License to Break Rules: How Managers Can Foster Intrapreneurship

Intrapreneurship is a term used for employees who act like entrepreneurs within an established company or organization. Intrapreneurs are people operating within existing corporate structures who develop innovative ideas, identify new business opportunities, and successfully realize them on the market – just like a start-up entrepreneur would do.

Unlike Twins: Intra- vs. Entrepreneurship

As opposed to classic entrepreneurs, who run their own company, intrapreneurs are employed by an established organization. This comes with a much smaller level of risk but also limited access to the profits generated through an innovation. Just like entrepreneurs, intrapreneurs have a keen eye for opportunities and a knack for exploiting them. Their entrepreneurial skills and creative mindset are important assets for their companies, helping them develop new products, services, processes, and business models. Without intrapreneurs, companies will suffer from a shortage of radically new ideas. And even if those are brought forth by some stroke of luck, they will likely be thwarted by internal resistance arising from the formalized and rigid structures of established organizations. Intrapreneurs are curious about new ideas and novel approaches to solving problems. They are always on the lookout for ways to tackle existing issues and identify untapped potential on the market. They take the road less travelled to implement innovative ideas. And they are able to mobilize resources, lead teams, and drive innovative projects.

A Company’s Friend, not Foe

As intrapreneurs habitually question the status quo in their companies, they are often labeled as troublemakers or the odd person out. This is why management must support them in a targeted way – lest their creative juices eventually run dry or they leave the company for good. There must be benefits to being an intrapreneur.

Purposeful Rule-Breaking: a How-to

For one thing, managers must actively encourage intrapreneurs to break the rules heeded within the company. Always sticking to the rules effectively prevents innovation. To innovate means going beyond established patterns of thinking, and it also involves going against beliefs and principles that are seemingly set in stone. Pursuing unconventional and creative approaches is by definition a departure from existing patterns. And this is particularly the case for disruptive innovations that rebuild existing industries and markets from the ground up. The courage to question rules, routines, and established business models is a prerequisite for being able to develop radically new technologies, products, or services that harbor the potential to shake markets to the core.

Naturally, it’s not easy to strike a good balance here. A company’s day-to-day business depends on establishing and observing rules and monitoring compliance with them. Rules make for clear expectations and a uniform framework for employees’ conduct and work procedures. They ensure that both the company and its employees abide by legal and other stipulations, which in turn minimizes legal risks. Rules that apply to everybody also increase productivity by defining guidelines for handling tasks, responsibilities, and resources. They facilitate collaboration, and they can also contribute to maintaining the quality standards of products, services, communication, and customer service – and the list goes on. At the same time, rules have a tendency to proliferate. And, frequently, they lack flexibility. All organizations around the world have one thing in common: they create more rules than they abandon.

Intrapreneurs: Driving Forces of Change

Looking back in history, we can see an example of how people with an entrepreneurial mindset who questioned and broke existing rules eventually helped everyone around them. Witty farmers living in the impoverished Chinese Province of Anhui in the 1970s secretly split up the land they had been forced to farm collectively and cultivated it separately. Their business model of a quasi-privatization clearly violated existing rules and in this case even broke the law of the Communist system, which adhered to an ideology that offered no alternatives to planned economy and common ownership. The effect, however, was overwhelmingly positive. Already in their first year, the rule-breakers produced crops amounting to the sum total of the previous five years. Of course, the ruling party did not fail to notice these outstanding results. They had a considerable impact on the major reform of the agrarian system in 1984, in which laws were amended to enable more private property – with beneficial effects for millions of people who would otherwise have starved.

Also, in the present and the Western world, it absolutely makes sense to break the rules sometimes. New York’s transport system regulations, which prompted cab licenses to be traded for more than one million US dollars apiece, are a case in point. The exorbitant costs led to a drop in quality. Uber and Lyft dodged these restraints by positioning themselves as technology enterprises. Many cities and countries reacted to the pressure created by this new type of service and reformed the regulations. Entrepreneurs in the field of the sharing economy, such as Airbnb or the file sharing platform Pirate Bay, had similar effects in their spheres. The higher the pace of a technological or societal change, the more likely it is for laws and stipulations to become outdated and harmful rather than helpful.

This means that people who break the rules can drive positive change. And also intrapreneurs should not preoccupy themselves with existing rules and their narrow scope of possibilities too much. They must question the world’s status quo and strive to redefine it. They are non-conformists by nature and must be able to act true to their instincts. Innovation equals productive destruction, and only those permanently on the lookout for something new will be able to change things. An extremely successful manager once put it this way: “If I played by the rules 100% of the time, I would be doing nothing but filling in forms 24 hours a day.”

Legitimate but not Legal – Legal but not Legitimate?

Naturally, this does not mean that intrapreneurs get free rein to act as “quasi-anarchists” and randomly cross all kinds of lines. The emissions scandals involving Audi and Volkswagen are examples of cases where a red line was crossed. A lesson to be learned here is that intrapreneurs should let themselves be guided by the purpose and goals of a company; they must never break the rules for the sheer fun of doing so. And they can turn to historical precedent as a guideline: Austrian Empress Maria Theresia is known to have rewarded “successful insubordination.” Intrapreneurs thus need a good moral compass and must have a sound grasp of their company’s goals. What’s legitimate? For whom is it legitimate and according to which standards? In which ways are the costs or risks of breaking a rule offset by the benefits for the company? These are clearly difficult questions, the answers to which might be influenced by any self-interest an intrapreneur nurses.

How to Establish a Culture Conducive to Intrapreneurship

Managers looking to actively support intrapreneurship are thus well advised to regularly question internal rules. What’s really necessary? Are there rules that have become obsolete? Where would flexibility and independent thinking lead to better results? The fewer rules there are, the less rule-breaking will be required. This could be realized by, for instance, setting a time limit for the applicability of all rules. If rules must be renewed by design, they will automatically be less random. Only rules that have served their purpose will be maintained.

In addition to their power to make formal rules and structures leaner, managers also influence and shape an organization’s informal corporate culture. For intrapreneurs to thrive, they need a culture of openness with enough space to experiment and learn. Such an atmosphere is a prerequisite for staff to be willing to question existing rules and keep investing energy in new ideas. This will be the case in a company that has defined suitable values and clear incentives. Managers should also explicitly point out that it can sometimes make sense to break the rules, and they should also act as role models in this respect. By openly breaking out of routines and violating (meaningless) rules themselves, they will encourage staff members to do the same.

Striking the Right Balance

In business practice, managers must find the right balance between encouraging rule-breaking and maintaining a healthy framework. Naturally, it will never be about simply supporting random violations. Bending a rule must be a conscious decision, made after the associated opportunities and risks have been carefully weighed. The success of intrapreneurship hinges on a sound grasp of the company’s greater goals, the compliance with ethical standards, and the consideration of the consequences of breaking rules. If these requirements have been met, companies will be able to be more creative, courageous in their actions, and more effective in driving change.

Nikolaus Franke’s Personal Tips for Intrapreneurship: How to Establish a Culture of Intrapreneurship in Your Company

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