The examples of corporate entrepreneurship outlined above offer evidence for several principles which characterize effective entrepreneurial environments. These are presented below.
Purpose-driven
In a market economy, it is rare to find business units within a corporation which are not established for some purpose. But merely existing for the accomplishment of a purpose is not identical to being driven by that purpose. Purpose-driven units organize, operate, and subsist in response to the fulfillment of a single goal or set of goals above all others. The degree to which a unit’s activities adapt to effect these goals is the degree to which the unit is driven by them.
Purposes of units must be aligned, even if indirectly, with the purposes of the larger organization. While it is uncommon for all units to generate revenue, each should remain focused upon a purpose which aids in the development of the organization as a whole.
Structurally independent
Agents that operate on behalf of the purpose can be grouped into a logical unit. This unit might be a department, a team, or a single person. The ability of this unit to operate independently of other units within the corporate structure represents its structural independence. Once again independence is a matter of degree: a unit whose operations can be effected smoothly with little or no assistance from other corporate units is structurally independent. Note that in order for a unit to remain internally purpose-driven, it cannot be completely structurally independent of the corporation. In such cases the unit is commonly spun-off, as the economic benefit of its operations in a larger world becomes greater than the cost of its assistance internally.
Internally flexible
In order for a unit to respond to its purpose effectively, it must possess some degree of flexibility in its operations. This flexibility includes not only the ability to reorganize operations themselves, but also the ability to monitor their success. A higher degree of flexibility is given to those units that can pinpoint operational failures and attempt a corrective reorganization most quickly. Those corrections that provide positive result increase the degree to which a unit is purpose-driven. As a rule, the smaller the team and better the monitoring mechanisms, the better the flexibility.
As mentioned earlier, these principles are symbiotic with one another. Internal flexibility, for example, is hastened by structural independence. In an entrepreneurial environment, units will achieve high levels of all three.
Creating an Entrepreneurial Environment
If we take these principles to represent desirable qualities of business units under a corporate entrepreneurial structure, the next question becomes how to foster them through management practice.
Implementing by Part or by Whole
Most organizations are not conglomerates, and so implementing corporate entrepreneurship to the degree it was used at XPARC or GE makes little sense. But the “peer as client” strategy outlined above was an example of how entrepreneurial tactics can be employed to a lesser degree for benefit. In places where entrepreneurial approaches might prove useful, an entrepreneurial environment will encourage their establishment.
An effective entrepreneurial environment will allow business units to develop the three principles outlined above. Several important techniques may be employed to encourage this development:
1. Team-To-Purpose
Teams driven by small, specific purposes, rather than large complex ones, often find themselves more clearly driven by purpose. If multiple purposes are at play within a unit, it is difficult for the unit to effectively measure performance and hence be flexible. Team membership should be directly tied to purpose, so as to keep the business unit smaller and more flexible.
This is contrasted against a team-to-hierarchy approach, where many stakeholders would be included in the operation of a team in order to represent their interests. A proper purpose should be one which satisfies all stakeholders in its fulfillment, and will invariably include input from all stakeholders. But only if the execution of purpose demands their participation are stakeholders included in the entrepreneurial unit’s operations.
2. Focus Communication
Communication between and among business units is a positive and necessary activity. But business units which are structurally independent generally require a fewer number of communication channels than those who are structurally dependent. An environment of focused communication will engender the development of structurally independent units.
This is not to suggest that employees themselves should be constrained in their ability to communicate freely, but rather that communication between business units should be consolidated in so far as this is possible.
Communication between one unit and another can be described as any type of correspondence which is required for the operation of one or both. Approvals, notifications, orders might all be examples of this communication. Focused communication within a corporation specifies the structural boundary: if the channel is available the business unit may utilize it, if not the business unit must find a way to do it internally.
3. Provide Tools for Measurement and Analysis
Internal flexibility depends upon effective measurement and analysis. Strategies like Six Sigma have recognized this need and place performance measurement at their center. Providing tools that accurately measure performance is essential in creating an entrepreneurial environment.
Most corporations have several different performance measurement programs in place. Unfortunately, a large majority of these programs are used only for decision-making at the very highest management levels. Measurement tools are most effective when used close to the action. Arming business units with powerful measurement procedures increases their internal flexibility by making them more immediately adaptable.
