Every large organization is sitting on a competitive advantage hiding in plain sight. It isn’t technology, capital, or market position. It’s the entrepreneurial potential of its own people.
That’s the question at the heart of this conversation with Gifford Pinchot III, the man who wrote the book on intrapreneurship. His 1985 bestseller Intrapreneuring introduced a simple but powerful idea: the entrepreneurial spirit can thrive inside large companies, if you create the right conditions.
In this episode, Gary and Gifford explore the gap between what leaders say they want from their people and what their systems actually allow, why organizations suppress the very behavior they claim to want, and what it takes for that talent to surface.
This is a conversation about human potential, and what becomes possible when organizations stop getting in its way.
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Listen to the Podcast here
Unlocking Entrepreneurial Potential Inside Organizations With Gifford Pinchot III
Every organization is sitting on an untapped competitive advantage that is hiding in plain sight. It’s not technology. It’s not capital or market position. It’s the untapped entrepreneurial potential of its people. Welcome to another episode of the show, where we explore the hidden logic that enables ordinary people to accomplish extraordinary things. Our guest is none other than Gifford Pinchot III. This is the man who wrote the book on intrapreneurship.
In 1985, his landmark book, Intrapreneuring, became a bestseller that was translated into 15 languages and sold more copies than any book Harvard Business Review had ever published. It introduced the world to a simple but powerful idea that the entrepreneurial spirit can thrive within large established companies if you create the right conditions.
Like so many entrepreneurial journeys we hear, Gifford stumbled into this idea by following his natural curiosity and by looking for problems to be solved. After selling his struggling blacksmith business, he wandered into a weekend seminar and walked out with an idea that would change the way organizations think about innovation.
In this conversation, Gifford and I explore the tension at the heart of every large company, the gap between what leaders say they want from their people and what their systems allow. We discuss how organizations say they want their people to act like owners and then suppress the very behavior that would make that possible. We explore what it takes to create the conditions for intrapreneurial thinking to flourish. We also discuss the importance of sponsors who are willing to put their own reputation on the line to protect promising ideas.
Along the way, Gifford also shares examples of the impact of his work, from the US Forest Service to a German pharmaceutical company, to illustrate what becomes possible when organizations get this right. He also shares insights he learned from people like Art Fry, the inventor of the Post-it Note. Whether you’re a leader who wants to unlock the entrepreneurial potential of your people or an intrapreneur who has more to give, I hope you enjoy this conversation with Gifford Pinchot.
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Gifford, thanks for being a guest on my show.
It’s an honor. Thank you very much.
Every organization is sitting on an untapped competitive advantage that is hiding in plain sight. It’s not technology, capital, nor market position. It’s the untapped entrepreneurial potential of its people. Share on XWe met circa 2012 in Seattle when we brought the Icehouse Entrepreneurship Program to Seattle. We bumped into each other and met then. I’ve since come to recognize that you are the guy who wrote the book on intrapreneurship, meaning entrepreneurship inside an organization. I want to start by understanding how that happened for you.
From Blacksmith To Intrapreneurship Pioneer
It began when I was an unemployed blacksmith. I had sold my company. I went to the school for entrepreneurs, Bob Schwartz’s marvelous weekend seminars. He said three things were going to be important in the future. One was chips, one was bugs, and one was entrepreneurship inside corporations. I said, “What do you mean by that?” He said, “I don’t know, but I know there’s a pony in there.”
I went away, and I wrote him a white paper on what entrepreneurship inside corporations would look like, what conditions the corporations would have to set up, what the entrepreneurs were going to be like and doing, and so forth. The Swedish company that was a partner of the firm, which was a consulting firm that was employing me then, came one evening to talk to Bob about entrepreneurship. I handed them the intrapreneurship paper, and they went back to Sweden and started working on a school for intrapreneurs.
The paper, through them, fell into the hands of Norm Macrae at the London Economist. He wrote a five-page article in The Economist, Intrapreneurial Now, citing me as the person who created it and so forth. The world exploded a little bit for me then. The next thing you know, there were other people calling up and wanting to talk about it and so on. The next thing you know, I had an introduction from Harper & Rowe to write a book on the subject. You have to understand that this is all fairly fast movement from somebody who had been living in the middle of upstate New York with 80 cows and a little blacksmithing operation.
I wasn’t going to let that one go. This is how these stories always go. You went from a blacksmith farmer. Did you say a failed blacksmith?
We sold the company, but it went pretty well for a while. We had showrooms in 10 cities and 20 smiths in the barn pounding away. We were a real operation.
You had some entrepreneurial chops already.
We were discovered by Mexican blacksmiths. That was not a good thing because they copied every product we had and put it on the market for half what we were selling it for. They were selling it for under our cost. I quickly sold the company while it still had some value to someone who had a real reason for owning it that was above and beyond the financial. That went well. That’s when I went down to Bob Schwartz’s course in entrepreneurship. I figured, “What am I going to do next?” That led to the Norman Macrae article, which got me going.
It led to the book. You wrote this book about intrapreneurship. When the book came out, what happened?
The phone began ringing. It was a bestseller. It sold more copies than any book that Harvard Business Review had ever published. It was in fifteen languages. The phone was ringing off the hook. I remember DuPont called up and said, “We’d like to do this intrapreneurship thing. Would you come down here and talk to us?” I said, “I don’t make sales calls. You’ll have to come up here.”
In the end, we did over $1 million of business with them. I thought, “You were a little cocky at that point,” but the phone was ringing so consistently that we didn’t know what to do. That was a move from struggling to pay my bills. Suddenly, I was doing very nicely. That was a nice thing that happened to me, and it went on for quite a while.
Entrepreneurial Vs. Managerial Mindsets
There’s an economist at Harvard named Amar Bhide. He wrote a book called The Origins and Evolutions of New Businesses. He looked at about 200 of the fastest-growing companies in North America. He described the founders of these companies as enthusiastic and inexperienced.
