Imagine you’re the CEO of a company that has been assembling mechanical widgets and their parts since 1952, which you and your predecessors have grown to employ 5000 staff. Then along comes a digital widget that doesn’t rely on any of the pieces or processes that your widgets rely on.

After 70 years of success, your widgets are suddenly on the road to becoming obsolete in an increasingly digital world. Your business model could soon be redundant, along with you and your 5000 employees.

If you as the CEO, accept the fact that digital is already replacing the physical in many areas of our lives, and that your company is not immune to this reality, you could launch a new initiative to develop a new offering. This is instead of waiting for a group of young entrepreneurs with no experience in your industry to do the inevitable and steal your customers by offering them their digital widget.

Now replace that thought about the widgets with what your company really does and imagine the opportunities and threats you could face between now and 2030.

Kill Two Problems With One Stone

Most CEOs have a lot to contend with, but two fundamental challenges many struggle with are employee engagement and innovation. Let’s look at these two challenges individually and then consider the one stone any open-minded CEO could pick up and defend themselves and their company with.

Employee Engagement

According to Gallup, employee engagement remains dismally low at 20 percent globally. This means that most employees in the world could either watching the clock or opponents of their employer.

For the company, this disengagement stifles productivity and organisational change, let alone any hope of transformation. Ultimately, the odds of well-intentioned CEOs and their senior leadership teams achieving their goals and objectives are low.

For employees, this disengagement results in negative emotions such as stress, worry, anger and sadness. Gallup found that roughly seven in ten employees are struggling or suffering, rather than thriving in their lives and that this crisis has now reached record levels around the world. And these problems existed long before Covid came onto the scene.

The good news for CEOs is that it doesn’t have to be this way. Providing it's well-executed, not only will the solution increase employee engagement but it can also help safeguard the future of the company in the fast-changing world we all now operate in.

Improving employee wellbeing and engagement depends on the decisions of executive leaders. But leaders themselves must first be thriving and ensure the well-being of their managers so that the wider workforce can see and follow good examples.

Engaged employees are highly involved in and enthusiastic about their work who achieve and drive high levels of performance.

As shown in the chart below, the best companies are achieving engagement levels of 73 percent while others are suffering down at 20 percent. 

Source: Gallup State of the Global Workplace Report 2021

Now let’s consider the second fundamental problem that CEOs face, which is innovation. And let's face it, any attempts at transformation without innovation are usually uninspiring technology upgrades or small business changes, which are a far cry from authentic business transformation.

Innovation

Ask a room full of entrepreneurs and employed executives what innovation means, and there’s a fair chance that you’ll get a wide range of answers based on their personal opinions and experiences.

While most entrepreneurs build companies that they own, and become a senior executive of, the majority of executives help run a company that someone else started and built. All are accomplished leaders labelled as executives, but they’re often a very different breed because building a company and operating a company require different capabilities and mindsets.

Many people subscribe to the notion of innovation being vital for a company’s future success, but far fewer go on to turn a bright idea into a profitable business.

At its core, innovation is focused on generating value for a company and historically that value has typically been described as “faster, better, or cheaper.” Although still important, the best innovation in today’s world goes beyond that.

Let’s consider three types of innovation:

Product Innovation: This is what typically comes to mind when someone says “innovation.” This category covers the development of a new product, as well as an improvement in the performance or features of an existing product. Apple’s continued iteration of its iPhone is an example of product innovation.

Process Innovation: Process innovation involves the implementation of new or improved production and delivery methods to increase a company’s production levels and reduce costs. One of the most notable examples of process innovation is when the Ford Motor Company introduced the first moving assembly line more than a century ago.

Business Model Innovation: Business model innovation includes changes in how a product is brought to market. By Amazon serving as a channel for other retailers, the company is able to take a cut of each purchase without maintaining inventory of slower-selling products. Business model innovation is typically a more complex art than product or process innovation, which explains why fewer companies do it. And yet it is the foundation of some of the most groundbreaking success stories of the century.

A company may choose to innovate in one or all three categories, but what matters most is that they start innovating and get better at it over time. If senior leadership fails to continuously challenge their own and their team’s way of thinking, the company’s competitive advantage will eventually decline or dissolve altogether.

Innovation Doesn’t Come Easy

Most companies want to learn how to leverage innovation more effectively, because while many have hired chief innovation officers or established innovation labs, they still struggle to do anything that really moves the needle.

While trends such as Artificial Intelligence encourage innovation, most companies remain constrained by focusing only on their current business models, products and services. Even though the company might be talking about AI, innovation, and transformation, it might just be creating a slightly better version of what already exists. Which is change, rather than transformation. And this is precisely why so many companies, which use all the right buzzwords, are not getting very far.

Meanwhile, the best companies are busy generating new ideas and exploring new markets. They're not constrained by what they did in the past and they're not afraid to cannibalise their established business model.

All leaders need to understand the difference between transformation and change, and recognise that while product and service innovation is good, business model innovation is hard to beat and hard to do well.

Intrapreneurship - The Big Rock to Engage and Transform

Intrapreneurship is nothing new and the term was first coined by Gifford Pinchot III back in the 1970's. Even back then, it's reported that Peter Drucker said..."Intrapreneurship is really just a new name for an old idea. These young people have no memory. It is like every 19-year-old thinking he has just discovered sex."

