Corporate entrepreneurship: strategies and organizational practices

Corporate Entrepreneurship

The purpose of this paper is to critically evaluate the key success factors that corporations who are successfully managing corporate entrepreneurship programs have in common and which factors they vary on. The issue of how competitors to companies who have successfully put corporate entrepreneurship programs into place attempt to create comparable entrepreneurial climates and copy processes proven to be successful will also be addressed. Four companies who have successfully used corporate entrepreneurship programs are used as the basis of this analysis.

Introducing IBM's Emerging Business Opportunity (EBO) Unit

Of the many companies who have successfully managed to create and sustain their corporate entrepreneurship programs, IBM's efforts in this area exemplify best in class performance. In an excellent article on corporate entrepreneurship in the Harvard Business Review (Garvin and Levesque, 2006, p. 110-112) provide an insightful history into how the EBO Program in IBM came into existence, the decision to have IBM veteran John Thompson lead the effort, and the critical aspect of performance metrics, some highly quantified, others highly qualitative in nature, be used to gauge progress. The EBO process within IBM quickly became one that had three parameters associated with project progress. These include project-based milestones, financials, and assessments of the specific business' maturity. As IBM's culture is heavily focused on metrics of performance, additional milestones included market acceptance including the number of customer pilots, customer references and design-ins, mentions by key industry analysts, product development checkpoints, internal execution, and software vendor partnerships. EBO-based initiatives also were staffed with the most senior members of the management team, and while these seasoned veterans complained they felt they were being actually demoted, in fact EBO leadership gave them the opportunity to gain a higher level of visibility than was the case before.

In addition to being a culture dominated by metrics and the measurement of results, IBM is very process-centric, hence their approach to managing the entire EBO process, which is shown in Figure 1. Beginning with the QuickScan step and progressing through the Investigation, Validation/Incubation and Transfer phases, the IBM EBO process relies heavily on checkpoints to ensure a high level of coordination on new and emerging businesses.

The extensive work of (Nunes, S., 2004, pages 20-23) show the specifics of how the EBO process is organized.

Figure 1: Nunes' interpretation and analysis of IBM's EBO Process

Nokia's Approach to corporate entrepreneurship

Nokia, like IBM, has a specific strategic business unit developed to manage the processes associated with corporate entrepreneurship. There are also a series of metrics or key performance indicators Nokia heavily uses to manage turning new business ideas into free-standing business units. The Nokia approach stresses the opportunity for individual contributors to the company to have the opportunity to develop their own ideas and concepts into business. Nokia clearly sees the need to provide its employees with the opportunity to begin businesses that align with and fill unmet needs in related markets.

Figure 2 shows the structure of Nokia's business units and the further definitions tructurally of the Nokia Ventures Orgnization. The broader functions of the Nokia Venture Organization (NVO) is that the division acts as a corporate-level organization that is responsible for identifying, developing and eventually turning emerging business units into fully functioning divisions of Nokia.

Figure 2: Nokia's structure of the NVO source: Arthur D. Little (2002) pg. 11

The Nokia structure allows for a more granular focus on emerging opportunities, including the potential of giving individual members of the organization enough freedom to create entirely new lines of business. This decentralized yet unified organizational structure is unique to Nokia and their corporate entrepreneurship efforts; IBM has a single business unit that reports to the CEO that encapsulates all these functions that Nokia breaks out. It is also useful to keep the long-term perspective of Nokia in mind. They have transformed themselves from a forestry company over 140 years ago to one of the leading cellular phone and convergence telecom products and services providers globally.

Toshiba's Unorthodox Laptop Journey

Having used a classical series of processes that had originated in Japan with the launch of a comprehensive market research effort across Europe, the United States, and Asia, product planners returned back to Japan and promptly began working on their own laptop and its own proprietary operating system. The designers had seen a wide variation in the types of MS-DOS and Microsoft Windows versions of software running on systems globally, and decided the best approach would be to customize both the operating system and the BIOS (which is the electronics that allows the system components to work together) to Toshiba standards. The launch of these laptops was an abysmal failure due to not applications from Microsoft, Software Publishing and many other software companies being able to run on the laptops.

Frustrated with their product development and new venture approach, Toshiba Corporation created the Information Systems Division (ISD) in the U.S. And hired a former market research firm founder, John Rehfeld, to head the division. Mr. Rehfeld was well respected in the Japanese it community for having been one of the founders of International Data Corporation. He was hired specifically to lead development and selling efforts for the new laptop. Immediately however Mr. Rehfeld told the Japanese manger the product would continue to fail due to many incompatibilities with software specifically written for the Microsoft operating systems and Windows environments. What Rehfeld did next was take the concept of the laptop and completely re-design it based on the ISD distributors' and dealers' requirements. Instead of making this an rigorous and highly defined process, Rehfeld worked to create more of a sense of common accomplished and open communication (Abetti, P, 2004, pages 529-545) which in turn allowed for the creation of a laptop more closely aligned with the needs of the American market. Toshiba Corporation in Tokyo had many rigorous process flow diagrams, a small group of managers who were tasked with creating business plans. Rehfeld had completely circumvented this team and chose to build close alliances with the factories where engineers could be counted on to create the new prototypes. The result of this rather unconventional approach to corporate entrepreneurship led ISF from being a $40M division in 1985 to nearly a $600M division by 1992, driven primarily by new laptops every year.

Toshiba's successes in laptops transformed the entire corporation, and it took a leader with the courage and vision of John Rehfeld to redefine entire series of processes to make the new product development and internal corporate entrepreneurship strategies work.

Trilogy Software and the Indian Corporate Entrepreneurship Connection

Joe Liemandt is the CEO and founder of Trilogy Software, and originally had the inspiration of starting the company while studying at Stanford University for his graduate-level degree in engineering. He was reading through the intricate configuration requirements telecommunications switches, hubs and routing equipment required during their production process, and the thought occurred to him that a constraint-based software engine would be ideal for managing the configuration requirements and also managing the process workflows for the specific production requirements. After working through the requirements and creating a prototype that Silicon Graphics expressed in interest in buying, and who is today one of the most loyal customers Trilogy has, the company was born. That was in 1992, perfectly timed before the launch of electronic commerce and the growth of the Internet as a means for customizing products. The company quickly grew and has to this day a reputation for looking to hiring only the best and brightest from the nations' top universities. Throughout the 1990s Joe and his team of developers continued to build out their roadmap, yet in the 2000 timeframe Joe found that PhDs from U.S.-based universities were dwindling in computer science and the growth in graduates in India was a potential answer to the problem of increasing the brainpower of the company.