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The Rise of Intrapreneurship
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As times change, companies are stagnating and facing shorter life spans. These companies are struggling to find new ways to grow through innovation and stay on top of new trends.
Large companies especially are finding it hard to innovate and therefore create a sustainable competitive advantage due to size, bureaucracy, and risk appetite. Enter the term “intrapreneurship.”
The te rm is o f ten confused wi th entrepreneurship. Though very similar, there is one important factor that distinguishes the two – intrapreneurs work to drive growth and innovation within an established company, not their own ventures.
89% of the Fortune 500
companies in 1955 are not on the list today
“The reality of large companies having sustainable growth is less common as the business environment transforms.”
The average lifespan of an S&P 500 company is now only
15 years
Big companies often have high potential employees who are looking to break through big corporate routines and limitations and start their own companies. In an age of a younger, more restless workforce seeking to make an impact, large companies realize the need to allow more autonomy and creativity to break through so that their best asset (human capital) is not lost.
Why is that? 7 0 %
o f m i l l e n n i a l s s e e themselves working
independently at some point
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Intrapreneurship is allowing employees to
enjoy the autonomy they seek with the benefit of a safety net. Companies give their employees the resources needed and ability to pursue their ideas within the company’s line of business while taking away any major risk of venture failures.
In some unique cases, intrapreneurship has changed entire industries with companies like eBay, LinkedIn, and Google. However, intrapreneurship is not limited to the leaders of the business environment, smaller firms can also adopt practices that impact workplace culture and productivity.
Without innovation, companies get too comfortable with past successes and employees are deterred from trying new things. Intrapreneurship programs have changed this dynamic by creating a risk-tolerant environment where employees are encouraged to take a larger stake in the company’s future.
So how does this work?
90%
of Startups
fail
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Culture Intrapreneurship can be external through acquiring innovation, or internal through a program. For example, Capital One’s recent acquisition of the design firm, Adaptive Path, showcases a large player in a conservative industry adopting new features to their businesses. Though this type of adoption is less resource-intensive and convenient for companies, not innovating from within can create inherent barriers in the company’s culture and processes.
A shift in culture is one of the main success levers in the implementation of intrapreneurship programs within companies. If carefully managed, this spirit of innovation from within can create a cycle of innovation and growth that spreads to all departments and business units. Innovation labs and the establishment of these programs are one of the most seamless ways of implementing growth within a company because by allowing innovation to come from within, there are less barriers to the change. When employees feel as though they’ve had a hand in creating it, they will be less likely to resist it.
Other companies, like GE, are taking these programs one step further by integrating them into the organization of the firm itself and how they distribute rewards. Instead of seeking for perfection and predictable, exact results, GE is rewarding those who come up with new ideas or improvement processes in the middle of the term. They now see top performers not as those who can meet the corporate needs and deadlines, but those who are willing to
“Social motivation seems stronger than economic. That’s why it takes someone from within championing the change. We think because of the personality involved to lead change”
Mercer, an HR consulting firm, was an unlikely bet for innovation, yet, they are a great example of a team that has had an effect on the culture of its company.
In fact, Michelle Wood, Senior Associate of Corporate Strategy, cites one of the major reasons for programs like this to exist is to create a more open and risk-taking culture that is welcoming of change.
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take risks and test new ideas even when they know there is a possibility of making mistakes. Taking away these pressures of needing to perform for a final review or evaluation has allowed a greater amount of freedom and employees whom are happier to innovate from within to make GE a better company for its stakeholders and for itself.
Productivity Since 2000, 54% of the S&P companies have been replaced. Once companies reach a certain size, their ability to innovate from within suffers. Investors become “conservative” and their risk-appetite stagnates as past business successes show stability. This reality can be seen within companies such as Blockbuster and Borders who were once industry leaders and have now been replaced by faster, more convenient, businesses such as Netflix and Amazon.
Conversely, as companies let innovation come from within, they are creating more efficient processes to prevent external disruption and have a competitive advantage. Specifically, companies with intrapreneurial components have shown higher levels of productivity with employees having more of a stake in the company when working on their own projects. Manufacturing conglomerate, TATA Steel, saved $10B over three projects which had stemmed from intrapreneurial endeavors. Executives supported employees at every stage of the company by providing them with the leadership, flexibility, and independence to create value for the firm. Through these projects, TATA was able to solidify its position as one of India’s most respected companies, and among the world’s lowest cost and most efficient steel manufacturers.
54% of the
S&P companies have been replaced
FaceBook, conducts internal “hackathons” to innovate from within. By providing its diverse mix of employees with time to explore new ideas, the Facebook “Like” button, Timeline, and Chat messenger have been created.
