“Entrepreneurial thinking is not optional. Those who stand still fall behind, and market leadership changes regularly. This is why it’s important for all companies — even large, established corporations — to cultivate innovation through intrapreneurship.” Maria Pinelli, Americas Director for Strategic Growth Markets, Ernst & Young LLP
How do companies fan the flames of innovation by tapping into the creativity of their existing employees? What are some practical strategies to foster a culture of innovation from within?
To answer those questions, EY conducted a series of global surveys of senior business leaders as well as interviews with leading academics and industry authorities. We found that effective intrapreneurship involves six tactics:
- Set up a formal structure for intrapreneurship. Give people enough time away from their “day jobs” to work on creative projects, but provide a formal process for new product development.
- Ask for ideas from your employees. They have their fingers on the pulse of the marketplace. Encourage them to contribute to the innovation dialogue.
- Assemble and unleash a diverse workforce. It’s no secret that diverse groups come up with more innovative ideas. Tap into this multifaceted source of power.
- Design a career path for your intrapreneurs. For the most part, intrapreneurs are mavericks who will quit — and take their best ideas with them — if they don’t see prospects for career advancement.
- Explore government incentives for innovation. Ask how these can support your intrapreneurial ventures. Governments all over the world are offering new tax breaks and other incentives for research and development (R&D) — and corporations in turn are urging governments to support innovation.
- Prepare for the pitfalls of intrapreneurship. Not all ideas will produce successful new products. Failure is an important part of the process.
These strategies achieve a key goal: institutionalizing intrapreneurship so that it becomes an inseparable part of a company’s operations. Only then can the process of continuous innovation take place — allowing the company to stay a market leader.
What has your company invented lately?
Every entrepreneur knows the legends of great inventions. Take 3M’s Post-it Note, for example.
Back in the 1970s, 3M scientists Spencer Silver and Arthur Fry were toying around with possible uses for an adhesive that Silver had discovered. The invention eventually resulted in the groundbreaking product that 3M launched in 1980 and which has since become an office and household staple.
Or take the Sony PlayStation, launched in 1994. Originally a sideline project for Sony Sound Engineer Ken Kutaragi — one that nearly got him fired — the gaming system eventually received the blessing of then-CEO Norio Ohga and became the best-selling game console of all time. Kutaragi later founded Sony Computer Entertainment, one of the company’s most profitable divisions.
What these and other revolutionary ideas had in common was that their creators benefited from a corporate setting that fostered creativity by allowing them to pursue their own projects.
They were classic “intrapreneurs,” a term coined in 1985 by Gifford and Elizabeth Pinchot to refer to what they called “free market entrepreneurship within the corporate organization.”
Also referred to as “corporate entrepreneurship,” intrapreneurship involves individuals or groups of individuals exploring high-risk, high-reward ideas within the safety and support of a larger, well-established corporate structure.
There are two factors without which this activity can’t get off the ground:
- Encouragement and support from senior management
- Reassurance that even if the ideas fail the intrapreneur will not lose his or her job or be “punished” in other ways
The second factor is particularly important in today’s turbulent business environment.
On the one hand, we grapple with a post-recessionary economy that is struggling to recover and propel new growth; on the other, we face fierce global competition that makes it especially difficult to develop speedy innovations to fuel that growth.
In our survey of 263 of the world’s leading entrepreneurs (all winners of EY’s Entrepreneur Of The Year® awards), 82% of the respondents agreed strongly that the ability to innovate was critical to the growth of their organizations.
But innovation demands a loose and agile organizational structure that fuels creativity and accommodates failure; large established companies are often comprised of rigid, hierarchical institutional structures that can stifle the entrepreneurial spirit and limit their growth.