Featured Insight Report: Corporate Entrepreneurship, Managing A Useful Chaos
Corporations can become ambidextrous if they nourish our suggested four exploration components in the report in coherence and consider this journey as a marathon. The entire organization should focus learning and improving. There will be many failures, but in the long run, it will pay off.
Search for new approaches of innovation sources emerged after the failure of the centralized R&D based innovation approach in generating a business return. Technology startups’ success after the 1970s accentuated this trend. Corporate entrepreneurship has become a favorite one and aims to leverage internal capabilities and resources for new products and services. In 1985, for the first time, Gifford Pinchot used the term “intrapreneur” who initiates new business in a corporate context. He says, “Intrapreneurs are the dreamers who do.” From a scholar’s perspective, corporate entrepreneurship is a process whereby the firms engage in diversification through internal development. Startup entrepreneurs and intrapreneurs have similar and different challenges, but where(ecosystem) they matter a lot for both.
In the last 50 years, companies’ average tenure on the S&P 500 index decreased from 33 to 14 years. Incumbent companies need to focus on internal innovation more than ever. According to our review of academic research, only a minority of the internal corporate innovation engagements have a promising return. Being ambidextrous, balancing exploring innovation capabilities, and exploiting the existing ones, is hard because there is a paradox between exploiting and exploring. Core capabilities of a company simultaneously enhance and inhibit the development of new ones. Three main problems cause this paradox;
- The top management has limited bandwidth to assess the potential of the internal venturing activities
- Middle management is in difficulty to balance running the ongoing business and support the correct engagements
- Operational teams may not have the skills to articulate new ventures’ potential and connect them to overall company strategy.
In the report, we developed a global view on how to focus on exploration. It covers four components where each one has opposing sides, frequently used exploitation, and our suggested exploration approaches. Our suggestions are;
- Cultivating a learning strategy rather than conventional prescription. Allowing emergent and collective learned strategy and acknowledging the organization’s potential to experiment.
- Supporting a network organization for autonomy, collaboration, and creativity where corporate entrepreneurship proliferates.
- Growing a collective iteration, not only for the product development team but also top and middle-level management should involve this iteration in their role context.
- Nurturing adhocracy culture where curiosity, customer obsession, adeptness for ambiguity, collaboration, and humble empowerment develops.
Corporations can become ambidextrous if they nourish each component above in coherence and consider this journey as a marathon. Senior management’s frequent delusion is to expect remarkable quick results after initiating corporate entrepreneurship programs, selecting a few product ideas, and building cross-functional teams. Short term executive presence and institutional ownership are negatively correlated with the corporate entrepreneurship activities and performance. Rather than announcing highly publicized, fancy programs, the entire organization should focus on components, learn, and improve. There will be many failures, but in the long run, it will pay off.