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Implement entrepreneurial thinking in established organizations.

Introduction

"Corporate Culture has more to do with the mind than with the organizational chart."

The current decade has witnessed a growth in corporate strategies focused heavily on creating a competitive advantage through entrepreneurship. This emphasis on entrepreneurial thinking developed during the "entrepreneurial economy" of the 1980s. Peter Drucker, the renowned management expert attributed the emergence of this economy to four major developments. First, the rapid evolution of knowledge and technology promoted high-tech entrepreneurial start-ups. Second, trends such as two wage-earner families, continuing education of adults, and the aging population, added fuel to the proliferation of newly developing ventures. Third, the venture capital market became an effective funding mechanism for entrepreneurial ventures. Fourth, and most important, American industry began to learn how to manage entrepreneurship.(1)

The thrust in entrepreneurship as a major force in American business has led to a desire by corporate managers to replicate this type of activity inside enterprises. While some researchers conclude that entrepreneurship and bureaucracies are mutually exclusive, others have reported numerous successful entrepreneurial ventures within the established corporate framework.(2) These ventures have been undertaken in companies such as 3-M, IBM, Hewlett-Packard, General Electric, and Polaroid. Today, there is a wealth of popular business literature on the new corporate revolution, reflecting the infusion of entrepreneurial thinking into larger bureaucratic structures. This infusion is called "corporate entrepreneurship" or "entrepreneurship."(3)

Steven Brandt described management's role in taking on the new challenges confronting corporations:

The challenge is relatively straightforward.

The United States must upgrade its innovative prowess. To do so, U.S. companies must tap into the creative power of their members. Ideas come from people. Innovation is a capability of the many. That capability is utilized when people give commitment to the mission and life of the enterprise and have the power to do something with their capabilities.(4)

This new challenge must permeate enterprises seeking to achieve success in the 1990s and beyond. In order to implement entrepreneurial thinking, today's managers need to recognize newly developing strategies, assess the corporation's climate for readiness, and reinforce behavior with effective rewards. Thus, many of the traditional functions of management are present, but in newer, more innovative ways.

One current example of this movement is IBM. The dramatic changes that are occurring to create a "new IBM" are a direct result of the decentralizing of authority and decision making. These changes have turned some parts of this corporate entity into almost freestanding, independent companies.(5)

Strategies for Creating Corporate Entrepreneuring

There are a number of approaches an organization can take in creating corporate entrepreneurship. It is important to understand that when an entrepreneurial environment is created, the ethos of the original enterprise often changes dramatically. Traditions will be set aside in favor of new processes and procedures. Some people, uncomfortable with operating in this environment, will leave; others will thrive in a system that encourages creativity, ingenuity, risk taking, teamwork, and informal networking, all designed to increase productivity and make the organization more viable.

The key to creating an entrepreneurial environment is to develop and articulate a specific strategy for encouraging innovative activity. The following discussion outlines the steps that managers need to follow to establish an entrepreneurial strategy.

Assessment of Current Strategies for Entrepreneurial Activity

This process has four major components. The first involves an assessment of the current organizational situation. Several questions can help management in this task, and by applying the answers, managers may be able to assess the organization's environment and readiness for change.

* Has the company developed effective ways to access the resources needed to try new ideas? (Intrapreneurs need discretionary resources to explore and develop new ideas.)

* Are the managers prepared to allow experimentation with new products or services?

* Does the organization encourage risk taking and tolerate mistakes?

* Are the employees more concerned with new ideas or with defending their turf?

* Is it easy to form autonomous project teams within the corporate environment?(6)

A second component of the assessment process is to determine whether there is an understanding of the innovation that management wishes to achieve. Since corporate entrepreneuring unleashes the creative talents of people in the organization, employees need to understand this vision from the perspective of top management.

The third component is to identify specific objectives for corporate entrepreneuring strategies and the programs needed to achieve them. Rosebeth Moss Kanter, a noted researcher on innovation, has described three steps toward innovation:(7) making sure that current system, structures, and practices do not present insurmountable roadblocks to the flexibility and fast action needed for innovation; providing the incentives and tools for entrepreneurial projects; and seeking synergies across business areas, so that new opportunities are discovered in new combinations at the same time that business units retain operating autonomy.

