IIR131
EXPERT
insight
CORPORATE ENTREPRENEURSHIP
By HAKAN ENER
A
t the beginning of 2014, Thomson
Reuters reported that companies
around the world were sitting on
an estimated $7 trillion in cash and
liquid assets. In battening down the hatches
to ride out the storm of the global financial cri-
sis, it seems companies have accumulated vast
amounts of cash on their balance sheets – more
than twice the levels of a decade ago. “Capital ex-
penditure relative to sales is at a 22-year low and
some strategists reckon the typical age of fixed
assets and equipment has been stretched to as
much as 14 years from pre-crisis norms of about
nine years,” stated Reuters.
The same report quoted several investors
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Illustration by LEONARD BEARD
who believed that companies were under-
investing in their core business activities,
casting doubt on their prospects for organic
growth in the near future. A “record number of
investors” were urging firms to “deploy their
cash,” with one chief executive insisting that
“the extent to which firms put cash balances to
work was key to the pace of recovery.”
But what should corporate leaders do to
deliver growth? In the past, a popular strategy
was to go on an acquisition spree. However,
making the right acquisition deals that gen-
erate economic value is difficult, risky and
potentially expensive – all the ingredients
of a corporate strategy that make managers
ISSUE 23 FOURTH QUARTER 2014 47
 EXPERT insight SIX KEYS TO RELEASE IDEAS FOR PROFITABLE GROWTH
Senior management’s ability to generate new sources
of value depends on reinforcing ties with customer-
facing employees who have maintained their
proactive stance toward customer needs.
nervous during times of uncertainty.
Yet there are other strategies that com-
panies can employ to put their abundant re-
sources to work – not just of cash but of ideas
and people.
This article calls on leaders to engage in
corporate entrepreneurship – to embrace new
initiatives inside their companies that will
boost profitable growth in the marketplace.
Using examples from Europe and North Amer-
ica, and based on my work at IESE collaborat-
ing with companies to help them create new
business units, I highlight the shared features
of effective corporate entrepreneurship strat-
egies. By answering the six essential questions
that I outline below, senior executives can
discover how to involve middle managers and
employees alike in the process of generating
new business ideas and developing those ideas
into viable business opportunities.
Asking the Right Questions
Corporate entrepreneurship, which is some-
EXECUTIVE SUMMARY
As the recession fades, cor- where they currently stand in
porate leaders need to switch relation to corporate entrepre-
from crisis mode to thinking neurship. It also draws on the
more seriously about how real-life experiences of corpo-
to grow revenues and create rate entrepreneurs to suggest
value once again. Corpo- better ways of boosting buy-in
rate entrepreneurship – the for their new business ideas.
creation of new businesses By considering state-of-
inside established corpora- the-art practices and learning
tions – offers a strategy for how Silicon Valley entrepre-
profitable growth, and serves neurs operate, the author
as an attractive alternative to reveals smarter ways for
old, acquisition-led, inorganic customer-facing managers
growth strategies. and employees to generate
Based on the author’s work ideas, assess their potential
collaborating with companies and measure their progress –
to help them create new busi- so that the start-up spirit finds
ness units, this article high- free expression in the corpo-
lights six key questions to help rate world at a time when it is
senior executives reflect on greatly needed.
48 FOURTH QUARTER 2014 ISSUE 23
times referred to as intrapreneurship, is a term
coined by the legendary management scholar
Peter Drucker. It refers to the process of initi-
ating new ventures or creating new sources of
value within an established organization. Put
simply, it is where the start-up spirit meets the
corporate world.
Until recently, corporate entrepreneur-
ship took a top-down approach. Senior ex-
ecutives dominated the process, seeing it as
their job to come up with the ideas for all the
new business opportunities that the company
would pursue.
Increasingly, however, companies are
adopting alternative approaches. Rather than
controlling all of the decisions that need to
be made along the way, senior executives are
playing more of a guiding role. Approaching
corporate entrepreneurship this way is prov-
ing better for identifying and nourishing new
growth areas for companies, and generally
yields more exciting results.
To identify new corporate entrepreneur-
ship initiatives, senior executives need to re-
flect on where they currently stand. Heads of
business units and corporate divisions should
start by asking themselves the following six
questions.
1. Are We Asking the Right People?
In the past, senior executives may not have
felt quite so compelled to ask those outside of
the leadership team for input on new business
opportunities. However, during the recession
years, as senior executives found themselves
preoccupied with urgent restructuring and
cost-cutting measures, their attention was
diverted from customers and their emerging
needs. Consequently, senior management’s
ability to generate new sources of value de-
pends on reinforcing ties inside the organi-
zation with customer-facing employees and
middle managers who have maintained their
proactive stance toward customer needs.
