Why entrepreneurs will always beat intrapreneurs

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intrapreneurs

I was involved in a lively debate the other day about the relative effectiveness of entrepreneurs (creating new businesses independently) versus intrapreneurs (creating new businesses inside an organization). In my mind, there is no debate as to the most effective way to go.

Here’s a little story to explain my thinking on this …

A man of vision

During my grad school days, I had the wonderful opportunity to get to know the CEO of Verifone, Hatim Tyabji. When you “zip” a credit card to make a payment … that’s probably a Verifone reader.

Mr. Tyabji was one of the first serial entrepreneurs of Silicon Valley and became a personal hero of mine for his global vision, consistent track record of success, and enlightened leadership style. Years later he would become the CEO of BestBuy.

Under Hatim’s leadership, Verifone dominated the credit card transaction market worldwide and continued to do so since the 1980s. It was one of the first true global companies, out-sourcing production and programming long before other larger companies. Their management team met for five days every six weeks at a new location in the world so they could cultivate a global mindset.

The need for speed

In the late 1980s Verifone was a red-hot company and an even hotter stock (they were eventually purchased in the mid-1990s which was a big stock market win for me thank you very much!).

While we take credit card transactions for granted today, in the 1980s this was still an emerging method of financial transaction. Verifone depended on constant innovation to keep up. The company was one of the first in the world to issue laptops to every employee and created some of the first systems for internal collaboration and ideation. But these new concepts were not being commercialized fast enough to meet the aggressive CEO’s vision.

All the employee-driven innovations seemed to languish. Hatim explained to me at the time: “I learned that as long as employees had a steady paycheck and an office to go back to, the fire and urgency of a start-up was lacking. I wanted to encourage entrepreneurial behavior among my employees but saw that I needed to do something dramatically different.”

The intrapreneur shake-up

“So I kicked them out,” he said. “If an employee really believed in a new idea for a business or technology, they had to leave the company to make it a reality. Verifone became their financier. We provided funding and a workspace at an outside facility in Oakland. Our only provision was, if they were successful, we had the first right to buy the company. This is the only way we could instill a sense of urgency in employees. They had to leave the mother ship.”

Several employees took the offer, providing the rapid development and commercialization the company needed to compete and succeed.

That was 20 years ago but the lesson has remained as relevant to me today. I see this as a chronic problem in many companies. They are looking for innovation internally when the real fire is outside the company where entrepreneurs need to succeed to eat.

There is certainly a role for systematized employee innovation within a company. In fact, Peter Drucker’s book Innovation and Entrepreneurship (one of my favorite business books) provides an excellent roadmap for institutionalizing a culture of constant innovation within an organization.

But in terms of a race to market, I’ll put my money on an entrepreneur versus an intrapreneur. What are your thoughts?

Illustration courtesy of Flickr CC and Tony Fischer.

This post was written as part of the Dell Insight Partners program, which provides news and analysis about the evolving world of tech. To learn more about tech news and analysis visit Tech Page One. Dell sponsored this article, but the opinions are my own and don’t necessarily represent Dell’s positions or strategies.

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