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People power: An underestimated success factor in corporate new business creation

13 April 2018

By Cecile Veerman, Business Creation Manager at DSM, IDCP* participant 2017-2018

 

Summary

Corporates are increasingly recognizing that radical innovation requires another approach than incremental, running business activities. However, the importance of having top leaders and high performing teams in each stage of developing viable new business is underestimated. This should be one of the key decision criteria in radical new business development. A “go” to proceed to a next phase should only be given after a thorough validation of the team and its leader. Having this in place would tremendously increase the chance for successfully creating business.

 

Problem

Nowadays, many corporate organizations focus on developing radical new business opportunities next to incremental innovations in their core business. Being able to do so successfully requires a so-called ambidextrous organization. By having an ambidextrous organization in place, a firm is increasingly recognizing that radical innovation (exploration) requires another approach than incremental, ongoing business activities (exploitation). O’Reilly and Tushman (2016), explain in their book “Lead and disrupt” pre-requisites for successful ambidexterity: having a clear strategic intent, senior management commitment, and an explorative business that is sufficiently separated from the exploitative business. A final pre-requisite is a vision, values and a culture providing a common identity throughout the company. All these factors play a key role when focusing on developing radical new business opportunities while at the same time maintaining core activities. Although there is much focus on commitment and behavior of senior leadership, the behavior and skills needed of the, (mostly) middle management, leader and the new business creation team is a topic that has received less attention in this context.

Nevertheless, these teams and their leaders are critical for success and for creating viable new business. The complexity and skills needed to set up a new business, lead a team, or being part of a radical innovation team, are very different compared to a team working on incremental innovation activities and are often underestimated. Most employees of large corporations working in innovation are hired to execute incremental innovation projects in running business and not to set up a new business. Moreover, most jobs focusing on new business creation have the same profiles, rewarding schemes and incentives as jobs focusing on incremental innovation activities. There appears to be a lack of awareness that these jobs are different. In addition, a career path for people working on radical innovation opportunities is not always present in the same way it is for incremental ones, making it less attractive from a career perspective to work on radical innovation opportunities. While senior leaders generally recognize the importance of optimum team composition and leadership in different stages of new business development, pro-active management upon this is not always done.

 

Solution

It is a start that awareness exists that having a high performing team with the right leader is a key success factor for successfully creating business from new growth opportunities in an ambidextrous organization. The next step is to act upon it and thereby increase the chance of successfully creating viable new business. The importance of effective teams and leaders is already described in research for decades. A selection of corporates already took the next step. For the ones where further development is needed, the following elements can support a pro-active use of “people power” as one of THE success factors in creating viable new business:

  • A clear profile describing requirements for e.g. knowledge, skills and mindset for a leader and the team in each stage of the development of new business;
  • Based on a clear profile, pre-assessment, selection and hiring of the right people should take place. Re-evaluation takes place in each stage of development and where needed changes are made to ensure the largest chance for success. This should be a pre-requisite from early stage onwards;
  • Attracting external entrepreneurs with knowledge on how to set up a new business area would be beneficial;
  • Creating separate job functions with attractive rewarding and incentives for employees active in working on radical innovation. This acknowledges the complexity and difference of a radical innovation job compared to working on incremental innovation activities and it can help in making it a more attractive job also for young talents;
  • A longer-term career path for employees working on radical innovation opportunities should be developed;
  • Education of (senior) leaders and HR, or a separate recruiter, on how to pro-actively manage people to have maximum chance of success is a pre-requisite to make a next step;
  • Learn from best practices in other corporates at e.g. innovation round table meetings

“Are we sure this team can make it happen?” should be included as one of the key decision criteria in radical new business development. A “go” to proceed to a next phase should only be given after a thorough validation of the team and its lead.

 

Challenges

To make a next step, it should go from awareness on importance of people as key success factor in creating viable new business, to pro-active management on getting a high performing team and a top leader. There are several challenges in changing this. In some cases, (senior) leaders do not know how to compose a team and choose a leader with highest chance of success. Also, re-evaluating the leader and team in each stage and managing changes pro-actively is experienced as a highly sensitive topic. This is because expectations on the period of leading or participating in a team are not managed. Currently, when changes are made in a team, it might give involved employees the emphasis and feeling of failure, even though they were successful in an earlier stage. Also, assessing and selecting the most suitable persons internally for radical innovation opportunities is often not easy, since employees are not (made) available because of a lower priority setting of new business creations, specifically in early stage. Hiring external persons with the right, entrepreneurial profile is an attractive option. However, dealing with new business in a corporate setting has different dynamics than in a startup. Most corporates are highly complex, with a lot of rules and stakeholder management, which is not easy to deal with for a real entrepreneur.

 

Background information

This opinion piece is one of the deliverables of participants of the *Innovation Driver Certification Programme (IDCP). 

Author: Cecile Veeman, Business Creation Manager at DSM, IDCP participant 2017-2018

Also published onhttps://www.managementexchange.com/hack/people-power-underestimated-success-factor-corporate-new-business-creation

 

Disclaimer: This is a personal opinion piece. Any views represented in this post are personal and belong solely to the author and do not represent those of people, institutions or organizations that the owner may or may not be associated with in professional or personal capacity.

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