Innovation and Intrapreneurship Characteristics in Large Organisations Assignment

Assignment Task

This first lecture in Topic 2 focuses on innovation within large organisations and the factors that may affect their ability to change, adapt, be creative or innovate. It examines entrepreneurship inside a large organisation, known as intrapreneurship. It considers the role of innovation labs and provides examples of well-known intrapreneurship in action from outside sport. It looks at how intrapreneurship drives innovation in some larger corporate organisations due to the way they encourage creativity. It then considers the notion of large companies being schools for start-ups and potential training grounds for entrepreneurs.

As we discussed in Topic 1, innovation and entrepreneurism mean different things, and there is a risk and ‘grit’ involved in entrepreneurism which is not inherent in innovation.

However, as entrepreneurism begins with innovation, it makes sense to consider innovation first in this topic because if large (or indeed any size) sports organisations fail to innovate, it is likely to have a negative impact on entrepreneurial activities within those organisations.

You will be familiar with the notion of competitive advantage if you have already completed the Strategy module. This can be defined, however, as follows:

“Competitive advantage refers to factors that allow a company to produce goods or services better or more cheaply than its rivals. These factors allow the productive entity to generate more sales or superior margins compared to its market rivals,” (Twin, 2020).

There are several scholars who describe innovation as a source of competitive advantage in public, private and non-profit sectors (many of whose definitions are summarised by Crossan and Apaydin, 2010).

Crossan and Apaydin’s own summary definition of innovation is as follows: “Innovation is: production or adoption, assimilation, and exploitation of a value-added novelty in economic and social spheres; renewal and enlargement of products, services, and markets; development of new methods of production; and establishment of new management systems. It is both a process and an outcome.”

Austrian-born American management consultant, educator, and author Peter Drucker defines Innovation as “the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business”. He says innovation is capable of being presented as a discipline, capable of being learned, capable of being practised. “Entrepreneurs need to search purposely for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation (2015, p23).

It is generally accepted that organisations should change or adapt when required to meet the expectations of their customers or to create added value through innovation. Sports organisations such as sports federations are no different in this regard.

If they don’t change or learn to adapt to the lifestyles and demands of new generations, they may fail to attract new fans or could lose existing fans.

All sports organisations face competition from other sports organisations and forms of entertainment for finance, facilities and volunteers. They therefore would likely benefit from finding a way to ‘stand out from the crowd’.

Entrepreneurship inside a large organisation can and does prosper, and this is described as ‘intrapreneurship’, a term made popular by academic researcher Howard Edward Haller in his 1982 Master’s Management Thesis (2014), management consultant Gifford Pinchot III (1985) and Steve Jobs (co-founder of Apple) in the early-to-mid 1980s.

Intrapreneurship can be considered not simply a driving force in companies, but a key engine of innovation (Govindarajan and Desai, 2013).

Intrapreneurship is defined by Knippen (2017) as when organisations harness the entrepreneurial drive and vision of their employees to their own benefit. “Unlike entrepreneurs, who work independently to execute ideas on their own, intrapreneurs already have an existing structure to work with. Generally, their endeavours will be encouraged and nurtured by company resources and personnel; ultimately, the company - not the individual - will be the final owner of the idea.”

The benefits for a company encouraging this activity is that it will have access to creative talent and new ideas without losing those people to a competitor or to their own start-ups. And the benefits for the entrepreneurially-minded staff are that they can create and implement their ideas without the personal risks inherent in being a start-up.

The three stages that Knippen identifies that successful organisations follow in order to encourage intrapreneurship are:

Writing in the Harvard Business Review, Corbett (2018) believes intrapreneurship is not simply a driving force in companies, but is a key engine of innovation. In essence, intrapreneurship is a form of big-picture, long-term thinking (and investing).

However, evidence suggests that large and mature companies in particular may struggle when it comes to innovation or encouraging intrapreneurial activity. According to Wessel (2012), large and mature corporations are designed to execute on the ‘science of delivery’ rather than engaging in the ‘art of discovery’. He says: “They’re bad at innovation by design: All the pressures and processes that drive them toward a profitable, efficient operation tend to get in the way of developing the innovations that can actually transform the business.”

Wessel puts forward ways that large companies can foster a culture of innovation. He says that strong and focused leadership is important as is testing of ideas in order to learn.

Alves et al list six factors that influence an organisation’s ability to be creative (and therefore innovative).

1. Organisation strategy and resource availability.

2. New technologies.

3. Research and design intensity.

4. Organisation culture and communication.

5. Organisation structure.

6. Employee motivation and involvement.

Later research by Corbett (2018) shows that, “in order to develop, incubate, and scale game-changing innovation, organisations need a company-wide innovation management system” that he says includes eight primary elements.

“It starts at the top with (1) leadership and an innovation culture willing to commit (2) system-wide resources and (3) a governance process that can deliver on a clearly articulated (4) mandate and scope for breakthrough innovation. An inclusive (5) organisational structure with interfaces between different parts of the company incorporates the (6) processes and tools and (7) metrics and rewards required for an innovation cycles that takes longer than incremental product innovation. Lastly, companies need (8) skills and talent that are differentiated from traditional R&D or new product development roles.”

