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  • 12.07.09

How to Tell If You Are Getting Traction as a Corporate Entrepreneur

Growing a new business within an existing corporation can be exhilarating and rewarding, but also unsettling. Given that the rewards of designing new businesses have a longer time horizon than executing on current business, how can corporate entrepreneurs be sure whether they are moving in the right direction in the early stages? In our seven years of research of corporate entrepreneurship and innovation at more than 30 major companies, we’ve found three major signposts of progress toward building new businesses.

Growing a new business within an existing corporation can be exhilarating and rewarding, but also unsettling. Given that the rewards of designing new businesses have a longer time horizon than executing on current business, how can corporate entrepreneurs be sure whether they are moving in the right direction in the early stages?

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In our seven years of research of corporate entrepreneurship and innovation at more than 30 major companies, we’ve found three major signposts of progress toward building new businesses.

  1. CEO and Senior Management Commitment is Solid. Inertia, risk aversion, and operating outside existing incentives are common obstacles faced by budding corporate entrepreneurs. Overcoming them requires support from senior executives, though they do not always need to take an active, hands-on role. Often, all that’s required from senior management is to give corporate entrepreneurs a public mandate, and occasional assistance in bureaucracy busting.
  2. Your Energies are Focused. Remaining focused on building a new business must be the corporate entrepreneur’s first priority. If you’re expected to continue making your quarterly numbers or to manage existing product lines at the same time, you’re likely to fail. Most of your energy needs to go into resolving uncertainties and testing assumptions in order to identify the most promising business model. At the group level, focus means pursuing a balanced portfolio of opportunities and engaging with the right people across the company and externally. The most effective corporate entrepreneurship groups build a clear picture for themselves and others as to how their activities fit within the company’s overall strategy.
  3. You’re Already Planning for Transition and Scaling. Many companies have made the “fuzzy front end” of the corporate entrepreneurship process more systematic and productive by implementing explicit procedures for generating, collecting and evaluating new business ideas, with tools like discovery-driven planning, technology scouting, and portfolio risk management. Yet despite these efforts, corporate entrepreneurship projects often stall at the “back end,” when it comes to transitioning field-proven new business concepts into the organization and scaling them into self-sustaining businesses. As a corrective, early business model exploration should anticipate where new business system design may involve changing the existing business system. For instance, you will squarely need to address disincentives to cooperation within other business units, and resistance from existing corporate functions, such as human resources or supply chain management.

A successful corporate entrepreneurship effort will eventually bring results to the bottom line, though it’s never a bad idea to try to find some low-hanging fruit that will show concrete results early. As you begin your quest to build new businesses, pay attention to the three issues outlined here. Problems in these areas can stop an otherwise good, innovative concept from becoming a robust new business that makes a difference for your company.

Read more from Robert Wolcott and Michael Lippitz on how corporate entrepreneurs can take their vision to market and help their companies Grow From Within.

Robert Wolcott and Michael Lippitz are leading authorities on innovation and corporate entrepreneurship at the Kellogg School of Management at Northwestern University, and co-authors of Grow From Within: Mastering Corporate Entrepreneurship and Innovation (McGraw Hill, 2009). In the past six years, they have studied more than 30 companies across industry sectors and developed an ongoing dialogue with them about corporate entrepreneurship through the Kellogg Innovation Network (KIN).