Corporate Entrepreneurship | CMAT Mock Test Series - CAT PDF Download

Why is Corporate Entrepreneurship important?

The breathtaking pace of development and innovation is driving the way business is conducted. As several new processes, ideas, strategies, and technologies are flooded in the competitive world, the already established companies can either innovate their future or be the victims of innovations. The pathway to overcome such circumstances involves fostering and promoting entrepreneurial activity.

The reason why corporate entrepreneurship is important can be summed up in the following points:

• Need for Innovation: There is always a need for innovation as managers look for ways to cut costs, improve quality, or otherwise enhance performance.
• Creation of New Value: Businesses engaged in entrepreneurial activities are expected to achieve higher levels of growth, profitability, and new wealth creation.
• Effect on Economy: Corporate entrepreneurship can affect an economy by increasing productivity, improving best practices, creating new industries, and enhancing international competitiveness.
• Boosting Productivity: Intrapreneurship helps in boosting productivity as people come up with new ideas and also helps to increase morale among the workforce.
• Benefit for the Organization: Corporate entrepreneurship provides a new source of revenue which is the ultimate benefit of the parent organization. This leads to a greater impact on the market condition of the company.

Implementing Corporate Entrepreneurship

Entrepreneurial success is defined in terms of innovative capacity that enables a business to renew itself and hence survive longer. The key to making an organizational structure entrepreneurial involves several factors, especially fostering the right climate or culture. Intrapreneurship can be implemented with the help of the following:

• Flexibility: Organisations must encourage flexibility whereby bureaucracy is minimized and the ad-hoc approach is maximized.
• Facilitating Opportunities: An entrepreneurial climate that promotes the detection and facilitation of opportunities as well as fostering motivation to pursue opportunities provides an ideology to which employees can commit.
• Providing Resources: Organisations must provide employees with all the necessary resources for their projects which might include funding for research and development, the use of technology, and more importantly the guidance of experts.
• Separate Existence: Entrepreneurial structures should be new and separately organized from the old and existing ways of a business, with a specific place for new projects.
• Teamwork: Teamwork and participative management styles improve the environment inside a company which helps in the altogether growth of employees as well as the company.
• Training and Development: One should offer training programs to enhance employees’ entrepreneurial skills. This may include workshops on problem-solving, creative thinking, and risk management.

Corporate Entrepreneurship Examples

Several companies have established corporate entrepreneurship. A few examples of companies that took the initiative of introducing corporate entrepreneurship or intrapreneurship in their organization are discussed below:

• Google: Google introduced a policy called “Innovation Time Off” where engineers are encouraged to spend 20% of their paid time on projects they are passionate about. It has led to the development of Google products.
• Amazon: Amazon Web Services (AWS) introduced by Amazon was the outcome of corporate entrepreneurship. It was originally developed as an internal infrastructure service to support Amazon’s e-commerce platform. AWS evolved into a separate business unit, providing cloud computing services to external customers.
• Sony: PlayStations by Sony are one of the best examples of Intrapreneurship. Initially, Sony was not interested in entering this industry but today, gaming accounts for 29% of Sony’s revenue. Ken Kutaragi was the intrapreneur to launch the first Sony’s PlayStation.
• 3M: “Post it Notes” by 3M is one of the most intrapreneurial inventions. Mr. Fry developed the Post-It Note during his “15% time,” a program at 3M that allows employees to use a portion of their paid time to pursue and develop their ideas.
• Airbus: “Crowdcraft” by Airbus is an intrapreneurship example of ecosystem innovation. It is a crowdsourcing and crowd-staffing platform to find solutions to technical challenges. The main objective of this platform is to create a better-connected world and also to reduce work time and cost through more efficient ways.

Advantages and Disadvantages of Corporate Entrepreneurship

Advantages of Corporate Entrepreneurship

• Organisation Growth and Profitability: When organizations use various new strategies to make the most of opportunities near them, it will increase the organization’s profitability and it’s growth.
• Availability of Resources: Corporate entrepreneurs get access to different resources, including finances, established sales force, brand, and customer base, which brings them one step ahead of others.
• Availability of Alternatives: Due to diversity among the employees, there is greater knowledge inside the group which provides a wide range of alternatives to consider before making a decision.
• Professional Connections: A large network of corporate entrepreneurs can assist the workforce in developing new business ideas.

Disadvantages of Corporate Entrepreneurship

• Long Approval Cycles: It is crucial to understand that they can’t decide without getting the approval of a higher authority. Hence, it becomes a lengthy and time-consuming process of getting approval before taking any decision.
• Limited Financial Rewards: Corporate entrepreneurs receive fewer rewards as compared to their efforts for the project, which might be one of the reasons that affect company morale. It discourages employees from working profoundly.
• Competition inside the Group: Competition among the members can undermine the importance of the ultimate goal of the project.
• Herd-thinking: Herd-thinking tends to force the group to agree and accept the first apparent solution without considering alternatives. It also shows a lack of open ownership.

