Corporate entrepreneurship: teaching managers to be entrepreneurs

an opportunity that his competitors have missed? Thus the idea of corporateentrepreneurship has a certain cache that is hard to resist.But what is the reality? Can corporate entrepreneurship really be instilledinto a bureaucratic culture? How different are corporate entrepreneurs fromexternal entrepreneurs, and how well does the entrepreneurial mindset fitwithin a hierarchical corporate structure? There are few empirical answers tothese questions. The literature abounds with examples, but unfortunately theexamples often revolve around a few high profile examples like 3M, andDisney. These companies have had long histories of innovation andopportunity focus as cultural values, and have had numerous processes thatinstitutionalized these values (Greco, 1999; Roepke et al., 2000; Schrage, 1999).There is relatively little field research regarding the successes or failures oflarge companies who have tried to systematically instill corporateentrepreneurship within their walls.The purpose of this paper, then, is to discuss the results and lessons learnedfrom field research involving the attempt to create internal or corporateentrepreneurship within four large companies –Siemens-Nixdorf, Colonia-AxaInsurance, the Venezuelan Oil Company (PDVSA), and Mott’s (a part ofCadbury Schweppes) – struggling to be more innovative. Two of theseorganizations favored a corporate venturing approach, while the other twofollowed more of an intrapreneuring approach.Corporateentrepreneurship333BackgroundCorporate venturingBoth Siemens-Nixdorf Information Systems Company (SNI) and Mott’sfollowed a corporate venturing path.SNI came to Babson College in 1995 with an RFP to create a managementeducation program for its unit managers. The main purpose of the programwas to create a group of 300 corporate entrepreneurs within SNI who wouldlearn to be opportunity-focused, not just resource-focused. GerhardSchulmeyer, President of SNI, had embarked on an organization-wide changeprogram to turn a rather staid, conservative, risk-averse culture into a moreopportunistic, market-focused, fast, flexible organization in order to competemore effectively with the likes of H-P, IBM, Arthur Anderson, and the smallaggressive boutique IT vendors increasingly present in the marketplace.Both SNI and Mott’s followed a corporate venturing path.Schulmeyer had already brought in new board members from the outside,and was involved in a number of internal change efforts when Babson Collegewas approached to design and deliver the corporate entrepreneurship program.The entrepreneurial development program was considered a cornerstone inSNI’s change efforts because it was meant to make corporate entrepreneurs outof managers who had just been assigned to the newly-created position of unitmanager. The unit manager’s job sat at the intersection between the the line of

JMD22,4336(2) Is it better to try and identify people within the company who alreadyhave entrepreneurial leanings, or can any competent, motivated managerlearn to act and think like an entrepreneur?(3) Is corporate entrepreneurship really an oxymoron? Can people actuallybe trained and then allowed to act like start-up entrepreneurs within analready, well-established company. Or, as stated before, are there toomany corporate antibodies in place to allow such a phenomenon?(4) If there are such antibodies at work, how do large companies learn toidentify and overcome them?(5) Finally, is there a real return on investment in such educationalendeavors? Do any new, truly entrepreneurial ventures come to fruitionthat justify both the program’s expense and the managers’ time awayfrom other potentially more productive and certain activities? Ultimately,will increased entrepreneurial behavior actually lead to the capturing ofhigher margin, durable new business opportunities by the company?Summary of findingsFor purposes of confidentiality, the author has chosen to consolidate thegeneral findings from these four companies. Several sources of data served as afoundation for the following results. First, many of these programs haverequired that participants develop full-blown business plans and then competewith others in front of an executive team for resources and support. Thus, thereis some hard data regarding business plans that have actually developed intosuccessful businesses. We also have feedback from senior management, HRrepresentatives and the participants themselves as to how much they actuallylearned and could apply within their own businesses. While there are somecompany specific differences in results, the degree of similarity in the findingswas impressive.Nature v nurturePerhaps the first question