Driving renewal: the entrepreneur-manager
The Authors
Bala Chakravarthy, Professor of Strategy and International Management, IMD, Lausanne, Switzerland.
Peter Lorange, President and Nestlé Professor of International Business at IMD, Lausanne, Switzerland.
Acknowledgements
Note: the research for this paper was part of a larger project, published recently as a book (see Chakravarthy and Lorange (2007a), Profit or Growth? Why You Don't Have to Choose).
Abstract
Purpose – Strategic renewal requires both a top-down and bottom-up effort. Top management sets the broad vision for the firm and specifies the scope and pace of renewal. However, it is the firm's entrepreneur-managers who shape its renewal strategies and take responsibility for their implementation. This paper aims to profile the skills, personal traits and experiences of successful entrepreneur-managers.
Design/methodology/approach – The paper uses field research.
Findings – The paper finds that entrepreneur-managers are in part corporate entrepreneurs. They are outward-focused, cognizant of changes in their business environment and the new opportunities that these may bring. They are willing to experiment with new business models and to explore new capabilities. But they are also operating managers interested in scaling up an entrepreneurial idea and in delivering results. They have a few special personality traits. They are not risk averse and are action oriented. They are also supremely self-confident. These traits allow entrepreneur-managers to take risks, persist despite failures and learn from their mistakes. However, more than special traits, it is experience that grooms entrepreneur-managers in a firm. Entrepreneur-managers are typically not new comers to the organization. Their long tenure helps with networking inside the firm. They also have an established track record of performing well. That buys them the freedom to operate outside the usual confines of the organization and enjoy the trust that is needed to take risks on behalf of the firm.
Research limitations/implications – Like in any field-based study, the sample size is a limitation. However, for the modest goal that this paper has set for itself, i.e. profiling the entrepreneur-manager, this is not a severe limitation.
Practical implications – The paper provides a profile for identifying and nurturing entrepreneur-managers. As it argues, they are the drivers of strategic renewal within the firm.
Originality/value – Prior empirical and theoretical research on intrapreneurship has focused more on creating distinct new corporate ventures. This article suggests that the real power of intrapreneurship is to help connect the future of the firm with its current core businesses. Intrapreneurship is about leverage and build, more so than transform, to use the three types of renewal strategies that are offered in this article.
Article Type:
Research paper
Keyword(s):
Entrepreneurialism; Corporate strategy; Managers.
Journal:
Journal of Business Strategy
Volume:
29
Number:
2
Year:
2008
pp:
14-21
Copyright ©
Emerald Group Publishing Limited
ISSN:
0275-6668
Driving renewal
Renewal strategies seek to go beyond protecting and extending the core businesses of a firm, and progressively transform the core through a succession of leverage and build strategies (Figure 1).
Leverage is a strategy that takes the firm into new markets by leveraging the existing competencies that it already has. Build, on the other hand, is a strategy that helps the firm access distinctive new competencies in order to protect its existing market franchise. Both “leverage” and “build” should logically relate to the other. If the two are linked systematically, they can help the firm migrate to new markets and new competence platforms progressively over time (Chakravarthy and Lorange, 2007b). The present does not have to be discarded; it can be morphed into the future. It is the preferred way to transform the firm without taking undue risks. We call this continuous renewal.
Strategic renewal requires both a top-down and bottom-up effort. Top management sets the broad vision for the firm and specifies the scope and pace of renewal. Given this broad directive, senior executives, with the help of staff experts, define the renewal agenda for their organizational units. However, it is the firm's business and functional managers who shape its renewal strategies and take responsibility for their implementation.
But a frequent problem is that the business and functional managers entrusted with the responsibility for shaping and implementing renewal strategies also have to deliver short-term results. Their priority is to exploit current markets and competencies, rather than explore for new markets and competencies. And yet, adapting to a changing environment means venturing out into the new and unexpected. Managers entrusted with implementing renewal strategies, no matter where they are in an organization, are lacking in entrepreneurial skills. This hurts continuous renewal.
