Fostering Corporate Entrepreneurship : Feature Article; July'08

Understanding Corporate Entrepreneurship

Do you long for the spark, innovation, speed and risk taking that small entrepreneurial companies have and envy the passion people working in such firms display? Fostering Intrapreneurship is the key to achieving this in your own organization even if it is not in a start up phase. Intrapreneurship is all about retaining ideas / product innovations within your company. It is being able to create an environment where the idea generator does not feel the need to leave the company to take his idea to the market but finds the support systems within. And the company gets to share the benefits!

Gifford Pinchot III coined the phrase 'intrapreneurship' in 1985 to describe the marriage of an entrepreneurial spirit - complete with its fierce independence and lack of deference to established views and the strictures of conventional wisdom - with the resources of a large corporation.

 “They (corporate entrepreneurs) are always the dreamers who figure out how to turn an idea into reality.” - Pinchot

Entrapreneurship also known as Corporate entrepreneurship (CE), generally, refers to the development of new business ideas and opportunities within large and established corporations (Birkenshaw M.J. Scheepers, J. Hough and J.Z. Bloom 2003). And Entrepreneurship should not be confused with just incremental improvements - it is about a new idea, product, revenue stream or way of maximizing returns. In most cases, CE describes the total process whereby established enterprises act in innovative, risk taking and proactive ways (Zahra 1993; Dess, Lumpkin and McGee 1999; Bouchard 2001). But what prevents most individuals from bringing the entrepreneurial energy to their jobs?

What retards Corporate Entrepreneurship in large companies?
Primary factors in large organizations that discourage Corporate entrepreneurship are:-

  • Mindset of Senior Management who support sure success ideas only: The view that most of us share as analysts and problem-solvers runs counter to successful entrepreneurship. When demand for lots of data is made it kills the entrepreneurial spirit which relies more on instinct.
  • Cost of Failure: The costs of failure are too high and the rewards of success are too low. Failure is an unavoidable aspect of the Intrapreneurial process. But Intrapreneurs are not given the space in which to fail. The rewards for success are usually inadequate. Very few organisations provide rewards for Intrapreneurs that come close to the rewards available to their entrepreneurial counterparts.
  • Inertia: Inertia is caused by established implicit and explicit systems that no one is willing to change. Intrapreneurs are met with "if it ain't broke, don't fix it", and "changing it now would just take too much effort..." In fact many organizations use their existing systems to prove they already have the "right answer" effectively killing creativity.
  • Hierarchy: The deeper the hierarchy, harder it becomes to get permission for anything new. How long does it take to get the green light and obtain resources to implement a good idea born at the grass root level in your company? If the answer is long then it will be tough to foster intrapreneurship in such a culture. This is not to say that there should not be a business approval process, but that it should be efficient.
  • Complacency: A company that does not encourage its employees to reinvent themselves and their careers at regular intervals also faces the risk of complacency in thought and action among its employees.

So how can one get individuals to act in an entrepreneurial manner? Cultivating corporate entrepreneurs requires creating a corporate culture which encourages firm-level entrepreneurial orientation that is reflected by five dimensions: autonomy, competitive aggressiveness, proactiveness, innovativeness and risk-taking. Let’s look at the ways to create an intrapreneurial culture.

Be an “Intraprenuerial” Company
BP PLC a leader in the restructuring of the global oil and gas industry and a highly innovative, forward looking company has a management model that rests on four components that help guide and control entrepreneurial action.

In fact the four elements in the above model are well balanced in all companies that are successful at encouraging entrepreneurial behavior in their employees. 3M’s “15 Percent Rule,” which enables employees to spend 15 percent of their time on pet projects (space), encourages the use of cross-functional and cross-country teams (support), and still adheres rigorously to the broader growth objectives and values of the company (direction, boundaries). But when too much space, too little direction and support and too few boundaries are there it can lead to chaos. For instance having too few boundaries at Enron resulted in its demise. It was ultimately a failure of control and governance. At the organization level, lack of support typically results in business units doing their own thing duplicating efforts. For example at one point executives in Ericsson’s central research and development organization discovered five separate development teams in different countries all working on their version of a ‘screen phone’ — a telephone with a small TV screen for Internet access. Quickly steps were taken to bring these teams together and to encourage a more coordinated effort.

Here are some ways you can create space within your company for all those potential “entreprenuers” employed with you. Of course how you do it will depend on the kind of business you are into. Like Google not every company can afford to let all its employees spend a day in a week working on their pet projects.

Defining characteristic of entrepreneurs are confidence, optimism, and the perseverance to keep working toward the goal no matter what the odds. Your company needs to support this by providing the freedom to fail! A manager at Dow Chemical remained optimistic and determined that a new class of plastics would lead to important products for the company. His research in the area was killed twice because nobody else saw the possibilities. Thankfully the researcher never became discouraged. And, in time, it lead to plastic films that are resistant to oil and moisture, and today are used in the packaging of everything. In contrast Game designer Seamus Blackley who joined Microsoft in 1999 after a big project of his failed was able to develop his Xbox concept in relative freedom at Microsoft, and get credit for it.