It helps to be inexperienced because if you had any idea how hard it was, which was not true in my case, but in most of them, with entrepreneurship and how hard it is to start a business and how it’s not going to turn out the way you thought it was going to turn out, you probably wouldn’t. You were talking about the mindset of intrapreneurs and entrepreneurs.
A traditional manager studies the future so that they can align themselves with the future. Intrapreneurs and entrepreneurs don’t do that. They know that they’re going to cause the future, so they don’t have to predict it. They’re going to make it happen. That is a very different way of looking at things. They tend not to so much do a lot of secondary research on what you can find out about the market as to try something, see what happens, and learn by doing it.
Entrepreneurial Potential: A traditional manager studies the future so that they can align themselves with it. Entrepreneurs don’t do that. They know that they’re going to cause the future, so they don’t have to predict it. They’re going to make it happen.
One more way that they’re different is that the managers are busy trying to calculate the ROI on this new idea, which, incidentally, is impossible. The numbers that you come up with are pure fantasy. You can’t know what’s going to happen. The entrepreneurs have a different criterion. They say, “If I go out and try this, and it fails, am I still okay?” If the answer to that question is yes, they do it. It is fundamentally different.
I was talking to Richard Branson. We were together on a TV show in England. He said, “When I started Virgin Air, it wasn’t because I thought it would be a good business to go into the airline business. I wanted to go into the airline business. I did the math, and it looked like we’d still be in business if it failed, and so I did it. That’s the way I’ve always behaved.” That’s true of entrepreneurs in general.
I heard Richard Branson say this once. This is fairly advanced in his career, but he was in a board meeting and had hundreds of millions of dollars at stake. Somebody pulled him out of the meeting and said to him, “You don’t know the difference between gross and net, do you?” He said, “No.” I like where you’re going with this. I’ve come to the same conclusion.
Let’s go back to mindset, which I’ll loosely define as the underlying values and taken-for-granted assumptions that drive our behavior, which we’re mostly unaware of. Managerial assumptions are fundamentally at odds with entrepreneurial assumptions. You alluded to this. The manager is focused on productivity and efficiency. They draw from the past in order to predict the future. The entrepreneur is drawing from imagination to predict the future.
What the managers are doing makes sense of what you’re trying to do, which is maintain an existing business that has a long history. A lot of the bugs have been worked out of it, and you want to make it a little better. That’s what you’re rewarded for, and that’s what you do. Creating something out of whole cloth is a different challenge. You blunder around and make a lot of mistakes because that’s how you learn. The cheapest way to start a business is to blunder around, make a lot of mistakes, and fake it until you make it. Each of these groups is responding to the actual best way to do what they’re doing.
The cheapest way to start a business is to blunder around, make a lot of mistakes, and fake it until you make it. Share on XIn fundamentally different ways.
I’ve had this experience over and over again. You find somebody who has left a major corporation and has tremendous credentials in the area that you want, and then you hire them, and it’s a disaster. You say, “It’s time to write this consulting report.” He says, “Good,” looks around, and says, “Who can I delegate this to?” I say, “You’re supposed to do it.” The manager hasn’t done anything themselves for a long time. That desire to delegate is a good thing when you’re part of a large organization. When you’re part of an organization that has 3 employees, or even 10, it’s not such a good idea. You probably can’t delegate a lot of stuff.
That’s something Jim Collins has written about. He called it the Entrepreneurial Death Spiral. In the beginning, it’s chaos. It’s like, “You need to be in Tokyo like Tuesday morning. Here’s the credit card. Go figure it out.” The managers come in, and they’re like, “You can’t do that. You have to have processes and request forms.” The early people who thrive on that tend to leave, and they’re replaced with people who are more tolerant of it. That cycle keeps happening.
It’s one of the reasons that many acquisitions of innovative companies fail. I ran a small Internet security company. I managed to sell it to a publicly traded company. Two years later, no one who worked for me was still employed by that company.
I hear that a lot.
They bought us for our talent. They came down and presented a security problem that they had a team of six working on for six months. They said, “What would you do with this?” I handed it to one of my little geniuses. A week later, they had working code. This is one of the reasons that we got ten times the revenue.
How to Manage Entrepreneurial Talent
That gets into the entrepreneurial mindset, in my way of thinking. Is it your belief that that talent is inside the organization and the culture of the company is stifling it, or is it that they’ve hired the wrong people or somewhere in between?
It’s a little of both. What we find is, in the general population, people who are set up to be entrepreneurs are about 10%. Probably in the corporation, it’s about 5%. We’ve never found a shortage of entrepreneurs. If you ask the question right, they come out of the woodwork. Not at first. A few brave ones come out of the woodwork, and then when the rest of the people see they didn’t get killed, the next level of bravery comes out. When those don’t get killed, then you get a flood.
We’ve never found a shortage of entrepreneurs. If you ask the question right, they come out of the woodwork. Share on XI love that.
The entrepreneurial talent is there. It is being suppressed. You have to create bypass pathways around which somebody who thinks as an entrepreneur can function. You’ve got to find sponsors for them. One of my conclusions about creating the environment for innovation is that you can train entrepreneurs and get them to bring out their entrepreneurial spirit that was hidden. Maybe they don’t even recognize they have it anymore.
Much more important than that is training the managers what an entrepreneur looks like, what you have to do to manage them, how you can kill their enthusiasm, and what it’s going to take from you in order to have the courage to back them when the going gets rough, which it will. There will be times when things do not look good at all.
The combination of a sponsor with enough self-esteem and enough courage to stick with that entrepreneurial team and keep defending them to the people who are trying to kill it is what succeeds with innovation inside large organizations. Entrepreneurs can’t do it on their own, and the sponsors can’t do it.
