3 Reasons Why Companies Fail at Intrapreneurship – and How to Succeed

Intrapreneurship, or creating a startup culture within an existing large business, is a fairly well known element in corporate jargon these days. With a new wave of urgency sweeping the corporate landscape and the threat of extinction, it is not surprising that large companies have started looking to intrapreneurship to help them fast track new offerings and explore innovation opportunities. This article is not an effort to describe the merits of intrapreneurship, but instead is aimed at highlighting a few reasons why companies are unsuccessful at inculcating intrapreneurship or startup culture into their normal activities.

What is IntrapreneurshipWe all like to emulate the Apples, Googles and Starbucks of this world, and in desperate attempts to start something new, many companies rush forward in what they claim to be well-thought-out-strategies for successful intrapreneurship. These attempts are often related to mission statements, vision statements, goal setting and trainings.

In this article, I will highlight three major reasons why many attempts by large companies to engender intrapreneurship have ended in failure.

Art versus Science

Developing a sub-culture within a larger organization is difficult, and rushing ahead optimistically without a solid plan will not work. However, the process of engendering intrapreneurship is usually not subjected to the same amount of thoroughness that other processes like financial planning and budgeting are. Until companies begin to see the cultivation of an intrapreneurship culture as a science, they will most likely leave the results of their efforts to serendipity.

The Solution: Intrapreneurship should be managed with a paradigm of causes and effects, inputs and outputs, and planning and scheduling. In other words, building this kind of culture should have its accountability points, dedicated resources, and gates of evaluation. At LinkedIn, for example, employees can propose a new idea once every quarter. They form a team to work on the idea and pitch it to an executive team. They are then given three months to work on the idea and improve its viability. These kinds of processes – coupled with the appropriate enablers, such as an online idea submission portal – provides a method for intrapreneurship and makes it repeatable.

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Innovation Management: A Paradigm for Change or Simply a Buzzword?

innovation-quote-jobsEver since the world has become aware of the importance of innovation, almost every company has created a strategic plan toward becoming more innovative or toward jumpstarting its innovation journey. While the amount of buzz around this topic is commendable, it is not difficult to see that innovation is more of a lip service and buzzword for a TV commercial, than it is a crucial strategic goal of many organizations. In other words, the low level of adoption of innovation as a strategic goal and as part of a management program depicts a lack of clear understanding of what innovation is and the consequences of not putting resources toward it.

Has this always been the case? If we take a historical look at the adoption of management methodologies, we can get an inkling of what is currently happening with the adoption of innovation management.

In the middle of the last century, most management methodologies, processes and tools were focused on enhancing productivity (with Ford Motors taking the lead in the 1920s). However, by the 1980s, it was apparent that Quality Management was the next big thing. This later took the form of TQM (Total Quality Management) and Six Sigma, and no doubt companies invested massively in efforts driving quality management in the early 1990s.

Studying the evolution and adoption of these management methodologies, one can safely assume that a good definition of adoption is when corporations actually put their money where their mouth is. In other words, when they invest in the execution of whatever strategy they have developed—whether it is increased productivity or quality.

A good way to see this adoption lifecycle will be to actually subject it to the theory made popular by Everett Rogers in his book “Diffusion of Innovations”. While some may argue that management concepts can hardly be subjected to the diffusion model due to the wide application of this model to products or general ideas within a social system, I think it may be useful in understanding the response of typical companies today to important concepts in management—most especially, innovation management.

Diffusion-innovation

The Diffusion of Innovation theory explains that there are five categories of adopters of an idea or a product: innovators, early adopters, early majority, late majority, and laggards. We can apply this to the concept and practice of innovation management as a management methodology and principle. [Read more...]

The Importance of Feeling Threatened

There are few CEOs who don’t feel threatened by their company’s main competitors. Often significant and costly measures are taken to stay ahead of, or apace with, the competition. Yet how many CEOs have a system in place to warn them of other threats that can be just as deadly to the survival of the company?

We have seen big corporations lose the battle for market share to seemingly smaller and “less privileged” entrants. We have also observed how these small entrants were seemingly negligible and posed no obvious threats to the incumbent initially.

