Entrepreneur: Corporate Incubators

INTRAPRENEURISM — WHAT’S NOT TO LOVE?  2013

Large players hope to reap reward from entrepreneurs – and vice versa

© 2024 Stuart Wade 

Funding. Flexibility. Access to genius. And a steady paycheck. What’s not to love about Intrapreneurism?

For some, “inside entrepreneurism” may be the ideal work situation. As a means to promote innovation and to cultivate talent, corporate incubators can prove fruitful for employers and beneficial for the entrepreneurs – or “intrapreneurs” – who work in them. 

Intrapreneurism, however, exists in contrast to conventional bootstrapping where someone has an idea, working passionately to make it a reality out of his proverbial garage.  He gets no sleep for days at a time, hits up all his friends and relatives for capital, etc. But the product is all his, and if it succeeds, he – and any partners — will be the winners. 

With in-house entrepreneurship, a large corporation curtains off a small skunk works where promising minds can go play, in hopes of uncovering some new product or idea that can be successfully commercialized. Here, participants plug right in to crucial capital, know-how, branding and networks. From underused staff to spare Swinglines, the creative think tank down the hall may also be able to optimize company assets in new ways. For example, being able to tap into the company’s market research may mean a firmer grasp on what audiences want – a resource that isn’t available to Joe in his garage.

Although it offers many advantages, intrapreneurism has its fair share of detractors as well. Among the criticisms they levy against the concept:

IT’S NOTHING NEW

In-house entrepreneurship is nothing new. Gifford Pinchot III, co-founder of Seattle’s Bainbridge Graduate Institute, is credited with coining the term “intrapreneur” back in the late 70s. Within a decade, management guru Tom Peters (“In Search of Excellence”) was building his career on championing the small, empowered team — often separated from HQ — as the basic organizational building block of excellent companies.

Companies set up inside R&D shops for myriad reasons. In-house entrepreneurism helps companies compete, develop niche markets, reap technological returns, and potentially build future businesses — and develop future executives. 

Upside abounds: for the organization, potentially breakthrough innovation, increased competitiveness, and amazing talent; and for the innovator, access to resources, to senior advisory talent, and to the broad capabilities of the parent.

Smaller groups intended to promote innovation are (at least nominally) given the green light to operate with minimal management restriction. Companies carve out labs to keep up, to stay out front, and to capture opportunities they might otherwise miss. And they do it since one ”hit” can save you from 1,000 failures, if you have the right culture for it.

“Physically separating the intrapreneurs from the rest of the company supports the incubator’s survival rate and increases effectiveness, since it’s less influenced from the core business,” says Oliver Gassmann, professor for innovation management at Switzerland’s University of St. Gallen and an acknowledged expert on the trend.

The corporate incubator traces its origins to 1943, when the U.S. Army Air Corps approached Lockheed to meet its urgent need for a jet fighter to counter a growing German threat. Sequestered from Lockheed to expedite this project, a handpicked team of 23 Lockheed engineers and 103 shop mechanics — the now legendary “Skunk Works” — was able to create and build America’s first jet fighter, the P-80, several weeks earlier than planned, a huge advantage in the middle of a war.

Any intrapreneur today would recognize the ancestral relationship between his work and that of Lockheed engineer Kelly Johnson’s unconventional team, which proved with the U2, SR-71 and other aircraft that it was much more than a one-hit wonder. A small, autonomous team collaborates apart from the mothership, while retaining its full financial, material and managerial support.

IT’S NOT REALLY ENTREPRENEURISM

Business incubation within an existing corporate colossus can dangle a number of material and financial attractions in front of entrepreneurs, in addition to the familiar boot-strapping lures of funding, managerial gurus, high-potential business networks, and experienced academic and research talent. But what it can’t automate is innovation, says Steve Golab, founder and CEO of creative co-working facility GoLab. 

“If there are line managers already looking after your project, it’s not truly innovative,” says Golab. “The way the project is going to be measured for success has already been defined, and the culture of the company is already established.”

So is this truly a new approach, or just new packaging which sounds cool, post-modern, and innovative — but frankly is the same setup that’s been going on for decades at the likes of productive but nevertheless old-school players like DuPont, P&G, Boeing and 3M? 

“Realentrepreneurism is about guts and risk, whereas intrapreneurs are playing with house money,” says Don Dalrymple, founder of Ascendworks, a demand-gen marketing firm. “They may be transacting in the service of their employer, but they are not in similar company with entrepreneurs. The mindsets are different.”

SERENDIPITY GETS BETTER ODDS

Just ask 3M, whose Post-It Note is the textbook example of “inside R&D” succeeding despite early resistance. Even though the idea was rejected initially, its creators Art Fry and Spencer Silver continued to guerilla-market the 3-inch, low-adhesive paper squares internally, after Fry got the idea to use the adhesive to anchor a bookmark in his church hymnal. The Post-It serves as a great model for how companies ought to formalize “disruptive” innovation.

MANAGEMENT WILL FUMBLE IT

Built into the lore of American innovative brilliance is Xerox’s Palo Alto Research Center (PARC), a cautionary tale of what happens when the suits, in this case at Xerox, overemphasize market analysis, failing to recognize the greatness within their reach. 

PARC churned out some truly incredible concepts — ask Apple — but was unable to commercialize them, in part because it was working not only as a physically separated unit from Xerox HQ, which was desirable in theory, but in practice, the physical separation – 3,000 miles – made it impossible to work effectively with the parent company’s executives in New York. 

