Q&A WITH GEOFF BAKER ON INTRAPRENEURSHIP

Last night, I was lucky enough to be asked to speak at the first Royal Academy of Engineering Innovators Network, answering questions about intrapreneurship and innovation alongside Elspeth Finch and Andy Harter. Below are a few of my thoughts on intrapreneurship and corporate venturing that may interest you.

What exactly is intrapreneurship?

Intrapreneurship is the act of behaving like an entrepreneur whilst working within a large organisation.

What is the difference between an intrapreneur, as opposed to an entrepreneur?

Basically there is no difference; we all have a pretty good understanding of what an entrepreneur does; they have an idea, a vision for a business and the sheer determination and belief they will find the necessary resources and support to turn their idea into a business. This, if successful, means the entrepreneur and the financial backers that supported the entrepreneur, will share in the financial rewards of that business. As such, entrepreneurs usually work on their own and outside the confines of a large organisation or company, and very often have to leave the security of their employment to pursue their vision and start up a new business.

On the other hand an intrapreneur is a person, usually within a large corporation, who will come up with an idea and turn that idea into a new product, service or business for that company.

Innovating and coming up with new ideas, isn’t that what large companies should do anyway?

The simple answer is yes, they should, and in many case they do. However, I think we need to separate out on-going product and business development, which is an essential aspect of any successful company, from intrapreneurial activity. Intrapreneurship is more concerned with stepping out, creating something new or seeing an opportunity in the market that the company may not currently be involved in or does not see as its core business.

Is the encouragement of intrapreneurial behaviour important to a large company?

Yes, it is absolutely fundamental to their survival. Every company that exists today was created, at some time, maybe even many years ago, by an entrepreneur or a group of entrepreneurs. They saw a need, they saw a gap in the market, they had a vision, and through their energy and determination they turned their vision into a company. However, once a company has been created and even grown to become a large corporation, it can’t turn its back on entrepreneurship. The energy of entrepreneurship created the company in the first instance and that same entrepreneurial energy is needed to sustain and grow the business.

Let’s consider the second law of thermodynamics; despite all the complicated mathematical interpretations, basically it says, left to its own devices, everything will decay and change to a different state. A large corporation is no different; the energy of entrepreneurship created the company in the first instance and that same entrepreneurial energy is needed to sustain and grow the business. The statistics are quite disturbing; 88% of the companies in the Fortune 500 50 years ago have either gone bankrupt, merged, or if they still exist today, are much smaller companies.

Entrepreneurial behaviour or the encouragement of intrapreneurship within a large company is fundamental to its long term survival.

What stops a large company from being entrepreneurial?

Much of it is centred on a company’s attitude to risk. In large companies, creating, or even maintaining the entrepreneurial culture that established the company in the first place is becoming increasingly hard to do. Large companies are built around structure and process and this is not the best environment to encourage innovation and entrepreneurship. Large companies are good at ‘identifying and managing risk’, something they have legal and moral responsibility to do. However, by developing and promoting a risk management culture, this can often result in discouraging entrepreneurial behaviour the company.

In fact, management strategy is increasingly being centred on enterprise risk management. As a result, management culture, together with reward and senior executive career progression in the corporate environment, is becoming increasingly focussed on senior managements’ ability in identifying a problem or risk and then eliminating the risk. The problem with this culture is that it is totally at odds with the encouragement of an entrepreneurial culture, which by its inherent nature is based on ‘taking risks’ to create something new. In this situation, the heroes of the organisation become the trouble shooters or ‘risk managers’, rather than the ‘risk takers’; as a result you can end up with a senior management team, who preside over the orderly decline and ultimate failure of the business.

It is possible that the increasing focus on risk management, by senior executives of large corporations in the belief that they are ensuring the long term stability of their organisation, could be the very thing that is actually accelerating the demise their company.

