Intrapreneurship: Developing CorporateEntrepreneurship

CHAPTER OBJECTIVES
1. To define the term intrapreneurship 2. To illustrate the need for corporate entrepreneuring 3.To describe the corporate obstacles prevailing innovation from existing in corporations 4.To discuss the intrapreneurship considerations involved in reengineering corporate thinking 5. To describe the specific elements of an intrapreneurial strategy 6. To profile intr apreneurial characteristics and myths 7. To illustrate the interactive process of intrapreneurship

There is nothing more difficult to take in hand, more perilous to conduct, than to take a lead in the introduction of a new order of things, because the innovation has for enemies alt those who have done well under the old conditions and lukewarm defenders in those who may do well under the new. Machi avelli, The prince The global economy is creating profound and substantial changes for organizations and industries throughout the world. These changes make it necessary for business firms to carefully examine their purpose and to devotea great deal of attention to selecting and following strategies in their pursuit of the levels of success that have a high probability of satisfying multiple stakeholders. In

response to rapid, discontinuous, and significant changes in their external and internal environments, many established companies have restructured their operations in fundamental and meaningful ways. In fact, after years of restructuring, some of these companies bear little resemblance to their ancestors in their business scope, culture, or competitive approach.1 The new century is seeing corporate strategies focused heavily on innovation. This new emphasis on entrepreneurial thinking developed during the entrepreneurial economy of the 1980s and 1990s.2 Peter Drucker, the renowned management expert, described Tour major developments that explain the emergence ofthis economy. First, the rapid evolution of knowledge and technology promoted the use of high-tech entrepreneurial startups. Second, demographic trends such as two-wage-earner families, continuing education of adults, and the aging population added fuel to the proliferation of newly developing ventures. Third, the venture capital market became an effective funding mechanism for entrepreneurial ventures. Fourth, American industry began to learn how to manage entrepreneurship.3 The contemporary thrust of entrepreneurship as the major force in American business has led to a desire for this type of activity inside enterprises. Although some researchers have concluded that entrepreneurship and bureaucracies are mutually exclusive and cannot coexist,4 others have described entrepreneurial ventures within the enterprise framework.Successful corporate ventures have been used in many different companies,including 3M, Bell Atlantic, AT&T, Acordia, and Polaroid.6 Today, a wealth of popular business literature describes a new "corporate revolution" taking place thanks to the infusion of entrepreneurial thinking into large bureaucratic structures.7 This infusion is referred to as corporate entrepreneurship8 or intrapreneurship.9 Why has this concept become so popular? One reason is that it allows corporations to tap the innovative talents of their own workers and managers, Steven Brandt puts it this way:

The challenge is relatively straightforward. The United Slates must upgrade its innovative prowess. To do so, U.S. companies must tap into the creative power of their members. Ideas come from people. Innovation is a capability of the many. That capability is utilized when people give commitment to the mission and life of the enterprise and have the power to do something with their capabilities. Noncommitment is the price of obsolete managing practices, not the lack of talent or desire. Commitment is most freely given when the members of an enterprise play a part in defining the purposes and plans of the entity. Commitment carries with it a de facto approval of and support for the management, Managing by consent is a useful managing philosophy if more entrepreneurial behavior is desired.10 Continuous innovation (in terms of products, processes, and administrative routines and structures) and an ability to compete effectively in international markets are among the skills that increasingly are expected to influence corporate performance in the twenty-first century's global economy. Corporate entrepreneurship is envisioned to be a process that can facilitate firms' efforts to innovate constantly and cope effectively with the competitive realities that companies encounter when competing in international markets. Entrepreneurial attitudes and behaviors are necessary for firms of all sizes to prosper and flourish in competitive environments.11

THE NATURE OF INTRAPRENEURSHIP

In recent years the subject of intrapreneurship has become quite popular, though very few people thoroughly understand the concept. Most researchers agree that the term refers to entrepreneurial activities that receive organizational sanction and resource commitments for the purpose of innovative results.12 The major thrust of intrapreneuring is to develop the entrepreneurial spirit

within organizational boundaries, thus allowing an atmosphere of innovation to prosper.

Defining the Concept

Operational definitions of corporate entrepreneurship have evolved over the last 30 years through scholars' work. For example, one researcher noted that corporate innovation is a very broad concept that includes the generation, development, and implementation of new ideas or behaviors. An innovation can be a new product or service, an administrative system, or a new plan or program pertaining to organizational members.13 In this context, corporate entrepreneurship centers on reenergizing and enhancing the firm's ability to acquire innovative skills and capabilities. Researcher Shaker A. Zahra observed that "corporate entrepreneurship may be formal or informal activities aimed at creating new businesses in established companies through product and process innovations and market developments. These activities may take place at the corporate, division (business), functional, or project levels, with the unifying objective of improving a company's competitive position and financial performance."14 William D. Guth and Ail Ginsberg have stressed that corporate entrepreneurship encompasses two major phenomena: new venture creation without existing organizations and the transformation of organizations through strategic renewal.15 After a thorough analysis of the entrepreneurship construct and its dimensions, recent research has defined corporate entrepreneurship as a process whereby an individual or a group of individuals, in association with an existing organization, creates a new organization or instigates renewal or innovation within the organization. Under this definition, strategic renewal (which is concerned with organizational renewal involving major strategic and/or structural changes), innovation (which is concerned with introducing something new to the marketplace), and corporate venturing (corporate entrepreneurial efforts that lead to the creation of new business

organizations within the corporate organization) are all important and legitimate parts of the corporate entrepreneurship process.16
The Need for Corporate Entrepreneuring

