MGT 576 Week 4 Corporate Entrepreneurship Example

Building a New-Ventures Group Inside a Fourth-Generation Mill: Corporate Entrepreneurship at Prairie Mill Foods

[Student Name]

University of Phoenix

MGT/576: Opportunity Evaluation and Value Creation

Week 4 Assignment

[Instructor Name]

[Date]

Prairie Mill Foods and all people and figures are composites written for a model paper.

Prairie Mill Foods, a composite family-owned miller in Kansas City, is launching two new businesses: custom mixes for bakery-café chains and a gluten-free mix line. The board wants these to be the first of many, not a one-time effort. Yet the company's structure, budgets and incentives are built for running mills efficiently, and managers are rewarded for cost control and on-time shipments. Companies that are excellent at running their existing business are often poorly designed for starting new ones, because the habits that make the core efficient make new ventures look wasteful. This paper designs a corporate entrepreneurship approach for Prairie Mill.

What Corporate Entrepreneurship Is

Corporate entrepreneurship includes creating new businesses within an existing firm and renewing the firm's strategy and capabilities. Ireland et al. (2009) described corporate entrepreneurship strategy as a vision-directed reliance on entrepreneurial behavior throughout the organization, requiring an entrepreneurial strategic vision from leaders, an organizational architecture that supports it and entrepreneurial processes and behavior among employees.

How New Ventures Emerge Inside Firms

Burgelman (1983) studied internal ventures in a large diversified company and found that new initiatives often began with frontline managers acting outside the official strategy, gained support through product champions and middle managers who linked them to corporate goals and became part of strategy only after proving themselves. Senior leaders' role was to create a context that allowed such initiatives to emerge and to recognize promising ones.

Exploration and Exploitation

O'Reilly and Tushman (2013) reviewed research on organizational ambidexterity, the ability to exploit current businesses while exploring new ones. They found that ambidexterity is often achieved through structurally separate exploratory units that share key resources with the core and are integrated through senior leadership. For Prairie Mill, the mills must keep running efficiently while new ventures experiment.

Tensions at Prairie Mill

Tensions already appear. Mix plant managers resist giving production time to custom mix trials that disrupt efficient runs. Sales representatives focused on flour contracts have little time for new products. Finance applies the same return hurdles to a $500,000 pilot as to mill upgrades, which almost guarantees that uncertain ideas lose.

The New-Ventures Group

Prairie Mill will create a new-ventures group of four people led by a director who reports to the chief executive. The group will run the upcycled grain pilot, help develop future opportunities and support the custom mix and gluten-free teams during launch. Once ventures reach stable operations, they will move into the regular business with their own managers.

Sharing Resources With the Core

The new-ventures group will draw on the core's food scientists, grain sourcing, food safety systems and customer relationships, which are Prairie Mill's main advantages. A pilot line in the mix plant, scheduled separately from production runs, will give ventures production time without disrupting efficiency.

Funding and Stage Gates

Funding will be staged. Ideas can receive up to $50,000 for customer interviews and samples, then up to $500,000 for pilots if they meet learning milestones and up to several million for launch if they show customer commitments. A venture board made up of the chief executive, the finance chief, one family director and the head of new ventures will decide at each gate.

Bringing Ideas From the Front Line

Following Burgelman's findings, employees anywhere in the company can propose ideas through a simple process and receive time and seed funding to test them. Two ideas from the Week 1 workshops, a grain storage service for farmers and an online specialty store, will be the first submissions, and the director will report on their progress at the next board meeting.

The Program Budget

The new-ventures group will cost about $900,000 a year for its four staff, seed funding and pilot line time, with larger launch funding approved case by case. The board has committed to the program for at least three years, long enough for several ideas to move through the gates. At the end of the second year, the board will review the number of ventures tested, those launched and the lessons learned, and decide whether to expand, adjust or close the program.

Learning From Stopped Ventures

Most new ventures do not succeed, and the program must treat stopped projects as sources of learning rather than embarrassment. Each venture that stops at a gate will produce a short review of what was learned about customers, technology or operations, shared with the leadership team. Insights from a failed online store, for example, might inform how the company markets gluten-free mixes to consumers.

The Role of Family Ownership

Family ownership affects corporate entrepreneurship. Family firms often take a long view and can fund ventures patiently, but they may also be cautious about risks to the family's reputation and wealth. Prairie Mill's board has set clear limits, no venture may require outside equity or put the core business at risk, which gives the program freedom within boundaries the family accepts.

Incentives

Managers who contribute people or production time to ventures will receive credit in their reviews. Venture team members will have bonuses tied to milestones rather than revenue in early stages, and returning to the core business after a failed venture will carry no penalty.

Culture and Leadership

The chief executive and family board members will visibly support ventures by attending gate reviews, celebrating lessons from stopped projects and telling the story of the company's own history of innovation, including the baking mixes the founder's grandson introduced in the 1960s.

Skills the Program Needs

Running ventures requires skills the core business rarely uses: interviewing customers about unmet needs, designing small experiments, building simple financial models for uncertain businesses and making decisions with incomplete information. The new-ventures director will be hired from outside, ideally with experience launching food products, and will train internal team members through real projects rather than classroom courses. Over time, managers who rotate through the group will carry these skills back into the core.

Measuring the Program

Early-stage ventures will be measured on learning milestones and customer validation; later ventures on revenue, margins and return on investment. The program as a whole will be measured by the number of ideas tested, the share reaching launch, revenue from products launched in the past five years and employee participation.

Integrating or Separating Successful Ventures

Ventures that rely heavily on the core's mills and customers, like custom mixes, will be integrated into the core after launch. Ventures that serve different customers or need different practices, such as an online store, may remain separate longer.

Risks

Risks include the new-ventures group becoming isolated, the core starving ventures of support and ventures distracting management from the core. Regular joint reviews and the chief executive's direct oversight address these risks.

Conclusion

Prairie Mill's core business is designed for efficiency, not invention. A small new-ventures group, staged funding, shared resources, frontline idea channels, supportive incentives and visible leadership allow the company to explore new businesses while continuing to run its mills well.

References

Burgelman, R. A. (1983). Corporate entrepreneurship and strategic management: Insights from a process study. Management Science, 29(12), 1349-1364. https://doi.org/10.1287/mnsc.29.12.1349

Ireland, R. D., Covin, J. G., & Kuratko, D. F. (2009). Conceptualizing corporate entrepreneurship strategy. Entrepreneurship Theory and Practice, 33(1), 19-46. https://doi.org/10.1111/j.1540-6520.2008.00279.x

O'Reilly, C. A., & Tushman, M. L. (2013). Organizational ambidexterity: Past, present, and future. Academy of Management Perspectives, 27(4), 324-338. https://doi.org/10.5465/amp.2013.0025