Corporate Entrepreneurship: "The Other Side of Innovation"

Currently, I am reading "The Other Side of Innovation" by Vijay Govindarajan and Chris Trimble. The book is packed with theory, practice, examples, recommendations and strategy on how established companies can innovate. Being inspired by the book, I decided to write a blog post on the topic. In my post, I will refer to the book and also other resources that I have referred to understand more on this topic of Corporate Entrepreneurship. 

What is Corporate Entrepreneurship? I found an interesting definition while reading MIT Sloan Management Review -  "(corporate entrepreneurship is) the process by which teams within an established company conceive, foster, launch and manage a new business that is distinct from the parent company but leverages the parent’s assets, market position, capabilities or other resources". It is different from corporate venture capital that primarily aims at investing in external companies and spin-offs, which are created as an entity independent from the parent company. I will separately cover both the topics, corporate venture capital and spin-offs, in future blogs.

How can business organizations encourage entrepreneurship and innovate? To answer this question, Vijay Govindarajan and Chris Trimble bring about an interesting conflict that established businesses face while innovating - "Business organizations are not built for innovation; they are built for efficiency". Thus, the question is how can a business organization balance efficiency and innovation? As an answer to this question, the authors quote Ray Stata (founder and chairman of Analog Devices) who said (paraphrasing) innovation in business organizations has nothing to do with creativity or technology but management capability to convert ideas to impact (emphasis mine). However, as you might agree, questioning the managerial competence that has successfully delivered innovative products, is rather provocative. But, based on the authors' research, it indeed seems to be the case. In The Other Side of Innovation, the authors address this provocative question and give a blue print on how big organizations can simultaneously deliver efficiency and innovation.

In "The Other Side of Innovation", the authors explain that a Performance Engine of a business takes care of ongoing operations. This engine has to be routine, repeatable and risk-free. In other words, it has to be reliable. Thus, it is the mechanism that ensures delivering reliable profits every quarter. In contrast, innovation is non-routine and uncertain hence non-repeatable. But is it possible to repeatably deliver innovation without compromising efficiency? Indeed yes, but for this, the performance engine and innovation initiatives have to be organized and planned differently. The essential components of the organization and planning of an innovation initiative are:

innovation = idea + leader + team + plan

Importantly, because each idea is unique, it implies that each idea requires unique leader, team and plan. In these components, the most critical is the team because the challenge is not dearth of ideas but execution of ideas. So, how will you build the innovation team that efficiently executes the ideas? The authors propose that such a winning team is built on a partnership (highlighted as + below) between members dedicated for leading innovation and members from the performance engine. Thus:

Winning Innovation Team = Members shared from Performance Engine (routine tasks) + Members dedicated for the innovation (non-routine tasks)

Some of you may be curious to know why does one need members from the Performance Engine for an innovation initiative? Isn't the Performance Engine designed for routine tasks? Will it not compromise the efficiency of the Performance Engine if their members have to divert their attention to an "additional task" (= innovation initiative)? Will it not be more efficient for an organization to have team independently dedicated only for innovation? To know answer to these (and many more) questions and how to build a winning innovation team, I encourage the readers to read "The Other Side of Innovation". It is a must-have book for any entrepreneur and innovator.