Intrapreneurial Transformation of Internal Departments into Business Ventures Proposal

Project Proposal

Title of the Project: Intrapreneurial Transformation of Internal Departments into Viable Business Ventures by Modular Business Model

Background

Business development is a natural process and the apparent goal of any undertaking; therefore, research will always be relevant in the scientific community on how to continue this development in crisis or deadlock situations. At some point, there comes a stage when a business can provide performance that exceeds the market’s needs. The business unit’s priorities are shifting towards increasing efficiency; innovations are associated with decreasing labor costs, material consumption, and many more (Wach, 2020). Efficiency innovation activities include outsourcing, financial leverage, process optimization, and industry consolidation to realize economies of scale (Stojcic, Hashi, and Orlic, 2018). Over time, business units must become more efficient to remain competitive, and the shift to innovation in efficiency is a natural result of development.

The voice of shareholders might conflict with the client’s representative. A business unit often achieves efficiency by moving to a modular structure, standardizing the interdependencies between each of the components of the business model. It ultimately cements the design of the business model as it stands (Lynn, Roland, and George, 2022). Deviations from the existing structure undermine the modularity of components and reduce efficiency, so when evaluating such changes, the business will prefer productivity over flexibility.

This stage is an inevitable step in an ever-growing business. The modular model allows for establishing and applying standardization between each of the components of the corporation through interdependence. Compared to other business models, this one offers the highest degree of differentiation (Geissdoerfer et al., 2020). This study explores the mechanisms of internal transformation into viable business units. The basis of the theoretical analysis will be the deductive method in the aspect strategy of scientific research of specific examples of companies with the philosophy of scientific realism. Potential barriers to transformation and the most effective strategy will be considered. The theoretical background of the problem is currently described by a relatively small number of scientific studies. As a result, the search for patterns in this area is relevant.

The practical context will focus on OK Care Limited, an O2O healthcare platform in Hong Kong. The company introduces advanced telemedicine approaches to reduce the distance between professionals and potential patients (OK Care, 2022). The processes of departmental differentiation followed by integration to achieve a typical result have become more pronounced during the pandemic when remote work has become a standard mode of work (Espitia et al., 2022). Departments have become more independent, and given that they have different workloads in different periods, there are opportunities for using a modular business model (Saunders, Lewis, and Thornhill, 2016). Outsourcing by corporate clients would allow each department to be treated as an independent unit capable of generating income without regard to other departments.

The relevance is dictated, in addition to the need to present the problem more widely in the scientific and theoretical field. There is an opportunity for large companies to find additional sources of income, increase the autonomy of departments and use opportunities to remain competitive in many areas (Creswell and Clark, 2017). Economic crises caused by a pandemic or other global cataclysms have shown that maintaining efficiency can be the key to a company’s success in overcoming problems (Seetharaman, 2020). Rising costs, the declining purchasing power of consumers, various legislative restrictions, and interruptions in supply chains – all these events require serious management decisions to keep the company efficient (Creswell and Creswell, 2017). The modular model can become a partial solution to these situations, which will help mitigate the risks of a crisis, and in more favorable times, promote autonomy and development of the department and the company as a whole.

The value of the study lies in the opportunity to highlight this new integrated approach to the modular business model. This assessment allows companies to develop their departments into subsidiaries, giving them autonomy based on specific examples. Among the results, the most effective strategies in specific industries, various aspects of the implementation of these strategies, and obstacles that can be critical will be highlighted. The beneficiaries are the managers of OK Care Limited, who may be interested in additional workload on departments that may be idle at specific periods. The development paths of stable growth companies face the need for horizontal or vertical scaling. However, as in the case of OK Care Limited, it is not yet possible to diversify products as well as enter other markets, and therefore the modular model is the most effective way out. In the case of positive results, this study will be valuable for organizations with this specific development.

Research Questions, Aims & Objectives

The research questions are as follows:

• What intrapreneurial transformations are most effective when applying a business-modular model?
• What are the barriers to this transition of internal departments into viable business ventures?
• What factors drive transition and efficiency?
• What management decisions are needed to implement the model?

The main question practically echoes the title of this work: what intrapreneurial transformations are most effective when applying a business-modular model? Accordingly, the details will be revealed in leading questions that should clarify the pros and cons of this model. First, what are the barriers to this transition of internal departments into viable business ventures? Second, what factors drive transition and efficiency? Thirdly, what management decisions are needed to implement the model? These questions will identify the necessary and sufficient conditions for companies that may need such a transition, as well as factors that facilitate and hinder the testing of the model.

