In my previous article, I talked about strategy-driven innovation, and when a company's executives should lead the innovation process.  Today, we'll look at the other side of the coin: Intrapreneur-driven innovation.

What is Intrapreneur-Driven Innovation?

Intrapreneur-driven innovation is a bottom-up approach, which means that the primary drivers of the innovation activity are the employees themselves.  In fact, “intrapreneur” is simply a term for employees who behave like “internal entrepreneurs”, starting up new businesses from within your existing business.

Many people in an organization have entrepreneurial skills, and if they are properly motivated, they can direct those skills to develop new businesses for the company.  In this approach, executives don’t define what innovations people should work on – that is left for the intrapreneurs to define.  However, this isn't necessarily a hands-off approach for the leadership team either.  Frequently, the executives still define who will innovate, through their allocations of time and money.  As well, the executives will often provide market guidance, if there are strategic constraints regarding the domains they are willing to enter.

3M's Post-it notes were created under such an intrapreneur-driven program.  Specifically, they were developed as part of 3M's "permitted bootlegging" program, which we'll discuss in a later article.  In this model, employees are given time to investigate and promote any ideas which they believe show promise.  They choose their innovation activities, and receive no direction from upper management.

However, remember that when comparing intrapreneur- and strategy-driven innovation, that nothing is black-and-white.  It is not a binary choice of one approach or the other.  In most environments I've seen or researched, there's usually a balance between strategy-driven and intrapreneur-driven innovation, depending on the needs of each individual innovation and organization.

It’s also important to note here that neither of these approaches is inherently better than the other.  Each organization has its own strengths and weaknesses, and the approach you choose should be based on your capabilities, your market, and your goals.

What are the Advantages of Intrapreneur-Driven Innovation?

It motivates staff to innovate.  In this model, innovation is now “owned by the innovators”, which becomes a tremendous motivator and morale builder.  In an organization where staff is inherently proactive, this model provides the formal blessing for them to pursue their ideas, and reinforces an existing culture of innovation.

It generates more and better ideas.  As well, an intrapreneur-driven approach typically generates more ideas, and higher quality ideas, than a top-down approach.  When more people are innovating and discussing ideas with one another, that feedback increases the quality of the ideas beyond what a smaller group could achieve.  This is especially true when the employees feel a sense of ownership over the ideas.

It protects ideas from upper management.  Despite the best intentions of the executive team, they may be tempted to kill ideas which could eventually come to dominate the market.  This is the key challenge facing disruptive innovations.  In his book, The Innovator's Dilemma, Clayton Christensen emphasizes the need to protect disruptive innovations from the rational, good management practices of business leaders.

To explain this a little further, disruptive innovation involves creating lower end technologies that don't currently meet the needs of the mainstream market.  However, they do meet the needs of smaller, lower margin markets.  And as the technology improves, the innovation eventually comes to meet the requirements of the mainstream market as well, driving out older technologies.  However, when first conceived, the lower returns for disruptive innovations make them inherently less attractive than their non-disruptive counterparts.  As a result, disruptive innovations are unlikely to appear and survive within a strategy-driven innovation approach, which typically focuses on maximizing ROI.

What are the Disadvantages of Intrapreneur-Driven Innovation?

Employees may not get time to innovate.  Intrapreneur-driven innovation requires that employees spend time on activities which are not formally directed by upper management.  This can frequently cause a conflict between employees' innovation activities and their assigned deliverables.  You can expect this conflict to occur if time for innovation is not explicitly allocated in the budget or planned for in the schedules.  As well, time for innovation could also get swallowed up by other day-to-day activities, such as consulting for staff on other projects.  The key step for success here is to ensure that time is formally allocated for innovation, and that you follow up to make sure that people are not pressured away from using that time.

Intrapreneur-driven innovation may lack direction.  The company preferred strategy may be to grow into certain markets, but intrapreneurs’ innovations may not be aligned with that strategy.  If you do have a strong preference for target markets, but still want to use an intrapreneurial approach, be sure to communicate your strategy and encourage innovations that are consistent with it.  But also be careful not to be so restrictive as to stifle employees' motivation.

Nothing may happen.  When everybody is responsible for innovation, then nobody is responsible for innovation.  This is a problem of accountability.  Successful intrapreneur-driven innovation requires a culture of initiative among the employees.  People need to be able to take the lead to spend time on innovation, even when they have competing demands for their time.  If your team is not able to do this, then you should probably focus more on strategy-driven innovation, until you've grown a stronger culture of innovation.

When to use Intrapreneur-Driven Innovation?

When the company has a strong innovation culture.  If the organization’s culture doesn't support innovation, then selecting an intrapreneur-driven approach will simply result in nothing being done.  The cultural traits that support innovation, and that you need in your organization to succeed with this approach, include constructive conflict, voluntary and enthusiastic action, and accepting failure.  In the absence of these traits, you're more likely to be successful with a strategy-driven approach.

When the company has mature processes.  For intrapreneur-driven innovation to succeed, the company's processes need to be mature enough to ensure that the employees are given the time to innovate.  Without guaranteed time, choosing an intrapreneur-driven approach will have the opposite effect: generating cynicism and hurting morale within the ranks.  But if people are explicitly given the time to innovate, then they are much more likely to use it.

When the company wants to expand into new markets.  If the management team is willing to experiment with new markets, or isn't sure where the company's next winner will appear, then this approach is ideal.  Innovating into new markets is inherently riskier than innovating within your existing market, and you are likely to encounter more failures.  But the upside potential is also much greater.  Cirque du Soleil's creation and dominance of a new circus-theatre market has made them much more successful than if they had simply targeted the traditional circus or theatre markets.

Lastly

I hope you're finding these articles to be helpful in strengthening your offerings.  There are a lot of ideas introduced here, and I'll expand on these in much greater depth in future articles.

Seriously, send me an email and let me know what you think!  Have you had more success with strategy-driven or intrapreneur-driven innovation?  Do you have an example you'd like to share?  Maybe others can learn from your experiences.

Of course, if you have any questions, or if you would like more information on how to implement these or other software development processes in your organization, please feel free to contact me at Charles@CharlesConway.com.

If you know of someone who may find this article of interest, please forward it on!

Good luck!
Charles