The fourth component requires managers to understand entrepreneurial thinking by employees. Initially, a "corporate entrepreneur" is one who develops a business idea that does not yet exist. In the beginning, the individual may be specialized in one area such as engineering, marketing, or research and development, but once the individual starts an "intraprise", he or she quickly begins to learn all facets of the project. The corporate entrepreneur soon becomes a generalist with multi-skills.

Corporate entrepreneurs tend to be action-oriented and goal-oriented, willing to do whatever it takes to achieve their objectives. They combine thinking and doing, planning and working, vision and action. Dedication to the new idea is paramount. As a result, corporate entrepreneurs often expect the impossible from themselves and consider no setback so great that it threatens the success of their venture. They are self-determined goal setters who go beyond the call of duty in achieving their goals.

When faced with failure or setback, corporate entrepreneurs remain optimistic. They do not admit that they are beaten. They view failure as a temporary setback to be learned from and dealt with, not as a reason to quit. In addition, they view themselves as responsible for their own destiny. They do not blame their failure on others, but rather focus on learning how they might have done better. By objectively dealing with their own mistakes and failures, they learn to avoid making the same mistake again, and this, in turn, is part of what helps make them successful.

Managers must be prepared to handle a corporate entrepreneur differently than a traditional manager. Understanding the critical differences in action, status, decisions, and problem solving will help the manager develop procedures and policies that motivate rather than inhibit the entrepreneur; corporate entrepreneurs can be developed.

Specific strategies for effectively managing entrepreneurial thinking and behavior will vary from firm to firm. Nevertheless, most are based on a common set of assumptions, that is, a proactive change of the status quo must occur and a new, flexible approach to the management of operations must be installed.

Implementing An Entrepreneurial Climate

Most managers agree that the term entrepreneur refers to entrepreneurial activities that receive organizational sanction and resource commitments for the purpose of innovative results.(8) In establishing the drive to innovate inside today's corporations, one approach is to concentrate on developing a climate conducive to corporate entrepreneurs. When coupled with other specific strategies for innovation and research, these efforts can enhance the potential for inventors and venture developers. One researcher, after profiling inventors as a potential employee source for corporations, found that companies need to provide more nurturing and information sharing in order to attract these individuals.(9)

Several elements are critical in establishing the necessary climate. These include: the presence of explicit goals; a system of feedback and positive reinforcement; an emphasis on individual responsibility; and rewards based upon results.(10) Table I provides an explanation of these key elements.

To establish corporate entrepreneuring, companies TABULAR DATA OMITTED need to provide the freedom and encouragement that intrapreneurs require to develop their ideas. This can be a problem, because top managers may not believe that entrepreneurial ideas can be developed in their environment. They also find it hard to implement policies that encourage freedom and unstructured activitity.

What can a corporate manager do to foster the intrapreneurial process? First, the manager needs to examine and perhaps revise his or her philosophy of management. Many enterprises have obsolete ideas about cooperative cultures, management techniques, and the values of managers and employees. "You see what you are programmed to see, and you restrict your seeing to the signals that favor your expertise."(11) The obstacles to corporate entrepreneuring usually reflect the unanticipated effects of traditional management techniques on new venture development. Although unintentional, the adverse impact of a particular traditional management technique can be so destructive that the individuals within an enterprise will tend to avoid corporate entrepreneurial behavior. Table II provides a list of traditional management techniques, their adverse effects (when the technique is rigidly enforced), and the recommended actions to change or adjust the practice.

Understanding these obstacles is critical in fostering corporate entrepreneuring. To gain support and foster excitement for new venture development, managers must remove the perceived obstacles and seek alternative management actions.(12)

Unfortunately, doing old tasks more efficiently is not the answer to new challenges. A new culture with new values must be developed. There are significant differences between new venture units and historical operating units in corporations. It is important for managers to recognize the differences if corporate entrepreneuring is to flourish. Bureaucrats and controllers must learn to coexist with, or give way to, the designer and entrepreneur. This is easier said than done. However, there are some steps that organizations can take to help restructure corporate thinking. These TABULAR DATA OMITTED include: an early identification of potential intrapreneurs; top management sponsorship of intrapreneurial projects; the creation of both diversity and order in strategic activities; promotion of intrapreneurship through experimentation; and development of collaboration between entrepreneurial participants and the organization at large.(13)

Peter F. Drucker(14) noted that entrepreneurship operates through the tool of innovation. It is a discipline that can be learned and developed. Based on this premise, Donald F. Kuratko and Ray V. Montagno have developed a training program for corporate managers to develop entrepreneurial skills.(15) Their research has led to the identification of specific factors that help individuals within an organization develop more entrepreneurial behavior.(16) These factors -- top management support, time, resources, and rewards -- are within the domain of managers and, thus, become the primary tools to be used to develop entrepreneurial thinking. In addition, James Brian Quinn, an expert in the field of innovation, noted that the following characteristics are present in large corporations that are successful innovators:

Atmosphere and vision: innovative companies have a clear cut vision of an innovative company and the support necessary to sustain it.