We need a dedicated and special kind of manager to execute renewal. We refer to this individual as an entrepreneur-manager, a hybrid between an external entrepreneur and a good operating manager – having the external focus and risk taking ability of the former and the discipline around delivery of the latter. This is different from the intrapreneur (Pinchot, 1985), whose primary focus was in creating a new venture and not in integrating it with the rest of the firm.
But entrepreneur-manager is a label that we have coined. It does not exist in any of the organizations that we know. We use the hyphenated label intentionally to highlight that managers who drive renewal initiatives must have entrepreneurial skills to complement the operational skills that most of them bring.
Below we will profile the desired qualities of an entrepreneur-manager (Chakravarthy and Lorange, 2007a):
-
Skills:
- see the big picture and shape strategy;
- communicate and market the strategy;
- manage stakeholders, gain support and mobilize resources; and
- assemble and motivate a team of experts.
-
Personal traits:
- propensity to take risks;
- passion and inner fire;
- action orientation; and
- self-confidence.
-
Professional experience:
- established track record – buys freedom and trust; and
- long tenure and varied experience – helps with networking.
We have compiled this based on the experiences of Nestlé, Dow Chemical, Hewlett Packard and Ericsson in implementing renewal strategies (see Box 1). The qualities we have identified are consistent with prior findings (Block and MacMillan, 1993), but with one important difference. We strongly believe that entrepreneur-managers are not newcomers to an organization. They have long and well-rounded experience. Their prior track record buys them the credibility to take risks on behalf of their firms. Long association gives them information and access to the company's network of resource holders and power brokers. Personal traits are important as well, because these influence the entrepreneur-manager's ability to proactively seek the relevant experiences within the firm and learn from these.
Skills of an entrepreneur-manager
See the big picture and shape strategy
Unlike external entrepreneurs, entrepreneur-managers do not march to their own drum. Each of the five ventures we have described had a business proposition that was anchored in the corporate strategy of the firm. For example, LC1 was aimed at building a new competence platform for Nestlé in functional foods (Lorange, 2003); E-services at HP was aimed at leveraging HP's strengths in products into services (Chakravarthy, 2003a); and the e-channel at Dow Chemical was aimed at building a new low-cost channel for the company (Chakravarthy, 2003b). But within this guiding vision, the entrepreneur-manager finds the freedom to develop strategies that can help in the firm's renewal.
Communicate and market the value proposition
A difficult challenge for the entrepreneur-manager is to communicate the value proposition of his venture to key stakeholders. At Dow Chemical, for example, Ian Telford was worried that the company's epoxy leadership team (ELT) would reject his e-channel idea. Telford had tested the prototype of the site and put together a good business plan. But he was concerned because the vote to fund his exploratory study had been contentious, and he felt there were vested interests on the ELT who were opposed to his project. He wanted to do something dramatic to push home the importance of his venture.
Two weeks before a critical review meeting for his project, Telford started a rumor claiming that a major competitive announcement was in the offing. With mounting suspense over the impending announcement that weekend, Telford volunteered to have the show taped and flown in from the UK. He had already arranged to have a spoof broadcast videotaped using his friends as stand-ins for a news anchor, a financial analyst, and the CEO of the new joint venture.
We mention the Telford example not to advocate such a radical approach to communicating the value proposition of a renewal project, rather to highlight that renewal ventures do attract internal resistance within the firm. The entrepreneur-manager must not only deal with their substantive concerns, but also with the underlying emotional issues. Marketing a renewal project is not just a matter of formal presentations it is also about informal lobbying and influencing key stakeholders.
Manage stakeholders, gain support and mobilize resources
Selling a renewal strategy to key internal stakeholders is difficult. Even though we would expect the business and functional heads whose units are affected to take an enterprise-wide view, parochial considerations do exist. The entrepreneur-manager must have the ability to deal with these competing interests.
