An entrepreneurial audit is a comprehensive examination of a
firm's entrepreneurial and innovation characteristics. It evaluates
the ability to identify and respond to opportunities, create and
maintain an "entrepreneurial" environment, analyze the
utilization of resources, and understand organizational efficiency to
maximize time-to-profits. This corporate entrepreneurial behavior has
been shown in repeated studies to improve financial performance.
This entrepreneurial audit uses a qualitative managerial analysis
approach to allow for the diversity of executive perspectives and
organizational behaviors to be fully encompassed. The audit begins with
assessing the fundamental mission, vision, and competence of the
corporation. Then, six component areas of an audit are scrutinized: 1)
Internal Environment, 2) Entrepreneurial Culture, 3) Starting Points of
Innovation, 4) Innovation Process, 5) Team Dynamics, and 6) Resource
Allocation. Appendix A contains a summary of the questions that an
executive may use to assess a firm's entrepreneurial environment
and support for innovative behaviors.
The conclusions of the entrepreneurial audit are an indication of a
firm's entrepreneurial momentum and innovation efficiency. This
momentum is a framework for the firm's ability to respond to
environmental opportunities and threats in the 21st century. The audit
summary offers an organization a baseline of innovation efficiency and a
strategic tool in which to begin entrepreneurial renewal.
There is nothing more difficult to take in hand, more perilous to
conduct, or more uncertain in its success, than to take the lead in the
introduction of a new order of things.
ENTREPRENEURIAL AUDIT INTRODUCTION
In the global markets of the 21st century, businesses in pursuit of
sustained competitive advantage are finding that lower costs, higher
quality, and improved customer service are not enough to maintain their
competitive edge. As the pace of product, service, and process
innovation increases, companies must be better tuned to compete in their
own fiercely competitive industry. They must be faster and more
flexible, aggressive and more innovative in order to maintain their
competitive edge ... they must be more entrepreneurial.
One of the more bewildering business outcomes is why certain
companies continue to produce new products and process innovations as a
matter of practice-3M, General Electric, Disney, Intel, Sony for
example, while others struggle to produce even a glimmer of originality.
Most corporate executives would acknowledge that their business has
untapped potential in the new competitive environment, and yet, few seem
to excel at planning for innovation and using the entrepreneurial
process as a key strategic business asset. While several notable books
have been authored on this topic, including Fifth Discipline (Senge),
Innovator's Dilemma (Christensen), Leading the Revolution (Hamel),
and Innovation (Kanter) to aid top management, most corporate
environments remain geared to preserve the status quo. (1)
If Post-It[R] Notes, Pentium[R] 4 Microprocessors, or
Playstation[R] innovations are perceived to be valuable product
offerings to customers and the income statements of the firms that
create them, then understanding entrepreneurial environments should be a
priority. An Entrepreneurial Audit assists in assessing a firm's
environment for innovation efficiency and time-to-profit within new
ventures. Crucial to sustaining competitive advantages is a method for
inspecting the entrepreneurial-ness of an organization. In the end,
management must understand the environment the firm has created for
itself as it regards fostering innovation and new ventures; an
environment that generally allows for a short window of opportunity and
The fact that an entrepreneurial posture produces superior
financial results has been illustrated repeatedly (MacMillan & Day
1987; Miller & Camp 1986; Morris & Sexton 1996; Wiklund 1999,
Zahra and Covin 1995). While the goal is obtainable for some,
understanding where you are today in the process of becoming more
entrepreneurial is the purpose of this article. This entrepreneurial
audit offers a qualitative approach to discern a firm's
entrepreneurial and innovation characteristics. While there are
quantitative instruments available to access entrepreneurial posture or
intensity (Hornsby, Kuratko, and Zahra 2002; Morris and Sexton 1996),
some executives may find it futile to attempt to distill a firm's
entrepreneurial assessment into a quotient. In fact, using a
questionnaire, or a few metrics already gathered as a matter of business
practice, may not be truly taking the pulse of a firm's ability or
inability to change itself and respond to market shifts and
Thus, this article will offer one method for comprehending an
organization's entrepreneurial norms and it begins with assessing
the fundamental mission, vision, and competence of the corporation, then
six components of an audit are scrutinized: 1) Internal Environment, 2)
Entrepreneurial Culture, 3) Starting Points of Innovation, 4) Innovation
Process, 5) Team Dynamics, and 6) Resource Allocation. The
Entrepreneurial Audit will pose questions for each component section.
