Here Come the Intrapreneurs

By John S. DeMott

Ronald Reagan extols them. Venture capitalists lavish money on them. They seem to be everywhere, starting their own companies, making megabucks in everything from computers to package-delivery services, and turning up on talk shows as the new Beautiful People of the 1980s.

They are the entrepreneurs, and their current success can be threatening to established corporations. At a time of rapid technological change, young, fleet-footed firms with a new product or a new way of selling can quickly take over markets. Some of the most important breakthroughs in recent years in such fields as semiconductors and bioengineering have been made by smaller companies. At the same time, large firms risk losing prized employees who have caught the entrepreneurial fever. In 1975 Stephen Wozniak, then a 25-year-old designer at Hewlett-Packard, went to his boss with the idea of a microcomputer that could be hooked up to a home television set. The firm was not interested. Wozniak therefore started his own company with Steven Jobs, a friend working at Atari. The company: Apple Computer. Sales last year: $1.5 billion.

Now some big companies are fighting back. They are trying to create the spirit, zest and rewards of entrepreneurship right in their corridors, shop floors and laboratories. They are giving employees the resources and freedom to pursue their own ideas, cutting back on traditional red tape, endless meetings and other obstacles that can slow down innovation.

One of the most ambitious of the efforts was started three weeks ago by General Motors. The giant automaker launched Saturn Corp., a separate company apart from the main GM structure, to produce a new subcompact car, starting in 1987. General Motors Chairman Roger Smith said that he wanted the new subsidiary to be free of the mother company's entrenched procedures. Saturn will have its own engineering and design staffs and its own contract with the United Auto Workers. It is to be a test track for new ways of making, selling and servicing cars. Saturn will, in effect, be an entrepreneurial firm within General Motors.

There is now a code word for this kind of operation: intrapreneurship. Gifford Pinchot III, 42, a management consultant from New Haven, Conn., coined the term and has written a book about it called Intrapreneuring, or Why You Don't Have to Leave the Corporation to Become an Entrepreneur (Harper & Row, $19.95). Writes Pinchot: "The more rapidly American business learns to use the entrepreneurial talent inside large organizations, the better. The alternative in a time of rapid change is stagnation and decline."

Pinchot argues that entrepreneurs and intrapreneurs have similar motivations. Both are pushed primarily by the desire to accomplish something. Says he: "What drives the entrepreneur is a deep, personal need for achievement." This, rather than any large financial gain, is the key. Pinchot says that companies should try to tap employees' interest by giving them the freedom and the financial backing to chase their ideas. If they succeed, they may get a bonus or a promotion. But for intrapreneurs, the real payoff is the feeling of success--"I did it, and it worked."

If the employee fails, that is okay too. Failure, says Pinchot, should be regarded as a learning experience and must be permitted within firms. He writes that large companies are good at coming up with sound ideas, but they are generally poor at carrying them out because of a "morass of analysis, approvals and politics."

General Motors is not the only major corporation to adopt intrapreneurship. Data General, DuPont, Texas Instruments and AT&T are all trying to nurture intrapreneurs. Even smaller companies are trying to catch the spirit. At W.L. Gore & Associates, a privately held firm in Delaware founded by the husband- and-wife team of Wilbert and Genevieve Gore, the employees, or "associates" as they are called, are grouped into teams of no more than 150 to 200 people to encourage new and different ideas and products. One such team developed GORE-TEX, a line of insulating fabrics used in space suits, tents and ski jackets. Gore also makes antipollution filters, desalinization products and artificial veins and arteries.

Some firms trying intrapreneurship:

Minnesota Mining and Manufacturing. Arthur Fry, 53, a 3M chemical engineer, used to get annoyed at how pieces of paper that marked his church hymnal always fell out when he stood up to sing. He knew that Spencer Silver, a * scientist at 3M, had accidentally discovered an adhesive that had very low sticking power. Normally that would be bad, but for Fry it was good. He figured that markers made with the adhesive might stick lightly to something and would come off easily. Since 3M allows employees to spend 15% of their office time on independent projects, he began working on the idea. Fry made samples and then distributed the small yellow pads to company secretaries. They were delighted with the product. 3M eventually began selling it under the name Post-it. Sales last year: more than $100 million.

