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Innovation Through Intrapreneuring

by Gifford Pinchot - 1987
Published in Research Management March-April 1987
Volume XXX No.2

In-house entrepreneurs, -- those "dreamers who -- can increase the speed and cost-effectiveness of technology transfer from R&D to the marketplace.

The economy of the United States is on an innovation treadmill. Our competitors enjoy cheaper labor, cheaper capital. and more government support than we. To maintain our competitive position, we need superior technology, more proprietary products and services, and better processes. As our competitors become more scientific, and managerially sophisticated, it takes them less and less time to understand and copy- our innovations. We have to increase our speed and cost-effectiveness of innovation in our country,- to match our competitors' increasing sophistication in copying and capitalizing on our technology,.

Most large companies operate stable businesses well. However, they are not as adept at starting new ones. Most are good at developing a new business from the idea stage on through research and prototype development. But they falter at the start-up stage-the stage of commercialization. Inefficient commercialization by big business has created opportunity for venture capitalists. The venture capital industry is producing 35 percent return on investment by taking frustrated R&D people and their rejected ideas out of large companies, and financing the commercialization of those ideas. That the venture capital community can make 35 percent ROI on rejected ideas and people should be a constant rebuke to everyone in the R&D community. Venture Capitalists have found a different way of managing innovation that gets returns which few of us can equal inside large organizations.

A Missing Factor In Corporate Innovation

The primary secret of the venture Capitalists' success is revealed in the way they select ventures for investment. They say: " I would rather have a class A entrepreneur with a Class B idea than a class A idea with a Class B entrepreneur." They put their faith in choosing the right people and then sticking with them, while many corporate managers would feel uncomfortable with a strategy dependent on trusting the talent, experience, and commitment of those implementing it. I believe the primary cause for the lower returns of corporate managers of innovation is their failure to understand the importance of backing the right people-this is their failure to identify, support, and exploit the "intrapreneurs" who drive innovation to successful conclusions.

Imagine the organization as a Cell, with R&D producing new genes. In the cell, there are also the productive capacity of the ribosomes, which are like factories ready to use the information in those new genes to produce new products. What's missing in most large organizations is linkage from idea to operation-by analogy the RNA. In most large organizations there are exciting new genes-new technologies but no broadly effective system of technology transfer. What is absent are large numbers of intrapreneurs devoted to turning new technologies into profitable new businesses, cost reductions, new features, and competitive advantages. Because we have tended to have scientific standards of excellence in R&D, we have tended to honor the inventor more than the implementor, more than the intrapreneur. The result is that we not only reward inventing more than intrapreneuring, but our management systems are far more supportive of invention than of commercialization.

The future role of R&D, the size of its budgets and its degree of autonomy all depend on efficient technology transfer. Older "hand-off systems" of development which ignore the role of the intrapreneur don't work, or at best are so slow and expensive they make R&D appear ineffective. Cost-effective innovation happens when someone becomes the passionate champion of a new idea and acts with great courage to push it through the system despite the "Not Invented Here" syndrome, and a11 the other forms of resistance which large organizations supply it is therefore important for R&D managers to understand and recognize intrapreneurs who can, when properly managed, greatly increase the speed and cost effectiveness of technology transfer.

Dreamers Who Do

Intrapreneurs are the "dreamers who do." In most organizations people are thought to be either dreamers or doers. Both talents are not generally required in one job. But the trouble with telling the doers not to bother about their dreams is that they dream anyway. When they are blocked from implementing dreams of how to help your company they're dreaming dreams of revenge. A mind is meant to imagine and then act. It is a terrible thing to split apart the dreamer and the doer.

What we need, then, is to restore the place for vision in everyone's job. One of my favorite stories is the story, of Nikola Tesla who invented the three-phase electric motor and a host of other things. It is said that he would build a model in his mind of a machine, such as a new generator, and then push it into the background of his consciousness, set it running and leave it going for weeks while he went about his other business. At the end of that time he'd pull it back into the foreground of his mind tear it down and check the bearings for wear. With such detailed imagination, what need is there for computer-aided design and finite element analysis?