For example, Ian Telford faced internal opposition to his e-channel idea for Dow Chemical. Product managers and country heads did not like the price transparency that the e-channel would bring. This had the potential to hurt the profitability of their units. Telford came up with a compromise idea, limiting the products and terms that would be offered on the e-channel and ensuring that the price offered was never lower than that available to the firm's best customers.
Besides getting the buy-in from stakeholders on the strategy, the entrepreneur-manager needs stakeholder support for the resources he needs. We noted earlier that entrepreneur-managers seldom have all the resources they need to deliver on their goals. They need to tap into the knowledge and skills available throughout the organization. For example, a big challenge for Telford was to get resources from the company's corporate Information Systems (IS) department.
The IS department was legitimately concerned that the exceptions required by Telford's project made connectivity with other systems an issue. Also, his system would not be easily scaleable should the project become a success. Tracy Teich, IS director for the business, recalled how Telford won them over:
The strength of the e-epoxy.com venture was that Telford had a well-articulated position. He had a credible story and he told it well. Telford was also a model customer. He respected all the IS rules. He took great care in preparing the initial specifications and there were no major revisions as the project progressed. He met all the IS requirements, on time, every time. Some of the best IS architects volunteered for the project. Telford recognized their work and praised their efforts. When he received his first order, he took the trouble to call the IS team. This gave them instant ownership of the project.
Assemble and motivate a team of experts
The entrepreneur-manager has to be a skilled manager of human talent, even more so than his peers in operations. This is because he does not have any special carrots to offer team members in exchange for the risk they must take in working for him. The risks in joining a renewal project are two-fold. First, if the project fails it can have negative career consequences. A more immediate concern is that salary increases and bonuses may also be at risk. Project teams assigned to renewal strategies tend to be small and concentrated on talent. Yet most corporate reward systems insist on a forced ranking of employee performance. In a small high-performing team, it will cause several talented individuals to be rated as par or even sub par. This is the risk that an employee takes in joining a renewal project.
Consider the challenge for Ganev when he launched the CTS project in Ericsson (Lorange, 1999). He sought to hire some of his erstwhile colleagues in the Components Division of Ericsson Mobile for his project. Despite the risks in the CTS venture, five of them volunteered to work for Ganev. The excitement that Ganev was able to communicate for his project was one reason.
Besides providing an island of fun and excitement, entrepreneur-managers also have to manage the career risks of their subordinates. When asked what would have happened if the e-epoxy venture had failed at Dow Chemical, Telford replied:
I think my career would have taken a hit. But I was not worried about that. I was more concerned with the experience to be gained and the future of my team members. Even though they volunteered to take on this risky assignment, I tried to develop “escape routes” for all of them. Given the high visibility that the venture had, I made sure that team members were placed in positions where senior executives would notice them if worst came to worst.
Personal traits
The four personal traits that we have noticed in successful entrepreneur-managers are: a propensity to take risks, passion and inner fire, an action orientation, and self-confidence.
Propensity to take risks
Entrepreneur-managers usually display an appetite for risk in both their personal and professional lives.
Personal risks
A prior record of some risk-taking in one's personal life is perhaps a good predictor of an appetite for risk-taking in a corporate context. Indeed, we found such a streak in some of the entrepreneur-managers we met. Ian Telford at Dow Chemical, for example, has a passion for adventurous sports like ice climbing, off-piste skiing and karate. Tsviatko Ganev, who worked for Ericsson in Sweden, was a refugee from communist Bulgaria and an outspoken critic of the then regime. But good ice climbers avoid accidents and smart political critics do not get shot. We are talking about prudent risk-taking here.
Professional risks
Apart from taking prudent risks in their personal lives, entrepreneur-managers also take risks professionally. But here again these are more prudent than the ones that external entrepreneurs take, betting personal assets such as bank balance, home, boat and cars, in order to pursue a dream. But unlike many of their peer managers in the firm, entrepreneur-managers are far more likely to take career risks in pursuit of projects they are passionate about.
