Descripción textual de los casos de uso del sistema

Intrapreneurship theory suggests that if established organizations are to re-invent themselves, then a number of factors have to be in place. These include the fol-lowing.

Committing the organization

Innovation is necessarily a bottom-up process. It can only work, however, when it is supported from the top. Top management commitment means that the CEO and his/her team are firm believers in the benefits of corporate entrepreneurship, making it possible, for example, to change the reward system, which will be nec-essary for the process to be successful.

Determining the corporate entrepreneurship model

Here there are five possibilities. The organization needs to decide which is the most appropriate. Briefly they are as follows.

1. Organic organization. The entire organization adopts intrapreneurship and an

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organic structure is developed, similar to the one developed by Richard Branson at Virgin (see Chapter 9). While a cellular structure inevitably results in a loss of the economies of scale, scale is not quite the advantage it used to be. In an era of rapid change, speed, flexibility and focus have become more important and a cellular structure permits this as each cell is seen as an autonomous entrepreneurial business unit that is close to its customers.

Additionally, it is a structure that promotes flexibility and experimentation.

Individual cells can grow or contract according to developments in the market, while risks can be taken without damaging the whole organization if they fail.

2. New products group. A multi-disciplinary ‘new products division’ is formally established at vice-presidential level to facilitate new product development and encourage others in the organization. The vice-president becomes the product champion.

3. New products subsidiary. This is established with a semi-autonomous structure.

It accepts proposals from individuals, evaluates them and determines whether a project is worth funding.

4. Corporate venture capital firm. An autonomous company that underwrites and assists either internal or external proposals that meet formal venture capital cri-teria.

5. A section within the HR function. This trains managers in intrapreneurship or arranges for them to attend off-site seminars and conferences. However, it is likely to have only limited impact as a result of perceived limited commitment of senior management, and the lack of a structure and incentives.

Developing an intrapreneurial culture

If a corporation is to be truly intrapreneurial, the entire corporate culture must fit the intrapreneurial mode. This cannot normally be done immediately—it devel-ops over time and, according to Pinchot (1985), involves 10 principles, as described below.

1. Self-selection. Intrapreneurs appoint themselves and pursue their own ideas.

They are self-starters, not people who just carry out an assignment.

2. No ‘hand-offs’. There is continuous involvement. The inventor or initiator is involved throughout the project’s development. While other individuals may be brought in, the originator retains membership of the intrapreneurial team.

3. The ‘doer’ decides. The originator must be allowed to continue for as long as he/she believes the project to be viable.

4. Corporate slack refers to an excess of resources beyond those required for nor-mal output. These are discretionary resources that can be channelled to an intrapreneur for a project that might not otherwise be funded.

5. Ending the home run philosophy. Realizing that not all projects will be a major success.

6. Tolerance of risk, failure and mistakes.

7. ‘Patient money’—the willingness to invest funds in intrapreneurial ventures without expecting an immediate return.

8. ‘Freedom from turfiness’. The corporation is seen as a family of teams, all of whom work towards the same goals. Working together as a group is encour-aged. Resources are shared, ideas are exchanged, moral support is provided and assistance is given without regard to ownership claims.

9. Cross-functional teams. For intrapreneurship to work at its best, individuals must be allowed to work in teams, irrespective of their specialities.

Individuals with different specialities need to be encouraged to work togeth-er and to stay with the project throughout its development.

10. Multiple options. Often the requirements of a particular project are not known at the outset, which means that multiple options should be followed.

Identifying intrapreneurial talent

Once the intention to endorse corporate entrepreneurship has been made, some intrapreneurs will surface automatically. They may have projects they have been working on secretly or developing in their minds.

Others, who possess the ideas and managerial skills, will need to be identified.

Not all aspiring intrapreneurs make good venture owners and not all creative indi-viduals make good intrapreneurs, however. Good results can be achieved, though, by pairing a creative person with a good manager. The best intrapreneurs, as Ross and Unwalla (1986) have recognized, are results-oriented, ambitious, rational, competitive, questioning individuals who dislike bureaucracy and are challenged by innovation, but who understand the organization and believe in their col-leagues, with the ability to resolve conflicts.

They need around them support staff with entrepreneurial tendencies who can work through the corporate system. These are people comfortable with the entre-preneurial culture, who can cope with uncertainty, long lead times, indefinite resources and new concepts or products.

Rewarding intrapreneurs

This is a complex issue. Unlike the entrepreneur, the intrapreneur is normally unwilling to give up a salaried position. At the same time, intrapreneurs believe that if they are to work on more risky projects, which have the potential to make large profits for the organization, they should benefit from that risk.

Designing an appropriate reward system requires that senior management understands the needs of both the intrapreneur and the more traditional employ-ees. However, the reward system for intrapreneurs needs to be both:

● monetary—this may include bonuses, profit-sharing or intracapital (i.e. the freedom to use corporate resources to fund additional product development), and

● non-monetary—these might include formal recognition of performance (e.g.

Halls of Fame), the provision of discretionary funds, the establishment of sup-port groups or dual promotion systems that recognize performance in innova-tive project development.

