Sources of Innovation
What is Intrapreneurship?
For most companies and startups, innovation and entrepreneurship is the lifeblood of growth and success. Most people, however, focus on the glitz and glamor of entrepreneurial startups for their examples of innovation, when in fact, innovation occurs just as frequently within older, more established companies. This style of innovation simply takes on a different form and name. This form of internal innovation is referred to as, intrapreneurship. (The chart below contains the other key differences of intrapreneurship and entrepreneurship (Exhibit A.)) Both of these forms of innovation have their own advantages and disadvantages, but it is oftentimes the personality of the individual or team that determines the best method for developing new products or services.
Oftentimes the constraints of working intrapreneurially within an established organization, as opposed to entrepreneurially actually result in the more creative solutions. It must also be noted that these solutions are not constrained to simply creating new products or service offerings. Instead, companies with more mature product offerings must focus their intrapreneurship efforts on product modifications, extensions, or changes in channels of distribution. However, some innovators find the constraints and bureaucracy of established companies as stifling and prefer to explore new product ideas on their own. They wish to generate new products or services entrepreneurially. These individuals shun the oversight of a company and choose to face the challenge of finding funding and resources on their own – both of which are typically much easier to procure for the intrapreneur.
One of the best ways to explain the similarities and differences of intrapreneurship versus entrepreneurship is to look at real-world examples of both. For this reason, the preceding sections will cover four examples of innovation. Two sections will depict examples of intrepreneurship within two mature companies, both of which have operated for over 75 years. As a comparison, we will then look at two entrepreneurial examples from companies developed in the last couple of years. This will provide the reader with a more crystalized view of the differences between intrapreneurship and entrepreneurship innovation methods.
First, the mature company 3M will be dissected and discussed. 3M’s culture of intrapreneurship is highly regarded, and considered so unique that it would be difficult if not impossible to duplicate. Next, a focus on innovation in operational processes will be discussed using the well -established property and casualty insurance company, Progressive Insurance, as an example. Following these examples of intrapreneurship, two instances of entrepreneurship will be explored. First, we will cover the entrepreneurial professor that created the open-source language learning app, Duolingo. Duolingo represents an interesting form of entrepreneurship, in that the creator has yet to pursue a monetization method for his product. This will present an interesting contrast to a more typical entrepreneurial example, Square Inc. Square, Inc., is a commerce revolutionizing company which introduces yet another interesting concept within the innovation space – the notion of serial-entrepreneurs!
This Minnesota-based company is widely praised as one of, if not the strongest cultivator of internal innovation and intrapreneurship. This is an astounding, given that the company is over 100 years old! In fact, 3M is so committed to innovation, that they have developed a standardized format for their innovation process. As explained in the Harvard Business Review Article, “Creating Breakthroughs at 3M”, 3M follows a four step process in all product development undertakings. The process progresses through: 1.) Laying the Foundation, 2.) Determining the trends, 3.) Identifying lead users, 4.) Developing the Breakthroughs (Hipple, Thomke, Sonnack, 1999). While the specifics of these steps can be more thoroughly explored through the link in the sources section below; it is important to note the dedication that this company shows towards innovation. They are so consumed by new product creation, that they have attempted to standardize the intrapreneurship process for their teams!
Another interesting innovative technique that 3M implements is their 15% rule. This rule, as explained by Paul Kretowski in Wired Magazine, allows 3M employees to spend 15% of their paid time thinking intrepreneurially and attempting to develop new products (Kretowski, 1998). The creation of the post-it note is the most remarkable example of this program’s effectiveness. 3M , while an extremely mature company, is a shining example of innovation in the intrapreneurship form. 3M is extended as the best-in-class example of this form of innovation.
Progressive insurance, another mature company, offers another form of intrapreneurship – one focused on processes and administrative systems rather than strictly product development. Progressive, a company servicing very cost sensitive customers, has been able to keep costs lower than competitors while still extending ever more service features to the consumer. This is due to their commitment to constant innovation in their customer service and operational processes departments. For instance, in a 2002 Harvard Business Review case, Progressive was noted as being the first insurance provider to extend “pay-as-you-go” options to their customers. They are also the first insurance provider to offer real-time online price comparisons to their customers (Frei, Rodrigues-Farrar, 2002). This has allowed Progressive to quickly scale the amount of customers they can interact with, without needing to rely on hiring more personnel. Additionally, Progressive is well known throughout the industry as one of the first companies to rely on “big data” to selectively price their products. In this way, Progressive can better anticipate the risk factors of various customers, and can price these risky customers more accurately than their competition.
