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Intrapreneurship as a transformation tool

Intrapreneurship is the new black. Quite a number of books have been published recently on this topic. Including “The start up way” by Eric Ries.

Innovation equals entrepreneurship

Finally, CEOs start to realise that entrepreneurship and innovation are two sides of the same coin. It is called intrapreneurship. It is a hot topic. Peter Hinssen writes about in “The day after tomorrow”. Freek Vermeulen writes about it in “Breaking bad habits”. Geoffrey Moore writes about in “Zone to win”. It is “Antifragile”. It is “Brilliant mistakes” or “Blackbox thinking”.

Intrapreneurship

The principles of entrepreneurial management could be applied in any industry, any type of  company, or sector of the economy. Intrapreneurship as the antidote to creative destruction. Creating internal engines for innovation, experimentation and growth. Ongoing change management and transformation. Units that can unleash the talent, the sense of purpose, achievement and ownership.

Entrepreneurship as a core organisational capability

Entrepreneurship as a core discipline and core capability within large organisations. Based on the assumption that for a modern company, the payoffs of continuous innovation are not only the breakthrough new products, services, internal systems, and commercial wins that it produces. Innovation also provides the opportunity to incubate a new culture, one that unleashes entrepreneurial creativity at every level of the organisation.

You are being disrupted

Based on the assumption that global communications mean that new products can be conceived and built anywhere, and customers can discover them at an unprecedented pace. What’s more, individuals and small companies have unprecedented access to these new global systems, compared to a small number of owners of capital in the past. If you won’t. They will.

The question to ask

  • If you selected an employee of the company at random, from any level or function or region, and that employee had an absolutely brilliant idea that would unlock a dramatic new source of growth for the company, how would he or she get it implemented?
  • Does the company have an automatic process for testing a new idea, to see if it is actually any good?
  • Does the company have the management tools necessary to scale this idea up to maximum impact, even if it doesn’t align with any of the company’s current lines of business?
  • Does the company harness the creativity and talent of every single one of its employees?

Not a hope. You are still working with business plans. They don’t work anymore. Because the “fantasy plan” of the original pitch is often far too optimistic to be used as a real forecast. But managers, lacking any other system to use, need something to hold on to. Without an alternative, they cling to the forecast—even if it’s just made up one. Your system of accountability was designed in a very different time and for a very different context.

The metrics to use

Business plans tend to be made up of forecasts and predictions, always denominated in gross metrics (vanity metrics). What Silicon Valley has learned the hard way over the past few decades is that “no business plan survives first contact with customers”.What you need a clear understanding of the difference between trailing indicators (such as gross revenue, profit, ROI, and market share) and leading indicators that might predict future success (such as customer engagement, satisfaction, unit economics, repeat usage, and conversion rates).

Failure as an option

Unlike in a corporate setting, where everything has to be right in order to proceed, a startup doesn’t have to have everything figured out. Because in this era failure is not only an option, it is pre-requisite. You need to start eating failure for breakfast. Because no amount of forecasting, diligent preparation, planning or execution is going to prevent that. There is too much uncertainty. Which means you can’t afford to bet on one horse. You need to let a 1000 flowers bloom. And find a mechanism to kill off the initiatives that don’t work. Creating fast failure through experimentation.

A modern company…….

  • A modern company has to have a capacity to produce products with great reliability and quality, but also to discover what new products to produce.
  • A company in which every employee has the opportunity to be an entrepreneur.
  • A company that respects its employees and their ideas at a fundamental level.
  • A modern company is disciplined at the rigorous execution of its core business—without discipline, no innovation is possible—but it also employs a complementary set of entrepreneurial management tools for dealing with situations of extreme uncertainty.

Lean startup thinking

Lean startup thinking. Internal startups. Passionate. One idea. With cross-functional teams. Iterative. Metric driven. Customer facing. Productive failure. Learning. Executing (because ideas are worthless). Read “The myth of the idea“. Create entrepreneurship as the missing function within your organisation.

Some more questions:

  • Who in your organisation is in charge of grappling with uncertainty, unlocking unexpected and dramatic new forms of growth and impact, translating research insights into viable products, and harnessing the forces of disruption in the organisation?
  • Who is overseeing high-potential growth initiatives that could one day become new divisions of the company?
  • Who is infusing everyday work across the organisation with an entrepreneurial, experimental, iterative mindset?
  • Who is managing success (because that is when the real fun starts)?
  • Do you have a dedicated function with its own career-path of corporate entrepreneurs, and also as a source of widespread basic knowledge, responsible for spreading entrepreneurial methods throughout your organisation?
  • Are you creating “islands of freedom”?

Do you know where and who they are?

Paradoxically, at the very moment in history when organisations critically need entrepreneurial talent, they are deeply confused about where to find it. Most organisations are replete with entrepreneurs already, but not only are they unable to recognise them, they inadvertently force them into hiding. Most companies are more likely to fire those who show entrepreneurial initiative than to promote them.

But once you start looking, you will find that there are a surprising number of other hidden startups tucked away. The underground network. The employees that managers know to call when things look like they might go off the rails—or already have. The person who to call if they get saddled with a high-risk, high-reward project. The person who is willing to risk career suicide to give it a shot. That is your coalition of the willing. Waiting to be unleashed.

What if?

And so the question I ask them is: What if? What if we were to give these creative, energetic people a structure for working intelligently on the kinds of projects they want to work on, and then we reward them and recognize them for that skill?

Entrepreneurship as a function

The promise of adding entrepreneurship as a function is the chance to create an environment where experimentation is encouraged, where ideas can be tested and then assimilated into the culture, where the passion to pursue the unexpected is not marginalised but systematised, not stymied but supported.