Many companies today are realizing the need for corporate entrepreneuring. Articles in popular business magazines (Business Week, Fortune, Success, U.S. News & World Report) are reporting the infusion of entrepreneurial thinking into large bureaucratic structures. In fact, in many of his books, Tom Peters has devoted entire sections to innovation in the corporation. l7 Quite obviously, both business firms and consultants/authors are recognizing the need for in-house entrepreneurship. This need has arisen in response to a number of pressing problems, including rapid growth in the number of new and sophisticated competitors, a sense of distrust in the traditional methods of corporate management, an exodus of some of the best and brightest people from corporations lo become smallbusiness entrepreneurs, international competition, downsizing of major corporations, and an overall desire to improve efficiency and productivity.18 The first of these issues, the problem of competition, has always plagued businesses. However, today's high-tech economy is supporting a far greater number of competitors than ever before. In contrast to previous decades, changes, innovations, and improvements are now very common in the marketplace. Thus corporations must either innovate or become obsolete. Another of these problems, losing the brightest people to entrepreneurs hip, is escalating as a result of two major developments. First, entrepreneurship is on the rise in terms of status, publicity, and economic development. This enhancement of entrepreneurship has made the choice more appealing to both young and seasoned employees. Second, in recent years venture capital has grown into a large industry capable of financing more new ventures than ever before. The healthy capital market

enables new entrepreneurs to launch their projects. This development is encouraging people with innovative ideas to leave large corporations and strike out on their own. The modern corporation, then, is forced into seeking avenues for developing ill-house entrepreneuring. To do otherwise is to wait for stagnation, loss of personnel, and decline. This new "corporate revolution" represents an appreciation for and a desire to develop intrapreneurs within the corporate structure.
Corporate Venturing Obstacles

The obstacles to corporate entrepreneuring usually reflect the ineffectiveness of traditional management techniques as applied to new-venture development. Although it is unintentional, the adverse impact of a particular traditional management technique can be so destructive that the individuals within an enterprise willtend to avoid corporate entrepreneurial behavior. Table 3.1 provides a list of traditional management techniques, their adverse effects (when the technique is rigidly enforced), and the recommended actions tochange or adjust the practice. Understanding these obstacles is critical to fostering corporate entrepreneuring because they are me foundation points for all other motivational efforts. To gain support and foster excitement for new-venture development, managers must remove the perceived obstacles and seek alternative management actions. 19

After recognizing the obstacles, managers need to adapt to the principles of successful innovative companies. James Brian Quinn, an expert in the innovation field, found the following factors in large corporations that are successful innovators: Atmosphere and vision: Innovative companies have a clear-cut vision of and the recognized support for an innovative atmosphere. Orientation to the market: Innovative companies tie their visions to the realities of the marketplace. Small, flat organizations: Most innovative companies keep the total organization flat and project teams small. Multiple approaches: Innovative managers encourage several projects to proceed in parallel development. Interactive learning: Within an innovative environment, learning and investigation of ideas cut across traditional functional lines in the organization.

 Skunkworks: Every highly innovative enterprise uses groups that Function outside traditional lines of authority. This eliminates bureaucracy, permits rapid turnaround, and instills a high level of group identity and loyalty.20

Reengineering Corporate Thinking

To establish corporate entrepreneuring, companies need lo provide the freedom and encouragement intrapreneurs require to develop their ideas.21 This is often a problem in enterprises because many top managers do not believe entrepreneurial ideas can be nurtured and developed in their environment. They also find it difficult to implement policies that encourage freedom and unstructured activity. But managers need to develop policies that will help innovative people reach their full potential. Four important steps for establishing this new thinking follow: 1.Set explicit goals. These need to be mutually agreed on by worker and management so that specific steps are achieved. 2.Create a system of feedback and positive reinforcement. This is necessary for potential inventors, creators, or intrapreneurs to realize that acceptance and reward exist. 3.Emphasize individual responsibility. Confidence, trust, and accountability are key features in the success of any innovative program. 4.Give rewards based on results. Reward systems should enhance and encourage others to risk and to achieve.22 Although each enterprise must develop a philosophy most appropriate for its own entrepreneurial process, a number of key questions can assist in establishing the type of process an organization has. Organizations can use the following questions to assess their enterprise. Applying these questions helps them feed back to the planning process for a proper approach. Does your company encourage, self-appointed intrapreneurs? Intrapreneurs appoint themselves to theirrole and receive the corporation's blessing for their selfappointed task. Despite this, some corporations foolishly try to appoint people to carry out an innovation. Does your company provide ways for intrapreneurs to slay with their enterprises? When the innovation process involves switching the people working on an ideathat is, handing off a

developing business or product from a committed intrapreneur to whoever is next in linethat person is often not as committed as the originator of a project. Are people in your company permitted to do the job in their own way, or are they constantly stopping to explain their actions and ask for permission? Some organizations push decisions up through a multilevel approval process so that the doers and the deciders never even meet. Has your company evolved quick and informal ways to access the resources to try new ideas?Intrapreneurs need discretionary resources to explore and develop new ideas. Some companies give employees the freedom to use a percentage of their time on projects of their own choosing and set aside funds to explore new ideas when they occur. Others control resources so tightly that nothing is available for the new and unexpected. The result is nothing new. Has your company developed ways to manage many small and experimental products and businesses? Today's corporate cultures favor a few well-studied, well-planned attempts to hit a home run. In fact, nobody bats 1,000, and it is better to try more times with less careful and expensive preparation for each. Is your system set up to encourage risk taking and to tolerate mistakes? Innovation cannot be achieved without risk and mistakes. Even successful innovation generally begins with blunders and false starts, Can your company decide to try something and slick with the experiment long enough to see if it will work, even when that may take years and several false starts? Innovation takes time, even decades, but the rhythm of corporations is annual planning. Are people in your company more concerned with new ideas or with defending their turf? Because new ideas almost always cross the boundaries of existing patterns of organization, a jealous tendency to "turfiness" blocks innovation.