Passion and inner fire
Entrepreneur-managers are passionate people. They will only sign onto projects they care about and once they commit they invest themselves fully and emotionally in the project's goals. Describing this quality in Lang, the project manager for Nespresso (Kashani, 2003), his superior Rupert Gasser remarked:
Lang was ambitious and strong-headed. He wanted to do something outstanding. Lang had personality; he was a force. There were not many people in the company who believed in Nespresso, but Lang did. He was totally convinced of the opportunity.
This inner fire is not unique to entrepreneur-managers. We have also seen it among other managers when they are driving a quality or process improvement initiative, pruning or extending the company's product line or even leading a tough restructuring effort. What distinguishes the two, however, is where this energy and inner fire are directed. In the case of the entrepreneur-manager, it is always directed outwards towards leveraging a new opportunity or building a new capability, and not on optimizing what the firm already has. Entrepreneur-managers delight in doing new things. This is the side to their personality that most resembles an external entrepreneur.
On the flip side, when a project looses its novelty, the entrepreneur-manager's passion for it also drops. Telford at Dow Chemical described it as being as anticlimactic as “writing the final exam”. The hard work is done. Instead of coasting on the fruits of that labor, the entrepreneur-manager wants the next challenge. This passionate commitment of the entrepreneur-manager is vital for the success of a renewal project. But once the passion ebbs, the energy can too.
An action orientation
Entrepreneur-managers are action-oriented. They are not big on planning but they will do what it takes to get the project funded. Executing the venture is more important to entrepreneur-managers than researching or talking about it. In fact, it is in the execution of a project that they learn how to shape it. An R&D vice president at Ericsson realized this simple truth and was skillful in inviting Ganev to “research” difficult issues for the company on four different occasions. Ganev responded every single time with a successful project. Each of these ventures lasted about five years.
When confronted with obstacles, entrepreneur-managers are also not averse to challenging the bureaucratic ways of large corporations. In that respect they differ from many operating managers, who are far more compliant.
But entrepreneur-managers, like Ganev, know which rules to bend. Although they can ask for, and often receive, forgiveness for bypassing operating procedures that hinder speedy implementation, they are careful not to violate procedures that embody the core values of the firm.
Self-confidence
Entrepreneurial projects are risky and they can fail. It is important that the entrepreneur-manager learns from his or her mistakes and either makes mid-course corrections or pulls the plug. We believe there is an important personal trait that helps entrepreneur-managers to accept their mistakes. It is their immense self-confidence in their own abilities. When a project fails, they do not take it personally. They genuinely feel that no one else could have managed it better.
Professional experience
We believe that professional experience is another important element in the profile of an entrepreneur-manager. There are two aspects to this experience: track record and length and quality of tenure.
Established track record
It is said that successful venture capitalists bet on the jockey more so than on the horse or the race; i.e. the track record of the venture manager more so than on the venture itself or the industry that it is in. This is equally true when implementing renewal strategies. The track record of the entrepreneur-manager matters a lot. It buys him freedom to operate and the trust of his senior managers.
Consider the LC1 project, for example. Gallagher realized that the French launch was a disappointment. Instead of hiding this, he increased commitment levels and sought the help of his superiors to re-launch the product in Germany. Gallagher could do that because he had earned their trust through a proven prior performance record. Even if the LC1 venture was in trouble, he knew that he himself would not be seen as a failure, given his successful track record.
Long tenure
Entrepreneur-managers seldom have all the resources they need to deliver on their goals so they have to borrow them from elsewhere in the organization. It takes time to know who the best sources are for these resources. But the lending unit may have no incentive to cooperate; it usually has its own priorities. In order to borrow, it helps if the borrower was a lender previously or is a prospective lender in the future. Establishing this kind of reciprocity can take time. It is unlikely, therefore, that successful entrepreneur-managers will have spent fewer than five years in their companies. It takes at least that long to establish trust and a network of support within the firm.