Orientation to the market: innovative companies tie their visions to the realities of the marketplace.

Small flat organizations: most innovative companies keep the total organization flat and project teams small.

Multiple approaches: innovative managers encourage the parallel development of several projects.

Interactive learning: within an innovative environment, learning and investigation of idea cuts across traditional functional lines in the organization.

Skunkworks: every highly innovative enterprise uses groups that function outside traditional lines of authority. This eliminates bureaucracy, permits rapid turnaround, and instills a high level of group identity and loyalty.

Controlling and Evaluating Corporate Entrepreneurship

The final task for managers is the control and evaluation of corporate entrepreneurship activities. As with traditional management functions, the evaluation process will be a key to the effective implementation of corporate entrepreneurship.

Vijay Sathe has suggested a number of areas that management must focus to control entrepreneurial behavior successfully. The first is to encourage, not mandate, entrepreneurial activity. Managers should use financial rewards and strong company recognition rather than rules or strict procedures. This is actually a stronger internal control and direction method than traditional parameters.

Another area is the proper control of human resource policies. Managers need to remain in positions long enough to learn an industry and a particular division. Rather than move managers around as is the case in many companies, Sathe suggests "selected rotation," where managers are exposed to different but related territories. This helps managers gain sufficient knowledge for new venture development.

A third factor is for management to sustain its commitment to entrepreneurial projects long enough for momentum to occur. There will be inevitable failures, but they must be regarded as learning experiences.

A final element mentioned by Sathe is to bet on people not on analysis. While analysis is always important for judging the progression of projects, it should be supportive rather than imposed. The supportive challenge can help the entrepreneur realize errors, test their convictions, and accomplish a self-analysis.(18)

Overall, the concept of relying on people is a major managerial requirement if corporate entrepreneurship is to prosper. Therefore, it is important to reward employees effectively for their risk-taking on these projects. In one study of typical employees(19) the following factors (and the percentage of people responding to them) were cited as leading to improved performance:
Job enables them to develop abilities 61%
Pay tied to performance 59%
Recognition for good work 58%
Job requires creativity 55%
Job allows them to think for themselves 54%
Interesting work 54%
Challenging job 53%
A great deal of responsibility 50%


While these factors are not exclusive to corporate entrepreneurs, they do reinforce the belief that employees are willing to work on new projects and challenging teams if the rewards are apparent. lt should be mentioned that the exact rewards for corporate entrepreneuring are not yet agreed upon by most researchers.(20) Some managers believe that allowing the innovator to be in charge of the new venture is the best reward. Others would say that allowing the corporate entrepreneur more discretionary time to work on future projects should be the reward. Still others insist that special capital, called intracapital, should be set aside for the corporate entrepreneur to use whenever investment money is needed for further research ideas.

Summary and Conclusion

The major thrust behind corporate entrepreneurship is a revitalization of innovation, creativity, and managerial development in our corporation. The strategies and insights presented in this paper serve as a foundation for understanding how to manage entrepreneurial interests inside corporations.

However it is imperative that corporations establish specific goals for corporate entrepreneurship. Today's strategies for innovation will only be recognized as effective if there are concrete performance goals to measure progress against. For some organizations it may be the resurgence of creative ideas from employees while other companies may seek a more sophisticated goal of new product lines or new corporate divisions. The final measurement is important as a reinforcement of the process. In other words, organizations need to experience some concrete results from an innovative process that differs from the traditional short-term results focus. However, it is clear that corporate entrepreneurship is a complete redevelopment of our traditional corporate strategies and thinking. Thus, newer and more innovative methods of measurement will also accompany this transition in strategies.

Overall it appears that corporate entrepreneurship may possess the critical components needed for the future productivity of our organizations. If so, then recognizing how to assess the current environment for innovative activity, implementing an entrepreneurial climate, and controling corporate entrepreneurial activities can be a manager's key for developing entrepreneurial thinking in today's organizations.

