17
Chapter 2
Intrapreneurship: Corporate
Entrepreneurship
2.1 Introduction
“Sooner or later your competitors will slow your sales, and prots
will begin to evaporate. The solution is Intrapreneurship.”
Some of the world’s most successful companies, including 3M, Anaconda-
Ericsson, GE, Lockheed, Intel, Apple Computers, Rubbermaid, Google, Sony,
Toyota, Thermo Electron, Medtronic, and IBM, are all enthusiastic supporters
of intrapreneurship. Could that be their secret of success?
2.2 Denitions
An intrapreneur is an innovator within an existing, large company.
In their inuential 1978 publication, Gifford Pinchot III and Elizabeth
Pinchot
1
coined the phrase “intrapreneurship” to describe the marriage
of an entrepreneurial spirit—complete with its erce independence and
lack of deference to established views and the connes of conventional
wisdom—with the resources of a large corporation. Later, Norman Macrae
credited the term to Gifford Pinchot III in the April 17, 1982, issue of The
Economist.
2
18 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
In 1992, the American Heritage Dictionary ofcialized the popular use of
intrapreneur to mean, “A person within a large corporation who takes direct
responsibility for turning an idea into a protable nished product through
assertive risk-taking and innovation.” Intrapreneurship is now known as
practicing a corporate management style that integrates risk-taking and inno-
vation with reward and motivational techniques more traditionally associated
with entrepreneurship.
In 1994, Pinchot and Pinchot published their “Intraprise Manifesto,”
3
which is summarized next:
◾ Employees are treated with independence, dignity, and responsibility.
◾ Employees make up their own minds about what to do, limited only by
general rules and commitments.
◾ Employees have access to resources required by their ideas and are
held accountable.
◾ Employees have the authority to manage the resources of their business
units without interference.
◾ Employees are free to select their associations (e.g., peer support, coaches).
◾ Employees are permitted, and even rewarded, for taking qualied risks
and making mistakes.
Using the failed examples of Wang Computers, DEC, Polaroid, and
Kodak, Investopedia
4
suggests that companies should encourage employees
to explore ideas rather than waiting until the company is in a bind. If an
idea looks protable, the company provides the innovator an opportunity
to become an intrapreneur. Intrapreneurs thus use their entrepreneurial
skills without personally incurring nancial risks associated with entrepre-
neurial activities.
2.2.1 Kelly Johnson’s 14 Rules of Skunk Works
5
Johnson earned recognition for his contributions to noteworthy aircraft
designs including the Lockheed U-2, SR-71 Blackbird spy planes, P-38
Lightning, P-80 Shooting Star, and the F-104 Starghter. Johnson’s famed
“down-to-brass-tacks” management style was summed up by his motto, “Be
quick, be quiet, and be on time.” He ran Lockheed’s Skunk Works using
“Kelly’s 14 Rules.” (Note: Skunk Works is a term used to describe keeping a
group of intrapreneurs separate from the rest of the rm.)
Intrapreneurship: Corporate Entrepreneurship ◾ 19
1. The Skunk Works manager must be delegated near complete control of all
aspects of his program, and should report to a division president or higher.
2. Strong but small project ofces must be established by both the military
and industry.
3. The number of people having any connection with the project must be
strictly limited. Use a small number, 10% to 25% of a typical project’s
stafng of top-notch people.
4. A very simple drawing and drawing release system with great exibility
for making changes must be provided.
5. Require a small number of reports, but important work must be
recorded thoroughly.
6. There must be a monthly cost review covering not only what has been
spent and committed but also what expenditures are expected to com-
plete the program. Don’t prepare the books 90 days late, and don’t
surprise the customer with unexpected cost overruns.
7. The contractor must be delegated and must assume more than normal
responsibility to get good vendor bids for subcontract on the project.
Commercial bid procedures are very often better than military ones.
8. The current inspection system used by the Skunk Works, approved
by both the Air Force and Navy, meets the intent of existing military
requirements and should be used on new projects. Push more basic
inspection responsibility back to sub-contractors and vendors, and don’t
duplicate such inspection.
9. The contractor must be delegated the authority to test his nal product
in ight. He can and must test it in the initial stages. If not, he rapidly
loses his competency to design other vehicles.
10. The specications applying to the hardware must be agreed to well in
advance of contracting. The Skunk Works’ practice of having a speci-
cation section stating clearly which important military specication
items will not knowingly be complied with and reasons therefore is
highly recommended.
11. Funding a program must be timely so that the contractor does not have
to keep running to the bank to support government projects.