Appendix A contains a summary of these questions. Figure 1 outlines each
of the inputs that must be cohesive in order to excel at innovation
[FIGURE 1 OMITTED]
ENTREPRENEURIAL FUNDAMENTALS: VISION, ASSETS, AND MOMENTUM
The entrepreneurial audit begins with assessing the fundamentals of
the corporation, its mission and vision, strategic assets, and strategic
momentum. For an organization to succeed in today's
ultra-competitive global environment, it is essential to understand the
strategic capabilities and areas of strengths. Companies continually
have a multitude of innovation ideas for management to evaluate. The
entrepreneurial potential of the company is closely aligned with the
fundamentals of the company. Understanding these fundamentals is the
first step in the entrepreneurial audit process.
The company's mission and vision set a direction for your
organization that is a central point for all strategic decisions, both
for current business and new innovation. What is the five-year vision of
your organization? Can your organization articulate the role innovation
plays in that vision? Does it match? The mission defines where the
company is headed, while vision describes what it looks like when you
arrive. When potential new innovations are aligned to the company
mission and vision, the organization is in a better position to support
the project to make it successful. Corporate antibodies and barriers to
success are lessened or removed altogether.
Strategic assets are those resources the organization relies on to
create current revenue flow. They are also the assets the organization
relies on to engage a new opportunity and are the genesis for
sustainable competitive advantage. Can you quickly list three of your
corporate strategic assets? How does this list of new opportunities map
to the strategic asset list?
As an example, Coca-Cola's strategic asset list would include
their secret cola formula, their brand, diverse beverage and food lines,
and worldwide distribution network. At Disney Imagineering Studios ideas
are strategic assets. There are several fully developed, but dormant,
concepts on the Disney Imagineering Studio shelves regarded as valued
assets. In fact, they are stored on the lower shelves so they can be
easily uncovered time and again for inspiration (Jones 1996).
Momentum is a force that can assist overcoming many uphill battles
in the realm of innovation. Offering impetus and direction, momentum
carries customers and discovery to new heights. Intel Corporation's
34-year history of strategic momentum in silicon innovations has led to
eight significant market moving microprocessor cycles, from the 8086
through the Pentium[R] 4 microprocessor. Intel is rewarded with 75% of
the global market share and is accepted as the standard of today's
personal computer industry. Can you easily identify the top two areas of
your business that have market or technology momentum?
INTERNAL ENVIRONMENT: CAPABILITIES, STRUCTURE, AND COMPETENCIES
The Entrepreneurial Audit facilitates the process to identify the
capabilities, structure, and competence of a company as they relate to
entrepreneurial potential. These elements provide the internal
foundation for entrepreneurial and new innovation effectiveness of a
company. The key is to understand how engineering, marketing, and
operations interact to create and deliver new opportunities.
Capabilities of the firm are the means by which the objectives of
the organization get accomplished; it is a matter of matching an
organization's strength to environmental opportunity. Capabilities
can be the skills or professional attributes of the various departments,
the size or capacity of the various functional departments (e.g.,
marketing, engineering, etc.), and the experiences and track record of
the departments. To launch the 2002 Envoy at General Motors, an entirely
new SUV vehicle, required not just the standard new product development
steps. The intelligent engineering design, the manufacturing ability,
and factory capacity allowed GMC to produce a refreshing and innovative
SUV with such excellence that it won Motor Trend's 2002
Sport/Utility of the Year.
Organizational structure is a mechanism that can either help or
derail entrepreneurial endeavors. People, communication, and ideas are
built to support innovation, yet they can also interfere. The
devastating effect of corporate silos stifles breakthroughs. Intel
Corporation uses a multi-discipline Product Life Cycle (PLC) team
approach. One such example is the Communication and Internet Server
Division (1999-2000) that used the multi-discipline PLC team structure
to create a market-leading 1U rack server for the Internet data center
market. The functional departments, marketing, engineering, operations,
and manufacturing, have specific roles within the PLC process for new
product development. Those roles are defined within the PLC structure
for the objectives of the project to be accomplished. The specific
objectives for this project were: 1) robust product features, 2)
flexible configurations, 3) low material cost, and 4) gain
time-to-market advantage. The PLC cross-discipline team applied the PLC
process and utilized the mechanisms to organize the project and meet the
milestones throughout the development process to launch the new product
successfully in the spring of 2000.
