Sep 06

Four Models of Corporate Entrepreneurship

First, though, what exactly is corporate entrepreneurship? We define the term as the process by which teams within an established company conceive, foster, launch and manage a new business that is distinct from the parent company but leverages the parent’s assets, market position, capabilities or other resources. It differs from corporate venture capital, which predominantly pursues financial investments in external companies. Although it often involves external partners and capabilities (including acquisitions), it engages significant resources of the established company, and internal teams typically manage projects. It’s also different from spinouts, which are generally constructed as stand-alone enterprises that do not require continuous leveraging of current business activities to realize their potential.

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. Consequently,  the opportunist  approach  is  undependable  for  many  companies.  When organizations get serious about organic growth, executives  realize they need  more  than  a diffused, ad hoc  approach. As a  result of its past success with minimally invasive  surgical procedures, Zimmer  has  instituted  more  formalized  development  practices  for bringing  new  businesses  to  market.  As  such,  the  company  has begun  to  evolve beyond the opportunist model.

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.

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  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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