Corporate Entrepreneurship & Innovation

Corporate Entrepreneurship &

Innovation

Assessment Task 1 MGT731

Course Coordinator: Robert Ogulin

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Due Date: 26/11/2018

Introduction

In an ever-changing and uncertain world, organisations must consider challenging traditional viewpoints and opt to view their organisations internal and external environment through entrepreneurial eyes (Phillips, 2017). Failure to consider alternative approaches leaves companies to reduce employees, moving operations to reduce costs, streamlining processes or in extreme cases, close (Morris, et al., 2011). One company taking on a corporate entrepreneurship approach and achieving a competitive advantage is Atlassian. This report has been prepared to establish organisational, industry and general business drivers that impact Atlassian and discuss innovation opportunities or challenges faced by the organisation. Two core issues inhibiting future organisational performance will be discussed and implications considered.

Two Australian entrepreneurs Scott Farquhar and Mike Cannon-Brooks founded Atlassian, with the dream, to be who they could be without having to conform to traditional practices (Atlassian, 2018). In 2002 Jira 1.0. was developed, a software collaborative tool designed to help unleash team potential in major corporations (Canon-Brooks, 2016). By 2005-2006 revenue was $14.9 million and these young innovators were named ‘Entrepreneurs of the year’ by Ernst and Young (Hanson, et al., 2017). Atlassian achieved rapid expansion, releasing new software packages, acquisition of new developing tools, opening overseas offices and creating Atlassian Cloud (Atlassian, 2018) and revenue in 2015 reached $319.5 million (Hanson, et al., 2017). Following such success, Atlassian released an IPO on the Nasdaq on December 2015 (Canon-Brooks, 2016).

External Environment

The external environment consists of forces outside of the organisation such as technology, political and legal regulations, consumers, suppliers, competitors, the economy, labour and wages that act as drivers of change which impact a firm’s survival (McWilliams & Williams, 2014). A framework to identify an organisation’s external environment is a PEST analysis. Subsequently, Table 1 identifies numerous external forces for Atlassian.

Change is a term describing a state of something new, a modification, or difference whilst at the same time considering an action to adjust it (Goodman & Dingli, 2017). Change can be incremental, radical or as Duncan (1979) suggests stable or dynamic and simple or complex. In a dynamic environment, change occurs quickly, often in unpredictable ways (Gracia-Villaverde, et al., 2018). A complex environment refers to a large number of environmental factors that impact change (McWilliams & Williams, 2014).

Table 1: PEST analysis of Atlassian

Political

Increased privacy legislation and corporate governance requirements

Government R&D Tax incentive encourages software development

Intellectual Property costs continue to increase as it becomes more difficult to protect.

Growing concerns around ethical company behaviours and corporate social responsibility

Economic

Increased employment in the technology industry making finding quality staff challenging.

Expected increase in Industry Value Added over GDP growth

Increases in wages throughout developed countries.

Changing prices, interest and exchange rates

Socio-cultural

Depreciation of older machines increases hardware and software upgrades

Expected corporate growth in software applications

Software subscription offers expected to influence small to medium business purchasing decisions

Changing consumer behaviours and increased expectations

Increases in Enterprises employing a team-based approach eg Self-managed,

self-designing and global virtual teams. 91% of US enterprises using a team- based approach (McWilliams & Williams, 2014)

Technological

Social Platforms increase WOM opportunities and increase brand awareness.

Increased internet speed and connectivity

Increasing technologies such as smart phone and tablet apps

Growing concern regarding data security

Rapid technological advancements, eg. Artificial Intelligence, cloud, Xaas

Increasing number of global virtual networks

Source: Lo, 2018 & Morris, et al., 2011

Technology and software applications are experiencing rapid transformations, subsequently Figure 1 identifies the degree of environmental uncertainty (Turban, et al., 2015) undergoing the software industry. Van Doorn, et al., (2017) suggest entrepreneurs with an ‘absorptive capacity’ (AC) may better identify opportunities and decipher implications to the firm in such uncertainty. Organisational leaders possessing AC, such as Atlassian’s co-founders, have been shown to positively influence a firms innovation.

Figure 1: Environmental Uncertainty Matrix (Source: Duncan, 1979)

Competitors

Competition is intense in the software industry, with many large and niche players offering collaborative tool products or services (MarketLine , 2018b). Major industry players include Microsoft, Heroku, Hewlett Packard Enterprise Development, Zendesk and CA technologies (MarketLine, 2018a). Technological advancements, some disruptive, completely change individual and organisational activities (Zacher, 2017). Firms look to utilising collaborative software to enhance employee engagement and increase performance through effective sharing of information, idea generation and solving solutions (FMI, 2018). The enterprise collaboration market is in the growth stage of the industry lifecycle and is expected to rise from ‘US $34.6B to US$59.9B by 2023 (Report Linker, 2018).

In 2017, Microsoft spent over US$13 billion (14% of total revenue) in R&D. Whilst this figure sounds impressive it only equates to a 14% spend of Microsoft revenue on R&D, compared to a 37% spend by Atlassian as shown in Figure 2. Cloud computing, data analytics and cybersecurity continue to be high growth areas, but it is companies that offer ‘computing platforms, applications and infrastructure delivered remotely’ (XaaS) that has the potential to deliver the highest revenue (Hanson, et al., 2017). Competition is expected to increase, as barriers to entry decrease, particularly, the reduced investment needed to expand globally (Lo, 2018). Turban, et al., (2015) suggests organisations must be adaptable and innovative to survive and gain the advantage.

