Intrapreneurship is Broken – Here’s How to Fix It

Intrapreneurship is broken, here's how to fix it

Another day, another major corporation trying to crack the code and create an entrepreneurial culture from within. Just this week, Forbes reported that Walmart announced the formation of Store No. 8, an internal venture meant to hatch new online retail businesses. In doing so, America’s largest retailer joins a number of once seemingly unbeatable firms that are struggling to create an innovative culture and stay relevant. It’s easier said than done.

Intrapreneurship is ripe for a quarter-life crisis. Despite large corporations’ best efforts to spur their employees to act like entrepreneurs, they’re failing: 52% of firms listed in the Fortune 500 in 2000 have either gone bankrupt, been acquired or ceased operations, as a litany of industries have been unmade, reshuffled, and remade by technological change. Within the next ten years, the pace of change will only accelerate, with another 40% of the current Fortune 500 expected to disappear.

Perhaps the widespread failure to make intrapreneurship work in the age of “innovate or die” is to be expected. There is no proven off-the-shelf approach to instill entrepreneurial energy into a corporate environment, so firms approach the challenge from various angles. Some companies encourage employees to spend part of their day on new ideas, while others organize business plan competitions, sponsor hackathons, or set up dedicated units to develop new products.

While each of those strategies have been successfully employed by Google, PWC, Facebook, and Lockheed Martin, respectively, other organizations have done so with little success. Sometimes it’s an issue of commitment. Since new ideas take time to pay off, success or failure comes down to a company’s willingness to stick with it. At a time when managers and shareholders are clamoring for short-term results, the long-term nature of intrapreneurship can make it an easy target when it comes time to cut costs or reset priorities.

The Three Ways to Fix Intrapreneurship

Leaving aside organizational issues, the problem with most approaches to intrapreneurship is that they tend to exclude or intimidate the majority of employees. That’s a critical mistake, because employees who work at the front lines of a business often know the day to day challenges of a firm far better than senior executives. Moreover, their buy-in will be critical to putting solutions into place and making them work. If companies are going to truly engage their employees and create cultures that are friendly to entrepreneurship, it’s time to flip the script, democratize the process of innovating, and follow three basic rules.

1. Don’t Create the Corporate Equivalent of a Velvet Rope – Make Innovation Democratic

Coworkers watching a presentation in a Macbook

Some organizations believe that their culture is so antagonistic to entrepreneurial thinking that they isolate new initiatives in autonomous units, with their own teams and offices, called skunk works. The archetype for this approach, the Lockheed Martin Skunk Works, has been operating for more than 70 years.

Lately, skunk works have gone Wall Street, where it’s all the rage for big banks to launch corporate “innovation labs.” Firms such as BNP Paribas, Goldman Sachs, Barclays, JP Morgan and BNY Mellon have each done so in the New York market. Unlike these companies’ staid corporate offices, labs are located in airy industrial spaces kitted out with ping pong and foosball tables. Employees in skinny jeans wander the floors clutching green juices.

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Given the radical departure from the culture of the mothership, skunk works send a clear message: At this company, you’re either entrepreneurial or you’re not. If you’re on the “right” side of the velvet rope, you wear skinny jeans, and if you’re not, you wear a tie. That cultural divide is fundamentally anti-entrepreneurial. Drawing a line in the sand and saying “you cannot come in here, this is for entrepreneurs only,” is fundamentally incompatible with entrepreneurship. By its nature, it’s easiest to create something new when your culture democratizes innovation.

Plus, creating a corporate elite, replete with better offices and perks, risks provoking a backlash. The minute the market turns or priorities change, the 99% will reclaim power, cutting all those “frivolous” expenses, and putting those t-shirt-wearing renegades back in their place. It’s happened before. In 2000, JP Morgan created Lab Morgan, their Web 1.0 innovation lab. When the tech market crashed, the unit disappeared and its employees were either fired or sent back to corporate.

2. Stop Trying to Be Shark Tank – Connect Ideas to the Real World

Workspace seen from above

Over the last decade corporate business plan competitions have become all the rage. PWC’s attempt at an internal Shark Tank called PowerPitch drew entries from 60% of employees. While more inclusive than creating a skunk works, framing innovation through the lens of The Apprentice – where some people are winners and others are losers - sets the wrong tone.

There’s nothing fundamentally wrong with acknowledging that some ideas just won’t work. After all, most entrepreneurial ventures fail. But it’s nearly impossible to know whether a venture will fail or succeed while it’s still in the idea phase. You only have to look to American Idol, the entertainment world’s version of The Apprentice, to see how ideas translate from the field of competition to the real world. Both Kelly Clarkson and Caleb Johnson won their seasons of American Idol, but their professional trajectories couldn’t have been more different. While Kelly Clarkson remains a household name, Mr. Johnson has all but disappeared.

Entrepreneurship requires you to put ideas to the test in the real world. If you’ve written a business plan and pitched a panel of judges, you’ve done important homework that will help make you more successful. But if you’ve never built a product, dealt with a customer, watched your prototype crash and burn, and then fixed it, then you haven’t done the work of an entrepreneur. Entrepreneurs learn by doing - it’s on-the-job training - and part of the doing is seeing how your ideas work in the real world. Having the best pitch and winning over a panel of judges will only get you so far.

3. Encourage Your Employees to Flex Their Entrepreneurial Muscles on Their Own Time and Their Own Dime

A designer's home office

If companies want to democratize intrepreneurship and connect it to the real world, they need to foster a culture that encourages their employees to unleash their entrepreneurial talents outside of the office, and then channel those experiences back at work.

By becoming entrepreneurs in their free time and working on projects that excite them, these employees will learn to take calculated risks, experiment, learn from their failures, and then try again. Having taken ownership of their entrepreneurial education, they will bring a fresh mindset and new skills with them every day when they come to the office. Whether they become angel investors, advisors, or founders, employees who invest their own time and resources develop the requisite skills, experience, and mindset to make a meaningful contribution to their firms’ entrepreneurial cultures. Best of all, this education won’t cost their employers a thing.

Recognizing that your employees have professional ambitions outside of work isn’t just good business, it’s also acknowledging the inevitable. A recent study by Adobe found that 33% of Americans work part-time at another job in additional to their day job. Other than money, these moonlighters work so that they can pursue a passion, access networking opportunities, or develop new skills.

Millions of people recognize the benefits of pursuing projects that excite them and offer them financial upside, so it’s time for corporations to take notice and harness this ambition for the benefits of their own innovation efforts. Plus, just because an employee is working part-time on another business doesn’t mean that he is looking to leave – more than 70% of employees with side jobs aren’t looking to leave full-time employment for the wilds of entrepreneurship.

If companies in the Fortune 500 hope to be around in ten years, then they better get moving. Entrepreneurship shouldn’t be restricted to a privileged few and aspiring entrepreneurs shouldn’t have to feel like they’re competing in The Hunger Games. Rather, every member of an organization should take responsibility for their own entrepreneurial journey and then contribute what they’ve learned back at their day job. That’s how you build a sustainable and entrepreneurial culture from the bottom up.

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