 How easy is it to form functionally complete, autonomous teams in your corporate environment? Small teams with full responsibility for developing an intraprise solve many of the basic innovation problems. But some companies resist their formation. Do intrapreneurs in your company face monopolies, or are they free to use the resources of other divisions and outside vendors if they choose? Entrepreneurs live in a multioption universe. If one venture capitalist or supplier can't or won't meet their needs, they have many more from which lo choose. Intrapreneurs, however, often face single-option situations that may be called internal monopolies. They must have their product made by a certain factory or sold by a specific sales force. Too often these groups lack motivation or are simply wrong for the job, and a good idea dies an unnecessary death.23 Another way to create an innovative corporate atmosphere is to apply rules for innovation. The following rides can provide a hands-on guideline for developing the necessary innovative philosophy: 1. Encourage action. 2. Use informal meetings whenever possible. 3. Tolerate failure and use it as a learning experience. 4 Persist in getting an idea to market. 5. Reward innovation for innovation's sake. 6. Plan the physical layout of the enterprise to encourage informal communication. 7. Expect clever bootlegging of ideassecretly working on new ideas on company time as well as on personal time.

8. Put people on small teams for future-oriented projects. 9. Encourage personnel to circumvent rigid procedures and bureaucratic red tape. 10. Reward and promote innovative personnel. When these rules are followed, they create an environment conducive 10 and supportive of potentialentrepreneurs. The result is a corporate philosophy that supports intrapreneurial behavior. What can a corporation do to reengineer its thinking to foster the intrapreneurial process? The organization needs to examine and revise its management philosophy. Many enterprises have obsolete ideas aboutcooperative cultures, management techniques, and the values of managers and employees. Unfortunately, doing old tasks more efficiently is not the answer to new challenges; a new culture with new values has to be developed.24 Bureaucrats and controllers must learn to coexist with or give way to the designer and intrapreneur. Unfortunately, this is easier said than done. However, organizations can lake some steps to help restructure corporate thinking and encourage an intrapreneurial] environment: (1) early identification of potential intrapreneurs, (2) top management sponsorship of intrapreneurial projects, (3) creation of both diversity andorder in strategic activities, (4) promotion of intrapreneurship through experimentation, and (5) development of collaboration between intrapreneurial participants and the organization at large.25 Developing an intrapreneurial philosophy provides a number of advantages. One is that this type of atmosphere often leads to the development of new products and services and helps the organization expand and grow. A second is it creates a work force that can help the enterprise maintain its competitive posture. A third is it promotes a climate conducive to high achievers and helps the enterprise motivate and keep its bestpeople.

SPECIFIC ELEMENTS OF CORPORATE INTRAPRENEURIAL STRATEGY

When attempting to create an intrapreneurial strategy, organizations should be aware of the following considerations for reinventing the corporation: 1. The corporations that promote personal growth will attract the best people. 2. The challenge of the new century is to retrain the manager as coach, teacher, and mentor. 3. The best people seek ownership, and the best companies will provide it with bonus plans, stock incentive plans, employee stock-option plans, profit sharing, and even employee ownership per se. 4. Authoritarian management is being replaced by a networking, people style of management, characterized by horizontal coordination and support. 5. Intrapreneurship within the corporation allows employees the satisfaction of developing their ideas without the risk of leaving the company. 6. Large companies are taking lessons from small businesses and learning how to be flexible, to promote innovation, and to create spirit.21

Corporations that create an intrapreneurial strategy find that the ethos of the original enterprise often changes

dramatically.27 Traditions are set aside in favor of new processes and procedures. Some people, unaccustomed to operating in this environment, will leave; others will discover a new motivational system that encourages creativity, ingenuity, risk taking, teamwork, and informal networking, all designed to increase productivity and make the organization more viable. Some people thrive in an intrapreneurial environment; others dislike it intensely. The four critical steps of an intrapreneurial strategy are (I) developing the vision, (2) encouraging innovation, (3) structuring for an intrapreneurial climate, and (4) developing venture teams. Each of these are now discussed in greater detail.

Developing the Vision

The first step in planning an intrapreneurial strategy for the enterprise is sharing the vision of innovation that the corporate leaders wish to achieve.2" Since it is suggested that corporate entrepreneuring results from the creative talents of people within the organization, employees need to know about and understand this vision. Shared vision is a critical element for a strategy that seeks high achievement (see Figure 3.1). This shared vision requires identification of specific objectives for corporate entrepreneuring strategies and of the programs needed to achieve those objectives. Author and researcher Rosabeth Moss Kanter has described three major objectives and their respective programs designed for venture development within companies. These are outlined in Table 3.2.

