Being an entrepreneur is exciting with greater control over one’s destiny and a more direct link between work and rewards. But with start-up failure rates of up to 90 percent, both the economic and personal price is high. The alternative is to become an “extrapreneur”, a blend of intrapreneur and entrepreneur. But how prepared are employers, educators, unions and others for that future?
People setting up or running their own business, the entrepreneurs, are the lifeblood of our economies. At least as important are intrapreneurs. Though intrapreneurs are less celebrated than entrepreneurs, they are a major factor in whether organisations fly or fail. And unlike entrepreneurs, intrapreneurs are essential not just for the private sector. Well-managed public and charitable organisations are equally indebted to intrapreneurs. Plus there is an important third category, the “extrapreneurs”. These are even less well known than intrapreneurs, but are likely set to become a prominent feature in our society.
Intrapreneurs are “inside” entrepreneurs who are employed by an organisation to use their talent for the good of the enterprise. In return, they get financial security in the form of a salary and in most cases an incentive package. The commercial success of modern companies heavily depends on having enough talented intrapreneurs.
The easiest way to describe the difference between an entrepreneur and intrapreneur is that the first takes commercial risks by putting his or her own wallet on the table, whilst the second takes commercial risks with someone else’s wallet. That does not automatically mean less focus, less passion and hence less success. Interestingly, intrapreneurs can be much more successful in achieving commercial goals than entrepreneurs. The reason is that anxiety about risking one’s own money can be an inhibitor, blurring judgement about risks and opportunities. An intrapreneur tends to be much more confident in making commercial decisions precisely because there is a certain level of detachment. The drive to succeed is probably the same, but the intrapreneur typically approaches commercial decisions and opportunities with a higher level of rationality.
Though financial incentives can play a role, some intrapreneurs also appreciate non-tangible results when they operate in a public or charitable setting, ensuring that the financial health of their organisation and its laudable work is not entirely dependent on the often quite volatile or restricted donations from public authorities or individuals.
So from an economic point of view intrapreneurs are not a lesser form of entrepreneurship. This applies even more so to the third form, extrapreneurs. In simple words, the extrapreneur effectively combines the features and characteristics of the entrepreneur and the intrapreneur.
Extrapreneurship is a new term and therefore googling it generates a wide range of definitions. I here reserve the term for a blend of both intrapreneur and entrepreneur. He or she is not employed, nor works purely for one’s own account. Instead, there is a contract with what might be called a mother organisation that gives mutual reassurances. Typically, this mother organisation has outsourced work to a preferred company, and both sides guarantee a minimum level of trade. But the extrapreneur is not just a mere supplier, he or she is more like a semi-detached intrapreneur. The extrapreneur offers services but does so in an entrepreneurial context, with the mother organisation as major client, at least initially.
Because the extrapreneur’s venture starts with a reasonably sound foundation already in place, the risk of failure is much lower compared with a regular start-up. The business might grow or shrink but at least one client is likely to be there for the long run. For companies, the big advantage is not having to employ someone but still guaranteeing delivery of specific services or products. The extrapreneur is an external partner who has good reason to treat the relationship with the mother organisation as core business.
Price-wise, these services or products represent normally a lower average price than in the free market, whilst on the other side of the equation the costs of the trade provider are a bit higher than when delivered in-house. The employer and extrapreneur split the difference in exchange for mutual guarantees and security, and both sides have the advantage of being much more flexible.
Like intrapreneurship, extrapreneurship works equally well in private and public or charitable sectors. As an example, in some countries the public sector is under political pressure to reduce its staffing. As the work still needs to be done, making for certain functions an extrapreneurial arrangement is much more attractive for all concerned (and normally cheaper) than mere outsourcing or redundancy. A common route to extrapreneurship is someone who held a formal or quasi intrapreneurial position who opts for an extrapreneurial arrangement. Alternatively it might be the desire of the mother organisation to reduce staffing but offering critical staff an extrapreneurship position rather than a redundancy package. Of course it might also be that the extrapreneur never operated within the company but has a critical service or function to offer and decides that being an extrapreneur is more attractive than being an intrapreneur or common employee. And finally,it might be the company that is in start-up or acceleration mode and want to expand without increasing FTEs, which is quite common.
Not automatically but certainly in ideal circumstances the extrapreneur can represent the best of the worlds of entrepreneurs and intrapreneurs. Of course, using a new label does not mean the concept itself is new. What is notable though is the trend and the likely prominent role extrapreneurship will have in the future. The reasons why I anticipate such development is because of the drivers that favour this direction.
First of all companies with many tens of thousands, even hundreds of thousands of staff, the mega employers, represent a now rather archaic concept which made sense in a context of large scale manufacturing and stable, predictable demand. But the economic world is rapidly moving on, turning mega-employers into dinosaurs. There are not many captains of industry still referring with pride to their large numbers of employees, for whom they once might have felt an almost paternalistic responsibility. In a world that values lean and mean, extrapreneurs are highly attractive for major employers because the alternative – short term ad hoc contracts – poses considerable risks in terms of ready availability and consistency of quality.
For SMEs, extrapreneurs are the best way of ensuring acceleration without creating the need for high levels of investment capital. Especially in times when credit is limited or expensive, extrapreneurs help to spread the risks. Also, in some countries where the employment regulations are still very rigid, an extrapreneurial arrangement can help to avoid certain liabilities.
