The greenhouse effect: Cultivating inside innovators
Can intrapreneurial initiatives serve the individual aspirations of the next generation and rejuvenate family firm innovation? Scott McCulloch looks at the possibilities
If traditional succession is not a clear-cut option, how can the next generation add value to a family enterprise inevitably heading for a challenging leadership transition? One area that is gaining traction among ambitious progeny is intrapreneurial initiatives. But who are the intrapreneurs and how do they create wealth?
In any business there are three basic wealth-creation profiles. The first is the builder, who drives sales, but doesn’t necessarily innovate. The second is the entrepreneur or external venture creator. Entrepreneurs start from scratch. They raise their own risk capital and tend to operate independently.
Then there is the intrapreneur. They behave like entrepreneurs, yet develop new value under the auspices of an existing enterprise. They are the “inside” entrepreneurs.
“Family cultures have become more oriented around individual development of talents that focus on helping individuals achieve their aspirations,” says John Davis, of Cambridge Family Enterprise Group in Boston.
“The needs of the family and collective aspirations are less and less seen as an obligation.”
Intrapreneurs are more common than thought. Vancouver-based Sked Guru founder and chief executive Phil DeSerres always knew he would have his own business. The question was, would it be within his family enterprise or outside? DeSerres’s sexagenarian father, Marc, remains firmly at the helm of third-generation Canadian art supply retailer Omer DeSerres.
“I’ve been around start-ups and entrepreneurial blood for as long as I can remember,” says Phil DeSerres, who began working in his family business after secondary school.
“There was no doubt in my mind that I was going to have a business.”
DeSerres had always gravitated towards his family firm, out of pride and a sense of duty. But when he discovered the Intrapreneurial Initiative, a programme supported by Quebec’s pension fund manager CDPQ and Montreal-based Business Families Foundation, things changed.
“The programme gave me a bit of a window,” says DeSerres. He recalls how he contrived to “tweak something out of the programme that could eventually either fold back into the family business or become a standalone enterprise.”
Disrupter not the disrupted
Intrapreneurship is not new. Yet it is gathering pace, not so much as a business fad but as an essential strategy.
Why? Business leaders are increasingly faced with disruption from start-ups to technology companies moving into their specific space, says intrapreneurship expert Peter Vogel.
Despite their market dominance and abundance of resources, established businesses are increasingly uncertain about their future.
“They are struggling to adapt to the new reality of disruption,” says Vogel, who directs the Lean Intrapreneurship programme at IMD Business School in Switzerland.
“Irrespective of whether you are a family firm of not, as a result of disruption or change, companies are increasingly interested in understanding how they can make sure they are the ones disrupting rather than somebody else,” he says.
“That is the underlying pattern.”
Understanding, indeed. But can intrapreneurship be taught? And if so, can it futureproof a business?
DeSerres, whose mother taught entrepreneurship at Montreal’s McGill University, can’t say for sure. Yet he is convinced his choices helped him.
“The programme gave me credibility within the Omer DeSerres organisation so that I could work on something else.”
That something was Sked Guru, DeSerres’s cloud-based scheduling software that helps businesses plan and manage staff schedules.
Although DeSerres works in British Columbia—dividing his time between developing Sked Guru and hitting the acquisition trail—he taps into the resources of his family business 2,800 miles eastward.
“I do not have to worry too much about billing. I keep an eye on it, but I do not have to deal with the banks, taxes, and the whole legal side since we have our department inside.”
There are other next-generation intrapreneurs like DeSerres. Jason Frohlich is president of Mentorum Inc, an e-learning company that grew out of his father’s language training technology firm LRDG.
A serial intrapreneur and marathon runner, these days Frohlich spends most of his time running StimaWELL North America, a manufacturer of medical-grade, electric muscle stimulation devices that help athletes perform better and heal faster. That, and his other ventures.
Like DeSerres, Frohlich’s brother, Jeremy, participated in Business Families Foundation’s 12-week Intrapreneurial Initiative in which Frohlich’s father, Julius, mentored his sibling in the development of a new business.
Mentoring is a key part of developing intrapreneurs. Although Frohlich, 36, devotes less time to LRDG, he has taken significant amounts of advice from members of his family and external professionals.
“Over the past few years, I have reached out to captains of industry, top people that I know, and brought them into the conversations to reinforce my message or specific objectives,” Frohlich says.