The core competence of your organization is regarded as the
cornerstone of entrepreneurial strategy. It is the combination of
capability and structure of the company. A firm that desires to
continually maximize its use of resources for new innovation opportunity
must understand how core competency relates to entrepreneurial
efficiency. It is this efficiency that indicates where it can excel, and
conversely, where the firm cannot and should enter. Many firms fail to
create lasting entrepreneurial value simply because they venture outside
their core area of competence (Zook and Allen 2001). What is your
company's core competencies? Does everyone in the company
understand the firm's core competence as it relates to innovation?
Toys-R-Us understands their competency as toy merchandising in the
children's retail market. The successful expansion into
children's clothing allowed them to use their expertise to organize
this new venture, select styles and trends for the stores, and to market
effectively to the target audience--parents (Block and Macmillan 1993).
ENTREPRENEURIAL CULTURE: INNOVATIVENESS, RISK TAKING, PROACTIVENESS
An entrepreneurial culture often starts at the top. When former 3M
CEO and scotch tape inventor William McKnight broke his leg, he found
plaster casts to be heavy and tiring. 3M scientists acquired a
technology for synthetic materials that were lighter and stronger than
plaster. Instead of accepting six weeks of drudgery, this
action-oriented culture resulted in a fiberglass-reinforced synthetic
casting tape that is widely used today.
Within the firm, innovativeness, risk taking posture, and
proactiveness will directly affect the capacity to be creative and
entrepreneurial. Do the underlying beliefs and assumptions that
employees have regarding their conduct and expectations (i.e., culture),
support original thought, calculated risk, and action? These are the
firm behaviors that foster change and produce new opportunities.
Corporate entrepreneurship is not determined by desire, but by
organizational culture and action.
Innovation emphasizes research and development that leads to new
products or new processes. An innovative culture seeks unusual or novel
solutions to problems, supports technical leadership, and covets
brainstorming as much as cost savings. While most organizations claim to
be innovation-oriented, few actually use measures to gauge innovation;
rather, they concentrate on optimization. What metrics does your
organization use to measure entrepreneurial innovation?
Risk taking is a willingness to pursue opportunities boldly and
aggressively, but not recklessly. The individual willing to move forward
when others are doubtful or unable to see the potential are those
supporting an entrepreneurial culture. These people, or even committees,
are willing to explore risky growth opportunities, make necessary
decisions despite uncertainties, and be aggressive in responding to
competitors. This posture is sometimes in short supply because few
managers are fired for neglecting to pursue an opportunity when compared
to those who do not meet this quarter's numbers.
Proactiveness is concerned with implementation and taking
determined action to bring an entrepreneurial opportunity to
realization. An idea can gain support from 10 people and then get
derailed by just one individual. But action, especially early wins with
regard to an opportunity, is more difficult to scuttle. Thinking and
being innovative is necessary, but hardly sufficient. Champions move
quickly past the identification of opportunity to the implementation of
their innovative concept. A proactive culture creates an internal
strategy, drafts resources, and outlines milestones while others are
still at the drawing board. How many unsolicited business plans does
your CEO receive from managers each year? Do you consider your culture
proactive, reactive, or unresponsive?
STARTING POINT OF INNOVATION: INFORMAL, FORMAL, AND CUSTOMER
The genesis of new innovation is of vital interest to an audit, and
an organization's health. Domains that can be identified as
breeding grounds for worthy ideas must be nurtured and cultivated. Where
is the birthplace of your organization's new business ideas? Areas
of particular interest to an audit include informal, formal and customer
mechanisms to foster innovation.
Many organizations have informal methods for introducing ideas for
products or new processes. Everyday, people get together at lunch and
discuss various topics, but often wind up talking about potential
inventions that challenge their wisdom and invigorate them personally.