Encouraging Innovation

As will be discussed in Chapter 5, innovation is the specific tool of the entrepreneur. Therefore, corporations must understand and develop innovation as the key clement in their strategy. Numerous researchers have examined the importance of innovation within the corporate environment.29

Innovation is described as chaotic and unplanned by some authors,30 while other researchers insist it is a systematic discipline.31 Both of these positions can be true depending on the nature of the innovation. One way to understand this concept is to focus on two different types of innovation: radical and incremental.32 Radical innovation is the launching of inaugural breakthroughs such as personal computers. Post-it Notes, disposable diapers, and overnight mail delivery. These innovations take experimentation and determined vision, which are not necessarily managed hut must be recognized and nurtured. Incremental innovation refers to the systematic evolution of a product or service into newer or larger markets. Examples include microwave popcorn, popcorn used for packaging (to replace Styrofoam), frozen yogurt, and so forth. Many times the incremental innovation will take over after a radical innovation introduces a breakthrough (see Figure 3.2). The structure, marketing, financing, and formal systems of a corporation can help implement incremental innovation. Jan Carlzon, CEO of SAS Airlines, has explained that his organization did not do one thing 1,000 percent better. Rather, his organization (referring to his people) did 1,000 things 1 percent better.

Both types of innovation require vision and support. This support takes different steps for effective development (see Table 3.3). In addition, they both need a championthe person with a vision and the ability to share it.33 And finally, both types of innovation require an effort by the top management of the corporation to develop and educate employees concerning innovation and intrapreneurship, a concept known as top management support.34 Encouraging innovation requires a willingness not only lo tolerate failure but also to learn from it. For example, one of the founders of 3M, Francis G. Oakie, had an idea to replace razor blades with sandpaper. He believed men could rub sandpaper on their face rather than use a sharp razor. He was wrong and the idea failed, but his ideas evolved until he developed a waterproof sandpaper for the auto industry, a blockbuster success! Thus, 3M's philosophy was born. Innovation is a numbers game: the more ideas, the better the chances for a successful innovation. In other words, to master innovation companies must have a tolerance for failure. This philosophy has paid off for 3M. Antistatic videotape, translucent dental braces, synthetic ligaments for knee surgery, heavy-duty reflective sheeting for construction signs, and, of course.

Post-it Notes are just some of the great innovations developed at 3M. Overall, the company has a catalog of 60,000 products. 35

Today 3M follows a set of innovative rules that encourage employees to foster ideas. The key rules include the following: Don't kill a project. If an idea can't find a home in one of 3M's divisions, a staffer can devote 15 percent of his or her time to prove it is workable. For those who need seed money, as many as 90 Genesis grants of $50,000 are awarded each year. Tolerate failure. Encouraging plenty of experimentation and risk Taking allows more chances for a new product hit. The goal: Divisions must derive 25 percent of sales from products introduced in the past live years. The target may be boosted to 30 percent in some cases. Keep divisions small. Division managers must know each staffer's first name. When a division gets too big, perhaps reaching $250 million to $300 million in sales, it is split up. Motivate the champions. When a 3M employee has a product idea, lie or she recruits an action team to develop it. Salaries and promotions are tied to the product's progress. The champion has

a chance to someday run his or her own product group or division. Stay close to the customer. Researchers, marketers, and managers visit with customers and routinely invite them to help brainstorm product ideas, Share the. wealth. Technology, wherever it is developed, belongs to everyone.36
Structuring for an Intrapreneurial Climate

When reestablishing the drive to innovate in. today's corporations, the final and possibly most critical step is to invest heavily in entrepreneurial activities that allow new ideas to flourish in an innovative environment. This concept, when coupled with the other elements of an innovation strategy, can enhance the potential for employees to become venture developers. To develop employees as a source of innovations for corporations,companies need to provide more nurturing and information-sharing activities.37 In addition to establishing entrepreneurial ways and nurturing intrapreneurs, they need to develop a climate that will help innovative-minded people reach their full potential. Employee perception of an innovative climate is critical for stressing the importance of management's commitment not only to the organization's people but also to the innovative projects. The importance of tin organizational climate for intrapreneurship is further emphasized by researcher Deborah V. Brazeal's model for internally developed ventures.38 Figure 3.3 illustrates the model's focus on a joint function between innovative individuals and organizational factors. Brazeal defines corporate venturing as "an internal process that embraces the ultimate goal of growth through the development of innovative products, processes, and technologies" that should be institutionalized with an emphasis on long-term prosperity. Thus, for organizations to promote innovation among their employees, they must give careful attention to the melding of an individual "s attitudes, values, and behavioral orientations with the

organizational factors of structure and reward. Ultimately, the key objective is to enhance a firm's innovative abilities by developing an organizational environment supportive of individuals. As a way for organizations to develop key environmental factors for intrapreneurial activity, an intrapreneurship training program (ITP) often induces the change needed in the work atmosphere. It is not our intent to elaborate completely on the content of a training program here, hut a brief summary of an actual program is presented to provide a general understanding of how such a program is designed to introduce an intrapreneurial environment in a company. This award-winning training program was intended to create an awareness of intrapreneurial opportunities in an organization. The ITP consisted of six four-hour modules, each designed to train participants to support intrapreneurship in their own work area,11 ' The modules and a brief summary of their contents follow:

1. Introduction. This module consisted of a review of managerial and organizational behavior concepts, definitions of intrapreneurship and related concepts, and a review of several intrapreneurial cases. 2. Personal creativity. This module attempted to define and stimulate personal creativity. It involved a number of creativity exercises and had participants develop a personal creative enrichment program. 3. Intrapreneuring. A review of the current literature on the topic was presented here, as well as in-depth analyses of several intrapreneuring organizations. 4. Assessment of current culture. A climate survey (not the research instrument) was administered to the training group for the purpose of generating discussion about the current facilitators and barriers to change in the organization.

