Corporate entrepreneurship (CE) strategies are widely recommended for established firms to solve growth- and economic performance-related problems that they encounter in highly competitive business environments. However, relatively little empirical light has been shed on practical CE strategy processes and how they function in the everyday lives of organizations. The case study presented herein addresses this underexplored issue by describing how one long-established firm in dire economic circumstances renewed its strategy, as related by an interview with the company's managing director. The analysis draws on the theoretical ideas of corporate entrepreneurship models and focuses on practical activities within the strategic renewal process: What did the case firm actually do to compensate for decreasing turnover and to improve its longer-term position in the market? The findings underscore the progressive, proactive, and impermanent nature of CE strategies; further, they suggest that firms need clients and other external partners with equally ambitious business objectives in order to successfully implement their CE strategies.
1. Business does not always go as planned
This article presents a case study of a real, and fairly typical, managing director faced with a crisis situation. The managing director, Mr. Virtanen, worked for AdChance, a Finnish business-to-business marketing services firm with a long history in the domain. The recent recession significantly weakened the financial position of Finnish firms in this particular field; from 2008 to 2009, overall turnover decreased by 11% and operating profits by 45%, resulting in negative net profits–—especially in larger firms (Statistics Finland, 2011). Not surprisingly, AdChance suffered from this downswing. The crisis began when a major client decided to leave the company, which demanded quick, short-term actions to compensate for acute financial losses. This led to a profound strategic renewal to safeguard AdChance’s longer-range future in the market.
6. How does the external environment influence the success of strategic renewal?
The findings of this study underscore the role of the external environment in leveraging CE strategies. In particular, the role of clients seems to be essential. As strategic renewal stories can be progressive, regressive, or stable, clients can also be categorized in the same manner (see Gergen & Gergen, 1986).
AdChance needed demanding new clients with high targets in order for a progressive strategy process to emerge. A compatible level of ambition between the agency and its first new client positively affected the performance of both firms. On the other hand, existing clients represented stable, or even regressive, performance development. Progressive new clients enhanced the effectiveness of CE because they better suited the agency’s future, whereas stable or regressive existing clients slowed CE implementation by clinging to the agency’s past ways of doing business. In terms of competitive advantage (see Ireland & Webb, 2007), new clients represented opportunity exploration where the proactive suggestions of the agency expand its current and future business boundaries. In contrast, the incoming briefs of existing clients represented opportunity exploitation that did guarantee a certain turnover level, but seemed nonetheless to forestall the agency’s growth.