A Publication of WTVP

We’ve all heard the story—an ambitious, hard-working, risk-taking entrepreneur takes an innovative idea and builds it into a successful business. It’s the fulfillment of the American capitalist dream, and everyone lives happily ever after. Right?

Not so fast.

What is not always talked about is what happens to that bold, innovative start-up company five, 10 or even 20 years down the road. If all goes well, it matures into a strong, profitable competitor. And along with that growth comes thousands of employees, lots of rules and layer upon layer of management bureaucracy—not always the ideal environment for cultivating new ideas.

That’s not to say that growth is a bad thing. In fact, it’s the whole point. The problem is, innovation sometimes gets smothered by processes and less daring attitudes that grow up with the company. Never mind that the company is a market leader and profits double every year. You would be hard pressed to find any of the original entrepreneurial fire in the belly of many corporate giants.

But it doesn’t have to be this way. Most companies already have the seeds of an entrepreneurial revival right there on the payroll. They just need to find them and plant them in the right places.

Enter the Intrapreneur
What the once daring and nimble company needs is an intrapreneur. Better yet, it needs a whole army of intrapreneurs. Yes, intrapreneur is a real word. It was coined in the 1980s by management consultant Gifford Pinchot and is defined by the American Heritage Dictionary as “a person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation.”

Sound familiar? Like the fabled American entrepreneur, the intrapreneur shares a passion for ideas, a healthy disregard for the rules, is willing to take a chance and has a single-minded goal: success. The difference is that the intrapreneur is an internal entrepreneur working within the company with the financial, technical and human resources backing of the organization.

Entrepreneurs are sometimes born of companies that cannot or will not give an innovator the resources to explore and develop his or her new ideas. To stop this outward migration of talent, companies need to build a culture where innovation is given more than lip service.

Entrepreneur or Intrapreneur
Why would someone with a truly innovative idea want to share it with an established enterprise? Wouldn’t it make more sense to scratch the entrepreneurial itch, drop out of the corporate environment and strike out as a solo act?

Not always. There can be real advantages to developing new ideas with an internal corporate sponsor. If a culture of innovation is already in place and healthy, intrapreneurship can be fulfilling and rewarding for the individual and their employer.

Fostering Intrapreneurship
Most business owners and managers like to think they are open to new ideas. Individually, maybe they are. But if they are part of a corporate culture that does not value or encourage innovation, they may find themselves becoming agents of the status quo.

Some of today’s most successful companies are harnessing the entrepreneurial spirit of employees, and taking advantage of the same kind of enthusiasm, passion and teamwork that launches start-ups. The difference is, instead of these internal “start-ups” being competitors, they are new products or services that can grow and succeed within a corporate structure that already exists.

Take Google for example. The wildly successful search company reportedly encourages engineers to spend 20 percent of their time on any project they are passionate about. This freedom of time and resources has lead to the creation of some well-known Google products, including Gmail and Google News.

Apple Inc. co-founder Steve Jobs has had it both ways. He was present at the creation of the personal computer in the late 1970s, and was later a member of the internal team of self-described “pirates” who developed the groundbreaking Macintosh computer. Apple is still at it today with internal development teams producing innovative products and designs like the iPhone.

W.L. Gore, maker of Gore-Tex rain gear, has a “dabble time” policy that lets workers devote time to personal projects. Back in 1997, an employee’s experiments with PTFE coatings on cables intended for use in animatronics lead the employee to wonder if the coating would make guitar strings more comfortable to play. The answer was yes, but even more important, the coated strings sounded better. ELIXAR Strings, one of the top-selling guitar string brands, was soon born.

Technology companies, manufacturers, service organizations, educational institutions and not-for-profits are all practicing one form or another of bottom-up innovation. Thirty percent of large companies report that they provide seed funds to finance intrapreneurial efforts. Their investments serve as a preemptive strike against their competitors, a powerful magnet for talent, and an investment in greater employee engagement and higher retention.

The Future of Intrapreneurship
Along with the business routines and processes that are the hallmarks of a well-established and stable company, come a whole list of compromises. For the risk-taker, what is gained in efficiency and profitability is paid for in restrictions on creativity and innovation.

Intrapreneurship may not be the answer to the competitive challenges of every company struggling to remain fresh and relevant in a fast-changing world. However, new ways of thinking and doing will almost certainly yield tangible results for companies that thrive on change. iBi

Matt Smutz, CPA, is a partner in Clifton Gunderson’s Peoria office.