5. Business planning. The intrapreneurial business planning process was outlined and explained. The specific elements of a business plan were identified and illustrated, and an example of an entire business plan was presented. 6. Action planning. In this module participants worked in teams and created action plans designed to bring about change to foster intrapreneurship in their own workplaces. To validate the training program's effectiveness, a questionnaire titled the "Intrapreneurship Assessment Instrument" (IAI) was developed by researchers Donald F. Kuratko. Jeffrey S. Horn shy, and Ray V. Montagno to provide for a psychometrically sound instrument that measured key entrepreneurial climate factors from the existing intrapreneurship literature. The responses to the IAI were statistically analyzed and resulted infive identified factors. Each of the factors discussed next are aspects of the organization over which management has some control. Each is briefly defined with illustrations of specific elements of a firm's environment relative to each dimension. Management support. This is the extent to which the management structure itself encourages employees to believe that innovation is, in fact, part of the role set for all organization members. Some of the specific conditions reflecting management support would be quick adoption of employee ideas, recognition of people who bring ideas forward, support for small experimental projects, and seed money to get projects off the ground. Autonomy/work discretion. Workers have discretion to the extent that they are able to make decisions about performing their own work in the way they believe is most effective. Organizations should allow employees to make decisions about their work process and should avoid criticizing them for making mistakes when innovating. Rewards/reinforcement. Rewards and reinforcement enhance the motivation of individuals to engage in innovative behavior. Organizations must be characterized by providing rewards

contingent on performance, providing challenges, increasing responsibilities, and making the ideas of innovative people known to others in the organizational hierarchy. Time availability. The fostering of new and innovative ideas requires that individuals have time to incubate these ideas. Organizations must moderate the workload of people, avoid putting time constraints; on all aspects of a person's job, and allow people to work with others on long-term problem solving. Organizational boundary. These boundaries, real and imagined, prevent people from looking at problems outside their own jobs. People must be encouraged to look at the organization from a broad perspective. Organizations should avoid having standard operating procedures for all major parts of jobs and should reduce dependence on narrow job descriptions and rigid performance standards.40 The statistical results from the IAI demonstrated support for this underlying set of internal environmental factors that organizations need to focus on when seeking to introduce an intrapreneurial strategy. These factors, as well as the previous research mentioned, arc the foundation for die critical steps involved in introducing an intrapreneurial climate. Another researcher, Vijay Sathe, has suggested a number of areas on which corpora-lions must focus if they are going LO facilitate intrapreneurial behavior. The first is to encouragenot mandateintrapreneurial activity. Managers should use financial rewards and strong company recognition rather than rules or strict procedures to encourage corporate entrepreneur ship. This is actually a stronger internal control and direction method than traditional parameters. Another area is the proper control of human resource policies. Managers need to remain in positions for a period long enough to allow them to learn an industry and a particular division. Rather than move managers around in positions, as is the case in many companies, Sathe suggests "selected

rotation," in which managers are exposed to different but related territories. This helps managers gain sufficient knowledge for new-venturedevelopment. A third factor is for management to sustain a commitment to intrapreneurial projects long enough for momentum to occur. Failures will inevitably occur, and learning must be the key aftermath of those failures. Thus, sustained commitment is an important element in managing corporate entrepreneurship. A final element Sathe mentioned is to bet on people, not on analysis. Although analysis is always important to judge a project's progression, it should be done in a supportive rather than an imposed style. The supportive challenge can help intrapreneurs realize errors, test their convictions, and accomplish a self-analysis.41 It should he mentioned that the exact rewards for corporate entrepreneuring are not yet agreed on by most researchers.42 Some believe allowing the inventor to take charge of the new venture is the best reward. Others say it is allowing the corporate entrepreneur more discretionary time to work on future projects. Still others insist that special capital, called intracapital, should be set aside for the corporate entrepreneur to use whenever investment money is needed for further research ideas. In light of these climate elements, it is clear that change in the corporate structure is inevitable if intrapreneurial activity is going to exist and prosper. The change process consists of a series of emerging constructions of people, corporate goals, and existing needs. In short, the organization can encourage innovation by relinquishing controls and changing the traditional bureaucratic structure.45 Developing Venture Teams Venture teams and the potential they hold for producing innovative results are recognized as the productivity breakthrough of the 1990s, Certainly, no one doubts that their popularity is on the rise.

Companies that have committed lo a venture team approach often label the change they have undergone a "transformation" or a "revolution." This new breed of work team is a new strategy for many firms. It is referred to as self-directing, self-man aging, or highperforming, although in reality a venture team includes all of those descriptions.44 In examining the entrepreneurial development for corporations, Robert Reich found that intrapreneurship is not the sole province of the company's founder or its lop managers. Rather, it is diffused throughout the company, where experimentation and development occur all the time as the company searches for new ways to build on the knowledge already accumulated by its workers. Reich's definition of collective entrepreneurshipfollows:
In collective entrepreneurship, individual skills are integrated into a group; this collective capacity to innovate becomes something greater than the sum of its parts. Over time, as group members work through various problems and approaches, they learn about each other's abilities. They learn how they can help one another perform better, what each can contribute to a particular project, how they can best take advantage of one another's experience. Each participant is constantly on the lookout for small adjustments that will speed and smooth the evolution of the whole. The net result of many such small-scale adaptations, effected throughout the organization, is to propel the enterprise forward.45

