The Four Models of Corporate Entrepreneurship
What is Corporate Entrepreneurship? Definition
Corporate Entrepreneurship (CE) is the process by which teams within an established company conceive, foster, launch and manage a new business that is distinct from the parent company but leverages the parent's assets, market position, capabilities or other resources (Wolcott and Lippitz (2007)).
CE is also known as intrapreneurship
, and as organizational entrepreneurship
. CE can also be defined as all entrepreneurial activities such as innovation, venturing and strategic renewal within existing firms. Note that CE involves more than New Product Development (NPD) as it includes innovations in products, services, channels and brands.
Proponents of CE highlighted the importance of corporate entrepreneurship as a crucial antecedent of firm's performance, revitalizing the short and long term success of the firm.
Quite a few senior managers are risk averse and dislike giving their employees the prerogative to think out of the current operations. But corporates should consider to make CE an organizational culture. Corporates that pursue CE stand a better chance of growth and survival especially in the current business environment characterized with intense technological and social changes. Risk averseness can lead to inertia and lower levels of entrepreneurial activities. Corporates should re-strategise and support employees with an entrepreneurial mindset in order to establish a strong footing for strategic innovation.
History of Corporate Entrepreneurship
The idea behind CE was first introduced by Peterson and Berger in 1971 as a strategy and leadership style adopted by large organisations to cope with the increasing level of market turbulence.
Categories of Corporate Entrepreneurship
CE can be seen from 3 main view points namely:
1. Innovation - This refers to a company's commitment to creating and introducing products, production processes and organisational systems.
2. Business Venturing - This refers to the birth of new business within existing organisations. The firm in this scenario will enter new businesses by expanding operations in existing or new markets through either internal or external venturing.
3. Strategic Renewal - Strategic renewal is defined as the transformation of organisations through renewal of the key ideas in which they are built. Strategic renewal include revitalisation of the company's operations by changing the scope of business, it's competitive approach and all other actions that fundamentally repositions the firm in the market.
Four Models of Corporate Entrepreneurship
Established companies can build new businesses within their current business through using the following four models of CE (Wolcott and Lippitz (2007)): the Opportunist model, the Enabler model, the Producer model and the Advocate model. These 4 models can be analyzed using 2 dimensions: level of resource authority
(Is there a dedicated "pot of money" allocated to corporate entrepreneurship, or are new business concepts funded in an ad hoc manner through divisional or corporate budgets or "slush funds?") and organizational ownership
(Who, if anyone, within the organization has primary ownership for the creation of new businesses?).
1. The Opportunist Model of Corporate Entrepreneurship
In this category, the company has no deliberate approach to CE. However internal and external activities drive the concept selection and resource allocation. This model is characterized by ad-hoc resource authority and a diffused organisational ownership of CE.
2. The Enabler Model of Corporate Entrepreneurship
The company provides funding and senior executive attention to prospective projects. There is dedicated resource authority and diffused organisational ownership. The strategic goal underlying this model is that of enabling entrepreneurial culture from employees, providing independent funding and the top executive's attention on future business leaders with new ideas. The success factors of this model include a culture of innovation, structural flexibility for teams to pursue projects and well defined executive involvement in entrepreneurial funding decisions and effective communication. However the major challenge of this model is that of maintaining coherence and discipline and in ensuring that the enabler process does not become a black hole for ideas.
3) The Producer Model of Corporate Entrepreneurship
The company establishes and supports a full-service group with a mandate for CE. This is characterized with dedicated resource authority and focused organisational ownership. The strategic goal at the basis of this model is that of exploiting cross-cutting or disruptive opportunities. The producer model ensures that corporates provide full service CE by conceiving, screening, funding, coaching, scaling and reintegrating new business concepts. Success factors in this model include respected leadership with significant internal decision authority. However there is the challenge of lacking business unit (BU) support in this model.
4) The Advocate Model of Corporate Entrepreneurship
The company strongly evangelizes corporate entrepreneurship, but business units provide the primary funding. There is adhoc resource authority and focused organisational ownership. The strategic idea behind this model is to reinvigorate or transform business units and to support CE teams. The most important success factor in this model of CE is that of significant team facilitation capabilities, internal and external networking and senior executive visibility and support.
Benefits of Corporate Entrepreneurship
- Business growth - New corporate strategies drive corporate growth through strategic renewal, redefinition of the system and organizational rejuvenation.
- Competitive advantages - CE enables firms to become competitive in the market through creating new business models with new value propositions and new revenue models.
- Niche market creation and exploitation - Firms that opt for CE are able to create new market opportunities through extension of existing markets, new market creation and entry.
- New product/service development advantages - Through CE, firms can create new products and services through creating new lines, creating extensions or additions to existing lines, improvements or revisions to existing lines and repositions.
- Improved internal processes and production - Firms which values CE benefit from improved internal processes and high productivity. With CE in place firms can improve production methods, marketing and sales approaches, distribution channels, logistical approaches and even pricing approaches.
⇨ How does your company approach corporate entrepreneurship? Kindly put forward your contributions below. Thank you.
Robert C. Wolcott and Michael J. Lippitz (2007) "The Four Models of Corporate Entrepreneurship", MIT Sloan Management Review vol 49, No. 1 pp. 75-83
Zahra et al ( 1996) "Governance, Ownership and Corporate Entrepreneurship: The Moderating Impact of Industry Technology Opportunities", Academy of Management Journal vol 39, No. 6 pp 1713-1735.