is the most critical one for companies consideringteaching managers to be entrepreneurs. We now believe, beyond any doubt,that much of what start-up entrepreneurs do can be taught to relativelyordinary but motivated individuals. So what do start-up entrepreneurs knowand do that can potentially be learned by others?Start-up entrepreneurs do three things very well. They identifyopportunities, shape and develop these opportunities, and then they create abusiness structure to turn these opportunities into successful businessventures. The starting point is an idea that is new. This new idea could berevolutionary or evolutionary and it might not even be theirs, but there issomething different about it. Start-up entrepreneurs then begin to learn aboutthis idea to see if is just an idea or an opportunity. They change it, shape it,modify, and sometimes discard it for something better. Once they are satisfied

that their idea has commercial merit, they begin to build an organization ofpeople and resources to go about capturing the opportunity.Identifying and shaping ideas can be learned. We have many great examplesof managers who never considered themselves creative or innovative, whofound significant new business opportunities as a result of their entrepreneurialtraining. A Siemens manager, for example, found a unique way to stop creditcard fraud through fingerprinting technology. A PDVSA team identified ahuge commercial market for one of their waste products that they used tothrow away. A Mott’s employee identified a way to start a spin-off business,based on Mott’s back-office competencies. None of these opportunities wouldhave been discovered had these participants not been exposed to a trainingmilieu, in which ideas were not only encouraged and supported but challengedas well. So, the ability to think creatively and to be innovative is a humancondition. Some people exhibit these tendencies naturally while others need acatalyst for these inherent capabilities to emerge. Education and particularlycoaching turned out to be two of the most important ways in which innovationand creativity were stimulated to emerge. What the entrepreneurship trainingdid most effectively, was give participants the tools, techniques, and disciplineto distinguish between a good idea and a good opportunity.Clearly, the most “teachable” aspect of the opportunity process is thebusiness plan. Business plans have both clear structure and clear contentrequirements. In fact, the business plan was perhaps our most importantteaching tool. All the theory, case studies, and group discussions could notreplace the tremendous amount of learning that went on when participants wererequired to turn their idea into a full-blown business plan. The written businessplan is one of the few ways that we could determine whether the participant’sidea was just that, an idea, or a commercial opportunity. Every participant whocompleted a business plan said it was the most important (and perhaps one ofthe most painful) learning experience about being an entrepreneur that they hadever had. Managers who have gone through the development of a completedbusiness plan are not the same when they finish. They have had to learn aboutmarketing, finance, value, cash flow projections, etc., to a point where they canstand in front of their peers, senior managers or venture capitalists and convincethem that their opportunity is worth investing in.It was also interesting that many of the program participants said theyeither knew how to write a business plan or had already written one prior tocoming to the program. It was clear from our experience that very few of thesepeople actually had business planning skills that would pass muster in front ofa venture capitalist or an internal venture officer.Corporateentrepreneurship337Identifying people with the “right stuff”One of our most surprising results, and one that we had not predicted, was thatwe were not able to predict with any reasonable certainty which managers

JMD22,4338would emerge as the most entrepreneurial. Neither background, education, orpast successes were good predictors of corporate entrepreneur success. Twoexamples will make this abundantly clear. One of our first entrepreneurialtraining program participants was a 50 year-old engineer with no prior historyof innovation or entrepreneurial orientation in his work history. He was a good“hands on” engineer, quiet and “anal-retentive” in personality, and was forcedto be in the program by his boss; clearly not the best of candidates from aneducational training perspective. We all wrote him off at the beginning of thecourse as a never-to-be corporate entrepreneur. However, he became one of aminority of participants who