Economic Affairs

Let intrapreneurs bloom

Companies that want to encourage employees to innovate from within need to maximise opportunity, not minimise risk

Big companies are not known to be entrepreneurial. Many of them don't know, or don't believe, they have entrepreneurs in their midst. Indeed, they are often quicker to stamp them out than seek them out.

So it was encouraging to read in The Business Times last week that in battling the threat from more nimble fintechs, some big banks have put systems in place to tap their employees for innovation.

Standard Chartered Bank gives its worldwide staff 100 "innovation dollars" each to invest in ideas they like, with the winning ideas going up to management. OCBC Bank has an innovation laboratory called The Open Vault, where bankers can experiment with new concepts after hours. DBS Bank has a programme to pump money into employees' start-up projects and it even allows them to raise funds from outside parties.

These are examples of what, in the business literature, is called "intrapreneurship", a term coined by serial entrepreneur turned corporate adviser Gifford Pinchot.

Dictionary.com defines an intrapreneur as "an employee of a large corporation who is given freedom and financial support to create new products, services, systems, et cetera, and does not have to follow the corporation's usual routines or protocols".

You might reasonably wonder whether such people exist. After all, if they really were entrepreneurs, would they not be already running their own companies instead of working for big organisations?

The research suggests that they do indeed exist.

In an article titled Recognise Intrapreneurs Before They Leave in the Harvard Business Review of September 2013, Dartmouth College's Professor Vijay Govindarajan and innovation strategist Jatin Desai noted that typically, in a firm with 5,000 employees, there are at least 250 natural innovators, of which at least 25 are great intrapreneurs who can build the next business for the firm. But most of them are hiding.

Other research corroborates this. Dr Tomas Chamorro-Premuzic, a professor of business psychology at University College London and Columbia University, found that 70 per cent of successful entrepreneurs incubated their business ideas while being employed by someone else. His sobering conclusion: "By failing to attend to their employees' ideas... bad leaders accidentally stimulate entrepreneurship."

Many progressive companies, such as 3M, Google, Accenture, Adobe and Deloitte, have put formal systems in place to ferret out and encourage their intrapreneurs.

Mr Hugh Mason, co-founder of the Singapore-based innovation consultancy Joyful Frog Digital Innovation, who has mentored more than 500 companies over the past 20 years, including some 50 multinational corporations, said deeply entrenched corporate culture is a big part of the problem, and it is common in Singapore.

"If the culture of the company is about minimising risk, it won't be able to maximise opportunity,'' he said. "If you try to be an intrapreneur, you might discover that your biggest enemies are your own colleagues - they are trying to minimise risk."

Many well-known products and services are the result of intrapreneurial efforts - including Gmail, which was the first to integrate a search function with e-mail; the Post-it note (whose inventor at 3M got tired of bookmarks falling out of his books); and the SR-71 "Blackbird", the innovative long-range reconnaissance aircraft that came out of Lockheed Martin's skunkworks, where a small team was allowed to work independently, freed from the usual corporate constraints.

So why don't more big companies do this? Why is intrapreneurship more the exception than the rule?

Mr Hugh Mason, co-founder of the Singapore-based innovation consultancy Joyful Frog Digital Innovation, who has mentored more than 500 companies over the past 20 years, including some 50 multinational corporations, said deeply entrenched corporate culture is a big part of the problem, and it is common in Singapore.

"If the culture of the company is about minimising risk, it won't be able to maximise opportunity,'' he said. "If you try to be an intrapreneur, you might discover that your biggest enemies are your own colleagues - they are trying to minimise risk."

That was the story at Kodak - where digital photography was invented, but discouraged, because the company was making a lot of its money from film - as well as Research In Motion (the maker of BlackBerry phones) and Nokia, both of which were doing so well from feature phones that they failed to invest in the technology for smartphones.

A related problem, Mr Mason said, is alignment with corporate objectives, which are often influenced by a company's existing products. The once high-flying Xerox had the technology to make computers (some of which companies such as Microsoft and Apple copied) but didn't, because whatever it produced had to look like a photocopier.

