Do Entrepreneurs Really Create More Transformative Innovations than Intrapreneurs?
Entrepreneurs have become rockstars. Richard Branson, Jeff Bezos, Bill Gates and Mark Zuckerberg are just as famous as movie stars. These entrepreneurs often grace the covers of business and celebrity magazines. When people think about transformative innovations that have had the highest impact on society,
they tend to associate this with entrepreneurs who started their own companies.
This belief is further supported by the recent decline of some of the most venerated companies in business history. The demise of Kodak, Blockbusters and Nokia, just to name a few, has added fuel to the belief that entrepreneurs and startups have the power to disrupt. Indeed, there have been conversations within the business community about how large companies can become more like startups.
But what about intrapreneurs who successfully innovate within large companies? What role do they play in all this? Do they not also create transformative innovations that have a high impact on society? Is it possible that these intrapreneurs actually create more transformative innovations than entrepreneurs?
Over the past month I have been running a poll during my webinars, virtual workshops and on social media platforms such as Twitter and LinkedIn. The poll asks people to indicate who they think has contributed the most impactful innovations to society over the last 30 years; entrepreneurs working in startups or intrapreneurs working in large companies. So far I have had responses from over 500 people.
While the sample may not be representative of broader society, the results are indicative and consistent with how entrepreneurs are currently regarded. Over 60% of people that I have polled believe that entrepreneurs working in startups have contributed more impactful innovations to society than intrapreneurs working in large organizations.
This result is consistent with the relative popularity of entrepreneurs. But how correct is this belief? Is it really the case that entrepreneurs have contributed the most transformative innovations to society? What does the data tell us?
And We May Be Wrong
I used to believe that entrepreneurship has more impact than corporate innovation. That was until I read the latest book by Kaihan Krippendorff. In Driving Innovation From Within, Krippendorff makes a compelling case for intrapreneurs. He first defines innovation as having three characteristics; newness, wide adoption and being valuable to relevant stakeholders. With that definition in mind, Krippendorff sets out to test the assumption that entrepreneurs create more transformative innovations than intrapreneurs.
In 2009, Wharton Business School collaborated with the PBS business news program Nightly Business Report to publish a list of the Top 30 Innovations Of The Last Thirty Years. After receiving about 1200 suggestions, a panel of eight judges from the Wharton Business School selected and ranked the Top 30 innovations. On this list are innovations such as the Internet, Broadband, Personal Computers, Mobile Phones, E-mail, DNA Testing, Fiber Optics, Laser Surgery and Office Software.
Krippendorff and his team analysed the innovations on this list. They tracked the journey of these innovations across the three stages of conception, development and commercialization. If the people who responded to my poll question are correct, then entrepreneurs should feature more prominently across all three categories. However, his findings were not as one might expect:
- Conception: Krippendorff found that only eight of the thirty transformative innovations were conceived by entrepreneurs. Instead, the vast majority of the innovations were conceived by employees working in established companies.
- Development: Only seven of the thirty transformative innovations were developed by entrepreneurs. According to Krippendorff, at this stage of the journey, academia and other institutions play a major role.
- Commercialization: One would assume that entrepreneurs become more prominent when it comes to the commercialization of innovations. However, only two of the thirty transformative innovations were commercialized by entrepreneurs. With commercialization, competitors become more important and competitors are often large organizations.
It turns out that our belief in the contributions of entrepreneurs may be wrong. In fact, my poll results show the exact opposite of what the reality might be. Over 70% of the Top 30 Innovations were conceived, developed and commercialized by employees working in large companies.
Is This Still True Today?
It is possible to raise the objection that this Top 30 ranking was conducted over 10 years ago. That makes the innovations on this list very old. People believe that entrepreneurship has grown over the last two decades and that should have an impact on the Top 30 list. According to Krippendorff, the first problem with this argument is that data from Kauffman Foundation actually shows no dramatic increase in the rate of entrepreneurship over the past two decades.
Secondly, if entrepreneurs are creating more transformative innovations you would expect them to feature on the lists of highly innovative companies such as the Forbes Annual List. If company rankings are considered the wrong unit of analysis, then you might expect to see the innovations from startups featured prominently in the annual lists of top innovations such as the R&D 100. However, Krippendorff’s analysis revealed that incumbent companies dominate both lists.
I also conducted my own analysis of companies that have been listed in the Top 20 of the Innovation 1000 annual rankings by PwC’s Strategy&. I looked at data from their most recent rankings from 2014 to 2018. The average age of the companies in the Top 20 of the ranking was over 60 years. This further illustrates the argument that employees from these older companies are creating more transformative innovations than entrepreneurs in startups.
The Truth Shall Set You Free
In reading Krippendorff’s book, I was surprised by how convinced I had been about the importance of entrepreneurs in creating transformative innovations. Nobel Prize winning psychologist Daniel Kahneman and his research partner Amos Tversky, would not be that surprised. It seems we have all been victims of a cognitive bias they called the Availability Heuristic. Kahneman and Tversky found that people sometimes judge the frequency of events in the world by the ease with which examples come to mind.
Since entrepreneurs have become rockstars that are widely featured in the media, it is not surprising that when we think of transformative innovations, the first examples that come to mind are entrepreneurs. This then leads us to mistakenly over-estimate how much entrepreneurs really contribute to society. This is not to say that the contributions of entrepreneurs to business and culture are not important. It is to simply recognize that the role of entrepreneurs in creating transformative innovations may not be as large as we think. That crown belongs to intrapreneurs!
Originally posted on Forbes.com.