Internal Business Management

I. Preface

As a new investment mechanism combining high-tech industrialization and financial capital, venture capital has promoted and created a large number of emerging companies. At this time, many large companies are faced with the problem of the loss of excellent talents. They gave up their well-paid jobs and moved to venture capitalists and other investors. In fact, removing the influence of bureaucracy in a large company makes it easier to start a business in a large company to create a new company independently. To get rid of the aforementioned crisis, a large company must establish a management system that encourages innovation, promote internal entrepreneurship, allow resources to freely flow to entrepreneurial projects, and move them to the company's overall strategy.

Internal entrepreneurship is not a new thing. In 1980s, some large enterprises in the United States started internal entrepreneurship. A large company allows its employees to run small businesses and develop new products within the company. Large companies have the manufacturing facilities, supply network, mature management technology, rich human resources and marketing capabilities, which provide a good resource environment for internal entrepreneurship; small companies are usually good at putting research results into production quickly. Internal entrepreneurship allows large companies to maintain their advantages in scale while having the characteristics of rapid action and agile response from small companies.

 

Figure 1 Internal entrepreneurial process framework

2. Obstacles to internal entrepreneurship from the Management System of Traditional companies

Most companies, especially large companies, have clearly defined organizational structures and plan them to communicate from top to bottom. Senior Management Personnel decide how to allocate resources, which we call a resource allocation management system. At this time, the company is often a bureaucratic organization that hinders the development of new things. A typical manifestation of this barrier effect is that the company rarely responds when it calls for innovation. This is often not because of lack of good ideas, but sometimes great organizational barriers are encountered in the process of achieving good ideas, sometimes the idea from the grass-roots layer degrades or gets stuck on the way to the decision-making layer.

To some extent, personalization of internal entrepreneurship is incompatible with organizational authority. To promote the development of internal entrepreneurship, it is necessary to bypass and break through the traditional management system within a certain range and open up a free space, allows creativity, capital, and people to flow and combine under the guidance of market mechanisms. Once a good idea is recognized, it can attract money and people. We call it a Resource-attracting management system. Innovative companies have mechanisms and cultures to encourage innovation, as well as employees who are brave in innovation. Compared with the two, the mechanism and culture are more important. If employees are bound to a regular business model, those ideologically active talents will either leave the company or gradually lose their creativity. Therefore. The company's management of internal entrepreneurship must transform from resource allocation to resource attraction.

Resource allocation models are usually suitable for investment decisions in conventional business models. Senior management personnel only need to make regular decisions. Once an enterprise enters a brand new business model or needs to make significant changes to the existing business model, the value of the original experience of senior management personnel will be reduced. In the old thinking model, valuable investment opportunities often fail.

Table 1 Comparison of Two resource configuration types

Resource allocation type

Resource attraction

Operating Mechanism

Level System

Market

Transfer Mode

Top-down

Flow and collision

Applicable business type

Existing Business

Create new business

Failed to treat

Avoid errors and accidents

Strive to succeed, and see the success from the failure to avoid public failure

Resource-attracting management is more suitable for creating new businesses. It is equally important for a company to prevent business risks in its existing business and to start innovative business and expand its core business. Therefore, the company should integrate two management modes: resource allocation and resource attraction, enable the classification system and the market to play their respective roles.

3. Establish a Resource-attracting internal entrepreneurial management system

The core of the resource-attracting management system is to establish three interconnected markets: creative market, capital market, and talent market. Under this system, there are three major elements: unlimited imagination, capital seeking for investment opportunities, and energetic and free-thinking talents, quickly creating huge wealth.

1. Creative Market

There are three reasons why traditional large companies are hard to innovate:

First, it is difficult to generate ideas. A large company focuses on operational efficiency. Whether it is optimizing the supply chain or implementing the ERP system, its goal is to make the existing one better. In this efficiency philosophy, employees seldom jump out of their conceptual shackles and think about other ways to create wealth. We should see that the success of the new generation of network is not achieved by improving efficiency in the traditional business model, but by developing new business models.

Second, the creative path is not smooth. The idea reaches the Decision-Making layer step by step through the feedback chain from the bottom up. The negative opinions of any stage in this process will lead to the loss of the idea. The creative "buyer" is a series of different levels, and it is less likely to be accepted.

Thirdly, the division of labor among employees in traditional enterprises also has a negative impact on the formation of the creative market. "Strategic issues are taken into consideration by senior managers, and other employees do not have to consider them." the limitations of such levels can easily lead to prejudice, and the soil of prejudice is difficult to cultivate the idea of freedom and activity.

