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This is true, but I've criticized it before. The prejudice+power definition already has a term: institutional racism. It got the point across and it's clear.
Racism means interpersonal racism to most people, as you said. Replacing this definition with the institutional one when dealing with laymen makes the issues unnecessarily confusing and, in my opinion, works against anti-racists. It allows people to think "are you saying black people can't be racist? That's ridiculous! [Insert anecdote]." It's better, to me, to keep "racism" meaning interpersonal and using "institutional racism" when referring to the systemic type.