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DEVELOPING AN ENTREPRENEURIAL PERSPECTIVE IN CONTEMPORARY


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DEVELOPING AN ENTREPRENEURIAL PERSPECTIVE


IN CONTEMPORARY ORGANIZATIONS

Donald F. Kuratko
Ball State University

Jeffrey S. Hornsby
Ball State University

ABSTRACT

The purpose of this paper is to describe how the


entrepreneurial perspective can be developed within
organizations through a specific intrapreneurial training
program that is described along with a discussion of some
significant results obtained by one company who utilized the
training.

Introduction

The current decade is seeing corporate strategies focused


heavily on innovation. This new emphasis on entrepreneurial
thinking developed during the entrepreneurial economy of the
1980s. Drucker (1984) the renowned management expert,
described four major developments that explain the emergence
of this economy. First, the rapid evolution of knowledge and
technology promoted the use of high-tech entrepreneurial
start-ups. Second, demographic trends such as two-wage-earner
families, continuing education of adults, and the aging
population, added fuel to the proliferation of newly
developing ventures. Third, the venture capital market became
an effective funding mechanism for entrepreneurial ventures.
Fourth, American industry began to learn how to manage entre-
preneurship.

Kuratko and Hodgetts (1995) emphasized that the contemporary


thrust in entrepreneurship as the major force in American
business has led to a desire for this type of activity inside
enterprises. While some researchers have concluded that
entrepreneurship and bureaucracies are mutually exclusive and
cannot coexist, (Morse, 1986; Duncan, 1988) others have
described entrepreneurial ventures within the enterprise
framework ((Burgelman, 1984; Kanter, 1985; and Kuratko and
Montagno, 1989). In addition, many authors talked about
corporate entrepreneurship as a growth strategy for
competitive advantage, (Kuratko, Hornsby, Naffziger and
Montagno, 1993; Merrifield, 1993). Successful entrepreneurial
ventures have been developed in many different companies such
as 3M, IBM, Hewlett-Packard, AT&T, General Electric, and
Polaroid.

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15

The purpose of this paper is threefold: (1) to present a brief


overview of the concept of intrapreneurship from an
organizational perspective through an examination of the
current research; (2) to outline recommended steps for
implementing an entrepreneurial strategy based upon the
organizational factors that would enhance the development of
intrapreneurship; and (3) to describe one particular
consulting training program which encourages innovative
activity.

Focusing on Intrapreneurship: An Employee-Centered Approach

Gifford Pinchott (1985) defined intrapreneurship as


entrepreneurship inside of the corporation where individuals
(intrapreneurs) will "champion" new ideas from development to
complete profitable reality. Other authors have expanded this
definition by including the need to recognize that
entrepreneurial activities revolve around organizational
sanctions and resource commitments for the purpose of
innovative results (Miller & Friesen, 1982; Burgelman, 1984;
Kanter, 1985; Alterowitz, 1988). )While on the surface this
concept may appear straightforward, a number of authors have
concluded that intrapreneurship may take several forms. Hans
Schollhammer (1982) proposed five broad types of internal
entrepreneurship which he labeled administrative,
opportunistic, imitative, acquisitive, and incubative.
Incubative entrepreneurship appears to resemble the
intrapreneurial model the closest since it refers to the
creation of semi-autonomous units within the existing
organization for the purpose of: sensing external and internal
innovative developments; screening and assessing new venture
opportunities; and initiating and nurturing new venture
developments.

Karl Vesper (1984) developed three major definitions of


corporate venturing which he identified as (1) new strategic
direction; (2) initiative from below; and (3) autonomous
business creation. Vesper's study illustrates that corporate
venturing could be any one of these individual types, as well
as any or all possible combinations. Similar to
Schollhammer's incubative form, the 'initiative from below'
approach, where an employee undertakes something new (i.e., an
innovation), best represents the type of corporate
entrepreneuring activity that has become recognized as
intrapreneurship. Stevenson and Jarillo (1990) proposed a
definition of entrepreneurship that would strengthen the
understanding of corporate entrepreneurship. They stated,
"entrepreneurship is a process by which individuals--either on
their own or inside organizations--pursue opportunities

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without regard to the resources they currently control" (p.


23). In this vein Guth and Ginsberg (1990) stressed that
corporate entrepreneurship encompass" two major types of
phenomena: new venture creation within existing organizations
and the transformation of organizations through strategic
renewal.

All of these concepts appear to be summarized by Zahra


(1991) when he stated:

Corporate entrepreneurship refers to formal and informal


activities aimed at creating new business in established
companies through product and process innovations and
market developments. These activities may take place at
the corporate, division (business), functional, or
project levels, with the unifying objective of improving
a company's competitive position and financial perfor-
mance. Corporate entrepreneurship also entails the
strategic renewal of an existing business (p. 262).