actually came up with a great idea, shaped it intoa viable opportunity and wound up running a successful spin-off business forthe corporation. In his own words, he got “switched on”. He was clearly nothappy to be on the course at the outset, but fell in love with a very innovativeidea he and another participant had cooked up, and then he becameunstoppable in his pursuit of this idea. He claimed that the training programgave him the courage and confidence to try his hand as a corporateentrepreneur. The more he learned, the more he was coached, and the more wedemystified the entrepreneurial process, the more confidence he gained.The second example involved one participant who was an exceptionallyhigh achiever in the company with impeccable MBA credentials from anextremely prestigious business school. We all predicted that he would outentrepreneureveryone in the class. Unfortunately, he could never come to gripswith leaving the security of his functional position. He demanded that thecompany guarantee his salary, bonuses, and position, no matter whathappened if he pursued his venture idea. He wanted no downside for being acorporate entrepreneur, only an upside; clearly, not the kind of stuff thatentrepreneurs are made of. In this company, potential entrepreneurs wereencouraged to drop the course if it became obvious to us or to them that theywere not cut out for this role. He was one of the first to drop the course forwhich he had so eagerly volunteered.Corporate antibodiesOur experiences with these four companies attempting to inculcateentrepreneurship demonstrated the importance of company culture and toplevelleadership as extremely important ingredients for developing managersas entrepreneurs. All of the aforementioned companies embarked on theirvarious journeys into corporate entrepreneurship with the sincere belief thatthey were committed to this goal and ready to support it. But only two out ofthe four were able to go the distance in terms of full support for those whoseideas had merit. The other two stopped short of their goals for a number ofreasons, but four key barriers or challenges stood out.(1) If an organization is to teach managers to act like entrepreneurs, theymust also be willing to pay them as entrepreneurs. Two of our sample

companies were either unwilling or unable to change their pay structuresin order to support corporate entrepreneurship. Pay structures in largecompanies are often quite structured and systematic and therefore easyto administer but equally hard to change. They are often geared toequity and fairness, not the creation of internal entrepreneurs. Personnelpeople have often spent extraordinary amounts of time fine-tuning thesepay programs to ensure both external and internal equity. However, fewif any, of these pay systems are capable of dealing with an internalentrepreneur. It is not the purpose in this article to discussentrepreneurial pay schemes but they involve current payment on thepromise of future success, and they often involve some equity stake bythe internal entrepreneur in the future venture. For these reasons alonesome companies prefer to spin out the venture so that it will not beconstrained by the company’s often fair but constraining policies,especially those of pay.(2) A second barrier involved time. In all four of our companies,managers were expected to do their day jobs and develop anopportunity to the point where it would either be funded or killed. Onthe surface, this approach makes sense from a “vetting” point of view.If you don’t really love your idea and see it as a real opportunity, thenyou won’t have the motivation to do your day job and work on a newventure at the same time. Start-up entrepreneurs also often work for alarge company, and in their spare time pursue their dream of startingtheir own business. Unfortunately, for most of our company “wouldbe”entrepreneurs, their day jobs were almost overwhelming. All thedownsizing and increased pressure for short term quarterly resultshad pushed many of the managers with whom we worked into tenand 12 hour days. So there was precious little time or energy left topursue another opportunity especially if the rewards were not clear fordoing so.(3) A third and quite surprising obstacle that we discovered from our workwith these companies involved the peers of the program participants. Itwas surprising how many of these manager’s peers hoped they failed intheir efforts to become corporate entrepreneurs. Because thisphenomenon (no head shall rise above the rest, unless it’s mine)existed across all four of our companies – we have been led to concludethat this may be a human condition in many companies. Competition forjobs, promotions, etc., undoubtedly causes many of us to judge our worthin terms of others’ successes. In large bureaucratic organizations whereit is difficult to differentiate oneself or to stand out, the prospect of seeingsomeone else chosen as a corporate entrepreneur with the potential torun their own businesses and get rewarded accordingly, can createintense jealousy. Many of our would-be entrepreneurs found this changeCorporateentrepreneurship339