An identifiable system for administering and evaluating projects

Importantly, the firm must establish some policy and report it to the staff.

According to DeSarbo et al. (1987), there are eight variables that are important for managers when projects are evaluated. These are:

1. high corporate fit

Additionally there is the issue of corporate politics. Funding corporate entrepre-neurship can never be as objective as funding decisions for new ventures because the firm can never divorce itself from the project. Political factors can therefore affect the acceptance process. Apart from proposals from individuals with a known, positive track record, proposals from known (visible) individuals are more likely to get funded. Similarly, in order not to discourage, an organization may decide not to invest in only the ‘best’ proposals, but to allocate acceptances to departments.

PA U S E F O R T H O U G H T

Consider a large organization known to you. How entrepreneurial is it? What would you do to increase its entrepreneurial capacity?

In 1990, the Burton Group plc consisted of 12 com-panies and 450 shops selling clothing for both sexes. It had not always been like this. In 1900 15-year-old Meshe David Osinsky fled to Britain from Russia. By 1904, he had opened his first store in Chesterfield offering cheap ready-made suits for men and boys under the Burton name. A second Burton shop was opened in 1908 and a third in 1909, and in 1910 Osinsky established the firm’s headquarters at Elmwood Mills in Leeds. Between 1910 and 1919 the number of branches grew to 40, including eight shops in Northern Ireland, and the firm’s operation included the production of clothing for both civilian needs and the armed forces. With the end of World War I, the firm had either to shelve half of its production capacity or expand its retail

outlets. It chose the latter and by 1992, the number of shops had grown from 40 in 1919 to 140. By the mid-1920s the firm, which had become Montague Burton Ltd, made almost entirely wholesale bespoke male clothing, with the customer being measured in the branch shop, and the measure-ments being sent to the factory for manufacture into the appropriate garment.

Throughout the inter-war years, the firm expand-ed and by the outbreak of World War II the number of retail outlets had increased to 595. During World War II, progress as a manufacturer and retailer of men’s bespoke clothing was restricted by the war-time shortages of materials, the disruption of the labour force in response to the demands of the armed forces and the rationing of clothes purchas-A Cpurchas-ASE EXpurchas-AMPLE

Sir Ralph Halpern and the Burton Group plc

ing, which continued into the immediate post-war period. Also, the company threw itself, once more, into the war effort. Thus it was not until 1950 that the chairman was able to report to the shareholders that stocks had improved to pre-war standards.

However, over £1 million was written off the value of the firm’s stocks when prices fell and, in 1952, Sir Montague Burton, as he had become known, died.

The following year, in an attempt to strengthen the management, the firm acquired Jackson the Tailor and the services of Sidney and Lionel Jacobsen, who had built a reputation for successful trading and who became directors. On their advice, the firm divested itself of its cloth-making activities.

However, in an attempt to make itself more com-petitive, in 1958 it introduced credit and in 1963, having saturated the home market, it established itself in France, anticipating Britain’s entry into the European Common Market. In 1964, after much detailed organization and planning, it launched Burton-by-Post, a mail-order venture that was never profitable and was sold in 1972.

With the exception of a small chain of women’s shops (acquired in 1947) trading as Peter Robinson, the firm remained dependent on the sale of men’s tailored clothing. However, in 1969, Greens Leisure Centre was acquired. This was a retail chain of 41 outlets specializing in photographic equipment.

Rymans, a chain of office equipment shops, was also purchased but neither venture was success-ful—Greens was disposed of in 1976 and Rymans in 1981. Even so, the then chairman (Ladislas Rice) made it clear that the company:

. . . is now on the way to becoming a group of special-ist retail chains each with a clearly defined market and a distinctive face to the public. . . . We intend to main-tain and develop our dominant position in the menswear market. However, we shall become less completely dependent on it as our newer retail activi-ties grow.

In continued pursuit of this strategy, the company attempted to break into the children’s market with the establishment of its Orange Hand shops. This initiative lasted for just four years.

Continued poor performance led to a policy of consolidation of existing units rather than contin-ued broadening of the retail base and, in 1977, Rice resigned as chief executive following a boardroom struggle. The aim of his successor was to ‘eliminate loss-making businesses’ and modernize retail

out-lets. From 1977 to 1981, the company embarked on a programme of consolidation. In 1981 Ralph Halpern became chief executive and all that changed. Born in 1938, Halpern had joined the group in 1961 as one of three trainee managers at Peter Robinson. During the 1960s, he developed Top Shop, the first example of the market segmen-tation strategy for which the Burton Group became famous. In the 1970s he applied the strategy to the whole of the loss-making group, and in 1981 was appointed chairman and chief executive. The 1980s, the ‘Halpern era’, was a period of ‘transfor-mation and flux’ (Jacobs, 1999: 47) for Burton.

Halpern sought to refocus the business on fashion retailing. In his chairman’s report of December 1981, he detailed the reasons why Burton had fall-en behind British clothing retailers in gfall-eneral and then outlined his strategy for retrieving the situa-tion. This included curtailing the company’s manu-facturing activity, applying the methods evolved at Top Shop to other company chains and shedding all of the loss-making activities.