Four of the entrepreneur-managers we studied were successful mid-level managers with long track records in their companies. They also had the opportunity to move through multiple functions, countries and/or businesses. They had a wide range of contacts inside the firm and had established strong internal networks, both through their own competencies that made others ask them for help and through a track record of giving and not just taking.
Summary
Managing a renewal strategy needs a special type of manager, an entrepreneur-manager. These entrepreneur managers are in part corporate entrepreneurs. They are outward-focused, cognizant of changes in their business environment and the new opportunities that these may bring. They are willing to experiment with new business models and to explore new capabilities. But they are also operating managers interested in scaling up an entrepreneurial idea and in delivering results.
Entrepreneur-managers are especially skilled at discovering a valuable business proposition for their ventures, communicating and marketing this to all stakeholders within the firm, mobilizing the necessary resources even when they have no authority over these, assembling and motivating a team of experts, and, most importantly, in delivering results. These skills can be learned and honed through practice and trial and error, under the watchful eye of a good coach.
Entrepreneur-managers have a few special personality traits. They are not risk- averse and they are action-oriented as well as supremely self-confident. These traits allow entrepreneur-managers to take risks, persist despite failures and learn from their mistakes. However, more than special traits, it is experience that grooms entrepreneur-managers in a firm.
Entrepreneur-managers are typically not newcomers to the organization. Their long tenure helps with networking inside the firm. They also have an established track record of performing well. That buys them the freedom to operate outside the usual confines of the organization and enjoy the trust that is needed to take risks on behalf of the firm. Spotting and nurturing these entrepreneur-managers is the key responsibility of senior managers.
Figure 1The domain of an entrepreneur-manager
Box 1
References
Block, Z., MacMillan, I.C. (1993), Corporate Venturing: Creating New Businesses within the Firm, Harvard Business School Press, Boston, MA, .
Chakravarthy, B.S. (2003a), Internal Entrepreneurship at the Dow Chemical Company, Case 3-1117, IMD, Lausanne, .
Chakravarthy, B.S. (2003b), Nick Earle: The Plate Spinner, Case 3-1071, IMD, Lausanne, .
Chakravarthy, B.S., Lorange, P. (2007a), Profit or Growth? Why You Don't Have to Choose, Wharton School Publishing, Philadelphia, PA, .
Chakravarthy, B.S., Lorange, P. (2007b), "Continuous renewal", Strategy & Leadership, Vol. 35 No.6, pp.4-11.
Kashani, K. (2003), Innovation and Renovation: The Nespresso Story, Case M 543, IMD, Lausanne, .
Lorange, P. (1999), Internal Entrepreneurship at Ericsson: Finding Opportunities and Mobilizing Talent, Case GM 783, IMD, Lausanne, .
Lorange, P. (2003), Managing Internal Growth at Nestlé: The Story of LC1, Case GM 840, IMD, Lausanne, .
Pinchot, G. II (1985), Intrapreneuring: Why You Don't Have to Leave the Organization to Become an Entrepreneur, Harper & Row, New York, NY, .
Further Reading
Stevenson, H.H., Gumpert, D.E. (1985), "The heart of entrepreneurship", Harvard Business Review, No.March 1, pp.89.
About the authors
Bala Chakravarthy is Professor of Strategy and International Management, IMD, Lausanne, Switzerland. His research and teaching interests include strategy processes for sustainable business growth, corporate renewal, and leadership dilemmas. Bala Chakravarthy is the corresponding author and can be contacted at: chakravarthy@imd.ch
Peter Lorange is President of IMD, Lausanne, Switzerland, and Nestlé Professor of International Business. His research interests are in multinational management, strategic planning processes, strategic control and strategic alliances.