Creation of new businesses in large established organizations

Abstract

Five Swedish companies in different industries were studied with regard to their processes for creating businesses in areas that are new to them. It was found that the companies were rather resistant to internal creation of new activities, and found it more effective to change their structures by such means as acquisitions. Internal development was considered to take too long a time to change the strategic structure of a group's activities. For such reasons, receptiveness to new ideas was comparatively low, especially for ideas outside already existing business missions. One consequence of such attitudes is that internal entrepreneuship within a company is rare; it is risky to be an internal entrepreneur as one setting up your own company. The major mechanism that helps in the creation of new businesses is found to be special spin-offs from existing divisions. These spin-offs are not separate venture organizations but development groups that are well integrated within the organization. Three phases are identified in successful start-ups. The first phase involves a creation and maturing process within an existing unit that can provide necessary support for the fragile embryo. The second phase involves a separate organizational unit where special managerial conditions exist, designed for precise purposes. This business development unit is given freedom from the organizational constraints of the rest of the group organization. The third phase begins when the new idea is ready to work as a normal business unit and has the potential to survive as a division in the group organization.