The 8 principles of intrapreneurship: how large companies can become more innovative and agile

Breakthrough innovations are not just the domain of startups, but also large companies that embrace intrapreneurship, according to Simone Ahuja’s new book, Jugaad 3.0: Hacking the Corporation to make it Fast, Fluid and Frugal.

Challenger products and services are emerging at lightning speed, and companies need new collaborative leadership models and cultures, according to Jim Loree, CEO of tools giant Stanley Black & Decker. Intrapreneurship is no small task since it involves tackling the traditional company’s “immune system”,  he writes in the foreword to the book.

“There is only way to continue to be relevant, and that’s continuing to innovate with purpose, openness, and ever-increasing speed,” Jim cautions. This calls for flexible innovation without necessarily discarding all past processes or successes.

Simone Ahuja is the co-author of Jugaad Innovation: A Frugal and Flexible Approach to Innovation for the 21st Century (along with Navi Radjou and Jaideep Prabhu – see my book review here). Based in Minneapolis, she is the CEO of Blood Orange and has been a consultant in corporate innovation at 3M, Target, Medtronic, P&G, and Stanley Black & Decker.

The material is spread across 224 pages, and is packed with checklists and examples. Here are my key takeaways from the book, summarised as well in Table 1 below. See also my reviews of the related books Do Better with Less, Lean Impact, A Beautiful Constraint, The Lean Startup Way, A World of Three Zeroes, and Do Good.

Context

Companies need to embrace ambitious breakthroughs in addition to incremental innovation, according to Simone. They need to beware of the ‘Kodak moment’ of business decline. Creative employees, therefore, need to be engaged and retained, she argues.

Strangely, the author defines Jugaad 3.0 in just a few lines (‘a spectrum of high impact, high-value innovation from within an established organisation; to use a fast, frugal approach common to an entrepreneurial startup’). There is no explanation either of what Jugaad 1.0 and 2.0 are, and how 3.0 may add to this evolution.

Intrapreneurs are also referred to as DIYers, corporate hackers, or constructive disrupters. They need not be lone geniuses, but are connected to resources, knowledge, and networks. Their passion drives them to start side projects, and their enthusiasm draws in like-minded colleagues.

Simone explains that intrapreneurs are forward-thinking, optimistic, biased to action, problem-oriented, married to the mission, frugal by nature, and open to partnership. But if their vitality, creativity and agility are not embraced, they may leave the organisation.

Simone lists typical organisational blocks to intrapreneurship: the play-it-safe mindset, rigid structures and processes, inappropriate metrics, lack of alignment, and bureaucracy. She urges organisations to embrace the complexity and messiness of intrapreneur-driven innovation.

The author debunks some myths about intrapreneurship, and affirms that it can be done systematically, measurably, proactively, reliably, in a team-centric manner, and across the entire organisation as well as outside.

However, though both share the builder mindset, the intrapreneur is different from the entrepreneur by avoiding the risk, unpredictability, and all-consuming hours of the startup world, and preferring to work within the safety of the corporate job.

The term intrapreneur was coined by Gifford Pinchot III. The core components of successful organisational intrapreneurship are leadership, culture, structure and people, which Simone distills into the following eight principles.

1. Keep it frugal

“Intrapreneurs are famously resourceful,” Simone explains. They hack solutions using whatever resources they have, often in their spare time. They operate in stealth mode and fly under the radar, and even occasionally break some rules.

Instead of placing only a few large bets, companies should also embrace taking many small bets. Off-the-shelf tools and existing assets can be repurposed. Financial adversity can inspire ingenuity, according to NASA’s Allan Paull. On-demand laundry service Tide Spin piggybacked its own drycleaning service.

The three big motivators of human achievement are mastery, autonomy, and purpose, according to Daniel Pink, author of Drive. These are the kinds of support that intrapreneurs should get in large firms.

2. Make it permissionless

Companies should support a “culture of permissionless innovation”, echoing the old adage that it is better to beg forgiveness than permission. Approval processes for innovative ideas should be low friction and fast, and supported by top managers.

Managers should help to make spontaneous creativity by employees proactive rather than deceptive or underground, according to strategists at Target and Lowe. Intuit and Amazon take a step further by legitimising and supporting experimentation through measures like “unstructured time” along with sponsor support, rather than restricting it through layers of permission requests.

Network18 CEO Harsh Chawla requires managers to support intrapreneurial employees. Air cover also includes White House memos encouraging government agencies to take up open innovation and citizen engagement, according to Seema Patel, USAID’s head of innovative design.

Google used to let employees work on their own ideas (some of which became Gmail and AdSense), but also injects some structure into the unstructured time, eg. hackathons. DropBox organises a Hack Week every summer, where employees pursue whatever projects they wish for five days.

