phase in the process, requiring decisions on methodology (start-up, acquisition, etc.), activity sector (related or unrelated diversification), size and location of the project, etc.
3. Viability analysis. Any decision on investment in a CV program – or in an individual or corporate project of any kind – requires a viability analysis. The Business Plan must let us analyze the project’s viability; reject it if it does not fit our goals or is non-viable; develop the most appropriate business model; analyze the marketplace; create the most suitable strategies; outline available capacities and resources; and provide the most adequate technical, human and financial resources. It must also provide us full knowledge of the prospective return on investment.
4. Organization of resources and start of the activity. At this stage, it is necessary to grant the project the required resources (money, personnel, facilities, equipment) and start-up operations.
5. Management and control of the project. Within a corporate model linked to the organization’s habits and customs, while demanding the flexibility necessary for a new project or new division dedicated to new projects.
6. Leadership in new projects. With the development and growth of the new activity, and its establishment as an integral part of the corporate organization, the new management team learns how to administer the projects and the internal policy of new activities and their relationship to the organization, thus facilitating growth and integration of the CV process.