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Good Thinking

Lonely burden of innovation wearing you down? Tap the entrepreneurial zeal in your employees, and they'll start pitching ideas faster than you can implement them.

This story appears in the July 2001 issue of Entrepreneur. Subscribe »

We've reached another era in which everything--,, science--is moving at light speed. For the past coupleof years, innovative entrepreneurs got all the buzz. Now it'sthe that fuels the everyone'safter. It's what huge corporations call in consultants to getand what established need if they want to survive.And because it's pretty hard for one mind--even the great mindof an entrepreneur--to be on target all the time, many managementexperts suggest that higher-ups should lose the ego and giveemployees the opportunity to exercise their own .

Now, empowering with the freedom to innovate soundsgreat in theory, but as many consultants know, and asmany large corporations have found out, adopting a new way ofthinking--one that goes against the ingrained corporatehierarchy--is scary and not typically welcomed with open arms.It's only when a lucrative business or a morecost-effective way of operating emerges from a company's lowerranks that senior management wakes up and sees the potential inallowing employees to escape their hawk-like eye, sit in a basementoffice and create something unique.

For more ideas on motivating your employees to thinkcreatively, read "Just a Suggestion" and"Generating GreatIdeas from Employees."

Where It Starts

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

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

Now everyone, from consulting firms like Pinchot & Co. toprofessors from the top B schools, is encouraging businesses toadopt some form of corporate , and they're attheir beck and call to help implement those programs. With TexasInstruments' Speak & Spell, Apple's Macintosh,Sony's PlayStation and Microsoft's much-anticipated Xbox asexamples of corporate entrepreneurship successes, you canunderstand why.

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

"It would be too disruptive for small businesses to nurturethings outside the current scope of activities," says RichardLeifer, associate professor of management and the project managerfor the Radical Innovation Project at Rensselaer PolytechnicInstitute's Lally School of Management and Technology in Troy,New York. "Focusing on breakthrough improvements within theircurrent lines of business would be less disruptive."

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

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

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

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

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

Sound tempting? If you're a small business, assuming a3M-like form of corporate entrepreneurship wouldn't cause muchof a clash. For well-established companies, however, it canbe riskier. But one thing's for sure: Showing employees theycan help create something groundbreaking lifts spirits, boostsproductivity and can create loyalty where most businesses havelittle. And that prospect is hard to ignore for entrepreneursfighting to stay innovative.

See It In Action

There's no better reason to have more than a few mindsworking overtime than your business being in a fast-moving market.New York City-based Warp Solutions Inc., which uses its proprietarytechnology to aid in the distribution of content on the Web,expects $6 million in 2001 revenue. Because demand for thisrelatively new technology is high, innovation is a must.

"The demand for increased functionality is quitehigh--functionality that doesn't even exist," says KarlDouglas, 38, co-founder with John Gnip, 32, and Lenny Primak, 26."So you have to have an environment that's veryentrepreneurial, down to the developers that create the technologyitself." Since its start in December 1999, Warp has paidengineers $10,000 for successful patent applications. And dependingon the technology's revenue potential, stock options may beoffered.

Also crucial to Warp's success is the "rawmaterial"--sales and marketing data on customerdemand--employees receive. "One of the classic mistakes techcompanies make is, they isolate their marketing and technology[people] from each other. We set out to do the exactopposite," says Douglas.

With 70 employees who interact regularly, Warp doesn't needto host innovation fairs. Ideas are voiced freely and heard. Goodthing, too, because, says Douglas, "it's the only way tosurvive."

How It Works

The key is, you and your managers must wholeheartedly acceptthat employees should be allowed to create. Neal Thornberry,faculty director of the School of ExecutiveEducation at Babson College in Wellesley, Massachusetts, has dealtwith companies that entered Babson's corporate entrepreneurshipprogram but never really seemed to be on board. "We run intothose barriers every time," he says. "Let's [take]equity [compensation]. We ask senior management, 'Are youwilling to change the way you pay people?' And if they say no,we say, 'OK, don't do this program anymore, becauseyou're not serious.'" An additional sign that theprogram might not work, says Thornberry, is if the CFO--not themost willing to invest in anything risky--is overseeing theprogram's finances. Thornberry suggests appointing outsiders,like venture capitalists, to your board to review your innovationefforts.