You need a framework

  • To create space for experiments with appropriate liability constraints
  • To fund projects without knowing the return on investment (ROI) in advance
  • To create appropriate milestones for teams that are operating autonomously
  • To provide professional development and coaching to help people get better at entrepreneurship as a skill
  • To provide networking and matchmaking in and out of the company, so people understand their new identity: “I’m a corporate entrepreneur.”
  • To ensure to put the right person on the right team? “Nobody gets assigned to work at a startup,” one corporate entrepreneur
  • To create new incentive and advancement systems?

The old way

Most corporate managers are looking for good ideas, sound strategy, and a solid business plan. Once they determine what is to be done, they then try to find the right person or people within the organisation to get it done. Personnel is evaluated by traditional criteria: past performance, résumé, and pedigree. (And, if we’re honest, a fair bit of politics.)

The new way

Silicon Valley investors, in contrast, make their investment decisions primarily based on the quality of the team: They look at the team first, then the idea. Instead of pedigree, they infer the quality of founders from the results they can deliver with limited resources, gambling on the chance that early success will be the hallmark of future greatness. Many investors believe that how a team runs the fund-raising process predicts how they’ll run a company, and use it as a leading indicator. And once you raised the money is yours. With full autonomy. You can spend it on what you like with minimal oversight (especially in the early stages). But Lord help you if you try to raise more money and you haven’t made any progress.

The contrast

Contrast this with the life of a typical corporate product manager. Most organisations subject their internal teams to an endless stream of meetings: formal reviews, budget updates, and a constant barrage of middle manager check-ins. In established companies, an incredible amount of talent and energy gets wasted because innovation is blocked by the archaic, inflexible structures and protocols in place.

Save time for management

But what about urgent problems that, for whatever reason (real or political), don’t rise to the CEO’s attention? What about the problems that require collaboration between one function or division that feels the acute pain and another that does not? And what about the frustrating, everyday problems that afflict “only” ordinary workers? Today’s management system struggles to bring attention and resources to bear in these situations.

A more entrepreneurial approach offers a better answer: Put a startup on it. Run an experiment. Measure the results. Scale it up—maybe even bring it to the attention of senior leadership—if and when the results merit this treatment. Take advantage of the fact that the vast majority of experiments fail, and so they don’t need to take up senior management bandwidth (nor do they necessarily benefit from senior management meddling). By the time the organisation needs to have a strategy conversation about whether to double down on the new idea, it can have a rational discussion—complete with actual customer data.

The Lean Startup basics

  1. Identify the beliefs about what must be true for the startup to succeed. We call these leap-of-faith assumptions.
  2. Create an experiment to test those assumptions as quickly and inexpensively as possible. We call this initial effort a minimum viable product.
  3. Think like a scientist. Treat each experiment as an opportunity to learn what’s working and what’s not. We call this “unit of progress” for startups validated learning.
  4. Take the learning from each experiment and start the loop over again. This cycle of iteration is called the build-measure-learn feedback loop.
  5. On a regular schedule (cadence), decide whether to make a change in strategy (pivot) or stay the course (persevere

Implementing Lean

He gives a lot of tips on implementing Lean. I particularly like his thinking around metrics and the creation of a growth board. A way to operationalise venture capital funds way of thinking.

Set up a dashboard

  • Conversion rates (such as the percentage of customers who try a free trial of a product who subsequently become paying customers).
  • Revenue per customer (the amount of money customers pay for a product on average).
  • Lifetime value per customer (the amount of money the company accrues from an average customer over the entire “life” of his or her relationship with the company).
  • Retention rate (what percentage of customers are still using the product after a certain amount of time).
  • Cost per customer (how much it costs to serve a customer on average).
  • Referral rate (what percentage of existing customers refer new customers to the product, and on average how many referrals they make per unit of time).
  • Channel adoption (what percentage of the relevant distribution channels carry the product).

Create a growth board

  • To be a sounding board for the founders and executives, helping them plot strategy, and hosting the pivot-or-persevere meeting
  • To act as the central clearinghouse for information about the startup, taking on the burden of reporting on behalf of the founders to key financial stakeholders like general partners and limited partners of the investment firm
  • To be the gatekeepers of future funding, either by writing checks themselves or by encouraging (or vetoing) sources of outside funding
  • To be the single point of corporate accountability for an internal startup.
  • To act as the single clearinghouse for information about the startup for the rest of the corporation.
  • To provide metered funding to startup teams.

Other lessons

  • Start with a limited number
  • Build a network of leaders
  • Create the golden sword (an executive with power to cut through red tape)

Intrapreneurship and transformation

Eric Ries predicts that twenty-first-century managers will live through as many organisational transformations as new-product platforms and come to see organisational forms the same way we see our smartphones—as something disposable that’s top of the line for a few years, then rapidly surpassed. The very skills that are required to do the Startup Way transformation are deeply transferrable. They are better seen as a permanent organisational capability than as a one-time event.

Continuous transformation—an organisation’s capability to test and learn from experiments having to do with its own structure and processes, promoting the best-proven techniques company-wide while limiting or discarding the rest—is what will give that organisation the ability to thrive in the modern era.

Entrepreneurship as a seat at the executive table

Progressive companies should give entrepreneurship a seat at the table when the other functions—especially gatekeeper functions—are setting company policy. This is incredibly important for finance, legal, HR, and IT in particular. This is the true promise. A management system that contains within it the seeds of its own evolution by providing an opportunity for every employee to become an entrepreneur.

If you read this book combined with the books I mentioned before, you will have all the tools and thinking you need to implement a solid intrapreneurship and innovation programme. It is not rocket science.

And you will become truly “Antifragile

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