copyright 2005 © by imd international, lausanne, switzerland not be used or reproduced without...

Copyright 2005 © by IMD International, Lausanne, SwitzerlandNot be used or reproduced without permission

Internal Entrepreneuring for Growth

FEL Annual Conference

Amsterdam, September 23, 2005

Dr. Peter Lorange, President, IMDThe Nestlé Professor

2 PL-Internal Entrepreneuring for Growth - Amsterdam

Dr. Peter Lorange, President

• Why is growth so critical?

• What characterizes an effective organization – to achieve growth?

• Why do we need internal entrepreneurs?

• What must they know?

• Their place in the organization

• What is the role of the CEO in growth?

A growth culture is critical today, and the Internal Entrepreneur is a key part of this.



Growth is critical!

• Either you grow – or you die. Status quo is not an option• Organizationally

• Reputation; track record (to attract capital)

• Growth is key in society• Jobs

• Societal wealth: Focus on how to create the pie, not on how to split it!

• World competitiveness race• Talents

• Capital



ex. CHINA

Exceptional Economic Growth is key for exceptional Business Growth

• Infrastructure - congestion– Harbours– Roads

• Energy consumption – can it be sustained?– Oil imports– Environmental limitations?

• Consumer durables exports– Container ship market – Terrorism?

• Political stability?• Steel manufacturing – can it drive the growth?

– Steel imports– Ore imports



GDP Per Capita, $’000

Ste

el

Co

ns

um

pti

on

Pe

r C

ap

ita

, k

gs

Expected Chinese Consumption (UBS Warburg)Average Consumption for Developed Countries

900

800

700

600

500

400

300

200

100

0

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

China

South Korea, Taiwan

Europe, Japan, U.S.

Example re. steel as an underlying economic driver:Steel Intensity Rises as Countries Get Richer – But how fast?New technology in Materials Usage?



The Daily Burn

0.72

0.83

0.83

0.92

0.97

0.98

1.11

1.13

1.39

1.55

1.6

1.75

1.91

1.91

2.22

2.59

2.8

2.87

3.05

3.35

3.94

4.05

4.28

4.42

4.46

5.56

Sw itzerland

U. K.

Norw ay

Sw eden

Germany

France

Italy

Japan

Australia

New Zealand

Spain

U. S.

Hong Kong

Poland

Canada

Argentina

Mexico

Taiw an

Brazil

Korea

Philippines

China

Malaysia

Russia

Indonesia

Thailand

Relative oil use intensity, in thousands of barrels of oil consumed per day, per billion dollars of GDP in 2004

Source: Morgan Stanley; BP; StatisticalReview of Energy; IMF

Average



• See opportunities before they are obvious to everyone else• Customer relationships

– closeness– understanding– continuity– trust

• Key to have: Unique know-hows that the customer can appreciate!• Technological• IT• Commercial

• A good Niche Strategy – does it build on already established strengths?

All Growth Strategies should – in essence – be seen as Niche Strategies

Key Elements of Niche Strategies



LeverageLeverageNew

Distinctive Competencies

Existing

Markets

New

Protect & ExtendProtect & Extend

Existing

StepwiseStepwiseTransformationTransformation

BuildBuild

Domain of Corporate

Entrepreneurship

A Model for Internally Generated Growth, and the Domain of Corporate Entrepreneurship

Source: Chakravarthy & Lorange, Leading for Growth, Forthcoming



We see Several Critical Skills/Capabilities that the Effective Internal Entrepreneur must Have

Board

“See”,Customer Interface

“Identify”Competencies

“Implement”Mobilize Team

and

• The outside market contacts

• The inside network • The inspiring and confident leader - we, we, wenot me, me ,me

CEO



Ability to:

• Ability to discover a profitable value proposition and communicate it

• Ability to understand what critical resources are needed for success

• Ability to mobilize these resources (networking ability both inside and outside – borrow with pride).

• Ability to assemble and motivate a team of experts.

• Ability to deliver results

• Breaks rules but always stays true to the corporate vision and values

An Internal Entrepreneur’s Profile




Characteristics:

• Not a narrow expert, visionary perspective – thinking out of the box

• Established track record – buys freedom

• Long tenure – helps with networking

• High integrity

• Not status conscious

• Not risk averse – unafraid. Will take career risks. Energy & Inner fire.

• Primary motivation is recognition

An Internal Entrepreneur’s Profile




Ability to:

• Spot the entrepreneur and provide the right assignment

• Empower, believe in the concept

• Sell upwards

• Help access resources: Finance, People, Time and Space

• Ensure integrity of mission

• Set tough goals and demand results

• Tolerate “idea” failures

• Provide political cover

• Plan personal development of the entrepreneur around new projects


• How does the Internal Entrepreneur fit into the Organization?• Effective sponsors of corporate entrepreneurs are equally key. A Growth Sponsor Profile:



Characteristics:

• A good strategic mind: able translator

• Handles ambiguity

• Willing to cash in personal credibility

• Courageous: Supports risky projects

• Coach/mentor

• Patient and persistent

• Not a control freak


• How does the Internal Entrepreneur fit into the Organization?• Effective sponsors of corporate entrepreneurs are equally key. A Growth Sponsor Profile:



An effective CEO – for fostering growth – is critical too. A CEO Profile:

Ability to

• Focus on key strategic projects

• “Pump” strategic resources into such projects – gain momentum, speed

• Represent the customer vis a vis own organization

• Balance growth and profits



An effective CEO – for fostering growth – is critical too. A CEO Profile:

Characteristics

• Get hands dirty – enthusiasm

• Comfortable with strategic budget

• Value to customer/marketing orientation

• Have strength to withstand short-term pressure

• Be cognizant of risks, and setbacks – with learning, and without stigmatization



• More networked organizations

Not dogmatic – no illusions of being the “one big brain,” but willing to challenge conventional business models

Creates “meeting places” between problems and solutions, fights the Not Invented Here (NIH) syndrome

Pushes for fewer silos and organizational “kingdoms”

Avoids home country biases!

• Action orientation

Promotes doing things, trying things – not analysis in absurdum

Ensures that there is no stigma if there are setbacks, but seeks break through ideas and not incremental thinking

Promotes learning from failures and sharing of successes

• Walk the talk

Rewards sharing

Ensures that HR policies support one enterprise thinking

Fights dysfunctional politics

The CEO Should Foster a Growth Culture




The CEO must take the customer’s viewpoint

• “Represent” the customer

• Not isolated (not imperial)

• Add resources to key strat. initiatives

• Be following these closely

• Gain time. Speed!



The Effective Organization for Achieving Strong Growth is:

• As simple as possible re. its formal structure – self-contained entities

• As close to the customer as possible – in a holistic way

• Lean on processes – above all control processes

• Light on central staff functions



“It is not the strongest of the species

that survive,

nor the most intelligent,

but the most responsive to change”

Darwin

copyright 2005 © by imd international, lausanne, switzerland not be used or reproduced without...

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