Recent figures from the U.S. Bureau of La-
bor show the “quit rate” among U.S. workers at
its highest level since the 2008-09 downturn,
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 EXPERT insight SIX KEYS TO RELEASE IDEAS FOR PROFITABLE GROWTH
Leaders need to transform from a suggestion-box
mind-set to a venture-capitalist mind-set, allocating
significant time for reviewing new business ideas –
and widely publicizing this fact internally.
and this voluntary turnover is frequently at-
tributed to a perceived lack of recognition
and empowerment. With this in mind, senior
executives would do well to pay attention to
the presence or absence of adequate feedback
systems, so that potentially lucrative business
ideas can find expression and reach the right
ears. If no such channels exist, companies
run the very real risk that the people with the
most interesting business ideas will eventu-
ally leave the company.
This was a point not lost on a group of top
executives of a large European aerospace
company for whom IESE recently ran a corpo-
rate development program. It wasn’t just that
they acknowledged they no longer had a mo-
nopoly on interesting business ideas; rather,
they were positively convinced that middle
managers needed to be given control over
generating, selecting and developing those
ideas. We observed that managers a few levels
below the top tier could be extremely effective
in managing such processes – first, when en-
couraged to do so by the senior management
team, and second, when working together in
groups of peers.
2. Are We Looking in the
Right Places?
Asking for input from managers who know
about customer needs is a great start, but it
is not always the best way to identify oppor-
tunities for corporate entrepreneurship. In
fact, according to research by Harvard Busi-
ness School professor Clayton Christensen,
a single-minded focus on meeting the needs
of existing customers may lead to innovation
blind spots, causing emerging customer seg-
ments to be overlooked and resulting in the
eventual loss of market share.
Corporate leaders increasingly recognize
that new business opportunities are emerging
in market segments and countries different
from their current focus. For this reason, many
car companies, including BMW, Volkswagen
and Renault-Nissan, have opened offices in
innovation hotspots such as Silicon Valley to
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develop entirely new capabilities. Even non-
automotive companies, such as Google, are
working in unexpected realms, exploring in-
novative fields like driverless cars. See sidebar.
In going to these places, companies can
keep track of emerging fields, feeding that
knowledge back to engineers and managers
who work in the core business and who can
transform those ideas into new sources of
value.
General Electric is another good example.
In a bid to become more of a service provider,
the company established a software hub in Sili-
con Valley. In identifying financially attractive
opportunities for the use of GE technology in
industry, healthcare and transportation, se-
nior leaders have largely followed the propos-
als of this software division, rather than taking
their steer from headquarters.
3. Is Our Review Process Right?
Even when top executives seek input from
middle managers, many business ideas never
make it to the top for even a basic review of
their value-creation potential. Part of the
problem is that many companies rely on old
processes that operate more like a suggestion
box. The problem with suggestion boxes, as
we all know by now, is that the best ideas get
buried in them – either because the decision-
makers never get around to reviewing them or
the ideas are too raw to merit their attention.
When identifying and reviewing promising
business ideas, leaders need to transform from
a suggestion-box mind-set toward a venture-
capitalist mind-set. Venture capitalists spend
roughly half their time looking for promising
ideas to invest in, while the other half is spent
managing existing investments. Likewise, se-
nior executives should be allocating signifi-
cant time for reviewing new business ideas
– and widely publicizing this fact internally.
Knowing that business proposals are being
taken seriously by senior management is a
powerful motivator that will encourage more
managers and employees to step forward with
their ideas.
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Match the new venture team with a senior executive
who acts as a sponsor, helping team members to
tap into resources, contacts, market segments and
customers who might become initial adopters.
How often should ideas be reviewed? Annual
reviews are currently the norm. Some
companies make it a part of their annual
business and budget plans, while others
integrate this process into a separate corporate
program that annually allocates seed funding
for promising ideas to go ahead.
The U.S.-based tech firm Qualcomm takes
the latter approach. It initiated Venture Fest, a
program that evaluates close to 20 business
ideas a year. Because Qualcomm is a large
company with more than 25,000 employees, the
initial review is normally carried out by peers
and external experts before senior executives
get involved to decide funding.
An interesting exception to the annual
review norm is Google, where new ideas are
presented weekly in meetings of the Google
Product Council, which includes the company’s
founders and senior executives.
4. Is There the Right Level of
Enthusiasm?
