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 downsizing  Large 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 Behavior Behavior 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 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.