The Importance of Intrapreneurship

The business world is full of buzzwords and portmanteaus that are increasingly confusing to understand.

Today, we'll take a look at one you may not be familiar with but has been around for a long time. We're talking about intrapreneurship. What exactly is it? What is the intrapreneurship definition? And what are the benefits of intrapreneurship? 

What IS intrapreneurship?

Originating in a 1978 white paper written by Gifford and Elizabeth Pinchot, intrapreneurship describes a system within a company that allows individuals to take on an entrepreneurial role — combining the terms "internal" and "entrepreneur." 

Deloitte defines it as a "people-centric, bottom-up approach to developing radical innovations in-house," providing an opportunity for employees to exercise their entrepreneurial muscles without the increased financial risk. This brings us to the critical discussion of intrapreneurship vs. entrepreneurship.

Intrapreneurship vs. Entrepreneurship

Entrepreneurs and intrapreneurs share many characteristics. In fact, it is often said intrapreneurs have 'entrepreneurial spirit'. What separates them is that an entrepreneur starts their own business, whereas an intrapreneur lends their innovative mind to their employers. Intrapreneurs may prefer operating using within an organization because of the resources and the relative lack of personal risk.

This difference is crucial in understanding the concept of intrapreneurship vs. entrepreneurship.

Often, intrapreneurs transition into entrepreneurship if they're able to generate the capital (and the confidence) to go it alone.

What are some famous examples of Intrapreneurship?

  • Google used to encourage intrapreneurship amongst its employees via its "20% time" policy. This policy encouraged employees, "in addition to their regular projects, to spend 20% of their time working on what they think will most benefit Google". Google's AdSense - responsible for billions of dollars in revenue - is a product of 20% time, and email service 'Gmail' was created by the developer Paul Buchheit on his 20% time.
  • When they were relatively young, Amazon had a "Super-Saver Shipping" offer, but this was under-utilized, and Amazon was losing out to their competitor, eBay. A team led by Greg Greeley formulated an idea based on this stagnating one — why not offer an exclusive membership deal instead? The membership deal would give customers two-day delivery — the same as super-saver shipping — but would be sold to them in a way that felt exclusive and wasn't as obviously contingent on how much the customer purchased. This idea, now known as Amazon Prime, spawned many offshoots for the company and now generates over $19 billion per year just on subscription fees. 
  •  In the 1960s, Spencer Silver worked at 3M to develop an adhesive for use in the aeronautics industry. He accidentally created a very weak, pressure-sensitive adhesive that was reusable and could be removed without leaving behind a sticky residue. The product had little use in aeronautics, but 3M encouraged Silver to continue searching for ways to use this strange adhesive. He even tried coating billboards in the adhesive, thinking it could be a good alternative to pushpins! Eventually, his colleague, Art Fry, was searching for an alternative to loose page markers and suggested to Silver that maybe this reusable adhesive should be on a piece of paper rather than the surface to which the paper was meant to adhere. And so, the Post-It note was born.
One of the early ads for Post-it Notes

What is the importance of intrapreneurship to a business?

A culture that encourages intrapreneurship can reap the benefits of innovation from all areas of the business. Of course, the financial impact of specific innovations is of enormous importance. But there are other benefits to encouraging this type of innovation. It breeds talent, something imperative for any business in the age of upskilling and reskilling. 

A perfect example of this is Sony and the Playstation.

In the late 1980s, the relatively junior employee Ken Kutaragi, a curious, intelligent mind who loved to tinker, created a chip to supercharge his daughter's Nintendo. He could see a future for video games, and so he went to his bosses with the idea of creating a new console for Sony. But Sony just didn't "do" gaming, perceiving it as a passing craze.

Deloitte says of intrapreneurs like Kutaragi:

They perform at the edge, circumventing the company's comfort zone, scouting for previously unknown opportunities and markets, and collecting valuable insights into the competitive landscape. Employees working in this kind of environment identify the blind spots - the opportunities and threats which are unseen and might otherwise be missed - and exploit them.