While few of us can match Tesla's talent, imagination is the most concrete mental skill that people have. It Is more concrete than all the tools we have for analyzing businesses and a11 the formulas we have for analyzing stresses. Imagination is simply the ability to see something that doesn't yet exist as it might be. Unless we have Tesla's clarity of imagination, what we see may not be as precise as the results we can reach from doing calculations, but our vision is more concrete and more whole than any formula describing some aspect of a new design. And without this concrete skill, we do not have innovation.

An intrapreneur's imagination is very different from an inventor's. Inventors look five or ten years ahead and say, "wouldn't it be wonderful if such and such." They, imagine how a customer would respond to their new product, what the technology would be, how the technology could produce desired features, and all those sorts of things. Good inventors have the customer in mind, but their vision is usually, incomplete unless they are also intrapreneurs. They don't imagine in detail how to get from the here and now to that desired future. An intrapreneur, on the other hand, having seen the Promised Land moves back to the present and takes on the rather mundane and practical task of turning the prototype into a marketplace success. This too requires enormous imagination.

Intrapreneurs ask questions such as. "Who would I need to help me with this? How much would it cost? What things have to happen first?" and so forth. They may ask "Could we release this technology- onto the marketplace in product form aimed at such-and-such a customer need? No. If we did that it would immediately- bite into a very important market of one of our competitors who has the ability to respond and before we produced our second generation products there would be a tremendous competitive response. Let's back up a little bit. 'What if we put it out in this way instead? Well it wouldn't do quite as well on the first round but I begin to see it would give us a little more time to develop unbeatable second generation products."

Intrapreneurs have to constant juggle potential implementation plans. They do this in their imaginations initially. Of course. intrapreneurs also juggle implementation plans on paper as business plans and drawings, but much of the initial work is done in the shower, or when driving the car, or any situation in which one neither feels guilty about not doing something useful nor can one get to pencil and paper. At such times, we are forced to use our imaginations, and thus often do our most creative work.

Distinguish Intrapreneurs From Promoters

One of the keys to managing innovation cost-effectively is to choose the right people to trust. Too often when managers look for intrapreneurs they choose promoters instead. Promoters are very good at convincing people to back their ideas, but they lack the ability to follow through. Thus, one of the keys to managing innovation is to be able to distinguish between intrapreneurs and promoters.

One of the best ways to separate the intrapreneurs from the promoters is to see how they handle, and even how they think about, barriers to their ideas. When analyzing a potential intrapreneur, think of some of the ways their project might go wrong. Ask them how they might handle such a problem. Real intrapreneurs will have explored these problems in their imagination. They will have considered them while driving to work or taking a shower. The real intrapreneur has thought of three, five, or even ten possible solutions. They may pause for a moment trying to figure out which of those answers would appeal most to you because intrapreneurs do have a certain ability to sell, but they are not hearing the question for the first time. It will be very hard for you to think of a problem which they haven't considered.

Promoters, on the other hand, respond by saving the problem you bring up will never occur. They remind you again of how wonderful things will be ten years from now, of the hundreds of millions of dollars their product will be making. They will not even talk about the problem because they have no interest in the barriers along the way, to implementation. They are counting on you to solve all problems by giving them enough funding. They just want to tell you why their idea is so much better than anyone else's. They are, in fact so focused on getting approvals and funding, that they haven't planned how to get the job done. If you give them money in the name of intrapreneurship, you will not only, give intrapreneurship a bad name, but you will waste everything you invested. The most important thing a manager can do when managing innovation is to separate out the promoters, and invest only in intrapreneurs.

Many people doubt that they want entrepreneurial people in their organizations. Entrepreneurs, they believe, are driven by greed. They are high risk-takers, they shoot from the hip, and furthermore, they are dishonest. Fortunately every one of these myths is false. In fact, entrepreneurs seem to be driven by a vision which they believe is so important that they are willing to dedicate their lives to it even when it starts to have trouble. Every new idea runs into terrible obstacles. People who are driven only, by a desire for money, or promotion, or status simply do not have the persistence to move a new idea forward. It is the person with the commitment to carry, through who will move an idea into a practical reality.

