Intrapreneurship the Concept of Intrapreneurship Evolved From

Intrapreneurship

The concept of intrapreneurship evolved from entrepreneurship, but the two are now distinct entities within the concept of the firm. Entrepreneurship is traditionally understood to be an individual or individuals starting a company from scratch, using their own resources or the resources of investors. They take on a significant amount of risk in order to start the company, and are entitled to all of the rewards, divided in whatever manner has been arranged. Intrapreneurship is a similar concept, except that it takes place within the context of an existing company. The company provides some of the resources to the intrapreneurs, and in exchange receives some of the benefits associated with the venture. This subtle difference with respect to risk and reward characterizes much of the difference between entrepreneurs and intrapreneurs. This paper will analyze the differences between the two and explain how this affects the firm.

Many organizations seek to encourage intrapreneurship as part of their innovation pipeline. They attract a segment of worker that seeks to innovate and drive new businesses, but needs the risk/reward profile more associated with a corporate environment than a true entrepreneurial environment (Hisrich, 1990). Intrapreneurship also represents a deviation from the norms of doing business for most corporations. There are a number of different dimensions that identify how intrapreneurship can affect the culture of an organization (Antoncic & Hisrich, 2003), but organizations that can successfully foster an intrapreneurship environment often become more innovative as a result, when compared with more centralized organizations.

Electronic Arts is one company that has long had an intrapreneurship program. The company has used this to develop a number of different games and lines of games within its overall corporate umbrella. EA does this in part as a retention strategy, in order to avoid having its best developers quit to start their own studios, which would ultimately compete with EA. Many of EA's titles originally spawned from intrapreneurs, a situation that mirrors most major technology companies (Takahashi, 2000).

Because intrapreneurship is so extensive at Electronic Arts, it has become part of the corporate culture. However, that does not mean that there are not issues relating to the high level of intrapreneurship. The company has enjoyed commercial success with some of the products created by the intrapreneurs, and this has encouraged a number of top developers to build their own studios within the company rather than to leave the company in order to pursue their projects. The company has, however, been forced to structure its operations largely around these individual studios, making it a relatively decentralized operation, with locations and studios around the world. EA has become something of an incubator/marketer, where studio heads operate with significant autonomy in exchange for delivering products that the company can take to market.

This decentralization results in some challenges, however. While only the top developers / project managers can be greenlighted for intrapreneurial activities, that they enjoy significant autonomy takes some of the deadline pressure and the ability to direct development away from the central location. The company must maintain strong communications links to the spinoff companies in order to know what is coming down the pipeline, so that the company can coordinate its production and marketing efforts. This coordination is one of the biggest challenges of having an organization that emphasizes intrapreneurship so strongly.

Another major challenge faced by companies like EA that have strong intrapreneurship programs is talent management. While the program was developed in order to retain the company's top talent, and avoid having them compete with EA with their own studios, this intrapreneurs also siphon off talent from other projects. If a new studio is created, it will inevitably be staffed partially with existing EA people, and that means they are going to be diverted from their existing work. This creates a problem for the company in that there can be a high level of turnover within divisions of the company, and many people leave in the middle of ongoing projects.

Another issue that needs to be resolved for EA is that of resentment among employees who are not afforded intrapreneurship activities. The company cannot support intrapreneurship for any employee who wants it -- scarce company resources must be used wisely. The challenge, however, is that some good people may be turned down, and may resent the increased autonomy and profit earned by intrapreneurs, while they toil within the more centralized corporate structure. One solution to this problem that EA devised was it offered stock options in EA.com to all of its employees, whether they were involved or not, in order to increase both their loyalty to the company and their financial stake in the company's success as well. This of course represents an increase in the cost of intrapreneurship, one that works best when the company's stock market performance is strong.

Intrapreneurship is one approach to advancing a new product, but there are other approaches that might work better in other industries. Traditionally, new products were kept entirely in-house, but this has the risk that the developer will either hold back the development if they think the idea is good enough, or that the developer will resent not earning a portion of the profits from the idea. Corporate-level stock options can help to address that problem, but ultimately these are a poor substitute for the benefits of either intrapreneurship or entrepreneurship.