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Why You Don't Have to Leave the Corporation to Become an Entrepreneur
Gifford Pinchot III
Harper & Row @ 1985 368 pages
BUSINESS BOOK REVIEW
Volume 3 Number 4 - 1985
Evaluation: This very professionally
presented book provides an excellent mixture of conceptual thinking and practical
applications. It promotes the idea of "intrapreneuring" (entrepreneuring
within the corporation) and also explains both how to be an "intrapreneur"
and how to create a corporate environment conducive to "intrapreneuring."
Thesis:
Corporations must innovate to survive; the best method is to encourage creative people
to become entrepreneurs within the company structure ("intrapreneurs")
by allowing them to earn the freedom and resources ("intracapital") with
which to pursue their visions (establish "intraprises").
Audience: Managers who have the potential and
desire to become "intrapreneurs"; CEOs who want to facilitate innovation.
Reading Time: 8 to 10 hours.
Author
Gifford Pinchot III is a consultant on intrapreneuring and the founder
of the School f or Intrapreneurs at the Tarrytown Conference Center in New York.
He is a man with diverse experiences and educational background and is also an inventor.
Audience and Intentions
Pinchot contends that innovation is stagnating in large organizations
as a result of entrenched analysis and control systems—just at the time when new
competition is making innovation necessary for survival. The problem is compounded
by venture capitalists bidding away the most creative people in the organization
and thus freeing them to become entrepreneurs.
The solution, Pinchot believes, is intrapreneuring-entrepreneuring within
the corporation a system for speeding up innovation inside an organization. "Intrapreneurs,"
he explains, "introduce and produce new products, processes, and services, which
in turn enable the company as a whole to grow and profit."
Contrary to common opinion, neither entrepreneurs nor intrapreneurs are motivated
by money. Instead, they are driven by a personal need to achieve. Corporations can
thus retain their innovative people and reap the benefits of their innovations by
providing the freedom and resources intrapreneurs require to pursue their goals.
Firms must learn how to manage the process of intrapreneuring and establish a system
by which intrapreneurs can earn funds to back their projects-what Pinchot calls "intracapital."
The purpose of the book is to explain how "corporations and intrapreneurs interact"
so that (1) those who want the freedom to innovate can succeed within the system
and (2) CEOs can "create an environment supportive of innovation and intrapreneuring."
In more general terms, Pinchot also wants to help begin the process of honoring and
empowering intrapreneurs by recognizing their importance the way we do entrepreneurs,
inventors, and top executives.
Intrapreneuring is written primarily for two audiences: potential intrapreneurs
and their CEOs. It is not a book about beating the system; it is, rather, a guide
to shaping the system for innovative use: an enterprise (or "intraprise")
made easier by the efforts of all.
Summary
Part I: The Intrapreneurs
Chapter 1: The New Intrapreneurial Spirit (29 pages)
The entrepreneurial spirit can be an important competitive advantage, especially
if harnessed in large organizations, which contain some of our best people and resources.
But to accomplish this, large corporations must grant employees the kinds of freedoms
entrepreneurs now enjoy. In the right environment, freedom and cooperation will generate
productivity.
Innovation involves turning new ideas (inventions) into business successes. Large
corporations are good at creating ideas but poor at developing them commercially.
Dissatisfied would-be intrapreneurs are then driven to venture capitalists to become
entrepreneurs. To keep their creative people and implement new ideas, firms must
first understand the complicated process by which innovation really works.
Both top management and potential innovators must also recognize certain truths about
intrapreneurs. They circumvent or ignore orders, follow intuition, go beyond formal
job descriptions, share responsibility with a team, and pursue goals passionately
but realistically.
Chapter 2: Who Is the Intrapreneur? (33 pages)
Intrapreneurs bridge the gap between inventors and managers; they take
new ideas and turn them into profitable realities. Without them there is an innovation
gap. They have vision and the courage to realize it. They can imagine what business
and organizational realities will follow from the way customers respond to their
innovations; they can plot the necessary steps from idea to actualization.
To make things work, intrapreneurs cross organizational boundaries to do other people's
jobs. They have a need to act, and they don't wait for permission to begin. Their
dedication frequently shuts out other concerns, including family life. They pursue
only goals that they set, that have personal meaning. Successful intrapreneurs learn
to overcome mistakes and to manage risk. The typical intrapreneurial personality
lies somewhere between that of the traditional manager and that of the traditional
entrepreneur.
Chapter 3: Making the Argument for Intrapreneuring (20 pages)
Intrapreneurs are enough like entrepreneurs to make top management nervous,
because of the unsettling myths about the entrepreneurial personality. Contrary to
prevailing opinion, (1) entrepreneurs are driven by a need to realize their vision,
not a desire for wealth; (2) they work to minimize risk in order to realize
their goals; (3) they follow both intuition and hard analysis; (4) they are honest
with themselves and others; and (5) they do not have a need for power. They are,
in short, worthy of freedom and responsibility.