Intrapreneurs and entrepreneurs are not high risk-takers, as many studies have shown. They like a 50-50 set of odds-not too easy not too hard. Having chosen a challenging objective, they do everything they can to reduce the risk.

Intrapreneurs seem to be equal in right brain and left brain, equally- intuitive and analytic. They make decisions based on intuition when data or time don't permit analytical solutions. When analysis will work, they use it.

Intrapreneurs may operate a little differently than other people. They often have personalities which make them difficult to live with, but their difficulties stem less from dishonesty than excessive directness. They often get themselves in trouble by saying exactly what they think because they don't seem to be good at compromising-strong politics are inherent in the cultures of very large organizations.

A New Monitor for the FAA

Vision and imagination make up half of "the dreamers that do." Action is the other half.

Intrapreneurs are often in trouble because they act when they are supposed to wait. They tend to act beyond the territory of their own job description and function. This boundary crossing is important. Charles House at Hewlett-Packard is a perfect example. House developed a new monitor for the Federal Aviation Administration that turned out to not quite meet the specs. (Failure is a typical way for stories of innovation to begin.) He responded to the disappointment by observing that despite not meeting the spot size criteria for this particular application, the fact that he had a monitor which was half as heavy, used half the power, and cost half as much meant he should find out what else it could be used for. He took the idea to the marketing people who asked the division's traditional customers if they, would like a monitor that was cheaper, but which had a slightly blurry display.

Nobody, seemed to want it. Being an intrapreneur, as opposed to just a researcher, House wasn't satisfied with talk. He took out the front seat of his Volkswagen Bug put the monitor in its place, and visited 40 customers in three weeks. At each stop he moved the monitor into the prospective customer's shop, hooked it up to their equipment, and asked whether this thing would do anything that's useful. By the end of the trip he had found several new, markets. House succeeded because he took the actions which were necessary for his prototype to go from technology, to business reality.

There are two important points in this story. One is that intrapreneurs perform their own market research. If your scientists and engineers are not allowed to do their own market research, then you have a major barrier to innovation.

The second point is that generally a new idea is so ugly only its mother could love it. Consequently, it is unrealistic to think that people in Marketing will understand a research idea in its early stages well enough to do valid marketing research. In general. they ask the wrong questions. They are trying to find out if it is a good idea, which in the early stages is the wrong question. The right question is: "I know this is a good idea; how am I going to present it in a way that some class of customers will agree? 'What are the ways in which this is a good idea? Who really needs it? How do I have to say this so that they will understand?"

The early stage of market research is searching for the market, not testing whether or not it is there. It is only after we have found a group of customers and learned how to talk to them, redesigned the product to meet their needs, and figured out how to position the product, that we can do the traditional form of market research which asks, "Will they buy it-is this a good idea?"

The idea of technically driven research is drifting into disrepute. We are told that we must first carefully identify, market needs and then invent what customers already know they want. This is rarely the way fundamental innovation works because we are not smart enough to invent to order. We are lucky- to invent anything with fundamentally new and protectable properties, and when we do so, we must then hunt for the most applicable markets.

To be sure, researchers do pursue what they perceive to be marketplace needs, but the final applications often turn out to be in some entirely different market. Scotch Tape was invented to better insulate refrigerated railroad cars. Radio was invented for point-to-point communication-missing the broadcast market entirely. Riston circuit board systems begin with a failure to produce a new photopolymer-based photographic film.

It is important for researchers to know about the marketplace, but important also to realize that for all of the thousands of unfilled or poorly filled marketplace needs each of us wishes to invent a proprietary solution for, we have the ability to invent a few. We know an anti-gravity, device would be useful and probably well-received by customers. We don't work on it because we don't know how to begin.

We know that television sets with better reception are desirable. Most of us don't work on them because we believe others have a competitive advantage in making them inexpensively.

