• Managers of entrepreneurial ventures
launched from within established companies
face a special set of challenges.
• Key among these is that, as the corporate
venture takes shape, the manager needs to
assume leadership responsibilities to
succeed - and this includes managing failure.
– No one else can.
• Tonight’s presentation maps out the
critical activities and the most important
responsibilities for the venture manager.
A Tight Proposition
• The venture manager's first challenge is to
convert each idea into a powerful, practical,
business proposition that can be understood
easily by the people responsible for executing
• The business proposition for a corporate
venture needs to have three properties:
– it must be simple;
– it must be actionable;
– it must resonate with people.
Keeping It Simple
• When it comes to simplicity, managers should
ask themselves whether they can write it on a
business card and still convey its purpose.
• This makes the business proposition easy to
comprehend and communicate.
• The proposition for Canon's personal copier
exemplifies this principle:
– "Take to market a copier that is small, inexpensive and
reliable enough for personal use on a secretary's desk."
• And the Japanese music equipment
manufacturer Yamaha replaced the idea of
being a company that only manufactured
pianofortes with the terse proposition: "Sell
• The phrasing of the business
proposition is all-important.
• It is good to start by finding a direct link
with the market and the customer and
simpler propositions are more powerful.
• Consider this statement from Priceline.com:
– "Customer: name your own price, any time, anywhere."
• Employees can mobilize around it, focus on it
and talk about it.
• Such images can be phrases, like those of
Yamaha and Priceline.com.
• They can be pictures or symbols, metaphors
or analogies - anything that makes it easy for
people to understand the basic challenges of
• It is important for managers to help those involved in
the project cope with uncertainty or they will find it
hard to be decisive.
• Unfortunately, it can be much more expensive for
companies to be slow than it is for them to be wrong.
• The project leader's must make uncertainty less
daunting and create among colleagues the self-
confidence that allows them to act without seeking
detailed managerial permission.
• In particular, the project manager should prevent
employees from being overwhelmed by the
complexities of the project.
– By setting a clear framework in which they can take action.
• In other words, the venture manager might
say to the team members:
– "Assume X is going to happen. If you work on this
assumption and I'm wrong, it's not your problem, but
mine. I may come to you later and say I was wrong and
we now have to assume Y is going to happen, but for
now, you should assume I am right."
• The importance of this practice is that it
liberates team members from the paralysis
caused by uncertainty and frees their
• The manager is left to cope with the
uncertainty, of course, but then the business
of thinking as an entrepreneur is all about
coping with uncertain situations.
• In fact, a manager seldom has to be right all
the time, just right enough often enough.
• Further, a competent, confident and resilient
team can usually cope with the differences
between the framework set by a manager
and events as they unfold.
• Crucially, leaders must recognize when
there is a need to absorb uncertainty so
that others can get on with
• Furthermore, they need to accept that
the leader is the one who can most
afford to be wrong!
• What does absorbing uncertainty mean?
• Leaders should ensure that team members
have enough guidelines and latitude for
setting their own priorities - what is important
and what can wait.
• They should make sure people know what
they are expected to prepare for - how soon,
how big, with what level of aggressiveness.
• A manager's best-guess directions can help
considerably until more information becomes
Frame the Challenge
• Managers must frame the venture in
such a way that others can implement it.
• They must use their knowledge of the
capabilities of their team members and
know how far those capabilities can be
stretched to make the venture happen.
• The Japanese company Canon provides a
• In the early 1970s, one of Canon's
executives, Dr Keizo Yamaji, noticed a set of
needs for photocopying that were not being
addressed by the incumbent Xerox - the
market for just a few copies of short
• Xerox offered machines designed to produce
hundreds of copies of long documents.
• Carefully assessing the skills of his
engineering staff, Dr Yamaji stacked up their
talents against what he thought was required
to produce a so-called “personal copier”.
• He was then able to give them this framework
– “I want you to make me a copier.”
– “It can be no bigger than a large breadbox.”
– “It can't retail for more than $1,000 in the US.”
– “It must never need servicing and it must be ready in 18
• Dr Yamaji framed the project, but he didn't
• He regarded his biggest challenge as setting
a task for his technical people that would
push them to the limits of their capabilities,
without pushing them beyond their limits.
• His personal judgment was crucial in
matching the difficulty of the project to the
skills of the employees.
• Dr Yamaji described the results:
– "At first the engineers did what engineers
always do - they whined! But then, guess what
happened - they went out and did it. It was a
little bigger, it cost a little more. While it did
need servicing, it very seldom needed servicing
and it took just under two years instead of 18
months. But I got my copier and the multi-
billion dollar business that it represented."
• Dr Yamaji realized that his obligation as
a manager launching an entrepreneurial
venture was to frame the challenge to
match his people's capabilities - and
then get out of their way so they could
get on with it.
Check Market Acceptance
• The lowest-cost route to successful
implementation is to probe constantly for
evidence that the market you have envisaged
accepts the business case for the venture.
• One successful entrepreneur will not launch a
new industrial effort until he has a preliminary
order from at least one customer.
• He argues that if not even one potential
customer wants it enough to risk a conditional
order then there must be better opportunities
• This may be difficult to pull off, but if you can't
get orders, can you get letters of intent?
