06 Creating and Growing Organizations

early framework for new venture creation

• creating a new venture = creating a new organization (social system, connected activities)

• process takes time, continuous process of organizing, fluid and interconnected

• unfolds in the environment: need to compete and find resources

Gartner, 1985

variance view entrepreneurship

• focus on the differences between individual entrepreneurs and their outcomes

• assumes that entrepreneurs are either succesful or unsuccesful

• focus on traits, variables and variables between relationships

⇒ entrepreneurship as an act

process view entrepreneurship

• focus in the underlying processes that drive entrepreneurial outcomes (e.g. learning, adaption, innovation)

• recognizes that entrepreneurial outcomes and entrepreneurial individuals are shaped by a complex interplay of factors

• focus on sequences, events and feedback loops

⇒ entrepreneurship as a journey

valley of death

space between opportunity discovery and new product development

• typical transition problem

• shift from invention to commercial innovation

  • organization variables (legal, supply chain, finance, …) begin to matter

• shift in roles

idea journey

1. idea generation

   • need: cognitive flexibility

2. idea elaboration (evaluating idea’s potential)

   • need: support

[valley of death]

3. idea championing (convincing investors)

   • need: influence and legitimacy

4. idea implementation (producing a tangible outcome)

   • need: shared vision and understanding

five phases of growth model (Greiner, 1998)

each phase involves growth and a crisis

1. creativity; leadership

2. direction; autonomy

3. delegation; control

4. coordination; red tape

5. collaboration; variable

maturity increases throughout the stages

critique and limitations to Greiner, 1998

• focusses only on moderately growing, industrial and consumer goods industries -> different problems e.g. in knowledge-based firms

• failure is possible at all stages

• additional stages exits, overlaps across phases

• past-oriented and deterministic; neglects role of future-making

growth ambitions: start-up

growth ambitions: yes

right business model: no

⇒ find a model

growth ambitions: scale-up

growth ambitions: yes

right business model: yes

⇒ scale the model

growth ambitions: shape-up

growth ambitions: no

right business model: no

⇒ reinvent the model

growth ambition: stand-up

deliberate strategic choice

growth ambitions: no

right business model: yes

⇒ secure the model

rapid growth

incremental growth

episodic growth

plateau growth

difference between growing and scaling

growing: increasing revenue with incrementally increasing costs

scaling: adding significant numbers of clients/customers/users, increasing revenue without necessarily expanding costs

⇒ scaling as a high-growth strategy, significant in digital economies

pathways of growth

affected by:

• management

• marketing

• money

blitzscaling

• measure when you need to grow really quickly

• rapidly building out a company to serve a large (usually global market) with the goal of becoming the first mover at scale

timing of scaling

• is important

• scaling early

  • benefit: decrease imitation risk

  • cost: increase commitment risk

  • both increases if scaled earlier

specific challenges of scaling, compared to continuous growth

• sense of turmoil and chaos instead of path dependence and rigidity (lack of an internal organization)

• no possibilities to learn from prior experience

• scaling early may reduce imitation risk, but prematurely curtails learning through experimentation

• bringing a “minimum viable product” (MVP) to market means that competitors can move ahead and quickly bring a better product to market

• launching an MVP product is only acceptable in a limited number of industries – mainly software

• compromising on ethics – i.e. a lack of HRM, dysfunctional corporate cultures, unethical business practices