Good Thinking

Where It Starts

It was back in 1976 in a business trends piece for The Economist that Norman Macrae said corporations should engage in "alternative ways of doing things in competition with themselves." By 1983, author Rosabeth Moss Kanter was suggesting innovation pioneers could be found at all levels of the organization in The Change Masters: Innovations for Productivity in the American Corporation (Simon & Schuster).

Then a model to create a "self-organizing" and "less rigidly hierarchical" workplace emerged: Coining the word "intrapreneur," or intra-corporate entrepreneur, Elizabeth and Gifford Pinchot published their book Intrapreneuring in 1985 and made it their mission to teach large corporations how to make innovation more cost-effective by using the talents and productivity of their employees. And they have: Their Bainbridge Island, Washington-based innovation services firm has helped everyone from 3M and Campbell Soup to AT&T realize the potential of their employees.

Now everyone, from consulting firms like Pinchot & Co. to professors from the top B schools, is encouraging businesses to adopt some form of corporate entrepreneurship, and they're at their beck and call to help implement those programs. With Texas Instruments' Speak & Spell, Apple's Macintosh, Sony's PlayStation and Microsoft's much-anticipated Xbox as examples of corporate entrepreneurship successes, you can understand why.

However, letting employees set up shop under your umbrella may not be the best move for your business. Employees may know their products and services inside and out and have ideas on how to expand them or cut costs, but you may think it's too risky to change the focus of your company. That doesn't mean you can't learn from the intrapreneurship model.

"It would be too disruptive for small businesses to nurture things outside the current scope of activities," says Richard Leifer, associate professor of management and the project manager for the Radical Innovation Project at Rensselaer Polytechnic Institute's Lally School of Management and Technology in Troy, New York. "Focusing on breakthrough improvements within their current lines of business would be less disruptive."

Another concern is that too many entrepreneurs running around within one small business could harm ongoing operations. 3M lets all employees work on developing their own ideas as much as 15 percent of their workday, but Leifer suggests no more than 3 percent of a small company's population should be "out-of-the-box thinkers."

That leaves us with just one riddle to be solved: How entrepreneurial can you make your company without giving it a shock to its system?

"I call this the schizophrenic approach to management," explains Leifer. "We have to do our current activities well and continuously improve those activities. At the same time, we have to think of new ways of creating value and growth. And unless we find new areas for growth, companies--especially small ones--will fade away."

Leifer likes the intrapreneurial model in place at 3M ("a big company that acts small"): If you come up with a good idea, develop it and get support for it, you can eventually build that business and manage it. Companies like Lucent and 3M also let employees share in the profits of their corporate entrepreneurship. "This may be a little far afield for many small-business owners," he says, "but look at the upside and the downside. The upside is, everybody wins: The value of the company goes up, and you attract interesting people. The downside is, the traditional entrepreneur loses some direct control."

Giving up control--oh, dear. "Control is elusory anyway," says Ken Perry, senior consultant at Pinchot & Co. "What you really want is order. And we believe order appears more effectively when you allow for self-organization."

Sound tempting? If you're a small business, assuming a 3M-like form of corporate entrepreneurship wouldn't cause much of a culture clash. For well-established companies, however, it can be riskier. But one thing's for sure: Showing employees they can help create something groundbreaking lifts spirits, boosts productivity and can create loyalty where most businesses have little. And that prospect is hard to ignore for entrepreneurs fighting to stay innovative.

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This article was originally published in the July 2001 print edition of Entrepreneur with the headline: Good Thinking.

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