In our January article Intrapreneurship – Past, Now and Future we looked at Intrapreneurship through the rear view mirror – The PAST. We looked at its inception and the economic, political and social context that was occurring at the time.
Our goal was to see if we could understand why Intrapreneurship did not survive back then and to explore the reasons why we think it will survive now and into the future. In response to that article there were two comments that are worthy of reprinting here before we proceed to the Now.
The founder of Intrapreneurship Gifford Pinchot responded by stating the following:
“Great inquiry. Thanks. A factor that you have not mentioned in detail is the “Home Run Philosophy.” As big companies expanded globally and by acquisition, they were not interested in small wins. They looked for opportunities that would produce as several clients told us, “a billion dollars in sales in two or three years with little risk or new technology.” That is not intrapreneuring’s sweet spot. Individual intrapreneuring projects do not produce billions that fast.
Intrapreneuring had a Lean Startup flavor: Entering the market with small probes and learning by actual experience in the market rather than by writing projections for billion dollar businesses based on theory. Individual intrapreneuring projects that we helped to launch did in the long run produce billions in sales and become the primary business of their companies, but that was not accomplished in two or three years. And it was not easy in advance to project billion dollar sales.
What worked was establishing a beachhead with a new product, service or technology and then, from the beachhead, seeing the billion dollar opportunity.
Probing the market is the way disruptive innovation takes place, but CEOs did not have patience to grow businesses from scratch unless they were agreed upon by the panels of executives in the stage gate process. Unfortunately the stage gate processes screened out the truly innovative ideas, which are hard to understand in advance. They win over foresighted sponsors who really work to understand them, they don’t win unanimous approval by a bunch of bureaucrats.
Rather than the reality of cost effective innovation, CEOs bet on the stage gate process which produces grand projections in theory. However, for the most part, as mentioned above, stage gate did not work.
To make intrapreneuring work CEOs have to have the patience to delegate the activity and let it grow out of sight until it surfaces both the big disruptive products and a host of smaller innovations that together also add up to billions. That produces a great return on investment, but requires a longer time frame. In the politics of corporate life too often promising predictions combined with plausible process trump what actually works.”
Pinchot’s comment’s point to a number of factors that contributed to the downfall of Intrapreneurship in the past. In particular his “Home Run Philosophy” rings true. Organizations were looking for big wins often based on theory versus experimentation and real world experience. The intrapreneurial efforts that did succeed were nurtured and developed over the long term. Patience was required and there was little of that at the top of most organizations.
At Xerox the threshold for investing in new businesses was so high that many promising projects did not get funded. At Digital Equipment it didn’t matter if you were the fastest growing business you did not get the resources to develop your business further because the immediate return was not there. At McGraw Hill if the project could not show a return in twelve months it wouldn’t get additional funding. These are only a few examples of how organizations were making investments at the time.
Another point that Pinchot puts forward is the reliance on things like the stage gate process that structured project development but “screened out” the truly innovative ideas. The focus was on getting each stage completed not integrating new insights or market factors into the product development process. Like re-engineering, the process was more important than the outcome. Sure projects may have gotten done on time and budget but did they deliver the business value that was intended. Nor did they deliver the billions estimated in their initial projections?
A few key questions remain: Has the corporate world changed enough to embrace Intrapreneurship today? Are investors and the Board of Directors willing to accept and balance the short term and long term demands required for Intrapreneurship? The answer to these questions may provide the best clue.
A second comment was written by a colleague of mine, Rick McPartlin who offered his take on the Past.
“Intrapreneurship – Past, Now and Future challenges all of us on a number of fronts. History helps put things in perspective both to challenge the idea of the minute (often a replay with a fresh coat of paint) and helps us see patterns that are not visible in the now.
There is a challenge not addressed in your post. Did intrapreneurship die or did we first abandon it and then starve it?
When intrapreneurship is working it is an elegant system and a practical way to predictably assure short-term success and long-term survival.