Specific Elements for a Corporate Intrapreneuring Strategy

"Developing the Vision"

The first step in planning a strategy of intrapreneurship for


the enterprise is sharing the vision of innovation that
executives wish to achieve. Since it is suggested that
corporate entrepreneuring results from the creative talents of
people in the organization, then employees need to know and
understand this vision. Brandt (1986) stressed the importance
of shared vision within a strategy that seeks high
achievement. This shared vision requires identification of
specific objectives for corporate entrepreneuring strategies
and the programs needed to achieve those objectives. Kanter
(1985), described three major objectives and their respective
programs designed for innovation. These are:

Objective #1 - Making sure that current system,


structures, and practices do not
present insurmountable roadblocks to
the flexibility and fast action
needed for innovation.

Objective #2 - Providing the incentives and tools


for entrepreneurial projects.

Objective #3 - Seeking synergies across business


areas, so that new opportunities are
discovered in new combinations at the
same time that business units retail

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operating autonomy.

"Developing Innovation"

The next step for corporations establishing an intrapreneurial


strategy is to develop innovation as the key element in their
strategy. Schroeder (1990) examined the importance of
innovation within the corporate environment as a key to
competitive strategy. Innovation is described as chaotic and
unplanned by some authors (Peters, 1987) while other
researchers insist it is a systematic discipline (Drucker,
1985). Both of these positions can be true depending upon the
nature of the innovation. One way to understand this concept
is to focus on two different types of innovation - radical and
incremental (Dent, 1990).

Radical innovation represents the inaugural breakthroughs that


have been launched (personal computers, Post-it Notes,
disposable diapers, oven-tight mail delivery). These
innovations take experimentation and determined vision which
are not necessarily managed but must be recognized and
nurtured.

Incremental innovation refers to the systematic evolution of a


product or service into newer or larger markets. Examples
include microwave popcorn, popcorn used for packaging (to
replace styrofoam), frozen yogurt etc. Many times the
incremental innovation will take over after a radical
innovation introduces a breakthrough. The structure,
marketing, financing, and formal systems of a corporation can
help implement incremental innovation.

Both types of innovation require vision and support. This


support takes different steps for effective development. For
example, Howell and Higgins, (1990) emphasize the need for a
champion -- the person with a vision and the ability to share
it. And finally, both types of innovation require an effort
by the top management of the corporation to develop and
educate employees concerning innovation and entrepreneurship --
a concept known as top management support.

"Development of Venture Teams"

A third step in developing an intrapreneurial strategy is to


focus upon venture teams. Venture teams and the potential
they hold for producing innovative results are being
recognized as the productivity breakthrough of the nineties.
There's certainly little doubt that their popularity is on the
rise. Companies that have committed to a venture team
approach often label the change they have undergone a

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"transformation" or a "revolution." This new breed of work


team is a new strategy for many firms. They are referred to
as self-directed, self-managing, or high-performance, but a
venture team includes all of those descriptions (Lee, 1990 and
Wolff, 1989).

In examining the entrepreneurial development for corporations,


Reich (1987) found that entrepreneurship is not the sole
province of the company's founder or its top managers.
Rather, it is diffused throughout the company where
experimentation and development go on all the time as the
company searches for new ways to build on the knowledge
already accumulated by its workers. Reich's definition of
collective entrepreneurship follows.

In collective entrepreneurship, individual skills are


integrated into a group; this collective capacity to
innovate becomes something greater than the sum of its
parts. Over time, as group members work through various
problems and approaches, they learn about many such
small-scale adaptations, effected throughout the
organization, is to propel the enterprise forward (p.
81).

In keeping with Reich's focus on collective entrepreneurship,


venture teams offer corporations the opportunity to
utilize the talents of individuals but with a sense of
teamwork.

The net result of many such small-scale adaptations, affected


throughout the organization, is to propel the enterprise
forward. In keeping with this focus on collective
entrepreneurship, venture teams offer corporations the
opportunity to use the talents of individuals but with a sense
of teamwork. An excellent example is Signode, a $750-million-a-year
manufacturer of plastic and steel strapping for
packaging and materials handling, located in Glenview,
Illinois. The company's leaders wanted to chart new
directions to become a $1 billion-plus firm. In pursuit of
this goal, Signode devised an aggressive strategy for growth
by developing,"new legs" for the company. It formed a
corporate development group to pursue markets outside the
company's core businesses but within the framework of its
corporate strengths. It also formed venture teams, but before
launching the first of these top management identified the
firm's global business strengths and broad areas with
potential for new product lines: warehousing/shipping;
packaging; plastics for nonpackaging, fastening, and joining
systems; and product identification and control systems. Each
new business opportunity suggested by a venture team was to

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have the potential to generate $50 million in business within


five years. In addition, each opportunity had to build on one
of Signode's strengths: industrial customer base and marketing
expertise, systems sales and service capabilities, containment
and reinforcement technology, steel and plastic process
technology, machine and design capabilities, and productivity
and distribution know-how.

