Having changed profoundly in just 10 years, it is perfectly conceivable that the pace of change to China’s business landscape will increase further over the next decade. What will this mean for European companies with subsidiaries in China? While many of them are currently market leaders maintaining this position won’t get easier; on the contrary, competition is set to become fiercer. The key to sustainable success, says Dr Laurenz Awater, Managing Partner at the INNOVA Management Institute (Shanghai), is encouraging and developing corporate entrepreneurs, and creating a framework that allows them to flourish.

Past patterns of success are by no means a guarantee for future growth and prosperity. The key to survival is the anticipation of coming changes and swift adjustment, agility. This requires closeness to customers and markets as well as sound and fast decision-making, conditions that call for greater empowerment of China CEO’s and leaders at regional headquarters who take the designated role of corporate entrepreneurs.

Nurturing corporate entrepreneurs

Small and medium-sized enterprises (SMEs) are typically built around entrepreneurial personalities and need corporate entrepreneurs to flourish. We dare to make a prediction: SMEs that do not nurture corporate entrepreneurs will struggle, fail or even vanish altogether.

Corporate entrepreneurs are the engines of organisational growth, providing much of the initiative, energy and motivation that is required. They identify and create opportunities, drive change and innovation, start new ventures and provide leadership for strategic renewal to create economic value. They excel due to their ability to bring others along.

What sets corporate entrepreneurs apart from more traditional managers? The two most important qualities of corporate entrepreneurs are open-mindedness and cognitive ability. They tend to be independent thinkers who make sense of the world based on their own observations and experiences. They deal proactively with ambiguity and uncertainty, and act as trail blazers, pioneers, business builders and change agents. They are not necessarily the idea generators but their strong execution orientation allows them turn ideas into profitable businesses.

Typically, corporate entrepreneurs are driven and motivated by the excitement of a challenge, willing to take on risks and actively look for opportunities to stretch and grow. What makes them effective leaders is that they are adept at setting the right direction and know how to exploit core businesses while exploring new ones.

Entrepreneurial leaders don’t grow on trees, they need to be developed over time.

Fostering entrepreneurial behaviour

Identifying, hiring and developing entrepreneurial talent is essential for nurturing corporate entrepreneurship. But to effectively foster entrepreneurial behaviour more profound changes are necessary, changes which provide individuals and teams with opportunities to learn and grow. These include:

• Recognising the unique qualities that corporate entrepreneurs bring to the organisation;
• Giving corporate entrepreneurs the freedom to experiment, and recognising that frequent trial and error is an inherent part of discovery;
• Assigning corporate entrepreneurs to your organisation’s biggest and most challenging problems;
• Encouraging innovative and entrepreneurial behaviour by financially supporting projects, knowing that some of the projects will fail;
• Providing decision-making latitude and freedom from excessive oversight by delegating authority and responsibility to corporate entrepreneurs; and
• Providing training and professional development opportunities in key areas of entrepreneurship, such as navigating amidst uncertainty and creative thinking.

Models of corporate entrepreneurship

To establish corporate entrepreneurship as a core competency of your organisation, you have to decide which approach to corporate entrepreneurship best suits your corporation’s culture, strategy and business model, and refine the processes used by individuals and teams to develop new businesses, products, or services. Researchers at MIT Sloan have identified two dimensions that consistently differentiate how companies approach corporate entrepreneurship:

• Organisational ownership: who, if anyone, within the organisation has primary ownership for the creation of new businesses? and
• Resource authority: whether there is a dedicated pot of money allocated to corporate entrepreneurship, or whether new business concepts are funded in an ad hoc manner through divisional or corporate budgets or ‘slush funds’.

Together the two dimensions generate a matrix with four dominant models: the opportunist (diffused ownership and ad hoc resource allocation); the enabler (diffused ownership and dedicated resources); the advocate (focused ownership and ad hoc resource allocation); and the producer (focused ownership and dedicated resources).

Each of the models requires different forms of leadership, processes and skill sets, the researchers found. An enabler model depends on establishing and communicating simple, clear processes for selecting projects, allocating funds and tracking progress, all with well-defined executive involvement. Advocate models require individuals with the instincts, access and talent to navigate the corporate culture and facilitate change. The producer model requires considerable capital and staffing and a direct line to top management.

Evolving from the opportunist model to any of the more deliberate forms of corporate entrepreneurship typically begins with a broad, clearly communicated vision. Whatever model is selected, your organisation should experience a significant increase in the number of proposals, which leads to the challenge of scaling field-proven, new businesses and finding organisational homes within the company. And the more distant a new concept is from the ‘comfort zone’ of the core business, the greater the challenge.

In a slowing economy with considerable overcapacities in many industries advocating corporate entrepreneurship is no easy game as budgets get trimmed and risk aversion prevails. It is corporate entrepreneurs, however, who hold the keys to the company’s long-term success.

Dr Laurenz Awater is managing partner at the INNOVA Management Institute (Shanghai), a consulting firm focusing on change, innovation, leadership and organizational development. Laurenz is co-facilitator of the management programme Corporate Entrepreneurship in China.