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Developing New Things: Implications of the Platform Economy for Intrapreneurship

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International Journal of Management Science and Business Administration

Volume 7, Issue 6, September 2021, Pages 34-44


Developing New Things: Implications of the Platform Economy for Intrapreneurship

DOI: 10.18775/ijmsba.1849-5664-5419.2014.76.1004  
URL: https://doi.org/10.18775/ijmsba.1849-5664-5419.2014.76.1004  

1Constantin Schmidt, 2Stefan Tewes

1,2 FOM University of Applied Sciences, Germany

Abstract: The following paper deals with the implications of the platform economy for intrapreneurship. It is becoming increasingly difficult for traditional pipeline companies to keep up with the speed of platform companies. They are innovative, agile, and ready for change, while their legacy counterparts are the opposite. In this paper, sources from the platform economy and intrapreneurship are analyzed and evaluated using qualitative research methods. The focus is on the question of what the structure of the platform enterprise must look like for the intrapreneur to unfold his creative potential. The results show that the intrapreneur needs structural autonomy and distinctive communication structures to act successfully. Within these structures moves the intrapreneur, considered an entrepreneur and a central driver for change and innovation. Based on the results, a structural model is derived and visualized, which concretizes the findings.

Keywords: innovation, intrapreneurship, entrepreneurship, digital transformation, platform economy.

Developing New Things: Implications of the Platform Economy for Intrapreneurship

1. Introduction

The implementation of innovations in many companies is in crisis. Classical organizations have become immune to change and, these businesses will only implement genuine innovations and further developments with great effort. Although the need for creation and agile implementation is becoming increasingly critical to success, and entrepreneurially minded employees could solve the lack of development (Tewes et al., 2018), the effectiveness of efforts often fizzles out. Structures, framework conditions, and processes provide an established bulwark against any change.

While traditional companies want to maintain the status quo, the global economy changes due to new, disruptive business models (Tewes, 2018). The platform economy is considered the central business model of the digital economy (Hosseini and Schmidt, 2018; Jaekel, 2017). It uses digital progress to network people, resources, and organizations, thus generating added value for all those involved. As an intermediary, the platform economy thus provides the framework for exchanging between customers, producers, and organizations. For example, Amazon’s customers can choose from a wide range of goods and have them delivered to their homes without Amazon owning a single item itself (Hosseini and Schmidt, 2018; Schmidt, 2017; Van Alstyne et al., 2016). Even Airbnb, the world’s largest accommodation broker, does not own its property (Handelsblatt, 2018).

Ownership and efficient management of many production factors are no longer the relevant success criteria of this model but rather the best possible control of interactions between external suppliers and demanders (Hosseini and Schmidt, 2018). Platforms quickly determine the markets in which they appear and manage to shift the creation of value completely. Traditional industrial companies have disadvantages compared to platforms because they can scale faster without having a similar cost apparatus (Hosseini and Schmidt, 2018; Parker et al., 2016).

The future is all about the platform, but how can still conservatively oriented companies transition from the classic pipeline to the platform economy? One of the possible answers to this is the intrapreneur’s type of employee (Rusnjak and Ercan, 2014). It reflects the entrepreneurial idea of innovation, the mindset, and the desire to change within a company. The intrapreneur acts like an entrepreneur within his organization and is proactively looking for a chance to open up new business areas and release future potential (Scheurenbrand, 2016). However, old structures in companies prevent the intrapreneur from being effective. Service by the book, old processual thinking, and unfavorable framework conditions contain practical development (Teece et al., 2016).

This study aims to analyze the intrapreneur’s critical structural conditions and success: How can the intrapreneur’s type of employee work successfully? This paper develops a structural model with practical recommendations for action to answer this question.

2. Literature Review

The following chapter focuses on the literature review. It covers digitization, disruption, entre- and intrapreneurship, and the platform economy and network effects.

2.1 Digital Transformation & Disruption

Digitalization primarily optimizes value creation processes through the Internet and computers, while digital transformation also describes the change brought about by using these new technologies. It thus transforms the functionality and interactions of people, society, and organizations, thereby creating lasting, massive effects on the economic system, economic drivers, and even creative destruction (Schumpeter, 2005; Srinivas Reddy and Werner Reinartz, 2017).

The concept of disruption goes hand in hand with progressive digitization. Disruptive digital business models threaten established companies in their core areas. Companies such as Amazon, Facebook, Google, or Airbnb can succeed through digital business models without production (Krämer, 2019). This way, the news is generated and distributed on Facebook every day without creating the content. Airbnb does not buy real estate but merely provides the digital platform on which suppliers and buyers can find what they are looking for (Franken, 2017).

