The Business of Intrapreneurship Series
The business of intrapreneurship series tackles key strategic and operational aspects that every established business must consider if they wish to remain entrepreneurial, attract innovators and develop future business leaders. The series is authored by Guillaume Hervé, the Business Families Foundation resident expert intrapreneur and the author of Winning at Intrapreneurship: 12 Labors to Overcome Corporate Culture and Achieve Startup Success. Mr. Hervé is the President of G3point0 Consulting, the Chairman of the Board of CTS Health, an executive mentor to entrepreneurs and a sought after speaker on strategy and intrapreneurship.
Intrapreneurship and Family Businesses
One of the first hurdles one faces when discussing intrapreneurship within the family business context is justifying its applicability. This often stems from a misconception that intrapreneurship best practices come from the world of large corporate businesses. The reality is that intrapreneurship is applicable to any business seeking to grow and develop great leaders, regardless of the type of business structure one operates in: family-owned or not. Intrapreneurship allows all businesses to create and maintain an entrepreneurial culture within their existing enterprise. This in turn ignites the engine of innovation in support of diversification strategies, expansion plans and entering new markets. Intrapreneurs also develop into great business leaders because they develop general leadership skills, they are comfortable working in the unknown, learn to make decisions with limited information, are not afraid to challenge the status quo and often are the ones capable of spotting opportunities when others cannot. It is important to address some of these preconceptions and tackle how intrapreneurship should be deployed within the business family context.
Public Versus Private
The confusion can stem from misconceptions around family businesses and what is often referred to as the corporate world. Here I do not refer to the legal definition of a corporation. Rather, people who use the term “corporate world” often do so to refer to very large conglomerates or to publically traded companies with well-established business governance rules. The fact is that many family-owned businesses are also “corporate.” Some of the world’s largest companies are both family owned and publically traded on the world’s stock exchanges and certainly fit the definition of “corporate.” Some examples include TATA in India, Volkswagen in Germany, Samsung in South Korea, Roche in Switzerland, Dassault Aviation in France, George Weston in Canada, McKesson in the United States, and America Movil in Mexico. These companies have grown to become dominant in their respective fields because they consistently nurtured their entrepreneurial spirit by sustaining an ongoing intrapreneurial drive spanning generations.
Small Versus Large
Along those lines, the size of the enterprise is sometimes heard as an argument of the applicability of intrapreneurship to a family business. The reality is that companies of all sizes have benefited from intrapreneurship. A good example is W.L. Gore, best known for GORE-TEX and a leader in the use of fluoropolymers that grew at great speeds in the 1990’s by leveraging intrapreneurship. One of many successful products was the launch of the Elixir guitar string back in 1997, which is now ranked as the world’s #1. More recently, Shutterstock, the global provider of high quality stock images and footages, has leveraged intrapreneurship to drive growth resulting in new businesses Offset and Skillfeed. The truth of the matter is that while smaller companies might be at a disadvantage because they may not have the breadth and depth of resources, distribution channels, and market presence to leverage when compared to larger enterprises, they tend to benefit from less resistance to change, more flexibility and faster decision-making to move their intrapreneurial ventures forward.
You Don’t Need To Be Big To Succeed
An inspiring example of a small family business leveraging intrapreneurship to address growth and to encourage the next generation is the Faita family in Montreal, Canada. Recently featured by the Business Families Foundation, this small business started as a hardware store, eventually diversified into hunting and fishing, then opened a cooking school and later a restaurant. This was accomplished via various generations of entrepreneurial-minded family members looking to follow their own passions and dreams while still remaining within the family business.
As mentioned in a previous article, intrapreneurship is “monetizing an innovation and turning it into a profitable and sustainable business within a corporate environment (Winning at Intrapreneurship (2015).” It is a business process focused on transitioning innovations to the marketplace by creating new profitable and sustainable businesses or lines of business within an existing enterprise. For business families, it also provides an additional tool to attract the next generation to enter the family business with a long-term view of possibly drawing them back into leadership roles within the broader family business. This is accomplished by providing family members, whom might have otherwise joined other businesses to follow their entrepreneurial dreams or approached independent angel investors or venture capitalist for funds to launch their own start-up, an opportunity to benefit from the help of the family – but on their own terms. As the family intrapreneur grows his/her new business venture, they develop into great business leaders and learn what it takes to scale operations, lead teams in growing operations and face adversities.
