Keeping the innovative spirit alive in companies

Bill Foster was a rising computer professional when he decided to leave Hewlett-Packard and the Silicon Valley for a job with a big computer firm in the East.

After three years, though, he felt his creativity severely crimped in the confines of a large corporation. So he decided to break loose and start his own company.

But his plan soon began to unravel: Of the 30 top innovators he hoped to lure from Hewlett-Packard to help launch his venture, 28 had already left - to start other new firms. Mr. Foster finally found the people he needed and established his company, Stratus Computer, amid the high-tech sprawl outside Boston.

Plucking a tomato from its cushion of lettuce in his luncheon salad, Gifford Pinchot III ponders Bill Foster's experience.

The computer entrepreneur's story, he says, is all too typical in American business: talented employee, chock-full of new ideas, finds his way blocked by a stodgy corporate hierarchy.

In recent years, the Bill Fosters in this country, together with other entrepreneurs who have never been inside large companies, have launched more than 500,000 new corporations annually. Some go broke. Some muddle through. A few spawn millionaires.

''But in many cases, they (the Bill Fosters) would have preferred to stay with big companies,'' contends Mr. Pinchot, chairman of New Directions Group, a Connecticut-based consulting firm. There's bottom-line logic to sticking with established companies, he says, including the access they provide to resources - both technical and financial.

The ideal approach, business experts agree, would be to blend entrepreneurship into the corporate structure. And, in fact, a number of companies are experimenting with ways to do just that.

For a hefty fee, the preppily clad Pinchot says he can help firms cultivate home-grown entrepreneurs. He says some employees simply need a little encouragement to blossom forth with new ideas.

He calls these people ''intrapreneurs,'' a trademarked term meaning intracorporate entrepreneurs.

Pinchot has helped half a dozen companies develop intrapreneurship programs, including such industrial mammoths as Xerox, Westinghouse, and AT&T. And this year, he'll be holding five seminars across the country to teach intrapreneurial skills.

He also plans to establish a longer intrapreneurship program here on the banks of the Hudson River not far from New York City. The setting: a hewn-stone mansion where a course for entrepreneurs is taught which Pinchot attended in the late 1970s. It was his teacher there who first sparked the idea for intrapreneurship, by saying that anyone who could develop a way to nurture entrepreneurship within corporations held the key to a major business dilemma.

The entrepreneur's major asset - a combination of curmudgeonly defiance and creative independence - is a liability within a typical firm.

''Entrepreneurs are tough people to have working for you, because they break the rules,'' says the mustachioed consultant, who holds two patents and has helped his clients market hundreds of new products. ''They naturally go against the established ways of doing things - they're the dreamers who need to follow their dreams.''

The problem, he says, is that companies are structured to manage ideas and products rather than people.

According to Bill Foster, the entrepreneur behind Stratus Computers, there's a tremendous amount of ''pressure within large corporations to design products that are just improvements on old products. It's the safe way of doing things.'' Radically new ideas imply risks - anathema to a safety-conscious business.

A glance at the record, however, shows what happens when companies play it safe. Of the world's major inventions over the last half-century, only about a third came from large organizations, while over two-thirds were developed by individuals or small businesses.

And while small inventors are responsible for such things as jet engines and zippers, large corporations can only take credit for more predictable products, such as crease--resistant fabrics and synthetic detergents.

''Most companies only have a few people working on really new ideas,'' Mr. Foster says.

It's this dedication to the status quo that Mr. Pinchot tries to chip away when he consults with a corporation.

As a first step, he studies the subtle signals being sent to employees. Everybody hears ''the 'mom and apple pie' statements about innovation,'' he says. ''But what we really need to find out is the perception at the firing line.''

At one firm, for instance, engineers just chuckled when shown a strongly worded executive order calling for more innovative thinking. Pinchot recalls, ''They all said, 'Do you know what would happen if we actually took any significant risks?' ''

Pinchot also helps companies winnow out individuals with ideas worth developing. These in-house entrepreneurs are then given fairly free rein to make decisions and spend money as they see fit.

''Tangible autonomy is essential,'' Pinchot says. At the same time, he recommends that companies set financial limits for the project and keep a steady eye on the development.

But giving employees creative freedom requires trust - something often lost in the layers of middle managers that separate top decisionmakers from the front-line innovators.

In Pinchot's intrapreneur model, innovators are expected to put some of their own money on the line as well. The way this might work, he says, would be for the intrapreneur to foot 10 percent of the cost of a project, plus up to 20 percent of his or her salary for the duration of the project and two years thereafter.

This personal commitment helps fuel an individual's motivation, according to Pinchot. But he says the toughest part is rewarding the efforts of a successful intrapreneur.

''The usual approach in business is to grant bonuses and promotions,'' he says. ''But 80 percent of entrepreneurs are unpromotable'' because they're not interested in finding a cozy niche in upper-level management.

Bob Schwartz, president of the Tarrytown School for Entrepreneurs and Pinchot's original mentor, says entrepreneurs are driven to seek success by a unique quality of character.

''These are people who thrive on adventure and risk; they're the poets and packagers of change,'' Mr. Schwartz says. The driving force behind them, he says , is the need to see their idea put into action.

But once a product is on the market - and success or failure is clear - how does a company reward a successful intrapreneur?

Here's where ''intracapital'' comes in. Pinchot contends that, on top of hefty bonuses, intrapreneurs should get a predetermined slice of profit from a successful venture. These corporate funds could then be used by the intrapreneur to invest in new projects.

While Pinchot promotes his concept of intrapreneurship, there is growing awareness in America's board rooms that entrepreneurs are too valuable to lose.

For example, back in the 1970s Atari and Hewlett-Packard each let an innovative employee slip away. Little did they suspect that Steven P. Jobs and Stephen Wozniak would join forces to create one of the most prosperous companies in the surging personal computer market - Apple Computer. Today, Apple has bitten off almost a quarter of this lucrative market.

Many companies do kindle the entrepreneurial spark among their ranks in various ways, with mixed success.

''There are many intrapreneurs operating out there that have never even heard of me,'' says Pinchot, who adds that companies such as 3M and Kollmorgen Corporation (manufacturers of electro-optical instruments) ''make a point of having entrepreneurs operating within them.''

One approach is to establish so-called ''new venture groups'' - semiautonomous divisions within a large company.

But while scrappy new firms have flourished in recent years, especially in the rapidly evolving field of high technology, many new-venture groups have languished. The difference, according to Pinchot, is the degree of genuine autonomy granted to the new venture.

The corporate colossus IBM, for instance, lets employees with good ideas launch ''business units.'' These units are operated like companies within a company, with their own staffs and budgets.

The idea, according to a company spokesman, is to let employees develop products ''outside the mainstream of IBM ideas.'' So instead of producing new designs for electric typewriters, for instance, the company's seven business units market such items as children's educational materials and precision instruments.

It was another type of semi-independent venture at IBM, called a ''special business unit,'' which is credited with getting the company's new personal computer onto the market in less than a year - a record-breaking achievement.

While the push for intracorporate entrepreneurship continues, there are signs that the concept is gaining broad recognition, if not full-throttle acceptance.

The University of Southern California, for instance, offers a course on the subject, as do several business schools where it is taught under the rubric of entrepreneurship.

Meanwhile, intrapreneurship is also making inroads in Europe, where a Swedish school for intrapreneurs graduated its first students in 1981. The school was started by a group of students who also attended the Tarrytown School for Entrepreneurs.

So far, the Swedish school has helped to launch close to two dozen new businesses within businesses, including a paper mill where waste heat is being used to run a vegetable greenhouse.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.