Intrapreneurship and Corporate Venturing 395Project Execution. Stage 4 is the actual execution of the ICV. It is parallel to an entre-
preneur’s official launch of a new venture, except that in this case there are multiple lev-
els of managers with different degrees of experience.^35 When the time comes to execute
the intrapreneurial strategy (see Chapter 4), the ICV must develop its entry strategy and
determine its entry wedges. If it has first-mover advantage, it must employ isolating
mechanisms to protect that advantage for as long as possible. It must assess the indus-
try environment, both static and dynamic, and make appropriate operating and tactical
decisions. It may be necessary to open the ICV to external influences and to recruit per-
sonnel and technology from outside.^36 Finally, the venture must adopt a strategic posture
and put in place criteria for evaluating performance and strategy.
Venture Completion. Stage 5 is the venture-completion phase. If the ICV has been less
successful, it can be dismantled and its resources reabsorbed by the corporation. If it has
succeeded, it can be sustained and supported with additional investment. The more or
less permanent position of the ICV in the organizational structure (see Chapter 9)
should now be established. If for any reason (uncertainty, incentive alignment, oppor-
tunism) the agency problem has proven insurmountable, the ICV may become a spin-
off—a completely independent company.^37 In such a case, the intrapreneurial managers
can buy the assets from the corporation using a leveraged buyout (LBO). A leveraged
buy-out is a financing scheme whereby the purchasers of the assets put up very little
equity and borrow most of the money for the deal. Sometimes the amount of leverage
approaches 100 percent (very little equity). The lender takes the assets of the venture as
collateral for the loans. After the LBO is executed, the new owners can keep and oper-
ate the new company or they can take it public. In this scenario the intrapreneurs’
rewards are enormous since they have used almost none of their own money. The pro-
ceeds from the IPO pay off the loans and the founders now have piles of company stock.
What did they do to earn it? They saw the opportunity, they put the deal together, and
they absorbed the risks and uncertainty.
Even though they understand the process, recognize an ICV’s potential benefits, and
are well aware of the impediments to intrapreneurship, corporations nevertheless find
the task daunting. They need to recognize that intrapreneurs and a viable intrapreneur-
ing process are rare, valuable, imperfectly imitable, and nonsubstitutable resources.
Thus, intrapreneurship is a source of sustainable competitive advantage.
Following a process in detail is not a recipe for guaranteed success. Sometimes the
process goes wrong. Sometimes the process is discontinuous, with a lengthy time lag.
On occasion, innovations originally designed for one purpose are used for something
else. Failure is definitely a possibility. Street Story 10.2 tells the story of some failures
and some delayed successes. It also shows that people can learn vital lessons from good
failures.
The IDEO Method
One of the firms listed in Table 10.1 as a world class innovator is IDEO, but it plays a
different role than the other firms in the list. IDEO is in fact a consultancy whose prime
domain is corporate innovation and venturing. It has a unique perspective on the inno-
vation process, one that deserves a more focused look. Steve Jobs has said, “When we