Overcoming the Barriers to Corporate Entrepreneurship
How do organizations achieve longevity, the kind of longevity that survives long past the founder or any particular leader or leadership team? Professors of business and corporate strategy (which includes me) research and lecture about the goal of long-term “sustained” competitive advantage, driven by grand plans that mesmerize and seduce the most seasoned leaders and leadership teams. On reflection, though, I find that the evidence does not support competitive advantage as a path to longevity. Instead, longevity is based on entrepreneurial thinking and innovation – in exploring ways to adapt corporate and business strategies in response to market, technological, and social and cultural change.[wcm_restrict]
The hard truth is that companies that do not pursue corporate entrepreneurship are doomed. Yet when businesses try to implement entrepreneurial initiatives, these initiatives often fail. In this article I explore three barriers to entrepreneurial action: resistance from within the firm, resistance from within the supply chain, and resistance from the customer.
Resistance from Within
The most significant hurdle by far is resistance to change from within. This takes many forms, but one of the most insidious forms of resistance is based on “one no.” Let me explain. It is fashionable today to have management committees, at various organizational levels, working as teams. Teams can be entrepreneurial, but they first need to function effectively as a team. All too often, I observe teams that would not be classified as dysfunctional by the team members, but they are teams where open and honest debate is not commonplace.
The outcome is often a ‘one no’ policy, wherein ideas are given to the team members (in the worst case by email), and if one team members has a negative reaction, the idea is scrapped. Leaders tend to feel that they are being consultative and open, but new ideas by their nature require new paths. Hence, it is rarely a straightforward process, and if the team is committed to the goals and direction of the entire organization, one no is an inappropriate test of the idea. Teams are meant to work collaboratively, which means to walk-through, debate, and likely reshape the idea before making a call.
Resistance from the Supplier
Organizations do not operate in isolation, and hence it is critical to bring key stakeholders, including suppliers, on board with any new initiative. Professor Marshall Fisher of the Wharton School of Business studied the role of suppliers in product innovation and found that it is beneficial to shift suppliers when moving forward with an innovative product. This helps avoid the natural resistance to change that the current supplier may have. Fisher presents a very simple and logical framework for choosing the right supplier – link innovative products with what he calls a “responsive” supply chain, and functional products with “efficient” supply chain. To address the concerns of the standard supply chain providers, assure them that once developed, the innovative product will be best served by an efficient supply chain, but while in the development stage, responsiveness is essential.
Resistance from the Customer
The customers are in the drivers seat, no doubt about it. They have the luxury of waiting to see what tantalizing offer comes their way, and then deciding yeah or nay. In the meantime, the firm and supply chain invest heavily in the product or service offering, in hopes of luring customers. Clayton Christensen has described his initial “aha” moment as the realization that firms actually abandon some of their best innovations and entrepreneurial initiatives because their customers say they don’t want it. In fact, a team of researchers from the City University of Hong Kong found that while supplier involvement significantly increases the quality and reliability, time to market, and innovativeness of new products, customer involvement has only a minor influence on quality and reliability.
Customers are firmly in the “prove it to me” camp, and often it is best to seek new customers when pursuing entrepreneurial initiatives and innovative products and services. This is particularly true with disruptive innovations where product or service features incorporate a new blend that favors different factors (such as the Netflix no late fees without the convenience of stores on every corner). Even so, it is important to understand the concept of the liability of newness, a phrase coined by Arthur Stinchcombe to capture the reality that new ideas suffer the most risk of failure when they are first presented, and the liability lessens over time.
Studies on the liability of newness indicate that customers are less interested in fully understanding the technical benefits of a new product or offering, and instead seek trustworthy support of the initiative. In this sense, the corporate entrepreneur must seek ways to build trust and reliance in the offering from the entrepreneurial initiative. This can be done by building alliances of support, having reputable endorsements, establishing high quantity, and using means such as discounts or samples to build a market presence.
Entrepreneurial activity within established firms faces many challenges, and managers are best advised to strategically and purposefully identify, anticipate, and combat the barriers from within, from suppliers, and from customers.[/wcm_restrict][wcm_nonmember]
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About the Author
Jim Dewald is the author of Achieving Longevity: How Great Firms Prosper Through Entrepreneurial Thinking
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