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Friday, October 25, 2019

Partner With Entrepreneurs Inside and Out

Should innovation come from within the company or from without? The answer is both.

By Associate Professor of International Business and Strategy Shameen Prashantham

Every company today faces the same challenge: how to innovate in the face of disruption. Many companies turn to external partners for innovation efforts, such as accelerators and innovation labs, while another approach is to promote internal entrepreneurship, also known as intrapreneurship. One has a manager-with-entrepreneur focus, the other a manager-as-entrepreneur emphasis. But which is more effective?

While it’s important for companies to prioritize these approaches to best suit their resources, one misstep organizations take is treating intrapreneurship programs and external partnerships as purely an either/or choice.

The problem is more common than you’d think. A manager from the intrapreneurship team of a large global company once asked me to recommend an accelerator he could talk to, completely ignorant of the fact that the startup partnering division of his own company was already working closely with one. This siloed approach to external startup engagement and intrapreneurship illustrates the dangers of treating innovation options as mutually exclusive.

To avoid losing innovation opportunities, managers should follow three approaches for effectively deploying people, resources, and capabilities.

Empower intrapreneurs to drive startup engagement. Over the past decade, I’ve conducted more than 200 interviews with multinational executives, startup entrepreneurs, accelerator managers, government officials, and industry experts from around the world about their expanding entrepreneurial efforts. Many of the internal leaders I’ve met who have entrepreneurial bents serve as the catalyst for partnering with startups. One example is former Microsoft corporate vice president Dan’l Lewin, a well-known Silicon Valley entrepreneur who joined Microsoft in 2001 and launched two pioneering programs, BizSpark and BizSpark One, which established Microsoft’s venture capital and startup community engagement efforts across six continents in over 150 locations.

Lewin started by introducing the BizSpark breadth program for startups working on the Microsoft stack and built on that success with the BizSpark One depth program, which identified the 100 most innovative startups from among Microsoft’s thousands of BizSpark member startups. Each member of the select BizSpark One group received business mentoring as well as technical and marketing support from a designated portfolio manager. This program allowed Microsoft to collaborate closely with highly innovative partners — including StorSimple, a Silicon Valley startup offering cloud-integrated storage solutions, which Microsoft went on to acquire, and Gridsum, a Beijing-based startup that became a standout partner in China and helped establish Microsoft’s credibility as a valuable startup partner in that market.

Organizations seeking to speed product development by working with startups should cultivate and empower their own internal entrepreneurs to drive this process. Lewin expanded Microsoft’s global innovation efforts exponentially by directing and supporting the intrapreneurial efforts of junior colleagues both at corporate headquarters and in global subsidiaries. One such empowered intrapreneur, Zack Weisfeld, launched an accelerator to partner with startups face-to-face for a shorter period of time (four months) at Microsoft’s R&D facility in Israel. Inspired by Weisfeld’s efforts, Microsoft’s R&D units in India and China soon followed suit, launching accelerators in Bangalore and Beijing. Weisfeld was ultimately given global responsibility for managing Microsoft’s startup engagement, including the Microsoft Accelerator program, which has been ranked among the most successful accelerators in the world in terms of the number of startups accelerated and positioned Microsoft as a desirable partner in the startup community.

Make the same resources available internally and externally. By sharing the same resources — such as training programs, co-working spaces, and startup mentors — with both intrapreneurs and external partners, companies can reduce costs while scaling innovation. Bosch, for example, utilizes the very same training program and resources for internal employees pursuing entrepreneurial efforts as in its accelerator program for external startups. Sheelpa Patel, cofounder of Infiniti Lab, an accelerator for external startups working with Nissan’s luxury car brand in Hong Kong, reduced costs by extending the same pitch training program to internal employees with intrapreneurial ideas. Additionally, said Patel, “Infiniti achieved the highest level of engagement scores ever as employees were so keen and passionate to become part of this intrapreneurship initiative.”

