TITLE : INTRAPRENEURING: WHY YOU DON'T HAVE TO LEAVE THE CORPORATION TO BECOME AN ENTREPRENEUR.

DISCOVERING "THE DREAMERS WHO DO"

Why would anyone choose to be an intrapreneur if he or she could become an entrepreneur just as well?

I first asked myself this question in 1978 during a seminar at Bob Schwartz's School for Entrepreneurs in Tarrytown, New York. Of the four great opportunities for entrepreneurs that Bob mentioned, one seemed a contradiction in terms and the paradox attracted me. Quoting his friend, Norman Macrae, who in 1976 had written in the London Economist that "successful big corporations should devolve into becoming 'confederations of entrepreneurs,'" Bob suggested that-if anyone could figure out how to make it work-the opportunities awaiting entrepreneurs inside large corporations could be tremendous.

The idea was jarring: The independent entrepreneur and the "organization man" seemed irreconcilable opposites, at least until Bob exploded some of the myths about the personalities and motivations of entrepreneurs. This new perspective gave me the first clue as to how established firms might make a place for what I came to call "intrapreneurs." From the standpoint of a company, the benefits of having intrapreneurs are obvious: Intrapreneurs introduce and produce new products, processes, and services, which in turn enable the company as a whole to grow and profit.

But back then it was less clear to me exactly how to design a system and culture within a large organization that would allow a place for someone like the entrepreneur.

"The Coming Entrepreneurial Revolution: a survey," The Economist, Dee. 25, 1976, p. 42. Norman says he dreamed up the idea with his friend, John Diebold, at John's Institute of Public Poliey Studies. Needless to say, the resources of a large corporation can be attractive to a would-be innovator. Corporations can provide manufacturing facilities, networks of supportive suppliers, a depth of proprietary technology, all kinds of personnel resources, and marketing clout. Such advantages, however, are often offset by bureaucratic systems that inhibit intrapreneuring. These inhibitions are compounded by the popular image of the entrepreneur as a money-hungry empire builder, a personality antithetical to the culture of the big company.

But this image was among the myths Bob's school challenged. I learned, to my surprise, that the primary motivation for most entrepreneurs is not the acquisition of wealth. Many do become wealthy, but they do so almost by accident in the course of pursuing some vision of what their customers, and the rest of the world, might need or want. Since their ventures must be financially successful if they are to satisfy their customers' needs, money becomes an important way to measure progress-but in and of itself, it is rarely the purpose of the venture.

Entrepreneur Howard Vollum, cofounder of Tektronix, explains that when he started out he had no idea the company would become large; much less the largest employer in Portland. "I would have been quite satisfied with a small company," he said. "I wanted to provide the tools needed by those of us who were coming home from World War II. We discovered we could not go back to what we were doing before the war. We were hooked on electronics, but the tools we had to work with were antiquated. In the beginning I just wanted to build the best oscilloscopes in the world."

Indeed, entrepreneurs are primarily motivated to satisfy a personal need for achievement, usually by bringing the world new products and services that are meaningful to themselves as well as to the market. Understanding this, I realized that the entrepreneur's commitment to action and drive to introduce new products rapidly was precisely what laree orzanizations need. I was heartened by the fact that the primary goal for most entrepreneurs is not the acquisition of great personal wealth, for I saw little opportunity for accord should the entrepreneur within the corporation require the same multimillion-dollar payoffs an independent entrepreneur might receive upon launching a successful new business. Given this insight, the corporation's challenge to attract, motivate, and retain intrapreneurs appeared a solvable problem: Rewards for intrapreneurs would have to include something more directly related to intrapreneurial needs, in addition to salary and bonuses. I learned through conversations with dozens of new entrepreneurs that most leave corporations not primarily because they find their pay and benefits insufficient but because they feel frustrated in their attempts to innovate. They need empowerment to act as much as they need material compensation.

When entrepreneurs succeed in independent businesses, they earn much more than wealth and prestige; they earn the freedom to act. The capital earned in the ventures empowers entrepreneurs to take risk, adopt a larger time frame in which to try new ideas, and pay for their own mistakes without having to justify them to a boss.