It has to be the two of them together, if they form a relationship, which is very much more a relationship of trust and mutual respect than you would expect between a supervisor and their employees. I’ll tell you a little story about that. To illustrate, because people think all the sponsor has to be the CEO. The sponsor often is generally not the CEO. You’re probably familiar with Art Fry and the Post-it Notes, right?
Yes.
The first stage of this was Art getting the secret adhesive in a company meeting. The billboard and the Post-it Notes wouldn’t stick to that, so he changed it and put it on the paper, and it stuck better. He gave those Post-it Notes to the secretaries of the executives who began using them, so the executives were familiar with the product. The manufacturing department put down its feet and said, “It’s unmanufacturable. It would take millions of dollars to try, and we would fail in all probability.”
Art was not to be stopped. He went to Sears, Roebuck and bought some cable. He went to Home Depot and got some 2×4. Art, at this stage, was pretty well known for things he had done. He was given the right to run a coding line at night that was being used during the day to make a real product. He was going to test something, which was an official product of the corporation, but that’s not what he did.
He simply threw everything that was supposed to be happening there and hooked up his own thing. He got the cables, the 2×4, and everything going and built a production line. I might add that his boss, and I’m talking about a first-line supervisor, not some powerful person in the organization, sat there side by side with him, building this new system. In the morning, they came in, and the manufacturing people were horrified. This did not look like anything they would build.
They said, “Bob, how could you let him do it?” Bob said, “If I had known he was going to do it, I would have stopped him. Now, you have to see it’s working. Too many people have seen it. We can’t say it can’t be manufactured anymore.” That is an example of a first-line supervisor who put his job on the line for Art. Maybe it’s not always that bad. There is always a time in every entrepreneurial story that I have ever uncovered when things go badly. If there isn’t somebody who keeps the entrepreneur from being fired at that point, that’ll be the end of innovation in that company.
Entrepreneurial Potential: There is always a time in every entrepreneurial story when things really go badly. If there isn’t somebody who keeps the entrepreneur from being fired at that point, that’ll be the end of the innovation.
This is something I’ve given quite a few talks about in CEO groups. They keep saying, “We want our people to act like owners.” I’m interpreting that as, “We want them to be entrepreneurial.” My response to the question is, “Why aren’t they?” My assumption is that not everybody wants to start a business, but the desire to contribute and identify and solve problems through our own effort and our own ingenuity is pretty widely distributed.
Why Employees Aren’t Acting Like Owners
Maybe this is part of the problem. I hear, “I want my employees to act like owners.” What I think that means is, “I want them to care about my money as much as I do. I want them to be constantly looking for efficiency rather than doing what seems to be the easy thing to do, and nobody gets fired for it.” I don’t think they’re asking them to be entrepreneurs. They don’t act as if that’s what they want because when people start acting like entrepreneurs, they start breaking rules.
When people start acting like entrepreneurs, they start breaking rules. Share on XChaos ensues.
One of the secrets of being an entrepreneur is knowing which rules you can break and which rules you can’t. That’s one of the things that a sponsor is helpful for. If you’ve been around longer, that’s a third rail. Step on that and you’re dead, so don’t.
There’s also a confidence factor, I would imagine. Nobody innovates in a vacuum. I can see the power of a sponsor giving somebody confidence. If I’ve got somebody with a little more authority, knows what I’m doing, and is signing off on it or giving me the blessing, I’ll go a little bit further than I might otherwise.
You have to have that relationship of trust, one where you think the entrepreneur is good at getting things done and is not just a dreamer. They’re a dreamer who does things. You’re right. There is a bringing out. We were teaching a course in the Forest Service on intrapreneurship. Sitting in the back of the room was Jenny Bradley. Her arms were crossed across her chest, and she was hunched down over her desk. She was listening.
It turns out, the reason that she was in the course was not that she wanted to be an intrapreneur. She was in the intrapreneur course because she believed the Forest Service would never let anyone be an intrapreneur. When they announced the course, she thought it was the funniest thing she had ever heard of. She decided she had to be there to watch it so she could tell all her friends how funny it was. Other than that, she was glum and certainly not buying anything I was saying.
We were telling stories about successful intrapreneurs and the ways in which they defied authority in order to get things done, the courage that they had, and so forth. She asked me, “How many people should I put in my business plan?” I said, “Jenny, it’s your business plan, not my business plan. How many people do you want? What’s your vision here?” She said, “Don’t give me that crap. I’ve been around here long enough to know that there’s a right answer to everything. Now, tell me what it is, and I’ll put it in my plan.” The next day, same question, same answer, and same response.
On the third day, when this came up again, I declared a break in order to see if I could figure out what to do because clearly, telling the truth was not going to work here. Jenny went into the bathroom with my colleague, whom I don’t know what she did in there. What emerged from the bathroom was a completely different person. It was a fire-breathing dragon. She was going to completely transform this whole function in the organization.
She started an organization called Recreation Solutions. What they did was creational planning for the 150 national forests. That was mandated. They had to win those contracts. The people had lots of other choices as to how to get the work done, but she was convinced that she could do a better job. I saw her some while later. She had done her organization, which, by then, was 32 people, and done the recreation plans for 40 national forests.
They had done the national recreation plan for the whole Forest Service. They had done the recreation plan for the Bureau of Land Management and then so forth. They were taken over because they were doing it better. That transformation from hunched over, not believing a word of it, and knowing that it could never happen to flipping a switch in which she said, “This part of myself which came here to laugh at this idea because it’s so stupid, and I’m going to quit in another month anyway,” was the part of her that finally believed.
That was the part of her that would succeed in this situation. She brought a whole new self to the operation, which had been there all along, but she had felt that it was of no value. What happens to entrepreneurs and intrapreneurs alike is that their family tries to beat it out of them. Employers try to beat it out of them with a little luck.