The criteria were based on "business-to-business" selling only


because Signode did not want to market directly to retailers
or consumers. The basic technology to be employed in the new
business had to already exist and there had to be a strong
likelihood of attaining a major market share within a niche.
Finally, the initial investment in the new opportunity had to
be $30 million or less. Based on these criteria, Signode
began to build its "V-Team" (venture team) approach to
intrapreneurship. It took three months to select the first
team members and initial teams had three common traits: high
risk-taking ability, creativity, and the ability to deal with
ambiguity. All six participants were multidisciplinary
volunteers who would work full-time on developing new consumer
product packaging businesses. The team members came from
diverse backgrounds: design engineering, marketing, sales, and
product development. They set up shop in rented office space
five miles from the firm's headquarters. The six teams were
not able to develop remarkable new ventures. However, the
efforts did payoff for Signode as one venture team developed a
business plan to manufacture plastic trays for frozen entrees
that could be used in either regular or microwave ovens. The
business potential for this product was estimated to be in
excess of $50 million a year within five years. Thus, the V-Team
experience rekindled enthusiasm and affected morale
throughout the organization. Most importantly, the V-Team
approach became Signode's strategy to invent their future
rather than waiting for things to happen (Kuratko and
Hodgetts, 1995).

"Structuring for an Intrapreneurial Climate"

In reestablishing the drive to innovate in today's


corporations the final, and possibly most critical, step is to
invest heavily in entrepreneurial activities that allow new
ideas to flourish in an innovative environment (Goddard,
1987). This concept, when coupled with the other specific
elements of a strategy for innovation, enhances the potential
for employees to become venture developers. In fact, in
developing employees as a source of innovations for
corporations, researchers have found that companies need to
provide more nurturing and information sharing activities
(Hisrich, 1985/1986). In addition to establishing

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entrepreneurial ways and nurturing intrapreneurs, there is a


need to develop a climate that will help innovative-minded
people reach their full potential (Quinn, 1990). The
perception of an innovative climate is critical for stressing
the importance of management's commitment to not only the
organizations' people but also to the innovative projects
(Schuler, 1986; Sathe, 1988; Brown & Meresman, 1990).

A study conducted by Kuratko, Montagno and Hornsby (1990)


investigated the types of factors which foster an
intrapreneurial climate. The Intrapreneurship Assessment
Instrument (IAI) was developed to provide for a
psychometrically sound instrument that represented key
entrepreneurial climate factors in the existing
intrapreneurship literature. The responses to the IAI were
statistically analyzed and resulted in five identified
factors: Management Support for Intrapreneurship, Work
Discretion, Rewarded Reinforcement, Time Availability, and
Organizational Boundaries. Further statistical analyses found
that each of the five factors had acceptable levels of
internal consistency reliability.

The results demonstrated support for the existence of an


underlying set of internal environmental factors that need to
be focused upon by organizations seeking to introduce an
intrapreneurial strategy. The research revealed factors that
were consistently mentioned in the literature: top management
support, risk-taking activity, organizational structure,
rewards, and resource availability. These factors as well as
the previous research mentioned, are the foundation for the
critical steps involved in an intrapreneurial strategy.

Intrapreneurship Training Program

As a way for organizations to develop key environmental


factors for intrapreneurial activity, an Intrapreneurship
Training Program (ITP) often serves as a manipulation to
induce the change needed in the work atmosphere. A summary of
an actual program based on the factors identified by Kuratko,
et al. is presented to provide a general understanding of a
training program designed to introduce an intrapreneurial
environment in the company. This award-winning training
program was intended to create an awareness of intrapreneurial
opportunities in the organization. The program consisted of
six four-hour modules, each designed to move participants to
the point of being able to support intrapreneurship in their
own work area. The modules and a brief summary of their
contents are as follows:

1. Introduction to Entrepreneurial Management - An

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enthusiastic overview of entrepreneurial thinking is


provided. Participants are challenged to think
innovatively and the need for "breaking out of the
box" in today's organizations is emphasized.
Participants learn about the intrapreneurial
activities at such well-known companies as Hewlett
Packard and 3M. A review of current management
practices demonstrates how innovation and cultural
change are necessary if organizations are to survive
in today's competitive marketplace. Participants
apply their learning by analyzing and contrasting
two video cases that describe intrapreneuring at Du
Pont and Polaroid. For each company, participants
identify what distinguishes the activity as
intrapreneurial.