Kutaragi was as close to the edge as it got - any closer, and he'd probably have been removed from his position. 

But he would not give up and eventually reached Sony's CEO, Norio Ohga - himself hired by Sony after writing a scathing letter to the company about the quality of its tape recorders. Aware of the promise the video gaming industry offered, Ohga sparked a joint venture with Nintendo. Licensing disagreements eventually doomed the partnership, but Sony continued to develop its own console – the PlayStation. Kutaragi went on to become CEO of Sony Computer Entertainment, which in 2021 generated $18.2 billion in revenue. If not for Ohga's decision to back Kutaragi, it's widely accepted that the latter would undoubtedly have been let go from the company.

Photo of Ken Kutaragi holding a lifetime achievement award
Kutaragi would go on to forge a legendary career at Sony Computer Entertainment

And Kutaragi's story isn't the only one. Equally remarkable is the story of Richard Montañez. Early in his career, Montañez was working as a janitor for FritoLay. When a vending machine broke down, Montañez reportedly took some of the Cheetos snacks home and flavored them with Mexican spices. Montañez had noticed that there were no snacks at the stores in his local Californian town explicitly catered to the large Latino population. So, he packed his new spiced Cheetos in hand-decorated ziplock bags and presented them to CEO Roger Enrico. The rest is a piece of history known as Flamin' Hot Cheetos — a snack that "rejuvenated the Cheetos brand" and garnered billions in revenue. Roger Enrico's choice to encourage intrapreneurial spirit revealed a huge new talent - Montañez became VP of Multicultural Sales & Community Promotions for PepsiCo.

The stories of Kutagari and Montañez and their meteoric rises show the incredible results nurturing experimentation can deliver. Of course, not every side project will be Gmail, and not every intrapreneur will be Kutagari or Montañez. But they don't have to be! Building a culture of curiosity and experimentation "will increase the number of innovations being pursued and adopted, leading to new product and services releases in established and new markets." It can also have a transformative effect on morale and motivation:

A dedicated intrapreneurship strategy enables the high performers to bring organizations to the next level. Intrapreneurs will help form productive and highly engaged teams, develop other employees, and, as a result, drive impressive growth for the organization. Once initial success stories begin to emerge, this will spawn spectacular employer and employee motivation across the whole organization...

But, we hear you ask, why wouldn't talented entrepreneurs take their idea for themselves? What's the incentive to be an intrapreneur, rather than an entrepreneur? Well, intrapreneurship can be a great alternative to entrepreneurship because:

  • it's an opportunity to build confidence
  • losses are absorbed by the company, so the risks aren't personal
  • the company will offer greater resources, which affords bigger and better opportunities to innovate
  • the employee get all the benefits of a job (401k/pension, health insurance, fixed income and hours etc.) while scratching the entrepreneurial itch
  • it's a good grounding - an opportunity to test assumptions, and develop key skills like an entrepreneurial apprenticeship

While intrapreneurship is less risky, it also comes with less autonomy. 

Why is understanding Intrapreneurship vs Entrepreneurship important?

Knowing the differences in intrapreneurship vs entrepreneurship helps companies foster innovation without the risks associated with starting a new business. It also allows employees to pursue innovative ideas within the safety net of a larger organisation. In this context, understanding intrapreneurship definition becomes crucial.

Maybe you think intrapreneurship doesn't sound like an ideal system to develop within a corporate structure. At first, it may seem like you would be taking away valuable, productive time from your employees, distracting them with a project that may not pan out in the long run. Also, an employee could end up getting bitten by the entrepreneurial bug, leaving you with a gap in your company. These are both understandable hesitations but indicative of negative, zoomed-in thinking. Successful intrapreneurship, according to Deloitte, "pays off many times over" in terms of company growth, culture, and talent.

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