By Ed McLaughlin and Wyn Lydecker
Corporations that continue to flex the same muscles and refuse to depart from old ways are likely to find themselves no longer able to keep up with the flow of fresh ideas and innovation that fuel future growth.
A recent study by KPMG revealed that 72% of CEOs fear their products will become irrelevant over the next three years. A whopping 90% are afraid of their products losing out to competitors. What’s a company to do? How can large companies attract and engage a workforce that will be able to provide the innovative mindsets needed to foster creativity and growth?
It’s not easy to reboot the old gears and levers of big corporations. But if Parker Hannifin, a 100-year-old company headquartered in Cleveland, Ohio, can loosen up its old corporate machine and spruce up the old model of research and development, you can too.
In his Forbes article on Parker Hannifin’s new innovation factory, Dan Alexander describes the new “hacker space” opened by the $13 billion company and long-time producer of trucks, cars, airplanes, and tractors. This dynamic intrapreneurship program is breathing new life into Parker Hannifin, as exhibited by breakthrough products such as an exoskeleton that could allow paralyzed people to walk. This product and others could set the company on a new course of growth and expansion.
In his article, Dan Alexander explains why corporations should break the old mold of research and development with corporate incubators like the hacker space at Parker Hannifin. “Just ask Kodak,” he says, “which invented digital photography, then stuck to film for too long and ended up in bankruptcy – while Instagram, Facebook, Pinterest and Snapchat took over the internet.”
Dan also quotes Bill Aulet of MIT’s Entrepreneurship Center who said, “For big companies to thrive and succeed, they need to be innovative–they all know it, but nobody has really cracked the code yet.” Until now.
Bill continued to say, “That’s why this whole thing with Parker Hannifin is so interesting, because you never would have thought that a $13 billion conservative company, in an old-line business, would be the one to solve it.”
Create your Own Corporate Incubator
There is a way to keep ingenuity alive and welcome the entrepreneurial mindset within the walls of your company: start a hacker space like Parker Hannifin. Grant power to the people with the ideas, and mobilize the talented employees who exhibit a hunger to grow, the desire to validate their ideas, and the gumption to make them happen. Not only will you have a better chance of keeping employees who already have a contagious innovative spark, you can attract more people who want to join you on the journey into the future.
New Beginnings Under an Old Roof
The Internal Incubator Partnership
The program I propose works like this:
- Do not put up roadblocks to innovation, rather encourage and support it
- Create an Internal Incubator Partnership Program
- Enable your entrepreneurial employees to form their own businesses within your corporation
- Invest real financial, physical, and intellectual support in their businesses
- Agree with your internal entrepreneurs that as the corporate parent, you will become a 50/50 partner with them
- They will share 50% of their profits with you
- Let your corporate entrepreneurs keep control of any intellectual property they develop
- They will have the right to license any inventions to your company, giving your corporation the first right of refusal
- Set up a means by which the entrepreneurs can have their venture spun off or stay under your corporate banner after they have reached a certain level of maturity.
Stop the Waste
I started out working for three major corporations, moved onto founding four entrepreneurial ventures, and have been the CEO of a division of a Fortune 100 company. These experiences have shown me the difference between capitalizing on enterprising spirit and creativity and tamping it down through command-and-control management systems.
Nurturing enterprise is the better way to go. When you encourage new ventures within your own company, you ensure that the best people will stay with you and that you will win more often in competitive situations. Your employees are the ones who know your customers, and they are the ones who can ensure your future growth.
An Internal Incubator Partnership Program will let you harness the entrepreneurial spirit that was responsible for your corporation’s birth years ago.
The Lesson of the Oreo
One of my favorite quotes comes from the book “Barbarians at the Gates” in which F. Ross Johnson, the Former CEO of RJR Nabisco, said, “Some genius invented the Oreo. We’re just living off the inheritance.” Corporations need to create partnership programs where they can keep 50% of the profits from the new Oreo. Otherwise, they risk losing 100% of those potential profits as they disappear into the sunset with the entrepreneur who is determined to launch a new venture.
Are you ready to retain the talent you already have and allow them to grow and develop new ventures under your corporate umbrella? Or are you an entrepreneurial employee who would like to break the mold and start your own business within the larger business? The Startup Roadmap is a business tool we designed to get entrepreneurs on the right track from the get-go. For a limited time, you can get a complimentary eCopy of The Startup Roadmap: 21 Steps to Profitability by clicking this link. If you prefer the print edition, you can purchase it directly from Amazon for $9.99.
Once you have read The Startup Roadmap, please let us know what you think by emailing us at: Ed@ThePurposeIsProfit.com
Ed McLaughlin is currently co-writing the book, The Purpose Is Profit: The Truth about Starting and Building Your Own Business, with Wyn Lydecker and Paul McLaughlin.
Copyright © 2015 by Ed McLaughlin All rights reserved.