There are many ways to evaluate new
business ideas, as any venture capitalist can tell
you. Senior executives typically look at who’s
pitching the idea (the champion) and then look
at the project’s potential impact on profits,
which requires an early estimate of the costs
ABOUT THE AUTHOR
Hakan Ener is an assistant teams won an international
professor of Entrepreneurship research award from
at IESE Business School. He the Center for Creative
also serves as the academic Leadership in the United
director of a custom program States, and his writings
designed to help executives on entrepreneurship have
create new business units appeared in Forbes and
for their companies. A Financial Times. He earned
case study based on this his PhD in Management from
program received Honorable INSEAD, with a specialization
Mention from the European in Strategy, which he
Foundation for Management completed at the business
Development (EFMD). His school’s campuses in France
research on entrepreneurial and Singapore.
50 FOURTH QUARTER 2014 ISSUE 23
and revenues. A feasibility study or a business
plan is a useful document in this phase.
But is it enough? Not if large resources are
at stake.
Another way of gauging the attractiveness
of an opportunity is to see if there are signifi-
cant numbers of managers and employees
willing to put their hands up to volunteer for
what is being proposed, apart from a single
champion. A business idea that excites only
one person in the company may be a sign that
now is not the time to dedicate resources to it.
New business ventures are always a team
effort, and it’s best when several people are en-
thusiastic about a project. Sometimes people
may be willing to take on a project above and
beyond their day-to-day job responsibilities,
such is their enthusiasm. If that’s the case,
the company has little to lose by letting teams
loose to explore new ideas, provided they still
meet their primary work objectives. Then,
only those ideas that demonstrate they have
a realistic chance of contributing to the com-
pany’s bottom line progress to the next stage
of development.
This is how companies such as Dow Chemi-
cal have been handling the creation of new
ventures internally. In weighing up the attrac-
tiveness of an opportunity, the senior execu-
tive committee always takes into account the
ease and enthusiasm with which team mem-
bers came together and embraced the initia-
tive of their own volition.
5. Are We Giving the
Right Support?
Even if a company manages all the previous
steps well, things can still go awry as the busi-
ness development project moves into the im-
plementation phase. Team members may find
they are not adequately trained to deal with
the technical, operational or financial details
of developing a new business from scratch.
This is a common source of frustration that
senior executives need to anticipate.
One way of dealing with this is to match the
new venture team with a senior executive who
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 EXPERT insight SIX KEYS TO RELEASE IDEAS FOR PROFITABLE GROWTH

Seek and Ye Shall Find

If you don’t find what you’re looking for at home, sometimes you have to go further afield.

T here is a misconception that

Europe’s economy and its
major corporations are stagnant,
simply fighting for survival. This
is far from reality. Increasingly,
executives from major European
corporations are traveling the
world in search of new business
opportunities. In their search for
growth, many end up spending
time in Silicon Valley to learn
more about innovation and
entrepreneurship, and some stay
for years. But what exactly are they
doing there?
Some have set up advanced
research centers to carry out R&D,
both in-house and in collaboration
with other Silicon Valley firms and
research institutes. This is what
European automotive companies
such as BMW, Volkswagen and
Renault-Nissan have done. Some
send their own engineers, partly to
monitor the latest developments,
but mainly to encourage their
people to start their own initiatives
in association with local R&D
partners.
Siemens, the German engineering
giant, takes a different approach.
It established its own Venture
Capital unit, which operates in
Silicon Valley as well as other
places. The unit invests in
emerging technology start-ups
that have the potential to make
an impact on Siemens’ core
business and contribute to its
corporate innovation strategy. To
date, Siemens Venture Capital
has invested in more than 150
companies and 40 venture capital
funds worldwide, many of them
based in Silicon Valley. Besides
keeping track of cutting-edge
innovation close to the source,
Siemens is also vying with other
corporate venture capitalists to
establish privileged relationships
with start-ups, so as not to get left
out of the game.
An interesting variation of this
model is the one that Alstom,
Schneider Electric and Solvay have
developed: They joined forces to
pool their corporate venture capital
activities under one roof, and
made investments in Silicon Valley
together.
What all this shows is that
European firms are alive to the fact
that they need to be proactively
investing in innovation. Going to
hotbeds of entrepreneurship, like
Silicon Valley, is one way that large,
established, industrial corporations
can glimpse the future and stay on
top of those innovations that have
the potential to shape their core
businesses for years to come.