The implementation of the ‘LASIC’ principles increases the prospects of success for these disruptive companies. They stand for low margin, asset-light, scalable, innovative, and compliance easy. In practice, these principles mean this platform companies only need small margins, multiply and maximize profits through economies of scale. A further advantage is the low fixed cost structure. These features are necessary to ensure flexibility and to improve it through technical progress. This digital progress is the critical source of innovation for changing industries and markets (Kuo Chuen and Teo, 2015; Srinivas Reddy and Werner Reinartz, 2017).

2.2 Entre- & Intrapreneurship

The concept of entrepreneurship generally falls into three broad categories: professional, behavioral, or start-up. While the foundation-related framework is limited to the foundation of a new business (Gartner, 1988), the professional type equates ‘entrepreneurship’ with the management of a company and an organization (Kollmann, 2016). A business entrepreneur is the professional title of the entrepreneur who, for example, runs an organization as an independent entrepreneur.

For the first time in the 18th century, the entrepreneur has ascribed a significant role: An entrepreneur acts in the markets intending to maximize profits and at his own risk (Cantillon, 2011; Herbert and Link, 1989; McMullan and Long, 1990; Roberts and Woods, 2005). In the 20th century, the entrepreneur was increasingly in the focus of science and business. Research sets new priorities in the 1980s and 1990s: Personality, general conditions, and characteristics associated with a successful entrepreneur move into focus. Two aspects are highly relevant for an entrepreneur (Fueglistaller et al., 2012):

  • Will to succeed: A greater need for success drives entrepreneurs compared to the general population. They are motivated to perform to be successful.
  • Risk appetite: Entrepreneurs show moderate risk appetite. They take calculated risks that give them a specific chance of success.

In addition, entrepreneurship research has generated further insights into the entrepreneurial personality, in which the entrepreneur differs from regularly employed persons. These areas are the expectation of self-efficacy, the striving for independence, problem orientation, social adaptability, emotional and psychological stability, tolerance of uncertainty, dominance, and creativity (Baum and Locke, 2004; Davison, 2013; Flannery, 2011; Fueglistaller et al., 2012; Gartner, 1988).

Existing groups, organizations, or companies may also have members who operate with the classic virtues of an entrepreneur’s desire to innovate, risk-taking, autonomy, and proactivity (Lumpkin and Dess, 1996; Miller, 1983; Nielsen et al., 1985; Sharma and Chrisman, 1999). In this context, corporate entrepreneurship is realized through various mechanisms, such as the reorientation of proprietary capabilities and strategies, creating new internal ventures, and innovation within the company. The goal can be the development of new markets as well as the focus on an existing market. Intrapreneurs are considered ‘entrepreneurs’ who drive innovation and business models (Desouza, 2011). On average, less than 5% of employees are intrapreneurs (Bosma et al., 2010). The term intrapreneurship describes the ability of a company to generate innovations, take risks, and assess them correctly (Miller, 1983). An intrapreneur is a person who takes responsibility for implementing new ideas and their profitable realization (Baruah and Ward, 2015; Carrier, 1994).

Recent research shows intrapreneurship as a multidimensional, action-oriented concept with eight characteristic dimensions, which operates at the organizational frontier and breaks new ground in the areas of services, standards, technologies, orientations, and structures. These dimensions are described in more detail below (Antoncic and Hisrich, 2003):

The (1) creation of new businesses and (2) business areas are essential features and components of intrapreneurship. Here, the dimension of the new enterprise refers to the establishment of a company or a company unit, while the dimension of the business area is limited to the existing organization and the expansion of the business area. This process is also known as incubative entrepreneurship (Schöllhammer, 1982, 1981) or corporate venturing (Sharma and Chrisman, 1999). The dimension of (3) product and service innovation refers to the development in the technological field of a company. These products and services include improving product and process development and opening up new production and manufacturing processes (Schöllhammer, 1981). In addition, (4) new products and services are among the dimensions. (5) Self-renewal as a dimension refers to the transformation of the organization within its core ideas. The focus is on strategic components for organizational change to ensure a high degree of flexibility and adaptability. Another critical dimension of intrapreneurship is (6) risk appetite. Loss is an inherent risk feature and is a component of innovation, business creation, and proactive action. Risk is defined here as the rapid realization of opportunities, the daring use of resources, and bold activities (Lumpkin, 1998; Lumpkin and Dess, 1996). The dimension of (7) Proactivity characterizes a pioneering role and initiative. Orientation towards the future ensures anticipation and resulting actions of the latter (Lumpkin and Dess, 1996). Proactivity ensures that organizations take the lead rather than just following their competitors (Covin and Slevin, 1986). The last dimension is (8) competitive dominance. It characterizes that the organization measures itself against its competitors in the benchmark and thus dominates them. It is based on the dimension of proactivity but is a dimension in its own right. The dimension of proactivity in response to exciting business opportunities is the answer; competitive dominance in response to business-critical threats and challenges is evident (Lumpkin and Dess, 1997).

