Need Innovation? Hire an Entrepreneur
Twenty years ago, "entrepreneur" was spelled "L-O-S-E-R." If you were a bright, talented college grad, the only road to success was by working your way up the corporate ladder.
Today that's not the case. Recently we spoke at an event in Charlotte, N.C., called the Extreme Entrepreneurship Tour, a series of conferences for aspiring young entrepreneurs. In the audience were hundreds of high school and college kids, feverishly taking notes. The tour, which is only five years old, will attract an estimated 20,000 students this year.
A high percentage of those students will pursue their entrepreneurial passion in college. The number of entrepreneurship courses nationally has grown from 250 in 1985 to more than 5,000. This is now the hottest degree for the ambitious with dreams of becoming billionaires before age 29. Thank you, Mark Zuckerberg.
If you lead a large corporation, you may think none of this matters. You're probably getting plenty of well-qualified, new management applicants, especially given the weak economy.
What you do not realize is you're losing access to a certain type of individual—the kind who makes things happen, the risk-takers who drive change and help create disruptive innovation.
We studied sources of innovation in 25 consumer product categories over 50 years. From the 1960s to the 1980s, 64 percent of all major new innovations came from large corporations (more than $1 billion in revenue). During the past two decades, only 16 percent of innovations came from large companies, while 84 percent of them came from startups or small companies.
In corporations, disruptive innovation has always been somewhat serendipitous. Great corporate innovations are rarely planned by senior managers or chief executive officers, unless your name happens to be Steve Jobs.
To have any chance of finding that next "New Thing," you need entrepreneurial-minded people in the lower- to middle-management ranks pushing the boundaries and challenging the organization. Only now those people are opting out of the corporate experience altogether and getting venture capital funding to compete with the large firms they shun.
Many people mistakenly think this trend is all about technology; it's not. Take the most mundane category: cleaning products. During the past decade, it was reinvented by two young entrepreneurs, Eric Ryan and Adam Lowry, who bypassed corporate careers to start their own cleaning products company called Method. They built an innovative product line, raised several million dollars from VCs, and created a $100 million-plus new business that is now one of the leading cleaning lines at Target (TGT) stores.
Method transformed household cleaning, replacing harsh chemicals and utilitarian bottles with elegant packages and unique fragrances that make the drudgery of the task more pleasant.
Their company (now more than 100 strong) has attracted top talent from some of the best schools. These entrepreneurial-minded people prefer a "cool" startup over a traditional corporation (sorry, P&G).
This trend is not likely to change. The resources available to budding entrepreneurs are growing each day. Twenty years ago, there were few role models and fewer resources. Today there is a growing ecosystem of support. A number of other successful entrepreneurs, like Mitch Kapor (Lotus), Jeff Bezos (Amazon.com) and Dave McClure (PayPal) have become active investors in startups.
As these investments mature and the ventures succeed, they will create new generations of millionaire investors and mentors.
If you are not one of these "cool" startups, how do you compete?
First, even if you have a talented team, you've got to acknowledge that you're probably missing a critical element: the entrepreneurial thinkers, the people who prod you to take on outrageous new projects.
For the most part, these people are not even interviewing with you anymore. They may be going to great business schools like Harvard or Stanford or Wharton. But most have no interest in corporate jobs because those jobs are not sexy. Some companies have made valiant efforts to change their work cultures or benefits programs to appear less stodgy and give the company a younger, hipper feel. But unless your name is Google (GOOG) or Apple (AAPL), you're probably not even in consideration right now. A few small perks aren't going to make a difference.
Other companies have tried investing in entrepreneurs as a way to drive innovation. While this idea has some merit, it doesn't solve the core problem—the need to inject entrepreneurial thinking into their existing businesses.
The solution to this dilemma starts with the recognition that as a corporation you're never going to have a traditional employer/employee relationship with entrepreneurs. Let's face it, entrepreneurial types have never been a great fit for the corporate model. They're highly independent, don't like rules or bureaucracy, and get bored quickly.
Entrepreneurs do get motivated and excited when asked to help solve challenges and create new business opportunities. In fact, in our work with them, many have shown an interest in—and even a preference for—working on corporate challenges, because they're big and exciting. They just want to do it on their terms.
All of this is leading many companies to a new line of thinking. Instead of trying to hire young entrepreneurs, they bring them in as consultants on a short-term basis to help develop new products or solve critical problems.
During the past year, our two organizations have created SWAT teams of young entrepreneurs for several large companies, working on everything from reinventing motor oil to snack foods, for companies as diverse as Ashland Oil, Ecolab, and Starbucks (SBUX).
The entrepreneurs we have engaged like these assignments, because they allow them to have an impact and do something interesting without making a long-term commitment. If set up properly, these assignments can also fill an important need in the entrepreneurial ecosystem. For many entrepreneurs, consulting gigs are a great bridge between startups.
Longer term, we envision a world of "entrepreneur agencies" dedicated to contracting out entrepreneurial thinking and capabilities to big companies, much the way ad agencies offer creative services. There are already several innovation agencies that provide new product development, but most of these are strictly ad agency creative types that have been repackaged.
The true benefit of entrepreneurs is that they think in terms of business models and can provide strategic and business planning solutions in addition to clever ideas. While they're not always right and don't always know your business, small doses of entrepreneurial thinking across critical projects can dramatically expand your options, without a big cost or commitment. And that's spelled "W-I-N W-I-N."