SOURCE: Adapted from “Silicon Valley Innovation, European Style” by Hakan Ener, IESE Entrepreneurship Department blog.
http://blog.iese.edu/entrepreneurship/2014/01/15/silicon-valley-innovation-european-style/

acts as a sponsor, guiding the team at crucial (https://www.coursera.org/course/globe and

moments. This sponsor may come from the
management committee that authorizes the
seed funding for the project, helping team
members to identify and tap into resources
that might otherwise be unknown to them.
These resources could be important contacts
inside and outside the company, or knowledge
of specific market segments and customers
who might become initial adopters of the
venture.
Sponsors may also provide technical and fi-
nancial expertise, reallocating skilled employ-
ees to the venture and making sure team mem-
bers receive relevant training. To this end,
there is an abundance of educational material
available online. IESE Business School offers
free webinars (http://www.iese.edu/es/servi-
cios/open-learning/webinars/) as well as mas-
sive open online courses, known as MOOCs
https://www.coursera.org/course/corpfi-
nance) to help managers fill their knowledge
gaps on corporate entrepreneurship essen-
tials. We have also seen growing demand for
corporate programs tailored toward building
the skills that corporate entrepreneurs need
to create new businesses.
6. Are We Making the
Right Evaluations?
While creating profitable growth is the ulti-
mate objective of most corporate entrepre-
neurship initiatives, this may take years to ac-
complish. In the meantime, senior executives
need to track their progress in other ways.
A common mistake is to measure the
progress of corporate entrepreneurship by
comparing the initial business plan with the
current state of play: Did development of the

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 EXPERT insight SIX KEYS TO RELEASE IDEAS FOR PROFITABLE GROWTH
What if the company’s strategy is not clear or
is about to change? Then it’s time for corporate
entrepreneurs to keep their ears to the ground and
listen to what the senior executives are saying.
prototype take six months, as predicted? Did
we break even within the first 15 months, as
targeted?
These may be convenient milestones for
senior executives to refer back to, but they
ignore the fact that most new businesses, by
nature, go through major revisions that in-
variably deviate from the original plan. More
appropriate ways to assess progress on corpo-
rate entrepreneurship include the following:
COMPARE QUALITY OVER TIME. You know you’re
doing well when managers and employees with
solid track records in the company begin to par-
ticipate actively in the corporate entrepreneur-
ship process. You’re doing especially well when
your team is attracting managers and employees
with the commercial, operational and financial
skills relevant for developing a new business.
In IESE’s corporate development pro-
grams, we observe the following pattern as the
quality of entrepreneurial teams increases:
first, senior executives become more enthusi-
astic about meeting these teams and hearing
their ideas, leading to greater attendance and
engagement in project review meetings; sec-
ond, the resources dedicated to new business
development projects increases over time; and
third, even if the initial business idea pitched
by a very capable team did not work out as
planned, senior executives give them an op-
portunity to pivot or reposition their project.
LOOK FOR GAPS IN THE PORTFOLIO. Some corpo-
rate entrepreneurship initiatives are aimed at
funding business ideas around a specific theme.
BP, for example, made a deliberate effort to pur-
sue business ideas related specifically to the ap-
plication of information technology in the oil and
gas industry.
While this may give strategic clarity to cor-
porate entrepreneurship efforts, it also means
that other worthy business ideas that fall out-
side that scope may fail to get the attention
they deserve. This may result in major gaps in
a company’s corporate entrepreneurship proj-
ect portfolio.
52 FOURTH QUARTER 2014 ISSUE 23
To avoid this from happening, senior exec-
utives should periodically review their project
portfolios as a whole. Do the corporate proj-
ects they have supported so far match with
wider perceptions of the various opportuni-
ties on the horizon? When gaps are identified,
senior executives should be proactive in allo-
cating funding for specific opportunity areas
to rebalance the portfolio, at least on a tem-
porary basis.
Tips to Thrive in Spite of the
Challenges
These six questions, as well as being essential,
are undoubtedly daunting, especially for those
who are trying to launch corporate entrepre-
neurship. Depending on where the company
stands, these questions reveal the magnitude
of the task that lies ahead.
And it’s not just senior executives who may
feel these challenges acutely but those on the
entrepreneurial team itself. It’s one thing to
recognize the critical importance of recruit-
ing others to your cause in order to legitimize
and boost buy-in for your idea; it’s quite an-
other to actually do so when you don’t have
any positional authority or financial resources
behind you.
But don’t throw in the towel yet! Many cor-
porate entrepreneurs have managed to thrive
despite the challenges. In our corporate devel-
opment programs at IESE, we have repeatedly
observed the following lessons, drawn from
the experiences of corporate entrepreneurs.