Figure 2: % of R&D and S&M spend of Atlassian compared to competitors (Source: Atlassian, 2018)

Core Issues

Successful strategic innovation involves establishing a corporate culture that embraces idea generation, through the creation of new products, processes, policies, that add customer-driven value, increase competitiveness and enhance growth (Goodman & Dingli, 2017). Innovativeness is a critical component in establishing a firm’s entrepreneurial activities (Miller, 1983). Atlassian creates an open innovation culture, with team members leading by example, openly communicating and collaborating, whereby creativity is expected from everyone and, failures are celebrated (Price, 2017). Herbert (2018), Atlassians’ risk futurist explains, individual and team interaction and managing change is more important than processes and plans, and action is preferred over just telling people to do things (Herbert, 2018). Pink (2009) suggests autonomy, mastery and purpose are essential drivers of employee motivation. Atlassian values as seen in Table 2 have been hailed by Dan Pink as ‘a company that motivates its employees in radical and effective ways’ (Arconati, 2009).

Table 3: Atlassian Values (Source Atlassian, 2018)

Open Company, no bullshit

Openness is root level for us. Information is open internally by default and sharing is a first principle. And we understand that speaking your mind requires equal parts brains (what to say), thoughtfulness (when to say it), and caring (how it’s said).

Play as a team

We spend a huge amount of our time at work. So the more that time doesn’t feel like “work,” the better. We can be serious, without taking ourselves too seriously. We strive to put what’s right for the team first whether in a meeting

room or on a football pitch.

Build with heart and balance

Measure twice, cut once.” Whether you’re building a birdhouse or a business, this is good advice. Passion and urgency infuse everything we do, alongside the wisdom to consider options fully and with care. Then we make the cut, and we

get to work.

Be the change you seek

All Atlassians should have the courage and resourcefulness to spark change to make better our products, our people, our place. Continuous improvement is a shared responsibility. Action is an independent one

Don’t #@!% the customer

Customers are our lifeblood. Without happy customers, we’re doomed. So considering the customer perspective collectively, not just a handful comes first

The company lifecycle as seen in Figure 5 suggests companies go through 5 evolution phases, with each stage distinguished by different managerial approaches (Greiner, 1972). The end of each stage is followed by a crisis point (revolution) in which management problems become apparent (Greiner, 1998). These problems must, therefore, be resolved in order to advance to the next stage. Keating & Olivares (2007) suggest entrepreneurial start-ups are situated in phase 1, focusing on product development and the marketplace. This report would, therefore, suggest, Atlassian woud have been situated in stage 1 (creativity stage see Figure 6) as evidenced by their entrepreneurial mindset.

Figure 5: Organisational Growth Model (Source: Greiner, 1972)

Transitioning from start-up entrepreneurship to that of corporate entrepreneurship may prove challenging for Atlassian as the company moves into a new directive stage in the growth model. Public companies must look towards increasing shareholder equity (Peirson, et al., 2015). Hanson, et al., (2017) suggests this may have implications for managers as they shift their focus from long-term goals to short-term, ‘quarterly reporting cycles’. Stringent corporate governance controls become a necessity for larger organisations (Peirson, et al., 2015). This is one area that has provided challenges for Atlassian as Herbert (2018) reveals ‘taking corporate governance and compliance and applying that to an agile organistion proved challenging’. Furthermore, getting Atlassian members who had little experience with compliance to understand it’s importance and it’s implications was also a struggle (Herbert, 2018).

A common problem occurring is that when becoming public the entrepreneurial leader may not be suited to manage larger organisations administrative requirements (Osgood & Wetzel, 1977). This is what happened when Jason Gunn, founder of Australian start-up company Oliver’s Real Foods, ‘the world’s first organically certified fast-food chain’ experienced rapid growth and undertook an IPO in June last year. Differences in Jason Gunn’s values and those of the shareholder’s became evident and resulted in Jason Gunn’s removal from the board and revoking of his employment within 1 year of listing (Oliver’s, 2018).

Organisational growth may stiffle Atlassian’s risk-taking approach, therofore inhibiting team creativity and innovativeness. Strategies previously used for by Atlassian for growth may not suit those needed to manage a

larger workforce (Hanson, et al., 2017). Uncertainty may activate conservative approaches and organisaitons may revert back to focusing attention on increasing efficiency rather than creativity (Van Doorn, et al., 2017).

Conflict may occur also between what is best for shareholders and what is best for leaders, managers or employees (Osgood & Wetzel, 1977). Entrepreneurs that become a public company must lead other managers with the hope that they possess the same values and ethics. Agency theory suggests managers may satisfy their own needs over that of the shareholders (Peirson, et al., 2015). However, in highly dynamic markets such as seen in the software industry, organisations may advance through stages of development much quicker (Greiner, 1998). In addition, for Atlassian to sustain a competitive advantage it is imperative that the organisation continues to empower its employees by providing supportive leadership and utilising an open- innovation approach (Turban, et al., 2015).

Figure 6: 5 Stages of Growth (Greiner, 1998)

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