2. Thinking Creatively - The process of thinking


creatively is foreign to most bureaucratic
organizations. The misconceptions about thinking
creatively are to be reviewed and a discussion of
the most common creativity inhibitors is presented.
Participants complete several exercises which will
facilitate their own creative thinking.
Participants first consider several thinking
patterns and, using video vignettes, identify them
in people. For example, one character exhibits
"black-and white" thinking; another has a high
degree, of functional perception. Other theories,
such as left-brain/right-brain thinking, are also
discussed. Participants then assess their own
creativity and create a long-term structured program
to enhance that ability, often by focusing on
resolving personal issues or problems.

3. Idea Development Process - Participants at this


point are given the opportunity to generate a set of
specific ideas on chi they would like to work. The
process includes examining a number of aspects of
the corporation including structural barriers and
facilitators. Additionally, participants determine
needed resources to accomplish their projects.
Participants are instructed to meet in groups and
utilized evening time to flush-out intrapreneurial
ideas that they will present the next day.

4. Assessing Entrepreneurial Culture - The


Intrapreneurial Assessment Instrument is provided
and described which assesses the level of
Entrepreneurial culture within the organization.
Participants complete the survey and results will be

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fed back to all participants. Areas for improvement


are addressed during the remaining seminar topics.

5. Barriers and Facilitators to Entrepreneurial


Thinking - The most common barriers to innovative
behavior are reviewed. Participants complete
several exercises which help them deal with barriers
in the work place. In addition, video case
histories are shown which depict actual corporate
entrepreneurs that have been successful dealing with
corporate barriers. An interesting result is that
since the participants are usually mid-level
managers, they realize they are often both the
source and the victims of the barriers they
identify. Based on this aspect of the training
program, one of our clients developed the dollar
rule.

6. Action Planning - Up to this point, participants


have examined several aspects of facilitators
barrier to behaving innovatively in their
organization. During this time each participant is
asked to complete a personal action plan that sets a
goal, establishes a work team, assesses current
conditions, determines necessary resources, develops
a step by step timetable for project completion, and
a method of project evaluation. Participants can
also be assigned to groups for this activity. Top
management is encouraged to provide support for the
projects, evaluate their completion and reward
intrapreneurial activity.

In order to assess whether the training program improved


intrapreneurial culture a study was conducted on 111 low to
mid-level managers in a large Midwestern company (Kuratko,
Montagno & Hornsby (1990). The research study included three
steps. First, the IAI was administered to all participants to
obtain a baseline concerning their perceptions of the firm's
culture. Second, the participants participated in all phases
of the training program (except the assessment component)
described earlier. Finally, the IAI was readministered four
months following the training. A control group who completed
the IAI at both times but did not participate in the training
was utilized to provide an unbiased comparison for training
program results.

The results of the research study showed a significant


increase in all factors following completion of the Entrepre-
neurship and Innovation in the Corporation training program.
VA-tile these findings suggest that there is some validity to

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the training program it is important that each firm who


utilizes this or any type of training evaluates its
effectiveness.

After reviewing these elements, it becomes apparent that


change is inevitable in the corporate structure if
entrepreneurial activity is going to exist and prosper. The
change process consists of a series of emerging constructions
of the people, the corporate goals, and the existing needs.
In short the organization will encourage innovation by
relinquishing controls and changing the traditional
bureaucratic structure.

Burgelman (1983) stated, "Progress in understanding the


process of corporate entrepreneurship may help the development
of new managerial approaches and innovative administrative
arrangements to facilitate the collaboration between
entrepreneurial individuals and the organizations in which
they are willing to exert their entrepreneurship."

Revolutionary Results of an Intrapreneurial Program

The results of an intrapreneurial strategy are best


illustrated by the changes at The Associated Group. Under the
vision and direction of L. Ben Lytle, Chairman and CEO of The
Associated Group, a startling restructuring plan was put into
effect during 1986 in order to facilitate the intrapreneurial
process. In 1983 the company was operating as Blue Cross/Blue
Shield of Indiana and was literally bogged down in its own
bureaucracy. As a result the Associated Group (the new name
taken by the company rather than Blue Cross/Blue Shield of
Indiana) was losing ground in a fast-paced, changing insurance
industry. However, by 1986 Lytle had divided the company
legally, emotionally, physically, geographically, and
culturally into operating companies named Acordia Companies,
ranging in size from 42 to 200 employees.