What corporate entrepreneurship consultants stress are thebenefits of discovering new talent and the likelihood that ifinnovative employees are rewarded properly, they'll stay withthe company rather than resign to start their own businesses."Most of the people with the ideas prefer to stay insidebecause you have a heck of a brand," says Thornberry."[These people] probably already have a pool of talent acrossthe organization if they can get access to it--and a paycheck everyweek. Not everybody's cut out for the start-up entrepreneurshiprole."

The thing is, it's hard to tell who has the ability to comeup with fresh ideas, and the dedication to follow through, withoutgiving everyone a go. When Thornberry taught corporateentrepreneurship at electrical engineering and electronics companySiemens eight years ago, he was taken aback when the samefiftysomething engineer who demanded he be told exactly how to givea presentation (flip chart or overhead--weighty stuff) went on todevelop a successful business within the company, while twoStanford MBAs were the first to quit the program for fear it wouldthrow them off their career paths. Working with food companyMott's, which found innovators via a competitive application,Thornberry saw a secretary beat out a senior vice president."You never know who could be entrepreneurial unlessthey're put in a situation where it might bud," hesays.

"Particularly with the fall of dotcoms, there are a lot offolks with entrepreneurial tendencies who are now in themarketplace."

The first step in building an innovation program, says Leifer,is understanding that entrepreneurial minds are valuable--evenvital--to your company's success. Then you need to designate aperson (or group) to whom employees can turn with new ideas."If you identify people tasked with seeking out newideas," says Leifer, "there's a greater chance ofthose ideas emerging and being supported and nurtured."

If you sense a lack of entrepreneurial thought within yourcompany, Leifer suggests looking outside. "Particularly withthe fall of the dotcoms, there are a lot of folks withentrepreneurial tendencies who are now in the marketplace," hesays.

You'll be surprised by not only how re-energized youremployees are once they're granted entrepreneurialresponsibilites, but also the skills they'll learn. "Allof a sudden the five- or 10-person team [of] programmers ortechnical engineers has to do sales and marketing [to get theirideas funded internally], deal with finances and do human resourceswork," says Perry. "They're no longer just individualcontributors, but with new management and business skills, theybecome candidates for leadership roles outside their specialtyarea."

Is It For You?

So how do you know whether you need an innovation program? Hereare a few signs to note, says Leifer: Sales start to erode,customers start asking whether you're doing anything new, orgood employees start to leave the company. "There's nocookbook approach," says Leifer. "It depends on thepersonalities of the company leaders, the culture of the companyand the industry. But most companies we've seen have to thinkabout reinventing themselves and [their products] . . . to staycompetitive and successful. It's a big challenge."

Now There's an Idea!

If Bill Ernstrom has his way, lots of ideas will be born fromhis corporate entrepreneurship program.

VoyantTechnologies Inc. is four years old, but the company, aprovider of audio-conferencing technology, only started promotinginnovation in the most cost-effective way in February--via itsintranet.

Using that network, Westminster, Colorado-based Voyant's 200employees learn about the company's history as well as the"Product Implementation Process"--rules for launchingentrepreneurial ideas. "That's a really important part,because if you don't know the ground rules, then it'simpossible to do it--even if you have a great idea," says CEOBill Ernstrom, 37.

Further fueling innovation is the Bright Ideas program, whichrewards both entrepreneurial successes and failures. The BestOverall Company Mind Share Contribution goes to ideas that capturedthe company's imagination, and the Elisha Gray Award (ElishaGray filed for a patent for the telephone a few hours afterAlexander Graham Bell did) goes to near-successes. The reward: anice plaque and stock options. "We steer away from [moneyawards]," says Ernstrom. "Everyone has stock options, sowe try to steer toward, 'Hey, we're all pulling the sameway, and we all win if it's pulled together.'"

Mimicking the VC process, Voyant executives review newideas--which tend to stay in the market space, although the companydoesn't limit itself in that way--and supply the high-potentialinnovations with funding.

Ernstrom says most ideas come from tech employees, butthere's no rule saying ideas can't come from anywhere inthe company. New projects are still germinating, so it's tooearly to tell whether Bright Ideas is working, but Ernstrom saysVoyant's sticking with the program for now. "We try tofind things that are inexpensive but really innovative," hesays. "And that's clearly what an entrepreneurdoes."

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