Meeting the challenges of

Corporate
Entrepreneurship

Mohammad ABBASI
Introduction

Corporate Entrepreneurship:
 Refers to process in which companies engage in
diversification through internal development.

Why is it needed?
 Existing business give stability but innovation
gives differentiation. Corporations needs both.
Challenges associated with
Corporate Entrepreneurship

Old company organization

Looks to exploit the existing market.

New company organization:

Looks to explore

Challenge is to balance these two in the

same corporation.
 Why corporates fails to make a
balance?
Corporations generally respond with two approaches:

 Diffused responsibility: Disperse the task of new business

creation to existing divisions which leads to:
 Resistance to change.
 Misalignment of incentives.
 Cowboy culture. E.g. Enron

Centralization: Completely separate new ventures from

existing divisions which leads to:

 Culture clash during integration phase.

 Power Struggle
How to handle the new business?

Develop strategy to explore new opportunity

 Search for opportunities in areas of promise.

 Rely on customer feedback rather than market research.

 Use prototypes to test assumptions

 Set non financial milestones.

 Pre-decide when to pull the plug.

Operate with mix of old and new

o Use “mature-turks” to run the new venture.

o Align the incentives.

o Have different review process

o Select resource with specific skills. E.g. Entrepreneurial

skills.

o Ask company veterans to run the new businesses oversight

bodies.
Integrate with autonomy

o Timing very critical when to integrate.

o Identity and integration should be balanced.

o Assign both corporate executives and managers from

division to look after new ventures.

o Stipulate criteria for handling new business over to

existing business.
An Example of IBM- EBOs
Strategy for new venture

 Emphasis on “Strategic clarity”

 Teams encouraged to engage with market place.

 Proposed product to be tested as a pilot, design-in.

 Review process based on plan targets rather than

financial targets.

 EBO evaluation based on project based milestones,

financials and business maturity
Operating the new venture

 Appointment of “mature turks”- John Thompson as the head of EBO.

 Created new development, oversight and review process.

 Handpicked EBO leaders based on different selection criteria.

Integrating the new business

 At the time when business had clear leadership and strategy.

 Corporate Strategy executives monitor progress of EBOs

 Reviews to check if traditional business is choking new business.

THANKS!!