Thus, the study aims to focus on the critical features of implementing a modular model in business and systematize these into a single theory. In addition, this study will evaluate the performance of subsidiaries by comparing their financial performance and looking for a correlation with the degree of autonomy. As a result of the study of case studies, the study will receive qualitative data, which will either be confirmed or refuted by quantitative data. The work will establish the key features of the modular model, which will be confirmed by the practice of real examples and statistically significant results of the comparison of financial indicators.

The research objectives are as follows:

1. Explore the theoretical foundations of the modular model.
2. Examine real-life examples of subsidiaries transitioning by critically reviewing for deterrents, facilitators, and necessary conditions.
3. Research effective ways how the theoretical data will be matched with practical examples in an attempt to systematize the information under consideration.
4. Develop the obtained qualitative data after systematization to analyze for correlation with companies’ financial performance and further statistical significance testing using a t-test.

Literature Review

The implementation of a business model begins with creating a new business unit, then it grows, and ultimately the business model moves to the stage of effective functioning. Each stage of this development requires a specific type of innovation, creates a specific set of interdependencies in the model, and responds to a specific set of performance measures. At the third stage of this phenomenon, the approach describing the modular business model is placed. It involves the autonomy of the internal departments of the company in order to reduce downtime or increase profits (Nosratabadi et al., 2019). Speaking of autonomy, extrapolation involves the creation of subsidiaries that now maintain their reporting, resource management, and much more that is characteristic of an independent organization. At the same time, the relationship with the leading company is maintained, which becomes the “main client” of the subsidiary since the wholly-owned relationship remains (Sestu and Majocchi, 2020). Each subsidiary is built around a specific operating activity that was previously only a part or department of a larger parent company (Claver-Cortés et al., 2018). Accordingly, the first necessary condition for an organization to apply this method is the presence of many departments in the internal structure.

The modular approach itself became a historical response to the vertical development of enterprises that began to move into the status of ecosystems. One of the distinguishing features of the systems is their complexity, which requires new solutions, taking into account the multicriteria. Initially, this phenomenon began to be offered in the industry, where advanced areas were a symbiosis and integration of several scientific fields at once, for example, the biofuel industry (Tsvetkova and Gustafsson, 2012). The emphasis on such approaches has not been made in actual practice for a long time, although they are often heard in the scientific literature in the early 2010s (Chesbrough, 2010; Bask, Tinnilä and Rajahonka, 2010). It was since such a reorganization required extensive material and resource costs and the lack of global examples on whose experience one could rely (Tsvetkova and Gustafsson, 2012). The multicriteria of the process were taken into account in theory, but in practice, only certain aspects of the modern modular model were gradually implemented.

Gradually, this model was tried on by industrial and logistics enterprises. In the first case, the integration of enterprises at the junction of different fields created new, highly specialized areas, requiring the fusion of the experience of companies from different fields (Anwar, Azis, and Ruma, 2019). This new sub-specialization required significant support and a more complex business organization that required highly skilled people and creativity. As a result, a method for decomposing internal departments of newly minted promising companies was proposed, which assumed greater autonomy and modularity (Tsvetkova and Gustafsson, 2012). By dismantling departments into independent units, including subsidiaries, the parent organization may lose precise control but gain efficiency.

In the second case, the focus shifted to the service sector, which also began to gain momentum. Research proves the relationship between the chosen business model and performance. At the same time, modularity stands out as one of the essential tools in relation to the available services of companies (Bask, Tinnilä, and Rajahonka, 2010). As a result, the diversification of services and products contributes to the transition to a modular approach because it becomes possible to develop sales of each of the individual business units.

The evolution of companies has led to the fact that once outsourced processes became internal, performed by new divisions. The vision of the possibility of adapting such units has always been perceived with apprehension since the reorganization of supply chains and hiring of personnel requires a significant expenditure of resources, as well as preliminary estimates that should show a predictable payback (Jones, Chesley, and Egan, 2020). However, later it turned out that the development of own outsourcing services, especially for corporate clients, turns out to be very useful and can contribute to revenue growth, even in crises (Seetharaman, 2020). Therefore, the development ground of loyal corporate customers, who can access a broader range of company services as they develop, also favorably contributes to introducing a modular model.

