Fostering an intrapreneurial culture can reap long-lasting rewards for your business
What is intrapreneurship?
Intrapreneurship is a people-centric approach to developing an entrepreneurial culture. Unlike entrepreneurs, intrapreneurs are actual employees who work with an existing company’s resources to achieve corporate innovation.
While the term “intrapreneurship” has a debatable history, it was first coined by Gifford Pinchot III and Elizabeth Pinchot in their published paper “Intra-Corporate Entrepreneurship” in 1978 and used again in their 1985 book “Intrapreneuring”. The term is a portmanteau of the words “inside” and “entrepreneur”.
Intrapreneurs are not building ventures from scratch, nor are they investing their own money into businesses. Instead, these people use an entrepreneurial mindset to develop innovative products and ideas that benefit the companies they’re working for.
Intrapreneurship can be achieved in 2 ways:
- Experimenting with new lines of business through investment in new internal ideas
- Instilling an entrepreneurial approach to strategy and execution into existing business lines
Why intrapreneurship accelerates growth
Companies that embrace innovation while optimizing existing products see lasting growth and profitability. A powerful yet simple approach to achieving innovation is capitalizing on the most important resource within your company: your people.
Research shows that intrapreneurship elevates both productivity scores and employee engagement. This is especially true for those employees who are more motivated by rewards as opposed to punishment. (As you might expect, employees that have a cautious and risk-averse mindset generally do not make good intrapreneurs.)
Why it’s hard to achieve
Intrapreneurship runs the risk of pinning all hope on a “genius who can save the day” which results in unpredictability of results and returns. This in turn can make it hard to champion intrapreneurship again in the future in front of boards and execs.
Furthermore, intrapreneurship isn’t as perfect a fit for all industries, especially where capital requirements and regulatory burdens are high. Some industries like aerospace and energy may face headwinds simply because the investment into internal startups must be more significant to generate data and measurable returns—and usually without the typical funding channels available to the rest of the business.
Intrapreneurial projects are also different from a traditional startup that is usually based on a blank canvas. As Bill Aulet, director of the Martin Trust Center for MIT Entrepreneurship puts it, startups are generally worry-free compared to larger companies. When you’re operating an enterprise, there’s already “a lot of paint on the canvas”.
An established business like this has several products, revenues, staff, processes, and an organizational structure—all those things that a startup is still trying to obtain—which can be both an enabler and a decelerant.
As startups mature, staying flexible and avoiding rigidity becomes harder. An entrepreneur has nothing to lose, but when you’re part of a bigger business you just don’t have that much freedom anymore due to potential threats and risks. Maintaining a balance in cases like these is crucial.
The right way to do intrapreneurship
Companies leveraging intrapreneurship the most fully tend to have 4 traits:
- They embrace uncertainty
- They assemble the right team and resources around intrapreneurs
- They reward agility and incremental proof
- They widely explore new customer needs and segments
Let's explore 4 companies that have had stellar results from intrapreneurship.
Case study 1: Amazon Web Services
Amazon Web Services (AWS) is a global cloud computing service provider. The story of how AWS became the workhorse of the cloud computing industry, now standing next to such giants as IBM, Microsoft, and Google, is fascinating, to say the least.
According to Andy Jassy, AWS leader and SVP, no “ah-ha” moment lead Amazon, then an online bookseller, to become a game-changing force in the technology market. Instead, the idea to expand gradually emerged out of the company’s frustration with its ability to support existing customers, and launch projects.
Amazon stumbled upon the concept of AWS while trying to solve a recurring need for faster technology deployments. The reason for this was the company’s focus on delivering better experiences both internally and for its partners.
The AWS team soon started as an intrapreneurial venture within Amazon. After some time, the company began to look seriously at what this branch of business would look like in the long term. Amazon’s early-stage startup questions included:
- Is there a market need for a better solution?
- Do we have the competency to provide a successful product?
- Is the space large enough to become part of the business?
- Do we have a differentiated approach?
The answer to all of these was a solid yes. AWS was launched in 2006 and soon manifested itself as a disruptive approach to cloud computing development.
Case study 2: PlayStation
PlayStation is a captivating story of a successful product creation launched by Sony’s intrapreneur Ken Kutaragi.
Ken joined Sony in Japan in 1975. He was working as an electrical engineer at Sony sound labs when he bought his daughter a Nintendo game console. As his daughter played games, he noticed that the quality of the sound was sub-par. Ken figured that a digital chip dedicated to sound would drastically improve the quality of the gaming system.
Long story short, he started working as an outside consultant for Nintendo while keeping his day job at Sony. Ken managed to develop the SPC7000 for Nintendo games, and as he continued working as a part-time consultant, he eventually developed a CD-ROM-based system for Nintendo.
Nintendo decided not to move forward with the CD-ROM system. That’s when Ken saw the market opportunity of gaming systems for Sony. Being a natural intrapreneur, he pressed hard to convince Sony to enter the electronic gaming industry. Sony’s then-CEO Chairman Ohga recognized Ken’s creativity and innovation-focused mindset. He backed Kutaragi’s plan despite most of the senior management opposing the idea.
Ken went on to lead the effort to help Sony develop a gaming system that later became widely known as PlayStation. The product became a global success, taking a significant market share of the same consoles and selling more than 70 million units in the late 1990s. By 1998, the PlayStation made up 40 percent of Sony’s operating revenues.
Case study 3: Post-It Notes
Post-It Notes is the classic business school example of an intrapreneurial mindset. It all started in 1974 when a 3M engineer Arthur Fry saw that a special adhesive developed by the company was failing. He noticed the glue had a slight tacky quality so he tried some of it to stick a note in his hymnal. Not only did it work, but it was also easily removable.
However, after the initial discovery, 3M management failed to see value in the non-sticky adhesive. There was no internal senior support for the concept until a change in management in 1973. That’s when the new products laboratory manager Geoff Nicholson was convinced to give this a go.
It wasn’t until 1977 that the product has been finally tested for real-world sales, and the rest is history.
Case study 4: Gmail
As Google’s CEO, Eric Schmidt puts it, Google’s business is all about innovation. A notable aspect of Google’s innovative culture is its legendary 20 percent time policy that allows employees to invest about a day per week to pursue projects outside of their area of duty. Through this practice, Google encourages its employees to act as intrapreneurs and think outside the box. Most of the time, Googlers that work on 20 percent projects join forces with others to create an internal start-up.
One of the most notorious and successful examples that resulted from this practice is Gmail. It all started with Google’s employee Paul Buchheit and his idea to expand Google’s services by developing a web-based email that could provide a search engine.
Most within the company thought this was a bad idea from both the strategic and product point of view. But all worries were set aside when founders of Google Larry Page and Sergey Brin decided to go ahead and support Paul’s project.
As a result, Google’s Gmail launched in 2004 and became the company’s first landmark service since its search engine service started in 1998.
Today, Gmail has more than 1.5 billion active users from around the world. It has gone from a small intrapreneurial experiment to becoming one of the key services of Google’s product offering.
It’s important to understand that intrapreneurship is by no means the catch-all solution for companies looking to innovate. As mentioned earlier, intrapreneurship is not made for every business, and it certainly can’t solve all problems. Think of it more like one of the many elements that can be applied to foster company innovation.
The case studies provided in this article all point out one simple truth: intrapreneurship isn’t just about doing things in a certain way but is more of a mindset that enables your employees to think and act in a way that supports entrepreneurial culture within the company.
It’s also not about hero employees saving the day. Developing an intrapreneurial culture takes time and has to be supported at an organization-wide level to bring lasting results.
Photo by Riccardo Annandale.