Reference no: EM131764483

Please read and answer the discussion questions on the bottom of this case study. The Acordia Companies: A Product of Entrepreneurial Leadership A classic corporate entrepreneurship strategy from a managerial point of view is best illustrated with an example of Anthem Blue Cross and Blue Shield. Under the vision and direction of L. Ben Lytle, chairman and CEO of Anthem Blue Cross and Blue Shield at that time, a startling restructuring plan was put into effect in 1986 to facilitate the entrepreneurial process. In 1983 the com- pany was operating as Blue Cross/Blue Shield of Indiana and was literally bogged down in its own bureaucracy. As a result it was losing ground in a fast-paced, changing insurance industry. However, in 1986, after initiating a corporate entrepreneurship training program, Lytle renamed the company The AAssociated Group and divided the company legally, emotionally, physically, geographically, and culturally into operating companies named “Acordia Com- panies”, ranging in size from 42 to 200 employees. The opportunities for entrepreneurial managers within the organization began to expand with the development of these mini-corporations, which were designed to capture market niches and innovatively develop new ones. Each separate Acordia company had an individual CEO, vice president, and outside board of directors that delegated full authority to run the business. In 1986, The Associated Group was one large corporation with 2,800 employees serving only the state of Indiana, and with all revenue generated from health insurance. By the end of 1991, a five-year strategic plan to restructure and in- fuse entrepreneurial thinking into the organization was completed. The results had the company employing 7,000 people in 50 different companies, serving 49 states and generating over 25 percent of its $2 billion in revenue in lines of business outside health insurance. It provides an example of the effectiveness that corporate entrepreneurship can have in capturing the imagination of the entire company. It uncovers “builder-types” in the company seeking challenge and accountability of their ideas and innovative abilities. By 1996 there were 32 Acordia Companies where corporate clients could obtain all types of insurance-related services, including commercial property and casualty coverage, group life and health insurance, third-party claims administration for self-insured benefit plans, and employee benefits consulting. In order to institute self-perpetuating change in the Acordia network, the mini-corporation CEOs were encouraged (and rewarded through stock options) to expand business and then spin off certain parts of the business either geographically or by specialty when there were 200 employees, else there would be too many management layers. In addition, the CEOs were evaluated on their ability to identify and nurture additional potential CEOs within their own organization. Acordia’s experience with entrepreneurial actions as the foundation of its corporate entrepreneurship strategy offers several insights that inform manage- rial practice. Entrepreneurial actions and the corporate entrepreneurship strat- egy for which they are a foundation result from intentional decisions. Analysis of the Acordia, Inc., experience suggests that forming an entrepreneurial vision, using new-venture teams, and relying on a compensation system that encourages and supports creative and innovative behaviors are products of careful and deliberate planning. UUpper-level managers must support the importance of entrepreneurial actions, through both words and deeds. Watching managers behave entrepre- neurially, including actions taken to deal with the consequences of those behaviors, demonstrates that all parties will work together to cope with the disruption to existing work patterns that novel behaviors create (Kuratko et al., 2001). The corporate entrepreneurship strategy of Acordia, Inc., was a success, with entrepreneurial actions being used throughout the Acordia companies. Innova- tive processes helped to streamline company operations. The company became more diversified in its products and markets, in that new products were intro- duced into multiple markets, while new markets with specific customer needs were regularly identified. The commitment to serve new, highly focused mar- kets led to additional Acordia companies. Using its original competitive advan- tages as well as innovation, a new advantage was formed in many of the individual companies. Acordia’s entrepreneurial journey proved to be the foun- dation for The Associated Group’s success in the early 1990s. Impressive financial results were recorded during implementation of the cor- porate entrepreneurship strategy. At the end of 1991, The Associated Group (TAG), the parent organization for all Acordia companies, was earning more than one-fourth of its $2 billion sales revenue from business lines outside Blue Cross/Blue Shield of Indiana’s original core product—health insurance. In early 1992, Acordia, Inc., completed a successful IPO. Subsequently, the company’s stock traded on the NYSE. In June of the same year, Business Insurance ranked Acordia, Inc., as the 10th largest insurance broker in the United States and 14th largest in the world. A remarkable success accomplished through the entrepre- neurial leadership exhibited by the then CEO, L. Ben Lytle. Discussion Questions 1. Explain how Ben Lytle exemplified putting in place a “pro-entrepreneurship organizational architecture” described as a role for top management in the chapter. 2. Relate the key entrepreneurial imperatives of top level executives (Table 12-2) to the efforts exhibited by the top level executives in the Acordia story. Be specific. 3. Using Table 12-3, discuss how Ben Lytle appears to be “managing ambidextrously.”