Now that Enron has collapsed, are we required to write off the idea that companies should encourage entrepreneurship, stretch goals, and risk taking, on the grounds that they will ultimately lead to disaster? Must we accept the logic of journalist Malcolm Gladwell, who, assaying Enron’s demise, asked rhetorically in The New Yorker magazine, “What if Enron failed not in spite of its talent mind-set but because of it? What if smart people are overrated?”
No, we do not have to reverse our thinking. As with any corporate failure, the challenge is to separate the actions that led to the problems from those that continued to work well despite them. Or, stated more positively, we need to understand the enormous benefits of internal entrepreneurship and how it can drive corporate innovation and growth, while not neglecting the costs and risks that are associated with it.
This article provides a framework for thinking through the paradox of entrepreneurship: Every company needs to embrace it, while understanding that, if taken too far, entrepreneurship has the ability to undermine its own power. Building on extensive research in more than a dozen multinational companies (see “About the Research,” at the end of this article), this article describes a model of corporate entrepreneurship and the four typical problems that may arise if it is carelessly implemented. It also suggests ways to avoid each of those problems. Additionally, the research illuminates the promise and the pitfalls of some of today’s celebrated organizational concepts, in particular the challenges of encouraging an unconstrained free-market environment for managing people and ideas inside companies.
An Entrepreneurial Framework
The concept of corporate entrepreneurship has been around for at least 20 years. Broadly speaking, it refers to the development of new business ideas and opportunities within large and established corporations. Within this broad definition, there are at least four schools of thought, each with its own assumptions and objectives. The four basic schools are corporate venturing, intrapreneurship, entrepreneurial transformation, and “bringing the market inside.” (See “The Four Schools of Thought on Corporate Entrepreneurship,” at the end of this article.)
This article centers on the entrepreneurial transformation school of thought. According to this view of corporate organization, entrepreneurship is an individual behavior that is shaped by the systems and culture of the firm. To bring about lasting change in an established company, the job of senior executives is to develop a set of corporate systems and processes that promote such entrepreneurship throughout the organization.
Our approach is to take the model of entrepreneurial transformation that BP PLC has developed and add our own conceptual twist to it, to show that when it is taken too far, entrepreneurialism can be detrimental to the enterprise. BP is a rare example of a giant company that has radically, and beneficially, transformed itself from within. Close to collapse at the end of the 1980s, BP is now recognized as a leader in the restructuring of the global oil and gas industry and a highly innovative, forward-looking company that, in its pursuit of sustainable energy solutions, is effectively managing the difficult task of balancing growth, profitability, and social responsibility.