General Electric. Jacques Robinson, 37, was named in 1982 to run GE's lackluster video-products division in Portsmouth, Va., and set out to extend it to include a long list of products for home information and entertainment. His door, he said, was open to anyone with helpful ideas. One respondent was Howard R. Stevenson Jr., 48, a technical whiz since his high school days in Michigan. He had spent his entire professional life with GE, most of the time working on radar, but felt stifled. General Electric offered him the chance to move to Portsmouth, and he soon saw his first opportunity. Ordinary TV sets are much less effective than monitors in displaying data from home computers, video games and video cameras. Laboring at night in his cluttered home workshop, Stevenson designed circuitry that brought standard television sets up to monitor quality. Last May the new monitor went on sale. Robinson says it has been "very successful," and Stevenson's career has been reborn, along with GE's consumer electronics operation. Says Stevenson: "I like the atmosphere of taking risks, trying things."

IBM. The computer giant five years ago adopted the concept of independent business units, which operate as separate organizations. Now eleven in number, the IBUs each have their own mini-board of directors and can decide on their own manufacturing and marketing strategy, usually without asking for approval from headquarters. One unit is developing automatic teller machines for banks; another is building industrial robots. IBM's best-known IBU produced the company's Personal Computer. A dozen executives led by Philip D. Estridge, 47, set up headquarters in Boca Raton, Fla., in 1980 with a blank check and a mandate to get IBM into the personal-computer business as soon as possible. The group proceeded to break some of the most sacrosanct IBM traditions. Instead of just using IBM's legendary sales organization, it decided to sell through computer retailers as well. To keep costs in line and speed up development, it bought most of the parts from outside suppliers, rather than from inside IBM. The PC has been extraordinarily successful and last year had estimated sales of about $5 billion. The dozen people in the PC group grew into the entry systems division, which now has 10,000 employees.

Hewlett-Packard. Though it failed to recognize the potential of Wozniak's proposal for a personal computer, Hewlett-Packard is highly regarded in Silicon Valley for fostering innovation. In 1982 Engineer Charles House was given a medal for "extraordinary contempt and defiance beyond the normal call of engineering duty." He had ignored an order from Founder David Packard to stop working on a type of high-quality video monitor. Despite the rebuke, House pressed ahead and succeeded in developing the monitor, which has been used to track NASA's manned moon landings and also in heart transplants. Although there were early estimates that the market for such large-screen displays would be only 30 units, more than 17,000 of them, worth about $35 million, were sold.

Pinchot's thesis is stirring discussion within management circles. Peter Drucker, 75, author of more than a dozen books, says that intrapreneurship is really just a new name for an old idea. Says he: "These young people have no memory. It is like every 19-year-old thinking he has just discovered sex." Thomas J. Peters, co-author of the best-selling In Search of Excellence, believes Pinchot is on to something. Says he: "People ought to think about this intensely."

Some business executives are skeptical. They believe that entrepreneurship cannot exist inside a large company on more than a token basis. Harold Geneen, the builder of ITT, contends in his 1984 book, Managing, that "entrepreneurism is the very antithesis of large corporations." Shareholders, he says, will never stand for the risks involved.

Other management experts maintain that it is not easy for corporate executives to adopt a policy of letting free spirits go off on their own, spending company money with little centralized control. Says Terry Winters, a venture capitalist in Englewood, Colo.: "Even the best of organizations cannot keep its management's finger out of the pie." The new style involves a radical departure from corporate policies based on control from the top, layers of reporting and analysis, and an intolerance of failure. As a result, & intrapreneurship seems to work best in companies like 3M that have a long tradition of encouraging employees to be independent and innovative by working in small groups. Says Wilbert Gore: "I don't know how one can take an authoritarian style of management and make it intrapreneurial."

In his book, Pinchot gives "The Intrapreneur's Ten Commandments." The first two: come to work each day willing to be fired; circumvent any orders aimed at stopping your dream. Such attitudes are not welcome in all companies. But Pinchot argues that large corporations can prosper in today's rapidly changing business environment only if they are willing to encourage employees with fresh ideas to come forward and bet their careers on new projects.

With reporting by Rosemary Byrnes/New York