There are companies that, after receiving the status of subsidiaries, could experience specific difficulties. For example, HCL Technologies, which spun off HCL TalentCare, later had to abolish it due to duplication of functions, financial problems, and ineffective operating practices (Sudharshan Prabhu and Vaikunth Pai, 2018). While the parent HCL is famous for its attitude toward employees through the innovative ideapreneurship approach, which significantly improves employee engagement, relevance, and satisfaction (HCL Technologies, 2022). The HR department of this company is often cited as an example of effective management in theoretical studies (Sudharshan Prabhu and Vaikunth Pai, 2018). However, the modular approach faced several reasons that will be highlighted as barriers: financial activity, duplication of functions with the parent or other subsidiaries, or operational inefficiencies that stand out as a module. Google Scholar was primarily used to find scholarly sources, and the Internet search was utilized for other secondary sources. These sources provide a comprehensive picture of the subject of interest.

Research Design & Methodology

The literature review at this stage has identified a set of features of intrapreneurial transformations of internal departments according to the modular business model. The type of investigation is based on realism philosophy because the research problem needs practical and realistic assessments. According to the textbook, realism relies on the assumption that reality is independent of the human mind (Saunders, Lewis, and Thornhill, 2016). However, some issues might arise in the data collection process, which include the lack or insufficiency of information to make statistically significant conclusions. The core limitation is the novelty of the topic, which might not have enough evidence to answer the research questions.

Scientific research and the financial performance of subsidiaries are the only data sources in work, as the philosophy of scientific realism is adopted. The deductive approach allows moving “from more to less”: from real ready-made examples and multiple studies to specific details and factors that affect the application of this model. Among the strategies chosen are case studies of real examples of subsidiaries and regression analysis of their financial performance to search for correlations with the factors-variables identified above. Accordingly, the choice will fall on mixed methods of working with quantitative and qualitative information.

A further literature review can finally reveal several factors that practical implementation examples will confirm. The list of obstacles and contributing factors will be highlighted and presented in a table, which will be filled out for each selected case study separately. Then, based on these estimates, two periods of a series of financial indicators will be given that are responsible for the selected subsidiaries’ liquidity, market value, asset turnover, and profitability. During the transition, the dynamics of the financial activity of organizations will be monitored and how it correlate with the results of a qualitative assessment.

Qualitative assessment should always be based on expert judgment, so only peer-reviewed sources of primary scientific research are used to identify factors. In this case, the qualitative indicators will be the detectable variable causes, and the quantitative indicators will describe the effect (Cresswell and Clark, 2017). The results obtained should be tested for statistical significance using the t-test. The null hypothesis in this case for each factor will deny the existence of a correlation between this aspect and efficiency, which will be expressed in financial terms. The student’s t-test is preferable because it is more accurate in the two compared groups, while univariate and multivariate analyses, including Cronbach’s alpha, are preferable for a more significant number of samples (Cresswell and Cresswell, 2017). Thus, scientific research will create a proven basis for understanding the dependence of really significant factors.

As a result, OK Care will be offered a theoretically systematized scheme for transforming internal departments into viable business enterprises. A drafted evidence-based plan will be offered to study beneficiaries to differentiate departments’ operational functions, identify downtime periods, and calculate an approximate balance at start-up costs. Even a hypothetical assessment of the practical application of systematized knowledge can show the effectiveness of the study using a real example. In addition, OK Care currently has the opportunity and identify the reasons for these changes. According to the Glacier formula, it is also necessary to influence the readiness of the change plan and lobby for the first steps toward leadership for these changes to reach their destination (Savolainen and Collan, 2020). However, this further work will be beyond the scope of this study.

Ethical issues in this study include the potential evaluation of actual firms, which may decline to mention their name as a matter of confidentiality. Before publishing the results, one should contact representatives of these organizations and agree on this moment. Otherwise, the study works exclusively with scientific literature and financial indicators in the public domain. Therefore, there are no more grounds for conflict. The research onion of this work is shown in Figure 1.

Project Plan

Research objectives are taken as the research plan. The theoretical foundations of the modular model are a vital source of quality data for research; therefore, a significant amount of time will be required to search for them in depth. In parallel, a search and analysis will be carried out through the given theoretical minimum of practical examples as a case study. It will require the same amount of time allocated to each selected case. After that, creative scientific activity will be carried out to systematize the factors and present them as a table. Finally, it remains to perform statistical analysis between the selections of financial indicators and selected factors, for which very little time is allocated since the main calculations will be performed in environments like SciLab or HSE. Additional days are allocated for potential deviations, separating the completion of tasks. At these stages, it is possible to change the methodology in connection with which such days are allocated. The Gantt chart is shown in Figure 2.

