What Got You Here Won't Get You There.

During the past ten years the Chinese business landscape has changed profoundly. Chances are high that in the coming ten years speed of change will increase even further with game-changing transformations being around the corner. What will this mean for European companies with subsidiaries in China? Many of them are market leaders but to retain that position won’t get easier for most of them, on the contrary, the common expectation is that competition will get much fiercer.

What Got You Here Won't Get You There. Past patterns of success are by no means a guarantee for future growth and prosperity. Key is the anticipation of coming changes and swift adaptation, agility. This requires utmost closeness to customers and markets as well as sound and fast decision making, conditions which call for greater empowerment of China CEO’s and leaders at regional headquarters who take the designated role of corporate entrepreneurs.

Nurturing Corporate Entrepreneurs

SMEs are typically built around entrepreneurial personalities and need corporate entrepreneurs to flourish. We dare to make a prediction: Those SMEs which don’t nurture corporate entrepreneurs will fail, struggle or even vanish.

Corporate entrepreneurs are the engines of organizational growth, they provide the initiative, energy, and motivation to help organizations grow. They identify and create opportunities, drive change and innovation, start new ventures, and provide leadership for strategic renewal to create economic value. They excel due to their ability to bring others along.

What sets corporate entrepreneurs apart from more traditional managers? The two most important qualities of corporate entrepreneurs are open-mindedness and cognitive ability. They tend to be independent thinkers who make sense of the world based on their own observations and experiences. They deal proactively with ambiguity and uncertainty and act as trail blazers, pioneers, business builders and change agents. They are not necessarily the idea generators but their strong execution orientation let them turn ideas into profitable businesses.

Typically, corporate entrepreneurs are driven and motivated by the excitement of a challenge, willing to take on risks and actively look for opportunities to stretch and grow. What makes them effective leaders is that they are adept at setting the right direction and know how to exploit core businesses while exploring new ones. Entrepreneurial leaders don’t grow on trees, they need to be developed over time.

Fostering Entrepreneurial Behavior

Identifying, hiring and developing entrepreneurial talent is essential for nuturing corporate entrepreneurship. But to effectively foster entrepreneurial behavior more profound changes are necessary, changes which provide individuals and teams with opportunities to learn and grow:

• Recognize the unique qualities that corporate entrepreneurs bring to the organization.

• Give corporate entrepreneurs the freedom to experiment, and recognize that frequent trial and error is an inherent part of discovery.

• Assign corporate entrepreneurs to your organization’s biggest and most challenging problems.

• Encourage innovative and entrepreneurial behavior by financially supporting projects knowing that some of the projects will fail.

• Provide decision-making latitude and freedom from excessive oversight by delegating authority and responsibility to corporate entrepreneurs.

• Provide training and professional development opportunities in key areas of entrepreneurship, such as navigating amidst uncertainty and creative thinking.

Models of Corporate Entrepreneurship

To establish corporate entrepreneurship as a core competency of your organization, you have to decide which approach to corporate entrepreneurship best suits your corporation’s culture, strategy and business model and refine the processes used by individuals and teams to develop new businesses, products, or services. Researchers at MIT Sloan have identified two dimensions that consistently differentiate how companies approach corporate entrepreneurship: organizational ownership - Who, if anyone, within the organization has primary ownership for the creation of new businesses? – and resource authority – Whether there is a dedicated “pot of money” allocated to corporate entrepreneurship, or whether new business concepts are funded in an ad hoc manner through divisional or corporate budgets or “slush funds?”

Together the two dimensions generate a matrix with four dominant models: the opportunist (diffused ownership and ad hoc resource allocation); the enabler (diffused ownership and dedicated resources); the advocate (focused ownership and ad hoc resource allocation); and the producer (focused ownership and dedicated resources). Each of the models requires different forms of leadership, processes and skill sets, the researchers found. An enabler model depends on establishing and communicating simple, clear processes for selecting projects, allocating funds and tracking progress, all with well-defined executive involvement. Advocate models require individuals with the instincts, access and talent to navigate the corporate culture and facilitate change. The producer model requires considerable capital and staffing and a direct line to top management.

Evolving from the opportunist model to any of the more deliberate forms of corporate entrepreneurship typically begins with a broad, clearly communicated vision. Whatever model is selected, your organization should experience a significant increase in the number of proposals, which leads to the challenge of scaling field-proven new businesses and finding organizational homes within the company. And the more distant a new concept is from the “comfort zone” of the core business, the greater the challenge.

In a slowing economy with considerable overcapacities in many industries advocating corporate entrepreneurship is no easy game as budgets get trimmed and risk aversion prevails. It is corporate entrepreneurs however who hold the keys to the company’s long-term success.

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By Dr Laurenz Awater, INNOVA Management Institute

Dr. Laurenz Awater is managing partner at the INNOVA Management Institute (Shanghai), a consulting firm focusing on change, innovation, leadership and organizational development. Laurenz is co-facilitator of the management program ‘Corporate Entrepreneurship in China’.