In keeping with Reich's focus on collective entrepreneurship, venture teams offer corporations the opportunity to use the talents of individuals but with a sense of teamwork. A venture team is composed of two or more people who formally create and share the ownership of a new organization.46 The unit is semi autonomous in the sense it has a budget plus a leader who has the freedom to make decisions within broad guidelines. Sometimes the leader is called a "product champion" or an "intrapreneur." The unit is often separated from other parts of the firmin particular, from parts involved withdaily activities. This prevents the unit from engaging in procedures that can stifle innovative activities. If the venture proves successful, however, it eventually is treated

the same as other outputs the organization produces, it is then integrated into the larger organization.47 In many ways, a venture team is a small business operating within a large business, and its strength is its focus on design (that is, structure and process) issues for innovative activities. One organization that operated successfully with the venture team concept was the Signode Corporation (see the Contemporary Entrepreneurship box). Specific intrapreneurship strategies vary from firm to firm. However, they all have similar patterns, seeking a proactive changing of the status quo and a new, flexible approach to operations management.

THE INTERACTIVE PROCESS OF INTRAPRENEURSHIP_

Who Are Intrapreneurs?

Intrapreneurs are not necessarily the inventors of new products or services but are the persons who can turn ideas or prototypes into profitable realities. They are the people behind a product or service. They are team builders with a commitment and a strong drive to see their ideas become a reality. Perhaps most surprising, they are typically of average or slightly above-average intelligencethey are not geniuses. Most intrapreneurs begin their "intraprise" with an idea. This idea typically starts as a vision, often referred to as the "daydreaming phase." Here the intrapreneur mentally goes through the process of taking the idea to fruition. Different pathways are thought through, and potential obstacles and barriers are mentally examined. The intrapreneur of the Pontiac Fiero, Hulki Aldikacti, provides an example of this process. When Aldikacti first came up with the idea for the Fiero, he was unsure of what the car would look like. So he built a wooden mock-up of the passenger compartment. He then sat in the model and imagined what it would feel like lo drive the finished car. This helped him develop and perfect the final product.

Initially, the intrapreneur is the general manager of a new business that does not yet exist. In the beginning the individual may specialize in one area, such as marketing or research and development, but once the intraprise is started, he or she quickly begins to learn all the project's facets. The intrapreneur soon becomes a generalist with many skills. Intrapreneurs are sometimes captured by the description as "a dreamer who does." They tend to be action oriented. They can move quickly to get things done. They are goal oriented, willing lo do whatever it takes to achieve their objectives. They are also a combination of thinker, doer, planner, and worker. They combine vision and action. Dedication to the new idea is paramount. As a result, intrapreneurs often expect the impossible from themselves and consider no setback too great to make their venture successful. They are self-determined goal setters who go beyond the call of duty in achieving their goals. 48 (See Table 3.4 for the intrapreneur's ten commandments.) When faced with failure or setback, intrapreneurs employ an optimistic approach. First, they do not admit they are beaten; they view failure as a temporary setback to be learned from and dealt with. It is not seen as a reason to quit. Second, they view themselves as responsible for their own destiny. They do not blame their failure on others but instead focus on learning how they might have done better. By objectively dealing with their own mistakes and failures, intrapreneurs learn to avoid making the same mistakes again, and this, in turn, is part of what helps make them successful.

Intrapreneurial Myths Dispelled

A great similarity exists between entrepreneurs and intrapreneurs. Consequently, some of the myths about entrepreneurs have earned over as myths about intrapreneurs. These myths sometimes affect the impressions peers and supervisors have of intrapreneurs. They follow, along with a discussion of each: 1. Myth: The primary motivation of intrapreneurs is a desire for wealth; hence, money is the prime objective. Fact: The primary motivation of intrapreneurs is the process of innovation: The freedom and ability to innovate are the prime motivators. Money is only a tool and a symbol of success. 2. Myth: Intrapreneurs are high risk takersthey arc gamblers who play for high stakes. Fact: Moderate risk taking is a more realistic description of intrapreneurs' actions. Because of their insatiable desire to achieve, small, calculated, and analyzed risks are the favorite stepping-stones of these individuals.

3. Myth: Because intrapreneurs lack analytical skills, they "shoot from the hip." This has led to a philosophy of "luck is all you need." Fact: Intrapreneurs are extremely analytical. Although it may appear they are lucky and shoot from the hip, in truth, they are well prepared, understand innovation, and perceive market needs very well. 4. Myth: Intrapreneurs lack morals or ethics due to their strong desire to succeed. They do not care how they succeed, just as long as they do succeed. Fact: In today's demanding, educated, and critical society, intrapreneurs must be highly ethical and have moral convictions consistent with society's expectations. If they do not have these convictions, they donot survive. 5. Myth: Intrapreneurs have a power-hungry attitude and are most interested in building an empire. They want the venture to grow as big and as fast as it can. Fact: Most intrapreneurial enterprises arc small and conservative. They are more interested in profit and growth than in empire building. The focus is on doing things right rather than doing them big. Table 3.5 on pages 74-75 compares the characteristics and skills of the intrapreneur with those of the traditional manager and entrepreneur.49
The Interactive Process of Individual and Organizational Characteristics

As we emphasized in Chapter 2, the entire new-venture creation process is an interaction of many factors.30 This is clear from the specific organizational strategies for intrapreneurship and the individual traits and characteristics of intrapreneurs. One research model was developed to illustrate the critical interaction of severalactivities rather than events that occur in isolation. Figure 3.4 illustrates the key elements of this process.

