INTRAPRENEURING: THE GOLD RUSH

25 September 2001

by Tom Bragg

Intrapreneuring is a term that came into widespread use during the late, lamented dot-com boom. Merriam-Webster's Collegiate Dictionary, however, dates the term "intrapreneur" to 1982 and defines it thus: "a corporate executive who develops new enterprises within the corporation." But you could define it equally well by adapting the old joke about pioneers: How do you tell the intrapreneurs? By the arrows in their backs.

The risks of intrapreneurship are substantial, but the rewards can be, too. Here's a quick prescription on how to strike intrapreneurial gold:

1. Have a written plan and stick to it. Do a cash flow projection that shows when the new business will be profitable -- and remember, it does have to be profitable. If the cash inflows are not matching the plan, stop and understand why. Do not continue to blindly follow the part of the plan that's comfortable if other parts aren't working; for example, don't staff to the level called for by $10M in revenue if you have somehow brilliantly managed to avoid generating any revenue! If you don't understand the plan, you'd better keep somebody around who does understand it. Joe's $5M plan probably won't work if Hubert fires Joe and tries to run the plan himself.
   
   
2. Hire the best. Starting with the top, pick top people for your intraprise. And once you do get somebody good, be smart enough not to get in his or her way.
   
   
3. Have the best, invest. If you can actually get somebody like SoftBank to invest in your new business, by all means do it if you need investment at all. Money from a first-rank investor is much more valuable than money from other sources, simply because a SoftBank can network you with other companies in its portfolio to share resources -- as well as provide you with good advice directly, because it understands the new e-commerce business models. Don't worry that you may lose control -- somebody like SoftBank probably knows how to do it better than you do, anyway. After the investment, you may wind up with 30% of a $300M pie, instead of 80% of a $3M pie, and with somebody like SoftBank dedicated to making you even richer. What's not to like about that scenario?
   
   
4. Have a budget that's real. Allow the budget to be spent, but do so accountably. Don't flatter yourself with a Larry Ellison budget and then manage it like Ebenezer Scrooge.
   
   
5. Protect the project early. When jealousy, interpersonal conflict, and cultural clashes can distract your intrapreneurs and even kill the project, strong management is needed to quell the conflict and give the new business a chance to focus on its mission. It's really hard to negotiate mountain passes when there's fighting in the Conestoga. The management challenge here is (a) to prevent these problems from occurring in the first place, and (b) to solve them effectively if they do perchance occur. To that end, one approach is to treat the project as a "skunkworks."
   
   
6. Invest in organizational development (OD). It may sound silly, but an organizational psychologist can work wonders for helping your management team pull together and actually work for -- not against -- the success of the new business. The key point here is that intrapreneuring, like a trip through the outlaw-infested Badlands, puts new and unusual stresses on your organization. For example, it may be easy to deal with the executive who performs no useful function in a status quo environment; it becomes far more difficult when that individual is put in charge of a key aspect of the new business. An OD intervention will help the management team understand one another's operating styles and fundamental needs, hopes, and fears. These exercises also tend to improve communication throughout the entire organization, which can be critical in undertaking a new and difficult task.
   
   
7. Pay Darwin his due. Not all those who headed West in the California Gold Rush struck gold, and not all intraprises are destined to succeed. If the new business isn't meeting objectives, take a cold hard look at it to see if it's really worth doing -- or if you really know how to do it. (If the person running the show for the new business tells you the organization doesn't have what it takes to succeed, listen.) On the other hand, if the project does succeed, recognize that not all your existing staff is going to be able to develop the skills and attitudes to get on board the new New Thing. Give people an opportunity, but if they can't make the transition, it's kinder and it's better management to release them to industry.
   
   
8. Understand the exit strategy. Maybe an IPO is in the cards, and maybe not. Before panning for intrapreneurial gold, everyone involved should understand what the goal of the exercise is. Whether the objective is to develop a product or Web site that's acquired by another company or to develop a business that will endure for decades affects how you finance, staff, and manage the new entity. The exit strategy also helps to set expectations for those involved in the project, so it's important to be honest here. Don't say your stock is going to be worth $100 per share if $10 (or even $1) is more likely. It's true, too, that a fast-buck opportunity attracts a different kind of employee than does a longer-term, solid business that must be built painstakingly over a period of three to five years.
   
   

-- Tom Bragg, Senior Consultant, Cutter Consortium