To succeed at intrapreneurship, all companies, regardless of size, shareholder composition, geography, or market, must do the following:
- Ensure CEO support. Success with intrapreneurship starts at the top. Securing the CEO support is vital to the medium and long-term success of any intrapreneurial initiative. The CEO will ensure the leadership team gives the right level of support and resources are made available in a timely manner.
- Define an intrapreneurship vision. An intrapreneurship initiative is essentially a strategic choice. It is a strategic decision to leverage intrapreneurship for growth. For this reason it must be aligned with the overall goals and needs of the parent company and demonstrate how it will support the broader enterprise vision. Here, the parent company must define a sandbox that is large enough to allow for creativity and innovation and to give the intrapreneurs plenty of room to launch and grow their startups, while at the same time defining some broad guidelines as to what areas the parent company wishes to explore via intrapreneurship.
- Take a long-term view. Intrapreneurship is not the tool for quick blockbusters that will bring in millions of dollars in the short term. Intrapreneurship is an organic growth strategy that works when intrapreneurs can explore ideas, test and validate them in the market place, adjust their value proposition as they gather more data and then scale when the minimum viable product has been clearly established.
- Separate funding. It has been demonstrated repeatedly that to succeed at intrapreneurship, the parent company must separate intrapreneurship funds from its core business budgets. These funds must be clearly earmarked for intrapreneurs, clearly secured and protected from the temptations of core business leaders to access it or cut it to suit their own core business needs.
- Define the process to evaluate ideas. The process by which the company will identify new business ideas and select them must be clearly communicated to all. This will ensure people are working on the right things and avoid any perception of preferential treatment in the future.
- Define the process for funding and follow up. Similar to the process of evaluation ideas, how ideas will be funded and supported must also be clearly defined. This not only helps the intrapreneurs know what is expected of them, but also gives the company confidence that steps must be followed and gates must be passed through to receive ongoing support and funding.
- Establish separate teams. Your intrapreneurs must be established outside of the core business and separated from the core business activities. This provides them the freedom of movement necessary to act as the leaders of startups and create the environment and capabilities they deem necessary to succeed in their new business ventures.
- Adapt KPIs and reporting requirements. Companies must adapt their standard reporting requirements and key performance indicators (KPIs) to the startup world because the measured of performance and measures of success used to manage and grow an established and mature core business are not suitable to the needs of a startup that must remain agile, reactive and invest in idea validation.
- Embrace change management. Companies entering into intrapreneurship must understand that it will necessitate a certain degree of change inside the core business. This change is necessary in order to adapt established systems, processes and company practices to provide the level of support required by the startup in the manner in which the startup requires it.
- Understand the need to pivot. Pivoting in business is the act of adapting a strategy or an execution plan to new information being received from the market and customers. Pivoting is natural in the world of startups, where less is known about a new market and where trial and validation occurs frequently, especially in the infancy stages of the startup. New businesses will need to pivot much more frequently than the mature business sponsoring it.
Additional Success Factors for Family Businesses. Family businesses must also address the following issues due to the unique dynamics of the business family. These include:
- Defining continuity (business, family name, etc…). The question of “what does continuity mean to you” is very important. Are you looking to ensure family members will be ready to take over when you are ready to exit the business? Are you seeking to maintain the business in its existing market(s) and want to develop a successor accordingly? Are you looking to preserve the family name in business, regardless of the markets the enterprise will evolve towards? Understanding your own definition of continuity will help you refine the scope of your intrapreneurship activities and the profile of the next generation family member(s) needed to execute this vision.
- Clarify who has access? Clearly define who will have access to the funding behind the intrapreneurship drive. In non family-owned businesses, every employee can have access, but this may not be the case for your family business. You must be clear and be transparent wherever you can because you cannot risk alienating your non-family employees inside the business. This does not mean that a family member must lead the new business initiative, but you might require that one be part of the leadership team of the startup. This must be well thought through.
- Communicate your values. Finally, are there specific family values that you insist must be respected by any future generations seeking to take advantage of your intrapreneurship initiative? These go beyond business values and represent what you and your family feel are important criteria you wish to support. These values could represent your cultural, environmental, regional, or even personal expectations.
Understanding how the principles of intrapreneurship can be applied to your specific family and family business is the first step towards laying down a clear strategic growth initiative founded on intrapreneurship that will benefit you, your enterprise and your family members wishing to embark on their own entrepreneurial journey for generations to come.