How often do you see sales, marketing, engineering, or manufacturing
people sitting together at lunch sharing the brown bag experience? The
outcome is the exploration of thoughts that, coupled with ingenuity,
create new products. Another informal method to disperse valuable ideas
is the use of a suggestion box (most currently suggestion e-mail). The
utility of this approach varies widely depending on the perception of
what is actually done with the input.
Some of the more entrepreneurial companies obtain opportunities by
offering a more formal approach, while still inviting everyone's
participation. Are all your employees offered a forum where they feel
invited, if not obligated, to submit innovative ideas? Some firms have
processes already in place; Disney has the Gong Show, Texas Instruments
it is the IDEA program, and Royal Dutch/Shell offers the "Game
Shell allocated $20 million to invest in employee-generated ideas.
During a three-day innovation lab, the ideas were coached, financial
plans developed, and crisp 10-minute presentations assembled. Funding
ranged from $100,000 to $600,000 in 1999 and of Shell's five
largest growth initiatives, four had their genesis in the Game Changer
process (Kanter 1983). The IDEA (Identify, Develop, Expand, and Action)
initiative at Texas Instruments opens the door for proposals submitted
to one of forty worldwide IDEA representatives with an immediate $25,000
with a stroke of the pen. Approximately $500,000 to $1 million is spent
on this program annually to fund innovativeness.
The 'Gong Show' at Disney occurs three times each year
and invites employees to pitch film ideas to senior executives.
Colleagues are used to first critique the business concept and
presentation, and then they unleash their idea upon management.
Approximately 40 ideas are shared each session and feedback, positive
and negative, is shared immediately (McGowan 1989). Again, the purpose
for uncovering innovation starting points is to identify potential areas
or programs that cultivate discovery and warrant investment.
The customer is an integral starting point of innovation. Customers
often instigate innovation, set market timing, and confirm the
"customer value proposition" of your product's success or
failure. What mechanisms does your firm have to direct customer feedback
to the appropriate product group?
The Customer Value Proposition: Customer Value = Customer Benefit -
Expectations of your company by the customer also set a pace for
innovation in products, services, and processes. The customer dynamics
in the marketplace determine modifications to your organization's
strategy and structure. For example, a rapidly expanding product line,
such as consumer electronics DVD players, will require Sony to plan for
appropriate product cycling, staffing, and service infrastructure.
Customer's expectations, perceptions, and reactions to your new
innovations are crucial to the next generation of products or services.
A good example of customer based innovation is
"Build-Your-Own" PC offered by many of the leading personal
computer companies (e.g., Dell, Hewlett-Packard, etc). The customer is
provided a kiosk at a retail store or a "configure to order"
web site for them to work through selections and create a tailored order
for their exact needs, peripherals, performance, colors, etc. Ultimately
the customer determines if you are innovative and what financial success
you will have in the market place.
INNOVATION PROCESS EVALUATED: EFFICIENCY, SUCCESS, AND FAILURE
New innovation revenue is the life-blood of any healthy
organization--especially in highly competitive industries. At 3M for
example, the corporate financial planning strategy is to have 30% of all
revenue over the past four years be new innovation revenue. If a new
venture within the organization can shave one-third off the development
cycle, how much is that worth to your organization? There should be no
reasonable argument against better time-to-money and time-to-profit
efficiency, except for when quality or safety is compromised. What is
your average time-to-profit?
Innovation cycles can vary widely from industry to industry.
Pharmaceutical companies research and test drugs for years and General
Motors may take five years to develop a new car. Contrast that by
Sony's rapid prototyping processes that can test a new product
concept within weeks and have it to market within months. Clearly, the
type and pace of successful innovation varies by industry, and changes
by new market dynamics as well, e.g., the Internet. However, if a
relative and significant percentage can be shaved off your development
cycle, the payback is clear. The Entrepreneurial Audit endeavors to find
the bottlenecks for time-to-profit efficiency. Do you have a mechanism
to gauge the profit timeline and adjust the performance of your
organization given specific profit goals? What are the best practices
and benchmarks in your industry to align your organization to compete?
