"Entrepreneurship within the world's largest businesses is just as important as that displayed by enterprising start-ups," says Peter Grigg, principal policy adviser at the Make Your Mark campaign, which aims to create an enterprise culture among young people.
I could not agree more, but much of the debate has tended to focus on how individuals within an organisation innovate, rather than analysing how an organisation itself can utilise the talents of its employees
The concept of 'intrapreneurship'
How can an organisation help foster innovation? And how does a large organisation deal with entrepreneurs when they are on the inside?
According to Gifford Pinchot, a Harvard academic and expert on innovation, the answer is to foster what he calls "intrapreneurship" - people who focus on innovation and creativity within the organisation.
Supporting this intrapreneurial behaviour is often the best way to promote company-wide innovation. But this debate has yet to trickle down into public discourse or policy discussion.
This is important, because across the UK we are faced with a new business reality. It is one in which networks and relationships are facilitated online, and collaboration is the norm. In this new reality, people entering the workforce expect a more fluid hierarchy and a greater level of autonomy.
It is part and parcel of an economy that is increasingly dominated by knowledge and where businesses are reliant on the flow of information. In this new business reality, innovation is more important than ever.
Employee empowerment that allows intrapreneurial behaviour is the first step in expressing innovation. Chris Adams, one of Microsoft's graduate trainees in the Information Worker Business Group, said to me that "All the people I work with ask questions about what we are doing, how it is being done, and whether it could be done better. We are not afraid to challenge the status quo."
However, this necessitates new operational systems for managing a worldwide organisation to help intrapreneurs thrive. Intrapreneurs are eager to see change and progress, and if they are held back they can quickly become disenchanted.
Systems and processes, therefore, need to be designed to channel that energy into a meaningful reality. But many organisations still fail to grasp the importance of providing the infrastructure to capture the great ideas that intrapreneurs have.
The conventional wisdom of recent times has been captured in the three Ds: de-bureaucratise, de-layer and decentralise. But centralised, commanding systems and procedures are among the hallmarks of large organisations. They help deliver the accountability, transparency and efficiency that make a business run effectively. These processes can at times be cumbersome and inhibitive, but they can also be a facilitator of intrapreneurship.
Research conducted by the Centre for Innovation through IT (CIIT) concluded that "The impact of organisational culture on innovation cannot be overstated. Strong leadership that develops a culture supporting innovation is pivotal. An environment that encourages communications and knowledge-sharing across organisational boundaries is vital."
As the CIIT research suggests, an organisation's culture is decisive in creating successful innovation. A culture is delivered by leadership, but also by the structures and procedures that are put in place. One way Microsoft has done this has been by setting up business groups such as the Information Worker Greenhouse.
This group is a small incubator within Microsoft charged with fostering new products. Ideas are pitched to the group, good ideas are prototyped, and eventually the Greenhouse team looks to commercialise the product.
An example where this process has delivered tangible and marketable innovation is through the Knowledge Network for Office Sharepoint Server 2007, which facilitates networks in businesses and organisations by automating the sharing of undocumented knowledge and relationships.
This product has been something of a virtuous circle of innovation: it is a product delivered by intrapreneurial innovation, but is also a tool that helps other organisations capture and replicate creativity through greater collaboration and knowledge-sharing.
The Greenhouse incubator is important because it is an open and transparent process built around an organisational initiative to find space for creative thinking.
To stimulate competition and entrepreneurial thinking, we have also started a Dragons' Den-style internal panel where new ideas can be pitched for funding. In addition, we have an online intranet site called "My Ideas" on which people can log suggestions about ways to improve the business.
These tools and structures are important facilitators, but crucially they send out a message to employees that they should be acting entrepreneurially and challenging established norms.
Taking a break to innovate
This type of leadership in an organisation is critical to establishing an experimental culture. At Microsoft, Bill Gates has done a great deal to create a vision for innovation in the business. Two or three times a year, he sets aside dedicated time to think about the future.
Ahead of these "Think Weeks", there is a call for white papers from across the business - an invitation open to anyone. This initiative is a strong signal that the leadership of the company is listening to ideas and thinking about the big questions. But more importantly, it sends the message that dreaming is not only okay, but highly valued.
As much as anything, these initiatives stir people's emotions, which is important in making sure our people stay engaged. Hiring more "emotionally intelligent" and entrepreneurially-minded people does, of course, bring with it certain challenges in terms of management. Experience has taught us that these people need to feel they are making a difference - that their ideas and actions are changing people's lives.
John Kotter, a Harvard Business School professor, stresses the significance of speaking to people on an emotional level to engender change and innovation. He says, "Not only is an emotional pull more inspiring, it also encourages people to connect and collaborate to problem solve."
Getting the most out of intrapreneurs in a business asks for a strong philosophy, but there is also a need to provide an inspiring physical space that sets the stage for creative exchange. At Microsoft we have designed office space that includes anarchy areas: informal, fun and playful places designed to encourage networking, idea generation and imagination. They also function as a space where people can have a break, unwind and recharge. In our experience some of the best ideas are born when you are away from your desk.
For businesses, all this effort is a worthless exercise unless it contributes to the bottom line.
This is a conundrum that has been characterised as a conflict between disruptive and sustaining innovations. The products that evolve out of a company's medium to long term investment in research and development are different than new, cheaper and simpler products or services brought to market swiftly.
Although they both challenge, and frequently transform market assumptions and norms, disruption is a quicker and more intense change.
The assumption is that large companies do not need to be disruptive to be innovative, that improvements will happen organically. We have never subscribed to this belief. Even large companies need to adopt the agility and disruptive approach of smaller organisations to stay competitive they sometimes need to act smaller to be bigger.
To help establish a culture of disruption, we have invested in a research laboratory closely linked to Cambridge University. It is here that some of our most exciting product developments have taken place, such as the Microsoft Surface platform.
But these initiatives are not only hubs of innovation in themselves, they are also part of a broad strategy to engage with educational institutions and tap into some of the cutting-edge research taking place externally.
Our emerging business team provides a similar function, tasked with harbouring start-ups outside the company and helping them succeed through the networks and expertise our business can offer. Reaching out externally is a way of injecting fresh thinking and new ideas internally.
The Microsoft journey
As Microsoft has grown, it has experienced the same challenges that many large multinationals face in the 21st century. Growth creates complex communication and decision-making lines, which demand an increase in management processes. Balancing this with the need to cultivate the entrepreneurial side of employees can be tricky.
As a global company, we need to provide room for connecting ideas across geographical boundaries. The integral role Microsoft's research lab in Cambridge played in the development of Microsoft Surface is an example of how our best skills can come together successfully, regardless of location.
We have made efforts as we have grown to foster a global culture of collaboration built on the principle that the best skills in the business should be used to meet the appropriate challenge. Global gatherings, such as the Microsoft Techfest, bring together researchers from around the world to learn and share knowledge face-to-face through demonstrations and lectures from the company's leading innovators.
One of the most effective ways to foster more innovation is to keep intrapreneurs engaged. These people need to feel that they can ask the demanding questions, be creative and action their ideas.
Importantly though, to profit from innovation, people must be able to make their ideas come to life. As Bill Gates once said, "Never before in history has innovation offered promise of so much to so many in so short a time." Our challenge is to make this promise a reality.
● Gordon Frazer is managing director and UK vice-president at Microsoft International
This was first published in December 2007