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As a result of intrapreneurship, with companies having a constant stream of innovation, they refrain from standard “expansion to contraction” business cycles and only focus on growth. Google’s “Innovation Time Off” encourages Google’s employees to spend 20% of their work time on projects that interest them. This initiative has allowed good ideas to spread fast, encourage collaboration, and foster constructive input to
minimize technical, product positioning, and marketing mistakes. Two of Google’s key operations, Gmail and AdSense, are byproducts of this intrapreneurship. This action of taking the most crucial assets, their human capital, and allowing it to grow via structured, risk-tolerant, and supportive intrapreneurship programs, has proven to result in success.
Arguably, the most innovation is happening where it is presumed least possible, the humongous financial industry is relatively structured, conservative, and archaic in its processes. However, the prevalence of financial technology firms is turning the industry on its heels. In order to adapt to a more personalized, convenient, and lean approach to their operations, banks and finance firms have made $13B+ investments in innovation labs, accelerators, and acquiring startups to adopt innovation externally. Capital One’s acquisition of design firm Adaptive Path, Barclays investment into a TechStars financial technology startup accelerators, and strategic investments in 30 financial tech (fintech) companies since 2009 by Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo show how archaic industries are innovating and preparing theirselves for the future.
$13B+ investments in innovation labs
0 10 20 30 40 50
Strategic Innovators
Innovation is part of the strategy but it is not practised
Innovation is ad hoc
Little or no innovation Culture
Percentage of firms reporting an increase compared to the previous year
Innovation's Impact on Productivity
Total employment Range of goods or services offered Productivity
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Conclusion As we’ve seen the integration of innovation and intrapreneurship programs is creating a great shift in the industry. From complete industry overhauls in tech companies to smaller scales of change through culture and productivity in the workplace, there is no doubt that these programs are changing many workplace dynamics.
Through the creation of a more autonomous and creative environment for workers and champions of change who are leading the innovation and growth movements, the business world is seeing a change in workplace culture that may have been standard for the past 100 years.
Further, examples like TATA and Capital One show that innovation improves productivity levels in the workplace from how much workers are doing each day and how much they are motivated to push themselves to how much they actually accomplish and can see the results of.
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University of Virginia
University of Pennsylvania Wharton School of Business
About the Writers
Tulane University
www.linkedin.com/in/mam3bc
www.linkedin.com/in/nrawangh
www.linkedin.com/in/ashley-castillo
About the Research In choosing this topic, we were looking to understand a bit more about the role of innovation and high speed of growth happening today in many businesses. Although the idea of an entrepreneur has become something very familiar to many and something easily understood, we found that intrapreneurs were still largely ignored. It is still a concept that many aren't familiar with. However, the growth of internal intrapreneurs and innovators is something that is quickly on the rise as more companies are looking into how they can catch up to smaller companies and innovate from within to remain competitive. In gathering our data we spoke to many people in various industries from corporate settings like Mercer and Accenture to more innovation-leading companies like Microsoft and Google. Their differing perspectives allowed us to further understand how the creation of internal innovation programs and the rise of intrapreneurs affected culture and productivity within the workplace.
References
• Michelle Wood, Senior Associate Corporate Strategy, Mercer • Olivia Nelson, Intern, Microsoft • Kelsey Gliva, Associate Product Marketing Manager, Google • Michael Lenox, Senior Associate Dean and Chief Strategy Officer, University of Virginia
Darden School of Business • Damon DeVito, Managing Director, Affinity Management • Daniel Weaver, Strategy Analyst, Accenture • https://surveys.strategyand.pwc.com/innovation_accelerator/
0095_infographic_innovation-accelerator-v8.pdf?PHPSESSID=adb14c3dab285cec7ff395f66c46c86b
• http://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Policy/AustralianInnovationSystemReport/AISR2012/chapter-4-business-innovation/innovation-culture/index.html
• http://trends.fjordnet.com/?design-from-within • http://www.intrapreneurshipconference.com/intrapreneurship-good-bad-ugly-part-2/ • http://www.innovationexcellence.com/blog/2013/01/23/how-dreamworks-linkedin-and-
google-are-building-intrapreneurial-cultures-to-drive-innovation-competitive-advantage-and-customer-experience/
• https://www.questia.com/library/journal/1G1-424990416/empherical-study-on-the-relationship-between-entrepreneurial
• https://www.entrepreneur.com/article/243884 • http://www.fastcompany.com/3046231/the-new-rules-of-work/the-rise-of-the-
intrapreneur • http://www.intrapreneurshipinstitute.com/intrapreneurship-case-studies/
intrapreneurship-case-study-googles-intrapreneurship-program-is-very-successful/
