Bright Ideas, Big Company: Encouraging Corporate Entrepreneurship

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CC Image Courtesy of Brian Talbot, Flickr Creative Commons

Companies are sort of like sharks. Just as sharks must keep moving to avoid death, companies must keep growing. But large, well-established corporations often find it difficult to grow organically under an existing business model. Corporations are less nimble than startups, and more averse to risk. Because of reputation and shareholder expectation, they lack the ability to “pivot” the business when a product or idea is not working out as planned.

How can large corporations focus on product innovation in the same way that startups do? Through corporate entrepreneurship or intrapreneurship.

What Is Corporate Entrepreneurship?

Since the late 1990s, many large companies have been experimenting with the idea of corporate entrepreneurship—a way to launch and manage new ventures within a big corporation. (The term intrapreneurship seems to have existed for decades, but officially entered the lexicon around 1992.)

Using the resources of the parent company, individual employees and internal teams can develop new products, innovations or brands. This leads to increased profits and a more competitive stance in the marketplace. It also helps large companies retain talented staff that might otherwise leave to start their own ventures.

Corporate entrepreneurship has also been called corporate venturing. This should not be confused with corporate venture capital, which involves large corporations investing directly in external startups as a means of innovation. Corporate entrepreneurship happens completely from within the existing company.

Corporate Entrepreneurship Models

Traditionally, most new ventures arise from the research and development or information technology departments. Corporate entrepreneurship encourages innovative thinking in departments across the organization. A research study by Robert C. Wolcott and Michael J. Lippitz published in MIT Sloan Management Review; outlines four models of corporate entrepreneurship:

1. Opportunist model

This is sort of the “no model” model. An employee has an innovative idea and happens to get the support of a project champion with the power to say yes to funding and research.

2. Enabler model

The organization hires entrepreneurially minded people and encourages all employees and teams to promote and pursue their ideas. Google, for example, aims to hire people with “entrepreneurial DNA,” and allows employees to spend 20% of their time exploring new concepts and prototypes. This model requires that companies communicate clearly how they select projects, provide resources, and track projects.

3. Advocate model

The company creates a core group of who act as innovation experts and evangelists to work throughout the company and help encourage new business ideas. There are no established funds to participate, so each unit must pay for it’s own ideas. Those that participate do so because they think the initiative is valuable. This model depends on people who can work with different teams and facilitate change.

4. Producer model

The company creates internal organizations with funding and a defined process for how new ideas will be developed if they don’t fit into the existing business structure. This model requires significant funding and staffing, and support from executive management.

Corporations or management teams that want to encourage intrapreneurship should promote an environment where new ideas are heard and supported, make innovative thinking a part of the corporate culture, and identify and foster those who have entrepreneurial drive. Successful corporate entrepreneur initiatives, according to Wolcott and Lippitz, are those that communicate a broad vision and delineate specific objectives. Companies typically start with a small team who can get consensus from senior management to determine these objectives and build support across the board.

Are you ready to start thinking like an entrepreneur? Take our 10-week Business Fundamentals & Tactics course at GA.

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