Progressive is so proud of their intrapreneurial culture, that they have devoted an entire page of their website to their innovative product and service releases. On the company’s “Progressive Firsts” webpage, the reader can peruse a chronological listing of Progressive’s innovation from 1937 to present ([Online], 2013)! Progressive and its employees have clearly been committed to intrapreneurship for a long time, as they continue to be considered best in class in insurance innovation for over 75 years.
Duolingo, a language learning software, follows more in line with the standard view of entrepreneurship with one small twist – the creator (Von Ahn) is not trying to earn money for his product! Duolingo, a product created by a Carnegie Melon professor and graduate student, is what is considered open-source software – a product that encourages its own users to help develop it. Other examples of prominent open-source products include the search engine Mozilla Firefox, and the operating system Android (in its pre-Google acquisition days). This entrepreneurial professor Duolingo chose to tap into his own student body and the public at large to help develop his language learning software. The product continued to grow and develop as users translated the web and voted up the best overall translations. This form of teaching and learning was so innovative, that MIT Sloan’s Technology Review calls the software the “Cleverest Business Model in Online Learning” – in their article by the very same name (Simonite, 2012). What makes the creator of Duolingo an entrepreneur versus and intrapreneur is his separation from a corporation guiding his innovation. Instead, Von Ahn is free to think outside of the constraints of a corporation. His challenge instead is finding funding and a team that is in sync with his vision – a lesser challenge in the intrepreneurship setting in most cases.
Of the four companies discussed, Square, Inc. probably depicts the most generally accepted notion of entrepreneurship. An idea created separately from the constraints of an overseeing company, this revenue seeking company developed a product that revolutionized the process of purchasing. This small device allows the user of iOS smartphones to accept credit card payments from others without having to purchase expensive POS software or hardware. It allows the average person to be a credit card accepting merchant!
The evaluation of Square and its creator Jack Dorsey allow the coverage of another notable innovative term – the serial entrepreneur. Jack Dorsey, like many entrepreneurs is obsessed with the idea of the perpetual creation of new products and services. As a creator of the famed micro-blogging service, Twitter, Mr. Dorsey is what many would consider a serial entrepreneur. This is an individual that opts to remain separate from the constraints of established companies, and instead continuously creates new ones to be developed and grown by others. Square’s founder has used his entrepreneurial spirit to not only create a new product, but to revolutionize the way the world does business.
Summary
While there are many forms of innovation, the overarching theme is that creative people and teams can create and succeed in almost any setting. As entrepreneurs show, one does not require the financial backing or bureaucratic support of an established company to succeed at creating new products or services. Likewise, intrapreneurs prove that established companies are not so idea-stifling as to suppress great innovation. In fact, traditional companies can expedite and encourage innovation through pre-formed innovative protocols and established funding sources. Whichever the method, when creative individuals find the setting most suitable to their personalities, great ideas and products are born.
Innovation can present itself in many ways. It can be found in either new products or services. It can be found in the modification of an existing product or the creation of an entirely novel idea. Lastly, it can be found within an established company or a newly blossoming one. Regardless, innovation is mission critical for companies new and established alike.
Exhibit A
| Key Factors of Intra- vs. Entrepreneurship | ||
|---|---|---|
| Intrapreneurship | Entrepreneurship | |
| Where it occurs? | Internally within a company | External individuals or groups |
| Challenges? | Corporate culture and bureaucracy | Naysayers & lack of funding |
| Idea generation? | Steering committees, and project teams | Individual or start-up team. |
| Funding? | Budget | Self-funded, Loans, Investors |
| Who owns the idea | The parent company | The individual or team |
| Benefits? | Internal funding/backing of a corporation | Freedom of thought and whim. |
Sources:
von Hipple, E. Thomke, S., & Sonnack, M. (1999). Creating Breakthroughs at 3M. Harvard Business Review, September-October 1999. retrieved Aug 12, 2013, from http://web.mit.edu/evhippel/www/papers/HBR 99 LU pub version 3M.pdf
Frei, F. & Rodrigues-Farrar, H. (2002). Innovation at Progressive: Pay-as-You-Go Insurance.Harvard Business Review, HBS Premier Case Collection. retrieved Aug 12, 2013, from http://hbr.org/product/innovation-at-progressive-a-pay-as-you-go-insuranc/an/602175-PDF-ENG
Progressive Firsts. (2013). retrieved Aug 13 2013, from Progressive.com Web Site: http://www.progressive.com/progressive-insurance/first/
Simonite, T. (2012). The Cleverest Business Model in Online Education: A Startup Called Duolingo Taps the Power of Crowds to Make Learning a Language Free. MIT Sloan Business Review,MIT Online News Collection. retrieved Aug 12, 2013, from http://www.technologyreview.com/news/506656/the-cleverest-business-model-in-online-education/
