Developing a Corporate Entrepreneurship Strategy

In theory, there’s no difference between theory and practice. 
But in practice, there  is.”
                                        - Lawrence “Yogi” Berra, American Baseball Legend

How do you successfully build a corporate entrepreneurship capacity?  Our  research has found that it’s a multi-stage process. 

The first key element is a mandate for growth or transformation accompanied by a vision that points in the general direction.  At DuPont, for example, CEO Chad Holliday wanted to make a push for better top-line revenue growth, in addition to cost-cutting that had sustained margins and returns in the prior six years. 

Holliday’s corporate planning group considered DuPont’s strengths, their changing competitive context, and state-of-the-art academic research to articulate a strategic vision.  That vision, captured by the phase “beyond the molecule,” described how DuPont could increase top-line growth by adding services and knowledge value to their traditional bulk chemicals business. As a result, in 2005 (6 years after the initiation of “beyond the molecule” effort), DuPont’s revenues from traditional bulk chemical sales dropped to only 17% of its revenue, with new knowledge-based services and solutions accounting for its internal growth. 

The second crucial element of success, as exemplified by DuPont, is their focus on setting specific corporate entrepreneurship objectives.  In general, those objectives fall into three categories

1. Build entirely new businesses
2. Assist existing business units in transforming the way they do business (e.g. moving into adjacent markets, create significant new products or services, or in-license or out-license intellectual property to capture value)
3. Nurture a culture of innovation company-wide

Each objective can add value, but they are also quite different.  What types of people, capabilities and processes would your firm require in each instance?

A third element, corporate context, is also extremely important in shaping your corporate entrepreneurship strategy.  The most often mentioned elements shaping innovation in the companies we studied were constraints and gaps derived from factors internal to the company and external influences in their core markets. 

These included:

Internal Structure and Culture

• Divisional or Business Unit Autonomy
• Divisional or Business Unit Diversity
• Corporate culture and history with collaboration and entrepreneurship\ 

External Business Environment

• Level of turbulence in the firm’s core markets
• Breadth or intensity of technologies underlying offerings
• Capital requirements for commercialization of new business models
• Regulatory restrictions on commercialization of new business models

Clearly, these factors make a difference in the type of corporate entrepreneurship structure and practices most appropriate for your company.  For instance, the highly structured and expensive commercialization process for a medical device or pharmaceutical argues for a different type of corporate entrepreneurship design than those used for consumer packaged goods or a new website. 

If divisional or business units enjoy a great deal of autonomy in your corporation, a central organization aimed at overcoming the barriers between them—sometimes called silos or stovepipes (or, in the tongue-in-cheek version of one of our private clients, “cylinders of excellence”)—may be warranted.  That central organization might or might not have its own project funding, depending on corporate objectives and processes, as we discussed earlier. 

We’ll write more later about some of the specific steps in the early stages of a corporate entreprenuership implementation.  In the meantime, we’d like to hear about your experiences setting corporate entrepreneurship objectives– please let us know about them in the comments area below.

Tagged as: business building, DuPont, Growth, innovation culture, setting objectives, Structure and process, supporting innovation