Amazon Prime arose from software engineer Charlie Ward’s suggestion for free shipping; Alexa also grew out of an internal team’s proposal for an intelligent personal assistant. Facebook’s ‘like’ button came from a similar process.

Adobe’s Kickbox initiative, along with prototyping toolkits, comes with a prepaid credit card loaded with $1000 to support group activities. Intuit allows employees to test ideas with a carefully-picked customer.

3. Let customers lead

“Nothing clears the way for intrapreneurship like the ability to connect with real customers’ pressing needs,” Simone emphasises. The customer base is the best intrapreneurial asset for a large firm, along with its operational scale, brand, domain expertise, and financial resources.

Early and frequent customer connects help determine whether a proposed idea is tackling a ‘morphine pain’ or ‘aspirin pain.’ It is important to quickly determine problem-market fit, product-market fit, and solution-market fit, according to UnitedHealth Group.

An Intuit employee in Bengaluru came up with the product idea of an app-based accounting tool called ShopOwner (rather than on-site computers), by testing it on a campus café owner. Intuit co-founder Scott Cook is a believer in “love metrics” – whether customers love and recommend a product, and come back for more.

Fidelity created a safe space for experimentation called Fidelity Labs, which helped develop cloud-based products like FidSafe. Balanda Atis came up with her idea for cosmetic products for women of colour by piggybacking on the corporate events of L’Oreal to collect consumer data.

DHL’s Customer Innovation Workshops helped develop the Parcelopter drone, which was tested in Bavaria. It also gives awards for Most Innovative Customer Solution, eg. Daimler/Smart delivery to vehicle trunks.

Sales and account managers at 3M introduce innovation teams to their customers to boost the company’s image and help win more business from new products. Other measures including visiting customers in their facilities, eg. GE CT designers visiting hospitals and children’s museums.

Such co-design approaches require getting over fears that these connects can erode customer and brand trust, and that customers only want to see perfect finished products. “Ultimately, customer-led innovation takes hold faster, yields more revenue, generates more valuable intelligence, and creates a market for new solutions,” Simone explains.

4. Keep it fluid

High-paced competition calls for nimble, fluid and self-organising innovation teams operating in a “holocracy,” according to Simone. Today’s digital tools also enable rapid, easy and cheap communication, and enable effective operation in an ecosystem of “firms, funders, and freelancers.”

Teaming thus becomes a core capability. Advertising expert Rei Inamoto describes three types of core team members: hipster (ideator), hacker (developer), and hustler (pitch to customers and funders).

Brand leaders at Kishore Biyani’s Future Group are required to behave like intrapreneurs to pursue multiple opportunities and learn from the ups and downs of the journey; they need to “fail fast and win faster”. ING Group flattened its org chart over two years to create smaller teams called squads, with chapter leaders and customer journey experts.

Lars Kolind, of Danish firm Oticon, advocated the “spaghetti organisation” where projects are posted on notice boards, and employees gravitate towards their preferences to excel or learn. The “agile manifesto” is practised at Netflix, Spotify, and Uber. Amazon’s expectation is that its thousands of employees will be the source of most new business ideas; some of its team formations are based on the “two pizza rule” for small collaborative groups.

Small workgroup empowerment is followed at China’s Haier Group via four thousand self-managed cross-functional units operating in a loosely-coupled way. Managers are supporters rather than commanders, and help “make the big company smaller.”

This mental and organisational agility helped Haier come up with innovative products based on customer suggestions, such as a washing machine that can help wash and even peel potatoes. Other products help Mongolian herders churn yak into butter.

Babak Forutanpour started brown bag lunch groups at Qualcomm; the small group of eight “co-conspirators” grew into an intrapreneurial movement of three thousand people in five years. These autonomous teams worked on hundreds of inventive ideas and hacker-style solutions as side projects.

“The role of managers should morph, not disappear,” Simone cautions. Managers need to become more like mentors, coachers, advisors, and connectors; they should empower people to experiment more.

5. Maximise return on intelligence

Innovation, and failures en route, should be seen as a “continuous journey towards becoming smarter, faster and better versus a win/lose event”, according to Sam Reid, Founder of Ideas2Impact.

Experiments, iterations, and pivots save money by allowing insights to arrive earlier, trim the unknowns, and fine-tune what to do or not to do. The software sector’s agile model, with its focus on learning, is becoming adopted elsewhere as well.

An internal repository of ideas helps contextualise the learning journey over the years, and spur new learnings and experiments. Institutionalising intelligence leads to “reinvested learnings”, Simone explains.

This calls for new metrics and KPIs that extend beyond traditional performance measures and are separate from the main business. The metrics should address organisational, process, team and individual levels of intrapreneurship, eg. number of ideas generated and experiments conducted, learnings from assumptions, engagement of senior leaders, product usage, revenue generated, repeat business.

