Need Innovation? Hire An Entrepreneur

Corporations should hire young entrepreneurs on a short-term basis to help develop new products or solve critical problems.

 

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.

Corporate Disruption

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.

Thanks to Arielle Patrice Scott and Larry Popelka / Bloomberg Businessweek
http://www.businessweek.com/innovate/content/may2011/id20110527_276850.htm