Anthony Farr’s latest blog post published on Ventureburn.
In recent years the power and potential of entrepreneurship has become more and more entrenched in public debate and the attention on this particular field of human endeavour has increased exponentially.
This shift was well captured by Jonathan Ortmans, CEO of Global Entrepreneurship Week, when commenting that, “Entrepreneurship has been transformed from a subject of narrow commercial significance into one of substantive cultural consequence that signifies the potential of human endeavour for the benefit of all.”
And it is in this seeking “benefit for all” that increasing attempts are being made to harness the entrepreneurial spirit in a range of different contexts, not least in the big corporation itself, with growing interest in the notion of intrapreneurship (applying entrepreneurial principles within an existing company).
But before we get too excited about intrapreneurship’s potential there are two challenges to its obvious appeal. The first one is philosophical. Economist Joseph Schumpeter, the founding father of entrepreneurship theory, established the notion of “creative destruction” whereby innovation happens and society moves forward through the role of entrepreneurs in “incessantly destroying the old and creating the new”. So can intrapreneurship overcome the inherent tension of unleashing a force that will ultimately be seeking to destroy the platform from which it has been launched?
The second is practical. There are issues with the inherent compatibility of entrepreneurship and established business. Simplistically entrepreneurship is not management. They are activities in very different stages of Land’s system change cycle — entrepreneurship in the invention or search phase and management in the improvement or replication stage.
The rules of the game are fundamentally different between these two, with the former requiring skills such as observation, experimentation and curiosity to create something useful. The latter is more focused on planning, compliance and process. Despite the interest in intrapreneurship, is it really possible to apply different rules to the same phase? Do oil and water really mix?
The answer lies with the third phase of system change after invention and improvement – namely obsolescence. Change is the overwhelming reality and without it any system or company will inevitably move to obsolescence.
We have been given the most dramatic illustrations of this in recent times with the examples of Kodak filing for bankruptcy in 2012, having discovered digital photography nearly 40 years previously, only to then ignore it, or Nokia moving from the most dominant market position in the smartphone industry (43.7%) in 2008 to less than 3% in 2013.
If it is then clear that companies have no choice but to embrace change, then it is equally clear that the best mechanism for harnessing change is entrepreneurship. So understanding the limitations of fully applying entrepreneurship within an existing business, as discussed above, there is still a crucial role for intrapreneurship in ensuring the long term sustainability of businesses.
There are three key principles that can make this a reality. The first it to create the opportunity for entrepreneurial thinking to feed into the organisation. It is this mindset that will catalyse the benefits of intrapreneurship.
I recently attended the Global Entrepreneurship Congress in Russia and had the good fortune of meeting a number of key role players within the global entrepreneurship field. One such person was Ingrid Vanderveldt, a seasoned entrepreneur in the USA and also the first Dell entrepreneur-in-residence.
Started in September 2011, Dell’s Entrepreneur-in-Residence programme (EIR) is focused on “helping Dell drive strategy and takes our ability to listen and act on what customers need to the next level.” This in itself is unusual as EIR type roles are usually found in venture capital firms, which form part of the entrepreneurial ecosystem rather than a corporate organisation.
Dell recognised that entrepreneurial thinking was key to enhancing their business strategy and so became deliberate in their approach to fostering entrepreneurial mindset within the organisation.
This entrepreneurial mindset should then become part of the culture; a culture that rewards the skills of invention and experimentation in initially contained environments, often in stand-alone projects.
In 2012, First National Bank was named the world’s most innovative bank of the year at the BAI-Finacle Global Banking Innovation Awards – a first for South Africa and surely a first for banks! How did it achieve this? A deliberate part of First National Bank’s strategy was to develop an innovative culture internally.
It did this through a staff competition, where winning innovative ideas would receive a monetary prize. This was different from other reward and recognition initiatives in that the prizes awarded were significant and outside of standard employee benefits. Then CEO Michael Jordaan said that, “Effectively, every employee can be an innovator and can change the way we conduct business.”
This points to the last principle, individual ownership — the defining characteristic of entrepreneurship. And if this can be achieved at an airline then it should be possible almost anywhere. Southwest Airlines founder Herb Kelleher based his company ethos on the philosophy of never being satisfied with status quo.
He said this of his competition: “They can buy all the physical things. The things you can’t buy are dedication, devotion, loyalty – the feeling that you are participating in a crusade.”
How did Kelleher enroll his staff into Southwest’s crusade and engender the philosophy of not being happy with the status quo? The most important lever was to launch various initiatives to empower staff to act independently.
But the accountability associated with independence must be weaved together with increased rewards. In return for their participation in the company’s strategy to become the largest and most respected airline carrier in the world, employees were offered the following:
- Freedom to pursue good health
- Create financial security
- Make a positive difference
- Learn and grow
- Create and innovate
- Work hard AND have fun, and;
- Stay connected.
Unsurprisingly, Southwest is still the record-holder for the longest-running profitability streak in the US airline industry, 41 years and counting. It is also the domestic airline industry leader in the USA in terms of customer satisfaction.
Intrapreneurship is no myth and will become an increasing differentiator as the rate of societal change continues to accelerate. Our best insurance against future obsolescence is to harness the power of entrepreneurship through embracing the principles of an entrepreneurial mindset to foster an innovation culture that allows individual ownership. Who said oil and water don’t mix!