JMD22,4340in their peer’s behavior difficult to cope with. We uncovered severalinstances of peers going to their joint boss to complain that theentrepreneur was not holding up his/her part of the workload andtherefore should be taken out of the entrepreneurial training program.The bosses on the other hand had not seen this supposed downturn inproductivity.(4) The fourth and biggest obstacle was the corporate entrepreneur’s directline boss. In all four of our companies, senior management wascommitted to trying to create greater innovation and new businessdevelopment through the development of corporate entrepreneurship.Unfortunately, many of the bosses a level or two down from these seniorexecutives were not so committed. We had numerous reports of directline bosses telling their managers in our program to “forget what youwere taught, all I care about is meeting our quarterly results”. It oftentook strong executive team intervention to dissuade these direct bossesfrom acting in this manner. Obviously many of these direct bosses wereeither poorly informed about what the company was trying to do, or theyhad not bought into the processes for obvious and often legitimatereasons.Does corporate entrepreneurship really make a difference?First, let’s look at what success means. One end of the continuum would be achange in the manager’s behavior, which fosters more innovation, creativeproblem solving, and circumvention of red tape. The manager is not really acorporate entrepreneur in terms of creating a new business venture, but he orshe is now much more appreciative of the importance of new ideas, and thenacts to create a more innovative culture for his/her employees. We have createdan experimental Entrepreneurial Orientation Survey, which we hope will allowus to assess this type of change in behavior from a pre/post programperspective. As previously stated, there is some fairly strong evidence thatacting more entrepreneurially as a manager can have a significant impact onboth attitudinal and financial measures, even if the manager does not create anew business (Pearce et al., 1997).At the other end of the spectrum is the creation of a completely newbusiness, which is durable and generates a great deal of money for theorganization, much like the returns venture capitalists seek.But, at the end of the day, the real test of a corporate entrepreneurshiptraining is whether significant new businesses or new business results fromthis type of educational immersion. As one might expect, we have severalspectacular successes and many failures. But, perhaps our sample ofstatistics from these four companies is no different than what would beexpected from looking at the number of successful ventures funded byventure capitalists.

First, a couple of the spectacular successes:(1) One of our managers-turned-entrepreneur proposed a new business thatwould focus on oil company distributors to help them manage both frontand back end logistics better. In addition, his new business was one ofthe first to create the “speed pass” idea that allows motorists to wave amicrochip in front of the gas pump as a method of payment. Within thefirst three years of his new company’s creation, it was grossing over 250million dollars in revenues.(2) Another example involved an entrepreneurial team whose innovativeidea of turning waste oil products into a new business for xxxx resultedin yyyy revenues.Clearly, these examples are impressive and they happened in companies wherethe overall cultures were not particularly entrepreneurial, thus dispelling thenotion that cultural change has to happen before the fruits of entrepreneurialinterventions can be realized. But, they must also be seen in the light of theoverall approach to training entrepreneurs. Over the past six years we haveprobably run corporate entrepreneurship programs for well over 1,000 managers.While many of these managers describe the educational process and thedevelopment of a business plan as the most significant business educationexperience they have ever had, relatively few, perhaps 10-15 percent of theseentrepreneurial plans ever led to successful new ventures. Again, this data seemsto square with the notion that most (90 percent) new start-up businesses fail.The deck seems to be stacked equally against corporate entrepreneurs aswell as