“For any intrapreneur that is extremely important.”
Guiding lights
When the next generation commit themselves to credible ventures, businesses that have a real chance of turning a profit, senior family members begin to take notice. This, IMD’s Vogel believes, reassures family leaders.
“If you work on something, a new business opportunity or an adjacent business that the next generation are excited about, the senior generation might be more willing to act as mentors. [That is] because the next generation are not going in and trying to change their legacy by making all kinds of modifications to the core business.”
Is intrapreneurship shifting the roles of the next generation in the family-firm preservation stakes? That’s unclear. What is certain is that traditional succession planning remains weak. Globally, 43% of families have no plan in place, according to PwC.
In its 2016 family business survey, the management consultant describes the next generation as ambitious, dynamic, and open to change.
“They want the business they hand on to be very different from the one they inherit.”
Which may explain why PwC found that 47% of the next generation are looking to set up parallel ventures, alongside what the main business is doing.
With intrapreneurial programmes popping up at universities and educational organisations worldwide that figure may well rise.
Certainly, coaching elements of intrapreneurial programmes are a lure for the next generation. In DeSerres’s case his mentor was not his father, it was the family firm’s chief financial officer, who is now chief executive.
“It was nice to see him from a different perspective from what I had seen in the past.”
Yet what struck DeSerres most was relationship shifts between participants.
“The programme really forced a mentorship relationship,” he says.
“It was not just parent and child, it was the employee that I’m nurturing to carry forward to try and understand that this is not a straight line, that there are challenges. In our case the challenge was building another company with access to some of the main company’s resources.”
Vogel agrees: “I think one of the big challenges in family businesses’ succession is that you need to break up this traditional parent-child relationship and turn that into an adult-adult relationship. That will never work 100% [of the time], but that is ultimately what we have to get to.”
Essential ingredients: Key qualities of an intrapreneur
Intrapreneurs are often described as innovators, problem-solvers, and visionaries who persevere with dogged determination.
Intrapreneurs are “ideas” people. They come up with smart ones, stick with them and collaborate to bring them to fruition, often by seizing opportunities along the way.
Vijay Govindarajan, professor of management at Dartmouth College’s Tuck School of Business, and Jatin Desai, chief executive of US-based DeSai Group, have identified six patterns of successful intrapreneurs.
One, that “money is not the measurement” for intrapreneurs, is particularly telling. The primary motivation for intrapreneurs, Govindarajan and Desai note, is “influence with freedom”. Intrapreneurs appreciate rewards, but money is not their starting point.
Govindarajan and Desai describe true intrapreneurs as people with the capability of making significant, even courageous, shifts from a current strategic direction.
Govindarajan and Desai describe this shift as “pivoting”—think Steve Jobs, who pivoted Apple from an education and hobby computer company to a consumer electronics giant. This pattern is often needed to resuscitate a dying company, yet can be unfathomable to mature organisations.
Intrapreneurship is the act of behaving like an entrepreneur while working within an existing enterprise. That means creating new ideas and, crucially, self-financing opportunities towards new forms of value under the auspices of an existing business.
Being an intrapreneur is considered beneficial for both intrapreneurs and their organisations.
Companies support intrapreneurs with finance and access to corporate resources, while intrapreneurs innovate for their enterprises.
An intrapreneur may not face as high risk or reap the rewards of an entrepreneur, but has access to the capabilities of the established firm.
Gifford Pinchot, the US entrepreneur, author and inventor, is credited with the first use of the word intrapreneur. Pinchot defined intrapreneurs as “dreamers who do… those who take hands-on responsibility for creating innovation of any kind, within a business”.
Identifying intrapreneurs: Who is the next disruptor?
Intrapreneurs are a different breed. In a large business around 5% of employees are natural innovators, according to DeSai Group chief executive Jatin Desai. Of that, a mere 10% are great intrapreneurs who can build the next great business within the existing enterprise. Their most important trait? Arguably, it is their ability to innovate.
But innovation must be recognised as a permanent function of a successful company, say experts familiar with intrapreneurial patterns, just like other fundamental functions such as accounting, operations, and sales.
Incubators that are isolated from other business areas tend to have limited success, because they are disconnected from the larger organisation. Game-changing innovations inevitably require a company-wide approach.