In summary, intrapreneurship is an essential factor for organizational growth due to the dimensions mentioned above. It ensures that a company regularly adapts to new market conditions and thus stands out from the competition. Intrapreneurship significantly impacts an organization’s profitability and ability to survive (Antoncic and Hisrich, 2001).

2.3 Platform Economy & Network Effects

A platform acts as a foundation that promotes value-added interactions between external producers and consumers. It provides a participatory infrastructure for the exchange and regulates the process. The focus is on creating added value for all participants based on information and interaction (Alstyne et al., 2016). Communication, exchange, and value creation take place on a multidirectional basis (Parker et al., 2016).

The platform economy regards as the counterpart of the pipeline economy. The generation and the provision of added value classically carry out individual, linear work steps. The producer works step by step on the product or service until the final result is made available to the customer at the end of the value chain (Alstyne et al., 2016; Parker et al., 2016).

Platforms are not an entirely new phenomenon but have existed for decades. Shopping centers that connect merchants and customers or print media that enable their advertisers and subscribers to exchange information are forms of a classic platform. Despite the diversity of platforms, they are basing on an identical ecosystem, which comprises four actors. The owners are the owners of the intellectual property and the platform and control it. The providers are the interface and access to the users. Producers create the content, while consumers create this benefit. The roles of the participants are flexible, and today’s consumers may be the producer of tomorrow. In the example of the Airbnb platform, this means the guest himself becomes the provider (producer) and rents out one of his properties, even though he was only a guest during the previous holiday (Alstyne and Parker, 2017).

Figure 1: Platform participants
(Alstyne and Parker, 2017)

Network effects are the engine of any platform and drive technological progress. They point to the number of platform users’ impact on the value-added (Hendler and Golbeck, 2008). In the classic industrial age of the 20th century, economies of scale secured monopolies in production. The more efficiently a product is produced and in larger quantities, the lower the unit costs. These supply-based economies of scale make it more difficult for regular competitors to compete against their giant rivals. However, these advantages became increasingly insignificant in the 21st century as near-monopolies with demand-based economies of scale emerged. These economies of scale take advantage of technological progress on the demand side of the value chain and are promoted, for example, through marketing campaigns in social networks or advances in app development to increase the value of the network in the eyes of its users. In the platform economy, these network-based effects give rise to difficult advantages for competitors to overcome. They are the foundation for economic success and one of today’s most relevant competitive advantages and form the basis for positive network effects (Parker et al., 2016; Wang et al., 2010).

Positive network effects describe the ability of a large, well-managed community of a platform to generate significant added value for each user. Their counterpart, the adverse network effects, explains that a poorly managed platform community can reduce the added value for the individual user. Adverse network effects happen when growth is fast and uncontrolled when the correct matches of suppliers and demanders are missing or poor quality partner matches. Network effects ensure the development of the platform and its added value. Based on these effects, it may well be worthwhile for platform operators to make a significant investment on one side of the market to attract new users to the platform, as long as the profit from the other side of users justifies and exceeds this investment (Alstyne et al., 2016; Parker et al., 2016).

3. Methodology

In summary, the theory shows that intrapreneurship is a central building block that ensures the future viability of organizations. Phenomena such as digital transformation, platform economy, and associated disruption constantly change companies’ internal and external environments. Existing business models within the pipeline economy are falling victim to the platform economy and the accompanying new competitors, while network effects on platforms are accelerating this process. The organization faces the challenge of managing this transformation with the help of its employees. The intrapreneur as an employee type holds the potential to address and solve these challenges first. Based on these findings, the following research question arises:

How can the intrapreneur’s type of employee work successfully?

The answer to this research question is inductive-explorative. The method of summary content analysis chooses to answer the research question, as no comparable studies on the topic are available to date (Larcher, 2010; Mayring, 2015). This approach aims to provide a basis for further research, describe little researched facts, and reduce the material to its essences in a new category system (Fürst et al., 2016; Mayer, 2013; Mayring, 2015).