start-up entrpreneurs. On the other hand, the venturing process doesresult in the generation of many new ideas, the education of people regardingdifferences between good ideas and good opportunities, and many times newcorporate knowledge and competencies which did not exist before. Ourexample of the thumb-printed credit card created new technologicalcompetencies that have been leveraged elsewhere within the company. It isunlikely that this technology would have been commercialized had Siemens notempowered this manager to think and act in a more entrepreneurial manner.Lessons learned.Pockets or islands of entrepreneurial activity can develop and thrive, atleast for a while, in cultures that are not in themselves entrepreneurial.Clearly, researchers are right when they claim that organizational cultureplays a key role in a company’s ability to develop corporateentrepreneurship (Morris, 1998; Hood and Young 1993; Bygrave, 1997).But, successful ventures can develop in non-entrepreneurial companieswith the right kind of tactical interventions. This is good news forcompanies who are told that it takes five to eight years to change culture.Perhaps, it only takes a critical mass of switched-on corporateCorporateentrepreneurship341

JMD22,4342entrepreneurs, with some championing at the senior level, to start to seeresults..A lot of ordinary corporate citizens can learn to act as corporateentrepreneurs with the right education, training, and support. The mostcritical piece is that they are helped to develop an idea that theythemselves are turned on to. Without this passion, it would be hard toimagine anyone willing to fight the uphill battle that many of our wouldbeentrepreneurs had to do. This really speaks to the mindset of theentrepreneur. Passion can’t be taught, but it can be encouraged. The skillset, however is much easier to teach. Market analyses, cash flow analysis,operations management etc., can be taught, as we know from workingwith MBAs and other executives..Catalytic coaching and the business planning process were the two mostimportant educational tools for the development of new businessopportunities. Catalytic coaching sounds like an oxymoron, but itinvolved pushing managers to move from an iterative focus to a platformfocus. Most managers, when asked to think about new businessopportunities, tend to start close to home with iterative, relatively smallchanges to products or services. It takes a push from a coach whoaggressively challenges this “close to home” mentality typically found inthe ideation phase. We saw many mediocre ideas blossom into trulyentrepreneurial ideas as a result of this type of coaching. In addition, thisis where some of the real passion developed within the corporateentrepreneur. They started to fall in love with their ideas, especially whenthey became really interesting and more risky. Many of Mott’s peoplestarted off with ideas about packaging and apple sauce color. At the endof the program they were thinking about day care centers and managingbrands for the World Wide Wrestling Federation, a far cry from blueapple sauce. These types of ideas are more of a platform of ideas in thatthey leverage the corporation’s capabilities, but into significantlydifferent product offerings or markets. The importance of the businessplan is obvious. Great ideas without the discipline of the businessplanning process are generally not great opportunities. This was the mostimportant tool for differentiating the two and further shaping theopportunity. One of our entrepreneurs came to us in a perturbed statebecause his business plan was telling him that he could not make anymoney with his original idea. He was afraid that he would some how “fail”the entrepreneurial course. We soundly congratulated him for notspending the company’s money on a bad idea and told him to find anotherone. This little story says a lot. Being entrepreneurial also means knowingwhen to “pull the plug”..Entrepreneurs can come from anywhere in the organization. One of ourbiggest lessons was our inability to predict who could become a corporate

