Taking the entrepreneurial approach
Corporations can be so constrained by their hierarchy and mindset that they are unable to adapt to the rapidly changing commercial landscape. That’s when businesses need “intrapreneurs” and “angel investors”, Stephan Klaschka tells Nick de Cent.
Constrained by their organizational structure and processes, confined to functional silos and burdened by concerns about risk and compliance, it’s perhaps unsurprising that many corporate executives are finding it difficult to adapt to seismic changes in today’s commercial landscape. However, it’s time for them to rediscover their entrepreneurial spirit, according to one time Boehringer Ingelheim Director for Global Innovation Management, Stephan Klaschka.
Now a consultant who is advocating the “power of corporate entrepreneurship", Klaschka argues that there is a pattern that plagues large, mature organizations. “When you look back to the beginning, when a company starts, the founder’s mindset and focus is on discovering something new that customers will pay for.
With success comes growth, yet scaling up the company requires a different mindset, skill and people, since you have to deliver the product reliably at a specified quality level. Over time, the management team will comprise delivery specialists, who are good at incrementally improving product and processes but who never discovered and started a company themselves.”
He continues: “When the market or business landscape shifts, as we observe so dramatically in healthcare today, different leadership thinking is needed that can discover ‘the next thing’ again and bring it to life.” This may require abandoning previous products or establishing new business models to differentiate the company from its competitors while opening new revenue streams.
Incentive to change
However, because the old commercial approach is still making money, there is often little incentive to make the investment in new models. Nevertheless, these will become ever more necessary, so how do we foster ways of nurturing disruptive ideas and find the means to implement them?
One way of breaking free of the status quo is to adopt a more entrepreneurial mindset within the organization by encouraging so-called "intrapreneurs" - company executives with an entrepreneurial approach who are focused on developing, implementing and monetizing innovative ideas. This helps to overcome the inertia of simply sitting around and talking about what needs to be done, and breaks down silos by encouraging the formation of multidisciplinary teams. In this way, Klaschka aims to help executives get promising, innovative ideas “translated into something that can be implemented.”
Klaschka’s approach at BI involved twin initiatives designed to translate innovation into action; one was the so-called "Boehringer Ingelheim School for Intrapreneurs" (SFI); the other involved “internal corporate venturing.”
SFI helps BI executives get promising initiatives off the ground by operating like a new-venture accelerator and also acting as a vehicle to help identify intrapreneurial talent within the business, while also building a body of alumni from the program, all of whom have become competent change makers.
Within an organization you look for a promising disruptive idea with a huge return or game-changing potential for future business that otherwise would not be implemented or even considered by the conventional organization".
But how do you measure whether such an approach is successful? In terms of metrics, the main measure looks at new business growth and “there have been concrete outcomes across the portfolio,” according to Klaschka. ROI is ten-fold and the returns can be measured in millions of dollars.
The returns from internal corporate venturing can be even higher – with a 100-fold ROI. So, how does internal venturing work? Basically, it involves looking at the range of potentially disruptive ideas generated within a corporation through the eyes of a venture capitalist. Klaschka explains: “Within an organization you look for a promising disruptive idea with a huge return or game-changing potential for future business that otherwise would not be implemented or even considered by the conventional organization.”
Indeed, the returns from disrupting the existing way of doing things can be extremely good. One project that Klaschka is currently engaged in involves innovation by using technology in a new way; the project’s goal is to double the market share of a new drug. And when you’re talking about a blockbuster, suddenly the figures start to skyrocket.
But how many of these ideas progress? With the SFI approach, 54% of projects achieved funding; the top five in every class got pitched and 100% received funding. With the internal venturing approach the figures are “more mixed,” Klaschka reveals. This is because this model is looking for higher returns while accepting higher risks and, consequently, a smaller percentage makes it.
Do compliance issues tend to stand in the way of such approaches? Klaschka has often seen compliance used as an excuse for inaction and he acknowledges that pharma is second only to the nuclear industry in terms of regulation. “Nevertheless, a lot of companies don’t take any risks,” he tells eyeforpharma. At one time Klaschka was actually a compliance officer so well understands the issues. “Regulatory authorities are very open to discussion if you involve them early on.”
Indeed, managing risk appropriately can itself have potential to be disruptive. One project Klaschka has been working on has been looking at regulatory risk. At first glance, it doesn’t generate any obvious ROI, until you measure the new approach against what a firm might have paid out in damages; when this is factored in, the ROI becomes extremely significant.
By helping executives to take risks and “think outside the box”, the School for Intrapreneurs provides the opportunity to generate and implement disruptive ideas that would otherwise be rejected by the “corporate immune system.” Moreover, it encourages them to engage with innovators outside of the company more easily and bring external perspectives to the organization.
Equally, internal corporate venturing or “angel investing” can become a “beacon of hope” for employees, Klaschka suggests. “Many see it as an alternative way to set ideas in motion, which – over time and with success stories shared – has the potential to change the organizational mindset and culture,” he concludes.
3 key takeaways
- The search for high-potential, disruptive ideas requires accepting risk and acting as “go keeper” instead of “gate keeper.”
- Branding the program as experimental or “proof-of-concept” helps to buy time to develop the idea to a presentable state. It circumvents early resistance from the organizational immune system and creates leeway to cut through the bureaucracy’s “red-tape.”
- Acting as “first investor” puts a project in motion. Seeking business buy-in validates alignment with business needs; the business now has a vested interest.
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