Corporate Entrepreneurship- Meeting the challenge
Today, one of the ways of growing a company is by creating, developing and sustaining new businesses within the organization but at the same time, focusing on the present-day and established operations. These new ventures which are set up by existing companies face several barriers — process, culture and integration within the business and the research shows that they fail most of the time, and so it’s important to understand the different challenges and figure out ways to overcome these challenges in order to succeed within corporate entrepreneurship.
While the company usually focuses more on their established businesses, one of the primary reasons why new ventures fail is that these new ventures aren’t fully defined at the beginning of their life, and they usually need adaptive environments to succeed. In case of new businesses within an organization, it’s usually difficult for companies to comprehend how the new product/service/idea that is being proposed, will do in the marketplace. Due to lack of evidence and insights from past projects it becomes difficult to financially forecast how the new business will do.
Traditional car manufacturers found it difficult to forecast how electric cars will perform in the future as they lacked hard data around them, resulting in less research and development in that space.
Companies are so caught up in the existing operations, that they don’t venture out for innovations, and they lack ‘out of the box’ thinking. Even if they do, these new business ideas are not sustainable in the company and are usually the first to be dropped off due to budget cuts. Integrating new businesses with traditional operations is another challenge that organizations face. Its important for companies to adapt an iterative model with continuous feedback from their customers on prototypes or pilots when venturing into new spaces and at the same time work strategically to integrate new businesses into existing systems.
Any new business is always in an ambiguous territory when trying to understanding if it will succeed or not, but companies fail to experiment while venturing in newer businesses, and they try to get it right the first time, without looking at customer reaction and adapting along the way. They don’t use prototypes to test the assumptions about customer needs and their feedback. This is the most important way of coupling trial and error with rigor and discipline, since this allows organizations to figure out if the new idea is going to work and if not changes can be made early in the product life cycle.
Traditionally companies have employed two strategies to deal with new businesses- imposing aggressive targets in the innovation space or centralizing the new venture from existing operations. IBM realized that there needed to be an equilibrium between these strategies when their CEO saw IBM kept missing the emergence of new industries. This started by creating a balance of operational experience with invention, when a separate emerging business opportunity (EBO) system was introduced and was led by the chairman at IBM. This move got everyone on board to understand the seriousness of the EBO team. The approach to test the proposed products with pilot launches to get feedback and adapt quickly helped in creating a balance in the trial and error strategy. The continuous monitoring of the EBO helped IBM to keep track of project-based milestones, finances and their business maturity. This also helped IBM to figure out when new businesses were ready to integrate with existing operations.
IBMs EBO success is an excellent example of how and why companies should try the gray area of execution so that the process doesn’t drift out of the equilibrium. There should be a right balance of strategies that have worked for a company in the past and integrating the new disciplines into them while keeping an eye at sustainability, that is how the corporate entrepreneurship will flourish.
Meeting the challenge of corporate entrepreneurship. (2006, October 1). Harvard Business Review. https://hbr.org/2006/10/meeting-the-challenge-of-corporate-entrepreneurship