Sponsoring renewal

Entrepreneur-managers are highly desired in the corporate world. But few are successful unless they have an executive sponsor. Bala Chakravarthy and Peter Lorange tell why.

CEOs and other top executives have been exhorting intrapreneurship – the cultivation of entrepreneurial skills within a large corporation – for years. It has long been seen as a guaranteed way to renew a company’s fortunes and perhaps the best way to overcome the inertia caused by too many people slavishly dedicated to a flagging core business. All that is needed, reason many executives, are a few brilliant, intrepid intrapreneurs who can lead a corporate charge to create dazzling new products to sell in lucrative new markets. They seem to believe that the best way to renew their companies is to discover a few young Richard Bransons or James Dysons, hire them and set them loose. In truth, internal entrepreneurs cannot succeed without the sponsorship and support of senior executives; and there are three critical roles that senior executives must play to counterbalance the natural emphasis in a firm to protect and extend its core businesses.

Renewal strategies can best be defined by thinking of two dimensions of growth: a corporation can grow its existing business or move into new business lines. Entrepreneur-managers must navigate between these two growth vectors.

Protect and extend is a strategy for profitable growth in the firm’s existing market franchise through continuous improvements in operating performance, new product introductions, new approaches to servicing the customer and new ways of segmenting the existing market – but without diversifying the competence base of the firm or the markets in which it competes. Transformation, by contrast, is about entering new markets and serving them using competencies that are also new to the firm.

There are two additional renewal strategies: a company can leverage or it can build. Leverage is a strategy for entering new markets using the competencies that a firm already has, but complementary new competencies will have to be added eventually in order for the firm to compete successfully in these new markets. Build is a strategy of adding new distinctive competencies in order to protect the firm’s existing market franchise. This, too, cannot be a dead-end initiative. The new competencies that are built must allow for leverage into new markets.

Clearly, transformation is the most risky renewal strategy. Instead of engaging in revolutionary transformation, with its attendant risks, a more prudent approach would be to pursue a step-wise transformation through a judicious blend of leverage and build strategies; this will promote a continuous renewal of the firm. A persistent dilemma for senior executives is how to counterbalance the firm’s necessary preoccupation with protect and extend strategies with the more risky renewal strategies of build, leverage and transform. Thus, entrepreneur- managers are needed when such transitions are called for. But they cannot do the work alone. Instead, senior executives serving as sponsors must (1) shape the renewal project, (2) locate a proper organizational home and (3) tailor the context for implementation. Here is how they can best perform these roles.

Shaping things to come

Shaping a renewal strategy is in part a tops-down exercise, a karaoke arrangement in which the music is preset; but, in part, it is also like jazz, allowing creative new initiatives to emerge without scripted music. In transforming companies, we have found that neither is sufficient; what is needed is a blend, karaoke jazz. The firm needs to steer a middle path between the two extremes of all initiatives being planned and prescribed by senior executives, on the one hand, and everything being emergent and improvised by the entrepreneur- manager on the other hand. Designing such a blended context is not easy. Senior executives can help their budding intrapreneurs by managing the interactions and iterations in the firm’s planning process.

Interactions in the planning process refer to the communication between the sponsor and the entrepreneur-manager in shaping the firm’s renewal strategies. The greater the interaction, the richer are the alternatives considered; also, the alignment with the corporate vision is better.

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