Their church is trying to beat it out of them. School is trying to beat it out of them. It’s pretty well buried in some people. You were saying earlier that everybody wants to see something and make it better. Everybody wants to contribute. That is the gift economy. If you look at tribal societies, they operate on a different economy. If you give something to the tribe and do something good for the tribe, people respect you more.
It’s very simple.
That’s the exchange. You don’t get anything in exchange.
When my new book came out, I got invited to give a talk at Harvard at the Human Flourishing Program. I said what you said. I’ve interviewed maybe 700 or 800 entrepreneurs all over the world since I saw you last. What I’m becoming increasingly convinced of is that we’re supposed to pursue the things that are interesting to us in ways that are useful to others. When we do that, it brings out the best in us. Whether we own the business or not is almost secondary.
Entrepreneurial Potential: We’re supposed to pursue the things that are interesting to us in ways that are useful to others. When we do that, it brings out the best in us, whether we own the business or not.
It’s become less secondary with this generation. I’ve been talking to some intrapreneurs, and they’re not getting paid as well as their classmates who did a routine management job. Since they have school loans and because getting by in this world is a lot harder than it was when I was growing up, they care about how much you pay them to a greater degree.
Some of those early 3M intrapreneurs, I talked with them, and they didn’t give a crap what the company paid. They were like, “I’m well paid enough. What I want to do is have fun. I want to do things. I want to make innovations happen. I have faith that they’ll pay me more if I do something spectacular, but that’s not why I’m doing it.” That was universal. It’s still true that that’s not why they’re doing it, but they do care.
That’s true. I want to come back to something. I want to come back to the Forest Service story and the lady that had her arms folded. I’m so happy you brought that up because I’ve seen that over and over again. We were invited by the mayor of Albuquerque to teach city government workers how to think like entrepreneurs.
I half-jokingly thought this was a prank phone call, because like a lot of people, I had this underlying assumption that a city government worker is about as far away from an intrapreneur as you could possibly get. His name was Richard Berry. He said, “I was reluctant to even participate. Let’s try it with 100 employees.”
He ranged from the sanitation supervisor to the law director. There was a guy. He was the sanitation supervisor, Rob Vigil. He had his arms folded and told his boss, “I’m not a classroom guy. I want to be out there with my guys in the trucks.” His boss voluntold him to do it. He was sitting back in the classroom with his arms folded. He said to me the second day that it clicked that the taxpayers are our customers. He said, “I could get my guys together and figure out how we can solve problems.”
They started using Ice House as a verb. They were like, “How do we Ice House this? Meaning, we don’t have authority, and we don’t have any resources. Let’s figure it out.” They figured out that the city was losing $40 a ton picking up recyclables. This guy took his team. They figured out how to make $4 or $5 a ton profit. That saved the city $1 million a year. It’s the same thing. I love the idea that the skeptics sometimes can become the most ardent believers.
It’s my own experience, too. I wanted to tell you a little more about that Jenny Bradley story, but we can put that off.
What I wanted to ask you is, do you remember the bones of your initial article or the white paper that you wrote? The original article that you wrote or the white paper that started the whole thing, do you remember the bones of that?
Intrapreneurship In Action: The Forest Service
It stands up remarkably well. One of the innovations in that article was what I call intracapital, which is something that has not been easy to put in. Normally, in a corporation, you get a budget, and at the end of the year, it’s zeroed out, and then you get a budget for the next year. With intracapital, you find an internal customer. This is what’s interesting about this story.
If you think about entrepreneurship, how many new products a year does a company come out with? Ten? Twenty? That’s not a lot of intrapreneurial opportunities if you have 100,000 employees. If you look at all the things that one little bit of the company is doing for some other part of the company, and the market research people, the videographers, and this and that, they all have internal customers. They could all be intrapreneurial, too.
In that case, we could serve the need of humanity to have decent jobs where they come to work excited because they’re going to do something. I can also tell you about what happens with productivity when you do that. We wrote a book, my wife and I, about The Intelligent Organization, which talked about these internal teams. During the Al Gore period of the administration working under Clinton, he was doing the reinvention of the government.
They told the Forest Service to reinvent themselves. We got selected as the facilitators of the team that was going to figure out what that meant. We ended up, four years later, implementing one of the things we had come up with, which was the enterprise team system, or as I like to call it, free enterprise. Inside the organization, you have exchanges taking place, and they function more like a normal market.
One of the parts of the normal market is you bill your customers, and then you put the money in your internal bank account. It stays there until you spend it. You can build up a big buffer, and then nobody can fire you because you can’t be fired as long as you have money in your internal account and haven’t broken some important law. You have total freedom from fear. Somebody says, “I’d like you to do this.” You say, “I don’t feel like it.”
It’s okay as long as you have money in your account and enough customers. It’s a completely different way to go to work. What happened? We spent nine months with a team of fourteen people getting the rules of that game agreed to. We got everybody to sign papers saying they would stand up and defend these rules no matter what happened. That turned out to be very important.
We started forming a team that did environmental reviews. This is a big business in the Forest Service. You’ve got to do your NEPA evaluations before you could do anything. Some of these people got very good at it, and they began selling that service to other people in the Forest Service. They went through our accelerator, got trained, and so forth. Digital Visions was doing InfoTech.
We had a group of people who were doing grants. If you needed a grant, they would help you write the grant. Recreation Solutions, I already mentioned. The road building crew. When the road building crew needed a new bulldozer, what did they do? They went out and bought it because they had enough money to buy a bulldozer in their internal account. We’re not talking about pennies here.
We’re talking about hundreds of thousands of dollars.
The rules held. No one came and told them they couldn’t do it.
Is that the first place you tried it inside the Forest Service, and it worked?
It worked. It was audited almost every year by hostile groups from headquarters who were trying to prove that this was a bad thing. Two things went wrong with their investigation. One, their customers loved them and said they couldn’t get their work done without them. Unlike external contractors, these people knew the Forest Service, and they were much more effective at blending with the culture and all those sorts of things.
