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Meeting the challenge of corporate entrepreneurship - Coggle Diagram
Meeting the challenge of corporate entrepreneurship
The two-cultures problem
Different financial, operating models of new businesses
Challenges
Lack hard data particularly with cutting-edge products or technologies not widely diffused in marketplace
Innovation requires fresh ideas, mavericks
Poor fit between new businesses, old systems
Corporations designed for established businesses success
Need to modify systems for less biasedness against new businesses (balancing act)
Why traditional responses fail
Diffused responsibility fizzles out
Easy for traditional businesses to dominate ("Donnelley nod")
Trouble in finding home (lack of willingness to assume responsibility for diversions)
Cowboy culture leading to loss of financial, operating discipline
Centralization isolates
Internal corporate venture division
Corporate venture capital groups
Later challenges to integrate fledging businesses with mainstream
Traditional responses
Assigning to existing divisions
Centralise in special-purpose divisions or venture groups
Disperse new-business creation
Balancing acts
meld cultures while avoiding extreme behavior
function with 2 opposing ideas at the same time
balance operational experience with invention
balance new businesses' identity with integration
balance trial-and-error strategy formulation with rigor and discipline
Develop
strategy
by trial and error
Use prototypes to test business models, products, services
tangible basis for discussion and evaluation with informed responses from potential users
Detailed enough for users to evaluate form, content, desirability
Coupled with forums for consumers debriefings, discussions, reviews
Eg. UPS
Track progress through nonfinancial measures
guided trial-and-error strategy formulation
more than guesswork with concrete goals (project-based milestones in ambiguous environements), leading indicators
Learn from small samples, closely observed
interactions with small number rather than large sample surveys
statistical power VS formative insights
P&G, Intuit "Follow Me Home", Starbucks "inspiration trips", Nokia
Suspend judgment, but not indefinitely (When, how to pull plug)
biggest risk - trial and error process continue for too long
Agreement (top management, new venture team) - length of time, who to decide whether to shut down, criteria
criteria eg. time, dollars, pace of technological progress, customer enthusiasm, confirmed orders, financial performance, competitors success etc.
Most critical - senior managers' willingness for timely go or no-go decisions eg. Kodak
Narrow the playing field (desirable opportunity)
not definitive, promising sectors
best judgments of industry trends + market, technologies attractiveness
divisional brainstorming + corporate criteria
Uncertain VS ambiguous
Open-minded opportunism + Disciplined planning
Organization
- Integrate with autonomy
Establish criteria for handoffs
faster shift to divisional ownership from corporate oversight
qualitative eg. strategy clarity, stability and experience of leadership team, competitive superiority
quantitative eg. revenue, size, customers, market share
common understanding, agreement
Employ hybrid organizational forms
formal authority + informal oversight
balance identity, integration
eg. Ashland Chemical Strategic Expansion Project Board
Assign corporate and operating sponsors
Operating (business, division or group) - organisational savvy, acceptance
Freedom + discipline
Corporate (line or staff) - credibility, clout
Identity + Integration
signals long-term commitment, thought to transition to maturity
Eg. Staples
New businesses need parent help to develop independent identity till handover to existing business group (outgrow ability to manage as exception)
integration works best early in new business life
Too much integration early or rushed handoff = no differentiation
too much independence = lack of organisational learning
Too much early independence or corporate dominance = resistance to integration
Eg. GM Saturn
Balance
operational
experience with innovation
Staff new ventures with "mature turks"
"Mature turks"
Young, hard-changing mavericks
Handpicked from HIPOs
Annual personnel evaluations on entrepreneurship, innovativeness, risk-taking
eg. L.L. Bean
Change veterans' thinking
presell ideas
oversight communities group heads, division chiefs
boards of promisiing startups
familiarity, understanding, acceptance
shared understanding with scenario planning
incentives, promotion criteria for deeply rooted existing values
Develop some capabilities, but acquire others
Open market skills availability
Time for internal development
Ease of integrating into organization
eg. UPS - specialized skills, relationships, mission-critical, customer facing capabilities touching many business areas
Share responsibility for operating decisions
complete control -> easy lose perspective
more accepting of established practices, success at leveraging existing strengths
strengths beyond novelty for its sake
experience increase odds of profitability, sustainable operations
established distribution channels
proven processes improve odds of profitable, sustainable operations
seasoned personnel
preexisting customers
invention
fresh thinking
innovative operations approaches
How IBM strikes a balance
Leadership
Strategy development
Monitoring