Some amount of failure is inevitable when one is trying to achieve something new or different. Do not penalize such failures thus sending out the message that failure is not tolerated. Otherwise people will always play it safe. Many entrepreneurial careers are built on a succession of minor failures. As long as the idea was well thought of, well planned and well executed the failure should be viewed constructively. People learn to trust their leaders and the culture if interim setbacks are not politicized and used in unhealthy ways against them. Of course the company must encourage responsible and optimistic risk taking. There is no place for recklessness in CE and all initiatives should be backed by solid business cases. For intrapreneurship to work effectively, risk should be balanced with reward and opportunity with difficulty.

Allow challenging of status quo. It is essential to have rules and processes in every organization for order to prevail. But when we catch ourselves saying “we've never done it that way before" or “that's not how we do things here”, then we need to evaluate those rules to see whether they still serve the purpose of guiding the current business or are they restricting successful building of a new business. There is every chance that we may be citing a rule that may no longer be appropriate for the new situation. In fact it is even necessary, to sometimes break with past traditions and status quo and establish new precedents to respond to new opportunities. Disparate voices should not be squelched, but encouraged, and disruptive ideas should not be labeled troublemaking, but entrepreneurial.

Allocate adequate resources for entrepreneurial pursuits. If you want entrepreneurship to be part of the organization’s DNA, everyone should have access to the tools, training, shared techniques and resources to quickly bring their innovations to market. Leaders should demonstrate the willingness to listen to and recognise good ideas whenever and from whomever they arise. Do not classify ideas as good or bad based on the persons it come from. A culture with one set of rules for some and another set of rules for the rest of the employees will not work. Instead every person should have the opportunity to innovate while accepting responsibility for his/her choices. Company should provide financial, technical and motivational support to all good ideas that will help meet organization goals.

Adobe India, for instance, launched the incubation program under which, employees generate ideas which are then sifted through various channels and finally recommended by a committee for innovation. Once it’s approved, these ideas get the support from Adobe’s global expert pool for further development. Apart from initial funding of $1 million, the idea initiator also gets a 6-12 months window to work on it. If it succeeds, it’s scaled up and the person behind it ends up heading the entire project or venture. And has it been successful? Well, in three years time, the IT major’s Indian arm filed 60 patents and 25% of the patents filed by Adobe worldwide in 2007 came from India alone.

Reward entrepreneurial behavior : One way you can reward is by allowing intrapreneurs to follow through with their ideas. The intrapreneur's creativity and emotional investment in the project and knowledge and understanding of the various issues under consideration will be helpful in further developing the process or product. Also not allowing these intrapreneurs to do so can lower their morale and reduce future contributions from others, too., the online social networking service was based on Google engineer Orkut’s selfdirected research that Google encourages. So not only did Orkut become the technical lead for the project, Google also named the site after him. Entrepreneurial behavior should also be financially rewarded. Your objective is to inculcate entrepreneurs within the company and not for them to seek better rewards by implementing their ideas outside the company.

Finally entreprenuership is not accidental, but intentional. CE must start at the top. Top management support for CE is crucial to developing a climate that is supportive of entrepreneurial projects. Senior management must be comfortable dealing with ambiguity, fast-paced workplace developments, and changing marketplace dynamics. They must possess the collaborative skills needed to “flatten decision-making” with internal constituents, partners, suppliers, and customers in order to bring innovative products to market faster.

A case in point is Google. Marissa Mayer director of consumer Web products at Google is good at drawing out programmers informally, during a chance meeting in the cafeteria or hallway.
During a casual chat in 2003, an employee told her about the project of an Australian engineer, Steve Lawrence. He was developing a program to track and search the contents of his computer, which ran on the Linux operating system. Knowing Google had to figure out a way for people to find stuff on their own computers, Mayer tracked Lawrence down and asked him about developing a version of his software to search any PC. He was enthusiastic, so she helped assemble a team to work with him. The result: Google introduced its desktop search in October, 2004, two months before Microsoft.

Entrepreneurs build businesses. Great entrepreneurs are able to create value from almost nothing, often by building on existing ingredients. You may see the result and wonder 'Why didn't I think of that?' Entrepreneurs see the world differently. They see possibilities. They see what can be. Google has institutionalized this process and is able to remain the leader and be competitive because the whole company is an ‘innovation lab’. Being an intrapreneur is more about attitude than aptitude. So one can be an entrepreneur even while running a department or leading a team just as much as by starting a company. The question is whether you have created an organization culture that will allow, encourage and sustain Corporate Entrepreneurship in your company.


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