entrepreneur. When experience, creativity tools, coaching, and a person’sown confidence and desire collide with market knowledge, customerintimacy information, and technological changes, entrepreneurialopportunities are identified. We could not predict with any accuracywho would be in the intersection at the right time, but providing thisintersection in a planned way did result in brand new businesses andsignificant innovation in current businesses. In addition, we could notpredict which of our would-be entrepreneurs would be motivated. OurMBA star arrived motivated, became unmotivated and then quit. Ourolder engineer arrived unmotivated, got excited and stayed. So theinteresting research question is, what are the key ingredients for causingthe right kinds of collisions at the intersection. We know some of theelements but not others..Decoupling ideation and opportunity identification from implementation.As we looked at our four companies, we discovered that some individualsreally do have the right stuff to identify, develop, and implement a newbusiness venture from start to finish. They are akin to many start-upentrepreneurs. We also encountered people who were good at the creativeopportunity identification and shaping phases, but who could not or didnot want to implement their idea. For them, the fun was in theconceptualization piece, not the implementation piece. Thus, anycorporate entrepreneurship process must first be framed around thequestion of whether a company wants to develop corporateentrepreneurship processes or corporate entrepreneurs. The processapproach means that a company does not expect the same people todevelop and then implement a new business, but they want the structuresand processes in place, which help to identify, shape, and then capture anew business opportunity. Many companies are starting to build oralready have, some form of entrepreneur process in place. Intel, Proctor &Gamble, Ford, Dow and others are exploring and testing these variousmachines of innovation. Obviously not all of these structures work(Altman, 2000) but companies seeking greater innovation are increasinglyexploring new avenues. An emphasis on identifying and supporting a“corporate entrepreneur” who is expected to follow a new opportunityfrom start to finish is a relatively new model and one that does not requirethe same investment in fixed assets. We do know that passion counts andinstitutionalized processes do not always take this into account. Perhapscompanies seeking innovation need to pursue both paths..The last lesson is that a little difference can make a big difference. Notevery manager needs be an entrepreneur to help a company spawnsignificant new business opportunities. Several of our examples,particularly the $250 million dollar one, attest to this. So companiesneed to be realistic about how much corporate entrepreneurship isCorporateentrepreneurship343

JMD22,4344enough. Do companies really need to change their culture, or get a coupleof big wins every few years? Perhaps many organizational consultantshave put too much effort into organizational change as a pre-requisite toventuring. Maybe more emphasis on venturing first, and a few wins,would do more to change the culture than the other way around.ReferencesAltman, J. (2000), “Xerox new enterprises” (case study), Arthur M. Blank Center forEntrepreneurship, Babson College, Wellesley, MA.Block, Z. and MacMillan, C. (1993), Corporate Venturing, Harvard Business School Press, Boston,MA.Bygrave, W (Ed.) (1997), The Portable MBA in Entrepreneurship, Wiley, New York, NY.Covin, J. and Slevin, D.P. (1991), “A conceptual model of entrepreneurship as firm behavior”,Entrepreneurship Theory and Practice, Vol. 15, pp. 7-24.Covin, J.G. and Miles, M.P. (1999), “Corporate entrepreneurship and the pursuit of competitiveadvantage”, Entrepreneuship Theory and Practice, Vol. 23 No. 3, pp. 47-63.Greco, J. (1999), “Strategists of the century: Walt Disney”, Journal of Business Strategy, Vol. 20No. 5, pp. 33-4.Hood, J. and Young, E. (1993), “Entrepreneurship’s requisite areas of development: a survey oftop executives in entrepreneurial firms”, Journal of Business Venturing, Vol. 8 No. 2,pp. 115-36.Morris, M. (1998), Entrepreneurial Intensity, Quorum Books, London.Pearce, J.A., Kramer, T.R. and Robbins, D.K. (1997), “Effects of managers’ entrepreneurialbehaviour on subordinates”, Journal of Business Venturing, Vol. 12 No. 2, pp. 147-60.Pinchot, G. III (1985), Intrapreneuring, Harper & Row, New York, NY.Roepke, R., Agarwal, R. and Ferratt, T.W. (2000), “Aligning the IT human resource with businessvision: the leadership imperative”, MIS Quarterly, Vol. 24 No. 2, pp. 327-53.Schrage, M.D. (1999), “Serious play: how the world’s best companies stimulate innovation”,Research Technology Management., Vol. 42 No. 6, p. 58.Schumpeter, J.A. (1934), The Theory of Economic Development, Harvard University Press,Boston, MA.Stopford, J. and Baden-Fuller, C.W. (1993), “Corporate entrepreneurship”, in Lorange, P.,Chakravarthy, B., Roos, J. and Van de Ven, A. (Eds), Implementing Strategic Processes:Change, Learning and Cooperation, Blackwell, Oxford, pp. 91-114.Stopford, J.M. and Baden-Fuller, C.W. (1994), “Creating corporate entrepreneurship”, StrategicManagement Journal, Vol. 15, pp. 521-53.Timmons, J. (1989), The Entrepreneurial Mind, Brick-House Publishing Company, Andover, MA.