Six Simple Rules to Help AEC Firms Win the Intrapreneurship Game

While working as a construction project engineer conducting quality control inspections and recording findings, Tracy Young became frustrated with the cumbersome, convoluted, slow and inefficient workflow. She recognized the pressing unmet need for a better way, and refused to fall victim to legacy thinking (“that’s the way we always do it”). Instead of starting a more efficient construction company, she teamed up with four friends in 2011 and founded PlanGrid to build software designed to help construction teams build better (early concept of using iPad tablets as a better way of creating and sharing blueprints). Seven years later, PlanGrid was being used on over a million projects across 85 countries, and was acquired by Autodesk for $875 million.

Domain knowledge and talents may not show up on the balance sheet, but they are the most valuable assets ENR firms possess. They're also key drivers of new, profitable growth. As it turns out, most AEC firms — especially large ones — are actually awash in creative ideas that never get executed. The surprises that lead to new business ideas often come from front-line engineers working on real projects and solving real customers' problems. The overall tendency to harness innovation in their work, by finding better ways of doing things, and proactively nurturing progress in their organizations is a clear and present opportunity.

So how do you retain that invaluable talent pool and its profit potential? It starts by embracing ambidextrous thinking and intrapreneurship. Because when you, the leader, drive change, your team and your business will follow.

Simply put, ambidextrous leadership is about strengthening long-term resilience without undermining performance. It demands a skillful juggling act: maintaining a healthy and thriving core business (optimizing the present) while investing in innovations (creating the future). Intrapreneurship is the vehicle for bringing those innovations to life and spurring a new level of profitable growth. The term was coined in 1978 by sustainable business school Bainbridge Graduate Institute founder Gifford Pinchot III. He defined intrapreneurs as employees who do for corporate innovation what an entrepreneur does for his or her start-up. In essence, an intrapreneur acts like an innovative entrepreneur, but within the ecosystem of a larger, more traditional, organization. Skill in playing both games simultaneously gives firms their best chance of staying vibrant and sustainable.

Innovyze (initially MWH Soft) is a quintessential example of intrapreneurship success. With a loan of just $50k from MWH Global (now Stantec), the company delivered uninterrupted double-digit profitable growth, becoming the single largest contributor to MWH Global profits. What’s more, its profit per employee was greater than the revenue per employee of any top ENR firm.

Virtually every firm tries to produce breakthrough innovation. But many attempts are short-lived because they are promoted within a system defined and constrained by the business model of the core.

Ambidextrous leadership is simple and easy in theory, but complex and difficult in practice. The main challenges are twofold and represent the two most common intrapreneurship failure modes for AEC firms. First, it requires AEC firm leaders to shield intrapreneurship innovations from the core business DNA with its detailing force (e.g., processes, rules, norms, metrics, and structures); large-project pursuit focus; and too often intense competition from the core business. Second, it requires AEC firm leaders to set aside time for the future despite innate cognitive biases, the incessant drumbeat of quarterly performance and short-termism of Wall Street or board expectations, the tyranny of the urgent and the stresses of the present. These pressures reinforce the status quo and prioritize operational efficiency of the core above anything else. The odds of success increase when the present core and future businesses view each other as good neighbors rather than good marriage partners.

In general, the new business should be kept separate from the core when: (1) it requires a different business model and branding to fulfill its potential; (2) it requires different leadership skills and organizational rules, metrics, values and norms; and (3) it tends to be disruptive to the core business model, making money with a higher margin, demanding new capabilities or requiring a different cost and reward structures. When the businesses are kept separate, it is important to let the intrapreneurial business borrow resources (e.g., HR, legal, accounting) from the core business based on a relatively small corporate tax. In addition, it should be able to leverage the vast client base of the core, paying a small success (referral) fee for each win.

In my view, the following set of simple rules will maximize your firm’s intrapreneurial success:

1. Smaller, not bigger: choose the market segment you can dominate, become the best in, and deliver to with excellence (remember, different customer groups have different pains). If you can’t lead it, you don’t want it. Do not pursue marginal positions in large established markets. Think like an investor: be a big fish in a small pond, not a small fish in a big pond.
2. Pain killer, not vitamin: cure real customers’ pains (pains are problems customers need to solve) faster and better than anyone else in the market. Innovate, don’t imitate. Be first, because there is no second prize.
3. Better before cheaper: compete on differentiators (e.g., simplicity, reliability, convenience, accessibility, superior customer experience) rather than price.
4. Revenue before cost: prioritize growing revenue faster than costs. This is where many innovations fail. Turning an early profit is critical to staying relevant and winning long-term success. Many innovations are slow to thrive, and senior leadership of the core business can quickly pull the plug, especially during an industry downturn when the core is not performing as expected. Be patient for revenue growth but impatient for profit. Engineers are assessed on their performance of billable time. You are measured on the number of customers you win and delight, the more the better.
5. Faster before better: be quick in getting simple, convenient, easy to use painkiller products to market. The chief mandate: Launch! The sooner the better, and soonest is best. Do not overload your first versions with features and functionalities. Customer feedback will drive product improvement, and customers will serve as a sounding board for new products and services.
6. Partner, not vendor: be a trusted partner and delight your customers every day. Ensuring the very best customer experience (raising customers’ expectations beyond the competition’s reach) will pay off handsomely, not only in increased credibility, access, references, margins, and repeat business, but in decreased price sensitivity, competition, and sales cycle length. When you get the customer experience right, you’ve created competitive differentiation that’s hard to copy.

And build services around the use of your innovative products.

The future is now, because you are building it day by day. The goal is not so much to read that future as to strive to create it. Your domain knowledge and talented engineers are your key competitive advantages and the strongest force you can marshal in pursuit of innovation.

Mahatma Gandhi said, “Be the change you wish to see in the world.” This maxim applies to leading intrapreneurship success. As an ambidextrous leader, you can shape the future by becoming a role model for the most important managerial decisions. It’s key to optimizing your impact on your firm and its people. Use these simple rules to own that future and ensure the long-term viability of your organization, leaving it stronger, more productive, and more valuable than ever before. You’ll be preparing it to set new industry standards, to redefine what is possible, and to forever change the terms of competition. Your stakeholders will be the ultimate beneficiaries. As a bonus you get a touch of (symbolic) immortality.