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VQ65012
GRIST : CORPORATE VENTURING - REWARDING ENTREPRENEURIAL TALENT : MAY 2002

Andrew Gaule and Nigel Spinks

ISBN: 0-9542799-0-5

This report covers: corporate venturing,mobilising talent,risk,motivation,risk & reward,intrinsic & extrinsic rewards,

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TABLE OF CONTENTS

Contents
iv List of figures
v Author profiles
vi Foreword
1 Executive summary
1 Risk and reward in new ventures
2 Key findings
2 Research methodology
2 Acknowledgements
3 Chapter 1: Introduction
3 The challenge of managing innovation
3 Corporate venturing
4 The corporate venture unit
4 Mobilising talent
5 Chapter 2: Personal risk and reward
5 The nature of personal risk
6 What is at stake?
6 Risk, motivation and incentive alignment
7 The nature of personal reward
7 The role of reward management
9 Chapter 3: The corporate venturing process
9 A model of corporate venturing
10 Idea generation
10 Plan and build
12 Launch
13 Chapter 4: The corporate venturing context
13 The individual context
13 Reward and the individual
14 Risk and the individual
14 Individual contributions
14 The organisational context
14 Sharing resources
15 Internal equity
15 Salary structures
15 Rewarding the support team
16 Sharing rewards
16 Goal conflict and goal congruence
16 Communicating values
16 The environmental context
16 Attracting outside talent
17 The impact on the venture process
19 Chapter 5: Managing risk and reward
19 Reward and value creation
19 Balancing risk and reward
20 Dealing with failure
20 Focusing reward systems
21 Beyond launch
21 Beyond corporate venturing
23 Chapter 6: Case studies
23 Unilever (Insense)
24 Powergen (Spark)
25 British Airways (London Eye)
27 Chapter 7: Conclusion
27 Nurture creativity and innovation
27 Develop an entrepreneurial culture
27 Create new stakeholder value
28 References
28 End notes

List of figures
Figure 1 Risk and reward
Figure 2 Intrinsic and extrinsic rewards
Figure 3 Risk and reward in the new venture process
Figure 4 The corporate venturing process
Figure 5 The changing level of personal risk in new business development
Figure 6 Risk and reward in context
Figure 7 Balancing risk and reward—personal perceptions
Figure 8 Focus of reward systems in new business development

Foreword

Increasingly we hear that organisations see innovation and creativity as pivotal in achieving competitive advantage. Equally we know that organisations have recognised the importance to their business of attracting and retaining talent and building employee commitment.

Corporate incubators provide a valuable potential means of encouraging innovation. This report explores how such ventures can help to establish a broader innovative environment within an organisation and thus meet some of the changing needs and expectations of employees. A core issue of rewarding those associated with new ventures in a way which balances risk and reward is central to this report. However, in addressing this issue the report opens up our view of reward to encompass elements beyond the purely financial. A more holistic view of reward is likely to be critical in the future to building an environment which offers scope, challenge, development and recognition to individuals. It is these aspects of an environment which will help to build committed employees.

Whilst this report offers valuable insights into reward issues in an incubator context, the total reward perspective discussed has far broader applications within today's organisations.

Professor Malcolm Higgs

Henley Management College

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EXECUTIVE SUMMARY

Risk and reward in new ventures

In today's knowledge-based, competitive environment, companies must mobilise and motivate their employees' latent entrepreneurial talent, encourage them to bring forward innovative ideas and then see them through to launch. At the same time, firms must avoid distracting or demotivating the core business. A key element of this is the management of personal risk and reward systems.

How can reward systems encourage entrepreneurial behaviour in organisations? What are the problems that venture managers face in designing reward systems to support their goals? How does personal risk affect innovation? How are the needs of the corporate entrepreneur reconciled with the needs of the existing organisation? What solutions are companies adopting?

This report investigates the experiences of corporate venture managers in dealing with these issues as they seek to promote innovation, entrepreneurial spirit and to create new value for their organisations. Specifically it identifies a number of ways reward management can help, including:

Reward and risk can, however, only be understood in the context of the dynamics of the new business development process itself. As the venture moves through the stages of idea creation, planning, building and launching, management focus will change. Equally important is the complex context within which rewards and risks must be managed. This includes not only the new venture unit but individual, organisational and environmental dimensions.

This report underlines the importance participants attach to maintaining a balance between risk and reward. It also confirms the importance of intrinsic rewards, such as challenge and excitement, throughout the venturing process. Whilst the salience of monetary rewards increases as the new business nears launch, they are never the sole motivator. Importantly, the new business unit provides the ideal opportunity to create the sort of challenging work environment even in a large corporation that many of today's managers and executives are seeking.

Key findings

The key recommendations to emerge from this research are as follows.
• Focus on creating space—organisational, psychological and physical— where intrinsic motivators can flourish.
• Recognise the differing individual needs, attitudes, aspirations and contributions of those taking part.
• Use failure as a learning opportunity for both the organisation and the individual.
• Acknowledge the need to include a broad range of stakeholders in the reward/risk strategy, including venture team members, the incubator team and external partners.
• Link incentives to key new business development goals rather than the mainstream business metrics.
• Release incentives in coordination with the new venture process, not the mainstream organisation’s systems.
• Allow for different rewards at different phases of the venturing process.
• Actively manage the expectations of all of those taking part.
• Ensure reward systems are appropriate to attract the right talent to the venture

Research methodology
This study is based on a series of interviews with managers of corporate incubators, leaders of new venture teams and human resource specialists within major companies. It focuses on the practical problems and solutions as seen by those engaged in new business development. Additionally, it draws on the experiences of members of the Henley-Incubator team and their work in helping companies to harness the intrapreneurial flair of their employees. Use has also been made of the academic and non-academic literature that addresses the field of corporate venturing.
Acknowledgements
We would like to thank and acknowledge the invaluable contribution of individuals and organisations that contributed case studies. The Corporate Venture Network members have also provided significant input during the CVN thought leadership forums

Author profiles
Andrew Gaule is CEO of Henley-Incubator and possesses a passion for releasing new business ideas and developing intrapreneurs in organisations. Henley-Incubator helps enterprises generate, validate and develop new ventures in established organisations. Andrew facilitates a Corporate Venture Network that includes ABB, AMP, BT, Powergen, Shell, Syngenta, Unilever, WHSmith and other leading organisations.
Andrew has been a senior executive in the IT services sector and a business change and project manager. He was previously an international SAP project manager and commercial manager with Unilever where he delivered major divisional reorganisations and IT projects.
Andrew holds an economics degree from St John’s College, Cambridge, is a qualified Chartered Management Accountant and gained his MBA at Henley Management College.
Nigel Spinks is a researcher with Henley Management College. His research interests include innovation and organisational competency development. He has most recently been involved in a major research project for the Engineering Employers’ Federation.
He has over 10 years’ experience of technical and export sales and marketing from a start-up division of a large multinational company. Prior to embarking upon a civilian career, Nigel served as an army officer for 10 years.
Nigel holds a history degree from Fitzwilliam College, Cambridge. He gained his MBA from Henley Management College, completing his dissertation on strategic innovation in the financial services industry.
Grist publish research and thought leadership studies for senior executives. These management reports and executive briefings, written by leading business schools and consulting firms, provide independent, authoritative analysis for decision-makers with responsibility for strategy formulation and business planning in global corporations.
Henley-Incubator is the corporate incubation consultancy of Henley Management College, the leading global business school. They help major organisations to address key business dilemmas such as:
How to nurture new business innovation without suffocating initiatives
How to develop talented intrapreneurs
How to leverage value from new business concepts

Text © 2002 Grist

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