This week we focus on entrepreneurship. Corporate entrepreneurship (CE) refers to building entrepreneurial businesses within existing corporations. It has two primary aims: the creation of new venture opportunities and strategic renewal. In this section, we address corporate growth and renewal via internal venture development.
All the factors that influence the strategy implementation process – corporate culture, leadership, features of organizational structure, and rewards and learning systems – will affect how corporations engage in internal corporate venturing.
In some large corporations, the spirit of entrepreneurship permeates every part of the organization. It is found in companies where the strategic leaders and the culture together generate a strong impetus to innovate, take risks, and seek out new venture opportunities.
Firms using a focused approach typically separate the corporate venturing activity from the other ongoing operations of the firm. That is, CE is usually the domain of autonomous work groups that pursue entrepreneurial aims independent of the rest of the firm.
Two forms – new venture groups (NVGs) and business incubators – are among the most common types of focused approaches.
The following article describes one type of highly focused entrepreneurial environment – Samsung’s VIP Center where innovative ideas and engineering problems are addressed with great intensity and speed.
Samsung’s Intensely Focused VIP Center
Some of the most successful corporate innovators operate in a climate of intense pressure. One of these is Samsung, the South Korean electronics maker that made a $9.4 billion profit in 2004 compared to $1.5 billion by Sony, its close competitor.
This success – and the pressure – is due in part to the role played by its VIP Center. VIP stands for Value Innovation Program (not very important person) and it refers to a 5-story building in the heart of Samsung’s industrial complex in Suwon, South Korea. It is completely dedicated to research, engineering and design. The first floor houses big training rooms. Floors two through four are workrooms for various team projects. The top floor has 42 dormitory-style rooms, each containing two beds, a shower, and a small desk. In the basement, there’s a gym and sauna as well as ping-pong and billiards tables. In essence, it is an around-the-clock assembly line for ideas and experiments.
When an engineer or other Samsung employee is assigned there, they know they will be there until the particular problem they are working on is solved. “When people are told they have to come here,” says Sun Woo Song, a senior engineer and project leader at the VIP Center, “they know they have to come up with results in a very, very short time.” As a result, the building is occupied 24 hours a day, seven days a week. “This is not a prison,” according to one engineer, “but it’s not a volunteer job either.”
This may seem like an extreme situation but most at Samsung see it as highly valuable. Doosik Joo, a father of three and five-time VIP alumnus says, “People say, ‘You’ve spent all your life there, and what have you done?'” He says, “I can say, ‘I drove down costs, created more value for the customer.'” Clearly, this level of commitment is a key element of Samsung’s success: The company has lower manufacturing costs, higher profit margins (an industry leader in 2004 at 21 percent), quicker time to market, and, more often than not, more innovative products than its competition.
Source: Lewis, P. 2005. A perpetual crisis machine. Fortune, September 19:59-76.
Corporations often form new venture groups whose goal is to identify, evaluate, and cultivate venture opportunities. These groups typically function as semi-autonomous units with little formal structure. A NVG’s mandate often extends beyond innovation and experimentation to coordinating with other corporate divisions, identifying potential venture partners, gathering resources, and, in some case, actually launching the venture.
Business incubators are designed to “hatch” new businesses. They are a type of corporate new venture group with a more specialized purpose – to support and nurture fledgling entrepreneurial ventures until they can thrive on their own as standalone businesses.
A culture of entrepreneurship is one in which the search for venture opportunities permeates every part of the organization. Everyone is attuned to opportunities to leverage the assets and capabilities of the corporation to create new businesses.
In this Discussion Forum, you have two tasks to perform:
First, watch the following video:
Entrepreneurship – http://video.mit.edu/watch/leadership-and-entrepreneurship-9505/
What is the difference between focused and dispersed approaches to corporate venturing?