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.
Setting Your Intrapreneurship Vision
After giving it some thought, you have decided that intrapreneurship is for you and you clearly see how intrapreneurship can reignite the entrepreneurial spark within your family business. You understand the place that intrapreneurship holds within a broader strategic context of growth, diversification and expansion. You also understand how intrapreneurship can create value for you and your company while at the same time be mutually beneficial to you and the family members who wish to get into business. You are willing to leverage intrapreneurship to support the next generation family members’ entrepreneurial drive and aspirations. You must now spend some time defining your intrapreneurship vision. This vision must cover 4 important elements.
1. Define the Vision
The intrapreneurship vision, sometimes referred to as an intrapreneurship thesis, is a clear statement that defines what you are aiming to achieve by embarking on your intrapreneurial journey. Obviously, intrapreneurship is about growth and entering new markets or launching new businesses or lines of business, but leaving it there is leaving the definition too broad. Every company will have different reasons to become intrapreneurial. You will want your intrapreneurs to be somewhat focused in areas of general interest to you. What you want to avoid is to have people working on great ideas that you never really intended to consider or pursue. This ould be frustrating for everyone involved and is a big waste of time, energy and money.
The vision should clearly state what you wish the intrapreneurs to think about. Here are some examples:
- Yours might be a product-based business wishing to leverage your expertize to enter a new market? I led such an initiative years ago when our business decided to leverage an extensive simulation and technology expertize in the aviation pilot training market to disrupt how training was being conducted to train doctors, surgeons and nurses. Five years after launch, this new business became the leader in its field.
- Maybe you are seeing a new trend in your existing market and want to get ahead of it to establish a leadership position. A simple example in Canada is the tire changing business. The law states that you must change the tires on your car from summer tires to winter tires at specific times of the year. Traditionally, people made an appointment and brought their car to the garage. A few years ago, young entrepreneurs brought a disruptive solution – you make an appointment via an app and they come to your house to change your car’s tires. Not only is this much more convenient, but it eliminates the need for customers to take time off work to get the job done. An intrapreneurship vision in that case could have been for existing garage owners to leverage technology and apps to create new solutions to service their traditional client base.
- Yours might be an intrapreneurship strategy based on creating spin-offs into totally new markets. Here, your vision might be to enter new markets that can benefit from your well-established and respected brand or your multiple installations or distribution channels. The Meuillet family of France is a great example of this type of intrapreneurship vision, having established itself in various sectors ranging from sports equipment and clothing to home appliances to home hardware to food and restaurants and several others.
- Finally, yours might be pure diversification play in which you have no limitations on the types of business being pursued. This type of strategy leverages your financial strength and your ability to provide funding and open doors to your network of contacts. Here, every business can be very different from the next with the only common link being that of your financial backing.
Each company must think about what it aims to achieve and what aspects of its existing operations and strengths it wishes to leverage.
2. Define Financial Materiality
I bring up the term the materiality minefield in the book Winning at Intrapreneurship as one of the biggest traps business leaders and owners can fall into. Materiality in the finance world refers to how important a financial amount or transaction is when compared to the overall size of a business. Obviously, a $500,000 transaction is much more material to a $10 Million business than to a $500 Million business. The materiality minefield refers to the lack of clearly stated financial goals that a business wishes to achieve. You want to ensure that intrapreneurs coming up with business ideas come to you with ideas that will meet your financial materiality expectations. There are many good ideas that can make money but that may not be worth your company’s effort and support because their projected annual revenues and profits, once properly scaled, are not large enough (material enough) for you. There are not right or wrong ratios to establish materiality expectations but establishing what this will mean to your business is important.
3. Demonstrate Alignment and Value Creation
Even if you are the CEO of your business or the major shareholder, you know that you cannot ensure the success of these new businesses by yourself. You will need to show the rest of your leadership team why it is worth investing in the new businesses. After all, they are the ones that must often make the sacrifices and who will be called upon to support the intrapreneurs while still operating the core business and delivering results. The business leaders in your core business must be engaged and motivated and that is achieved by clearly demonstrating how the success of the intrapreneurial ventures will benefit the broader enterprise in the medium to long term.
4. Define Who Has Access
Finally, family businesses must make it clear who will be considered to lead these intrapreneurial ventures. If you have decided to follow this path to give next generation family members the opportunities to lead new businesses, then make it clear to the organization that you have to be a family member to be in charge of an intrapreneurial venture. Again, transparency is always best. Also make it clear how non-family business employees can participate. Certain non-family members can make great co-founder or bring other skills that the new business will need to succeed.
There are other important ingredients that must also be incorporated into the deployment of an intrapreneurship initiative. Getting these right can make the difference between success and failure.
First, don’t be too restrictive. The purpose of an intrapreneurship vision is to provide broad guidelines. It establishes a “sandbox” in which you want your intrapreneurs to work. This sandbox should be large enough to give them plenty of room to innovate, discover new business ideas, and launch and grow their business. The vision is not meant to be too limiting. If it is, you risk losing great ideas and see your intrapreneurs leave.
Second, remain flexible. Companies that have followed an intrapreneurship strategy are always surprised how it leads to great ideas and new innovations. Often, these are in areas they never would have expected when defining their intrapreneurship vision. The creativity and entrepreneurial sparks that will have been ignited will inevitably lead to new lines of thinking and even challenge old established paradigms. Stay alert to these and, if need be, remain flexible on modifying your intrapreneurship vision.
Third, do not force acquisitions. The temptation to acquire an established business is a strong one but one that can be very costly and lead to failure. Give your startup the time they need to understand the new market so as to be much better educated on what will be required to succeed. An acquisition should be made to complement your existing capabilities, to add industry specific resources and know-how, acquire clients or distribution channels. Intrapreneurs will know when they have an opportunity to accelerate growth via an acquisition and they should make it very clear on what capabilities will make their new business succeed, and then go after it.
Finally, intrapreneurship is a team sport. Intrapreneurship, by its very nature of codependence with the parent company that sponsors it, requires leaders who are team players. Selecting your intrapreneurs is as much about how much they know about the business they wish to launch as it is about their ability to lead and motivate the people that will join them on this adventure AND to receive the support from employees inside your existing operations who will be asked to support them. Select your intrapreneurs wisely.
Your intrapreneurship vision is an important element to success. The process of defining this vision will force you and your team to understand what you aim to achieve, what areas you wish to explore and those that you might want to stay away from. It ensures you have thought about the financial contributions you expect these new businesses to make. A well-articulated vision will also allow your intrapreneurs to focus on broad areas of interest while still giving them the level of autonomy, decision-making authority and freedom of movement to launch their new business idea and create their own entrepreneurial legacy.