One of the little rules in the reinvention lab, which was how this thing was organized, was that they didn’t have to go through purchasing. You can imagine what that saved. They didn’t have to go through capital appropriations. They didn’t have to go through all that bureaucracy. According to one of the hostile audits, which turned out to be very positive in the end, these guys are 1.8 times as productive as the average government employee. If this government were 1.8 times as productive, we wouldn’t have a deficit.
It was extraordinarily successful financially. It was also extraordinarily successful because the Forest Service had a problem then. There had been a long period of no hiring. There were a whole bunch of people who were 3 to 5 years away from retirement, the people who knew what to do, and there were a bunch of brand-new recruits, and there was nothing in between.
All these enterprise teams were having so much fun that they didn’t retire when their retirements came up. They stayed there training the new people in their enterprises how to do the work that they were doing. The Forest Service bridged over. There was a gap, but not as big as the one we’re going to have. My wife and I have been mourning the Forest Service.
I can imagine.
They’re killing it. They’ll put a fine point on this. They’re getting rid of all the laboratories. They’re firing the scientists.
Wasn’t your father connected to the Department of Interior or something? Your grandfather?
My grandfather was the Founder of the Forest Service.
That’s the connection. That’s something near and dear to your heart.
I grew up wandering around in forests, too. This is something that every organization could be doing. It would produce enormous productivity. It’s interesting. We did it in a large semiconductor firm. One of the senior executives came up to me and said, “Gifford, something is very wrong here.” I said, “What is that?”
He said, “I went up to one of your teams and said, ‘The way you’re doing it is not right. Do it this way.’ The lady turned around and said to me, “We’re going to do it this way. That can’t be right.” Three months later, he came back to me and said, “Gifford, I don’t know what you’re doing. Whatever you’re doing, I have never seen employees so enthusiastic as this. There has to be something right about what you’re doing.”
I love that. I did this work at a community college outside LA with the leadership level. This exact same thing happened. Deans, who started with their arms crossed, started working across silos to identify and solve problems. The president of the college said to me, “I don’t know what you’re doing, but I’ve never seen my people so engaged.”
Think about the engagement level in major corporations. It’s at the bottom.
Reconcile that against the accelerated pace of change.
I did a virtual project with a German drug company. The only group we were working with was the IT folks, and there were 1,100 of them. The first thing we did was a three-hour training for everyone, including the top officers in the IT function. Everybody knew what an intrapreneur was. It was half about how to manage intrapreneurs, and the other half was how to be an intrapreneur. At the end of that course, we asked, “Does anyone want to be an intrapreneur?”
We ran a virtual idea fair. They put up their virtual posters, and then people wandered around the virtual room and looked at the posters. If they thought something was a good idea, they could either volunteer to be a sponsor of it, or they could volunteer to join the team. The rule was you had to have three people, all of whom were willing to go through the accelerator together on that project and could state the project, so that it was obvious they were working on the same thing.
They should have a good elevator pitch, which they all could give. If they had that, they got into the accelerator. That turned out to be a very good test because two things had to be true for that to happen. 1) There had to be a leader who could assemble a team. 2) There had to be an idea that wasn’t so bad that didn’t drive the people away.
That’s exactly what I was going to double-click on. I think about entrepreneurship in terms of Richard Feynman’s idea about science. The first trick of entrepreneurship is not to fool yourself. You’re the easiest person to fool, so if you can convince 1 or 2 other people, you’ve at least overcome some of that.
Twelve teams joined the accelerator. At the end of the accelerator, six of them were approved and got funded. We stayed on with them. We did weekly phone calls, helping them to solve problems, which incidentally were often solved by the members of other teams rather than by us as faculty. They knew where the resources were buried in the organization, which I did not.
At the end of one year, after graduation, we had a 10:1 return of everything the company had invested in our fees and all the projects. It is true that we ran a process in which we surfaced the most enthusiastic entrepreneurs. What happened next? Thirty teams volunteered for the next round. Four hundred people who were not in the IT function ended up taking that first course, even though it wasn’t offered. They warmed their way into it.
When they announced that management was compelling the IT folks to take a three-hour course, can you imagine what the reaction was? It was Jenny Bradley with their arms crossed. We got a 95% approval rating at the end. That does not happen on a mandated course, but there was one secret to that course and one secret to the accelerator.
Practical Mindset Training And Accelerators
The secret to that course was we were on the side of the entrepreneurs, not on the side of the suits. We were telling them how to work the system. In fact, they very much appreciated it. The secret of the accelerator was fifteen minutes of training and one weeks’ worth of work in their team. It was then presenting their results to two other teams and getting feedback. It was a very social activity.
You’re saying that it started with a simple three-hour workshop. That was it. That was enough to get them off and running.
The accelerator was a six-week accelerator. Each week, we gave them an assignment and said, “This week you’re to do your business model.” We gave them fifteen minutes of information about business models, some templates, some worksheets, and so forth, and then let them go.
It doesn’t take much.
The important thing is that they didn’t spend the week listening to lectures. They spent the week developing their idea with some guidance, but mostly their own work.
You’re saying this is a massive return to the organization, fostering intrapreneurial culture in the organization. Do you think people are hiring you because they want to increase the amount of innovation, or they want to increase engagement? What do the people that hire you think about that? Is engagement the byproduct or the cherry on the sundae?
I don’t see inside their minds, necessarily, but that’s a very important distinction. I remember once teaching a course, and we had an accelerator and team for going to the accelerator. At the end of the accelerator, one of the people said, “We should approve these teams and fund them because it’ll make them happier and make them feel that this is a good thing.” I said, “No. Do you think you’re doing them a favor by letting them work for six months when you know this thing is going to fail?”
