Is corporate entrepreneurship or individual startups riskier? Which have the higher likelihood of failure? In the corporate entrepreneurship (CE) world, what prevents pivots?
There is an escalation of commitment through increasing sunk costs, from people taking an overly optimistic stance, and from the planning fallacy of thinking things will take a shorter time than can be reasonably expected. There is a system missing to support CE, with too much reliance on the passion model, a lone champion, and an intrapreneur. Commitment is to today’s strategy versus an emergent one. Without the right learning mind-set, experiments are conducted that are inherently biased or too narrow. There is a tension between the need to focus and the need for flexibility required of experimentation, and this creates barriers to exploration.
This is an interesting observation because in many ways these are the same factors that derail success of startups, such as the passion model, focus, the immediate business strategy, and so forth. People believe these attributes drive the success of startups, but they do not. So, what helps a corporate firm develop startups?
There is a requirement to embrace a portfolio approach and clearly define a strategic intent. There needs to be an information rich environment, with easily accessible networkers and brokers to help develop it. In the startup world, venture capitalists (VCs) will replace founders if they do not work out and use boards to bring subject matter expertise and networks. Large firms, or more established companies, attempt to emulate this with advisory boards, but there is little consideration early on about replacing a team member. In fact, even when companies defund projects, they let champions go on and on and don’t really stop those projects; the projects just go underground until the air is clear again.
Both of these corporate-related challenges—of defunding and never really stopping projects—are either blocking or apathy measures. The outcome is that corporations do not proactively work to leverage learning and move forward. Project churn and redirection are treated as failure, rather than as a norm of the learning process. With coaching, champions can play a pivotal role to help uncover assumptions and keep biases to a lower level. Ideally, they should provide easier access to resources and help with leveraging networks. In addition, a robust system can also provide a safety net to mitigate resource and organization uncertainties so the corporate entrepreneur can fail and still go on. For startups, resource and organization uncertainties are also prevalent, though they might look different. On the resource side, the focus is on sources of capital and labor, and organization issues are compounded by how a startup fits in its ecosystem.
This is an edited extract from Pivot: How Top Entrepreneurs Adapt and Change Course to Find Ultimate Success by Remy Arteaga and Joanne Hyland, published by Wiley, RRP £26.99
About the authors
Remy Arteaga has more than twenty years’ experience in entrepreneurial, innovative, and strategic roles. Remy began his career with GM, where he was part of an internal consulting group, the sole mission of which was to change the way GM did business.
Joanne Hyland is President of the rInnovation Group (rInnovation) and former Vice President, New Venture Development, at Nortel Networks. As a Founding Partner in rInnovation, Joanne works with major corporations across diverse industries in the U.S., Canada, Denmark, Germany, and elsewhere to link innovation with strategy and to develop systems, leadership and culture capabilities that drive growth and corporate renewal.