Intrapreneurship: Achieving sustainable competitive advantage


But what is intrapreneurship? Zahra, (Journal of Business Venturing, 1991), defined intrapreneurship as the process of creating new business within established firms to improve organisational profitability and enhance a company’s competitive position or the strategic renewal of existing business.

Employees are usually given the opportunity to work on projects where they can use their entrepreneurial skills to develop new products or services that become profitable ventures for the company. Unlike entrepreneurs, however, they don’t incur the risks associated with these projects, but neither do they gain the huge financial rewards if their new product or service is a blockbuster.

One question that is often put to me is; “Isn’t an entrepreneur and an intrapreneur one and the same?” There are certainly some similarities although the former usually relates to the creation of a new venture externally, outside an existing organisation. Indeed, many successful businesses started life as entrepreneurial start-ups that later became mature organisations.

The last 100 years have seen significant levels of innovation, yet the demand for greater levels in business has never been more intense than it is today. There are many reasons why, not the least of which are maturing industries and products, increased levels of competition, changing consumer needs, political and environmental pressures and a rapidly changing global marketplace.

However, in many organisations innovation has become something of a paradox. Everyone knows that it’s probably essential for survival but it can be regarded as time-consuming and expensive, it diverts the company away from its core business and comes with a strong downside of failure. It seems more important to remain rigidly blinkered but still moving forward – irrespective of how slow – rather than adopting a more open view and adjusting tack to take advantage of better conditions that are likely to prevail in the future.

There is also a belief that corporate intrapreneurial activity has a higher failure rate than that of external entrepreneurs. But what is the evidence that intrapreneurial start-ups are less successful?

It has been suggested that corporate venturing is less successful because insufficient time, commitment and money are invested in innovative activities. Furthermore, because intrapreneurs operate within the structural and procedural constraints of an established organisation, they lack the innovative freedom that the entrepreneur enjoys. What entrepreneurs don’t benefit from is the financial, administrative and operational support that is provided to intrapreneurs.

However, much of the evidence is empirical and, given the large number of variables and basic lack of available data, unreliable. Nevertheless, where deeply entrenched beliefs and practices – many of which run counter to innovation and creativity – exist within the organisation’s culture, then corporate venturing is unlikely to get off the ground.

Doing nothing is often a bigger risk than doing something that could potentially be beneficial, and intrapreneurship is as much about change management as it is about innovation. If business leaders are willing to repudiate outdated notions and unworkable management practices, possibly forego short-term gains, accept (and factor in) that failure could potentially be an outcome, and openly demonstrate a higher degree of trust, confidence and respect in their workforce, job satisfaction will increase substantially and prosperity for all will follow. You only need to look at companies such as Panasonic, Toyota, 3M, Facebook, Google and many others to see the evidence of this.

Even though there are some similarities between intrapreneurial and entrepreneurial behaviour, there are some importance differences that business leaders need to be aware of. One very notable difference is that entrepreneurs are more self-centered than intrapreneurs, they are willing to take much greater risks, and the significant “adrenalin high” they get when working on specific projects plays a key role in their motivation. This is not to say that intrapreneurs are risk averse, but key motivators need to be carefully aligned for these internal innovators. Financial rewards such as success bonuses are important, but often more important to them is peer recognition and being placed in the corporate limelight.

Whilst entrepreneurs operate within a structure that has few boundaries, intrapreneurs live in an environment of constraints, brought about largely through corporate policies and management practices. For intrapreneurship to succeed, management must ensure that innovation is woven into the very fabric of their organisation and given a prominent place in job descriptions, procedures and performance evaluations.

Intrapreneurs need some degree of autonomy but have very clear guidelines within which they can operate. Effective managers are those who know when to pull on the reins without creating disillusionment, and when to let them go to maintain optimism.

Established companies have the advantage of an existing resources base – such as design, marketing, sales and finance – that entrepreneurs don’t have. However, if they remain scarce or intrapreneurs have to fight their corner every time they require these resources, innovative projects will never get beyond the drawing board. Once the decision is made to run with a specific project, management must ensure that the resources required to achieve a successful outcome are made fully available.

The digital era is beginning to provide enormous opportunities for companies to reap the benefits of innovation and creativity. Explosive wealth creation will only materialise, however, once business leaders have understood how to identify, nurture and manage the intrapreneurial spirit within their organisations.

ABOUT THE AUTHOR

Michail Sotirakos

CEO

<!--paging_filter--><p>Michail Sotirakos is an engineer&nbsp;by training and an entrepreneur. After 11 years in academia he branched out into business and has successfully launched a number of companies.&nbsp;He is the CEO of Watershed Entrepreneurs and, as a business modeling expert, also works with companies in the development of their intrapreneurial programmes.</p> <p> <a href="http://www.watershedentrepreneurs.co.uk">www.watershedentrepreneurs.co.uk</a></p>