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Disrupt Thyself: Intrapreneurship and the Challenge of Staying on Top

There’s a crazy game played in Japan that looks like a cross between rugby, wrestling and capture the flag. It is called “Bo-Taoshi” and the goal is really quite simple: defend your pole while simultaneously attempting to topple the pole of your opponent. Sitting on the top of the pole is the “ninja” and it is his job to counteract the forces trying to bring him down. The game is not unlike business, and the CEO is the ninja, with challengers seeking to disrupt the leader by being agile and attacking vulnerabilities. When you are at the top, the real challenge is to stay there.

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In his book, Why Big Companies Can’t Invent, Howard Anderson argues that it is hard to innovate when you are on top because all your natural instincts urge you to preserve the status quo. That is why the old model of the corporate R&D lab as the engine of invention does not work anymore. Companies, regardless of their size need a single-mindedness and a sense of urgency that is very hard to replicate in the traditional corporate environment. “The old model is dead. Time to build a new one,” proclaims Anderson. And it is hard not to agree with him.

Yet innovation is a top priority for all organizations. PWC’s recent CEO survey shows that 61% of CEOs consider innovation either their utmost priority or one of the top organizational priorities.

But if the current model of research and development is broken or even dead, how can a large corporation invigorate its business? Are there other models with a proven track record demonstrating explosive growth? By their very nature, it is the new companies that have the inherent potential for dramatic growth, led by the entrepreneurs. Anderson’s advice is to replicate the environment of entrepreneurial firms. And data supports him. Just take a look at the track record of companies created by MIT alumni. According to a 2009 report, 26,000 currently existing companies have been founded by MIT alumni. These companies have created approximately 3.3 million jobs and generated approximately $2 trillion dollars in annual revenue. To put this achievement in perspective, as a standalone economy, these companies would comprise the world’s 11th largest economy, positioned behind Brazil and ahead of Russia.

So what is a large, established company to do? Is it possible to capture some of the magic of the startup? Can a large company with tens of thousands of employees become more entrepreneurial? Can any company so focused on generating predictable results embrace risk and develop a culture of innovation?

As a digital innovation consultancy, we at Artefact have seen our fair share of innovation programs and efforts. We have even built and continue to evolve our own. And based on this experience, my answer is “yes.” Kind of.

The dream of intrapreneurship

The solution is the internal incubation program whereby companies seek to mimic the dynamics of a startup in order tap into the upside. These programs are often run like well-known investor competitions such as TechCrunch Disrupt where hopeful entrepreneurs pitch their ideas to develop new products and ultimately launch new businesses. And like the well-known external competitions, these programs often reward the winners with some kind of prize in the form of funding, resources and dedicated time away from core responsibilities.

These “intrapreneurship” programs and internal incubation competitions are not terribly new. In fact, they have been around for decades. Many large organizations such as Hewlett Packard, Shell, and Qualcomm have had their programs studied and documented.

Qualcomm’s exploration into this space started back in 2006 with support from the highest level in the organization. Ricardo Dos Santos who was charged with leading the program was given three clear goals to guide the initiative.

  1. The program had to remain fully open to employees from all divisions.
  2. The ideas were to be implemented by existing business or R&D units – i.e., no need to create new permanent infrastructures for innovation.
  3. The program had to have an efficient mechanism to bubble-up the best ideas (and their champions) to the timely attention of the top executive team.

Given that the majority of these programs are rarely publicized, it is hard to truly evaluate their efficacy. As of 2008, Qualcomm seemed to be reaping the benefits of its investment. Yet, its biggest success case study, a wireless gaming console called Zeebo, closed doors in 2012. The program itself shut down, due to what Dos Santos believes were challenges of culture, structure, and organizational alignment.

To thine own self, be true

When we consider the large corporation seeking to emulate the scrappy creativeness of the startup, it is helpful to understand how they are fundamentally different.