First, the unit of analysis to be determined is defined, which is subsequently reduced by all text passages of little or no relevance. All relevant text passages are translated to a uniform language level and converted into short grammatical forms. The paraphrases are generalized and brought to the defined abstraction level, and the first reduction carries out the selection and deletion of meaningless renditions. Subsequently, the second reduction of the material begins, followed by creating the new category system. Finally, the results review the formulated research question (Larcher, 2010; Mayring, 2015).

For the gain of knowledge of content analysis, materials are of interest, which are thematically in the field of platform economy or intrapreneurship and whose author recognizes as an expert in one or both topics. The selection, therefore, took into account that the experts themselves are successful platform operators or have been active as intrapreneurs in the recent past. The choice was made from freely accessible sources within the Internet and included company websites, interviews, and articles published by the respective experts themselves. The chosen target group of the materials is broad, as all sources are public and freely accessible. None of the sources suggests a spontaneous creation, and all contents show a planned and subjective character.

Figure 2: Theoretical Sampling and Procedure

(Own figure)

4. Results and Discussion

4.1 Category System

After conducting the qualitative content analysis, a category system with two main categories and associated subcategories emerge. The first main category is (1) Autonomous Structure. It consists of the subcategories (1a) Decentralization/Networking, (1b) Unbound, (1c) Self-determination, and (1d) Topic-centeredness. The second main category is (2) Communication Structure. It contains the three subcategories (2a) openness, (2b) transparency, and (2c) circularity.

The results indicate that two primary factors are relevant for the success of the intrapreneur within the platform economy. The first factor is the ‘Autonomous Structure.’ It characterizes the presence of subcategories 1a – 1d. Decentralization/networking (1a) is a primary structural requirement for the intrapreneur to operate successfully. This structure does not follow a classical hierarchy, and all persons are on an equal decision-making level. The people are networked with each other and are in exchange with each other. Unboundedness (1b) as a character refers to the lack of classic job descriptions, which manifests itself within the structure as an interdisciplinary distribution of tasks. The intrapreneur does not follow a classical activity of a topic or functional area (e.g., HR manager) but engages in each subject and available area to provide added value and resolve challenges. Self-determination (1c) within the autonomous structure represents minimal rules within the organization. Intrapreneurs work self-determinedly and get by with a minimal set of rules that only guide their work roughly. Topic-centeredness (1d) focuses on the content. Decisions, guidelines, or strategies are always made in the context of the topic and fed back to it.

The second factor is the ‘communication structure.’ It characterizes the subcategories 2a – 2c. Openness (2a) of communication indicates that all employees are informed about any decisions, and everyone can get involved in any issue. The data thus reaches every corner of the organization. The characteristic of transparency (2b) refers to the traceability of communication. Individual communication steps are transparent at all times because they are documented and are open to everyone. This openness applies to both synchronous and asynchronous communication. The final characteristic is circularity (2c). Communication is not only between two concerned parties, but the content scatters throughout the organization. This distribution enables optional, diverse exchanges and information gain on discussed topics since various stakeholders can participate in the discussions.

4.2 Practical Implications

In the context for the two categories ‘Autonomous Structure’ and ‘Communication Structure’ and the total of seven subcategories, practical implications for the successful work of intrapreneurs in companies are as follows. The results of the category system suggest that one of the central components is the topic-centeredness within the autonomous structure. Thus, the ‘topic’ is at the center, while the other components circulate the center and constantly exchange with each other. This intense focus intends to do justice to their significance. In practical terms, this means that there is no classic top-down or bottom-up structure but that a circular arrangement characterizes the ideal setup. In this context, the system exhibits a decentralized character that enables it to organize itself. This self-organization empowers the structure, specifically the intrapreneur within it, to foster innovation and address the challenges posed to the form. Long-term goals of the enterprise, the organization of the daily business, and the type and structure of the information systems orient themselves, thereby at the principle of the topic centering.

This structure implicates that all participants in the company act with equal authority. Several levels of management with different dependencies do not exist. There is only one hierarchical level for employees who are subordinate to the topic (structure center). The subject represents in a certain way the ‘leadership position’; all other components of the structure send their contents, questions, challenges in feedback loops to the center of the system.

