New Venture Creation (PLCY/ENTP 429)
Fall 2006
Assistant Professor Nicola Lacetera
Email: nicola.lacetera@case.edu
Office Phone: 216-368-2197
Office 280
Office hours
TBA
Creating and growing a new venture inside or outside the corporation is a task that few individuals are
able to accomplish, even though many profess the desire. The primary goal of this course is to provide
an understanding of entrepreneurship and the entrepreneurial process. The course will broaden a basic
understanding obtained in the functional areas as they apply to new venture creation and growth.
While most of the examples in class will be drawn from new venture formation, the principles also
apply to new business development in corporate settings and to non-profit entrepreneurship.
Audience: The class is of relevance to students interested in starting new businesses, as well as to
students thinking about working in consulting or finance.
Teaching method: mostly case-based, with most part of each class dedicated to student discussion of
cases and topics. You are expected to come to class well prepared to discuss the case studies and
reading materials. Read the cases in advance. The articles listed among the required readings will
help you to give some background to the cases and to analyze them with greater details. You should
read at least some of them. The discussion questions at the end of each section (see below) will guide
our in-class discussion.
Assignments: 7 individual, 2-page case memos, each on one of the cases discussed in class. The
memos should be sent to me the day before the analyzed case is discussed in class. There is no specific
format for the memos. You can use the “Questions for discussions” reported for each class (see below)
as a guide for your written analyses.
Final team project: elaborate a business plan in teams of 3 or 4. Each team will work on a business
plan throughout the course, will meet with me at least once to discuss the progress of the work and any
other related issue, and will send me, fortnightly, 10-line progress reports. The last 2 class meetings
will be dedicated to the presentation of the business plans by all teams. In fact, each team will have a
double role. In addition to working on and present its own plan, each team will be assigned to another
team, and will be called to discuss and evaluate this other team’s business plan. Each team will
therefore play the entrepreneurs with respect to its own plan, and, say, the venture capitalist (or more
generally the financing party) with respect to that team it is matched to.
Grading: Class attendance and participation will count for 30% of the grade. The (individual) case
memos will count for 25% of the grade. The final project/business plan count for 30% of the final
grade. The remaining 15% of the final grade will be given by the evaluation of the “companion”
business plan.
Make up class: We will need to re-schedule the September 28th meeting to another day, since I will
be out of town. We will discuss this issue in our first class.
Course material Most of the readings will be available in an online reading pack though
www.xanedu.com.
Some readings are freely available online. In the detailed syllabus below I provide links to these
readings.
Academic Integrity University policy on plagiarism and academic integrity will be rigorously
enforced. The University does not tolerate cheating or plagiarism in any form. Cheating or plagiarism
will result in a failing grade. Ignorance is not considered an excuse. If you are not sure whether or not
something you plan to submit would be considered either cheating or plagiarism, please do not hesitate
to ask me, or your other faculty.
Students with Disabilities I will be happy to meet with students with disabilities and who may need
individual arrangements. The coordinator of Disability Services can be contacted at 216-368-5230.
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Detailed Program
The class will meet once a week for fourteen weeks. Cases are indicated with a [C].
1. Introduction (1 week)
Aug. 31
a. Common pitfalls facing new start-up firms
b. Why do we care about entrepreneurship?
i. Many want to start their own business
ii. Entrepreneurship as an engine of economic development and growth
[C] “3M: Profile of an Innovating company”, HBS Case. [Course pack]
“The Questions Every Entrepreneur Must Answer” by A. Bhide, Harvard Business Review,
November-December 1996, pp. 120-130 (reprint 96603). [Course pack]
“What it Takes to Start a Startup” by. B. O’Reilly, Fortune, June 7, 1999, pp. 135-140.
Stern, S., 2005: “Economic Experiments – The role of Entrepreneurship in Economic Prosperity”,
Kauffman Foundation, pages 16-21.
Questions for discussion
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What are, in your opinion, the main factors explaining the success of 3M? What made this
entrepreneurial venture a giant, admired company? Are these determinants valid also for other
contexts?
Has 3M been only a technological innovator? Or has it experimented also in other areas, such
as marketing and internal organization?
How are more recent CEOs different from McKnight? Are they more suited to face the current
challenges? Are they as “entrepreneurial”?
Do you think that O’Reilly’s and Bhide’s analyses are contrasting? Why or why not? How do
they apply to 3M?
Is Bhide leaving out some important questions? If so, which ones?
Do any of the entrepreneurs described by O’Reilly look like any of the 3M’s CEOs?
