L4: Corporate Entrepreneurship

Corporate Entrepreneurship
Corporate Entrepreneurship (Intrapreneurship) is a process used to develop new businesses,
products, services or processes inside of an existing organization to create value and generate
new revenue growth through entrepreneurial thought and action.

Entrepreneurship inside of established organizations is called Corporate Entrepreneurship or

Intrapreneurship. All companies want organic growth, but few organizations have a process in
place to support and sustain growth over time. An innovation process alone is not enough.

Organizations need to build a framework to support innovation and new business growth.

Corporate entrepreneurship, or intrapreneurship as it is often referred to, is the concept of

supporting employees to think and behave like entrepreneurs within the confines of an existing
organizational structure. Employees with the right vision and skills are encouraged to identify
opportunities and develop ideas which lead to innovative new products, services or even new
lines of business.

Corporate entrepreneurship programs should produce ideas which are disruptive in nature, rather
than smaller, incremental changes. Also, innovations tend to be led by employees, rather than
being implemented by management.

Why do you need corporate entrepreneurship?

Innovation is the lifeblood of a company; without it, the company will die. But many larger
organizations struggle to innovate successfully due to their structures, bureaucracy and culture.
Implementing a corporate entrepreneurship program provides companies with a systematic way
of increasing their innovation capabilities, the benefits of which can be huge:

Growth: Successful corporate entrepreneurship ensures a consistent stream of new innovations

in the product and service pipeline, which in turn leads to future revenues and growth for the
organization.

Increased productivity and employee morale: Corporate entrepreneurship programs allow

employees to tackle new opportunities, immersing them in work which they find to be both
challenging and interesting. When employees are engaged and feel that their contributions are
valued by the company, productivity goes up.
Source of competitive advantage: Employees are an organisation’s greatest asset when it comes
to identifying opportunities and threats in the market. They can provide insights not available to
competitors, and are a valuable source of ongoing competitive advantage.

Employee recruitment and retention: Allowing employees to pursue their ideas and
opportunities for the business leads to higher levels of job satisfaction. A result of this is lower
levels of staff turnover. In addition, companies that are known for encouraging corporate
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entrepreneurship will in turn attract other talented, entrepreneurially minded employees, creating
a positive cycle.

Most organizations find that their ability to identify and innovatively exploit opportunities
decreases as they move from the entrepreneurial to the growth phase. However, the key to
success in the highly competitive and dynamic environment that most companies presently
operate in is to retain this ability. Therefore, companies need to adopt an entrepreneurial
strategy — seeking competitive advantage through continuous innovation to effectively exploit
identified opportunities — in order to sustain and grow under such circumstances.
For such a strategy to succeed, companies should develop an enabling economic and
political ecosystem that does not impede small or large scale redeployment of resources in new
ways towards creative, entrepreneurial ends. Companies have a range of options to choose from
to achieve this objective. At the one end of this option spectrum is ‘focused entrepreneurship’
wherein specific innovation initiatives are created with the rest of the organization insulated
from them. At the other end is a managerial approach that leads to the creation of ‘organization
wide entrepreneurship.’ Entrepreneurship in such organizations is a shared value and drives
managerial behavior in conscious and subconscious ways and creates an entrepreneurial
spirit organization-wide.
Many mature organizations, unwilling to alter the status quo, tend to create focused
initiatives that are mandated to identify and exploit new opportunities. While such focused
initiatives may stimulate innovation, the very nature of their design erects barriers between the
existing organization and the innovation effort. This makes it difficult for the organizations to
access and leverage the existing capability base and to integrate new initiatives back into
operational activity.

Companies intent on developing and preserving entrepreneurship organization-wide,

independent of their stage of growth, create an environment in which those who believe in the
attractiveness of opportunities feel encouraged to pursue them.

The top managements of such companies will design an organizational context conducive to
autonomous generation of entrepreneurial initiatives, provide a sense of overall direction to
these initiatives, and ensure that promising ventures receive necessary resources as they move
through the uncertain development process wherein:

- money is neither offered nor seen as a primary motivator

- entrepreneurial contributions are rewarded with recognition and through provision of
opportunities to engage in entrepreneurial activities on a bigger scale
- failure is considered normal and when failure occurs, the focus is on problem solving
and learning from it rather than apportioning blame
- appropriate processes are used to capture knowledge created in the innovation process
and routines developed to enable integration of such knowledge to create organizational
rents

Within the realm of existing firms, CE encompasses

Three types of phenomena that may or may not be interrelated (Sharma and Chrisman,
1999). These are:
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• The birth of new businesses within an existing firm

• The transformation of the existing firms through the
Renewal or reshaping of the key ideas on which they are built
• Innovation

BENEFITS OF CORPORATE ENTREPRENEURSHIP

CE can make a significant difference to a company’s ability to compete. It can be used to

improve competitive positioning and transform corporations, their markets, and industries when
opportunities for value-creating innovations are developed and exploited.