Halpern operated by centralizing the major poli-cy decisions in his senior management team.

Implementation was then delegated to teams in each of the operational divisions. Change was always on the agenda and Halpern talked about

‘institutionalizing change’. This required setting demanding targets and building the expectation for change into financial plans. It also required a posi-tive attitude to risk-taking and a reward system that recognized the achievement of these objectives:

We believe in high pay and incentives and we stress promotion from within for those who succeed. . . . For all our management and staff, substantial bonuses are linked to target plan. . . . A senior executive member of a divisional board can double his salary for outstanding performance.

Additionally he introduced a unique organiza-tional structure that cut out divisional managing directors and had functional (shop operations, mer-chandising, concessions, finance, personnel and systems) executives reporting directly to functional managing directors in order to ensure that ‘central management should keep in touch with every facet of the business. They can see what’s happening down to the market place.’

As a consequence, by 1983 Burton showed sales of £300 million, pre-tax profits up to £39 million and a return on capital employment of 16 per cent, after

a total of £29 million had been spent on new store openings and shop modernizations. Burton emerged as a group with different divisions special-izing in different market segments. Two new chains of shops were added: Principles for Women in 1984 and Principles for Men in 1985. These specialized in high-quality clothing. Also in 1985, the group suc-ceeded in a take-over bid for the Debenhams chain of 67 retail stores. Halpern promised, during the take-over battle, to sharpen up the Debenhams image. In his 1985 report to the group’s employees, Halpern made the following point:

. . . think of Marks & Spencer. It stands for something.

Burton stands for something. Or Next. Now think of Debenhams. If you’ve got a blank in your mind it’s because the retailers have not successfully stamped a position and an image on the store.

By 1987 Halpern and his team were able to unveil their new concept in the main London store and Burton emerged as a group with different divi-sions specializing in different sectors of the market.

In its corporate advertising in 1986, Burton described its various retail offerings using a mixture of demographic and psychographic labels (see Table 12.1).

The formula was highly successful and, by 1990, the group had a turnover just short of £2 billion and it is generally held that the strategies that Halpern introduced ‘transformed Burton’s retail presence and its performance’ (Jacobs, 1999: 47). According to Halpern it all resulted from good management, which in his view is about: ‘making complicated things simple. The first thing you have to decide is what business you are in. A high percentage of organizations are in decline because the original purpose is no longer relevant to the future.’

However, the Halpern formula for the success of the Burton Group, as it became known in 1985, was

more than just this. He recognized the importance of change. ‘Change,’ he said, ‘is always on the agenda. . . . Only the most visionary recognize the need to change a successful formula while it is still working.’ According to him, we have to learn to welcome and manage change—to lose the fear and anxiety that has led to change being seen as a threat as opposed to an opportunity. Commenting on the group’s performance he made the point that:

. . . people in my own group’s business, like Dorothy Perkins and Evans, which were dying on their feet and more recently in Debenhams, which was seriously under-performing, suddenly started rushing about making profits. They’re mostly the same people who were there before. So, what brought this about?

Nothing very mysterious. They acquired new skills and through encouragement, incentives and respect for their talent, we managed to realize a capacity for commitment and achievement that was always there but had simply been untapped.

(Halpern, 1987: 8)

Possibly the situation is somewhat more compli-cated than this might suggest. According to an arti-cle in The Sunday Times dated 18 November 1990, Halpern had created by 1988 the strongest and best retailing scheme in the whole industry. He had done it by being a megalomaniac and a listener, and by being able: ‘to put together a strong team around him and right down through the organiza-tion. A lot of the credit for that can be given to the remuneration package and generous option scheme.’

Having revitalized the group and turned it into an enterprising organization, the man who ‘trans-formed the firm of Burton almost beyond recogni-tion’ (Sigsworth, 1992: 22) resigned. Cracks were beginning to show and from 1992 the company re-entered a period of consolidation that included cost-cutting, downsizing (the loss of 2000 jobs) and

Table 12.1: The different Burton Group outlets

Dorothy Perkins The Young Female Market

Principles The Style Market

Top Shop/Top Man The Teenage Market

Evans The ‘Larger’ Market

Burton The Men’s Market

Harvey Nichols The Knightsbridge Market

Debenhams The Family Market

the demerger of Debenhams. It now trades under the name of Arcadia.

Case example exercise

Review the case study focusing, in particular, on the Burton Group during the post-1981 period when Sir Ralph Halpern was in charge. How far do the theo-ries of intrapreneurship and the creation of an enterprise culture within large organizations explain what Halpern was able to achieve at Burtons in the period he was in charge? On the basis of this case, should the theories be modified in any way? How,

having studied the theory, would you have turned Burtons into a more entrepreneurial organization?

Would you have done anything differently and, if so, what and why?

If it is important for large organizations to pos-sess an entrepreneurial culture if they wish to sus-tain their competitive advantage, why did ‘cracks’

begin to show in the early 1990s and the company begin to retrench? If Halpern had stayed on as chairman do you think things might have been dif-ferent? In what way? Justify your answer.