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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.
3 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
4 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
5 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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?
6 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
7 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
• 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
8 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
9 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
10 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
Source: Chakravarthy & Lorange, Leading for Growth, Forthcoming
11 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
Source: Chakravarthy & Lorange, Leading for Growth, Forthcoming
12 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
Source: Chakravarthy & Lorange, Leading for Growth, Forthcoming
• How does the Internal Entrepreneur fit into the Organization?• Effective sponsors of corporate entrepreneurs are equally key. A Growth Sponsor Profile:
13 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
Source: Chakravarthy & Lorange, Leading for Growth, Forthcoming
• How does the Internal Entrepreneur fit into the Organization?• Effective sponsors of corporate entrepreneurs are equally key. A Growth Sponsor Profile:
14 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
15 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
16 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
• 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
Source: Chakravarthy & Lorange, Leading for Growth, Forthcoming
17 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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!
18 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
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
19 PL-Internal Entrepreneuring for Growth - Amsterdam
Dr. Peter Lorange, President
“It is not the strongest of the species
that survive,
nor the most intelligent,
but the most responsive to change”
Darwin