The benefit of the doubt to some extent, for sure, but if you can see this clearly, and sometimes you can. All the time, people tell me ideas that I know in an instant are not going to work. They turned some people down, and we found they showed up at the next round with a much better idea. They honestly told them, “This is not a good idea for these reasons.”
They came to the conclusion on their own.
Learning Through Failure And Feedback
Some combination of both. The people who were running the panel to review them would tell them honestly what they thought. We’ve also had teams in our accelerators who quit before the end, which I always consider to be a great win. They said, “We did the research, and it doesn’t work.” One of the funny examples was food. They were taking industrial waste and feeding it to crayfish.
The crayfish ate it, and they grew and so forth. They said, “Crayfish is a small market. Lobsters is a big market. Why don’t we feed it to lobsters?” I said, “Do lobsters like it?” They said, “We don’t know.” I said, “Why don’t you go find out?” They said, “It’s not the time of year. The lobsters are hibernating.” I said, “Are the lobsters hibernating in Chile?”
They said, “Let’s go to the other side of the equator.”
They flew down to Chile, and the lobsters wouldn’t eat it. That was the end of that project. We saved them the salaries of five people for half a year. Those people didn’t leave the organization. They went on to do other useful things during that time. That’s typical of entrepreneurs. My reaction was a typical entrepreneurial reaction. How can you find out as fast and cheaply as possible?
I love that.
They were looking at airfare to Chile. That’s a huge expense, but not compared to your salaries for six months.
I like what you’re saying here. Some of the teams failed relatively quickly and didn’t give up. They came back into the next round with a better idea. They came back with that stronger, better, entrepreneurial capability. Others said, “We tried it. This is not for us. We’re out.” That’s also a good thing.
I don’t recall anyone doing that, and I think that’s because of our selection methods. To your earlier point, everyone wants to do new things, to try things, and to add value. It’s not like people are not motivated to do this. It is that they are afraid of doing it. If you put an environment where they’re not afraid, the chances that they would drop out because they discover they’re not an intrapreneur are not very likely because you don’t have to be an intrapreneur after all. You just have to be a teammate in order to add value in that situation. I’m trying to think, but I do not remember someone saying, “I thought I was an intrapreneur, but I’m not.”
That’s interesting.
Maybe they said that later. I don’t know. Jenny eventually took a rather senior post in the Forest Service. One of the things we use to sell intrapreneuring is that this is the best possible training. She learned a whole bunch of things about people, managing, and all those sorts of things. When she took a senior position, you had somebody who had an entrepreneurial mindset inside a senior position in the organization. That’s even better.
I can’t wait to read your papers, books, and articles. This is so exciting and so interesting to me. In a nutshell, can you summarize how your messaging to the manager might be different than it might be to the person who you’re expecting to be intrapreneurial?
First of all, you’re talking about a different job. This is pretty simple. The reason they probably are talking to me is because a couple of their employees left and started a big business that the company could have had, and they lost it. This has certainly happened to me more than once, where there’s an actual case history that is driving them. They’ve probably read the book. They want to do this. I don’t find myself in deep selling. I have to sell the idea that we are capable of making this happen, but I don’t have to sell them on the idea that it would be good to be more innovative.
Don’t you have to explain something different to the manager, like how not to interfere and how to tolerate this?
How To Create Space For Innovation
You do that by teaching the intrapreneurial way of operating and saying, “Now you want more innovation. They’re going to behave this way. If you’ve got the right people, they will behave this way. You have to create a space in which that can happen.” You have to convince people that that is, in fact, how entrepreneurs operate, and that the reason that they operate that way, among other things, is that’s what works. They know without you having to tell them that something is going on in the organization which is blocking innovation. That is not news to them, so you don’t have to make that point.
I get it.
You have to make the point that this is the way to get innovation to happen. I can think of somewhat difficult sales. For example, in the drug industry, we have a way of innovating. We have these steps, and we do these things. We don’t have any choice about that because that’s what the law says we have to do. All these things that you’re talking about, those could never happen in a drug company. In fact, they do happen in drug companies, but there’s the formal system as one thing.
The intrapreneurs are always operating in the informal system. You were pointing out they cross boundaries that you’re not supposed to do. They do. They get help from all sorts of different places. They build a virtual team that is not formally assigned to their project, but is excited by it and is helping them out. To have innovation in an organization, you have to have the hierarchy to run the ongoing businesses that don’t need to change that much.
Entrepreneurial Potential: To have innovation in an organization, you have to have the hierarchy to run the ongoing businesses, and you have to have a separate kind of organization, which is the informal organization.
You have to have a separate organization, which is an informal organization. That is made up of people who are in that formal organization, but they are operating some of the day in this other way outside that organization, both being intrapreneurs and the sponsors of intrapreneurs. They are working to change the system in one way or another.
The decisions that get made get made in the informal organization and then in the formal meeting, which takes place to make that decision. You’ve already stacked the deck. Every manager knows that. This is not a new idea. The informal organization can be strengthened in an organization by teaching people to respect it. It’s going to network across the organization and solve these siloing problems. It’s going to do all sorts of things that everybody knows need to be done. They try to get the formal organization to do it, and it’s not going to work. The informal organization has to do it.
I like that juxtaposition. It’s like complexity theory. It’s chaos. You have to preserve the core of the organization. If you’re not out on the fringes pushing the boundaries up against chaos, you’re probably stagnating.
Navigating Complexity And The AI Revolution
This is going very fast. What is going on in AI is truly scary. Did you see the thing on Anthropic?
I haven’t stayed closely tied to it. I use it every day.
What you do in the AI business, among other things, if you’re one of those ChatGPT-type people, is you keep making your model better. You keep making better models. One of the spaces in which Anthropic has been particularly good is in coding. Their models write code very well. They have a new model that has come out.