Researchers Jeffrey S. Hornsby, Douglas W. Naffziger, Donald F. Kuratko, and Ray V. Montagno believe the decision to act intrapreneurially occurs as a result of interactions among organizational characteristics, individual characteristics, and some kind of precipitating event. The precipitating event provides the impetus to behave intrapreneurially when other conditions are conducive to such behavior.51 Researcher Shaker Zahra identified a number of influencing factors in corporate entrepreneurship that could be viewed as types of precipitating events. These include environmental factors such as hostility (threats to a firm's mission through rivalry), dynamism (instability of a firm's market because of changes), and heterogeneity (developments in the market that create new demands for a firm's products). 52

These influencing factors seem to include some type of environmental or organizational change that precipitates or ignites the interaction of organizational and individual characteristics to cause intrapreneurial events. Some specific examples of precipitating events in the corporate entrepreneurship process could include the development of new procedures, a change in company management, a merger or acquisition, a competitor'smove to increase market share, the development of new technologies, a cost reduction, a change in consumer demand, and economic changes. The next major clement after the decision to act intrapreneurially is to develop an effective business plan. The entire plan will encompass all phases of the start-up research needed to clarify the operations of a new internal venture. (A complete analysis of business plan development is covered later in Chapter 10.) Although an accurate business plan is essential, its implementation and the ultimate success of the intrapreneurial idea depend on two factors. First, is the organization able to provide the needed resources? Second, can the intrapreneur overcome the organizational and individual barriers that may prohibit the new project?

The implementation of an intrapreneurial idea is the result of the interaction of the factors described in this chapter. After developing the feasibility analysis, acquiring the resources necessary for the new venture, and overcoming any existing organizational barriers, the intrapreneur is in a position to implement the idea and initiate the innovation. In Chapter 2, we emphasized that understanding the process of entrepreneuring is more important than understanding the

entrepreneur; likewise, understanding the intrapreneur is only one part of understanding the intrapreneurial process. The interactive nature of the process cannot be overstated. Intrapreneurship is multidimensional and relies on the successful inter-action of several organizational and individual activities.

SUMMARY

Intrapreneurship is the process of profitably creating innovation within an organizational setting. Most companies are realizing the need for corporate entrepreneuring. This need has arisen as a response to (1) the rapidly growing number of new, sophisticated competitors, (2) a sense of distrust in the traditional methods of corporate management, and (3) an exodus of some of the best and brightest people from corporations to become small-business entrepreneurs. When creating the climate for in-home entrepreneurial ways, companies must develop four climate characteristics: (1) explicit goals, (2) a system of feedback and positive reinforcement, (3) an emphasis on individual responsibility, and (4) rewards based on results. Organizations create corporate intrapreneuring in a number of ways. The first step is to understand the obstacles to corporate venturing. These are usually based on the adverse impact of traditional management techniques. The next step is to adopt innovative principles thatinclude atmosphere and vision, multiple approaches, interactive learning, and skunkworks. Specific strategies for corporate entrepreneurship entail the development of a vision as well as the development of innovation. Two types of innovation exist: radical and incremental. To facilitate the development of innovation, corporations need to focus on the key factors of top management support, time, resources, and rewards. Thus, commitment to and support of intrapreneurial activity arc critical. Venture teams are the semiautonomous units that have the collective capacity to develop new ideas. Sometimes referred to as serf-managing or high-performance teams, venture learns are emerging as the new breed of work teams formed to strengthen innovative developments. Intrapreneurs share a number of similar characteristics and traits. Among these traits arc a generalist point of view, an action orientation, an optimistic approach, self-determination, ambitious

goal setting, dedication to new ideas, and a willingness to accept mistakes and learn from them. At the end of this chapter we discussed the interactive process of intrapreneurship. We identified and attempted to dispel some of the myths about intrapreneurs. In addition, we examined the role of individual and organizational characteristics that impact intrapreneurship. KEY TERMS AND CONCEPTS bootlegging intracapital champion intrapreneurship collective entrepreneurship Intrapreneurship Assessment Instrument (IAI) corporate entrepreneurs hip radical innovation entrepreneurial economy skunkworks incremental innovation top management support interactive learning venture teams

REVIEW AND DISCUSSION QUESTIONS

1. In your own words, what is an intrapreneur? 2. What are two reasons that such a strong desire to develop intrapreneurs has arisen in recent years? 3. What are some of the corporate obstacles that must be overcome to establish an intrapreneurial] environment? 4. What are some of the innovative principles identified by James Brian Quinn that companies need to establish? 5. A number of corporations today are working to reengineer corporate thinking and encourage an intrapreneurial

environment. What types of steps would you recommend? Offer at least three and explain each. 6. What are five useful rules for innovation? 7. What are three advantages of developing an intrapreneurial philosophy? 8. Identify the four key elements on which managers should concentrate so as to develop an intrapreneurial strategy. 9. Explain the differences between radical and incremental innovation. 10. Identify the five specific entrepreneurial climate factors that organizations need to address in structuring their environment. 11. Why are venture teams emerging as part of a new strategy for many corporations. 12. Of the key intrapreneurial considerations set forth in Table 3.5, which three are of most value to practicingmanagers? Why? 13. How does an entrepreneur differ from an intrapreneur? Compare and contrast the two. 14. Why is it useful to understand some of the myths that have sprung up about intrapreneurs? Explain, using two of these myths as examples. 15. What exactly is the "interactive process" of intrapreneurship? Be specific. EXPERIENTIAL EXERCISE Developing Intrapreneurship Many ways of developing intrapreneurship exist. Some of these are presented in the following list. Write yesnext to those that would help develop intrapreneurship and no next to those that would not help develop intrapreneurship. __ 1. Create an innovative climate.