2. Identifying opportunities and the value proposition.
Generating and evaluating new venture ideas
Windows of opportunities and the “why me?” question
Sept. 7
[C] “R&R,” HBS Case 9-386-019. [Course pack]
[C] “Joseph Sanda”, Small Business Week Winners, Ohio 2002 (1 page)
[C] “Diane MacWilliams”, Small Business Week Winners, Illinois 2002 (1 page)
[C] “Adrian Lugo”, Entrepreneurial Success Award Winners, Washington (1 page)
[C] Caine, N., 2006: “Flu jabs kickstart doctor’s firm”, The Sunday Times, June 18th (1 page)
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[C] Economist, 2006: “Surfing the Airways”, July 13th. (1 page)
Levitt, T., 2002: ‘Creativity is not enough’, Harvard Business Review. [Course pack]
“Creating New Market Space” by W.C. Kim and R. Mauborgne, Harvard Business Review, JanuaryFebruary 1999, pp. 83-93 (reprint 99105). [Course pack]
Questions for discussion:
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How are entrepreneurial opportunities identified? What are the criteria you would use to assess
the viability of an entrepreneurial opportunity? What leads to opportunity windows?
Why was the TV Guide Trivia Game an entrepreneurial opportunity for Reiss? How successful
was he?
What risks and obstacles were there to overcome for Reiss? What should he do now?
Why do some people (and not others) identify opportunity windows? What is special about
Reiss, Joseph Sanda, Diane MacWilliams, Adrian Lugo, Charles Levinson and Craig McCaw?
What do they have in common? Were they just lucky?
Do you agree with Levitt’s analysis? How does it apply to R&R? What does it mean that
rigidity can be a good thing?
Did Reiss create new market space? Was his strategy similar to any of the examples brought by
Kim and Mauborgne?
Look at some of the ideas listed at the following website: http://www.whynot.net/. Which ones
suffer from the problems Levitt points to? Which ones looks viable to you, and why?
Suggestion for further reading:
B. Nalebuff and I. Ayres, Why Not?, Harvard Business School Press.
3. Business plans, designs, models: how to capture value?
Sept. 14
[C] “Zipcar: Refining the Business Model,” HBS Case 9-803-096.
“How to Write a Great Business Plan” by W.A. Sahlman, Harvard Business Review, July-August
1997, pp.98-108 (reprint 97409). [Course pack]
Zweidler, A. et al., 2005: “The Real Option approach to capital decisions”
Questions for discussion:
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What is Zipcar’s business model, and how has the model changed? What changes, if any,
would you make to the business model?
Is Zipcar model valid in other contexts?
Did you find Sahlman’s suggestions useful? Is he, in your opinion, missing anything of major
importance?
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Suggestion for further reading
R.G. McGrath and I. MacMillan, The Entrepreneurial Mindset, HBS Press, 2000
4. Strategies for start-up: how to compete against established firms?
Sept. 21
[C] “Ikea Invades America”, HBS case. [Course pack]
[C] “Judo in Action” HBS 9-703-454. [Course pack]
Yoffie, D. and Kwak, M., 2002: “Judo Strategy: 10 Techniques for Beating a Stronger Opponent”,
Business Strategy Review, 13, 1, 20-30.
Ian C. MacMillan, Rita Gunther McGrath, 1997: “Discovering new points of differentiation”, Harvard
Business Review, 1997. [Course pack]
Questions for discussion
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What made IKEA successful, abroad and in the US? How could they make it, against a solid
and established “local” competition?
What was the competitors’ reaction, if any? Or, do you expect incumbent to react more
forcefully?
Is IKEA a case of “clever” differentiation? In what sense?
Is a differentiation strategy a form of Judo Strategy?
How can new ventures compete against established firms, which have both more resources and
an established reputation?
Is the “Judo strategy” approach applicable to any firm, industry, and technology? How would
you apply the approach, for example, to the case of low cost airlines like RyanAir?
What did you learn about the “vignettes” of “Judo in Action” that can be applicable to your
entrepreneurial project?
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Suggestions for further readings
R.G. McGrath and I. MacMillan, The Entrepreneurial Mindset, HBS Press, 2000
Adner, R., 2006: “Match your Innovation Strategy to your Innovation Ecosystem”, Harvard Business
Review
"How do Entrepreneurs craft Strategies that Work?" by Amar Bhide HBR March-April 1994
Yoffie and Kwak, Judo Strategy, HBS Press, 2001
Brandeburger-Nalebuff, Coopetition.
5. Organizational issues:
Building a winning team and delivering value
Organizational culture (1 week)
[C] “Whole Food Market”, HBS case. [Course pack]
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TBD
“The New Venture Team” by J.A. Timmons, Chapter 7 in New Venture Creation, Irwin
McGraw-Hill, 1999. [Blackboard]
Peteraf, M., 1993: “The Cornerstones of Competitive Advantage”, Strategic Management Journal, 14,
3, 179-191. [Jstor]
Barney 1986: “Organizational Culture: Can It Be a Source of Sustained Competitive Advantage?”,
Academy of Management Review, 11, 3, 656-665. [Jstor]
Questions for discussion
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How would you explain the success of Whole Food? What is different and what is similar (if
anything) to the case of IKEA? Is this success sustainable in the long run?
How are Timmons’, Peteraf’s, and Barney’s considerations useful to understand the success of
Whole Food?
What can you learn from the Whole Food case for your entrepreneurial idea?
What did you learn from the three articles, of any use for your business idea?
