Not surprisingly there has been little attention paid to the role of senior management where it comes to corporate entrepreneurship. According to the article, The Future of the Corporation, “The strategic decision for entrepreneurial activities is not well understood, and particularly poorly conceived is senior executive responsibilities in the corporate application of entrepreneurship.”
In the past senior leaders were responsible for strategy formulation, policy setting, and directing organizational resources toward strategic objectives. Their focus was on optimizing the use of existing resources, while controlling and managing the use of strategic assets. Operational efficiency and risk avoidance were paramount. Traditional roles included the oversight of innovation efforts at lower levels within the organization. Efforts constrained by existing organizational systems and practices resulting in incremental innovations, providing lower financial returns and growth. The focus was on the exploitation of the core business.
In the future the senior management team will be directly involved in the generation of innovation ideas that are more strategic and will have a greater impact. Senior executives will be actively engaged in innovation and the change process. They will participate by becoming role models for the change and leading the change effort. Demonstrating through their actions what is required to instill and drive entrepreneurial thinking and action. Fostering an environment that encourages employees to take risks, be more proactive and innovative. Efforts that will transform the company while generating new levels of financial performance. The focus directed on the exploration of new businesses.
The challenge for leaders is operating in both of these worlds simultaneously. Managing the core business at the same time they are building a new one. Many of the things that are required in the core business are just the opposite of what is required in a new business venture. The policies, practices and systems that support the core business get in the way. They create barriers to growth and stifle innovation. The skills and capabilities required to lead in the core business are not the same skills required to build a new one. Leaders will find themselves having one foot in both worlds; the core business and the new business they are building.
According to research only one percent of senior executives in large organizations are able to lead an existing business at the same time they are building a new one. The true entrepreneurial leader is rare.
Corporate entrepreneurship requires an environment that most leaders are not accustomed to dealing with. Leaders must be highly adaptable, flexible, and responsive to a rapidly changing market environment. They will now be competing for the same resources used to support the core business. There will be new issues and conflicts to deal with. There will be systems and processes that need to be changed or replaced, existing policies and procedures that no longer make sense. There will be resistance to change, controversial decisions to make and risks to take. They will have to capture knowledge and lessons learned to embed them into the memory of the organization.
Formulating a strategy is one thing, implementing it is another. These are two distinct disciplines that require different know-how. Active involvement in the entrepreneurial process is the best way to learn what it takes to be an entrepreneurial leader.
In most organizations innovation is a bottom’s up approach taking place at lower levels in the organization. This is a problematic. According to the authors of The Future of the Corporation, “Individuals at lower organizational levels are more likely to limit innovations to those of incremental nature entirely within the strategic context of the organization.” These individuals perceive organizational boundaries as being fixed. They think that proposing a radically new idea would not be welcomed. That stepping outside the boundaries of acceptable behavior is not something worth risking. This approach results in fewer high growth opportunities and lower financial returns.
That’s why senior management needs to take an active role in innovation and entrepreneurship. Senior management has a view of the organization that few others share. They have the ability to see strategic opportunities when they arise. They know which ideas will fly and which ones will not. They can look at every decision from a strategic perspective. They have the experience to know how far they can push organizational boundaries. They are able to influence and negotiate for resources not readily available. They have the political clout to get things done.
The lack of entrepreneurial role models in most organizations is something that can be fixed. It is not a lack of talent but a lack of experience that is the problem. Leaders must become adept at exploitation and exploration. That is the paradox of corporate entrepreneurship. It is a two way street.
Is corporate entrepreneurship a strategic leadership role in your organization?
*Read the article Innovation versus Corporate Entrepreneurship to see how innovation and entrepreneurship are entwined.