Risk Management

The project’s risks lie in several planes at once, so a program has been developed to mitigate them. First, among real examples, there may not be factors identified in the scientific literature, and therefore the wide gap between theory and practice will be challenging to analyze. Secondly, the results may not be statistically significant due to a small sample or incorrectly selected factors. Finally, many factors can affect financial performance, including external ones independent of the applied business model, such as a pandemic, market changes, and many others.

As a consequence, assumptions may depend partly on aspects of these two risks. External conditions can influence, among other things, the factors identified in the literature review, which will not be ordinary and universal but dictated by the trends of the times. Consequently, risk and assumption mitigation requires consideration of the following issues. First, to consider external conditions, one should more carefully study the sources of the literature review for such errors or turn to other literature reviews that can evaluate primary studies in terms of retrospective. Second, if the results are not statistically significant, then the sample will need to be scaled up further to ensure no correlation. The expansion of performance measurement may not be limited to the company’s financial performance, so if the impact of this risk turns out to be critical, then more versatile quantitative indicators will need to be added.

References

Anwar, A., Azis, M., and Ruma, Z. (2019) ‘The integration model of manufacturing strategy, competitive strategy and business performance quality: a study on pottery business in Takalar regency’, Academy of Strategic Management Journal, 18(5), pp. 1-7.

Bask, A. H., Tinnilä, M., & Rajahonka, M. (2010) ‘Matching service strategies, business models and modular business processes.’Business Process Management Journal, 16(1), pp. 153-180. Web.

Chesbrough, H. (2010) ‘Business model innovation: opportunities and barriers’, Long Range Planning, 43(2-3), pp. 354-363. Web.

Claver-Cortés, E., et al. (2018), ‘Strategic knowledge management in subsidiaries and MNC performance. The role of the relational context’, Journal of Knowledge Management, 22(5), pp. 1153-1175. Web.

Creswell, J. W., and Clark, V. L. P. (2017) Designing and conducting mixed methods research. New York, US: Sage publications.

Creswell, J. W., and Creswell, J. D. (2017) Research design: Qualitative, quantitative, and mixed methods approaches. New York, US: Sage publications.

Espitia, A., et al. (2022) ‘Pandemic trade: COVID‐19, remote work and global value chains’, The World Economy, 45(2), pp. 561-589. Web.

Geissdoerfer, M., et al. (2020) Circular business models: a review.Journal of Cleaner Production, 277, pp. 1-17. Web.

HCL Technologies. (2022) About us. Web.

Jones, H. E., Chesley, J. A., and Egan, T. (2020) ‘Helping leaders grow up: vertical leadership development in practice’, The Journal of Values-Based Leadership, 13(1), p. 8. Web.

Lynn, L. A. M., Roland, S. O. H., and George, T. E. O. (2022) ‘The effectiveness of business essentials through action module in developing entrepreneurial thinking’, in Tenth International Conference on Entrepreneurship and Business Management 2021 (ICEBM 2021) (pp. 364-369). Atlantis Press. Web.

Nosratabadi, S., et al. (2019) ‘Sustainable business models: a review’, Sustainability, 11(6), p. 1663. Web.

OK Care. (2022) Why us? Web.

Saunders, M., Lewis, P., and Thornhill, A. (2016) Research methods for business students. Harlow: Pearson Education.

Savolainen, J., and Collan, M. (2020) ‘How additive manufacturing technology changes business models?–review of literature’, Additive Manufacturing, 32, p. 101070. Web.

Seetharaman, P. (2020) ‘Business models shifts: impact of Covid-19’, International Journal of Information Management, 54, p. 102173. Web.

Sestu, M. C., and Majocchi, A. (2020) ‘Family firms and the choice between wholly owned subsidiaries and joint ventures: a transaction costs perspective’, Entrepreneurship Theory and Practice, 44(2), pp. 211-232. Web.

Stojcic, N., Hashi, I., and Orlic, E. (2018) ‘Creativity, innovation effectiveness and productive efficiency in the UK’, European Journal of Innovation Management, 21(4), pp. 564-580. Web.

Sudharshan Prabhu, S., and Vaikunth Pai, T. (2018) ‘A study on products and services of HCL Technologies’, International Journal of Case Studies in Business, IT and Education (IJCSBE), 2(1), pp. 45-53. Web.

Tsvetkova, A. and Gustafsson, M. (2012) ‘Business models for industrial ecosystems: a modular approach’, Journal of Cleaner Production, 29–30, pp. 246-254. Web.

Wach, K. (2020) ‘A typology of small business growth modelling: a critical literature review’, Entrepreneurial Business and Economics Review, 8(1), pp. 159-184.