Why Intrapreneurship is an Oxymoron
What Corporations Can Do to Foster Long-Term Growth & Innovation
An intrapreneur is defined as an entrepreneur operating within a corporate context. Essentially, intrapreneurs take on responsibilities and risks to deliver radical new products to the market.
Unfortunately, we know how this goes. Companies are notoriously unsuccessful at launching new, disruptive products. While companies are usually effective at improving existing products, the domain of creating something from nothing is where fast-moving startups are most consistent.
As entrepreneurs, we’ve always been intrigued why this is the case and after working with many intrapreneurs it has become clear. The very context of large organizations strips an individual of entrepreneurial motivation and potential for three main reasons: limited autonomy, lack of upside, and internal politics.
First, autonomy is severely limited. Entrepreneurs rely on being close to market trends and new technologies to devise their own innovations. But in a corporation, ideas happen through a constricting filter. Intrapreneurs are required to work on projects that fit within the mothership’s competencies and values in order to win funding. This process favors incremental innovations instead of industry changing, high ROI innovations.
Second, upside is non-existent. A defining characteristic of being an entrepreneur is equity ownership. Essentially, entrepreneurs desire to trade cash today for stock, which could lead to a large payout in the future. Intrapreneurs rarely get the opportunity to get ownership in the ventures they create. This causes an adverse selection. The employees with the best ideas are incentivized to leave the company or do nothing, because they are not offered a fair share of the benefits the company may see.
Third, internal politics turn intrapreneurs into internal marketers, wasting the majority of their time. Entrepreneurs take years to build a successful business. As an intrapreneur, you are evaluated for funding on an annual or semi-annual basis, meaning you are guaranteed to have nothing to show in the early days. Promising to align with business units in exchange for their buy-in is a way to increase the potential for follow-on funding. Unfortunately, it’s a long-term mistake. Intrapreneurs are forced to take away time from cultivating a team, interpreting metrics, and talking to customers, all of which are incredibly challenging and time-consuming. This wasted time and perverse incentive leads to development of sub-par products.
There is a much better way. It involves putting intrapreneurs under a corporate structure enabling autonomy, compensating with entrepreneur-like incentives, and applying Lean Startup methods to measure progress and ROI.
Executives need entrepreneurs inside the company. As market uncertainty rises and time to market for new products shrinks, big companies are at risk. Waiting to acquire disruptive products after they’ve been proven is a losing strategy.
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