A key benefit of CE may be to push companies to employ a range of strategies often in unique
combinations. By doing so, companies build layers of advantage by combining distinctive bases
for competitive superiority.

There have been many studies to substantiate the above-mentioned claims. CE can improve a
company’s growth and profitability. The empirical evidence that CE improves performance by
increasing the company’s reactiveness and willingness to take risks through development of new
products, processes, and services.

The Corporate Entrepreneurship Process:

1. Strategic Renewal - Strategic renewal is the process of change and the outcome of adjustment
in strategic direction that have the potential to determine the long-term competitively of a firm.
The objective of strategic renewal is to provide a strategic fit between a firm's internal
capabilities and shift in the external environment involving technology, markets, industries, and
the economy that require a change in the status quo of conducting business.
2. Innovation - is a process used to create a commercial product from an invention. Thus,
innovation follows invention in that invention brings something new into being while innovation
brings something new into use.
3. Corporate Venturing - Corporate Venturing is the concept of large industrial organizations
either developing, sponsoring, or investing in startup companies in order to develop innovative
products or services. Typically, Corporate Venturing takes place within the core industry where
the corporation operates
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The Four Models of Corporate Entrepreneurship

Companies have four ways of building businesses from within their organizations. Each
approach provides certain benefits — and raises specific challenges.
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The Opportunist Model

All companies begin as opportunists. Without any designated organizational ownership or
resources, corporate entrepreneurship proceeds (if it does at all) based on the efforts and
serendipity of intrepid “project champions” — people who toil against the odds, creating new
businesses often in spite of the corporation.
The opportunist model works well only in trusting corporate cultures that are open to
experimentation and have diverse social networks behind the official hierarchy (in other words,
places where multiple executives can say “yes”). Without this type of environment, good ideas
can easily fall through organizational cracks or receive insufficient funding.

The Enabler Model

The basic premise of the enabler model is that employees across an organization will be willing
to develop new concepts if they are given adequate support. Dedicating resources and processes
(but without any formal organizational ownership) enables teams to pursue opportunities on their
own insofar as they fit the organization’s strategic frame. In the most evolved versions of the
enabler model, companies provide the following: clear criteria for selecting which opportunities
to pursue, application guidelines for funding, decision-making transparency, both recruitment
and retention of entrepreneurially minded employees and, perhaps above all, active support from
senior management.
Google Inc. is the poster child of the enabler model. Keval Desai, a Google program manager,
describes his company in the following way: “We’re really an internal ecosystem of
entrepreneurs… sort of like the [Silicon] Valley ecosystem but inside one company.” At Google,
employees are allowed to spend 20% of their time to promote their ideas to colleagues, assemble
teams, explore concepts and build prototypes. Project groups form on the fly, based on
requirements defined by the teams themselves.
An initial core team typically includes a project manager, technical lead, product marketing
manager (for competitive analyses, focus groups, market targeting and so on), user-interface
designer, quality-assurance specialist and an attorney (for privacy, trademark and other legal
input).

The Advocate Model

What about cases in which funding isn’t really the issue? In the advocate model, a company
assigns organizational ownership for the creation of new businesses while intentionally
providing only modest budgets to the core group. Advocate organizations act as evangelists and
innovation experts, facilitating corporate entrepreneurship in conjunction with business units.

The Producer Model

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A few companies such as IBM, Motorola and Cargill pursue corporate entrepreneurship by
establishing and supporting formal organizations with significant dedicated funds or active
influence over business-unit funding. As with the enabler and advocate models, an objective is to
encourage latent entrepreneurs. But the producer model also aims to protect emerging projects
from turf battles, encourage cross-unit collaboration, build potentially disruptive businesses and
create pathways for executives to pursue careers outside their business units.
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Corporate entrepreneurship sets the context for innovation and growth. It provides a systems
view of the resources, processes and environment that are needed to support, motivate and
engage the organization in entrepreneurial thinking and action.

Benefits: 
Organizations with strong entrepreneurial orientations statistically perform better.  They achieve
higher levels of productivity, innovation, growth, employee engagement and financial returns.
Although business growth is the overall end game, corporate entrepreneurship is difficult to
achieve.  It challenges traditional organizational practices.  Many of the things needed to support
the core business are just the opposite of what you need to do to build a new business.
Implementation: 
There is no perfect way to implement corporate entrepreneurship.  There are however three
components that enable corporate entrepreneurship; people, process and place.
 People – leaders that possess a core set of action oriented competencies and behaviors
 Process – systems and processes that support entrepreneurial thinking and action
 Place – an environment conducive to entrepreneurship, learning and growth
It is well known that internal champions can be effective in bringing new ideas to market.  It is
well researched that having the right processes can help facilitate entrepreneurship.