strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: February 13, 2003

 
 

The Paradox of Corporate Entrepreneurship

The BP model is a disarmingly simple approach to entrepreneurial transformation, but it is far from unique. The U.S. brokerage firm Edward Jones has become one of the fastest-growing companies in its industry by applying a BP-style model of entrepreneurial transformation, despite its conservative approach to financial services (historically, for example, it has not sold options or commodities). Managing Partner John Bachman says, “I give my people the canvas and the paints they have to use [direction, boundaries]. After that, it’s up to them to decide what they paint and how [space]. As long as they stay on the canvas, and use only the paints I give them, I am happy.” 3M Company is renowned for its corporate maxims articulating the management methods that sustain its entrepreneurial culture and decentralized structure through good and bad times. For example, there’s the “15 Percent Rule,” which enables employees to spend 15 percent of their time on pet projects (space), encourages the use of cross-functional and cross-country teams (support), and still adheres rigorously to the broader growth objectives and values of the company (direction, boundaries).

The entreprenurial model also applies to other sorts of endeavors, including sports and the arts, that are perhaps better known as bastions of command-and-control leadership. Sven Goran Eriksson, a Swede who is the coach of England’s national soccer team, has become famous for his hands-off approach. Essentially, he keeps the tactics and the team selection simple and gives his players the space to play their natural game. He provides feedback and coaching, but he keeps his interventions to a minimum, a highly unusual approach in the pressured world of professional soccer. In theater, Philip Slater, an academic who became a novelist and playwright, has observed that inexperienced playwrights who direct their own plays (for fear that others will not understand their vision) frequently end up with sterile, even disastrous productions. If the playwright’s vision comes through in the writing, the director will see creative ways of enhancing that vision. And so will the actors, designers, and composers.

What Goes Wrong
The BP model serves another purpose. It helps to shed light on what might happen when entrepreneurship is allowed to go too far. Our novel angle here is essentially to ask what would happen if the BP model were taken to its extremes. Enron provides a ready set of examples. (See Exhibit 2.)

Too Little Direction. Without a clear overarching sense of where the company is going, or what it stands for, entrepreneurship becomes a random set of initiatives. Although each initiative on its own may be perfectly rational, when you put them together, the result is a mélange that stakeholders are likely to denounce as incoherent, vague, or chaotic.

Enron fell into this trap. In the early days of its transformation, under the leadership of the former CEO Kenneth Lay, the company embarked on a number of growth initiatives, but they were all clearly within the natural-gas sector. By the late 1990s, however, the premise behind the choice of new business initiatives was diluted, as the company moved into electricity trading, online trading, weather derivatives, and broadband networks. Mr. Lay and his successor as CEO, Jeffrey Skilling, in effect acknowledged this drift as they gradually began to publicly shift the vision of the company. Starting out with the goal of being the “best gas distribution company,” they began to speak of Enron as “the world’s best energy company.” By 2001, Enron executives were citing as peers such companies as GE Capital, Goldman Sachs, and Merrill Lynch, and they talked of becoming simply “the world’s best company.” Although Mr. Lay and Mr. Skilling may have understood the logic that unified these diverse initiatives, it’s not clear the executives beneath them did.

 
 
 
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store

 

Resources

  1. Julian M. Birkinshaw, “Entrepreneurship in Multinational Corporations: The Characteristics of Subsidiary Initiative,” Strategic Management Journal, Volume 18, Issue 2, 1997; Click here. 
  2. Robert A. Burgelman, “A Process Model of Internal Corporate Venturing in the Diversified Major Firm,” Administrative Science Quarterly, Volume 28, 1983; Click here. 
  3. Henry W. Chesbrough, “Making Sense of Corporate Venture Capital,” Harvard Business Review, March 2002; Click here. 
  4. Jay Galbraith, “Designing the Innovating Organization,” Organizational Dynamics, Winter 1982
  5. Gary Hamel, “Bringing Silicon Valley Inside,” Harvard Business Review, September 1999; Click here. 
  6. Rosabeth Moss Kanter, “The Middle Manager as Innovator,” Harvard Business Review, July 1982; Click here. 
  7. Michael L. Tushman and Charles A. O’Reilly, “Ambidextrous Organizations: Managing Evolutionary and Revolutionary Change,” California Management Review, Volume 38, Number 4, 1996; Click here. 
  8. Clayton M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Harvard Business School Press, 1997)
  9. Peter Drucker, Innovation and Entrepreneurship: Practice and Principles (Harper & Row, 1985)
  10. Richard N. Foster and Sarah Kaplan, Creative Destruction: Why Companies That Are Built to Last Underperform the Market — and How to Successfully Transform Them (Currency Doubleday, 2001)
  11. Sumantra Ghoshal and Christopher A. Bartlett, The Individualized Corporation: A Fundamentally New Approach to Management (HarperBusiness, 1997)
  12. Rosabeth Moss Kanter, When Giants Learn to Dance: Mastering the Challenge of Strategy, Management, and Careers in the 1990s (Simon & Schuster, 1989)
  13. Tom Peters and Robert Waterman, In Search of Excellence: Lessons from America’s Best-Run Companies (Harper & Row, 1982)
  14. Gifford Pinchot III, Intrapreneuring: Why You Don’t Have to Leave the Company to Become an Entrepreneur (Harper & Row, 1985)
 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close