In recent years, many large corporations have established separate innovation labs or hubs as ways to encourage new ways of thinking and test new ideas. For example, Walmart, Starbucks and Facebook have all established innovation labs in recent years. An innovation hub or lab is defined as a centre of research and development of innovative ideas that acts as a catalyst to transform ideas into feasible solutions (Giaccone and Longo, 2016). Innovation labs are also known as incubators or accelerators.

However, it has been found that some innovation hubs can fail for similar reasons to the failure of innovation in the parent company such as lack of leadership or a clear vision.

Research also shows that innovation hubs do not always have a clear strategy that is aligned with the parent company’s — or does not have one at all.

 “Some of the innovation teams I’ve met recently seem unsure if they are charged with serving the core business or with disrupting it,” says Simone Ahuja, writing in the Harvard Business Review in 2019. “Leaders need to think through the implications of opening a lab [or hub], decide how it will complement or disrupt current and future business, and do the difficult work of determining how new ideas will be executed.”

According to Tendayi Viki writing for Forbes.com in 2018, really smart innovators understand that successful innovation requires them to manage their stakeholders well. “The need for stakeholder management is most clear to people that are working on an innovation project within the parent company. In that situation, they know they their product will not succeed without support from key stakeholders within the company.”

However, once product development switches to an external innovation lab, he claims that some intrapreneurs forget the value of stakeholder management. “But the most successful innovators, know that they have to manage their relationships with the stakeholders from the parent company - even if they are working in an innovation lab.” He says that the lesson learned is to not let the creation of an innovation lab lull you to sleep. “You are not in a safe space. The parent company does not love you as much as you think it does. There is still a lot of work to do to get buy-in and support from leaders and key stakeholders.”

Meanwhile, there are many examples of large organisations that have fostered intrapreneurial activity in-house. Examples include:

• Mac, iPod, iTunes, iPhone, iCloud by Apple
• Google’s Gmail, Google News, AdSense, driverless cars, Google Glass and other innovations
• And Virgin’s Air, hotel, casino, books, music, Megastore, mobile, wines, games, Galactic

Other examples include:

• PlayStation (Sony)
• Saturn inside (General Motors)
• Java programming language (Sun Microsystems)
• Digital Light Processing technology (Texas Instruments)
• Drone delivery of packages (Amazon)
• Post-it Notes (3M)

3M is a great example of a large organisation where people are encouraged to spend time on creating and developing new projects and is therefore able to hold onto these people – and also the ideas.

Indeed, 30 percent of each division’s sales at 3M have come from products that are no older than four years old (Deeb, 2015). The benefit from this is that the organisation maintains a constant stream of new ideas while encouraging its staff to be intrapreneurial.

In another example, digital photographic agency, Shutterstock hosts an annual ‘hackathon’ over the span of 24-hours. This event is designed to allow its employees to pursue any ideas they have to improve the company (The Anatomy of a Hackathon: A 24-Hour Infographic, 2014).

These examples show that a culture of intrapreneurship drives innovation in some larger corporate organisations due to the way they encourage creativity.

All organisations need to treat their intrapreneurial people as assets who need to be encouraged and nurtured otherwise they will end up taking their great ideas somewhere else.

Deeb (2015) offers the following advice for large companies looking to create a culture of intrapreneurship:

• Let employees know it is OK to spend part of their days tinkering around with new ideas.
• let them know it is OK to make mistakes, and that failure will not be punished if things do not go as planned.
• Hire people that have entrepreneurship wired into their DNA and promote leaders who are not afraid to make decisions on their own and take risks.
• And perhaps most importantly, Deeb thinks that companies should stop focusing on next quarter’s profits, and start focusing on the next decade’s worth of revenue growth.

Schramm puts forward the concept that large organisations are essentially ‘schools for start-ups’. He claims that “nearly ninety percent of all entrepreneurs have worked for other employers before starting their companies,” (2018, p.131).

Essentially, if a large organisation (whether sports or other) where someone works isn’t receptive to their entrepreneurial mindset, that person is still likely to benefit from working there anyway through honing their business skills, appreciating scale, acquiring industry knowledge and developing industry networks (Schramm, 2018, p. 132-33).

It is interesting that Schramm’s research indicates that many entrepreneurs who left large organisations to launch their own companies (“spinout entrepreneurs”) never intended to start their own companies as instead they were motivated to see those large organisations survive.

Hirschman (1970) claims that many people leave companies to start their own businesses due to frustration at having their ideas ignored or dismissed.

In my own case, being made voluntarily redundant twice fuelled my own desire to create something new, both times. Would I have done so without that push and backed by the stability of some redundancy money? The first time – probably not! According to some sources, this makes me a necessity-entrepreneur. (We will examine different types of entrepreneur in Topic 3).

This lecture starting by looking at innovation and its place with large organisations. It then examined entrepreneurship inside a large organisation, known as intrapreneurship. It considered the role of innovation hubs and provided examples of well-known intrapreneurship in action using examples from outside the sports industry. It surmised that intrapreneurship drives innovation in some larger corporate organisations due to the way they encourage creativity. It then considered the notion of large companies being schools for start-ups.

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