Definition of Intrapreneurship

Introduction

The term “intrapreneur” was coined in America in the late seventies. Several senior executives of big corporations in America left their jobs to start their own small businesses because the top bosses in these corporations were not receptive to innovative ideas. The executives turned entrepreneurs achieved phenomenal success in their new ventures. Some of them posed a threat to the corporations they left a few years ago. This type of entrepreneurs came to be known as intrapreneurs. Such corporate brain drain is a world wide phenomenon and is not confined to the United States. Industrialists all over the world started devising ways and of stopping the flight of their brightest executives. In 1976 Norman Macras wrote in the London Economist that successful big corporations should become ‘confederations of entrepreneurs’.

The idea was promising and the opportunities awaiting entrepreneurs inside large corporations could be tremendous provided in could be made workable. An American management expert, Gifford Pnchot III wrote his famous book. Intrapreneruing in 1985 and used the term ‘intrapreneurs’ to describe the persons who resigned from their well paid executive positions to launch their own ventures.

Gifford Pinchot-III suggested that well-established companies should learn to make use of the entrepreneurial talents within to avoid stagnation and decline. Entrepreneurs introduce new products, services and processes which enable the company to grow and succeed in a changing environment. What was, therefore, needed was a system and an organisation culture within a large organisation that would allow the executives to operate like entrepreneurs.

These persons are driven not by monetary gain but by a deep desire of personal achievement. Therefore, companies should provide such people with adequate financial resources and the autonomy necessary for the development and application of their ideas. Pinchot suggested the creation of a system which will provide selected executives a status within the corporation similar to that of an entrepreneur in society. Such people are ‘intra-corporate entrepreneurs’ or ‘entrepreneurs’.

The notion of entrepreneurship requires that managers inside the company should be encouraged to be entrepreneurs within the firm rather than go outside. For an entrepreneur to survive in an organisation he-she needs to be sponsored and given adequate freedom to implement his ideas otherwise the entrepreneurial spark will die. The entrepreneur who starts his own business generally does so because he aspires to run his own show and does not like taking orders from others.

The interest in entrepreneurship shown by existing organizations has resulted from a variety of events occurring in the United State on social, cultural and business levels. On a social level, there is an increasing interest in “doing your own thing” and doing it on one’s own terms. Individuals who believe strongly in their own talents frequently desire to create something of their own. They want responsibility and have a strong drive for individual expression and more freedom in their present organizational structure. When this freedom is not forthcoming, frustration can develop that can lead to the individual becoming less productive or even leaving the organization to achieve self-actualization elsewhere.

This new search for meaning and the impatience involved, has recently caused more discontent in structured organizations than ever before. When meaning is not provided within the organization, individuals often search for an institution that will provide it. Intrapreneurship is one method for stimulating and then capitalizing on individuals in an organization who think that something can be done differently and better.

Corporate Versus Intrapreneurial Culture

Business and sociological conditions have given rise to a new era American business: the era of the entrepreneur. The positive media exposure and success of entrepreneurs is threatening to some established corporations, as the smaller, aggressive, entrepreneurially driven firms are developing more new products and becoming dominant in certain markets. Recognizing the positive results that occur when employees of other large corporations catch the “entrepreneurial fever,” many companies are now attempting to create the same spirit, culture, challenges and rewards of entrepreneurship in their organizations. What are the differences between corporate and entrepreneurial cultures? Between, managers, entrepreneurs, and intrapreneurs

The typical corporate culture has a climate and reward system that favors conservative decision making. Emphasis is on gathering large amounts of data as the basis for a rational decision and to use to justify the decision should the intended results not occur. Risky decisions are often postponed until enough hard facts can be gathered or a consultant hired to “illuminate the unknown”. Frequently, there are so many sign-offs and approvals required for a large-scale project that no individual feels.

Comparison of Entrepreneurs, Intrapreneurs, and Traditional Managers

Climate for Intrapreneurship

How can the climate for intrapreneurship be established in an organization? In establishing an intrapreneurial environment, certain factors and leadership characteristics need to be operant. The overall characteristics of a good intrapreneurial environment are summariezed in Table. The first of these is that the organization operates on the frontiers of technology. Since research and development are key sources for successful new product ideas, the firm must operate on the cutting edge of the industry’s technology, encouraging and supporting new ideas instead of discouraging them, as frequently occurs in firms that require rapid return on investment and high sales volume.

Second, experimentation – trial and error – encouraged. Successful new products or services usually do not appear fully developed; instead they evolve. It took time and some product failures before the first marketable computer appeared. A company warning to establish an intrapreneurial spirit has to establish an environment that allows mistakes and failure in developing new innovative products. while this is in direct opposition to the established career and promotion system of the traditional organization, without the opportunity to fail in an organization, few if any corporate intrapreneurial ventures will be developed. Almost every entrepreneur has experienced at least one failure in establishing a successful venture.

Third, an organization should make sure that there are no initial opportunity parameters inhibiting creativity in new product development, Frequently in an organization, various “turfs” are protected, frustrating attempts by potential intrapreneurs to establish new ventures, In one fortune 500 company, an attempt to establish an intrapreneurial environment ran into problems and eventually failed when the potential intrapreneurs were informed that a proposed new product and venture was not possible because it was the domain of another division.

Fourth, the resources of the firm need to be available and easily accessible. As one intrapreneur stated, “If my company really wants me to take the time, efforts and career risks to establish a new venture, then it needs to put money and people resources on the line. Often insufficient funds are allocated to the task of creating something new, with available resources being committed instead to solving problems that have an immediate effect on the bottom line. Some companies like Xerox and AT

T have recognized this problem and have established separate venture.