Part of what history shows is those great intrapreneurial wins transition to the next business stage. That stage is the mass market to achieve VOLUME and increased topline. Geoffrey Moore’s book Escape Velocity suggests organizations either are or become so focused on growth (to satisfy investor’s needs) the organizations forget the intrapreneurial part of the business needs resources to keep a mix of new high value products to support and replace the mass market price sensitive commodities (which will disappear in the near future).
The question should not be about intrapreneurship’s survival but business’s ability to survive long-term without intrapreneurship (our source of those new high value growing products).
“Revenue Science” tells us a company’s survival will be challenged without intrapreneurship.
Most of those emerging companies from the last century were profitable and glamorous as long they were in a market or technology bubble. Their only critical variable was could they produce product at the level the market demanded. Once others entered the market and could produce or the market demand was saturated or the technology changed and something else solved the buyer’s needs the bubble and the once high flyer were deflated.
Long-term success is NEVER about product. Long-term survival and success is about continually solving buyer’s problems. The problems and the compelling ways to solve the problem are always changing and that is why intrapreneurship must be fed to build a sustainable company.
We abandoned intrapreneurship and stopped feeding it because we were feeding the fulfillment of short-term bubbles. If we keep just feeding the bubbles there is a time when it is too late to save or be saved by intrapreneurship. That point is where the company saves face with a merger or goes quietly away.
The purpose of intrapreneurship is to continually focus on solving buyer problems by delivering so much value to the buyers they are compelled to pay a lot for that value Now and into the Future because they are receiving even more value.” Rick McPartlin, CEO of The Revenue Game
So perhaps our assumption that Intrapreneurship failed is a false premise.
Is Rick correct in stating that organizations abandoned Intrapreneurship and sacrificed it for the short term? That while organizations were enamored by the glitz of a new product or service to satisfy investor demands they neglected to feed and nurture their new product pipelines. That organizations invested heavily in market and technology bubbles but failed to anticipate the lifecycle of those bubbles or the impact of competition on their products. That organizations so focused on revenue failed to see shifting customer needs or stopped adding value to products as market and customer needs changed.
Both Pinchot and McPartlin are on the same track. The see the short term focus as a major obstacle to intrapreneurship. They see that process alone is not enough, that real world experience and solving customer needs are paramount. That you can’t get there from here by relying on wishful thinking and unrealistic projections. That creating value requires more than analyzing data. That patience is required to explore, experiment and establish a “beachhead” for building a billion dollar opportunity. That it isn’t the product but the value from the product that determines long term success.
Ask yourself if things are different now. What has changed that makes Intrapreneurship a viable path to growth today.
Are organizations destined to repeat the past or are they more realistic about the challenges of creating and sustaining growth through intrapreneurship.
Intrapreneurship – NOW
According to economic forecasters the world economy in 2016 was expected to generate stronger growth. Economists forecasted an increase in the pace of growth after several years of economic turmoil in a number of major economies. Despite these projections growth has been slower than expected in the first half of the year. Investment levels and productivity growth have been weak. Yet things are expected to improve during the last six months of the year.
The European Union and euro are showing signs of life with some improvement in the total value of goods and services produced. The unemployment rate however remains high. Germany and the Netherlands are doing well, while Greece, Ireland and Italy still struggle. The refugee crisis will continue to have an impact. In the US forecasters point to stronger growth, a rise in consumer spending, more business investments, and an increase in hiring leading to a lower unemployment rate. Some emerging markets are expected to grow while others will find their economies in recession. In China growth is slowing while growth in India, Indonesia, the Philippines, Brazil, Mexico and East Africa is accelerating. It is clear that the world economy is in flux.
Despite these economic trends, investment spending is expected to increase for new product and service offerings. According to the PWC Trendsetter Barometer, “Half of the trendsetter panel tell us that product/service innovations are among their top opportunities in 2016.” But increasing uncertainty is putting some investment decisions on hold. Organizations flush with cash are seeking growth through acquisitions. New advances in digital technology are transforming businesses. Entire industries are being restructured. Increased competition is squeezing prices and profit margins and impacting employment growth. There is a high need for skilled workers but a lack of workers with these new skills is keeping many jobs unfilled.