To counteract this, senior management must ensure that the entrepreneurial culture that created the company in the first place is allowed to flourish and grow. Companies must create a culture where failure, albeit in the right areas, is acceptable, maybe even rewarded. Companies need to have ‘a risk taking policy, not just a ‘risk mitigation policy’. In the same way a company approaches ‘risk management’, it should also have similar focus on the ‘management of risk taking’.

Do engineers make good intrapreneurs and entrepreneurs? 

Absolutely; engineers are natural entrepreneurs, they possess all the inherent skills it takes to be an entrepreneur, they are creative, logical, innovative, understand risk and how to manage it; engineers are taught to analyse situations and come up with solutions, if those solutions meet a market need, then you have the basis of a business. Since the start of the industrial revolution, engineers have played a huge role in the development of our society; Stephenson, Marconi, Brunel, Ford, Bell were not only great engineers, but were also the great entrepreneurs of their time. The only way of taking their vision and ideas forward was to create a business in which to exploit it. Today, most engineers are employed by companies, but the inherent ability to innovate and find new ways of doing things is a fundamental aspect of what it means to be an engineer. It is important that engineering companies not only encourage entrepreneurial behaviour but also have well established structures to enable new business ideas to be created and supported with the help of the parent company.

For tips on how to create an intrapreneurial culture in a large corporation, read my previous blog.

Corporate Venturing – what is it, and why is it a good idea? 

What is corporate venturing?

The concept of ‘corporate venturing’, where a large company provides the financial backing and support for a new venture or idea from within the organisation. This is widely used in other industries throughout the world, but could be exploited far more in the UK and within engineering. However, with corporate venturing, the backing of an idea can from both within the company itself, or from outside. It is essentially like corporate finance, but where the money comes from a company that would have a vested interest in the technology, product or market that the new business would bring. However, unlike traditional sources of finance, a corporate venture partner can bring much more to the entrepreneur than just cash; a corporate partner can bring access to market, infrastructure support and high level management guidance. In return, the corporate partner company, will have a stake, and ultimately may well own, a new business, product or capability that will enhance and expand the core business of the main company. It truly is a win-win situation for both the entrepreneurs, intrapreneurs and the main company.

Do you have any examples of corporate venturing in the UK?

My own company, Plant Asset Management, was created as a corporate venture with the oil services company Petrofac. My business partner and I had an idea to monitor machinery condition remotely via the internet on oil and gas plants; rather than seeking finance from the traditional venture capital sources, we approached companies who we believed would benefit from having access to this capability. Petrofac responded very positively and we ended up created a business of £35million turnover, employing 250 people worldwide; Petrofac ended up acquiring all the equity in the company along the way. So initially, for a relatively small investment to get the company off the ground, Petrofac not only created a new income stream, but gained access to new a capability than would enhance and add value to the main core business of company.

Many companies have already created structured mechanisms to encourage intrapreneurship within their own organisations and also to look outside to entrepreneurs for innovation, new ideas and new ventures aligned to the markets they are in. Procter & Gamble has recently joined forces with a Silicon Valley crowd funding company in a hunt for promising consumer product start-ups. Johnson & Johnson Development Corporation (JJDC) has been making strategic investments in life science innovations for over 40 years and has invested and funded hundreds of emerging life science companies; many of whom have then become main stream parts of the company. BP has established BP Ventures (www.bp.com/ventures) to focus the investments it is making in connection with oil and gas and alternative energy. In recent years Conoco Phillips, Statoil, Shell, Total and Chevron have all established corporate venturing units. Veolia, the environmental company, has established the Veolia Innovation Accelerator (www.via.veolia.com) to focus its investments in innovative new areas associated with the environmental market. Similarly Unilever has created Unilever Ventures Ltd (www.unileverventures.com) to focus its investments in corporate venturing.

However, having the mechanisms in an organisation to exploit the ideas for innovation is only part of the solution; more specifically a company must have a culture that encourages innovation and entrepreneurship.


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