Table: Intrepreneurial Environment

Organization operates on frontiers of technology

New ideas encouraged

Trial and error encouraged

Failures allowed

No opportunity parameters

Resources available and accessible

Multidiscipline teamwork approach

Long time horizon

Volunteer program

Appropriate reward system

Sponsors and champions available

Support of top management

Capital areas for funding new internal ventures. When resources are available, all too often the reporting requirements become obstacles to obtaining them, causing frustration and dissatisfaction.

Fifth, a multidiscipline team approach needs to be encouraged. This open approach, with participation by needed individuals regardless of area, is the antithesis of the corporate organizational structure and theory. An evaluation of successful cases of intrapreneurship indicated that one key to success was the existence of ‘skunkworks” involving key people.

Some companies can facilitate internal venturing by legitimizing and formalizing the skunkworks already occurring. Developing the needed teamwork for a new venture is further complicated by the fact that a team member’s promotion and overall career within the corporation is related to his or her job performance in the current position, not to his or her contribution to the new venture being created.

Sixth, the spirit fo intrapreneurship cannot be forced on individuals, it must be an on volunteer basis. There is a difference between corporate thinking and intrapreneurial thinking, with individuals performing much better on the latter side of the continuum. Most managers in a corporation are not capable of being successful intrapreneurs. Those who do emerge from this self-selection process must be allowed the latitude to carry a project through to completion.

This is not consistent with most corporate procedures for new product introduction, where different departments and individuals are involved in each stage of the development process. An individual willing to spend the excess hours and efforts to create a new venture needs the opportunity and the accompanying reward of carrying the project through to completion. An intrapreneur falls in love with the newly created internal venture and will do almost anything to help insure its success.

The seventh characteristic is a reward system. The intrapreneur needs to be appropriately all the energy and effort expended in the creation of the new venture. These rewards should be based on the attainment of established performance goals. An equity position in the new venture is one of the best methods for motivating and cliciting the amount of activity and efforts needed for success.

Eighth, a corporate environment favourable for intrapreneurship has sponsors and champions throughout the organization who not only support the creative activity and resulting failures but also have the planning flexibility to establish new objective and directions as needed. As one intrapreneur stated,

“For a new business venture to succeed, the intrapreneur needs to be able to alter plans at will and not be concerned about how close they come to achieving the previously stated objectives”. Corporate structures frequently measures managers on their ability to come close to objectives, regardless of the quality of performance reflected in this accomplishment.

Finally, and perhaps most important, the intrapreneurial activity must be whole heartedly supported and embraced by top management, both by physical presence and by making sure that the personnel and the financial resources are readily and easily available. Without top management support, a successful intrapreneurial environment cannot be created.

Within this overall corporate environment, there are certain indi-vidual characteristics needed for a person to be a successful intrapreneur. As summarized in Table these include understanding the environment, being visionary and flexible, creating management options, encrouaging teamwork while employing a multidiscipline approach, encouraging open discussion, building and coalition of supporters and persisting.

To successfully establish a successful entrepreneurial venture, the individual must be creative and have a broad understanding of the internal and external environments of the corporation.

The person who is going to establish a successful new entrepreneurial venture must also be a visionary leader-a person who dreams great dreams.

The third needed characteristic is that the entrepreneur be flexible and create management options. An entrepreneur does not “mind the store” as is frequently taught in many business schools, but is playful and a bit irreverent. By challenging the beliefs and assumptions of the corporation, an entrepreneur has the opportunity to create something new in the largely bureaucratic organizational structure.

The intrapreneur must possess a fourth characteristic the ability to encourage teamwork and use a multidiscipline approach. To minimize the negative effect of any disruption caused, the entrepreneur must be a good diplomat.

A successful new entrepreneurial venture can be formed only when the team involved feels the freedom to disagree and to critique an idea in an effort to reach the best solution. The degree of openness among the team depends on the degree of openness of the entrepreneur.

Openness leads also to me establishment of a strong coalition of supporters and encouragers. The entrepreneur must encourage and affirm each team member, particularly during difficult times.

Last, but not least, is persistence, throughout the establishment of any new entrepreneurial venture, frustration and obstacles will occur. Only through the entrepreneur’s persistence will a new venture be created and successful commercialization result.

A distinction should be made between ‘intrapreneurs’ and ‘entrepreneurs’. First, an entrepreneur is an independent businessman who bears full risks of his business whereas an intrapreneur is semi-independent and does not fully bear the risk of the business he develops and operates. Secondly, the entrepreneur himself raises the necessary capital from various sources and guarantees the return to people who give him finance.

On the other hand, the intrapreneur neither raises the capital himself nor guarantees any return to the suppliers of capital. Thirdly, an entrepreneur operates from outside an organisation whereas the intrapreneur is an ‘organisation man’ operating from within the organisation. Comparing the two, Pinchot writes an intrapreneur is any of the dreamers who do, those who take on responsibility for creating innovation of any kind within an organisation. the intrapreneur may be the creator or inventor but is always the dreamer who figures out how to turn an idea into a profitable reality. Similarly, entrepreneur is someone who files the roel of an intrapreneur outside the organisation.

Both the entrepreneur and the intrapreneur are innovators and both perform the function of organisation and management. But the context within which the two operate and the degree of risk they bear are different.

Summary

This lesson has clearly narrated the importance developing intrapreneurship. The different methods of developing intrapreneurship are explained through case experiences.