How to encourage "intrepreneurship."

What is entrepreneurship?

Richard Cantillon, a French economist, originally defined entrepreneurship in 1755 as “self employment with an uncertain return.” Entrepreneurs work independently or as part of a corporation, to develop a product, process, market, or technology into a usable form that’s commercially viable in the marketplace. Entrepreneurs, by definition, chafe at confinement and regimentation.

What is intrapreneurship?

This refers to entrepreneurial efforts inside existing companies ("intrepreneurship") aimed at exploiting new markets or new products, or both, that are eventually treated as new businesses by existing organizations. These venturing efforts may or may not lead to the formation of new units that are distinct from the existing business (e.g., a new company or a new division).

What happens to defeat entrepreneurship in larger companies?

- Success leads to stagnation.
Of the ten leaders in vacuum tubes in 1955, only two were left in 1975. Some failed because of a decision not to invest in the new technology. Others invested, but picked the wrong technology. Still other companies failed because of their inability to play two games at once: to be both effective defenders of what quickly became old technologies and effective attackers with new technologies. Firms like Intel and Motorola were not saddled with internal conflict and inertia, and as they grew, they were able to re-create themselves. Firms like RCA were unable to manage these multiple technological approaches; they were trapped by their successful pasts.

- Large organizations find it difficult to successfully make small investments.
At one firm, it was impossible to invest $20K to automate a simple routine process although the manager could sign off on $20K in overtime for a single weekend. Investments had to be of the order of a million dollars or more just to be considered.

- The company’s culture has a predominantly inward focus.
There are extensive procedures for resolving issues through consensus. There’s an arrogance bred by previous success. There’s a sense of entitlement on the part of some employees to guaranteed jobs without a quid pro quo. There’s a preoccupation with internal procedures rather than an understanding of the changing external marketplace.

The typical intrepreneurial process has four phases:

The Solo Phase, where the intrepreneur works alone to develop an entrepreneurial idea.

The Network Phase, where the intrepreneur shares the idea with close friends and trusted customers.

The Bootleg Phase, where an informal team develops and provides support to the new venture while the intrepreneur takes on the responsibilities of leadership.

The Formal Product Phase, where the new venture becomes a formal, official organizational entity and must deal with the parent organization’s regular policies and practices.

You design organizations that encourage this kind of innovation by creating a culture where employees have a sense of security and a sense of possibility. To get innovation, you must allow freedom to experiment. However, to get good financial results, you must have a high degree of control. This culture is fostered by having internally inconsistent competencies, structures and cultures that can coexist, yet share a single vision.

As I've mentioned before, the characteristics of creative organizations are:
• Open channels of communication.
• Not run as a tight ship.
• Wide-ranging perspectives.
• Idea-generating units freed from other responsibilities.
• Investment in basic research.
• Risk-taking philosophy.
• Stable, secure internal environment.