Intrapreneurship

Making Big Companies More Entrepreneurial

Corporate Entrepreneurship

Due to: Rapid technological change, consumer demand for

variety, quality, customization and convenience Short business cycles Move from physical to intellectual assets The increase in strategic alliances with small

firms, outsourcing and downsizingLarge firms are changing the way they structure their processes in order to be more responsive to market needs, competitors’ strategies, and the initiatives of small businesses

Requirements for Corporate Entrepreneurship Instilling the appropriate CULTURE

Having a flexible structure Promoting certain behaviors: Independence & Risk-taking Developing a reward system

Implementing ENTREPRENEURIAL STRATEGIES Corporate Venturing Venture Capital Support

Investing in projects, funding product development Management as Champions of Innovation Sponsoring Independent Entrepreneurs

1. Creating The Appropriate Culture Large organizations:

Layers of hierarchy, inflexible structures, low level of employee participation, high level of political activity

Intrapreneurial organizations: Based on the need to build and foster innovation and

creativity to keep up with competition Tries to model the entrepreneurial environment by

encouraging employees to get involved in management This requires a conducive environment by encouraging

flexibility, independence, and risk-taking Intrapreneurship is developed through the organizational

structure (how the firm is structured to coordinate its efforts), the types of the behaviors that are rewarded, and the types of career development & reward systems that are utilized

Creating The Appropriate Culture (A) Organizational Structure

An entrepreneurial structure is flexible, has few levels of hierarchy and allows employees to participate in the decision making process

Flat structure: facilitates close connection with the customers, eliminates needless roles that slow down the process (e.g. separate unit for quality inspection), and develops a close-knit group

Small autonomous units: often found in manufacturing environments and/or multi-business organizations (a grouping of small organizations, each responsible for all the activities of the business) e.g. J&J, GE, 3M

Improves strategic decision making (close to market relationship)

Facilitates product innovation (speed)

Creating The Appropriate Culture (B) Promoting Intrapreneurial BehaviorBehavior that is rewarded will be repeated Risk taking: encouraging the development of new

ideas is essential -- must be willing to accept failure, success does not come without failure

Innovation is a prime ingredient in market success (especially in industries driven by rapid technological change)

Encouraging this environment includes, accepting a trial and error approach, and using brainstorming sessions to generate new ideas

Empowerment: giving employees the freedom to make decisions increases the flexibility of the firm, improves customer response time, and increases product innovation (e.g. Toyota - suggestions & assembly line)

Creating The Appropriate Culture (C)Career Development & Reward Systems The goal is to reward employees for their

efforts and to make them feel as an integral part of the organization Monetary = Equity, stock options, cash gifts,

bonuses Intrinsic = Promotions, free time,

recognition, access to funds and resources Ex. IBM introduced a “Fellows Program” in

1963 to recognize outstanding technological accomplishment – rewarded with 5 years total support to start something new

2. Corporate Venturing

The development of a ‘skunk works’ / ‘leaky roof’ (e.g. sink or swim environment @ Saturn)

The recreation of the business’ earlier days of being an out-of-the-basement project – i.e. Risk

Used to instill a sense of urgency to the employees -- to motivate the innovative process

Used to remove the project from the bureaucracy and politics of the large organization environment

Provides a high level of freedom, closeness (identification with a goal), rationed resources, motivation to succeed

3. Venture Capital Support

Funds set aside for the development of entrepreneurial/intrapreneurial initiatives

Budgets must be established for the purpose of funding internal and external entrepreneurial activities (e.g. J&J has $300mil VC funds, Virgin group, Xerox, AT&T, Campbell Soup, Bombardier)

Commitment must be long-term and part of the strategic process -- a means of obtaining a competitive advantage

Examples outsourcing, skunk works, internal projects (TQM), sponsoring independent entrepreneurs (a good source of innovation)

Venture Capital Support

Opposing view: Harold Geneen, ex-chairman 3M, says

large corps should not take such risks because investors expect 10% ROI… these activities compromise potential

return employees should not be compensated at

the same level as owners WHAT DO YOU THINK ?

4. Management As Champions Of Innovation New ideas can only be brought to fruition if given the

required support Bob Molenda’s vision is was kept Art Fry’s “Post-it”

notes project at 3M from being killed due to budgetary constraints

This support is best found with a sponsor or champion, an individual with the decision-making ability to commit resources to the idea

The required qualities of the sponsor include: Power: level in the formal hierarchy, ability to supply

needed resources (funding, time, workforce) Prestige: has respect of colleagues, ability to champion

the acceptance of the idea (politics) Vision: ability to perceive the long-term benefits of the

idea over the short-term budgetary effects

5. Sponsoring Independent Entrepreneurs Encouraging entrepreneurs with ideas

(within the company or outside) Ex. Entire 3M structure designed to

encourage successful entrepreneurs to run own business under corporate umbrella Lehr sponsored surgeons at Cleveland Clinic

who developed adhesive surgical tape – now have an entire healthcare division

Ex. Dupont also sponsors independent entrepreneurs

Summary Entrepreneurship is critical in today’s

economy Success of corporate intrapreneurship

depends on creating appropriate culture Success stories:

Texas Instruments’ Speak & Spell Sony’s Playstation Microsoft X-Box Etc.