The opportunities for entrepreneurial individuals within the


organization began to expand with the development of these
"mini-corporations," which were designed to capture market
niches and innovatively develop new ones. Each separate
Acordia company has an individual CEO, Vice President, and
outside board of directors which is delegated full authority
to run the business. In 1986 The Associated Group was one
large corporation with 2,800 employees serving only the state
of Indiana with all revenue generated from health insurance.
By the end of 1991, 1800 days had gone by and culminated a
five-year strategic plan to restructure and infuse
entrepreneurial thinking into the organization. The results
had the company employing 7,000 people in 50 different

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companies, serving 49 states and generating over 25% of its $2


billion in revenue in lines of business outside health
insurance. The results, according to Lytle, point to the
effectiveness of an intrapreneurial strategy capturing the
imagination of the entire company. The decentralized
structure appealed to the "builder-types" in the company
seeking challenge and accountability for their ideas and
innovative abilities.

There are currently 32 Acordia Companies where corporate


clients can obtain all types of insurance-related services
including commercial property and casualty coverage, group
life and health insurance, third party claims administration
for self-insured benefit plans, and employee benefits
consulting. In order to institute self-perpetuating change in
the Acordia network, the mini-corporation CEO's are encouraged
(and rewarded through stock options) to expand business and
then spin off certain parts of the business either
geographically or by specialty when there are over 200
employees or there are too many management layers. In
addition, the CEOs are evaluated on their ability to identify
and nurture additional potential CEOs within their own
organization. One concise example of the Acordia concept is
Acordia Corporate Benefits, Inc., which was incorporated as a
Third Party Administrator and Insurance Agency in the state of
Indiana effective December 1, 1990. Its approved mission was
to market and administer insurance and insurance-related
products to employers with 50 or more employees, excluding
customers that fall within the missions of any other Acordia
companies. (There were 23 original Acordia companies formed
out of The Associated Group, formerly Blue Cross and Blue
Shield of Indiana and today there are 32 companies.) Generally
speaking, employers in the manufacturing and service
industries with fewer than 1,000 employees are targeted, while
geographically there is a restriction to employers located in
the northern half of the United States.

During 1991, revenues exceeded $10 million and net income


before taxes exceeded $1.8 million, a pre-tax return on
revenue of over 18 percent. The second full year was even
better, and pretax net exceeded $2.2 million, a 22 percent
increase over 1991. During 1992, over 40 percent of net
income came from outside Indiana and over 20 percent of the
net income was from non-health sources. Acordia Corporate
Benefits was now licensed as a third party administrator and
life and health insurance agency in over 20 states,
concentrating in the Midwest. Acordia Corporate Benefits
began to consider diversification either geographically, by
product, or into non-health products. In 1993, the company
added a new product line, Flexible Benefits Administration,

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15

which increased revenues by over $1 million in the first year.


Also, Acordia Corporate Benefits acquired a large
Indianapolis-based property and casualty insurance agency
during the first quarter of 1993 increasing revenue an
additional $3.5 million.

By the end of 1993, annual revenue increased to over $16


million, with pretax net income approaching $3 million, and an
employment base of approximately 160 employees, all in a span
of three years. More importantly, this particular Acordia
made the transition from a business totally dependent upon the
health insurance business and employers in Indiana alone to a
business operating in over 20 states, with over one-third of
revenue from non-health products (Kuratko and Hodgetts, 1995,
pp. 484-485). Thus, the Acordia strategy is to "concentrate
and divide," which leads to continuous innovation, growth, and
entrepreneurial development. Acordia now ranks 14th in
Business Insurance's worldwide broker rankings.

Conclusion: A Continuum of Intrapreneurial Activity

Overall, the steps for an intrapreneurial strategy presented


in this paper have similar patterns in their purpose. Each
step seeks a proactive changing of the existing corporate
status quo and a new, flexible approach to the management
structure. However, it should be recognized that an
intrapreneurial strategy will not take place all at once.
There must be a progression of activity in using the steps
identified in this paper. There is a wide variety of
possibilities for intrapreneurial activity to take place.

The major thrust behind intrapreneurship is a revitalization


of innovation, creativity, and managerial development in our
corporations. The strategies and insights presented in this
paper serve as a foundation to understanding the current
increase in entrepreneurial interests inside corporations. It
appears that intrapreneurship may possess the critical
components needed for the future productivity of our
organizations. If so, then recognizing the objectives,
requisites, and range of potential activities are most
important in establishing the strategy behind an
intrapreneurship program.

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