Types of Corporate Entrepreneurship

Corporate entrepreneurship can be broadly classified into the following:

• Corporate Venturing: Corporate venturing is concerned with launching new ventures wherein larger companies invest and support entrepreneurs instead of equity stake. In other words, we can say that it is an activity that seeks to generate new businesses for the corporation in which it resides through the establishment of external or internal corporate ventures. It is further classified into sub-categories which are:
  • Internal Corporate Ventures(ICVs)– These are the ventures that originate within the corporation are owned by it and typically reside within the same corporate structure. However, as they reside within the same structure they miss real opportunities which they might get outside it.
  • Cooperative Corporate Ventures(CCVs)- Cooperative ventures generally exist as external entities that function beyond the organizational borders of the founding partners.
  • External Corporate Ventures(ECVs)– Any innovation that is created outside the firm is an external corporate venture.
• Intrapreneurship: Intrapreneurship is created to set the employees’ minds and behavior to create a culture of creativity. It is the process of creating new enterprises within the established enterprises. It is considered an activity that entrepreneurs use to develop a company for adding innovation.
• Organisational Transformation: An organizational transformation can be defined as changing the organizational system for better economic performance. The main motive of this transformation is to enhance the performance of the company. This is applied to align the culture of the organization with its strategy to achieve a competitive advantage.
• Industry Rule Bending: Industry Rule Bending form targets the alteration of rules in the working environment. This standard affects the entire industry. This form of standard creates an enormous set of opportunities regarding growth and innovation.

Four Models of Corporate Entrepreneurship

The four models of Corporate entrepreneurship are discussed below:

• The Opportunist Model: The first of four models of corporate entrepreneurship is The Opportunist Model which signifies the starting point of an entrepreneurial company, as they typically focus on resource production and ownership authority across the organization. All companies begin as opportunists. The opportunist model works well only in companies that are open to experimentation and have diverse social networks behind the official hierarchy. Consequently, the opportunist approach is undependable for many companies.
• The Enabler Model: The Enabler Model is facilitated by developing new business concepts, which eventually lead to improvements within a company or team’s personal development and overall engagement executively. The basic principle of the enabler model is that employees across an organization will be willing to develop new concepts if given adequate support. Well-designed enabler practices have the benefit of exposing senior management to ambitious, innovative young employees, allowing the company to identify and nurture future leaders. The enabler model sharply contrasts with the opportunist model, as it often utilizes dedicated resources.
• The Advocate Model: The Advocate Model focuses on developing new businesses to become more large-scale corporations. Its essential function is to coach and facilitate business units in pursuing new opportunities and also to support corporate entrepreneurship teams. The typical challenge of this model is to find ‘business builders’ among the executives. Advocate organizations act as innovation experts, encouraging corporate entrepreneurship together with business units.
• The Producer Model: Many companies pursue corporate entrepreneurship by establishing and supporting formal associations with significant funds or active influence over business units. The Producer Model utilizes focused power, where the business shares are held by only a few possessors and dedicated resources to help grease developing projects, facilitate collaboration, and the development of new business units. The Producer Model also aims to encourage cross-unit collaboration, build potentially disruptive businesses, and create pathways for executives to pursue careers outside their business units.

Selecting the Right Model

• The four models of Corporate Entrepreneurship provide individuals with a basic understanding of how to develop an entrepreneurial company after it has been created. The four models provide a strong foundation for a successful business.
• To select the right model, one has to discover the requirements of the organization and the ultimate goal that the organization is planning to achieve. The answers to such questions will suggest the use of one model over another. Evolving from the Opportunist Model to any other forms of corporate entrepreneurship begins with a requirement for growth and a broad, clearly communicated vision.
• Enabler Models can support efforts to enhance a company’s culture. It is particularly well-suited to environments in which concept development and experimentation can be pursued economically throughout the organization.
• For companies that want to grow their established units, the Advocate Model might be the best option. It exists to help business units do what they can’t accomplish on their own but should pursue to remain vital and relevant. The Advocate Model can prevent corporate entrepreneurship from becoming a casualty of powerful business units.
• If a company seeks to conquer new growth domains and discover breakthrough opportunities then it should consider the Producer Model. It can provide the necessary integration for new units that involve complex technologies or require coordination of certain expertise across different business units.

Putting the Corporate Models to Work

Putting corporate models to work is a vital task. Many companies start this with small teams and mandates from top leadership. The first step is to get consent from the senior management regarding the objectives, goals, and proper pathway of the project. Effective communication between the management and the workforce is important for consensus-ad-idem. It will ensure support for the initiative and also prevent the internal stakeholders. Communication is a crucial factor even after a corporate entrepreneurship program has made a proven track record because building new businesses often requires aid from people company-wide, especially during the launch and scaling of the business.

How to Become a Corporate Entrepreneur?

Guidance to become a corporate entrepreneur:

• Growth Mindset: The foremost requirement is to develop a growth mindset by approaching new challenges and new opportunities with a positive, solution-oriented attitude.
• Set Objectives: Start with a small team to clearly define and communicate the company’s objectives for corporate entrepreneurship. Make a roadmap for the implementation of those objectives.
• Relation Building: Collaborating and making a network with other entrepreneurs helps in getting the ideas off the ground. Seeking out mentors for their support and guidance also helps to overcome shortcomings.
• Right Model: Selecting the right model is the most important task of all. The right model will lead you to the right path.
• Calculate Risk: Experiment and try new things, but be sure to carefully assess the risks and potential benefits before moving forward. Calculate the risk and stay flexible.
• Grow: Starting a new venture or project within a corporation can be challenging, but persistence is the key to overcoming the challenges and evolving.