What is an autonomous business unit?

An autonomous business unit is one that is separate from the Core, and given autonomy to operate, with ring-fenced resources to pursue the corporation’s disruptive innovation agenda. It is not a spin-out; rather, the unit retains access to the core business assets- technology, manufacturing, sales channels, back office, etc.- so allowing it to go faster than a startup.

Why is an autonomous business unit important for corporate innovation?

An autonomous business unit is important for corporate innovation because giving the unit freedom to act outside of the existing management systems, and ring-fencing resources, enables the company to protect Explore efforts from being squashed by the pressures and expectations of the Core.

How do you create an autonomous business unit?

To create an autonomous business unit, you must give the unit special status as an Emerging Business, reporting to the CEO or other senior executive, and operating outside the Core management system. You must ensure that the unit has sufficient autonomy to pursue new ideas at its own pace, and is free to hire its own team and define a distinctive way of working. It also needs to have its own resources, sufficient to launch business experiments and generate learning on which it can act. At the same time, the company must design and ensure the mechanisms for managing points of targeted integration with the Core business so that the unit can access existing assets.

What is an example of a successful autonomous business unit within a corporation?

An example of a successful autonomous business unit is when IBM created its Emerging Business Opportunity Program in 2000. This was a multi-year effort to create new, disruptive businesses within the corporation. Eighteen separate units were carved out, including Life Sciences, Linux, and Pervasive Computing, and subject to the special rules of a new EBO management system. By 2006, the EBOs contributed over $15B in revenue, 24% of the IBM total. Learn more about IBM’s success with EBOs here.