An amazing amount of innovation happened here in the 70s and 80s, including laser printing, Ethernet, and even the mouse-driven graphical user interface (which Steve Jobs famously pinched in 1979). 

“I would not change one iota of Ethernet’s history for fear of disrupting it,” says Bob Metcalfe, the man who invented Ethernet (and “Metcalfe’s Law” — the value of a communications network grows by the square of the size of the network), who today is Professor of Innovation at the University of Texas. 

“A lot of innovation is day-to-day on the front lines of the status quo. And intrapreneurism has its hits — like the Post-It Note. And the iPhone. And the Edsel.”

Although PARC still operates today, its place in history will probably always be dominated by the legendary scale of its “What Might Have Been” potential. It’s the people at Xerox corporate that failed. If Xerox PARC can be blamed for anything, it is simply that a highly productive think tank, where R&D dared to dream big, lacked the influence to convince the rest of company of of the value of their inventions. 

MANAGEMENT WILL ABANDON IT

In-house entrepreneurism is not without actual existential risk. In an ROI-driven world, unprofitable business units don’t last long. With the incubator’s internal support – and ongoing funding – closely linked to its track record, if a company’s leadership changes, or the firm has a bad financial quarter, shutting it down may become an option that senior management sees as an important cost-saving move – or in any case a visible cost-saving gesture. 

Given the time needed to germinate, test and develop new concepts, inside incubators obviously require long-term corporate commitment by senior management. Unfortunately, this support can change on a dime.“Intrapreneurs have to go up against the immune systems of their employers,” says Metcalfe. Sooner or later, the incubator’s return on investment needs to be justified. The specific pressure points and time horizon will differ, but the pressure to perform is always there.

IT’S A CAREER KILLER

“At a startup, we all succeed or fail together, but at a big corporation, this is just the next project,” says Mark Herschberg, CTO for Madison Logic, a rapidly growing, 60-person New York lead-gen startup. The MIT alum helped launch Sears’ online home services and also played a role in starting NBC’s online video – now Hulu.com. 

Politicking from various parties can interfere — squabbles regarding important policies, personnel decisions, or who gets the corner cubicle. “Managers want people from their department involved and they will push for the decisions most useful for their department, not the project as a whole,” says Herschberg.

The startup world rewards risk takers, he says. 

“We take chances all the time, and many don’t work. Now consider a large corporation, where some people spend 20 years. The goal there is to get promoted. Rolling the dice might get you two gold stars, instead of one — but failure means a black mark that will follow you for the next decade.”

MANAGEMENT WILL FLAT-OUT SCREW IT UP

Corporations are finding that creativity — the sort that leads to genuine innovation and real competitive advantage – isn’t something you can cook up in a lab down the hall. Or can you? 

Yahoo long ago lost the search crown to Google, but when its recently installed CEO Marissa Mayer decided to buy mobile newsreader app Summly, the brainchild of a 17-year old, the move brought a renewed sense of momentum to the beleaguered online portal. 

Having its very own Cool Kids Club to generate game-changing innovations seems like something Yahoo would naturally embrace, and Summly might fit the bill.  

Curiously, and perhaps more tellingly, around the same time Mayer took a step in the opposite direction. She clamped down on the company’s employees working from home. For a company so aware of the value of collaboration, with a culture well suited for intraprenuers, the idea that the CEO could mandate how (and where) the firm’s talent is expected to operate was jarring. Whether it was a sign of panic, as some experts saw it, her decree certainly added a sense of the whiplash that entrepreneurs may feel in these environments today.

IT’S A FLASH IN THE PAN

Anything worth doing is worth doing well, but there is a lot of substandard stuff out there also being labeled as “intrapreneurism.” It’s important to be skeptical — where the spare conference room’s suddenly been made over with sofas, scooters and whiteboards or is now being called “the War Room” — when activity labeled “intrapreneurial” actually smells more like marketing’s “Me Too” idea of what an incubator is. 

INTRAPRENEURISM: IT’S HERE TO STAY

Given the intensely competitive culture of business in an uncertain economic time, one can expect that more organizations will be adding in-house approaches to cultivating new ideas, or even using intrapreneurism to develop high-potential talent for later managerial roles. So where is this trend of incubators & in-house entrepreneurship heading?

“Intrapreneurism and incubators will increasingly be welcomed,” asserts St. Gallen’s Prof. Gassmann. “They will become the norm.” Gassman believes that incubation will become a substitute for R&D, and instead of innovation occurring top-down, and directed by senior management, it will be driven more from the bottom up. As far as getting money, resources, people and ideas is concerned, the difference between entrepreneurism and intrapreneurism will shrink. 

So should an inventor who has an idea but no backing pitch his idea to a corporate incubator, hoping to be given secure space, a budget and some time to realize his concept? 

“Entrepreneurs like to build things and change the system; the money is secondary,” says Herschberg. “And the corporate denizens along for the ride weren’t motivated by startup lottery riches in the first place, or else they wouldn’t have been at a big corporation.” 

In the end, intrapreneurism’s a bit like a May/December marriage. While the company has established a fat bankroll, it’s the creative small player who possesses the hot innovative mojo. A symbiosis develops between the corporate “sugar daddy” looking for that one win to offset many more losses, and the young “bride”, who is likely to be a next-gen innovation nerd with a dream – but whose credit cards are maxed.