Assuming that internal entrepreneurship projects are good, the most critical factor is the people. No matter how favorable the timing and location are, without good people and teams to operate, it won't work. All things in the world are done by people, and people with different abilities and responsibilities achieve different results, so everyone values the human factor in business operations.
The concept of internal entrepreneurship platforms has been prevalent in the corporate world in recent years, and we are familiar with successful cases like Wangpin Group's Lion King Plan, Handu Yishe's small group system, and Haier's internal entrepreneurship incubation model, as well as unsuccessful ones like Huawei's 'Harbor Bay' incident. So how exactly should companies build internal entrepreneurship platforms?
Key Success Factors
Doing anything requires the harmony of timing, location, and people. With the opening of social resources, people's pursuit of wealth and self-realization has increased, making entrepreneurship a popular path. The advocacy of 'mass entrepreneurship and innovation' has awakened many with entrepreneurial dreams, but individual entrepreneurship is not easy, so companies are prompted to build their own entrepreneurship platforms to retain talent and allow individuals to realize their dreams.
When building an internal entrepreneurship platform, three key factors must be considered:
The project must be good;
There must be a good general manager;
There must be a good team.
A good project is easy to understand; high success rate. A good project typically has good prospects, a good business model, large market potential, and no competitors, meaning it occupies the advantage of location.
Assuming internal entrepreneurship projects are good, the most critical factor is the people. No matter how favorable timing and location are, without good people and teams to operate, it won't work. All things in the world are done by people, and people with different abilities and responsibilities achieve different results, so everyone values the human factor in business operations. For example, venture capital, on the surface, invests in projects, but actually invests in people. They must see if the project has a good general manager and also look through the general manager to assess the entrepreneurial team. So the human factor is crucial.
Finding a Good CEO
To find a suitable person as CEO, you can use 'willing to do' and 'able to do' as criteria. Whoever is both 'willing' and 'able' is the right person.
To measure whether a person is willing, look at whether they are willing to invest money, not just listen to their words. Because the amount they invest determines how much they will care or how confident they are. If someone uses lack of money as an excuse not to invest, they may not really want to do it, or they may lack ability. Capable people, even if short on money, can always find funds. Most Chinese bosses come from grassroots backgrounds and had no money, but they still found initial startup capital because they truly wanted to do it; that's the trait of a boss. So if they want to do it, they will definitely be willing to invest.
Whether a person is capable depends not only on their abilities but also on whether they can work full-time. If someone cannot devote themselves full-time and instead straddle two boats, no matter how strong their abilities, they are unsuitable. Part-time work itself shows a lack of confidence in the task, as the saying goes, 'One cannot serve two masters.' How can someone without confidence and full dedication do well? So if they have ability, they must be full-time to be truly capable.
No matter how good the project, if you cannot find the right person, don't do it; otherwise, it is doomed to fail.
Building an Excellent Team
An excellent team will make the general manager even more powerful. In simple terms, a team means there is a leader, and a group of brothers willing to follow him through thick and thin, with cohesion. To see if a group is a real team, the simple method is still to look at money—whether these brothers are willing to invest.
If a person is willing and able to be the leader, not only invests himself but also finds capable brothers willing to invest and work with him, then this person and this team are usable.
If you favor a person, and this person is willing to invest, but no one is willing to follow him in investing, then this person is not usable. Either he lacks real skills or has character issues. In a company, the masses often have sharp eyes. For example, how he treats subordinates, whether he only flatters superiors, whether he takes kickbacks, or is greedy for small gains—the masses see more clearly than the boss. No one wants to invest their money in someone with poor character.
To build a team, you can use internal crowdfunding or equity subscription, allowing several groups to compete. Whoever can assemble a team and raise the most money gets to do it. Of course, the team members, as partners of the CEO, must also be excellent employees of the company who can take on heavy responsibilities. This method avoids subjective preferences, uses objective standards to select people, and indirectly helps you choose a team. Let the leader and brothers choose each other; if they can truly bond, they become a truly usable team.
Balance in Profit Distribution
Whether the interests of both parties can be balanced directly affects the development of the internal entrepreneurship plan. When the entrepreneurial project is still small, maintaining an initial static balance is beneficial and necessary. For example, if the entrepreneurial team holds 40% equity but receives 50% or 60% of dividends, it allows the team to focus wholeheartedly on development. However, if the entrepreneurial team multiplies the assets by dozens or even hundreds of times, using the same ratio will cause unrest among the team, because after all, these people are working hard to earn money, and the disparity between contribution and reward will inevitably cause dissatisfaction.
When this unrest affects the project's operations, losses become inevitable or even irreparable. Therefore, bosses must pay more attention to dynamic balance during project development. They should plan ahead at the startup stage, such as agreeing with the team on how dividends and equity will be adjusted at different stages, and even when the project reaches a certain stage, the roles of major and minor shareholders can be swapped. This maintains a dynamic balance of interests, which is more beneficial than harmful to the project's development.
As long as the project survives and continues to develop, that is the greatest wealth; your investment will keep yielding returns. If you are greedy and focus only on short-term gains, losing the hearts of the people, the project will die, and you will truly lose more than you gain.
Sharing and Balancing Operational Risks
Business involves risks, and internal entrepreneurship is no different. Therefore, the company and entrepreneurs must also share and balance risks.
In reality, people often simply distribute dividends according to the proportion of capital contribution, and losses are the same, which is unreasonable. Instead, the principles of equal power and responsibility, and equal risk and return, should be followed.
Typically, the company fully delegates operational authority to the entrepreneurial team and does not participate in operations, at most helping with areas they are not professional in, such as HR, finance, and supply chain. Therefore, operational risks should be borne according to the size of power, not according to the proportion of capital contribution. Returns should also be distributed according to the size of power and responsibility; you cannot only see the benefits and ignore this logic. Once risk-bearing is not aligned with power and responsibility, the entrepreneurial team may harm you.
The best method is for the company and the entrepreneurial team to agree on a fixed amount of return in advance, such as a minimum return not lower than bank interest income. The portion exceeding the fixed amount is then distributed according to the agreed ratio. If there is a loss and the team cannot pay the fixed return, they can use equity as collateral or defer the previous year's dividends to cover the loss.
Conclusion
Building an internal entrepreneurship platform, from the perspective of timing, location, and people, the most complex is the people. From selecting people and teams to balancing and controlling interests and risks during operations, it is the most difficult. But the core principle remains the same: as long as you truly understand the logic and principles in these processes, you can design the most suitable internal entrepreneurship model based on the company's own characteristics, build a good platform, and create a benign and healthy business ecosystem.
Source: Taishan Management Institute
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