DO FIRST THINGS FIRST. Don’t waste time draft-
ing an exhaustive business plan at the start: go
public with the business idea first. Before diving
into cash-flow forecasts, validate others’ inter-
est in the idea – with colleagues who could serve
as potential recruits for the team, as well as with
customers who express interest in new products
or services.
Similarly, when pitching the idea to senior
executives for the first time, hold off on pre-
senting a multi-year investment plan. Instead,
talk mostly about short-term funding needs.
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 EXPERT insight SIX KEYS TO RELEASE IDEAS FOR PROFITABLE GROWTH
The key question at this stage is: What is the
minimum amount of support and resources
that this project needs right now in order to
reach the next level?
ALIGN WITH CORPORATE STRATEGY. Some cor-
porate entrepreneurs gain support when others
don’t because each time they present the busi-
ness idea they emphasize alignment with the
company’s overall strategy.
Imagine you are a manager at Microsoft
today. Which of the following two business
ideas would you prefer to present to the CEO:
a cloud-based software service aimed at tablet
users or a new shrink-wrapped, desktop soft-
ware package? Obviously most people would
pick the former, because that is where Micro-
soft has repeatedly expressed an interest in
growing its business.
What if the company’s strategy in a certain
field is not clear or is about to change? Then
it’s time for corporate entrepreneurs to keep
their ears to the ground and listen to what the
senior executives who will assess their project
are saying.
DELIVER PERFORMANCE METRICS THAT MATTER.
Corporate entrepreneurs need to know which
business performance criteria matter most to
senior executives. Some of these criteria are ex-
pressed in numbers – revenue growth objectives,
profit margins, return on invested capital – or as
market share. Other criteria may be more qualita-
tive, such as having the best-performing product
or being the most innovative or environmentally
friendly company in the industry. Corporate en-
trepreneurs need to know exactly on which of
these metrics their new venture is going to help
the company achieve better performance.
Maintaining Your Lead
The steps outlined in this article are remarkably
similar to those taken by smart entrepreneurs
in Silicon Valley start-ups. Think of Whats-
App. Cofounders Jan Koum and Brian Acton
spent virtually no time and energy on business
planning before they validated the concept of
global chat-messaging through an application,
and they avoided the classic mistake of raising
funds to spend on advertising before there was
significant interest from users.
Once the app gained a critical mass of us-
ers, they began to meet with potential acquir-
ers, and they understood the strategic objec-
tives and performance metrics that really
mattered in that industry.
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Facebook’s strategic objective has been to
make the world more connected, and the per-
formance metric that really mattered to Mark
Zuckerberg was growth in the company’s glob-
al user base, especially in emerging markets.
Providing exactly what Facebook needed, at
the time it needed, ultimately led to Facebook
acquiring WhatsApp for $19 billion – a valua-
tion beyond anyone’s wildest expectations.
The WhatsApp story also illustrates a
broader point: getting corporate entrepre-
neurship right is extremely important for cre-
ating and preserving a company’s leadership
position. Facebook could have probably cre-
ated a similar messaging app internally, but
didn’t – or couldn’t, especially after passing
over Koum and Acton in job interviews shortly
before they went on to set up WhatsApp. Face-
book paid dearly for making an acquisition
that has yet to prove its worth.
Similarly, in the field of smartphones,
Nokia could have been a market leader: It
launched a smartphone model similar to the
iPhone two years before Apple did. However,
Nokia did not adequately support this new
business line at the time, with grave conse-
quences for the firm. Nokia’s mobile devices
division has now been bought by Microsoft,
which is phasing out the Nokia brand name
from new devices.
Especially today when disruptive business
models and technologies may emerge from
unexpected places, it is crucial for senior ex-
ecutives to bolster corporate entrepreneur-
ship initiatives, and for corporate entrepre-
neurs to operate with a start-up spirit in order
to thrive.
TO KNOW MORE
Read Hakan Ener’s posts as part of the IESE
Entrepreneurship Department blog at http://
blog.iese.edu/entrepreneurship/author/hener/
Matallanos, J., M.J. Navarro-Veroz, M. Elvira,
A. Sanz and A. Vinambres. “Empowering
Internal Talent to Innovate.” IESE Business
School Case Study, 2013. Highly Commended
Case in the category of Talent Development
for an Excellence in Practice Award 2013 of
the European Foundation for Management
Development (EFMD).
Wolcott, R. and M.J. Lippitz. Grow From Within:
Mastering Corporate Entrepreneurship and
Innovation. McGraw-Hill, 2010.
ISSUE 23 FOURTH QUARTER 2014 53