The sun is shining brightly over Wujiang, in southern Jiangsu Province, west of Shanghai.

At the brand-new R&D building at Delta Electronics' Wujiang plant, the sunrays fall on a copper orange vehicle with "Delta" written in white, and reflect with glaring brightness from the engine hood.

Except that it ought to be called a motor hood, instead. Underneath, you won't find an engine – this vehicle is driven purely by an electric motor.

When this electric vehicle underwent road tests near the Taichung thermal power plant late last year, a lifelong dream came true for Delta Group founder and chairman Bruce Cheng.

The man who helped him realize this dream is Delta Electronics corporate vice president Simon Chang, who doubles as general manager of Delta's Industrial Automation Business Unit and its Automotive Electronics Business Unit. The electric car project is the second time that Chang has set up a new company within Delta.

A survey by CommonWealth Magazine shows that in-company ventures are seen as an important growth driver for large companies. Consequently, in recent years Taiwan's entrepreneurial energy has almost been completely absorbed by large corporations.

As many as 162 companies that are listed on the main board of the Taiwan Stock Exchange belong to the island's thirty largest business conglomerates, in terms of market value. Not included are the many new ventures inside these business groups that have not yet gone public or are still being incubated.

Polytronics Technology chairman Ben C. B. Chang, who invested in Asus and Via Technologies when still with the China Development Industrial Bank, observes that in the past the traditional financial industry transferred capital to the high-tech industry to create higher value. But now high-tech companies establish internal investment divisions that directly make investments for the sake of vertical integration or diversification.

"BenQ, AUO, Quanta Computer, Pegatron, Delta Electronics – they've all become giants these days, and they're able to support many new ventures on their own. Delta has been particularly successful in doing that," Chang observes.

Independent Small Companies inside Large Firms

Recently Delta has hatched another new business, which develops vehicle propulsion systems. But for Simon Chang, the Industrial Automation Business Unit is his first baby.

In 1992, not long after China began its transition to a market economy, Delta sent Simon Chang to China to look for business opportunities. Simon Chang spent more than two years on a fact-finding mission criss-crossing China from the coast to the interior and from the south to the north. He discovered that industrial facilities and equipment were old and shabby at both large state-run companies and small private factories. "They need modern equipment," Simon Chang reported back to his boss Bruce Cheng, concluding that key parts and components for automated equipment presented a huge business opportunity. Yet back then Delta had only electrical and electronic technologies, and no background in industrial automation. The company lacked personnel able to produce controllers and motor drives, and its business model as an IT company was also very different in nature from that of the automation industry.

Delta, banking on its strength in open innovation, approached the Industrial Technology Research Institute (ITRI) for technology transfer and cooperated with academics in the field of electronic control. From day one the Industrial Automation Business Unit was an entirely independent entity within Delta and was run like a small company. Its management directly reported to then Delta Group president Chen Meng-hsiung.

Asus chairman Johnney Shih believes that internal start-ups can only be successful if they are given a separate team and separate budget to prevent unfair competition within the company.

Delta is following the same principle. "If such units are placed under the business unit for development, they won't succeed, because they won't be deemed important or have autonomy," contends Simon Chang, whose background is in R&D.

In its first year the Industrial Automation Business Unit released a Delta brand variable frequency motor controller. Today, the unit has become the largest supplier of power inverters and servo motors for China's entire textile machine industry. When the financial crisis hit last year, the Industrial Automation Business Unit was the only Delta Group entity that bucked the trend, still posting growth.

"Industrial Automation is Delta's rising star. We expect to grow a further 30 percent this year," declares Delta vice chairman & CEO Yancey Hai, laying out this year's business target on behalf of Simon Chang.

Building on Core Competencies

Delta's principles for internal ventures are actually pretty simple. As Hai explains, new businesses need to meet the goals of energy-saving and low carbon consumption, and they need to match Delta's core competencies.

The story of the Automotive Electronics Business Unit illustrates these principles.

Among Delta employees, it is well known that the one subject is never far from the lips of Bruce Cheng – electric vehicles.

"A company doesn't just make products, but needs to make entire systems. When it has all parts and components, it needs to assemble them into a system," notes Cheng, not only referring to Delta's solar systems, but also its electric vehicle propulsion systems.

Six years ago when oil prices began to skyrocket over US$30 per barrel, Delta established its Automotive Electronics Business Unit. Like other electronics companies, Delta initially went for car entertainment electronics such as TV monitors and stereos.

But three years ago when Simon Chang took over the unit, he halted development of onboard entertainment electronics. All the investments of the previous three years came to nil. Instead, R&D was refocused on electric vehicle propulsion solutions. Since the new venture had been launched within the Delta Group, it was able to take advantage of the mother company's rich monetary and human resources to engineer this massive reorientation.

Since he was concurrently in charge of two business units, Simon Chang drew up a special budget in the Industrial Automation Business Unit to form a team that exclusively did R&D on traction motors for electric vehicles. Then he extended the team's core competencies to automotive electronics.

Pushing the Elephant's Growth into Motion

The Automotive Electronics Business Unit has now grown into a medium-sized company of almost 130 employees. The specialization of its staff differs greatly from that of the IT-focused mother company. More than 90 percent of the unit's personnel are new recruits, and 10 percent have a background in the automobile industry, including one former R&D manager for Japanese carmaker Nissan.

With more than US$10 million spent annually on R&D over the past three years, Delta has successfully developed a hybrid gas-electric vehicle propulsion system. The system consists of an onboard battery charger, battery management system, integrated starter generator, power control unit and traction motor, as well as the most crucial part – the vehicle control unit. Delta developed and designed all the components. The company has already launched talks with ten carmakers in China. One Chinese automobile company is already testing the propulsion system.

Delta has shown that a small internal start-up can grow into a profitable growth driver for the mother company.

Translated from the Chinese by Susanne Ganz