There is no plan B

The entrepreneur leading a newly formed startup has all of their eggs in a single basket. Their professional survival is inextricably linked to the future of the business, and as a result, they will nurture and push their idea no matter what the hurdles may be. The entrepreneur is laying everything on the line, knowing that if they fail, they will need to start over, or go out and “get a real job”. The entrepreneur has stakeholders in the form of angel investors and venture capitalists, and they are inherently comfortable with a high degree of risk. The entrepreneur is driven to disrupt the status quo, for there is no real future to be had in maintaining it. And if they aren’t looking to disrupt an existing business or industry, they are seeking to create wholly new categories.

Contrast the entrepreneur with the large, established corporation. The large organization views internal incubation efforts as a side bet, something separate from the core research and development process. It may receive funding and resources, but this investment is typically minuscule when compared to the core R&D budget. Unlike the entrepreneur, there isn’t really a whole lot at stake should this initiative fail.

Structure? What structure?

It is hard to be disruptive when you have to tiptoe around an existing corporate process. The startup process and organization may seem haphazard, but it is this chaos, agility, and speed that makes the startup easily pivot to latch on new opportunities. Even for organizations like Artefact, whose size and commitment to innovation makes us a potential poster child for intrapreneurship, we have to find the right balance between structure and process, and freedom to disrupt and reinvent. That is why when we go into incubation mode around a promising idea, like what we are building right now with 10,000ft Insights, we try to provide the team with the independence they need to be daring. And when our confidence increases that we have a winner, we spin it off into a separate entity, like our sister company, 10,000ft.

The virtue of patience

Another key consideration is patience. It can take a long, long time for an idea to be cohesively developed and its potential fully realized. Entrepreneurs and their investors know that and are willing to support an idea might turn into something promising down the road, even as it evolves and changes. Perhaps, the most recent example of that is Lytro, whose light field technology continues to excite investors, while refusing to settle into a single form factor. In the corporate world, these long timelines can test the patience of the executive team and stakeholders alike. Where entrepreneurs dream of diamonds, corporations often see only coal.

Fifty shades of intrapreneurship

Of course, to claim that corporations are incapable of intrapreneurship is a fallacy. There are plenty of examples of large organizations managing to create internal innovation labs, incubation programs or accelerators that have spun off promising new ventures. A recent example is Microsoft’s internal accelerator, Microsoft Garage, which according to TechCrunch spews off “some of the most interesting software to come out of Redmond.” Amazon’s Lab126 is another example of an internal incubation program that continues to surprise with new products and ideas. What both of these programs have in common though is their hybrid approach to innovation. While they enjoy the corporate sponsorships and funding, credit goes to Microsoft and Amazon for recognizing the need for independence from corporate structures that kills motivation and for creating the environment and independence needed for innovation.

Ultimately it is about authenticity and not trying to be something you are not. Startups are disruptive organizations that experience explosive growth because they are startups. Their behavior and attitudes reflect their motivations and are aligned to their stakeholders. These attributes cannot be conveniently co-opted by a corporation because they are anathema to their own mission. When organizations like Qualcomm seek to inject these processes and attitudes, they are rejected. This is akin to a human body rejecting foreign matter when the antibodies mobilize to protect the host.

The future of internal incubation

Good ideas are everywhere: what’s uncommon is people with the conviction to put their reputation behind ideas.
        – Scott Berkun, Myths of Innovation

The allure of internal entrepreneurial programs is unlikely to fade anytime soon. CEOs will continue to try and emulate the disruptive startups in the hope that they can develop a culture of innovation that will energize their product pipeline. However, unless they shift their objectives and set their sights on entirely different outcomes, then they will mostly fail.

In some ways, corporations will need to adopt the stance of an investor and consider different outcomes in order for this to truly succeed. Rather than looking to force new product ideas into existing infrastructure, they will need to consider spinning off entirely new companies or divisions as the end result of these explorations. There is an opportunity for companies to nurture not just new ideas, but future business leaders from within their own ranks.

A version of this article originally appeared on FastCo Design.