6. Financing issues: banks, venture capital, and government initiatives
Oct. 5
[C] Walnut Venture Associates (A), HBS case 9-899-062. [Course pack]
[C] Walnut Venture Associates (D), HBS case 9-899-097. [Course pack]
Gompers, P. and Lerner, J., 2001: “The venture capital Revolution”, Journal of Economic Perspectives,
15, 2, 145-168. [Jstor]
Zider, B., 1998: “How venture capital works”, Harvard Business Review. [Course pack]
Background reading
Sahlman, W., 1992: “Note on the Financial Perspective: What Should Entrepreneurs Know?”, HBS
Note. [Course pack]
(You can spread this week’s reading, excluding the cases, over this and next week).
Questions for discussion
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Go back to our discussions on business plans. Are the issues a new venture stresses in its
business plan the same as a venture capitalist looks at, as emerge from the Walnut Venture
Case? Look both at the “facts and features”, and at the “numbers” the different parties seem to
focus on.
Why is it difficult for a new venture to get financed? What is your experience on this matter?
Comment on this sentence: “Financing a company, and more so a new company, is not just a
“financial” problem. It is a genuine organizational problem”.
Guest speaker – Kate Kerr, SBA specialist
Oct. 12
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7. Managing growth
Oct. 19
[C] Anasazi Exclusive Salon Products, Inc.,” HBS case 9-295-111. [Course pack]
“Note on Building the Self-Sustaining Firm” by A. Bhide, HBS Note 9-395-200. [Course pack]
Questions for discussion
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Do you agree with Anasazi’s new strategic plan to meet its milestones? Why or
why not? What specific managerial action should be taken to implement the recommendations?
What does Bhide have to say on this matter? Do you agree? Why or why not?
Have you experienced “growth problems” in your business career? If so, did they look like the
ones described in the Asanazi case?
8. Exit: success or failure?
a. When to go public?
b. Learning from failure
Oct. 26
[C] Nantucket Nectars,” HBS case 9-898-171. [Course pack]
The Harvest and Beyond by J.A. Timmons, Chapter 18 in New Venture Creation, Irwin
McGraw-Hill, 1999, pp. 573-580. [Blackboard]
McFarland, A., 2004: “Entrepreneurial Failure: get used to it”
Questions for discussions
 Should Nantucket Nectars undergo an IPO or sell a part of the company? Why? If you
recommend the latter, who should it sell to and why?
 Have you ever “failed” in you business experience? Do you agree that it can be a good thing,
for you and for society? Why or why not?
9. Intrapreneurship: can you be entrepreneurial within an established company?
Nov. 2
[C] “3M Optical Systems: Managing Corporate Entrepreneurship” HBS case 9-395-017. [Course pack]
[C] Tripsas, M. and Gavetti, G., 2000: “Capabilities, Cognition, Inertia: Evidence from Digital
Imaging”, Strategic Management Journal, 21, 10, 1147-1161. [Jstor]
Govindarajan-Trimble, 2005 HBR: “Building breakthrough businesses within established
organizations”.
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Questions for discussion
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In what ways is entrepreneurship different in the context of an established firm relative to an
independent start-up?
Have you ever tried to advance a new idea within an established company, or have you seen
anybody trying to do that? How did it go, and why?
Is the Govindarajan-Trimble analysis similar or in contrast with Levitt’s considerations (see
section 2) on the role of rigidity?
As Andy Wong in the 3M case, how would you handle the authorization for expenditure (AFE)
for the relaunch of the privacy screen?
As Paul Gehler in the 3M case, would you approve the AFE if Wong sent it to you?
Is Tripsas and Gavetti analysis convincing?
10. Legal issues in new business creation
Nov. 9
Guest speaker – Frank P. Nagorney (Cowden, Humphrey, Nagorney and Lovett Co., LPA)
11. Family businesses
a. Nepotism vs. professionalism. The management and the family
b. Succession and continuity
Nov. 16
[C] “Hancock Land Company and Hancock Lumber Company”, HBS case. [Course pack]
[C] “Precista Tools Ag, A and B”, HBS Case. [Course pack]
[C] Bridge, R., 2006: “Son overtake stationary dad”, The Sunday Times, July 9th.
Wasserman, N., 2003: “Founder-CEO Succession and the Paradox of Entrepreneurial Success”,
Organization Science, 14, 2, 149-172. [ProQuest]
Villalonga, B. and Amit, 2004: “How do Family Ownership, Control and Management affect Firm
Value?”, working paper.
Questions for discussion
 How would you handle the situation at Precista? What went wrong? Why (and how) are the
things that went wrong related to Precista being a family Business?
 Why would you ever leave your company to a family member rather than going “the market” to
find the best available owner and manager? What is the benefit to keep a company within the
family?
 Have you ever had direct or indirect experience of family businesses that went very well or
very bad? In either case, can you attribute the results to the business being family-run?
 Do you believe the findings of Wasserman and Villalonga-Amit? If you do, what are the
entrepreneurial, strategic, and organizational implications? If you do not believe the results (or
some of them), why?
12. Student presentations
Nov. 30
Dec. 7
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