The Difference Between Mediocre and Radical Intrapreneurship
Over the years corporate intrapreneurs have been called many names: “dreamers that do”, “those who take hands-on responsibility for creating innovation of any kind”, even the “secret weapons of the business world.”
More broadly, corporate intrapreneurship is the “act of behaving like an entrepreneur while working within a large organization.” To us this simply sounds like an oxymoron. Being an intrapreneur can seem too good to be true.
But it is possible. And when practiced successfully, is highly beneficial for both the intrapreneur and the firm. But, from where does the practice (and the term) originate? And how do progressive organizations successfully put it into practice?
While intrapreneur sounds like a contemporary business buzzword, the reality is rather different. In fact, it originates from 1978 (!), when it was coined by Gifford Pinchot III and Elizabeth S. Pinchot in their revolutionary paper ‘Intra-Corporate Entrepreneurship’.
Here is a quote of theirs on the subject, that shows their problems, back then, were not very different to the problems large organizations face now in the ‘rapidly changing business environment’. Remember, this text was written 30 years ago:
“Today’s large corporations are suffering from size. They are so large that the managers making decisions are often isolated from a personal knowledge of the problems to be solved. The traditional answer for this situation is decentralization.
Unfortunately, decentralization alone is not enough. In a hierarchical organization, promotions can be won by social graces, loyalty to one’s boss, and in general, political skills. Courage, original thought, and the ability to observe the obvious but overlooked fact, do not necessarily lead to success.”
This promotion issue can lead to what Laurence J. Peter (in 1969!) called the ‘Peter Principle’. We recently wrote that this still results in mass incompetency in many firms. But, let’s continue with the Pinchots;
“The entrepreneur must please no one but himself and the select public to whom he sells. He is freer to see the world in new ways, and may choose to pursue only those types of business which align with his philosophy. Rather than being a limitation, this personal approach leads to new businesses and new ways of doing business that an organization dominated by politics would miss.
The corporations, by their very successes as well as by their failures, have created a world in which a new social invention allowing greater individual enterprise and responsibility in corporate society is desperately needed. Making a place for entrepreneurs within the corporation is the next step in solving the problems of large-scale organizations.”
Isn’t this exactly what all business gurus are still saying nowadays?
The single most practical question
The single most practical question is to ask how progressive organizations actually solve this issue. The Pinchots formulated this as being able to answer “two problems which are really one:
- The first is how to grant idea people the independence they desire without making them unresponsive to the needs of the corporation.
- The second is how to make the corporation more capable of responding rapidly and sensitively to our rapidly changing society.”
It should be a no-brainer that solving this problem successfully, as a firm, is highly advantageous. The Pinchots point this out quite clearly:
“People have enormous potential for goodness, for insight, for creativity, for intimacy, and for work. Much of this potential is trapped within the constraints of today’s huge hierarchical organizations.
The development of the entrepreneur is a step toward freeing individuals, our organizations, and our society to use our potential for building fuller, more meaningful, richer and more productive lives for us all. The signs of imminent change surround us. Intrapreneurship is an idea whose time has come.”
So, how do the truly innovative organizations create a place for entrepreneurs? We have seen two approaches; a mediocre one and a radical one.
Recently Meredith Somers of MIT Sloan School of Management described four practices used by organizations to encourage intrapreneurship:
1. Idea Fairs
A less formal version of a proposal or business plan, where a concept or design is pitched alongside other ideas. It is a kind of modern version of the old suggestion box.
A rapid design, one-off event, often associated with solving a particular problem. Spotify, for example, did this via company-wide “Hack Weeks” twice a year.
3. Sandbox Funds
An account which employees can access to buy time from other work or hire partners to help build a prototype or business plan. UKTV, for example, is not only rewarding the most innovative ideas employees develop, but also providing them with sufficient resources to make them a reality.
4. Dedicated Innovation Time
Like Google‘s “20% Rule” (which isn’t really practiced anymore), offers employees the option to spend some of their time on a side project of their choosing. Other examples include 3M’s “15% Rule”, Belgian’s Department of Social Security’s “10% Rule”, Spotify’s“10% Hacktime”, and Lockheed Martin’s “Skunk Works.”
We have seen all these practices during our visits to Bucket List organizations, but would classify them as rather mediocre approaches to the fundamental problem of entrepreneurship within a firm.
We have also witnessed more radical and permanent approaches. Ones that enable high levels of intrapreneurship throughout an entire firm.
Instead of taking a one-off or part-time solutions, there are entrepreneurial units within organizations that take intrapreneurship to the next level. They introduce it in everything they do.
The following case of how an IBM task force developed the personal computer in 1981 illustrates this point rather well.
In 1980 IBM “set up a task force that developed the proposal for the first IBM PC. Early studies had concluded that there were not enough applications to justify acceptance on a broad basis and the task force was fighting the idea that things couldn’t be done quickly in IBM. One analyst was quoted as saying that “IBM bringing out a personal computer would be like teaching an elephant to tap dance.”
This only seemed to motivate the team, as over the next year “the task force broke all the rules. They went outside the traditional boundaries of product development within IBM. They went to outside vendors for most of the parts, went to outside software developers for the operating system and application software, and acted as an independent business unit. Those tactics enabled them to develop and announce the IBM PC in 12 months – at that time faster than any other hardware product in IBM’s history.”
The Pinchots regarded this behavior as worth taking one step further. They envisioned an entire firm built of “small entrepreneurial sub-units set up as profit centers”. They described this as “a very exciting organizational advance”. So, why not organize and grow the firm around this principle of small, entrepreneurial sub-units?
Visiting many Bucket List organizations tells us that there are at least two ways of growing the firm. The traditional way is, obviously, to grow like an elephant, as many large organizations do quite well. The alternative path can be better compared to rabbits multiplying (where rabbits represent entrepreneurial sub-units).
Because why would a firm not be multiplying like rabbits, instead of growing like an elephant? Even large organization can do this. And that is exactly what four large progressive organizations asked themselves several years ago. They pioneered the practice, successfully, in four completely different industries.
1. W.L. Gore
W.L. Gore and Associates, the maker of Gore-Tex fabric (amongst other things), employs over 10,000 associates in 50+ workplaces throughout the world. They believe so strongly in the power of small entrepreneurial teams that they generally don’t allow staff at any one location to exceed 150 associates.
Buurtzorg is a Dutch home-care provider built as a network of hundreds of small entrepreneurial teams (each a max. of 12 nurses). There are 14,000+ nurses working in the organization, supported by around 50 people at headquarters. Client and employee satisfaction rates are higher than any other Dutch health care organisation.
Handelsbanken is a Swedish bank primarily operating in Scandinavia, UK and the Netherlands. Its 14,000+ employees work in hundreds of local entrepreneurial branches. Typically a new branch is set up when an existing branch in a town reaches around 12 staff. On average each new branch becomes profitable within 18 months.
Haier is a Chinese white-goods manufacturer employing over 70,000 people in 4,000+ independent microenterprises. Yes, there is a reason the firm is commonly called the 70,000-person start-up.
This is truly radical intrapreneurship. The words of the Pinchots are as true now as they were then. Do we need to say more?