Description
In this such a data concerning should companies be cautious entrepreneurs.
Should companies be
cautious entrepreneurs...
Andrew Campbell
The question posed in this EBF debate suggests that large companies need to be
‘entrepreneurs’ (creators of new businesses) – and that developing new businesses is a
game every company must learn to play. Research we have recently completed at
Ashridge points to a different view of the issue. Companies are more successful if they
are cautious entrepreneurs, limiting their efforts to a few new business initiatives and, at
times, choosing instead to channel spare cash back to shareholders. We have identified
the following causes of mismanagement in this area.
?? Presuming that success is related to the number of new ventures that you
launch – following a numbers game, not a selection game.
Despite the frequency of the advice to companies to increase their entrepreneurial
heartbeat, bring Silicon Valley inside and set up incubators and venturing units, there is
no evidence that success is related to the number of tries. Of more than 50 successes in
our database, fewer than three began their corporate life as part of a corporate incubator
or venturing unit. The solution appears to be wise selection not energetic
entrepreneuring.
? Investing in providing a supportive environment for entrepreneurs, for
‘purposeful accidents’ and for exploring the periphery.
The widespread assumption that big companies need to create the conditions where
untapped potential naturally bursts out (bottom-up, outside-in or whatever) is generally
misguided. There are very few situations where good ideas and good entrepreneurs
combine with good operators and good luck. This is because there are few good ideas,
fewer good entrepreneurs and a limited amount of luck. Hence the probability of it all
coming together is low. To some degree this is why so many successes seem more
accidental than planned. The period in the late 1990s, when conditions were most
favourable to entrepreneurs with ideas, spawned many thousands of people wanting to
emulate Bill Gates, but did not greatly increase the number of successes. The good
projects (the few ‘accidents’) will shine brightly enough to be identified by managers
using appropriate screening criteria. Companies appear to do better by channelling their
effort into the process of top-down screening rather than investing in bottom-up
venturing.
? Blindly setting entrepreneurial BHAGS (Big Hairy Audacious Goals) to increase
motivation.
The success of ‘stretch goals’ to power performance in existing businesses can blind
managers to the reality that similar techniques cannot be used to drive the creation of
new businesses. Stretch goals work in existing businesses because managers get stuck
in ruts and the stretch can unlock their thinking. In the search for new businesses
managers have no ruts to unlock. Stretch just distracts them from thinking rationally.
Companies are better advised to set development goals after the opportunities have
been screened, not before.
Ashridge Business School UK -http://www.ashridge.org.uk
? Seeking to transform the corporate culture in order to allow the disciplines of
new business creation to work together with the disciplines of running the core
businesses.
There are so few examples of companies who succeed in achieving the combination of
continuous new business creation and dedication to the core (newstreams and
mainstreams), that this is, for most, an unrealistic objective. Some companies devote
all their energies to new business creation – 3M, Virgin, Corning, Canon – and, as a
result, often have to exit businesses that were previously core (tapes for 3M, music for
Virgin, consumer products for Corning). The majority focus on driving their core
businesses. These companies should be comfortable with their focus, maintaining a
watchful eye for promising new businesses through careful selection processes. When a
promising proposal emerges they can make appropriate changes knowing the project
has the commitment of the organisation.
? Wrongly believing that success is primarily about long-term survival.
All companies have a finite life. Seeking to exist indefinitely is as foolish as seeking to
grow faster than the economy indefinitely.
Article first appeared in European Business Forum, pp 7-15, Autumn 2003
Ashridge Business School UK -http://www.ashridge.org.uk
doc_435164272.pdf
In this such a data concerning should companies be cautious entrepreneurs.
Should companies be
cautious entrepreneurs...
Andrew Campbell
The question posed in this EBF debate suggests that large companies need to be
‘entrepreneurs’ (creators of new businesses) – and that developing new businesses is a
game every company must learn to play. Research we have recently completed at
Ashridge points to a different view of the issue. Companies are more successful if they
are cautious entrepreneurs, limiting their efforts to a few new business initiatives and, at
times, choosing instead to channel spare cash back to shareholders. We have identified
the following causes of mismanagement in this area.
?? Presuming that success is related to the number of new ventures that you
launch – following a numbers game, not a selection game.
Despite the frequency of the advice to companies to increase their entrepreneurial
heartbeat, bring Silicon Valley inside and set up incubators and venturing units, there is
no evidence that success is related to the number of tries. Of more than 50 successes in
our database, fewer than three began their corporate life as part of a corporate incubator
or venturing unit. The solution appears to be wise selection not energetic
entrepreneuring.
? Investing in providing a supportive environment for entrepreneurs, for
‘purposeful accidents’ and for exploring the periphery.
The widespread assumption that big companies need to create the conditions where
untapped potential naturally bursts out (bottom-up, outside-in or whatever) is generally
misguided. There are very few situations where good ideas and good entrepreneurs
combine with good operators and good luck. This is because there are few good ideas,
fewer good entrepreneurs and a limited amount of luck. Hence the probability of it all
coming together is low. To some degree this is why so many successes seem more
accidental than planned. The period in the late 1990s, when conditions were most
favourable to entrepreneurs with ideas, spawned many thousands of people wanting to
emulate Bill Gates, but did not greatly increase the number of successes. The good
projects (the few ‘accidents’) will shine brightly enough to be identified by managers
using appropriate screening criteria. Companies appear to do better by channelling their
effort into the process of top-down screening rather than investing in bottom-up
venturing.
? Blindly setting entrepreneurial BHAGS (Big Hairy Audacious Goals) to increase
motivation.
The success of ‘stretch goals’ to power performance in existing businesses can blind
managers to the reality that similar techniques cannot be used to drive the creation of
new businesses. Stretch goals work in existing businesses because managers get stuck
in ruts and the stretch can unlock their thinking. In the search for new businesses
managers have no ruts to unlock. Stretch just distracts them from thinking rationally.
Companies are better advised to set development goals after the opportunities have
been screened, not before.
Ashridge Business School UK -http://www.ashridge.org.uk
? Seeking to transform the corporate culture in order to allow the disciplines of
new business creation to work together with the disciplines of running the core
businesses.
There are so few examples of companies who succeed in achieving the combination of
continuous new business creation and dedication to the core (newstreams and
mainstreams), that this is, for most, an unrealistic objective. Some companies devote
all their energies to new business creation – 3M, Virgin, Corning, Canon – and, as a
result, often have to exit businesses that were previously core (tapes for 3M, music for
Virgin, consumer products for Corning). The majority focus on driving their core
businesses. These companies should be comfortable with their focus, maintaining a
watchful eye for promising new businesses through careful selection processes. When a
promising proposal emerges they can make appropriate changes knowing the project
has the commitment of the organisation.
? Wrongly believing that success is primarily about long-term survival.
All companies have a finite life. Seeking to exist indefinitely is as foolish as seeking to
grow faster than the economy indefinitely.
Article first appeared in European Business Forum, pp 7-15, Autumn 2003
Ashridge Business School UK -http://www.ashridge.org.uk
doc_435164272.pdf