This article was kindly provided by Professor Peter Vogel and was originally published by IMD Business School. Find part 1 of the article on the MERIT Summit blog here.

From idea to market

Where do truly disruptive ideas come from? That’s the million-dollar question, which is evidently not easy to answer. However, there are some factors that enable the generation of truly novel ideas. Often, they occur at the intersection of three things: a strong market need (desirability), a novel or incredibly intuitive technology or system (feasibility), and a scalable and highly attractive business model (viability).

Good ideas take a while to incubate. Before they become useful, they may spend a long time – two or three years or even up to 20 – in the form of an intuition. Good ideas often come from a collision between different ideas that then form something bigger. Historically, systems that increase connectivity have been shown to be drivers of scientific and technological innovation. Managers should figure out a way to set up a system where ideas can mingle and swap, offering an easy way for colleagues to be in touch and “to borrow other people’s ideas” that might just complete the idea they are working on. But they should also leverage the external environment through open innovation, co-creation and crowdsourcing.

However, all the innovative ideas in the world are worth nothing if companies fail to implement them; and if the innovation is truly disruptive, the stakes are higher and the barriers even more daunting. In this context, it might be useful for managers to encourage their employees to embrace the lean start-up principles of building a minimum viable product (MVP), going out and testing it, learning from the feedback and adjusting their solution. This principle is based on the “fail fast and fail cheap” mindset, which in some cases can serve as a useful alternative to the traditional innovation mechanisms that remain behind closed doors until the perfect solution is finalised.

It is essential to take a holistic approach to intrapreneurship and to build an intrapreneurial ecosystem within the organisation.

Building a culture of intrapreneurship

Intrapreneurship can be defined as the application of start-up methods within a corporate environment. Building an intrapreneurial culture might be one of the toughest managerial challenges, but it is an essential part of dealing with change. Intrapreneurship facilitates multichannel interactions and helps reconcile bottom-up and top-down approaches to innovation. Finally, it leads to an organic diffusion of innovative ideas within a company.

Companies that transform towards an agile and intrapreneurial culture are more likely to develop radical innovations in-house. Promoting employees from the position of project manager to intrapreneur (possibly with some sort of stake in the initiative) can spur their dedication and passion for the job. However, managers should remember to design an appropriate reward and incentive structure, as well as a mechanism to spin radical innovative projects back into the company from the “innovation lab”. Often a successful new initiative fails when it comes back inside the business as it is placed into structures of the past. 

While an entrepreneur develops a business from start to finish, an intrapreneur (sometimes referred to as a diplomatic rebel) has a focused role in an established company, working to solve an issue within the business. Typically, an intrapreneur has more directly applicable skills to perform certain tasks than an entrepreneur and is exposed to more risks in the context of their job. Pinchot’s Ten Commandments of Intrapreneurship are:

1. Come to work each day willing to be fired.
2. Circumvent any orders aimed at stopping your dream.
3. Do any job needed to make your project work, regardless of your job description.
4. Find people to help you.
5. Follow your intuition about the people you choose, and work only with the best.
6. Work underground as long as you can – publicity triggers the corporate immune system.
7. Never bet on a race unless you are running in it.
8. Remember, it is easier to ask for forgiveness than for permission.
9. Be true to your goals but be realistic about the ways to achieve them.
10. Honour your sponsors.

Managers promoting intrapreneurship within their organisation should apply three steps to establish solid foundations for a truly intrapreneurial culture within their company: (1) have a clear vision and honest company values; (2) embrace a culture that accepts failure; and (3) encourage employees to take ownership of their ideas and turn them into reality.

Leading intrapreneurs

Innovation is a complex process and it needs fearless leadership. That is, leadership that is not only determined to maximise existing profits through continuous improvements (exploitation) but also willing to explore beyond the existing core competencies (exploration).

Exploitation is a company’s ability to keep aligned and efficient in managing today’s business demands. It refers to the past, previous investments, existing customer relationships, and the like, which still generate profits. Exploration is a company’s ability to innovate beyond its own core competencies. Exploration refers to the future, new technologies, new markets.

Balancing exploitation with exploration is the art of reconciling opposing tensions. Leaders therefore need to be ambidextrous, i.e. be able to effectively exploit all investments made to date and build on these achievements by exploring new areas and opportunities to ensure future viability.

Research has found that a truly ambidextrous organisation is the most effective approach for established firms to drive disruptive innovation. The best set-up appears to be that the disruptive innovation activities are positioned sufficiently outside the established firm, with their own culture, structures and processes, yet directly integrated with the top management team.

Key learnings

When building an intrapreneurial ecosystem, keep in mind:

1. Each ecosystem is unique. Don’t try just to replicate other organisations’ innovation ecosystems.
2. Put your USP first! What are your organisation’s core competencies and goals for innovation? What type of innovation are you looking for?
3. Holistic implementation is vital: It is not enough to simply establish an innovation lab somewhere – you really need to think through all the core dimensions from scratch and, most importantly, see how they are aligned with the overall vision and strategy of your innovation activities.
4. Adopt a multi-stakeholder approach: Involve all the necessary stakeholders, both inside and outside the organisation.
5. You need a “chief ecosystem officer” mandated to orchestrate the innovation ecosystem players within and outside the organisation. This person or entity should report directly to the top management team.
6. Bureaucracy blocks innovation. You should facilitate, but don’t regulate!

Register for the MERIT Regional Summit in Manchester where event participants will discuss and challenge the benefits of an intrapreneurial culture.