17 Dec 2001  Research & Ideas

Risks and Rewards of the Intrapreneur

Your company is forming an intrapreneurial venture, and has asked you to join the start-up team. Is this a career pick-me-up, or occupational suicide?

It could be either one, and employees should carefully weigh the pros and cons before jumping to an internal start-up, experts said during a panel discussion at the 2001 Harvard Business School Entrepreneurship Conference.

When Marc Levine was asked to head up an internal start-up at electronics equipment maker Teradyne Corporation, he jumped at the opportunity. And it paid off handsomely. The project—the Integra Test Division, a maker of low-cost test equipment—was a big success, helping the company ward off new competition. "It was a dramatic catalyst to my career within the company and the people I recruited had a tremendous career uplift," Levine, now a division vice president and general manager, told the audience.

The key for him, Levine said, was that the company's CEO backed the project, and allowed the group to operate outside the usual corporate boundaries. Levine was even able to move the start-up off campus. Once the group had developed its product, they were moved back into the corporate fold.

Another plus, he said, is that the start-up's mission was in alignment with the company's core business.

For would-be intrapreneurs, the advantages to a corporate start-up versus a jump to a brand new company can include increased visibility within the corporate parent and a safety net should the venture falter. If the intrapreneurial effort fails, you'll still have a job tomorrow, said HBS assistant professor Clark Gilbert, who served as moderator.

And for managers of the start-up, a corporate benefactor can make starting a new organizational life easy, relatively speaking. You can recruit talent from within the company, tap into management skills, leverage existing technologies, and use existing compensation and HR functions.

But while you are protected from failure, your upside—especially financial reward—is also usually less than what you expect with a pure start-up, Gilbert said.

Keys to success

Panelists identified several keys to help prospective intrapreneurs make the decision.

You have a better chance of success, they suggested, if the start-up's product is somehow related to the core business—you'll likely have access to more corporate resources. Gilbert said his study of chipmaker Intel showed that the closer an Intel intrapreneurial effort was to the company's main processor business, the better the chance of success. For projects outside the core business, Intel "either didn't fund it or did a bad job of it."

However, if the effort is developing a product or service that competes with the existing bread-and-butter business of the company, the effort could be seen as a threat to many inside the company.

It was a dramatic catalyst to my career within the company and the people I recruited had a tremendous career uplift.
—Marc Levine

For example, when The Boston Globe newspaper started Boston.com, the start-up founders had to calm the waters to ensure the newspaper's execs that the Web site wouldn't be stealing stories or ad revenue, said Lisa Desisto, Boston.com's CEO.

Desisto said her group worked a "grass roots campaign" to encourage writers and other staffers from the newspaper to also contribute to the Web site. But the turning point probably came, she said, when Boston.com was able to help the Globe break a huge story on a Sunday, after the newspaper had gone to bed.

Joining a project that appears to be outside the core business isn't always the wrong thing to do, Gilbert noted, because your project may one day become the core business. GE, once a maker of appliances, now derives 60 percent of its revenue and 70 percent of its profit from financial services.

Other keys to success:

  • Make sure the project has sponsorship in the upper levels of the company, particularly from the CEO.
  • Evaluate the company's other start-up efforts and how it handled projects that failed in some regard, said Jim Barron, vice president of Innosight L.L.C., a consulting firm specializing in disruptive technologies (and started by HBS professor Clayton Christensen).
  • Look at the product to be developed and assess its chances for success, Barron said. A start-up that develops a so-called disruptive business—one that dramatically improves upon the status-quo available in the market—has a 30 percent chance of being successful, while a start-up that goes up against an incumbent with only a slightly better product has just a 3 percent chance of success.
  • Evaluate the CEO of the start-up. Is this someone capable of running a start-up, or will his or her big-company legacy be a disadvantage?
  • Take advantage of your parent. The advantage of joining a company start-up versus a pure start-up are the resources at your disposal. "The key is to capture the upside of the parent in everything you do," Gilbert said.