Efficiency is one element; continued learning from mistakes is also
paramount. A vital element to future new venture success is recognizing
what has worked and that has not from a historical innovation
perspective. Successes can be modeled as BKM's (Best Known Methods)
for future ventures. Seasoned members of the successful team can
participate in future ventures to strengthen the new organization and
improve the learning curve. How does your firm cross-pollinate
experienced employees for future success of new ventures? Beyond success
and failure is the documentation of the venture's key discoveries
so organizational learning can occur. Is the management of a current
successful or failed venture required to document experiences for the
corporate knowledge bank?
Failures are readily and quickly ignored or buried in obscurity
sometimes due to politics and the embarrassment of the failed endeavor.
Not so, at General Electric. Failure is a key learning tool for the
organization. "Intelligent failures" are supported by the
organization as key learning experiences to be recognized. The Halarc,
an innovative new light bulb intended to last ten times longer than a
standard bulb using a fraction of the energy, was a large gamble at $50
million development investment. However GE quickly learned consumers
were not ready to pay $10.95 for a "revolutionary" new light
bulb in the late 1970's. The project failed. But, instead of
"punishing" the Halarc team, GE celebrated a great try by
handing out cash awards and promoting several Halarc team members into
new jobs. GE wanted everyone to know that it was okay to take an
intelligent "big swing" at a new innovative product, and miss.
Does your organization offer "get out of jail cards" for those
who risk and fail at a venture?
TEAM DYNAMICS: CHAMPION, SPONSOR, REWARDS
Venture capitalists understand that ideas are a dime a dozen, that
only execution counts. So how does an organization execute? It is
usually through a team of motivated individuals with a leader at the
helm and a senior advocate eliminating obstacles. Effective
entrepreneurial teams generally have a champion, a sponsor, and rewards
to rouse the innovative spirit.
Champions are people who encourage projects during critical stages,
keep decision-makers and sponsors informed, lead team members, and
enthusiastically promote the project at all levels of the company. These
champions excel at forgoing alliances with others, internal and external
to the firm. One report noted that 90% of raw ideas actually never
advanced beyond the idea generator's desktop (Howell and Shea
2001). Thus, understanding the market opportunity, envisioning the
resources and steps required to produce outcomes, and building support
via communication are the coveted people who move ideas from a desktop
to a marketplace. Do you recruit and retain future champions when
hiring? What percentage of your organization is filled with potential
To succeed, champions need someone to provide cover on occasion.
This person, called a sponsor, provides clout, occasional protection,
marshals resources, and offers coaching in an effort to nurture an idea
until it gains momentum. Sponsors offer advice and imitate knowledge on
how to be effective within the broader organization. Without this
advocate, success can be elusive. In short, a lack of internal direction
and support is highly detrimental to success. Art Fry, of Post It
Notes[R] fame, and Ken Kutaragi, the inventor of Sony's
Playstation[R], both had sponsors to support their successes. From an
audit perspective, look at your senior managers and see who specifically
has the interest and the talent to mentor an innovation-minded team.
Currently, whose people are the most entrepreneurial on an ongoing
The final part of the team dynamics is remuneration for risk
taking, extra work, and intellectual creativity. Many people seek
financial rewards; some seek power, status, or the freedom that
innovation brings to them personally, thus remuneration is as varied as
the individuals involved. While most accept that personal financial
wealth cannot match that of the outside entrepreneur, offering something
for fomenting improved firm performance is essential. One must review
the firm reward system to understand if the compensation offered is
motivating people beyond their wildest dreams. How does your
organization reward innovative people?
IBM named its first eight Fellows in 1963 in recognition for
prominent technical accomplishments. This status entitled the recipient
to five years of support to pursue novel or innovative opportunities.
Other reward avenues to motivate might include on-the-spot awards, paid
vacations, innovator of the month awards, bonuses tied to revenue
generation, or outright shares of stock. Not all risks to the company
are the same. Are your rewards the same? It is important to note that
the creativity and passion that drive the team is often internal to the
individual and thus difficult to finesse. The bottom line is to
understand what truly motivates your people to pursue their ideas and
RESOURCE ALLOCATION: STRATEGIC, TRADITIONAL, SKUNK WORKS
For entrepreneurial activities and innovation to occur within the
firm, resources must be made available in some manner. How does your
firm earmark or attract resources as it regards supporting new products?
