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Chapter summaries - Chapter 18

Corporate entrepreneurship is the term used to describe entrepreneurial behaviour in an established, larger organisation. It is an emerging discipline. A more precise
definition is difficult but there are four identifiable strands of literature:

1 Corporate venturing – for example the purchase of Pret A Manger by McDonald’s.
2 Intrapreneurship – for example Art Frye at 3M.
3 Bring the market inside – for example the establishment of Xerox Technology
Venture.4 Entrepreneurial transformation – for example as practised at 3M.

Entrepreneurial transformation is about adapting large firms through their
leadership, strategies, systems, structures and cultures so that they are better able to cope with change and innovation. This is called creating entrepreneurial architecture.

It creates within the organisation the knowledge and routines that allow it to respond flexibly to change and opportunity in the very way the entrepreneur does. It is not necessarily based on legal contracts and often only partly specified, therefore it is not easy to copy. It is based upon trust and mutual self-interest. Because it is complex, architecture can be a major source of sustainable competitive advantage. Strong architecture is based on deep personal relationships, either internal or external. Dell gains some of its competitive advantage from partnering with suppliers (external architecture).

Entrepreneurial management is about the ability to lead and manage this larger
entrepreneurial organisation – a need endorsed by Diane Thompson of Camelot. It
involves the development of an entrepreneurial architecture – the network of
relational contracts within, or around, an organisation, its employees, suppliers,
customers and networks – that encourages:

• Opportunity seeking and innovation;
• Vision and drive;
• Relationships and culture;
• New ways of dealing with risk and uncertainty;
• Institutionalising a process of continuous learning and strategising.

Learning organisations thrive in turbulence. Real knowledge means using the
wheel of learning (Figure 18.2) to understand the root cause of problems so as to put in place systematic solutions to problems – ‘knowing-how’, ‘knowing-why’ and doing something about it. It means linking this to our mental models so as to challenge how things are. The most important learning occurs on the job. It is social and active. It is about learning tacit knowledge – intuition, judgement and expertise.

Entrepreneurial firms thrive in environments of change, chaos, complexity,
competition, uncertainty even contradiction. The exact nature of effective
entrepreneurial architecture depends on the environment. It can be sectorally and
geographically dependent. It can vary with the nature of the entrepreneurial
intensity. The point is that there can be no prescriptive blueprint for entrepreneurial
architecture. However, generally entrepreneurial firms thrive in changing, unstable or disruptive environments.

Culture within an organisation is based on a firm set of enduring values. As
Michael Dell says, it is the most important thing a leader creates. It can be transmitted individually by the entrepreneur or, as in the case of Body Shop, through PR activities, induction, training and good communications generally.

Figure 18.5 shows the cultural web of entrepreurship, but it distinguishes between
‘high-level’ attributes – strong relationships, creativity and innovation,
empowerment, measured risk-taking and continual learning – and the detailed
elements of culture.

Structures create order in an organisation but there is no single ‘best’ solution. The
most appropriate structure depends on the nature of the organisation, the strategies it employs, the tasks it undertakes, the environment it operates in and its size.

Small organisational units are more responsive to the environment and large firms
have responded to the entrepreneurial challenge by experimenting with different
organisational forms.

An organic structure has limited hierarchy and is highly flexible, decentralised
with a minimum of levels within the structures. It is more horizontal than vertical.

Authority is based on expertise not on role, and authority for decision-making is
delegated and individuals empowered to make decisions. It is informal rather than
formal, with loose control but an emphasis on getting things done. Spans of control
are likely to be broader. Team-working is likely to be the norm.

There are structures within structures that encourage smaller units to develop, each with considerable autonomy, but there are also structures in place that encourage rapid, open, effective communication between and across these units and through any hierarchy.

Richard Branson understands this, and his Virgin empire comprises some
270 separate, semi-independent companies, often set up in partnership with other
individuals and organisations.

Managers must give up control to gain control. Entrepreneurial firms need loose
control but tight accountability. Too much control stifles creativity, innovation and
entrepreneurship. However, too little control can lead to chaos. Most firms place too
many constraints and controls on managers. What is needed is ‘balance’, as in BP’s
model which involves:

• Space or slack – a looseness in resource availability;
• Direction – the broad strategy and goals;
• Support – like knowledge transfer and training systems;
• Boundaries – not just rules but underlying morals and ethics.

The concept of space or slack – a looseness in resource availability – is important for entrepreneurship. Some slack is necessary for experimentation and innovation.
Internal seed or venture funding is also needed to take ideas further.

For an organisation to work effectively, the organisation structure and the style of
management need to be in sync. As an entrepreneurial firm moves away from
centralised, formal hierarchies to flatter structures with more horizontal
communication the need for managers and tight management control lessens. If you are looking for ‘dazzling breakthroughs’ then autonomy and flexibility are crucial.

But if the degree and frequency of entrepreneurship is less, the need for controls will increase. Again, it is all a question of balance. Many successful firms cycle between organic/entrepreneurial structure and styles and mechanistic/bureaucratic as they grow – mirroring the growth crisis consolidation process noted in strategy
development.