Daniel Soriano. Professor. IE Business School
4 December 2009
Large companies are sometimes so focused on their traditional core business that they miss niche opportunities that would enable the firm to innovate and launch new projects.
We’re hearing a great deal about the benefits of a corporate strategy based on innovation and entrepreneurialism. Large corporations are placing more and more emphasis on this idea, given the competitive scenario they face in mature markets where the general focus is on conventional patterns, and business models have ground to a standstill.
Moreover, new business initiatives bring, or at least should bring, an innovative approach, designed to attract larger market shares or new hitherto unexplored or latent niches. Unless the company´s culture fosters the values of entrepreneurialism and innovation large corporations tend to be more wary of implementing these new strategies, due either to inertia or a preference for leveraging an operative structure based on business models established in the past. This is understandable if we consider that investments made in the past, some of which were expected to provide long-term yields, were in line with the company´s strategy and made with the idea of exploiting the assets required to the maximum. But there are two sides to the story. The opportunity cost reduces the flexibility of the business model associated with the operative running of the organizational structure.
Since large enterprises usually focus their resources on their core business, only those that take time to identify business opportunities will be able to increase their output. This commitment to innovation and entrepreneurialism can lead to operations growing at above the average rate, known as gazelle companies, which increase their turnover by more than 20% continuously for a period of at least three consecutive years. Here I would like underscore the high value start-ups provide in terms of innovative business models and the source of know-how contributed by university research teams. Partnerships or knowledge-transfer agreements between these two players can spectacularly increase the number of opportunities for innovation in business models and products and services. Undoubtedly, the support provided by large enterprises in management, commercial expertise and product definition can be the perfect fuel for starting up new lines of business without diverting too much attention away from the day-to-day running of the company.
In line with these facts, the aim of the one-day workshop on Entrepreneurialism and Innovation organised by IE Business School and Fundación Eduardo Barreiros on 27 October, with the help of the presidents of large corporations, was to shed light on a field as complex as the application of entrepreneurialism and innovation in their organisations.