Rigid adherence to preset goals, in which big companies excel, can be another problem. Preset goals enable companies to create audit trails to measure progress. Many large companies in Singapore have departments dedicated to doing just that.

But it is hard to do with innovation, which is often the result of exploration.

A lot of entrepreneurs are like sea captains exploring the world, said Mr Mason. "The Chinese emperor who empowered Admiral Zheng He in the 15th century didn't set him a specific goal. He just said: 'Go forth and discover interesting places'."

Like sea captains, when entrepreneurs hit obstacles, they change course.

And so, as Mr Pinchot's research shows, innovators often end up creating products that they didn't originally set out to do. The inventors of Viagra, which is used to treat erectile dysfunction, were actually trying to develop a treatment for heart disease. Bubble wrap, the packaging material, was originally intended to be used as wallpaper. Coca-Cola was invented as a medicine to treat morphine addiction.

Innovation is not a linear process. It comes up against barriers, mistakes and accidents, for which big companies often don't have much tolerance.

Shareholder pressure can be another deterrent to innovation, according to Mr Mason. Financially motivated shareholders want returns in the short term. Innovation, which yields returns over the longer term, is typically not high on their list of priorities. Ditto for company boards, which are more focused on productivity and automation than innovation.

Boards and chief executives also have a near-monopoly in the allocation of capital. In an interview in 2012, management guru and consultant Gary Hamel pointed out to me that many large companies, including in Singapore, allocate resources in much the same way as the former Soviet Union, where a small group of planners would decide on investments in everything, ranging from power plants to safety pins.

"People in companies have to fight for resources through several layers of management, and then finally, somebody at the top says 'we're going to invest', or 'we're not going to invest'," he said.

"There should be no monopoly on the allocation of capital. If I am a young employee and I have a new idea, there should be multiple places I can go to in the organisation to compete for funding. Because if I can go to only one person and that person's biases are all grounded in the past, the company will always miss the future."

EXPERIMENTS ARE THE KEY

Decentralised resource allocation, which allows small amounts of capital to be invested in multiple, low-cost experiments, leads to more innovation than big spending on expensive projects, Dr Hamel noted.

Most experiments will fail, but a few will succeed - as happened at companies such as Google, which continues to experiment even today. Remember, some of the most innovative companies started out dirt poor, said Dr Hamel.

Developing a culture of experimentation also helps big companies partner more effectively with start-ups - which is now essential, as many big banks that are partnering fintechs have learnt.

As Mr Pinchot put it: "To co-innovate with entrepreneurial firms, you need to come close to matching their ability to experiment, learn and change.

"And you can be an effective partner to entrepreneurial firms only if the relationships are managed on your side by intrapreneurs who are free to act rapidly without being second-guessed by bureaucrats."

For intrapreneurs to emerge and thrive, the bureaucrats must change too. Many deeply entrenched attitudes like "this is the way it's always been done" have to go out the window.

Entrepreneur Eric Ries, author of The Lean Startup, who has helped many large companies with intrapreneurship, pointed out that those that succeed understand that innovation has to be supported by a culture that runs through the entire organisation. "Even things like HR, legal, and IT need to be set up to support innovation rather than hinder it, which is often what they do," he wrote.

Mr Mason said most big companies in Singapore still don't get it. Some have "employee idea" schemes, but these produce incremental innovation at best. Even when partnering small companies, big companies tend to have an incrementalist mindset. Typically, the questions they ask are not "how can we transform our business?'' but "how cheaply can we do this?" and "can we do this in-house?"

"There is a lot of innovation theatre in Singapore," he said. "But, aside from a handful of companies that think long term, I can't say anybody is really doing it right."

But he doesn't want to sound too negative, he said. "We're at the beginning of something here. This is a fantastic opportunity."

A version of this article appeared in the print edition of The Straits Times on December 13, 2017, with the headline 'Let intrapreneurs bloom'. Print Edition | Subscribe