Part II: Becoming an Intrapreneur
Chapter 4: Why Intrapreneuring Can Be Better than Entrepreneuring
(14 pages)
Big companies can make the development of a new idea far easier for an intrapreneur
than the same task would be for an entrepreneur. They offer marketing clout, a technology
base, trusted co-workers, and information resources. They can provide financial support
f or projects that would not be attractive to venture capitalists. On the other hand,
entrepreneurs escape the indecisiveness of the corporation, tap the experience of
sophisticated venture capitalists, and enjoy the satisfactions of ownership.
Chapter 5: Choosing an Idea (25 pages)
Successful intrapreneurs must choose the right idea from several they might be developing
simultaneously in their minds. The idea must be good for the market, good for the
company, and good for the intrapreneur. The idea will fit the market if there is
a real customer need and the product can be delivered in a cost effective manner
at a price that gives adequate margins. It should also be appropriate for the company
culture and lead to growth and profits. Most important, the idea should fit the intrapreneur's
skills and experience. It should inspire belief, enjoyment, and dedication.
Ideas can come from brainstorming, talking with co-workers in diverse departments,
individual curiosity, market research, and current company projects and technology.
Intrapreneuring can also involve improving a process within the corporation.
Chapter 6: Planning Your Intraprise (17 pages)
Business planning converts intuitive vision into an action agenda. It documents destination,
strategies, schedule, expected obstacles, and expected responses. The planning process
includes training yourself to become more entrepreneurial, screening your ideas,
attracting a venture team, building team consensus, raising money, and getting permission
to proceed. Be careful to whom you show your business plan. Before it is formally
presented, you should presell the idea to the decision makers. In writing the plan,
begin with your goals and then follow a table of events.
Chapter 7: Identifying Sponsors, the Protectors of New
Ideas (31 pages)
Sponsors break down three barriers to intrapreneuring: lack of resources , "nervous
money" (that is, vacillating investors), and political attacks. Sponsors are
involved with technical problems, marketing options, presentation of ideas to management,
and behind-the-scenes intervention. They help the intrapreneur think through and
execute the "intraprise." Sponsors can be CEOs, former intrapreneurs, and
owners. They must, however, be attracted naturally when the chemistry is right, not
recruited. Above all, there must be trust between intrapreneur and sponsor.
Chapter 8: The Intrapreneurial Way of Leadership
(19 pages)
Intrapreneurial leaders face a basic paradox: the new venture team needs decisive
centralized direction-setting but, at the same time, it requires participatory management
to do its best work.
Successful leaders breed a hybrid organization. They set the direction, give team
members freedom and respect, and listen to colleagues-but they make the final decision.
They build com-mitment by focusing on the goal of the intraprise and by sharing the
visionary task.
Building an intraprise includes four phases. The first is the solo phase in which
the intrapreneur works alone. The second is the network phase in which ideas are
shared with a few close friends and trusted customers. This evolves into the bootleg
phase where the emerging team works unofficially during spare hours. Finally, there
is the formal team phase, which requires delicate manage-ment of people and the mainline
corporate structure.
Part III: Building the Intrapreneurial Environment
Chapter 9: The Freedom Factors: Can Intrapreneuring Happen in Your Company? (65
pages)
The presence or absence of 10 freedom factors determines how effective intrapreneurs
can be in their corporate culture. Potential innovators and managers seeking to promote
innovation should audit their company's environment for the following:
- Self-selection: Does the company encourage the self-appointed intrapreneur?
- No hand-offs: Does the company provide ways for intrapreneurs to stay with their
intraprises?
- The doer decides: Can people do the job in their own way without always seeking
permission?
- Corporate slack: Are there quick and informal ways to gain access to resources
for new ideas?
- Ending the home-run philosophy: Can the company manage many small and experimental
products and businesses?
- Tolerance of risk, failure, and mistakes: Is risk-taking encouraged? Are people
allowed to learn from mistakes?
- Patient money: Can the company stick with the experiment through several false
starts?
- Freedom from Turfiness: Are people more concerned with new ideas or defending
their turf?
- Cross-functional teams: Is it easy to form autonomous teams?
- Multiple options: Are people free to use the resources of other divisions
and outside vendors?
Chapter 10: Rewards Along the Intrapreneurial Career
Path (16 pages)
The reward systems for most firms are inadequate because they (1) don't match the
risks of intrapreneuring; (2) feature promotions, which are not suitable for most
intrapreneurs; and (3) ignore the freedom to act on new projects, which is the basic
motivation of the intrapreneur. Reward systems discourage risk-taking and encourage
failure avoidance. They must be restructured to acknowledge the extraordinary contributions
of the innovators. Firms should create a career path for intrapreneurs that allows
the continual inception of new ventures without the financial penalties of lost promotions
and with the increased freedom to act.
Chapter 11: Intracapital: Freedom as a Reward (24 pages)
The most fundamental measure of progress for an intrapreneur is the increasing
freedom to use corporate resources to build new businesses for the corporation. This
reward can be given (earned, actually) in the form of "intracapital."
Intracapital is a permanent discretionary budget; like a bank account, it is there
until used. It is a powerful motivator because it conveys a sense of ownership and
guarantees freedom. It is advantageous to the company because it encourages frugality
and allows the firm to bet on proven winners.
