The Corporate Entrepreneurship is the process by which teams work in an established company, conceive, encourage, launch and manage a new business that even while being new and therefore different from that of the parent company, leverages assets, Market positioning, capabilities and other resources. An investigation conducted by Robert Wollcot and Michael Lippitz allowed to define four basic models of Corporate Entrepreneurship: O opportunist, Facilitator, Defense and Producer.
In today’s world, corporate entrepreneurship is increasingly necessary: a recent survey shows how the operating margins of companies that place greater emphasis on creating new business models grow faster than their rivals.
Corporate Entrepreneurship Reasons to Use
There are several reasons why so few companies are doing Corporate Entrepreneurship.
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Many feel incapable, whether for creative, technological or economic resources, or for a combination of them all. This makes many companies abandon the venture before even giving it a chance in their minds. And this is the cause of its collapse.
A new business can start with an innovation in process management, key or alliance-based, product and service innovation, channel, brand and customer experience, or finance.
Every little innovation is important in itself. And although the results are not seen or are not too relevant at first, small innovations contain a large corporate value in the form of creative confidence and cohesion they generate among employees, fueling the environment and organizational culture that will be needed for major innovations in the very near future.
The research identifies two dimensions that are under the direct control of management and differentiate the way of approaching corporate entrepreneurship.
The first dimension is organizational ownership: who, within the organization, has primary responsibility and must be accountable for the creation of a new business. The second is the authority that allocates resources: Is there a budget for corporate entrepreneurship, or is the new business concept financed on an ad hoc basis?
The opportunist Model
The Opportunist model is usually the initial model in companies. There is no focused property or resources, and corporate ventures are advanced (if at all) on the basis of fortuitous efforts and efforts by intrepid “project champions”, people who struggle against the wind and tide to create new business units, Despite the organization.
The opportunistic model works well only in corporate cultures based on trust, open to experimentation and with various social networks below the official hierarchy. Without this kind of environment, good ideas get stuck in the fissures of the organization or receive insufficient funds.
Once this has appeared unsought opportunity to corporate entrepreneurship, companies have the second triple chance to 1. Establish a corporate culture that encourages, Responsibility, Innovation, Commitment and Excellence); 2. Establish an effective Corporate Entrepreneurship program to improve the ability of a company to absorb opportunities and knowledge; 3. Establish more formal development practices to bring new ventures to the market
The evolution of the causal opportunistic model, towards the other three deliberate models.
The evolution of opportunistic model to any deliberate forms of corporate entrepreneurship usually begins with a broad view, clearly communicated.
Once the vision is established, the company must outline the specific objectives in order to determine the appropriate model.
Questions that help to outline the specific objectives are:
Are you looking for the cultural transformation of the whole organization, or the renewal of certain divisions? How much time is counted? Do you need immediate great results to solve a specific problem, or is the objective an evolutionary program designed to discover “blue oceans”?
Facilitator model: For companies seeking cultural transformation, facilitators processes, combined with new approaches to recruitment and staff development, they can convert some employee’s effective agents of change.
Defender Model: In case a company wants to accelerate the growth of its established divisions, the defending model could be the best option.
In this model the organization invests in the creation of a small internal group focused on corporate growth that learns and works following an entrepreneurship program that assists them in a wide range that goes from the conceptualization to the marketing of the idea and that can include A four-day seminar on business creation. The goal is for the team to develop a detailed business plan that must be presented to the leaders of the “innovated” business unit for approval. Success in one business unit arouses the interest of others and, over time, these selected teams become agents of change.
Producer model: When a company aims to discover (or prevent competition explore) disruptive opportunities, you should consider the producer model, because it helps business units to overcome the short – term pressures and other obstacles that discourage investment in new platforms of growth.
Each of the models described requires different processes, skills and leadership styles.
In order to implement the facilitating model, clear and simple project selection, fund allocation and follow-up processes should be established and communicated, and the involvement of the executives involved should be clearly defined. The advocate needs individuals with the instinct, the talent and the access necessary to cross the corporate culture and facilitate the change. The producer model requires considerable capital and personnel, and a direct line with top management; otherwise, it fails.