The record of thinking and discovery becomes the “currency” of how the culture works at companies like Intuit. “The only true failure is the failure to learn,” according to Intuit’s innovation leader Jeff Zias; the company frames failures as “disproven hypotheses”.

LEGO’s Future Lab design teams are given two weeks to test new mock-ups and learn from them. UnitedHealth pledges not to be “afraid to fail in honest efforts” towards innovation.

BMW honours its “flop of the year”, and WL Gore throws parties for failed projects. Alphabet X even has an epitaph on the “grave” of a large failed project, with bonuses awarded for the teams involved.

“Best failure” awards make people reflect harder on the different types and degrees of failure. Some failed plans have even led to successful discoveries of a different type, such as PostIt notes and Viagra.

Companies should embrace the learnings from failure, and not just failure itself; such learnings should be a source of joy, and not cause for humiliation, Simone urges. But failure of a project should not be equated with failure of a person. Inquiry-driven innovation and data-driven insights should help remove guesswork and determine when an unworkable idea should be let go of; such learnings should be widely shared.

6. Create the commons

Internal and external diversity of participation helps fertilise intrapreneurship by going beyond the usual suspects and bringing in different ideas, skills and mindsets. “Collaborative creativity” helps in this regard, according to Eric Quint, Chief Design Officer, 3M.

A proper space and structure should be created for intrapreneurship; this helps increase the quantity and quality of ideas. A diverse “primordial soup” spawns the best ideas, according to Marc Nager of TechStars.

L’Oreal has an annual contest called Beauty Shakers, showcasing new designs by teams at any level, eg. using the mirror app to check makeup, new displays for nail polish. SAP augments top-down innovation initiatives with employee-driven intrapreneurship as well as connects with startups.

UnitedHealth has launched hundreds of challenges to submit ideas for initiatives like reducing healthcare costs. Microsoft’s Garage incubator, established in 2009, shows employees that innovation is learnable and not the preserve of only some brainy few.

Intuit regards all its employees as innovators and entrepreneurs, and supports them with mentors (‘innovation catalysts’). LEGO invites customer ideas from its ‘LEGO Ideas’ website; they even receive royalties for successful products. Google credits its “psychological safety” for making it possible for employees to suggest ideas without risk of judgment or other repercussions.

MindTree’s annual Osmosis event brainstorms on stretch goals for its ‘5X50’ programme, with selection of five projects that can grow to $50 million in revenue. One such employee-driven innovation project was Digital Surveillance for better CCTV analytics, which was used by the Bengaluru City Traffic Police.

7. Engage passion and purpose

Intrinsic motivation leads passionate people to solve problems. Many employees have left the corporate world to pursue such initiatives when their passion reaches a fever pitch, such as John Wood who left Microsoft to start libraries in emerging economies.

Purpose-driven companies ally with employees to tap their passion and become intrapreneurs, thus offering a form of “innovation therapy.” Social intrepreneurship is an important driver of employee engagement for such “passion projects” in companies like J&J.

Lane Desborough left GE Energy to pursue diabetes solutions for his child, moved on to Medtronic and then created the NightScout solution. The Aspen Institute’s First Mover Fellowship Programme offers grants to exceptional social intrapreneurs. ITC’s e-Choupal project was generously funded so as to help farmers tap e-commerce and become more prosperous.

8. Add discipline to disruption

Simone urges companies to systematically pursue three streams of innovation in a hybrid 70:20:10 allocation: core (incremental improvements of existing business), transitional (new model or market for the core), and transformative (entirely new offerings).

The three types of innovation should be kept close, connected, or separate so as to balance flexibility with stability, Simone advises. The audacious, ‘leap of faith’ moonshot innovations should be separately incubated; unfortunately, many companies ignore, avoid or bury them.

For example, junior staff member Ken Kutaragi had to overcome resistance from Sony to launch the PlayStation, which was originally considered a ‘toy’ not befitting a high-end electronics manufacturer. In contrast, Jim Loree, CEO of Stanley Black & Decker, wants the 175-year-old tools giant to excel in innovative output as well as financial performance and social responsibility.

The company has a Digital Accelerator innovation centre, and its annual 10-week evaluation of new ideas “feels like Silicon Valley.” Sample outcomes include the breakthrough innovation FLEXVOLT for batteries.

Simone advises companies to help formal and informal connects between intrapreneurs, provide mentorship and training, and share captured lessons. For example, Lowe hosts ‘inventor sessions’ to widely share insights from its Innovation Labs. Activities like Startup Weekend help employees understand the culture, language and skills of startups.

In sum, intrapreneurship is moving from a random event to a reliable engine, the author observes. The emergence of more case studies and frameworks will strengthen the field of intrapreneurship. “Right now, we are in a period when corporate innovation activity is exploding,” Simone signs off.

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