Intrapreneurs earn intracapital when their new ventures succeed for the corporation.
In a formal system, intrapreneurs also take some risks, such as foregone salary increases
and extra, unpaid labor; there is an agreed-upon method of measuring success; profits
are allocated to sponsors and team members, as well, in an agreed-upon manner; and
earned rewards and autonomy can not be taken away.
Chapter 12: Putting to Rest the Fears of Anarchy (13 pages)
Contrary to many people's initial fears, intrapreneurial corporations are
better controlled than hierarchical organizations. The essence of efficient control
is a good fit between the system and the task. Intrapreneurial firms are fit for
the Innovation Age because they conserve the resource of brain power. Such firms
have found that trusting their people to preserve high quality works. In fact, with
the increased use of computers, smaller staffs will be possible, thus lessening the
chances of overcontrol. In the Innovation Age, control systems will be based on selecting
and empowering the right people, much as the venture capital system functions today.
Conclusion: The Renaissance Corporation (10 pages)
To survive, corporations of the future must change. They must balance necessary
structures and freedom of action to increase productivity. The first step is an "interactive
decentralization" that relies on voluntary customer-vendor relationships. Executives
can create an internal marketplace that pushes intrapreneurs and employees toward
the objectives of the corporation. Intracapital is the key ingredient in making decentralization
work because it generates free intraprise. Intrapreneurship is a way of organizing
business so that work again becomes joyful. The wealth of corporations-like that
of nations-is dependent on the freedom of their people.
Appendix: Intraprise Plan Guidelines (29
pages)
The author analyzes nine elements of a business plan as they would apply to an intrapreneurial
venture. He offers advice and raises questions that an intrapreneur must answer before
pro-ceeding.
Quotations and statistics are documented throughout the chap-ters in footnotes. The
author also provides a bibliography for further reading and an index.
Evaluation
Presentation
Pinchot has produced a very fine piece of professional literature. The book
is clearly written, evenly paced, and carefully (and well) argued. There is a nice
level—headed calmness to Intra-preneuring— a quality missing from many other serious
treatments of important business subjects. The author's chief professional concern
is the promotion of intrapreneurship. His personal expe-riences (the "I"
that seems to be everywhere in management books) intrude very seldom. Here, the idea
has precedence over the ego.
Intrapreneuring offers an excellent balance of abstract concept and practical example,
of reason and experience. In addition, seven of the chapters conclude with extended
profiles of intra-preneurs. These well-focused case studies do a good job of getting
Pinchot's main points across. The only drawback is that the examples seem limited
to a relatively few firms. We seem to meet the people at 3M in every chapter. But
this is probably a natural result of Pinchot's stress on depth over breadth.
In Intrapreneuring, lots of little things are done right: the layout makes for easy
reading; the figures are clear and significantly enhance the text; the documentation
is good, and so on. We understand better after reading a well-crafted book how people
like Tom Peters (A Passion for Excellence) can get so excited about what seem to
be small matters of business. In books as well as management, the little things do
make a difference.
Content
Just as the presentation contains a good mixture of the abstract and concrete,
so too does the material presented. Intrapreneuring is a book of ideas and applications,
of theory and practice. Pinchot is, first of all, selling the concept of intrapreneurship
and its importance. He asserts that (1) innovation in corporations is necessary for
their survival; (2) the push for entrepreneurial free-dom is strong and will if necessary
be satisfied outside the corporation by venture capitalism (and by foreign firms);
and (3) entrepreneurial innovation can be harnessed, indeed encouraged, within the
corporation through the intrapreneuring process. The possibility for and necessity
of innovation within large organizations is supported in the latest work of Peter
Drucker.
Today's businesses, especially the large ones, simply will not survive in this period
of rapid change and innovation unless they acquire entrepreneurial competence. It
is the existing business-and the fair-sized rather than the small one—that has the
best capability for entrepreneurial leadership. (p. 144).
Pinchot does not cite Drucker's newest book, nor does Drucker mention "intrapreneuring,"
but the two authors were clearly writing to much the same purpose.
Pinchot restricts his theoretical discussions to the first three chapters and to
the opening and closing comments directed at CEOs. His primary goals are (1) to explain
to interested managers how to become an intrapreneur (chapters 4-8 and the appendix)
and (2) to explain to top management how to structure a corporate environment conducive
to intrapreneuring (chapters 9-12). These chapters are dedicated to convincing both
potential intrapreneur and CEO that the process is possible. They are effective because
they are detailed, analytical, and honest.
Pinchot has had more than a little experience presenting the idea of intrapreneuring,
and he has well-considered responses to everyone's concerns. We are not left with
the feeling of having discovered an easy solution to encouraging and managing innova-tion,
but we do have a sense of possessing comprehensive guide-lines that could work.
Pinchot believes that the wealth of corporations will increase as corporations give
freedom to their employees, that is, as they empower intrapreneurs. His book gives
corporate managers the insight and instruction to begin that process.
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