In 2011, Redbox made video-game rentals available at each of its thousands of kiosks. The games were a success in their own right: games like “Call of Duty” often rented as well as blockbuster movies.
The innovation also had a profound effect on the performance of other products the company offered. Customers rented more frequently, increased the size of their rentals (selecting both a movie and a game, perhaps), and kept rentals out longer because games take longer to play than movies—all of which made a direct difference to a company that charges per night for rentals.
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“We blew away our numbers on video games, but it also had a financial impact on our core business,” says Mark Achler, an adjunct lecturer of management and organizations at the Kellogg School and former senior vice president of new business, strategy, and innovation at Redbox. “When we started, we didn’t know that would happen. It was an unintended consequence.”
Innovations like this are critical if a company is to remain competitive. But for many larger firms, this may not necessarily align with past practices. “Most companies spend decades building up a core business and the bureaucracy to support that core business,” Achler says. That structure is a great advantage for intrapreneurs in terms of having established channels of distribution and a brand that has a hard-fought trust with their customers, “but it also means that everybody’s time and attention is focused on that core business. So if you don’t create urgency around innovation, then it’s really easy to put it off.”
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While most companies say they are committed to innovating in a quickly evolving industry, there is always a pull between what is working and what is still unproven. Success depends upon getting a true company-wide commitment to the innovation agenda. Because corporations have a low tolerance for failure—and face it, innovation carries risks—getting the true buy-in needed to see innovations through can be difficult. After all, it is easy to focus energy and resources on a proven cash cow. It is harder to dedicate some of those resources to new concepts.
“You’re not going to hit it out of the park on the first try, and if you do, your second try is not going to hit out of the park.”
“You’re not going to hit it out of the park on the first try,” Achler says, “and if you do, your second try is not going to hit out of the park.” But what companies may find—as did Redbox—is that a strong innovation that rolls out at the right time can do more than just add a new revenue stream—it can have residual effects on other aspects of the business.
Getting Buy-In on Innovation
So what can intrapreneurs do to ensure that new projects get the buy-in they need?
First, because people gravitate to how they will be compensated, Achler suggests that companies incentivize innovation. At Redbox, that meant having the company include innovation as one of its five corporate-wide goals that were tied to everyone’s annual bonus.
“That told every single employee that innovation matters,” Achler says. “Here’s our vision. Here’s why it matters. Here’s why it matters today. And this is now part of your bonus structure. It’s not enough for the CEO to just say, ‘innovation matters.’ They have to back it up.”
That support extends beyond bonuses into the organization’s budget. “Not only do you need a budget, you need a protected budget,” Achler says. “When you’re part of the innovation team, you have scarce resources inside a large company. You don’t have your own accounting or legal departments, so you’re always dependent upon other people to do your work.” Carving out dedicated resources—and getting a commitment to the security of those resources—gives intrapreneurs the tools they need to create. Without a protected budget, one soft quarter may lead to that budget being siphoned off to shore up a current cash cow.
In order to succeed, innovation in established companies needs to be material. By that, Achler means that it has to be substantial enough to make a marked difference to the company’s top-line revenue. In short, it has to matter. Dedicating limited resources to small-bore projects is not enough. Now, what defines material varies from company to company—at Redbox, Achler knew that if he created something new that generated $100 million annually, it would meet the threshold.
How patient do companies need to be with their intrapreneurship efforts? Providing innovation teams with an ample time horizon allows the company to see ideas through. “Innovation’s not one- or two-year chunks,” Achler says. “You’ve got to have a three- to five-year time horizon because it takes time to source and vet ideas.”
Finally, companies should consider creating a framework of evaluation. Redbox, for instance, adopted a 20-criteria critical matrix. “That matrix says, ‘here’s our process for how we’re going to evaluate ideas,’” Achler says. “When finger-pointing happens—and finger-pointing always happens—people can fault the execution, but not the process, because everyone had bought in on the process.”
Beyond these five elements, according to Achler, successful innovation efforts in established companies require leaders who have the guts to see opportunities and go after them—even if that means failing some of the time.
“I think courage is really important, especially in intrapreneurship,” Achler says. “It takes courage to stand up, put your neck out on the line, and fight for what you believe in. It’s that moral imperative that says, “I have to do this. We have to do this,” and to do so with a sense of urgency.”
“What separates the intrapreneur is not only that willingness to take the leap, but to feel like you have to, like you can’t help yourself.”
Fred Schmalz is the Business Editor of Kellogg Insight.
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