The employers of today no longer aim to be big in staff numbers but rather big in revenue and clients, whilst small in staff numbers. But of course what is good for employers or other company owners, is not necessarily good for extrapreneurs. However, with job security rapidly being reduced – the UK and USA are typical examples where the redundancy process is nowadays quite a light touch – a long term contract can be more attractive than standard employment and certainly more appealing than operating in a “gig economy”. Moreover, extrapreneurs are able to mitigate the risk of dependency on the mother organisation through diversification, growing the business by bringing in further clients.
Having more extrapreneurs and less employees will impact considerably on the work of human resources departments. It would be unwise and incorrect to retain a strict focus on employees as extrapreneurs are not employees yet still of critical importance to the functioning of the business. One of the challenges therefore is how HR can engage in a beneficial way with extrapreneurs as well as the traditional employees. It will require expanded expertise and skills.
Of course as with the emerging gig economy, one can question whether the rise of extrapreneurs is good or bad news. That is essentially an ideological question. It introduces a higher level of flexibility to the labour market as a whole, but also it is a sign of the “job for life” economy further crumbling away. Maybe one can view it as a compromise, but as with the realities of the gig economy, Unions will need to decide whether to fight it or to embrace extrapreneurialism in a realistic manner and work out how to ensure more constructive and sensible regulation. A crucial question Unions may ask is how independent an extrapreneur really is. If not, then a position of strength can turn into one of vulnerability, with the need for some kind of protection.
We can consider entrepreneurship-intrapreneurship-extrapreneurship as three distinct categories. However, we also could see how they could be related. Normally entrepreneurs are assumed to launch at a young age and not surprising most such enterprises fail. An article in Forbes suggests that nine out of ten start ups fail and those that survive are due to perfect products, attention to all details including processes and focusing on business as a whole.1 Statistics from Harvard Business School in 2010 suggest that between 30-40% of businesses fail, with up to 80% unable to project a return on investment.2 In the face of such statistics, another more sensible route is first to join an employer in the field of interest, as an intrapreneur. Then, based on the experience acquired, the next step is to launch oneself as an extrapreneur. And finally, when the portfolio of clients or products outperform those of the mother company, confirm one’s status as entrepreneur. This step progression is much more likely to be a road to success than an inexperienced jump into the deep as normally still favoured.
Of course not all extrapreneurs will have been an intrapreneur in the past, but an extrapreneur certainly is likely to be more familiar with the challenges than a starting entrepreneurship and ideally will also be able to count on the professional, not just economic, support of the mother organisation – as there is a common interest in a sustainable operation – reducing the risks of failure even further.
Where the transition of intrapreneur to extrapreneur represents relatively low risk, it is an option that could work well for other employees as well, even in more junior positions. A simple example: a driver who realises that it would make more sense for a company to outsource this service yet still want to have drivers available who are fully familiar with the company, who are more trustworthy than those available through the regular outsourcing and bidding process. In this example the mother company will be amiable to pay a premium for an extrapreneurial arrangement with current staff, whilst the extrapreneurs have the opportunity to add further clients, resulting in a more effective use of time and resources plus ultimately, a bigger financial reward than being an employee.
Another major question to ask is how well our current education, especially business education, prepares the next generations for success not just as managers or entrepreneurs, but also as intrapreneurs and extrapreneurs. It is not just a question about the traditional education for young students. More important is what support is in place to offer a “just in time” education, in other words being available as educator when one is needed: at the precise moment when one prepares for a transition from employee to extrapreneur. The way the economy is changing also should have an impact on the way education has to reconsider its focus and function.
The same way intrapreneurs have gained a central role, extrapreneurs deserve recognition as an emerging force in how tomorrow’s economy is organised. The question is less about whether this is good or bad, but about how to engage in a positive way with this trend. The impact is not just on those who opt for such a role, but equally for employers, human resource departments, governments, Unions and certainly also educators. If society is willing and able to engage with this upcoming phenomenon in a constructive way rather than consider it as a threat to social convention and labour market status quo, the rise of extrapreneurship can turn into good economic news.[/ms-protect-content]
About the Author
Professor Maurits van Rooijen has been Group Rector/CEO Academic of Global University Systems since 2012, which is the first truly global university system with universities and colleges located from Vancouver to Singapore, online and with a variety of university partnerships and institutional affiliations. Maurits was previously Rector/CEO magnificus of Nyenrode University in The Netherlands and before that was a successful intrapreneur at the University of Westminster London and ditto at Leiden University. He started his academic career at his alma mater Utrecht University.
1. Patel, N (2015) Forbes “90% Of Startups Fail: Here’s What You Need To Know About The 10%” Available at http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the-10/#6ac47cc555e1
2. Barclays Wealth Insights Volume 16 “Understanding Failure” Available at https://wealth.barclays.com/en_gb/home/research/research-centre/wealth-insights/volume-16/understanding-failure.html
3. Van Rooijen, Maurits (2016) The Huffington Post, The Blog “Extrapreneurship Is The Future Of Entrepreneurship” Available at http://www.huffingtonpost.co.uk/professor-maurits-van-rooijen-/extrapreneurship-is-the-f_b_12554610.html