END NOTES

1. Peter F. Drucker, "Our Entrepreneurial Economy" Harvard Business Review, January - February 1984, pp. 59-64.

2. W. Jack Duncan, Peter M. Ginter, Andrew C. Rucks, and T. Douglas Jacobs "Intrapreneurship and The Reinvention of The Corporation" Business Horizons, May - June 1988, pp. 16-21; Also see: C. Wesley Morse, "The Delusion of Intrapreneurship" Long Range Planning, Vol. 19, 1986, pp. 92-95.

3. Gifford Pinchott, III Intrapreneuring, (New York, Harper & Row, 1985).

4. Steven C. Brandt, Entrepreneuring in Established Companies, (Homewood, IL, Dow Jones/Irwin Co., 1986).

5. "The New IBM" Business Week, December, 16, 1991, p. 113.

6. Adapted from: Gifford Pinchott, Intrapreneuring, (New York: Harper & Row, 1985), pp. 198-199.

7. Rosebeth Moss Kanter, "Supporting Innovation and Venture Development in Established Companies," Journal of Business Venturing, Winter 1985, pp. 56-59.

8. See: Robert A. Burgelman, "Designs for Corporate Entrepreneurship," California Management Review, 1984, pp. 154-166; and also, Rosebeth M. Kanter, "Supporting Innovation and Venture Development in Established Companies," Journal of Business Venturing, Winter 1985, pp. 47-60.

9. Robert D. Hisrich, "The Inventor: A Potential Source for New Products," Mid-Atlantic Journal of Business, Winter 1985-86, pp. 67-79.

10. Burt K. Scanlan, "Creating a Climate for Achievement," Business Horizons, March-April 1981, pp. 5-9.

11. Gustaf Delin, "Rewiring Corporate Thinking," Public Relations Journal, August 1983, p. 12.

12. See: Hollister B. Sykes and Zenas Block, "Corporate Venturing Obstacles: Sources and Solutions" Journal of Business Venturing, Winter 1989, pp. 159-167; and also Ian C. McMillan, Zenas Block, and P. M. Subba Narasimha, "Corporate Venturing: Alternatives, Obstacles Encountered, and Experience Effects" Journal of Business Venturing, Spring 1986, pp. 17-191.

13. Robert A. Burgelman. "Corporate Entrepreneurship and Strategic Management: Insight From a Process Study," Management Science, December 1983, pp. 1349-1363; and William E. Souder, "Encouraging Entrepreneurship in The Large Corporation." Research Management, May 1981, pp. 18-22.

14. Peter F. Drucker, Innovation and Entrepreneurship, (New York: Harper & Row, 1985).

15. Donald F. Kuratko and Ray V. Montagno. "The Intrapreneurial Spirit" Training and Development Journal, October 1989, pp. 83-87.

16. Donald F. Kuratko, Ray V. Montagno, and Jeff A. Hornsby (1990). Developing an Intrapreneurial Assessment Instrument for an Effective Corporate Entrepreneurial Environment. Strategic Management Journal, 11, 49-58.

17. James Brian Quinn, "Managing Innovation: Controlled Chaos" Harvard Business Review, May-June 1985, pp. 73-84.

18. Vijay Sathe, "From Surface to Deep Corporate Entreneurship" Human Resource Management, Winter 1988, pp. 389-411.

19. Robert W. Goddard, "How to Reward the 80s Employee" Personnel Management, April 1989, pp. 7-10.

20. See: Zenas Block and O. Ornati, "Compensating Corporate Venture Managers" Journal of Business Venturing, Spring 1987, pp. 41-51.

Dr. Hornsby, Associate Professor and Coordinator of the Human Resource Management Department at Ball State, is particularly interested in compensation, honesty testing, small business personnel, and intrapreneurship; Dr Kuratko, author of several books including Management and Entrepreneurship: A Contemporary Approach, is the Stoops Distinguished Professor of Business and director of Ball State's Entrepreneurship Program; Dr. Naffziger, an Assistant Professor of Entrepreneurship and director of the Small Business Institute at Ball State, concentrates his research on planning, start-ups, and other aspects of entrepreneurship; and Dr. Montagno, Professor of Management, has published numerous articles in his fields of interest--organizational behavior, human resource management, and international management.
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Author:Kuratko, Donald F.; Hornsby, Jeffrey S.; Naffziger, Douglas W.; Montagno, Ray V.
Publication:SAM Advanced Management Journal
Date:Jan 1, 1993
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