The instability in the world economy is creating an uncertain and cautious approach to new business growth. That said, there is tremendous opportunity for intrapreneurship for those organizations that adopt it and integrate it into the fabric of the organization. There are also significant challenges. Many of these challenges stem from breaking down long held beliefs that worked well in the past but not now.
We have a whole generation of workers waiting to retire that continue to play it safe. A system that rewards short term profits over longer term growth. Organizational structures designed for a twentieth century work environment. Strategies designed from the top down not bottom up. Investment criteria and decisions that screen out high potential opportunities. Outdated policies and business practices that constrain worker productivity. Work environments that discourage innovative thinking and experimentation. Streamlined systems and processes that constrain existing operating models. Cultures that reward conformity versus differentiation. Leaders that rely on traditional business practices to manage and develop the next generation of managers and leaders.
These organizations are being pressured by a set of business dynamics that are forcing them to rethink how they do business. New business models that are transforming how business gets done. A new generation of talent that is more entrepreneurial and focused on social and economic value. Customers that are more sophisticated and less loyal. Workers who are less engaged and committed. Lower barriers to entry. Shorter product life cycles. Disruptive technology that is separating winners from losers. Startups that are more agile and responsive to market and customer demands. The growing interest in self-employment, freelance and part-time contractors. A younger generation that sees a new way to do business that turns our concept of business inside out. These are some of the things that are driving the interest in Intrapreneurship NOW.
The most innovative organizations are adopting intrapreneurship to:
- Generate new business growth
- Build an environment to support and sustain innovation.
- Attract and retain the best and brightest talent.
- Develop the next generation of business leaders
- Leverage disruptive technologies to expand their investment portfolio
- Invest in projects that have a positive social and environmental impact
- Facilitate and effectively accelerate individual and organizational change
- Help employees stretch and grow while keeping them engaged
- Improve productivity and increase financial returns
The proliferation of incubators, accelerators and corporate venture groups in many of today’s largest companies are a testament to the fact that organizations are looking to address these issues through Intrapreneurship. The list of organizations embracing Intrapreneurship is growing. Attendance at intrapreneurship conferences, seminars, workshops and executive education programs is increasing. There is growing interest in helping employees develop an entrepreneurial mindset. Human resource departments are evaluating and defining a new set of competencies and capabilities for entrepreneurial workers. Organizations are moving to a more networked organizational structure that promotes collaboration and creative thinking. Workers are selectively joining companies that provide flexible and virtual work arrangements. Leaders are realizing that innovation requires a top down and bottom up approach to be successful. There is growing recognition that intrapreneurship is all about change at the individual and organizational level. That intrapreneurs have different motivations and aspirations. That organizations must create an entrepreneurial culture to sustain and support intrapreneurship over the long term.
Perhaps more importantly, according to Hult International Business School “the financial crisis proved that even the biggest companies are not immune to failure.”
The accelerated rate of change is prompting many organizations to adopt intrapreneurship. But increasing uncertainty, complexity and ambiguity is holding other organizations back from fully embracing it. The key is the degree to which organizations fully understand, develop and nurture intrapreneurship in their organizations. Intrapreneurship is not the latest management fad and it’s not a silver bullet. Intrapreneurship is a new way of operating that is aligned with the new market reality – consistent change, increasing complexity, ambiguity, uncertainty and a restless workforce looking to make a difference and add value to their organizations and society.
To address the role of Intrapreneurship NOW we must ask ourselves if Intrapreneurship has enough traction to gain a strong foothold or ‘beachhead’ in organizations. Will organizations give it enough time to germinate and grow? Will it stick? These are the same issues that Gifford Pinchot and Rick McPartlin addressed in their response to our first article on Intrapreneurship – PAST. Today there is a greater sense of urgency and need to create a new business model that will take us into the FUTURE.
Intrapreneurship may be the key to the FUTURE for many organizations.