In some cases, companies go a step further and bring together combined cohorts of intrapreneurs and external entrepreneurs under the same roof. Although not always feasible owing to, say, security concerns, selectively mixing these groups can imbue the company’s culture with an increased sense of entrepreneurialism. Bayer’s G4A (previously Grants4Apps) program, which was initiated by Bayer intrapreneur Jesus del Valle, accepted an internal team into its Berlin startup accelerator alongside external startups. Bayer was able to leverage the internal talent pool to tap one of the team members to run a similar accelerator program targeting external startups for another subsidiary within the company.

Fostering intrapreneurs by giving them access to the same training and resources supplied to external startup partners can result in even greater employee engagement with outside startups and fuel a self-propelling cycle of continuous innovation.

Coca-Cola’s Founders program achieved success by integrating intrapreneurship and external startup engagement resources over time. The company hired entrepreneurs from around the world to explore novel business ideas and models as Coca-Cola employees. For these intrapreneurs, the challenge was to find untapped revenue streams using Coca-Cola’s extensive asset base. The model eventually morphed into one in which the intrapreneurs were spun off into external startups that continued to utilize resources from Coca-Cola over a period of two years, in much the same way as they did within Coca-Cola.

Through this process, Jason Hosking, one of the first entrepreneurs brought in to launch the Founders program, became the CEO of Hivery, an AI/analytics startup that emerged from the Founders program. Today, the startup boasts an impressive list of corporate clients around the globe, including Coca-Cola; has grown to a 40-employee organization; and is scaling globally. But the starting point was an intrapreneurship program that evolved into an external startup engagement program, with resources seamlessly integrated across both initiatives.

Encourage collaboration between internal and external innovators. In addition to creating a culture of cooperation and transparency, empowering internal innovation teams and external startups to collaborate can increase efficiency and reduce time to market for new services and products.

Take, for example, Intel’s GrowthX intrapreneurship program, formerly known as Ideas2Reality (I2R), in China. The team was working on facial recognition technology to operate smart doors that let users into their homes simply by smiling at a camera and was on the lookout for an OEM partner to codevelop the solution and bring it to market. Curbing the instinct to partner with a known supplier, which seems less risky owing to a shared vocabulary and prior experience working together, Kapil Kane, director of innovation, Intel China, connected the team with LifeSmart, an external startup in Hangzhou. Kane found LifeSmart a good fit because “they were one of the rising stars in the smart home space in China” and shared complementary capabilities: Intel’s intrapreneurship team’s expertise in relevant components such as cameras, chips, and algorithms could be combined with LifeSmart’s design, manufacturing, and marketing competence.

The result? The team launched the final product within three months, much faster than the internal team would likely have achieved on its own. More broadly, the learning outcome was tremendous. Building a minimum viable product (MVP) collaboratively with LifeSmart led Kane to realize that bringing together intrapreneurs and entrepreneurs was a good way to accelerate innovation and led to several similar partnerships.

While the benefits of such partnerships may seem obvious, managers may miss out on opportunities simply because they’re unaware they exist. To stay abreast of industry opportunities, Eugene Borukhovich, head of Bayer’s G4A digital health team, streamlined the activities under three broad pillars: intelligence (“where to play” — understanding value pools, unmet needs, and strategic imperatives), partnerships (“who to play with” — including commercial deals with and early-stage investments in startups), and ventures (“how to win” — developing new revenue streams). These categories clarify strategy for innovation similar to Roger Martin’s “cascading choices” framework. In the ventures category, Borukhovich and his team’s first foray into identifying a new business involved creating a team of entrepreneurs and intrapreneurs, which Borukhovich anticipates will make the team nimbler and increase Bayer’s odds of quickly finding solutions to address identified business opportunities that improve patients’ experience of health.

Whereas the previous Intel example is one of an intrapreneurship program reaching out to external startups, Bayer is the reverse — a startup program now involving intrapreneurs. Effective collaboration flows both ways.

Driving corporate innovation is not a case of picking either intrapreneurship or external startup partnering — you need both. And it’s not enough to have intrapreneurs and external partners working separately, in parallel – although separate teams leading these initiatives may still make sense. To stay ahead of the competition, companies must recognize the ways in which these teams intersect and take advantage of the benefits associated with combining people, resources, and capabilities. Going beyond either/or thinking to embrace both internal and external entrepreneurs is likely to give your company a bigger bang for its corporate innovation buck.

The article first appeared in MIT Sloan Management Review.