According to the Conference Board’s CEO Challenge Study, innovation is one of four top priorities for 2014 along with human capital, customer relationships and operational excellence. Not surprisingly, organizations are repositioning themselves for growth after a period of volatility and slow growth.
Experts from Drucker to Hamel to Christensen agree that “Innovation is the key to the success of modern corporations.” Innovation is seen as the springboard to business growth. Higher levels of innovation yield greater market share, new product revenue, improved profitability, technical dominance, improved process and cost control, and greater shareholder returns. But…
Innovation alone is not enough. The context has to be right for innovation to be successful.
Corporate entrepreneurship sets the context for innovation by providing the infrastructure needed to support and sustain innovation over time – continuous innovation.
Many executives ask me, what is the difference between Innovation and Corporate Entrepreneurship? The lines between them are blurred. According to Michael Morris author of Corporate Entrepreneurship and Innovation, “There is a general lack of consensus surrounding an agreed upon meaning for both concepts.” They are so entwined that is difficult to see daylight between them.
One way to look at this is to think of Innovation as a process. Most organizations have an innovation process – a series of steps that take an idea from concept through to commercialization. It is a process that takes hundreds of ideas and narrows it down to a handful of potential candidates that are tested and eventually brought to market. There are mechanisms in place to support the front end and back end of innovation. Each part of the innovation process is characterized by its own requirements – creativity, iteration, design, co-creation, disciple, structure, process, analysis and control. Organizational systems, policies, procedures and metrics are used to guide the innovation process, like stage gate systems, that insure that various thresholds are met before moving forward to the next phase. The desired output, is a new product or service.
In this way, “Innovation is defined as a systematic, purposeful activity, planned and organized, with high predictability. “[i]
Despite the fact that most organizations have an innovation process – failure rates are still high. According to Relentless Innovation, “One of the real challenges is that business as usual isn’t simply accepted, it is defended and strengthened by management tools like Six Sigma, outsourcing and lean. While these help an organization become more effective and efficient, they also build greater resistance to innovation, especially sustained innovation.”
Corporate entrepreneurship on the other hand sets the context for Innovation. It encompasses the innovation process. Corporate entrepreneurship requires a more holistic, systems approach to innovation. It provides the framework. It is a complex process that touches all aspects of the organization including strategy, structure, policies and procedures, systems, culture, people and customers. Unlike other business processes that might follow a standard work process, corporate entrepreneurship is less structured, it’s more organic. It’s an attitude, a competence, a way of thinking and acting. You are asking individuals to shift their attitudes, change their beliefs, and learn new skills. It requires managing the inherent tension between maximizing economic value and developing human capital. The focus is on outcomes, the business value you want to deliver to customers and the organization.
In reality, corporate entrepreneurship is a change process or transformation that pushes the existing boundaries and tests the limits of organizational systems and processes.
This is just one way to think of the differences. You need to define what these concepts mean for your organization.
Corporate entrepreneurship challenges traditional organizational practices. There is no right way or perfect way to implement corporate entrepreneurship. There are, however, three components that enable corporate entrepreneurship: 1) entrepreneurs and leaders that possess a core set of action oriented competencies, 2) systems and processes that support entrepreneurial thinking and action, and 3) an environment conducive to entrepreneurship, learning and growth. These three components provide insight into how innovative and entrepreneurial an organization is. Many organizations only implement one or two of these components. You will need all three to be successful.
Innovation and corporate entrepreneurship are inexplicably tied together. They need to co-exist and work together to accelerate new business growth. A structured innovation process may work well for incremental and adjacent innovations but be less effective in transformational or blue sky innovations. An innovation process might work best for new products but less so for business model innovation. An innovation process might work better in one industry than a totally different one. But setting the context for innovation establishes a foundation for continuous innovation – no matter what type of innovation you are developing.
Corporate entrepreneurship is designed to enable your organization to become more entrepreneurial. There is no silver bullet for becoming more entrepreneurial; it takes practice and having the right people, processes and environment to support and sustain it over time. Those organizations that have been successful in building entrepreneurial capabilities statistically perform better.
The interesting thing is that corporate entrepreneurship touches every aspect of the Conference Board’s CEO Challenge Study – innovation, human capital, operational excellence and customer relationships.
If you want to harness the full potential of your organization and accelerate business growth through innovation, corporate entrepreneurship is one way to accomplish that.
Let us know how you differentiate between innovation and corporate entrepreneurship!
[i] Bhattacharyya, 2006