Mar 01, 2009
This could be the way to retain the entrepreneurial spirit of the IT industry.
The more things change, the more they remain the same. Economies are growing, market spaces are more crowded and differentiating products more vital. Yet, we have come back full circle to two words: Entrepreneurship and innovation, which in turn drive business transformation.
While these two feed into each other cyclically, the industry, with its current structure will be unable to sustain millions of IT entrepreneurs spinning out of the large global companies that it currently comprises. What then, is the answer to retaining the entrepreneurial, innovative spirit that is the bedrock of the vibrant IT industry, without risking its fundamental stability?
Intrapreneurship: When Gifford Pinchot coined the term in his eponymous book, (Harper and Row, 1985), the concept was not a new one, though the term was. Norman Macrae, in an article in The Economist in 1976, had already predicted a number of trends in business — one of them being “that dynamic corporations of the future should simultaneously be trying alternative ways of doing things in competition within themselves”. In 1982, he revisited those thoughts in another Economist article, noting that this trend had resulted in confederations of intrapreneurs. He suggested that firms should not be paying people for attendance, but should be paying competing groups for modules of work done. One suggestion was to set up a number of typing pools contracted for a certain amount of work over a certain time period for a lump sum. The members of the pool would be responsible for apportioning work, setting pay, setting work hours or even whether to subcontract out part of the work. Applied across the business spectrum, such groups would provide the intrapreneurial competition he envisioned.
The concept seemed a paradoxical one with two supporting pillars that were poles apart but what it did do was that it balanced the establishment and the maverick spirit that helped set it up in the first place. To quote only two examples, General Electric Chairman Jack Welch made a name for himself by building GE’s engineering plastics business as if he were starting his own company and Lew Lehr, former chairman of 3M, similarly built his career on his intrapreneurial pursuit of 3M’s expansion into the healthcare industry.
There is however, a flip side of the coin: Some small-business industry experts feel that the concept of “intrapreneurship” is nothing more than a myth that academics and consultants create to sell books. Their contention is that the ownership of the final product or service does not rest with the intrapreneur; since the paycheck of the intrapreneur is not tied to the success of his venture, the blood, sweat, toil and tears are not invested at the same level; the parent organisation usurps intellectual property and that there is no lifelong equity involvement possible.
Having said that, intrapreneurship does have a lot to recommend it. Given that technology and globalisation are driving competition, it is only agile organisations that can pounce quickly on new opportunities, which will retain an advantage over slower competitors.
As we have all witnessed, it is becoming increasingly difficult for any company to get to the top and stay there. The key position is no longer about getting there and occupying the seat as much as playing a very hectic game of musical chairs with the leaders. In order to do that, flexibility and entrepreneurship are key winning elements. In addition, we need to remember that employee loyalty is up for sale these days. A case in point is the hand-held device giant, Palm. As the company expanded, it began stifling intrapreneurship, and the founders left to start Handspring, which is when Palm realised its mistake and purchased the company back at a cost of close to $170 million.
Business transformation in the IT space is not just about the numbers game any more but about differentiation through customer relationships and operational excellence. Tom Nies, CEO of Cincom and one of the longest-serving active CEOs in the IT industry, feels that the advantage of intrapreneurship lies in the ability of a company to utilise its larger economic and technical resources to expedite decision-making processes. However, he points out that an organisation “should be able to demonstrate the willingness to break with traditions by embracing initiatives that run counter to the way the company had done things in the past.”
This also entails a change in the way that profits are shared because the kind of involvement that an IT organisation requires for an effective business transformation, can only come if every employee truly has a stake in the business and not just as an employee but as a stakeholder with a share in the profits. In other words, by creating entrepreneurs within the business, or “intrapreneurs” by introducing profit-sharing in a more immediate context.
It is this “intrapreneurship” then, which will drive innovation and growth. How does one foster it? Intel seems to have worked a way around it. They established an in-house “new business initiative” in 1998 to bootstrap new businesses that employees propose by financing businesses that the company’s own employees start. The Xbox story is a similar one. Game designer Seamus Blackley had joined Microsoft in 1999 after a big project of his failed. At Microsoft, he was able to develop his concept in relative freedom and get credit for it.
This open policy has paid off for GTE’s Information Systems Division, as a company and for individual employees. The program was developed by a former GTE employee, Anthony Spadafore, who left GTE to form his own consultancy program, Pathfinders, which works towards developing self-directed employees. Spadafore extensively counselled the volunteer employees in this new way of thinking and working. From the initial group eight new projects were proposed and a number of them funded. As a direct result of this, a number of employees have defined totally new career paths for themselves and the programme has totally redefined how GTE does business.
Key learnings from companies that have successfully implemented intrapreneurship in business encompass several elements, including identifying and fostering employees who have what are considered to be intrapreneurial traits; developing an intrapreneurial process for part or all of a business, and developing innovation through rewarding intrapreneurial behaviour.
At the risk of sounding maudlin, “love your people” works at a fundamental level. We at HCL, have been fostering talent and promoting all-round development through a radical HR policy called “Employee First” wherein the employee and his or her personal development take precedence over everything including the customer and the company’s bottom line. The logic in this case is that if every employee feels a sense of ownership for the business that he or she is handling, then we have a win-win situation in terms of ultimately doing away with unnecessary supervision; and also in terms of innovation-driven growth on part of the employee, which ultimately translates into healthier profits and most importantly, in today’s volatile environment, sustainable growth.
Ultimately intrapreneurship links innovation and business transformation to create a sustainable profit-sharing model that, in turn, works towards creating a stable organisation and industry.
The author is Founder HCL, and Chairman & Chief Strategy Officer HCL Technologies