Corporate Entrepreneurship Road Success
Companies seek to maintain their competitive advantage, grow and develop profitably; innovating and creating new business lines, models to introduce products and services in markets where it already has a presence or others who want to conquer.
The corporate entrepreneurship is the process under which a company teams conceive, launch and manage a new business, different from the traditional business of the parent company, leveraging its assets, capabilities, market presence or other resources. However, corporate entrepreneurship goes beyond new product development to innovate in business models, channels or brands. Companies must recognize the need to escape the “comfort zone” of their models and traditional business activities to create value from new business opportunities and challenges. Corporate entrepreneurship is the answer to the challenges posed by the design and development of new businesses in organizations.
According to the landmark article on corporate entrepreneurship by Wolcott and Lippitz Business School at MIT Sloan, which investigated about 30 leading companies in the United States, there are four ways to build new businesses within organizations. In this post, we will try to summarize these four approaches to corporate entrepreneurship and will raise the reflections necessary for executives and entrepreneurs from Latin America to plan corporate entrepreneurship processes in their organizations.
The four models are derived from the intersection of two dimensions observed: 1. the organizational property (eg the owner or manager of new business in the organization) and 2.The allocation of resources (eg those for new business concepts). The matrix resulting from the union of these two dimensions allows for the following schemes of corporate entrepreneurship: the model opportunist, the model enabler, and the model advocado and model producer. Together, these four models represent the approaches to build the corporate entrepreneurship in organizations. Below we will give a brief description of each one of them.
The opportunistic model of corporate entrepreneurship
This model mix allocation diffuse ownership with ad hoc resource. Organically organizations believe in intrepid executive leaders whose tenacity, credibility and manageability drives the organization to experiment and explore new business opportunities. The model works in organizations with strong corporate culture and social networks that transcend executive rigid organizational structures, in other words, companies where a significant number of executives “say yes” and take the risk of exploring a new business alternative.
The enabling model of corporate entrepreneurship
In this model, the premise is that without more structure, employees of an organization will be willing to create and develop new concepts if they are offered support and adequate resources. Without a formal organization, employees in companies seek ways to explore new opportunities on their own initiative as long as these are aligned with the strategic paths of the company. Companies that have implemented this model offer: transparency in the benefits offered to employees who make valuable contributions, clear criteria for selection of ideas and concepts, transparent mechanisms to fund new initiatives, and management support to implement the proposed business highlights. The flagship event of application of this model is Google that allows 20% of the time of employees is intended for exploration and prototyping concepts which are then validated and enriched among colleagues and teams of collaborators.
The corporate entrepreneurship model
Under this model, the company assigns responsibility and authority over creation of new businesses to an outstanding group of people responsible for creating and start new businesses while intended modest budgets or limited to the group. The idea is that the group of advocados acts as evangelizers and experts in innovation, facilitating corporate entrepreneurship among other functional areas or business units of the organization. DuPont uses these internal change agents to sensitize its various business units, encouraging them to experiment and create new business opportunities.
The producer model in corporate entrepreneurship
In this model, companies implement corporate entrepreneurship by creating and supporting internal formal organizations with large budgets and strong influence on other business units. The model also seeks to protect emerging projects of disputes between business areas, encouraging the collaboration between areas of the organization to create business potentially disruptive. Companies such as IBM and Cargill stand out for using these models within their corporate entrepreneurship schemes and policies.
How to choose the appropriate model of corporate entrepreneurship?
Companies looking to develop opportunistic model of corporate entrepreneurship towards a more structured model that reflects the strategic nature of change, innovation and growth, must align its corporate culture with a clear vision that must be shared and communicated to members of the organization. Similarly, business objectives must be clearly defined to understand whether the organization needs to transform, renew or find new opportunities for business development. Once the vision, communication, corporate culture and business objectives are defined, it should be an analysis of the capabilities, resources and industrial implications and market to consider and take for any of the models of corporate entrepreneurship exposed.
In any case, corporate entrepreneurship models must be explored in scope, and executives in charge must be flexible and take risks in their execution. At the end of the day, corporate entrepreneurship is an ongoing learning process innovation and business growth.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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