About twenty years ago, before I ran two startups as CEO and served as product-line general manager, I went through an intrapreneurship phase, where I was convinced that big companies should try to act like startups. It was a fairly popular concept at the time.
- I got all excited by Gary Hamel’s writings on the subject, such as Leading the Revolution.
- I learned about the Dunbar number, which suggested that people worked best in group of 100-200, a principle which Richard Branson embraced in building Virgin.
- I had grown up trained in product portfolio theory, like the BCG matrix, which suggested that companies should have portfolios of products in different phases of evolution.
Heck, we even decided to try the idea at Business Objects, launching a new analytical applications division called Ithena, with a mission to build CRM analytical applications on top of our platform. We made a lot of mistakes with Ithena, which was the beginning of the end of my infatuation with the concept:
- We staffed it with the wrong people. Instead of hiring experts in CRM, we staffed it largely with experts in BI platforms. Applications businesses are first and foremost about domain expertise.
- They built the wrong thing. Lacking CRM knowledge, they invested in building platform extensions that would be useful if one day you wanted to build a CRM analytical app. From a procrastination viewpoint, it felt like a middle school dance. Later, in Ithena’s wreckage, I found one of the prouder moments of my marketing career — when I simply repositioned the product to what it was (versus what we wanted it to be), sales took off.
- We blew the model. They were both too close and too far. They were in the same building, staffed largely with former parent-company employees, and they kept stock options in both the parent the spin-out. It didn’t end up a new, different company. It ended up a cool kids area within the existing one.
- We created channel conflict with ourselves. Exacerbated by the the thinness of the app, customers had trouble telling the app from the platform. We’d have platform salesreps saying “just build the app yourself” and apps salesreps saying that you couldn’t.
- They didn’t act like entrepreneurs. They ran the place like big-company, process-oriented people, not scrappy entrepreneurs fighting for food to get through the week. Favorite example: they had hired a full-time director of salesops before they had any customers. Great from an MBO achievement perspective (“check”). But a full-time employee without any orders to book or sales to analyze? Say what you will, but that would never happen at a startup.
As somebody who started out pretty enthralled with intrapreneurship, I ended up pretty jaded on it.
I was talking to a vendor about these topics the other day, and all these memories came back. So I did quick bit of Googling to find out what happened to that intrapreneurship wave. The answer is not much.
Entrepreneurship crushes intrapreneurship in Google Trends. Just for fun, I added SPACs to see their relatively popularity.
Here’s my brief epitaph for intrapreneurship. It didn’t work because:
- Intrapreneurs are basically entrepreneurs without commitment. And commitment, that burn the ships attitude, is key part of willing a startup into success.
- The entry barriers to entrepreneurship, particularly in technology, are low. It’s not that hard (provided you can dodge Silicon Valley’s sexism, ageism, and other undesirable -isms) for someone in love with an idea to quit their job, raise capital, and start a company.
- The intrapreneurial venture is unable to prioritize its needs over those of the parent. “As long as you’re living in my house, you’ll do things my way,” might work for parenting (and it doesn’t) but it definitely does not work for startup businesses.
- With entrepreneurship one “yes” enables an idea, with intrapreneurship, one “no” can kill it. What’s more, the sheer inertia in moving a decision through the hierarchy could kill an idea or cause a missed opportunity.
- In terms of the ability to attract talent and raise capital, entrepreneurship beats intrapreneurship hands down. Particularly today, where the IPO class of 2020 raised a mean of $350M prior to going public.
As one friend put it, it’s easy with intrapreneurship to end up with all the downsides of both models. Better to be “all in” and redefine the new initiative into your corporate self image, or “all out” and spin it out as an independent entity.
I’m all for general mangers (GMs) acting as mini-CEOs, running products as a portfolio of businesses. But that job, and it’s a hard one, is simply not the same as what entrepreneurs do in creating new ventures. It’s not even close.
The intrapreneur is dead, long live the GM.
Exactly right. I tried a similar path building an Intrapreneurial software product business inside a large consulting company. Adding to your lessons learned, I’ll add another. Don’t mix business models. At the Board level the little $2M intrapreneurial software product group started to take disproportional mindshare from the Board members who were directing a $400M consulting business. The new shiny object and it’s very different business operation and capital needs distracted the core of the company.
Yep. Mixing business models basically dooms something unlikely to succeed already.
<> Most salient point of the article IMHO and deceptively easy to gloss over.
Great post Dave. I agree with your assessment of Ithena. Brings back memories.
One example I wanted to share is Informatica Cloud. It was very much a SaaS start-up within an on-prem/perpetual license company. We had a completely different go to market and were able to hire very differently (SDR team, SMB sales team, cloud engineers, etc.) It worked for 3-4 years. We faced a different set of internal challenges, similar to what overlay teams face in enterprise accounts, but we sold 100% direct with our own cloud reps and had our own instance of Salesforce, Marketo, website, etc. That said, it was well nurtured and we shared many corporate benefits like AR/PR.
The biggest challenge I saw with the intrapreneur model came when it became a success in its own right. How to fold it in. How to not cannibalize. How not to confuse a buyer with what could easily look like competing products from the same vendor.
It’s an interesting story. When they folded it in, most of the early cloud team left. Informatica eventually went private and now talks about themselves as a cloud company. They got a lot of mileage out of the investment in an early cloud business unit, but you could make the case that it also prevented them from not making the bigger bet soon enough to go all in on the cloud. It was very much the Oracle model of multiple competing business units, each making their own acquisitions. The cloud group was really the only one with a separate P&L and very different GTM model.
Just thought I’d share. It’s an interesting example to look at. Many of the people involved in Informatica Cloud have joined/founded start ups, so they may also want to chime in.
You could do a post on, your incubated business unit has become successful. Now what?
Great story, thanks for sharing.