A New Definition of Corporate Entrepreneurship
Companies in the modern business world are divided into two categories - mature companies with successful and established business operations, and entrepreneurs with exciting and potentially successful business ventures. Mature companies sell products and services that are well-known and desired by their target markets. Entrepreneurs must struggle to increase consumer awareness and perception regarding their offerings.
What happens when a mature company wants to bring a new product to market, or an existing product to a new market? They experience the same challenges that any entrepreneur faces daily: for example, a need to reach and educate consumers. In these instances, normally-successful businesses are surprisingly unprepared to overcome the hurdles of entrepreneurship. Instead, they rely on brand loyalty and economies of scale to make the product launch successful, or avoid these situations entirely rather than embracing an entrepreneurial spirit. Many businesses even unknowingly practice entrepreneurship without recognizing the opportunity to take advantage of well-known entrepreneurial best practices.
Mature businesses must utilize an internal Entrepreneurship Department, or ED, when launching new products and services or pursuing new markets. All employees within the ED will act as a cohesive entrepreneurial unit. This ED will practice and implement entrepreneurial principles, allowing the new business venture to be successful. Ignoring entrepreneurial principles can result in a failed product launch or business expansion.
There are many entrepreneurial principles that can be used by the ED:
- Identifying a new idea or a unique spin on an existing idea and building a business around it.
- A focused niche-driven target market that is strategically expanded to include new markets when appropriate.
- A passion for the product/service being offered.
- Showing flexibility and Implementing new business practices and strategies that are appropriate for the product/service.
- Focus on the User Experience and User Life Cycle.
- Understanding of the Customer's Decision-Making Unit.
- Gorilla marketing without reliance on brand loyalty. For example: Microsoft needs to act as if the potential customer for the Surface tablet doesn't know about Microsoft and is meeting the company for the first time. Microsoft needs to build hype around the product release.
- Using a new and unique methods for bringing a product to market.
- Rapid growth opportunities, necessary in a traditional entrepreneurial business avoiding demise as well as in a corporate setting where shareholders demand quick profits.
Properly employing these principles leads to success for an entrepreneur. The ED would use these principles to successfully launch new products for an established company. Entrepreneurship is critical to success for businesses of any size, not just startup companies.
Entrepreneurship - a combination of marketing (understanding and communicating with customers) and business growth (product development and revenue) used to launch a new business venture.
Historical Definition of Corporate Entrepreneurship - large companies encouraging individual employees to develop innovative ideas, a.k.a skunkworks or intrapreneurship.
New Definition of Corporate Entrepreneurship - mature businesses using a startup mentality when selling new products or services.
How is a mature company different from an entrepreneurial startup company? Characteristics of a mature business:
- Marketing is a minor percentage of total budget.
- Customary business practices and operations are well-defined.
- The business has existed for a long time.
A Place for Great Employees
Small businesses are seen as a place for dynamic and vibrant work opportunities. A lack of stale big-business red tape allows entrepreneurs the freedom to explore new ideas and practices. Great business people that aren't interested in climbing an existing corporate ladder will strike out on their own in search of individual success. Individuals that wish to work in an entrepreneurial business must have a strong work ethic and be excited about uncertainty and risk. The ability to thrive in these types of circumstances, combined with extreme diligence, ingenuity, and a capacity for comfort in the ever-present danger of business failure, make entrepreneurs excellent workers.
Large companies miss out on hiring prospects and lose talented employees to the lure of entrepreneurship. An ED would give dynamic individuals the opportunity to enjoy and experience entrepreneurship within a corporate environment. All of the elements of entrepreneurship would be available, including opportunities for initiative, risk-taking, and personal growth, with the benefits of the entrepreneurial process going to the company. Companies could retain and attract the great employees that they currently lose to the temptations of entrepreneurship. An ED, supported by the resources of a large company, would be a much better opportunity for entrepreneurial success.
Mature businesses must also practice entrepreneurship when analyzing operations and implementing innovative business practices. Lack of innovation leads to stagnation and decline. Entrepreneurship leads to innovation, and innovation leads to long-term success.
The initiative used in an ED includes identifying a service the market needs and creating a solution to offer in that space, as well as an examination of current business practices within the company, industry, and general business world. This initiative can lead to Corporate Innovation, a large-scale restructuring of a company's business model or operations. While separate from the internal focus of the ED, this would certainly be an added benefit as industry professionals continue to recognize the importance of innovation to long-term survival. With the ED model, organizational resistance is less of an issue since the people within the ED have a goal of progress.
Old-school business professionals are comfortable in their established practices and don't want their operations to change. They won't have to change. Mature businesses must have a strong mission statement and stability so that employees can follow the company directive. When the department itself is an Entrepreneurship Department, all employees within that department understand their mission. The company doesn't need a "startup" culture. The ED wouldn't be constantly changing the company culture or direction. The ED is only internally focused on new product launches.
An ED is not a Research and Development department. Those responsibilities would still be handled by R&D. Ideas that come out of an R&D department should be treated as an opportunity for the ED. The ED is responsible for making new products or services successful for a company.
Outside of the ED, other departments in the company would continue to focus on the work that the company is already doing. This would allow the company to maintain its existing revenue streams. Software Development is done this way. A core team of developers focuses on the work to initially create the software (more exciting), and then another team focuses on bug fixes and support following the release of the software (less exciting). In other words, one department focuses on the launch of the product, and then other departments focus on long term support of the product.
Entrepreneurial businesses often operate in a haphazard and unorganized manner. In these instances, even selling a great product can't protect a small company as mismanagement and ignorance of best practices lead to total business failure. Books such as 'Disciplined Entrepreneurship' and 'Lean Startup' seek to guide entrepreneurs in using business practices that can lead to success. These guides could be modified to accommodate mature businesses, so that they could use these same practices.
Entrepreneurship Department vs. Entrepreneurs
Employees in the ED don't need to be entrepreneurs themselves. The department itself needs to be entrepreneurial. Individuals within a company shouldn't be independently entrepreneurs. That leads to disorganization and chaos with no clear direction. Instead, the ED provides a unified and clear entrepreneurial path.
Similarly, a manager within a large company who is independently entrepreneurial won't provide good leadership. A manager outside of the ED can't be a leader and be entrepreneurial because subordinates can't follow an uncertain business plan.
When a large company buys a startup company, the buying company changes the startup company's attitude. The attitude slows down, which takes away some of the excitement and sours the customer experience, losing the benefit of the ED. A mature business could partner with or invest in an entrepreneur or startup company, which is similar to an ED but isn't as strong as making it an actual department within the company. Some companies have begun hiring entrepreneurs as short term contractors, such as Target's Entrepreneur-in-Residence program.
Intrapreneurship doesn't work as well as an Entrepreneurship Department. Google used Intrapreneurship when they allowed employees to work on side projects for 20% of their time each week, or 3M's "Bootlegging Policy" program. It is essentially time off, and perhaps improved employee morale and inspiration, but doesn't necessarily lead to focused business development. Lockheed Martin "Skunk Works" and the Xerox PARC Research Lab were great R&D departments, but innovative ideas from these departments weren't handled correctly.