Case study: Two Financial Organizations
The case study researches the relation between Corporate Entrepreneurship (further CE) and the Adaptive Cycle (further AC). CE can be used to establish competitive advantage and pursue innovation. This means that CE can contribute to the organization’s existence, which is related to the AC.
We proposed a theoretical relation between CE and the AC. This theoretical relation is researched in the real world by this case study. We interviewed employees of two multinational financial organizations in order to validate our theoretical relation. The findings of our case study can be found on this page.
The definitions of corporate entrepreneurship and the adaptive cycle needs to be clarified in order to propose a possible relation between them.
Several definitions of Corporate Entrepreneurship (CE) or its synonym intrapreneurship are available. Guth & Ginsberg (1990) defines CE as the aborning of new businesses within existing business and transformation of organizations through a renewal of new ideas. Chung & Gibbons (1997) state CE is an organizational process for transforming individual ideas into collective actions by managing uncertainties in the process and refers to innovation that is initiated and implemented by employees within an organization. The definition used in our case study is the definition of Wolcott et al. (2007), which defines CE as the process by which teams within an established organization conceive, foster, launch and manage a new business that is distinct from the parent organization but leverages the parent’s assets, market position, capabilities or other re-sources (Wolcott & Lippitz, 2007). Wolcott et al. (2007) also defines The four models of Corporate Entrepreneurship. The four models are: the opportunist, the enabler, the advocate and the producer. These four models describe the strategy of CE within an organization among the two axes resource allocation and resource authority.
The adaptive cycle
The adaptive cycle depicts the flow of an organization or process. The cycle has a continuous flow through the four quadrants from: equilibrium, crisis, new combinations to entrepreneurship. More information can be found at this wiki.
Possible effects of Corporate Entrepreneurship and The Adaptive Cycle
The previous paragraphs described CE and the AC. Furthermore, a connection between CE and AC can be theorized. Theoretically, CE might affect the AC an organization goes through. Some effects of CE on the AC are:
- Creating a risk, organizations who stimulate CE might create a crisis to initiate the innovation;
- Impact of a Black Swan, organizations which explore new options and possibilities long before a Black Swan strikes will be prepared for a crisis;
- CE makes entrepreneurship more controlled, targeted and predictable, when an organization plans the innovations and has multiple spin-offs it gains control over this process;
- CE exists through the whole AC, entrepreneurship can for instance be executed in the equilibrium quadrant to prevent a crisis;
- The ROI of CE projects is unknown, the ROI of CE projects is unknown, resources might be spent and have a negative impact on financial health of an organization.
In this research we have studied two separate cases that are both multinational financial service providers. We conducted this research in order to discover the influence of CE on the AC. This led to the following research question: “How is corporate entrepreneurship influencing the adaptive cycle, in the organizational context of multinational financial organizations located in The Netherlands?”
By researching these cases we attempt to identify how CE is applied in an organization, if it is successful and how this contributes to the AC. Our semi-structured interviews provided us with the information about implementation of CE, how organizations define CE, advantages and disadvantages and its purpose for the organizations. This information will be used to link CE to the AC. The questionnaire can be found in the appendix
For this case study we interviewed representatives of two multinational financial organizations. Both were interviewed with a manager within the organization who knew about the topic; CE. During the interviews it became clear that there are large differences on the focus and how both organizations interpret CE. Organization 1 has CE clearly identified while Organization 2 is still struggling with it.
Organization 1 said; “Society is changing and generation Y is entering the labor market, which demands an adaptive working environment to satisfy the needs of this new generation.” At this organization CE is applied in several ways such as (1) flexible working (Het Nieuwe Werken), (2) ability to start your own company (being self-employed as a side job), (3) share employees with other organizations and (4) ability to work on your own idea/project. Employees with disruptive ideas can pitch their idea to managers in order to get resources to initiate a project to transform the idea into a product or service; entrepreneurship is quite encouraged!
Organization 2 has a different perspective on CE. The organization has a bureaucratic structure, which does not encourage employees to apply CE. This organization is struggling with on one hand getting generation Y , the ‘entrepreneurial’ thinkers, on board while one the other hand employees should be flexible within the organization and should; be able to work on different projects. The manager said that the bureaucratic structure does not imply that entrepreneurship not exist within the organization. However both organization agree with the fact that Entrepreneurship is required for innovation in the organization.
Due to privacy regulations, both organizations were anonymized.
It appears that CE is not influencing the AC directly in the organizational context of multinational financial organizations. Different interpretations of CE are used within the studied cases, which make the measurement of the phenomena difficult. However, representatives of the studied organizations are convinced that innovation, driven by entrepreneurship, contributes to the existence of the organization and customer satisfaction. Both studied organizations apply ad-hoc resource allocation and a diffused organizational ownership. This is why we think that both organizations use CE by "the opportunist" model.
The studied organizations are preparing themselves for generation Y to adjust the needs of employees and customers from the generation Y) era. CE is used to reach this goal. One of the key focuses is on the communication streams and channels. The change that is occurring by innovation has a positive influence on the AC. However banks take risks by doing investments, CE will likely not have a very big influence on this. It does however contribute to the entrepreneurial side of the cycle. As the world changes, organizations have to keep adapting to this similar to how the AC has indicated. In general we see that CE is mostly looked at as innovation within the organization. Because the financial industry is a fairly complex and strict area, CE is difficult to exploit.
CE has many different interpretations and meanings for every organization. This makes it harder to obtain data about one definition of CE. The reliability of the obtained data may suffer by comparing two CE “definitions”. It was also difficult to measure the amount of influence CE had within the organizations. Because of the size of the researched organizations, it is difficult to get the global picture of the entire organization. The studied cases represented not the organization as a whole, but presumably individual departments within. This makes it hard to generalize towards different organizations in the same sector and departments as these might have a different way of working.
- Have you heard of Corporate Entrepreneurship?
- What is your understanding of CE?
- To what extent is CE applied in your organization?
- a. What is the organization’s motivation for using CE, or not using it?
- b. How is CE formulated in the organization's strategy?
- c. How is CE applied in the operations?
- d. How are employees encouraged to perform CE activities?
- What are the advantages and disadvantages of CE within your organization?
- How successful is CE in your organization, and why?
- To what extent do you think job satisfaction contributes to CE?
- How does CE help to maintain the organization's market position?
- To what extent does CE contributes to innovation and the development of new markets for your organization?
- Guth, W. D., & Ginsberg, A. (1990). Guest Editors' Introduction: Corporate Entrepreneurship. Strategic Management Journal, 11, 5–15.
- Chung, L. H., & Gibbons, P. T. (1997). The Roles of Ideology and Social Capital. Group Organization Management, 22, 10–30.
- Wolcott, R. C., & Lippitz, M. J. (2007). The four models of corporate entrepreneurship. MIT Sloan Management Review, 49(1), 75.