The second headline of this article is: “Kill Two Problems With One Stone”. But it’s more of a big rock than a little stone. The challenge of both employee engagement and innovation is a cause for concern for many CEOs because their current approaches don’t work. So, what's the alternative?

Intrapreneurship can overcome both challenges. It is so fundamental to better engagement and transformation, and inexpensive. But not all companies are successful with it.

An intrapreneurship programme liberates the thought process of employees who have the potential to kickstart authentic transformation within the company. At the same time it can re-ignite the passion employees once had by making their work-lives so much more interesting and exciting.

We live in a world where people are developing new ideas they keeping thinking about, but do nothing with. These people often work inside companies which know they need to innovate. So if more executives took intrapreneurship more seriously, they would see more ideas rise to the surface and more engaged staff.

Intrapreneurs are employees of a company who are assigned to work on a special idea or project. They are given the time and freedom to develop the project as an entrepreneur would. In the way CEOs expect their boards to put their nose in but keep their hands out, intrapreneurs need to be afforded the same trust and respect by the CEO and other executives. Nose in - hands out.

Unlike many entrepreneurs, intrapreneurs don’t work solo because they have the resources and capabilities of their employer at their disposal. They get the autonomy to pursue innovative projects and financial backing with little if any risk, and yet their work can sometimes be world-changing.

Five Focus Areas For Profitable Intrapreneurship

1. Mindset - CEOs and their key executives first need to understand how intrapreneurship can pay off many times over in terms of company growth and culture. And how it can also address the employee engagement problem. They also need to ensure managers don’t get in the way of “what isn’t normal around here”.
2.  Identify - Intrapreneurship is more about setting up the process to find and support innovators, rather than creating innovators. Plenty of employees have incredible ideas that executives never get to hear about because there's no mechanism for that to happen.
3. Support - Demonstrate to your people how their entrepreneurial behaviour will be encouraged and supported through an easy-to-follow process.
4. Responsibility - Managers need to offer their teams time and autonomy to innovate without interference from a culture of bureaucratic command and control.
5. Passion and Pride - There is often no bigger motivation than passion and pride. So create the process and culture that gives rise to the innovations that people can be passionate and proud to produce. As Steve Jobs says in the video below, "If you don't love it, you're gonna fail".

It goes without saying that as with any new business, many fail, and more than half of new businesses started by established companies fall short of a mere $1 million in annual revenue, or get shut down. With that in mind, it's worthwhile getting the perspective of at least one person who has previously started a new business that has generated upwards of $1 million in revenue.

Intrapreneurship Inspiration

Many of us already know of classic examples where innovation began with an employee who convinced their company to take a small bet on an idea that became a success story.

One of the most well known goes back to 1974 when the 3M engineer Art Fry was fed up with his bookmark falling out of his hymn book during choir practice. At that time, 3M had a policy that allowed employees to spend 15 percent of their time working on their own project ideas. Another 3M engineer named Spencer Silver had already invented a repositionable adhesive. Although Spencer promoted his adhesive within 3M, it failed to get off the ground until Art needed a better bookmark. Together, they created the Post-It Note, which within a few years became a basic necessity in offices all over the world.

Academics then started observing and writing about intrapreneurship and in 1985 Time magazine published an article called Here Come the Intrapreneurs . Steve Jobs also used the term in an interview with Newsweek in 1986, and in 2011, the first intrapreneurship conference took place in London.

Let’s look at 10 success stories for some inspiration of what is possible when executives take intrapreneurship seriously and get it right. As opposed to doing what Kodak did when its executives blew the chance for the company to lead the digital photography revolution when they refused to capitalise on Steve Sasson’s digital camera invention.

Innovation 1: Post-It Note (1974)

Company: 3M 

Intrapreneurs: Art Fry and Spencer Silver

Innovation 2: BOXLAB (2019)

Company: BASF

Intrapreneurs: Mischa Feig and Lisa Ruffin

Innovation 3: Gmail (2001)

Company: Google (Alphabet)

Intrapreneur: Paul Buchheit

Innovation 4: Sony PlayStation (1984)

Company: Sony

Intrapreneur: Ken Kutaragi

Innovation 5: FORGE (2018)

Company: Societe Generale

Intrapreneurs: Six financial markets experts and six cryptography experts

Innovation 6: Amazon Prime (2005)

Company: Amazon

Intrapreneur: Greg Greeley

Innovation 7: ELIXIR Guitar Strings (1997)

Company: W.L. Gore

Intrapreneurs: Dave Myers and John Spencer

Innovation 8: The Happy Meal (1977)

Company: McDonalds

Intrapreneur: Dick Brams

Innovation 9: Java Programming Language (1995)

Company: Sun Microsystems

Intrapreneurs: Patrick Naughton, James Gosling, Bill Joy

Innovation 10: Digital Light Processing Technology (1996)

Company: Texas Instruments

Intrapreneur: Larry Hornbeck

A quick Google using the keywords above will shed a lot more light on any of these inspirational stories.

Tomorrow's Revenue

According to a McKinsey survey, a lot of business leaders predict that by 2026, half of their revenues will come from products, services, or businesses that haven’t yet been created.

With that in mind, what action are you taking to capitalise on the untapped potential that is already on your payroll? With the right processes, your potential intrapreneurs could be the key to building the next business, product or service that your company will generate new revenue from.