Executive Interviews: Interview with Philip Anderson on Corporate Entrepreneurship
April 2007 - By Dr. Nagendra V Chowdary

Philip Anderson
INSEAD Alumni Fund Professor of Entrepreneurship at INSEAD, in Singapore.
He is also director of the 3i Venture lab.

new business,then the answer is to launch a new business entity within your existing company. In an extreme case, the right answer might be to start something so different from your core business that you intend to spin it off and reap purely financial gains. The benefit of corporate entrepreneurship is very simple: if you learn how to do it, you can exploit all opportunities that fit your strategy and skill set, instead of limiting yourself to those opportunities that also fit your existing organization chart, culture, incentives, and so on.

• From your research, can you give us some of the finest examples of corporate entrepreneurship initiatives (successes as well as failures)?
  Apples launch of iTunes is a signal success. Within India, the formation of HCL Technologies and HCL Infosystems might be good examples. An example of a failure would be Apples attempt to set up a separate Newton PDA business or General Motors very expensive effort to set up the Saturn division as if it were an independent company.

• What are the enabling factors for a successful corporate entrepreneurship initiative? What are the reasons for some of the corporate entrepreneurship initiatives to fail? Do you see any specific pattern in the successes and the failures?
  Starting a company inside a company is harder in some ways than starting a greenfield operation because you are constrained by legacies like culture, incentive systems, or IT systems and usually have some internal rivalry. The most common reason why initiatives fail is because they are staffed by people who know the parent corporation well but have no track record in building a company. Usually when they succeed, it is because the key managers building the new business unit have built an organization before, for example, a new office overseas or a new practice or a new support function within the company. Bringing in the right outsiders who have companybuilding experience is also a key success factor. Many factors contribute to success or failure, but two stand out: (a) Are the founding managers suited to build a new venture? (b) Does the new line of business have a clear charter and strong support from senior management, allowing it to overcome predictable political opposition within the parent company?

• How to identify the ventures that would have the maximum strategic impact on the organization? Is there any criterion to weed out less potential ones, surpassing any possible idiosyncrasies?
  You start with those lines of business that would make strategic sense for the parent company. Then you ask yourself which of those opportunities best fits the key management talent you can put into it, whether from the parent or hired form the outside. Instead of ranking opportunities only in terms of strategic or financial attractiveness, you ask yourself whether you are capable of building the right organization to exploit an Interview 5 opportunity. If not, then you should either take a minority stake in an independent venture to exploit the opportunity; or start it at arms length with the intention of spinning it off; or let someone else start such a venture and acquire it later, after the venture has been built the right way by people who can execute without the constraints of your heritage.

• Is corporate entrepreneurship an offshoot of innovation?
  If you are pursuing an opportunity that is not an innovation from your point of view, why wouldnt you assign to an existing business unit?

• What were the roots of corporate entrepreneurship? In the life cycle of a company, when should corporate entrepreneurship be given a serious thought? Or is it that it rather should be an on-going practice? Are there any best practices that companies can (should) adopt while embarking upon a corporate entrepreneurship initiative?
  Corporate venturing has come into and gone out of fashion since at least the 1970s. Durable corporate entrepreneurship sprung from simple frustration with change management. If your existing business units dont fit a new opportunity very well, then it is a lot easier to start a new subunit that is configured from the start to do what is required than it is to change an existing subunit. A company should see corporate entrepreneurship as nothing more than a branch on its growth decision tree. First, do you want to grow by scaling up your existing businesses only, or do you also want to get into an area that is new to your company? If the latter, then does the new activity fit an existing business unit or is it better to start a new business unit? If the latter, do you have or can you attract the best people to start the new unit? If so, then corporate venturing makes sense. There are many best practices; the most important is staff the venture with the right people whose track record shows they know the domain and know how to build an organization.

• What happens to corporate entrepreneurship potential in familyowned/ run businesses?
  Most commonly, family owned businesses get into a new line of business because one of the family members becomes interested in it. Sometimes this leads family businesses to become conglomerations of different lines of business that have no coherence. When the new line of business is a good fit, however, having a trusted family member at the helm often helps the corporate venture overcome many of the political conflicts inherent in corporate entrepreneurship.

1. Leadership and Entrepreneurship Case Studies
2. ICMR Case Collection
3. Case Study Volumes