We left Hewlett-Packard's Charles House doing his own market research and thus doing somebody else's job, as intrapreneurs often do. He came home enthusiastic and his boss' boss Dar Howard, believed in him and told him to go ahead for another year. Unfortunately, a few months later the chairman visited the laboratory in Colorado. David Packard listened to the marketing people say that the idea was no good, even after House's research. He also heard a negative vote from the corporate chief of technology, who was backing a different technology.

At that time, Tektronix, was giving Hewlett-Packard a hard time in the division's core business, and Packard said that when he came back to this laboratory next year, he did not want to see this product in the lab. Dar Howard went back to House and told him he just didn't know what excuse he could give for going on now. With that remark he left the door open just wide enough for Chuck to get his foot in. He showed that he felt for Chuck, but ...

House said, "What exactly did Packard say?" "When I come back to this laboratory next year, I don't want to see this product in the lab" "Good," Said Chuck, "we'll have it out of the lab and into manufacturing." And so it was. The monitor was used in the first manned moon landing and turned out to be a great success.

A few years later, Packard awarded House the Hewlett-Packard Award for Meritorious Defiance. "For contempt and defiance above and beyond the call of engineering duty," the certificate read. He made it clear that at Hewlett-Packard, courage counts more than obedience. Innovation requires this attitude.

Succeeding at Intrapreneurship

Every new idea will have more than its share of detractors. There is no doubt that being an intrapreneur is difficult, even in the most tolerant of companies. So how can people succeed at it?

1. Do anything needed to move your idea forward. If you're suppose to be in research but the problem is in a manufacturing process, sneak into the pilot plant and build a new process. If it is a marketing problem, do your own marketing research. If it means sweeping the floor, sweep the floor. Do whatever has to be done to move the idea forward. Needless to say, this isn't always appreciated and so you have to remember that:

2. It is easier to ask for forgiveness than for permission -If you go around asking, you are going to get answers you don't want, so just do the things that need to be done and ask later. Managers have to encourage their people to do this. It may be necessary to remove some layers of management that complicate and slow down the approval process.

3. Come to work each day willing to be fired. - I began to understand this more from talking to an old sergeant who had seen a lot of battle duty. He said, "You know, there is a simple secret to surviving in battle; you have to go into battle each day knowing you're already dead. If you are already dead, then you can think clearly and you have a good chance of surviving the battle."

Intrapreneurs, like soldiers, have to have the courage to do what's right instead of doing what they know will please the myriad of people in the hierarchy who are trying to stop them. If they are too cautious, they are lost. If they are fearful, the smell of fear is a chemical signal to the corporate immune system, which will move in quickly to smother the "different" idea.

I find that necessary courage comes from a sure knowledge that intrapreneurs have-that if their employer were ever foolish enough to fire them, they could rapidly get a better job. There is no way to have innovation without courage, and no real courage without self-esteem.

4. Work underground as long as you can. -- Every organization has a corporate immune system. As soon as a new idea comes up the white blood cells come in to smother it. I'm not blaming the organization for this. If it did not have an immune system it would die. But we have to find ways to hide the right new ideas in order to keep them alive. It is part of every manager's job to recognize which new ideas should be hidden and which new ideas should be exposed to the corporate immune system and allowed to die a natural death. Too often it is the best ideas that are prematurely exposed.

The Intrapreneurial Shortage

I've made an interesting discovery since I wrote Intrapreneuring. I used to think potential intrapreneurs were commonplace, that they were hard to find because they were in hiding. But I have found they are more rare in most large organizations than the 10 percent who are entrepreneurial in the population at large. There is a scarcity of people who are, brave enough to take on the intrapreneurial role: therefore, we have to lower the barriers and increase the rewards.

If there are not enough intrapreneurs in your company you can hire more. There are two ways to go about it: raiding successful intrapreneurs from other companies, and hiring more intrapreneurial people in entry positions.

Were I running an R&D organization, I would even take ads saying, "Wanted: Intrapreneurs." One could capitalize on widespread intrapreneurial frustration and selectively hire a fair number of courageous people who would move innovation forward. Second, I would focus on hiring potential intrapreneurs out of school. Here are two hints: One is that candidates' transcripts should contain both A's and D's. When intrapreneurial people are interested they get As. When they are not interested, they don't pretend. They are self-driven.