Creating a creative market in the company will eliminate the above obstacles. It is not a tangible market. It recognizes that "innovation is the only way to create new wealth" and accepts any valuable ideas, regardless of the identity or position of the Creator, A special committee is set up in the company to review the submitted ideas and decide whether to provide support for each stage. When the Committee argues, one member says "no", and the other may say "yes", so this idea can be supported.

 

Figure 2 creative upward transmission path under resource allocation and resource attraction

2. Capital Market

Traditional large companies also have unreasonable restrictions on internal entrepreneurship in terms of funds:

First, the risks faced by internal entrepreneurs are asymmetrical with financial support. Big companies all have obvious power systems, and senior executives can make decisions on larger expenditures. When an ordinary employee wants to get some money to experiment with new ideas, it is a negligible risk for the company. For that employee or small team, it often means the whole of his career. In the same business environment, a department manager may face thousands of yuan of risks.

Second, it focuses on capital investment from the financial perspective, which is not conducive to internal entrepreneurship obtaining financial support. Creative new business ideas are often shelved by the ambiguity of estimated market capacity and length, and the lack of massive data analysis support for financial forecasts. In the view of venture capitalists, a creative business plan is not a contract that defines how a budget is implemented. It is more like a story about opportunities and how to create and capture wealth.

Third, the budget process easily misses the ideas that bring huge returns. In general, the goal of the budget is to avoid funds from being invested in low-return projects. The profit and loss of a invested item is obviously easy to see, and the loss of the abandoned investment opportunities is hard to find.

Fourth, managers who are accustomed to the current business model have the right to allocate funds. They tend to limit the flow of funds to new business areas. People who dream of a new radical business model have to seek financial support from the aforementioned managers, even if the idea is beneficial to the company's long-term development, once it threatens the existing business model, it will be suppressed.

The establishment of the company's internal capital market is a form of providing seed funds for future entrepreneurial undertakings, maintaining a certain degree of controllable freedom in use. Its investment goal is to ensure that there is a big success in several projects, rather than making sure there is no failure. It guarantees that internal entrepreneurs do not have to resort to the traditional "Taoist guard" when seeking funds for ideas ". In shell, there is a capital market completely separated from the traditional financial budget procedures. Internal entrepreneurs do not have to waste time waiting for the annual budget cycle, they can go to the relevant committees to present their business plans at any time and get feedback and support in a timely manner.

3. Talent Market

In many companies, there is always a process of fund allocation, and there is no flow of talent allocation procedures, let alone the Talent Market. There are still some practical procedures to judge whether the funds are used properly. However, no one knows that the company's talents are gathered before the new machine conference, it is still slowly suffocated under the dying business.

The obstacles to the formation of the Talent Market in traditional companies are mainly manifested in the following aspects:

First, title consciousness and localism are serious. Title awareness is still deep-rooted in many corporate department directors and management executives. Excellent Engineering and marketing talents are bound to a position without development potential, and their talents are only a small part of what they can actually do.

Second, lack of encouragement and support for talent flow. To "make the best use of all" talents, on the one hand, they should be given the opportunity to compete around new opportunities, and on the other hand, additional safeguards and incentives should be provided. There is no reason or way to tie ambitious and creative employees into the declining business.

If the talent market cannot be created, the company will not only fail to attract those talents, but this defect will lead to the continuous loss of talents. The talent market should be open and self-organized. In the talent market, there are novel and unique development opportunities, where employees flow to innovation and success, and where they flow out. In this environment, human resource management should not only focus on management development and performance evaluation, but also promote the flow of personnel. In a company that operates successfully in the talent market, employees believe that the best way to succeed is to become part of the emerging business, encouraging employees to give up their well-known business for non-traditional opportunities. At the same time, mobility provides a system guarantee for project implementation. When an employee is truly attracted to the project and team he is working on, it can release a huge amount of energy.

Iv. Conclusion

China's large companies are gradually growing, and they are facing the danger of stagnant innovation. The bureaucratic and planned management that comes with a large organization will suffocate the idea of innovation. Competition at home and abroad shows that large companies must innovate, or else they will perish. In this sense, a resource-attracting management system should be established to create a good internal entrepreneurial environment, it is the key for large companies to revitalize their innovation capabilities and thereby remain invincible in the fierce global competition.