One of the little tests that they made of this model is they asked it to examine the security in various applications. What they discovered is this new program can find gaping holes in the security that have been going on for decades. Every single application, every single browser, and every single operating system, it can easily crack any of them.
They scared themselves because that would be the end of business as we know it. What they’re doing is they are giving it to 40 tech companies to find these weaknesses in their security systems and plug them. They’re not going to release it to the public until they have gotten the system secured. I wonder if they’re ever going to get the system secured.
I used to be in the Internet security business. Somehow, this hits my heart a little harder than others because we made the software that you use when you talk to your bank. I know that it’s vulnerable. It always was vulnerable, but what happened is that we distinguished ourselves as the company that could fix it fastest. We had some geniuses.
Somebody would announce a new vulnerability in Secure Socket Layer, which is now TLS. It was the software that we made at that time. A day later, we would have a patch and recompile your software with this, and that hole is no longer there. That’s what goes on continuously in the security business. What if you crack everything all at once?
The levy breaks.
With realities which are much more fundamental to how that system operates. You can’t fix it.
I talked to Tom Rue about the way that AI attacks software service companies. Big software companies are in trouble because of AI.
You tell it, “This is what I want to do,” and it sets up. There’s your software right there.
You don’t have to write code. You don’t have to know how to write code if you’ve got access to AI.
That’s not true. You have to know how to write code because AIs make mistakes. Somebody has to look at their work. Somebody has to say, “That will work as a demo, but if you try to scale this.” This has to be people with experience. The human mind still has its role here. The trouble is we don’t need any young programmers. We only need experienced programmers. What happens when those people retire, and nobody knows?
Let me ask you a different question here. Did you ever go work inside a company where it didn’t work? It blew up, or people didn’t buy in.
Yes. I’ll tell you an interesting story. This was not a company where I was exactly a consultant. I was a speaker. I had time. It wasn’t like a given-hour speech. I had done a survey beforehand of the factors that support innovation in an organization, and I had rated those factors. We put the charts up on the wall, and we had everybody brainstorming what to do about the ones that needed fixing. The CEO walked in. He walked around, looked at the charts, and said, “All this is crap. None of those things are true.” I was like, “Your people filled out our forms. What are you talking about? These things are true.”
Lessons From Exit Interviews And Entrepreneurial Loneliness
Denial is not a river in Egypt. I remember I gave a talk. It was in Denver. A CEO raised his hand, and he said, “What if I teach all my people to think like entrepreneurs? They’ll all leave.” For my response to him, I paused for a little comedic effect and said, “What if you don’t and they all stay?” It’s an interesting question he asked. The question itself revealed his own mindset in a way that he may not have intended to.
I’ve done hundreds of exit interviews on intrapreneurs who left a company and formed a successful company. You’re in a situation where the data is going to be pretty interesting because we know that they were not a failure because they were not good at entrepreneurship. What we found is the same story to the point where I stopped doing those interviews.
I had an idea. I told my boss about it, and he killed it. I licked my chops and went back. I had another idea, but I was a little smarter this time. I hid it and developed it secretly. I developed some trusted friends who helped me, but they discovered it and killed it. I had another idea. This time, I was a little smarter and hid it a little longer. Eventually, I had to bring it out, and they killed it. After about five of those, I’m madder than heck. I’m not going to take it anymore.
The intrapreneurs do not have to have the risk tolerance of an entrepreneur. No venture capitalist is going to ask them to sign their house on the loan. Maybe they get put in the penalty box for 3 months or 1 year if their project fails. Maybe they don’t even have as good a career after that as they would have had afterwards, but they’re still going to get paid, their kids are still going to go to college, and they’re always going to have food to eat. I have been in situations where I had weeks to go, or I was on the street.
Inside an organization?
No. As an entrepreneur.
Out in the real world. Got it.
They don’t have that. The risks are much lower. The rewards are lower. I remember going up to Art Fry and asking him, “Art, you have a heck of a reputation at this time. You could step out of 3M, and venture capitalists would seek you out. You’d get all the money you want to do whatever you wanted to do.” He said, “That’s true, but I wouldn’t have the resources of 3M. I can walk anywhere in this organization, sit down, and say, “I have this idea, and I need help with this.” I won’t be revealing the idea in a way that is causing the possibility of losing the idea. I have a lovely sandbox. I have everything I need. I am well paid. Why would I leave?”
He was like, “Why would I jeopardize all this?”
Entrepreneurship is a lonely thing compared to intrapreneurship. That loneliness is not only a feeling, but it’s also a very real sense that there are all kinds of resources which are not available to me. I might add, if you do succeed in getting through the bureaucracy and you start selling your project in the open market, the company name is not exactly an inhibitor. The major asset.
Open stores.
In Art’s case, he wanted to take things so far, and then he wanted to hand it off to somebody else and go start on the next idea. In fact, he had already started on the next idea. Intrapreneuring was a plain, better deal for the way he was set up.
You’re validating something that we talked about early in this conversation. To characterize the entrepreneur as someone who takes a risk in exchange for a profit is misguided. To your point, people want to contribute. They don’t want to risk everything. If you create some space for people to do that, you get a very different level of engagement.
People want to contribute, and they ideally want to be recognized for having contributed. Share on XI like to say that an intrapreneur does not have an idea. An idea has an intrapreneur.
Carl Jung believed that we don’t have ideas. They have us. That’s certainly been my experience. I’ve been trying to deconstruct the entrepreneurial mindset for 35 years, and I’ve not been able to disabuse myself of this pursuit.
That is what drives them. The idea is driving them. That’s the sense in which the idea has them. It’s like a parasite.
I love that analogy. Wasn’t it Jung that said it’s like the little memes floating around and they attach themselves to us like a parasite? I love that idea. Quick story. One of the early entrepreneurs that I interviewed was a guy named Ray Kralovic, who was the Co-founder of a $3 billion or $4 billion company called STERIS. Have you heard of STERIS? It’s a sterilization company founded here in Northeast Ohio.