There are generally three approaches to appropriating resources to new
endeavors: strategic speculation, traditional new product development,
and skunk works projects.
Strategic speculation is investment in products and innovations
believed to hold great promise for the company during the next year or
two. Thus, these projects warrant special attention and are offered
unparalleled access to equipment, people, and financial resources.
Budgets for these endeavors are often set at the highest reaches of the
organization through a special disbursement or perhaps part of a new
venture budget. Pioneering firms digging at the frontiers of their
respective business sectors are constantly looking for new innovations
to secure their future. Banking on new significant innovation is key to
Traditional new product development is a mixture of marketing,
engineering, and management working together to craft new goods,
services, or processes. Lines of responsibility are usually clearly
drawn and boundaries are inferred from historical norms. This approach
for resource allocation generally is more structured, having been the
traditional method for some new products brought to market. Budgets are
set during the annual process and widespread communication regarding the
product is generally the custom in this approach.
Skunk works projects start as small enterprises and individuals are
often left to their own devices to procure the resources required.
3M's Post-It Note[R] is often considered the pinnacle of skunk
works success. Under this system, individuals scrimp, scrounge, or
"borrow" people, assets, or facilities to create a new product
for the organization. Often, this approach has zero financial resources
earmarked at the start. Thus, individuals may toil with their ideas
during regular business hours, but nights and weekends are when progress
is achieved since they are not working on officially sanctioned
projects. The counterculture mentality of skunk works initiatives often
put them at odds with others in the organization, but to these people,
another's contrary opinion should not prevent progress. What are
skunk works projects within your firm right now?
In short, there is no hierarchy of resource disbursement; no one
approach is necessarily better than the others. But if multiple methods
are available for stimulating innovation efficiency and entrepreneurism,
the more likely desired results will be obtained. From an audit
perspective, the bottom line is which, if any, of the three resource
methods does your firm offer to support entrepreneurial enthusiasm?
CHALLENGES OF AN ENTREPRENEURIAL AUDIT
The obstacles to conducting an Entrepreneurial Audit are the same
as those faced by firms attempting to be innovative by developing new
products and services. Most stumbling blocks are not linked to
environmental conditions or even technological challenges related to the
product itself. Most impediments are internal to the firm with people
frequently at the top of the list (Morris, Davis, and Ewing 1988).
Table 1 offers a list of factors that have been found to constrain
the entrepreneurial spirit in organizations. Resistance to change, lack
of motivation, fear of failure, resource constraint, and corporate
structure were the main constraints to entrepreneurial behavior.
Moreover, the mere act of asking questions or seeking opinions in an
audit is enough to make many employees nervous or outright fearful,
especially those who covet the status quo. Thus, confidentiality must be
guaranteed and perhaps independent auditors should be used. Employees
often perceive an audit as an opportunity to unload negative feelings
about the organization or specific individuals. The auditor can learn a
great deal from this information but must protect everyone's
interests while remaining highly determined to grasp the reality of the
The Entrepreneurial Audit provides any organization the opportunity
to critique itself in a practical and open process. Management has an
internal and an external option for conducting an Entrepreneurial Audit
no matter which organizational situation they find themselves. An
internal self-diagnosis approach of auditing entrepreneurial efficiency
relies on three elements for success; 1) credibility, 2) an unbiased
audit team, and 3) a confidential approach utilizing the Entrepreneurial
Audit structure. Alternatively, a professional consultant with expertise
in entrepreneurial organization process and innovation efficiency can be
utilized if there is potential for significant turf protection or
emotion from the organization. Employees should be encouraged to
participate in a candid, active, and involved way. If anonymous feedback
methods will stimulate increased participation, then offer a means to
conduct the audit in confidence.
ENTREPRENEURIAL AUDIT SUMMARY
In review, the objective of the Entrepreneurial Audit is to
evaluate how to create a more efficient, innovative, and competitive
organization. Conducting an Entrepreneurial Audit within the six areas
described is an important declaration to managers, employees, and
customers that the organization values efficiency, new innovative ideas,
and competitiveness. It states to the organization that its interest
lies in progressing and improving opportunities for invention. It also
states that efficient execution is crucial for a sustained competitive
advantage. The organization will begin to understand that new
innovation, when done efficiently, will have a positive impact on the
bottomline, thus, creating additional opportunity. Table 2 contains a
summary justification for conducting an Entrepreneurial Audit.
