How does a company fail? To borrow a phrase from Hemmingway, two ways: “gradually and then suddenly.”
For example, established companies often focus on short-term financial and business objectives, overlooking fledgling competitors until they are no longer fledgling and ignoring small market trends until they represent seismic shifts.
This is the opposite of what successful disruptors do. Those companies are sniffing out any small, potentially market-changing trend they can find in order to establish themselves and take on the bigger players.
“Established companies have to start thinking like disruptors,” says Paul Earle, an adjunct lecturer on innovation and entrepreneurship at the Kellogg School. “It’s not a choice. Their entire existence is at risk.”
Earle has seen the struggle to innovate from both sides: he has helped found startups like the brand acquirer River West Brands and the spirits company Angel’s Envy, which Bacardi bought in 2015, and has worked as an intrapreneur within global corporations. His current endeavor, Paul Earle & Company, advises corporations on innovation and new ventures. Drawing from these experiences, he offers tips for established companies to remain one step ahead of the disruptors.
Build—and Advertise—a Culture of Intrapreneurship
Company leaders looking to bolster intrapreneurship need to build a culture in which employees are given the latitude and support to experiment—a straightforward process that Earle says doesn’t require any tricks.
“I see it as binary: companies that value intrapreneurship will succeed, and the ones that don’t will be left behind,” Earle says. “You empower people by being a champion for their ideas and removing corporate red tape.”
Managers and innovation leaders ought to have broad purview to green-light interesting and quickly executable ideas, to allow for an authoritative sign-off instead of a byzantine approval process that ladders up to senior leadership. Earle acknowledges that giving up control is not always easy, but it is necessary to keep up with scrappier competition.
It is also important for large companies to advertise their intrapreneurial spirit to the world. Recruitment is a serious and growing challenge for more established companies, which are often pigeonholed as staid or antiquated. So Earle advises turning the freedom to experiment into a recruitment tool.
“They need to show the best and the brightest that, yes, you can create new businesses here, and yes, you will get the support of management if your ideas are good enough,” Earle says.
Embrace Fresh Scenery and Role Playing
Established companies setting the stage for their intrapreneurship need to shake themselves out of their usual ways of thinking. Earle recommends a change of scenery and a bit of role-playing.
“Companies need to step away from their corporate cubicle farm,” he says. “If you want to learn how to play baseball, it’d be a pretty good idea to go to a baseball field.”
“Companies need to step away from their corporate cubicle farm. If you want to learn how to play baseball, it’d be a pretty good idea to go to a baseball field.”
This means more than touring a local incubator. It means establishing working groups within those incubators, like Procter & Gamble did while working to develop novel products and business models.
“P&G went completely out of their own comfort zone and geography,” Earle says, by sending a team from corporate headquarters in Cincinnati to the 1871 incubator in Chicago. The result of the experiment was Tide Spin, an on-demand laundry and dry-cleaning service now being piloted in Chicago.
An equally valuable practice that Earle often encourages innovators to try is to imagine how you might tackle a problem if you were Sara Blakely, or Richard Branson, or Tony Hsieh.
“This kind of role-play can lead to decisions that would have been inaccessible if you’d stayed in corporate mode,” he says. “Asking yourself ‘what would Branson do?’ can spark divergent ideas.”
Think Simple Prototypes and Small Markets
Big companies, by default, tend to think big. “But these companies need to start behaving like startups, and that means launching concepts that may be small at first,” says Earle. For that to happen, they should follow two central principles: prototype quickly and think small.
“A good prototype is manifestation of strategy; it’s strategy made real,” Earle says. “But prototyping often goes wrong because companies wait too long and work too slowly.”
Today’s technology makes building a prototype—be it digital or physical—relatively easy and inexpensive. But don’t get hung up on finding the perfect technology right away. Use aluminum foil and duct tape for a physical object, or draw out the details of an app with pencil. In the end, timeliness rules in innovation. “If you wait until your product is perfect, you’re too late,” says Earle.
And while prototypes should not be developed without consideration for their future commercialization, that does not necessarily mean every internal innovation needs to hold out for a national launch at Walmart. Think and work small—in the same way that actual startups do.
“All the sexy companies that corporates are buying now? They all started small and none of them would have survived the corporate review process had they been pitched as an internal idea,” says Earle. And yet corporations pay “wild multiples” to acquire these companies later.
Not every great innovation is a billion-dollar business in three years; in fact, few of them are. Earle points to Nestle’s recent $425 million purchase of a majority stake in Blue Bottle Coffee, which started out using a six-pound roaster and delivering to a few residential customers. What major coffee company would ever think that small?
“If you’re completely absent smaller market experiments, that’s a sign you’re in trouble,” he says. “You should have lots of little bets going on at any given moment; you should not be sitting in a conference room waiting for the big bet to pay out.”