 

Figure 3: Topic centricity

(Own figure)

In this context, the topic functions as an instance that determines the implementation and connectivity of the question. This structure further facilitates a high degree of autonomy and self-determination. With its topic-centeredness, the model postulates that there are three types of possible response conditions to any question, challenge, or problem:

  • 1st condition: The first condition implies that the answer to the question, taking into account the previously defined goal, does not offer any recognizable added value. Under this condition, the measure or inquiry stops, as it is not goal-oriented in the thematic context.
  • 2nd condition: The second condition requires that the potential response provides identifiable added value in the context of the topic. Under this condition, the added value should seek implementation because it is conducive to the overall goal.
  • 3rd condition: The third condition assumes that The process can give no specific answer regarding the added value because the necessary information is insufficient or inconclusive. Under this unclear condition, further implementation will attempt to create a database to enable subsequent decision-making in a similar situation.

Figure 4: Decision run

(Own figure)

The issue-centric approach and the associated decision-making loop enable the organization and its members to act autonomously, drive innovation, and take responsibility for their actions. Each decision circulates in feedback loops to achieve the necessary thematic saturation until a goal-oriented decision is possible. Every experience offers added value that can have a lasting impact on future decisions and milestones. The basis for this is a healthy employee culture within the company, based on the fact that clarity is a goal to strive for, which can only achieve through courage and daring. People need to document uncertain decisions and individual outcomes so that future scenarios can benefit from the past, similar to the previous ones.

The ideal size of a team unit is six to twenty members. There is an equal decision-making level within a team, and all members have identical decision-making competencies and opportunities. The limited team size ensures that the unit can react agilely and quickly. Members make decisions autonomously by members who keep their teammates informed, such as via regular team meetings or digital updates, sharing milestones within their projects and subject areas. The traditional exchange enables the entire organization to learn from and with each other. The platform economy environment, characterized by a high degree of digitalization and digitally networked communication, is particularly suitable for this. Findings and lessons learned are then stored and archived centrally for all to access.

Figure 5: Team structure

(Own figure)

The communication cycle does not take place exclusively within the company. Information made additionally available externally. Due to a high degree of exchange and openness, customers and platform participants receive the necessary transparency and are an integral part of the circulating structure. Knowledge of internal processes also enables them to contribute via feedback. The concept treats external stakeholders identically to internal employees. However, they are available in an indirect advisory capacity, as they offer essential insights into relevant processes or interactions. The intrapreneur can take up this feedback and move closer to the higher-level goal through target/actual comparisons and subsequent changes.

Figure 6: Integration of external stakeholders

(Own figure)

5. Conclusion

In summary, the implications arising from the ‘Autonomous Structure’ and the ‘Communication Structure’ provide the ideal framework for intrapreneurs to make the most of their creative potential, innovative spirit, and unconventionality. This framework characterizes a decentralized, networked structure and character endowed with a low level of rules and a high level of self-determination. The concept of theme-centeredness pursues ideas consistently, takes calculated risks, and dissolves classic top-down and bottom-up structures. In its place, a circular design emerges that hosts a network of independent collaborators focused on the purpose of the enterprise.

This network circulates the topic nucleus and feeds it with the concerns and topics relevant to the company. Decisions are consciously tested in their decision run and focus on the concrete added value and the thematic saturation for the respective issue and topic. The structure consistently eliminates irrelevant content. The organization is allowed to learn autonomously and thus to adapt flexibly to changes in the environment. A target-oriented and transparent documentation of these processes sustainably ensures learning success and protects all participants from making mistakes again. The predominantly (digital) structure enables this mutual exchange, as it provides the necessary processes and tools that make this type of communication and collaboration possible in the first place.

The intrapreneur finds himself within this organizational structure, which focuses on agile decision-making and personal responsibility. Depending on its size, the team can dedicate itself to one topic in its entirety or become involved holistically within the company. Possible topic-centered functional areas are freely selected and based on classic departments of an organization, such as the human resources department or operational management. These units have a small number of members to enable quick reactions and effective exchange. Communication takes place externally as well as internally, openly and transparently. All stakeholders are included in feedback loops and contribute. The organization benefits from the digital transformation and the many opportunities it offers for timely communication and exchange.

For future research, several questions are interesting, which in their elaboration and possible answer can contribute to a gain in knowledge. It is of interest whether the structural model of this work also has practical relevance. How does the concrete implementation of the formulated/created structure affect the daily business of the company? Is the topic-centered focus applicable as well as implementable in practice? How does it compare to classical systems and models? Can the platform structure model approach also be applied to a classic pipeline company? What effects do the participants expect?

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