12. There must be mutual trust between the military project organization
and the contractor with very close cooperation and liaison on a day-to-
day basis. This cuts down misunderstanding and correspondence to an
absolute minimum.
13. Access by outsiders to the project and its personnel must be strictly con-
trolled by appropriate security measures.
20 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
14. Because only a few people will be used in engineering and most other
areas, ways must be provided to reward good performance by pay not
based on the number of personnel supervised.
2.3 Theory of Intrapreneurship
“Lead, follow, or get out of the way.”
As we have seen, an entrepreneur is an independent person who starts a
venture, bears the full risk of failure, and enjoys the complete fruit of suc-
cess, whereas an intrapreneur is partially independent and is sponsored
by the corporation in which he or she works. Intrapreneurs are not liable
for nancial losses in case of failure (although they may risk dismissal). An
entrepreneur raises the nance from various sources and promises a sub-
stantial return, whereas an intrapreneur does not assume responsibility to
raise capital or to return it. An entrepreneur has no relation with any exist-
ing organization, whereas intrapreneurs operate within the organization
where they work, as shown in Table2.1.
Intrapreneurship involves vision, innovation, risk-taking, and creativity.
Intrapreneurs imagine things in novel ways. Intrapreneurs have the capac-
ity to take calculated risks and accept failure as a learning point. An intra-
preneur thinks like an entrepreneur in seeking those opportunities that
will ultimately benet the organization. Intrapreneurship is a novel way of
making organizations more protable by incubating imaginative employ-
ees’ entrepreneurial thoughts. It is in the best interest of an organization to
encourage intrapreneurs because it is an effective way for large companies
to re-invent themselves and improve nancial performance.
Table2.1 Signicant Differences between Entrepreneurs and Intrapreneurs
Entrepreneur Intrapreneur
Independent agent Sponsored by employer
Risks own capital Not nancially liable for failures
Raises capital (either equity or debt) Financed by employer
Establishes a new entity Operates within an existing, large
organization
Intrapreneurship: Corporate Entrepreneurship ◾ 21
Large corporations such as IBM, General Mills, AT&T, and Apple have
been amply rewarded by the market for their intrapreneurial prowess,
although the ubiquitous Post-it
®
Notes has become legendary in the annals
of intrapreneurship. 3M’s policy of allowing employees to use 15% of their
time and resource on pet projects, known as “bootleg time,”
6
is more fully
discussed in the following paragraphs.
2.3.1 The 3M Illustration
The Post-it
®
Note was originally a solution looking for a problem. In 1972,
Dr. Spencer F. Silver patented (U.S. patent 3,691,140) a unique paper adhe-
sive that permitted easy removal without tearing, and permitted re-bonding
without application of additional adhesive; ironically, the 3M scientist didn’t
know what to do with his discovery. Six years later, a colleague of Dr. Silver,
Art Fry, remembered the light adhesive when he was daydreaming about a
bookmark that would stay put in his church hymnal. While the intrapreneur
did not receive any prots from his invention, he was rewarded with a pro-
motion that included a pay raise and many company benets.
A Post-it
®
Note (or Sticky Note) is stationery with a re-adherable strip of
adhesive on the back designed for temporarily attaching notes to documents
and other surfaces. In 1968, Dr. Spencer Silver, a chemist at 3M in the United
States, was attempting to develop a super-strong adhesive; instead, he acci-
dentally created a “low-tack,” reusable, pressure-sensitive adhesive. For ve
years, Silver promoted his invention within 3M, both informally and through
seminars, without much success. In 1974, a colleague of Silver’s, Art Fry,
who had attended one of Silver’s seminars, used the adhesive to anchor his
bookmark in his hymnbook. Fry then further developed the idea by tak-
ing advantage of 3M’s ofcially sanctioned “permitted bootlegging” policy.
3M launched the product in stores in 1977 in four cities under the name
“Press ‘n Peel,” but its results were disappointing. A year later, 3M issued free
samples to residents of Boise, Idaho, and 94% of the people who tried them
said that they would buy the product. On April 6, 1980, the product debuted
in U.S. stores as “Post-it Notes.” In 1981, Post-its
®
were launched in Canada
and Europe.
There were actually two accidents that led to the invention of the Post-it
®
Note. The rst was Spencer Silver’s creation of the Post-it’s adhesive. According
to the former Vice President of Technical Operations for 3M Geoff Nicholson
(now retired), in 1968, Silver was working at 3M trying to create super-strong
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