Darwin once famously wrote, “It is not the strongest of the species that survive, nor the most intelligent, but the one that is most responsive to change.” His theory on evolution can be applied to the present-day competitive business landscape, where corporate survival is no longer about size or strength – it is those able to best adapt to the fast-paced environment that will survive. Change has never been more rapid (with digital transformation as a key driver), and the net result is that companies can now rise and fall faster than ever. Therefore, companies must incorporate entrepreneurship to evolve the business, successfully adapt to the rapid change, and avoid becoming obsolete.
Internal Corporate Venturing – A Means to Survive
One entrepreneurial strategy companies can use to cope with future demands is internal corporate venturing (ICV). Companies that engage in this entrepreneurial strategy typically create a separate ICV unit within the existing company (parent) with the purpose of identifying and developing new businesses for the firm in a start-up-like environment. ICV makes it possible for established companies to work with new markets and business models in a flexible and innovative way, in addition to their existing business models.
While the criticality of ICV units for innovation and survival has long been acknowledged, the organizational factors associated with ICV success are less understood. Below are three recommendations on how to organize and manage these entrepreneurial initiatives successfully. The recommendations are based on how some of the most innovative companies in Norway (Schibsted, Finn, Storebrand, VG and Posten) organize and manage their ICV units.
How to Organize ICV Activities
1) First, the ICV unit should work with radical innovation and be separated from the core business but involve people from core if the idea will be integrated into the parent. Radical innovations are innovations that significantly transform existing products, services, and/or technologies and often make the existing product/service designs and technologies obsolete. This is different from incremental innovation which seeks efficiency and improvements of the company’s existing products and services. Being separate includes that the unit has its own resources and budgets and that the employees working within the unit are placed in a “new” environment shielded from the parent company’s culture when working on new initiatives. This makes the ICV team less affected by, and dependent on, the core business – which is beneficial. It is however essential to involve people from the core business at an early phase if the idea will be integrated into the parent company – this to secure a smooth integration between the parent and the venture, and to avoid the ‘not invented here syndrome’.
2) Second, the ICV unit should be given a high degree of autonomy from the parent firm. This includes that the ICV teams have the freedom to test, experiment, and decide based on how the new business evolves. Being a separate unit is a necessary foundation to gain the autonomy needed, as having their own resources and budgets makes them more independent of the parent. The ICV teams lose speed if they constantly need to ask for permission from managers. Moreover, ideas are more likely to succeed if they are based on decisions made by those with the most insight and who work closest to the new projects. Therefore, top managers should strive not to get too involved in the decision-making process, and rather give the teams mandates to decide. In other words, the unit should be freed from the otherwise bureaucratic thinking of the parent company.
3) Third, top management support is essential to succeed. Top managers need to serve as ambassadors for the new initiatives, where they support the ICV teams and communicate the importance of the ICV unit’s work throughout the parent company. Moreover, parent companies should implement concrete measures to build (or maintain) an innovative corporate culture. This increases the understanding and attention of the parent’s innovation efforts. Finally, the work within the unit must be seen as strategically important even if the company is going through hard times – one cannot stop working on the income for the future.
Want to Read More About How Some of Norway’s Most Innovative Companies Have Organized Their ICV-units?
You can read practical examples and more about ICV in this master’s thesis written by me and two fellow students from NTNUs School of Entrepreneurship. We investigated some of Norway’s most innovative established companies (Schibsted, Storebrand, Finn, Posten & VG) to identify critical organizational factors contributing to the success of their ICV units.