The second hint is that any history of self-employment predicts intrapreneurial success. The strongest demographic predictor of intrapreneurial success is having one or more self-employed parents. It is more important than birth order or any of the other commonly cited predictors. I guess it is a matter of having an entrepreneurial role model.

It is a particularly good idea to hire farm kids. They seem to make good intrapreneurs. I guess farm kids grow up with a kind of a can-do attitude and it never occurs to them that there is anything they aren't supposed to do. If the hay is on the ground, the bailer is broken and it is going to rain in six hours, you don't worry that you don't have a degree in bailer mechanics. Somehow farmers learn to get the job done.

Training Intrapreneurs

Training your people in acquiring intrapreneuring skills is as important as knowing whom to hire. Though most people imagine that intrapreneurs are born and not made, we have had good results training intrapreneurs. In our Intrapreneur Schools we ask for volunteers. This way we are training a select group of people who are courageous enough to volunteer for an intrapreneurial role. Training succeeds partly because it gives people permission to use a part of themselves that their supervisors have been trying to beat out of them for quite some time. They look around the room and say "My goodness, there are other people like me in this world and it seems that the corporation is really serious now about wanting this aspect of me employed." They get a tremendous rejuvenation and rebirth of vision and drive.

In addition, most intrapreneurs are missing skills for which training can help. They have some functional abilities which are often technical, and they've been convinced that they really cannot understand some things like accounting or marketing. They believe that those blind spots keep them from being the general manager of a new idea. They do not have to become excellent at all functions; they just have to understand enough to work easily with others in those fields. In fact, if the idea is good, success does not require great sophistication in many disciplines, just a journeyman like job that doesn't overlook the obvious. Training should be structured to build teams and so the whole team should work together while training.

Managing Intrapreneurs

Managers must choose intrapreneurs who are persistent, impatient, who laugh, and who face the barriers. Then they have to be willing to trust that the intrapreneurs know how to do their jobs and must give them what they are asking for resources and people to help carry forward their ideas. Since resources arc not infinite, they may have to take these things away from other people who are not intrapreneurs.

I know we are living in an age of head-count restrictions. Too often this means that everything stays the same. Whoever has three people gets three people next year. Anything new and growing will have too few people resources, and anything old and over the hill is going to have too many. We have to be courageous in sweeping out the old and giving the right people the resources they need to get the job done. The most effective use of a manager's time is in choosing whom to trust.

One very effective approach is to create heroes so intrapreneurs have role models within the company. Select a few of the most courageous intrapreneurs and publish their stories for everyone in the company to read. These stories should be written honestly, so that all the difficulties and problems faced by the intrapreneurs are presented so that people can see how barriers were overcome.

Keep R&D Close To The Action

It is important to bring your researchers close to model shops and pilot plants that allow dirty finger research. R&D people need to be able to test their ideas themselves-if they can't, they will fall back on more intellectual forms of research. Obviously, we'll hear more about discretionary. Time, the so-called 15 percent rules that many companies have. Other useful reward tools are seed money programs, the creation of cross-functional teams, and other ways to reduce the bureaucracy.

In conclusion, I issue a challenge to get your people to display courage, to display integrity and honesty to have a sense of proprietorship's if the business belonged to them. Help them to make the kind of decisions that would have to be made if that were true rather than the kinds they have to make in order to negotiate the turfs of a hostile bureaucracy. Encourage them to go into action and not wait for permission. Talking about these ideas is not enough. Between the words of top management and the intrapreneurs who can carry them out there are layers of management which punish independent thought, courage, impatience, and blunt honesty This is not something that you can devote a few hours to and fix. It is probably the most important aspect of your job, more important than getting the strategy right, because enough attention is being paid to strategy already.

You cannot have cost-effective innovation unless you hire, train and encourage intrapreneurs. The future legitimacy of R&D, the success of America's companies and of her economy depends on you, the R&D community, to do it right.

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