__ 2. Set implicit goals. __ 3. Provide feedback on performance. __ 4. Provide positive reinforcement. __ 5. Encourage structured activity. __ 6. Develop a well-defined hierarchical structure and stick to it. __ 7. Tolerate failure. __ 8. Encourage a bias for action. __ 9. Make extensive use of formal meetings. __ 10. Allow bootlegging of ideas. __ 11. Reward successful personnel. __ 12. Fire those who make mistakes as a way of creating a good example for others. __ 13. Make extensive use of informal meetings. __ 14. Encourage communication throughout the organization. __ 15. Discourage joint projects and ventures among different departments. __ 16. Encourage brainstorming. __ 17. Encourage moderate risk taking. __ 18. Encourage networking with others in the enterprise. __ 19. Encourage personnel not to fear failing. __ 20. Encourage personnel to be willing to succeed even if it means doing unethical things. Answers l.Y, 2. N, 3.Y, 4. Y, 5. N, 6. N, 7. Y, 8. Y, 9. N, 10. Y, ll.Y,12. N, 13.Y, 14. Y, 15. N, 16. Y, 17. N, 18. Y, 19. Y, 20. N

CASE3.1 SOUTHWEST AIRLINES: POSITIVELY OUTRAGEOUS LEADERSHIP

When Southwest Airlines first taxied onto the runway of Dallas's Love Field in 1971, industry gurus predicted it would be a short trip to bankruptcy for the Texas-based airline. But the first short-haul, low-fare, high-frequency, point-to-point carrier took a unique idea and made it fly. Today, Southwest Airlines is the most profitable commercial airline in the world. But it took more than a wing and a prayer for Southwest to soar to such lofty altitudes. It took a maverick spirit. From the beginning, Southwest has flown against convention. Southwest's fleet of 737sthe newest and safest in the industrystill makes only short hauls to 45 cities. The average flight distance is 394 miles. The airline does not offer baggage transfers or give seat assignments, and the only food it serves passengers is a bag of peanuts. But what Southwest may lack in amenities, it seems to more than make up for in what could be called positively outrageous service. "FUN" is the company's mandate! Leading the way is founder and CEO Herb Kelleher. "Herb Kelleher is definitely the zaniest CEO in the world," Libby Sartain, vice president of Southwest Airlines' People Department, admits. "Where else would you find a CEO who dresses up as Elvis Presley, who's on a first-name basis with 20,000 employees, and who has a heart as big as the state of Texas? His style has fostered an atmosphere where people feel comfortable being themselveswhere they can have a good time when they work." Legendary for his love of laughter, Kelleher calls his unique leadership style management by fooling around. "An important part of leadership, I think, is enjoying what you're doing and letting it show to the people that you work with," Kelleher reveals. "And I would much rather have a company that is bound by love, rather

than bound by fear." Kelleher's philosophy has been enthusiastically embraced by a work force that is 85 percent unionized. "Southwest's culture is designed to promote high spirit and avoid complacency. We have little hierarchy here. Our employees are encouraged to be creative and innovative, to break rules when they need to in order to provide good service to our customers," Sartain explains. "If you create the type of environment that a person really feels valued and they feel they make a difference, then they're going to be motivated. That's the type of environment we create here for our employees," Rita Bailey, Southwest's director of training, adds. Beginning with its new employee orientation, the airline nurtures intrapreneurship by grooming a work force of leaders. "You can do whatever it takes to keep this airline on top," an orientation instructor tells his class of newly hired staffers. At Southwest Airlines's University for People, future managers and supervisors attend a course titled "Leading with Integrity." Through a series of role-playing exercises, employees learn that trust, cooperation, mutual respect, and good communication are the components of success. "An organization that has an esprit, that does things cooperatively and voluntarily rather than through coercion, is the most competitive organization you can have," Kelleher asserts. These guiding principles have earned Southwest Airlines the distinction of being named one of the ten best companies to work for in America. Employees are valued and recognized in many ways for their achievements. Perhaps the most prestigious is Southwest's "Heroes of the Heart" award. Each year, one outstanding department has its name tattooed on a Southwest Jet. Southwest was the first airline to offer stock options to its employees. Today, employees own approximately 10 percent of the company. In the lobby of Southwest Airlines's corporate headquarters is a prominent tribute to the men and women of Southwest. It reads: "The people of Southwest Airlines are the creators of what we have becomeand what we will be. Our people transformed an

idea into a legend. That legend will continue to grow only so long as it is nourished by our people's indomitable spirit, boundless energy, immense goodwill, and burning desire to excel. Our thanks and our love to the people of Southwest Airlines for creating a marvelous family and wondrous airline." Questions 1. Describe some of the factors needed to reengineer corporate thinking that Southwest Airlines already exhibits. 2. What specific elements of a corporate entrepreneurial strategy are apparent within Southwest Airlines? 3. How has Herb Kelleher structured a climate conducive to entrepreneurial activity?