• If you can't get letters of intent, can you get
letters expressing interest?
• If you can't even get someone to write a letter
expressing interest, then the business
proposition should be viewed with suspicion.
Secure ‘Killer' Deals
• Success for most ventures depends on being
able to make three to five deals with
stakeholders whose commitment is crucial,
such as suppliers, distributors, funding
sources, employees, customers and
sometimes key supporters in the corporation.
• Managers should ensure they have identified
the deals that will make or break the venture
and that they are progressing well with these
deals ahead of major investment
• Failure to do so can threaten the
survival of the enterprise.
• Iridium, for example, spent billions of
dollars before finding out that major
companies would not sign up for its
expensive, bulky satellite phones.
• Importantly, managers should have a
clear idea of when to walk away.
• If the right deal can't be found, why
fatally burden the venture by being
forced to underprice or overpay for
• Other ventures will surface in future.
Use Imagination, Not Money
• Entrepreneurial managers must recognize
that they should minimize expenditure on
assets and fixed costs until they have
revenue streams to justify them.
• They should reduce initial investment as near
to zero as possible.
• If possible, the initial assets should be bought
second-hand, or better still leased.
• If the venture is launched and operated with
parsimony, the project managers can afford
to make some learning-rich mistakes as they
figure out what the true opportunity is.
• They should also try to initiate revenues
ahead of cost flows.
• For instance, one entrepreneur
succeeded in persuading a consortium
of future customers to fund the
development of a prototype.
• Whenever possible, costs should be incurred
depending on use, which avoids commitment
to a fixed cost.
• Another entrepreneur, for example,
remunerates her sales force with a big
percentage of profits on orders once
customers have paid - she gets money in
before paying out.
• Such tactics reduce the initial investment
burden on which the venture must eventually
Identify Skill Deficiencies
• The success of the venture may rely
heavily on new and unfamiliar skills and
it is easy to underestimate the difficulty
of securing and deploying them, or
• Witness the many dotcom start-ups that
cannot find programmers to develop
and operate their systems.
• If the first recruits are deficient in critical skills,
the quality of the products launched will be
inadequate and the first brave souls who
order will be disappointed.
• Venture leaders cannot allow this to happen -
they must ensure the right skills are
developed and reliably in use before inflicting
the offering on unsuspecting consumers.
Keep the focus on learning.
• Venture managers should carefully document
and test assumptions ahead of investment
and then systematically redirect the venture
as these assumptions are tested against
• The spirit of planning is to aim to learn by
converting assumptions to knowledge ahead
• There is no point in trying to stick to a plan
based on assumptions that prove invalid.
• Consider, for example, the prospects of the
carbon-fiber products industry if the
innovators had stuck to their original
assumptions, applications in space satellite
housings, instead of redeploying the
technology to sports equipment.
• In particular, the first customers should be
checked against those predicted in the
• This can reveal a lot about where the real
Early Warning Systems
• Small changes in key assumptions or
market variables can presage large
disruptions in performance.
• As venture managers get wrapped up in
day-to-day issues, they need to give
someone responsibility for monitoring
the most sensitive variables for early
• Every venture runs a real risk of failure, so
the greatest challenge for the manager lies in
• When failure occurs, the entire workforce
stops and waits to see what managers are
going to do.
• This is a testing time and managers' reaction
to disappointment will greatly influence the
commitment of the workforce to future
• How can the venture be redirected to areas of
• Two practices characterize the successful
venture manager when dealing with failure.
– The first is constructive postmortems.
– No one should be rewarded for making bad decisions
and entrepreneurial leaders of successful venture
programs should not forgive foolish failure.
– On the other hand, ventures in which the team has
consistently made good decisions, but which failed as a
result of circumstances beyond their control, deserve
recognition and reward.
• Managers should hold constructive
postmortems to distinguish between
ventures that failed because of bad luck
and those that failed because of bad
• They must publicly recognize good work
concealed by overall failure.
• The second practice is recouping some value from
• Failed ventures can be analyzed for information,
which can be profitably deployed elsewhere.
• In a failed foray by a financial services company into
capturing consumer data, the company had
developed powerful data compression technology.
• This asset could have been used by the parent
company, but the potential was lost in the
recriminations that followed the shut-down.
• Recouping value helps convey to project workers that
it was the venture that failed, not them.
• Let’s conclude tonight by suggesting
some key questions that venture
managers should ask themselves
during the course of a project.
1. Has sufficient attention been paid to
reducing uncertainty for the team?
2. Has the venture been framed adequately?
3. Is there a system to monitor market
4. Is there a process to secure the deals that
make or break the venture?
5. Are team members driving down fixed
6. Have skill requirements been thoroughly
7. Is there a plan to keep the focus on
8. How can postmortems be constructive?
9. What are the plans for recouping failure?
• Collins, J.C. and Pores, J.I. (1994) Built to
Last, New York: HarperBusiness.
• McGrath, R.G. and MacMillan, I.C. (2000)
The Entrepreneurial Mindset, Cambridge,
MA: Harvard Business School Press.
• MacMillan, I.C. and McGrath, R.G. (1995)
"Discovery Driven Planning" in Harvard
Business Review, July-August, 44-54.
• Guest speaker
• Lots more on entrepreneurship and