An Entrepreneurial Audit will allow you to clearly understand the
strengths and weaknesses of your organization as it relates to
innovation efficiency. The bottom line is that entrepreneurial posture
and firm performance have been positively linked by several studies over
the years, irrespective of past performance. Entrepreneurial firms do
better overall, understanding a firm's entrepreneurial innovation
efficiency begins with this entrepreneurial audit process.
The conclusions of the Entrepreneurial Audit are an indication of a
firm's entrepreneurial momentum and innovation efficiency. This
momentum is a framework for the firm's ability to respond to
environmental opportunities and threats in the 21st century. The audit
provides strategic tools in which to begin entrepreneurial
Sample Entrepreneurial Audit Questions Summarized
I. Entrepreneurial Fundamentals: Vision, Assets, and Momentum
* How does your organization foment, analyze, and prioritize a new
* What is the five-year vision of your organization? Can your
organization articulate the role innovation plays in that vision? Does
* What are three of your corporate strategic assets?
* Where in the organization are your top two areas for market or
II. Internal Environmental: Capabilities, Structure, and
* What resources and abilities can you immediately count on if a
new business opportunity arises?
* What structures are in place for engineering, marketing, and
operations to interact to create and deliver on new opportunities?
* How do you define your core competency?
* What percentage of your employees understand the firm's core
competence and how it relates to innovation?
* How does your list of new opportunities map to your core
III. Entrepreneurial Culture: Innovativeness, Risk Taking,
* How do the underlying beliefs and assumptions that employees have
regarding their conduct and expectations (i.e., your culture) support
original thought, calculated risk, and action?
* Does your organization use metrics to measure entrepreneurial
* How many unsolicited business plans does your CEO receive from
managers each year?
* Do you consider your culture proactive, reactive, or
IV. Starting Point of Innovation: Informal, Formal, Customer
* How are customers invited to define the next generation of your
* Where is the birthplace of your organization's new business
* Who are the most creative people in your firm?
* Are all your employees offered a forum where they feel invited,
if not obligated, to submit innovative ideas?
V. Innovation Process Evaluated: Efficiency, Successes, Failures
* What can the organization do to allow venture managers more time
to pace their venture team for market delivery versus jumping through
excessive internal hoops?
* Does your organization offer "get out of jail cards"
for those who risked and failed at a venture?
* How does your firm cross-pollinate veterans of previous ventures
into key roles for new ventures?
* What is the documenting process for a successful or failed
VI. Team Dynamics: Champion, Sponsor, Rewards
* How do you recruit and retain future entrepreneurial champions?
* What percentage of your senior managers have the interest and
talent to mentor an invigorating team?
* What mechanisms does your organization use to reward innovative
* To what degree are risks and rewards correlated with different
VII. Resource Allocation: Strategic, Traditional, Skunk Works
* How does your firm earmark or attract resources as it regards
supporting new product ventures?
* Which of the three methods (strategic, traditional, skunk-work)
does your firm offer to support entrepreneurial enthusiasm and
* What innovation is being funded at a strategic level as to be
considered your firm's future?
* Can you identify one or two skunk works projects underway
somewhere in your organization?
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Robert M. Peterson, University of Portland
Kevin D. Johnson, Intel Corporation
Table 1: Factors that Impact Corporate Entrepreneurial Spirit
1. Absence of innovation goals
2. Resistance from others
3. Top management support
4. Resource availability
5. Firm's posture towards failure
6. Reward system does not promote such behaviors
7. Rigid formal planning systems
8. Politics and turf protection
Adapted from Morris and Trotter (1990)
Table 2: Entrepreneurial Audit Justification
1. Provides a thorough critique of your organization's competitiveness
via a high-payback (ROI) exercise.
2. Asks probing questions about the organization effectiveness to
3. Moves people off the status quo tendencies, which are a detriment in
today's competitive environment.
4. Generates an understanding of how much your organization is acting
like an innovative-minded team.
5. Evaluates if the competition is out-innovating you.
6. Defines the bottlenecks to improve innovation process.
7. Prepares your organization for new opportunities.