Corporate entrepreneurs, despite prior successes, have no capital of their own to start other ventures. Officially, they must begin from zero by persuading management that their new ideas are promising. Unlike successful independent entrepreneurs, they are not free to guide their next ventures by their own intuitive judgments; they still have to justify every move. They have difficulty taking the long view because they never know whether their projects will be capriciously killed. How different this is from successful entrepreneurs who have capital of their own and thus can do as they choose.

Intrapreneurs' inability to use the earnings from one success to fund the next is among the greatest barriers to intrapreneuring. It is however a poor reason not to be an intrapreneur at least once, because success as an intrapreneur gives you the experience and track record to more easily succeed as an entrepreneur. Failing to empower successful intrapreneurs prevents corporations from benefiting from their seasoned innovators, who leave or become ineffective.

We know for certain that the entrepreneurial personality is to some degree intolerant of authority, and this makes it hard for intrapreneurs to beg for permission. I have seen intrapreneurs grow frustrated as they watched the corporation earning millions from their last business ventures while they remained unable to launch their next. What was needed if intrapreneurs were to remain inside the corporation, I concluded, was something that would function like capital does for the entrepreneur.

What I devised was a new system of rewards including "intracapital," a fund set aside by the corporation for use by a specific intrapreneur to start new businesses on behalf of the corporation. Originally, the purpose of the intracapital system was to reward past success with a tangible kind of freedom in the form of seed money for future ventures.

I then spent several weeks imagining how such a system might work. In the fall of 1978, four weeks after Bob Schwartz issued his challenge, I outlined the basic principles of such a system and coined the word "intrapreneur." Within three months I had sold my manufacturing firm and begun studying the intrapreneur and intvapreneuring in depth. At the time I was proud of the system I had created, but Bob and I agreed that corporations were not ready for it. That was just before the Japanese competitive scare hit, and American management was still too set in its ways to consider changing. Yet I knew the time would come for intrapreneurs.

To prepare for that time, I went to work for a new product consulting firm to see how new products and new services were handled in many different firms. I found myself bringing good ideas to firms that already had enough. Their real problem was that their intrapreneurs were prevented from implementing the ideas they already had, so bringing in more ideas solved the wrong problem. I decided again to dedicate myself to helping companies lower the barriers to implementing their people's own ideas by finding ways to encourage and empower the army of frustrated intrapreneurs which was their greatest resource for innovation.

Since deciding to work full time removing the barriers to new ideas within large corporations, I have divided my time among three tasks:

Helping audit and improve the environment for intrapreneurs in companies such as AT&T, Du Pont, 3M, Martin Marietta, and Xerox. (None of the specific information in this book comes from my studies of these companies as a consultant. I have taken the basic principles gathered from in-depth studies, and found examples of these principles in other firms.)

Making case studies in order to better understand the care and feeding of intrapreneurs everywhere.

Speaking to anyone who will listen about what I have learned.

After I agreed to write about intrapreneuring, it turned out that the publisher and I had different books in mind. They had expected one on how to succeed as an intrapreneur despite the system. I had hoped to explain how managers could create an environment supportive of innovation and intrapreneuring.

This book addresses both subjects, because understanding the basic barriers to intrapreneuring is useful both to would-be intrapreneurs and to their managers. In fact, most of the book is devoted to explaining how corporations and intrapreneurs interact, not to prescribing what to do about it.

Even when I direct my words specifically to intrapreneurs or to managers, I want the other group to listen in. By addressing intrapreneuring from both points of view, I hope to raise the level of dialogue about innovation and to make intrapreneurs, managers, and their organizations more effective. Right now, our society honors entrepreneurs, senior executives and inventors, but rarely intrapreneurs. If big companies want to quicken the pace of innovation and be cost effective at it, they must honor and empower intrapreneurs. Through this book, I hope to encourage and point the way for both intrapreneurs and those managers who want to help them flourish.

-Gifford Pinchot III January 1985