Achieving profitable growth in a tougher and tougher climate is becoming more difficult for today’s businesses; the reality of macroeconomic and competitive pressure is all too real.
In this article strategy expert Steve Asplen examines ways in which successful companies are approaching the challenge.
Getting profitable growth in today’s challenging economic market is getting tougher and tougher. Even putting to one side the macro economic outlook and the pressures on consumer disposable income, businesses today face ever sterner competitive challenges. These come from internally generated pressures, such as tighter innovation budgets and/or reduced human resource, from external sources in the form of more aggressive existing and new competitors, and from ever more demanding customers seeking relief from their own commercial challenges. In such environments businesses are increasingly on the lookout for new “space” in which to grow, be it product, service, geography or other revenue or profit opportunity.
Faced with these challenges, well run companies ensure they have a firm grasp on their current reality and outlook. They understand what makes them different and their unique competencies that they can use to protect or grow their business. They have a deep understanding of their core markets, where there is space to grow and where they can win. Armed with this foresight, they may decide to defensively protect their position, to build on and extend their competencies to unlock more business, or to leverage their existing category or channel footprint into new areas. So far, so easy – at least in theory !
The strategic options of protect/extend, leverage and build are well understood and for most businesses are part of the day job. This is part of what effective management teams, insight and marketing functions, sales, supply chain and operations teams exist to do. The extent to which they are successful is the extent to which they protect and build their competitive position in the market, or alternatively become market share fodder for those that do. It is also the reason leading global companies are investing to ensure they possess world class capability in their critical competencies and in their core and target markets.
But what of the “third way”. The strategic option of exploring transformational change typically sits on the corporate agenda in the form of M&A activity. It may also include the role of Joint Ventures in certain geographies, categories or channels where such an arrangement can fast-track the development of a portfolio or the distribution of it. In relatively few companies however is deep thought given to internally driven entrepreneurial activity, or what is sometimes called “intra-preneuralism”. However, many leading companies are actively exploring this route, seeking to learn and re-apply effective entrepreneurial practices within the corporate organisation. This may take the form of encouraging internal entrepereneurs and supporting strong ideas with human and financial resource. Alternatsome organisations apply private equity model thinking to the challenge, and seek ouattractive early stage businesses to make equity investments in via either seed or development capital.
Multinational companies typically are active in progressing each of the traditional routes to buildingenterprise value in their businesses. They also understand that as they move from organic growth strategies through alliances into JV’s and M&A that the cost and execution risk of such strategies increases. This is further support for the role of an intrapreneurial stream in the value creation strategy of firms. Whilst it will not necessarily transform the business overnight, as part of a portfolio of value creation strategies it has the potential to do so over the medium term at relatively low risk and cost.
The intrapreneurial path to growth does however pose some challenges for the clanational corporate. Chief among these is that by definition most “corporates” are not entrepreneurial. This clearly doesn’t mean they can’t be, just that the processes, organisational models, cultural values and competencies of the average corporate firm are geared toward corporate scale business, not entrepreneurial scale success. The Apple Corporation and the legendary 'skunk works' are probably the best known illustration of this point.
A good start point for the corporate intrapreneur is therefore to review these key building blocks and to define some key success factors for each which will enable the fledging intrapreneurial unit to succeed within the wider organisation.
In terms of processes, this may be about different ways of working that tend to typify successful entrepreneurial businesses. It may involve a bias for action and learning through doing, and from failures as well as successes. Indeed, the link of process and organisation that is often key to corporate efficiency and success is typically much more blurred in entrepreneurial firms where processes and organisational roles are by necessity fluid.
Whilst a flat organisation may be a common principle to both, the culture and values will almost certainly be the greatest difference. The intrapreneurial team will have, or at least feel they have, “skin in the game”. They will feel a deep belief and passion in the business idea and will do what it takes to bring it to reality. Their ownership for the venture, and the degree of exceptional commitment they show, is also reflected in the incentive and reward structure. The degree of fixed vs variable remuneration will be inverted vs the corporate remuneration model.
Finally, the competencies of the small team will be highly developed and complimentary. Whilst the business/idea owner may notionally be the “CEO”, he is more likely the entrepreneurial figure head for the business and supported by 3 or 4 other members of the management team who will lead the marketing, sales, finance, operations and technology areas. In the intrapreneurial business, it will be the strength of this team, it’s belief and commitment, not just the strength of the business idea, that will prove critical to success. In this sense, it is belief and execution that pave the road to intrapreneurial growth.
For more information contact :
steve@operatingpartners.co.uk +44 (0) 7801 646466
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