How Big Companies Are Becoming Entrepreneurial

Editor's note: Dan Schawbel is the managing partner of Millennial Branding, a Gen Y research and management consulting firm. He is also the author of Me 2.0 and was named to the Inc. Magazine 30 Under 30 list in 2010. Subscribe to his updates at Facebook.com/DanSchawbel.

You probably believe that big companies are anti-entrepreneurial because you assume they are slow growth dinosaurs that resist change, but history teaches us otherwise. Corporations have been run entrepreneurship-type programs for many years, like the fabled Lockheed Martin "Skunk Works" – a small group of employees working on revolutionary products such as famous aircraft designs including the U-2 and SR-71 Blackbird. Even today, some companies still refer to these projects as "skunkworks projects."

Today, companies are starting new entrepreneurship initiatives because they need fuel for innovation, desire top talent and need to sustain a competitive advantage. Smart companies are catering to entrepreneurs, allowing workers to pitch their ideas, and even funding them. They are holding entrepreneurship contests, investing in startups and bringing on entrepreneurs in residence (EIR). In the war for talent and innovation, companies have to think entrepreneurially in order to survive and thrive.

Intrapreneurship is on the rise

In the past, we heard of intrapreneurs or individuals that behave like entrepreneurs in major companies. These were the all-star engineers who would come up with original ideas and create new products. These days, companies have embraced intrapreneurship to drive innovation, stay ahead of the competition and as a recruiting tool.  This trend has been driven in large part by Generation-Y, a generation of entrepreneurs that want to reinvent the business world as we know it.  Companies are going to have embrace entrepreneurship if they want to be successful. Google is a great example of a company that understands this. If you work there, you are in a startup culture within a major corporation. It is part of the reason why they receive thousands of resumes each day. My prediction is that in the future, all companies will resemble startups and have a startup culture, regardless of size. Intrapreneurship programs are promising because talent can drive new ideas and products and caters to employees who are entrepreneurial but lack resources.

Corporate entrepreneurship contests

Colleges aren't the only ones starting their own entrepreneurship contests. Companies are using similar contests to engage their own workforce and as external recruiting and branding tools. Ernst & Young, for instance, has "The Innovation Challenge," which is an internal competition where employees come up with new service offerings for their clients. PwC, another major consulting company, runs the "PwC PowerPitch", which is an innovation contest where the winning team receives the sum of $100,000 to implement their idea. Mitra Best, the US Innovation Leader for PwC says that several of the top PowerPitch ideas have been implemented already and are creating value for the company. For example, two of the top ideas in 2011 were on predictive analysis and PwC created an analytics centers as a result of the ideas. Three of the ideas were related to PwC's role in cloud computing, which are now in the "idea refinery" where workshops bring several ideas together and develop two to three services around them.

Amazon Web Services has the "Start-Up Challenge," which is a competition for start-ups that use its Web, e-commerce and cloud-computing technology to build their infrastructures and businesses. Prizes include a cash grant of $50,000, mentoring sessions and a potential investment offer from Amazon. In 2011, Fantasy Shopper was the grand prize winner and Localytics was the runner up. Qualcomm Ventures offers the "Qprize Competition," which is an international business plan competition open to mobile industry entrepreneurs. The top prize is $250,000 of convertible-note financing. Corporate contests are promising because people are competitive in nature, it gives them the opportunity to make a name for themselves at a big company, and great PR.

Companies are investing in startups

Companies are investing in startups instead of just acquiring them. The most recent example of this is Microsoft's "Bing Fund", which is a new angel fund and incubator program that seeks to partner with entrepreneurs that focus on the mobile and web experience spaces. Microsoft also invested $240 million in Facebook for 1.6 percent of the company back in 2007. Last month, Dell announced the "Dell Innovators Credit Fund," which provides entrepreneurs up to $100 million in financial and scalable technology resources. American Express announced last year that they would invest $100 million in digital commerce startups that would help fuel their digital transformation. Also, Advance Publications invested $10 million in Unified, a software company used by brands and ad agencies to buy, manage and measure ad performance on social networks. Startup investments are promising because companies can't always acquire a startup in the early stages, when they invest they get a new partner and they fuel growth.

Entrepreneurs in Residence

When people speak of entrepreneurs in residence, they usually talk about successful entrepreneurs who have a position at a venture capitalist firm or within a business school. Today, innovative companies have embraced the idea of an EIR by claiming their own. Both Google and Dell have recruited EIR's to stay ahead of the curve and to advise them on startups. Stacy Brown-Philpot has been an entrepreneur in residence at Google Ventures since May. While Stacy never started her own business, she led operations for more than forty different products, including Google Search, Chrome and Google+.

Ingrid Vanderveldt recently landed her position as Dell's first entrepreneur in residence. Unlike Stacy, she is currently an entrepreneur as the CEO of Green Girl Energy, the creator of the GLASS Forum (Global Leadership & Sustainable Success), CEO of Ingrid Vanderveldt LLC and Managing Director of VH2 Energy Investments LLC. More brands will start to bring on EIR's in the future, especially in the technology industry, where acquisitions and investments are the norm. EIR programs are promising because they have knowledge on what startups are worth investing in, can oversee entrepreneurship programs, and can be used to attract new startups into corporate ecosystems.

Entrepreneurship/intrapreneurship programs drive business results

Industry experts believe that 30% of large companies now provide seed funds to finance intrapreneurial efforts. One of the most notable successes comes from 3M, who created the "Bootlegging Policy," which is a program that allows employees to spend 15% of their time at work doing creative projects. In 1987, Art Fry took advantage of this program to create the ultra profitable "Post-it Notes" product. Google also has a legendary program that allows all employees to spend 20% of their work time on projects that benefit Google customers. These "20% projects" have resulted in a number of very successful new products including Gmail, Google News and AdSense. Gmail, for instance, has 425 million users. By 2009, half of all Google's products originated from the 20% program.

Facebook, on the other hand, has a more non-traditional intrapreneurship program called "Hackathons," which promote product innovation through their engineering teams. A Hackathon is an event where programmers collaborate intensively on software-related projects. They have had over 30 hackathon's to date and during one of them, they conceived Facebook's legendary "Like" button, which is a major part of the Facebook brand and ecosystem. Then there's Microsoft's initiative called "Microsoft Garage," which is a company-wide program that encourages innovation. Employees gather in a real garage during after- hours and build things that they dream up and as a result, 99.9% of the projects either ship as part of a Microsoft project or remain internal.

Finally, PwC's PowerPitch program that I previously mentioned was an entrepreneurship contest that engaged 60% of their entire global organization of 30,000 employees. They had expected 100 ideas to come in, but received over 779 in the first round. In speaking to Mitra, she told me that their new offerings have helped them get new clients and support existing ones. Their biggest result was that the outcome helped them think differently about how to come up with new services. As more companies invest in their own talent pool, and externally, they will be able to innovate and break into new markets faster than ever before.

[Skunk Works image via The DEW Line.]