When you go into a hospital, it’s all over the place.
Ray was a back-country kid from West Virginia who became a biologist. Orderly, going through a hospital in the late ‘70s, he noticed that they would take this piece of equipment from the operating room, use it for 45 minutes, wheel it down to the basement to sterilize it, and then wheel it back through the hospital back up there.
To your point about being obsessed with ideas, he became obsessed with an idea that there’s got to be a different means of sterilization that you could do right there in the OR. He became obsessed and explained to me that he was exchanging cow dung with biologists in Germany to try to figure out some sterilization thing. He figured it out, and he got fired. American Sterilizer was the largest sterilization company in the world where he worked. He was in his 30s. They fired him at the company picnic.
That’s an odd place to fire somebody.
He was out of a job, and he had 3 or 4 kids. There was a VC firm here in Cleveland called Primus. They sent a guy out to talk to him and said, “Go make sure this guy’s full of crap. This can’t be anything real.” The guy came back and said, “This guy’s got something.” Long story short, they invested in him, and that’s how STERIS was born. STERIS wound up buying American Sterilizer.
Ray told me this. He came home one day, and there was a message on his answering machine. It was his ex-boss. He didn’t leave his name. He read him the Webster Dictionary definition of vindication. He didn’t say who he was. He said, “According to the Webster Dictionary, the definition of vindication is such.”
Entrepreneurial Potential: An idea has an entrepreneur. We don’t have ideas; they have us.
He read it to him and hung up the phone. That’s how a $3 billion company was born. I want to come back to reading between the tea leaves here. You and I are operating from similar assumptions, which are that the entrepreneurial desire is a human thing. It’s pretty evenly distributed. We learn not to do it.
Motivation Rooted In The Gift Economy
We live in a very individualistic and financially-oriented world, but the roots of human motivation run deeper than finance. People say the reason we develop these big brains is to handle complex social relations. That may be right or not, but it’s partially true, I’m sure. The way that works is an innate desire to contribute to your society, your team, your band, and your tribe. The situation does, in fact, reward that because people look up to you if you make contributions to the tribe.
I’m sure that works out for you in various ways, but there’s no quid pro quo. If you study the anthropology of this, there is a distinct part of the ritual of all that, of denying that you are giving anything of value. It’s like, “Here is some food I could not eat,” but the person who is receiving the food recognizes that it’s dinner and that it is a good thing. This method of motivation is hardwired into the human being. You say, “Does it survive today?”
Let’s go to a scientific conference. There’s a professor who is spending most of her time in the hallway talking to various people. She gets up and gives a paper that will be cited over and over again for generations. You ask her a question about the field. She doesn’t know everything that’s going on in the field. She doesn’t have knowledge, but she gives knowledge. The other professor knows everything that is going on in the field. They can tell you every chapter, verse, and what’s going on, but give a paper that nobody pays much attention to.
Who is the high-status scientist? Is it the one who knows a lot or the one who gives a lot? Any doubt in your mind? Here we have one of the basic institutions of our society, which runs pretty much on the gift economy. There’s a lot of that in art, too. You don’t make all that much money as an artist, but certain things change the way other artists think. Those people are remembered.
You’re speaking about something that’s near and dear to my heart. I read this little ditty that Marx wrote in his worker alienation theory that he wrote in 1843. He said something like this. He said, “Imagine if we could exchange as humans. We would both benefit in two ways.” I would benefit first by expressing myself. Let’s say I made this wallet. Who I am is expressed outwardly in the things that I create, so I benefit from that. I benefit doubly when you say to me that thing you created that’s a representation of who you are is also useful to me. That happens for both of us. He never mentioned the word entrepreneur.
It is a more general phenomenon in entrepreneurship. It is true. To the degree that people in large corporations are engaged, why do they stay up all night preparing a presentation? Is it because they think they’re going to get a promotion? No. They’re not going to get a promotion, but the people on that team are going to recognize them as a player.
They want to contribute. That’s another juxtaposition I think about a lot. If you look at Gallup data on employee engagement, the vast majority of workers globally, which is 87%, are not engaged in their work. It means they’re doing the least to get by. According to Gallup, 1 in 5 is hostile and actively disengaged. Only 13% of employees are actively engaged. I would argue those are the intrapreneurial employees. They’re not saying, “Thank God it’s Friday.” They’re saying, “Thank God it’s Monday.” They’re staying up all night making the presentation because they want to contribute. They want to be recognized.
I’ll tell you a little story about that. There was a theme park. They’d hire kids to play the various roles of the theme parkers and pay very well. The kids would work until they had enough money to buy a stereo system or something. When they got to the end of enough money, they quit. They didn’t care about the theme park. They were pretty disengaged in their work. They went through the motions. The owners came up with warm fuzzies. As each person came into the theme park, they gave them a little round thing with fur on it to stick on their back.
They said, “When you run across an employee who’s doing above and beyond, stick this on them.” The spirit of the place completely changed. The employees were keeping track of how many warm fuzzies they had and going out of their way to try to earn a warm fuzzy. They were not quitting. They were staying. They were having so much fun getting warm fuzzies that they stayed. What this illustrates is exactly what you’re saying. People want to contribute. They, ideally, want to also be recognized for having contributed.
They don’t want to risk their house, their future, and their kids’ future to do it. We’re running out of time here. I’m trying to be respectful of your time. I greatly appreciate this conversation. Where can we find your book and articles? Where can people learn more about the work you’ve done in intrapreneurship?
I have remaining copies of my books. I would be happy to sell them.
How do people get a hold of you?
Thank you so much for taking your time to share this with me. It gets at the heart of the basic idea I’ve been pursuing for 35 years. There’s a deeper dimension of human potential that we can’t get to.
I have a lot to learn from you.
Thank you.