Exploiting-Chaos-Jeremy-GutscheIn his book, “Exploiting Chaos: 150 Ways to Spark Innovation during Times of Change,” author Jeremy Gutsche shares examples of companies that, due to complacency and lack of foresight, lost their positions as market leaders. A notable one was Smith Corona, the typewriter maker whose $500 million 1989 revenues and market dominance gave them a misleading confidence in their ability to remain profitable in the coming years.  Cutting short projects and a potentially viable partnership that may have led to their entry into the computing business, the CEO G. Lee Thomson stated in 1992 that, “There is still a strong market for our products in the United States and the world.” Of course, there is no need telling what became the fate of this company.

Today, one would honestly wonder why such a hugely successful company with access to a vast array of resources, as well as the power to reinvent themselves if they wanted to, should have fallen prey of the danger of disruption. Well, the answer is not farfetched if one considers the characteristics of companies that lose when it comes to innovation. Executives and managers typically act in accordance with the rational principles needed to survive. These rational principles are by themselves the danger to tomorrow’s success.

According to Clay Christensen’s work on disruptive innovation, incumbents are more likely to flee the segments that are least attractive to them at the time, such as an area where profit margins are low. However, new entrants will most likely enter into segments where the incumbents earn comparatively lower profit margins. Christensen cited the example of how minimills gradually disrupted the integrated steel companies as the latter fled from the lower-margin markets.

While this only makes sense, it is also the main reason why new entrants and new technologies are most likely to succeed in disrupting the incumbent.  In some cases, the incumbent underestimates the potential of a small entrant stealing their market share and eventually forcing them to lose profits and possibly become extinct. In others, the incumbent fails to recognize or act on potential gamechangers in its industry, leaving the new entrant free to capitalize on future trends. [Read more...]

How to Protect Your Organization from Disruptive Innovation

While large corporations may always think of improving their innovation portfolio, it is necessary to also become battle-ready for an almost inevitable scenario of disruption. This is particularly true for companies playing in the ever-dynamic space of technology.

The term “low-end disruption” was first coined by Clayton Christensen in his book “The Innovator’s Dilemma.” Disruptive innovations are known to change the landscape of an industry by providing products, services or business models that are not as good as the currently available ones – but are far more affordable or otherwise appealing to the masses.

For example, U.S.-based Southwest Airlines disrupted traditional airlines in the 1970s and 80s by providing an easy and affordable alternative to driving by providing “no frills” service and operating from non-mainstream airports. Another example is the Tata Nano, which offers simple car essentials at a very low price. Also, the Internet-based telecommunications service Skype is disrupting more traditional services by allowing long-distance and global calls at a much lower price and with more convenience.

Disruptive Innovation Theory

While disruptive innovation may be easier said than done, the catch here – which every established or incumbent company must focus on – is whether or not there is a market for disruptive innovation in their industries. [Read more...]

Yesterday’s Success May Be Tomorrow’s Enemy

Whether you are running a start-up or an established brand, it is not enough to simply have a strategy for entering the market. Long-term success depends on having an innovation pipeline spread across multiple timelines and horizons. In other words, innovation is never a one-off event; it is a series of efforts that lead to a company always staying ahead of the game.

Hence, if you have a good product and you launch it, the question you may like to ask yourself is this: Do we have a robust portfolio and pipeline that ensures that we will constantly innovate, even beyond this new product we just launched? In other words, do we have a plan in place for sustainable innovation – and, correspondingly, a profitable and sustainable future for the company?

Consider the example of the Kodak film company, which recently went out of business after many years. As this sad story shows, having a great product is the first step. However, cultivating a culture that ensures you will ALWAYS have a great product is another (and maybe the most important). [Read more...]

Why and How to Create a Culture of Innovation

In a recent article for Wired Magazine, John Carter (co-inventor of Bose Noise Cancelling Headphones, and a CEO and founder) argues that the key to growth in today’s struggling economy is innovation. Successful innovation, he says, requires a culture of innovation. As he asserts, “Without the right culture, no set of tools, methods, or people will be successful.”

Why the emphasis on culture? There has actually been academic research on the topic, which summarizes it nicely:

“Culture affects innovation because it shapes the patterns dealing with novelty, individual initiatives and collective actions, and understandings and behaviors in regard to risks as well as opportunities.”(1) [Read more...]