THE BLOG
01/04/2017 10:38 am ET

5 Intrapreneurship Issues to Consider Before Taking the Plunge

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By Jacob Chapman

While the concept of intrapreneurship has been around for decades and has been championed by some of the most innovative companies in the world (including IBM, Intel and Google) it is still not very well understood. When executed improperly, intrapreneurship can be a disaster for both the company and the intrapreneurs involved. I've seen it from both sides of the table and have identified a set of key issues every company and intrapreneur should consider before embarking on their journey.

There are different levels of intrapreneurship: Unofficial intrapreneurs are individuals in an organization who take responsibility for driving end-to-end product development -- potentially up to and including bringing the product to market. These are essentially the "star product managers" in an organization. In some instances though, these intrapreneurs may spin up independent businesses within the parent organization. These quasi-independent intrapreneurship situations are the ones that have the most potential, but also pose the greatest danger.

Keeping this in mind, here are the five most common issues plaguing intrapreneurship today:

Strategy Conflicts

Intrapreneurs usually start out by identifying a new or previously missed opportunity for the parent organization, and then pull together the resources to capture the opportunity. In these instances, the strategic alignment between the intrapreneur and the organization is obvious. The problem is traditional entrepreneurs at the idea/seed stage rarely (if ever) make it to market with the original product they envisioned.

As an intrapreneur, my team and I developed an interesting piece of advertising technology that modestly surpassed our industry's benchmarks. We soon realized the modest improvements we could deliver weren't compelling to our customers, but our ability to gather data across tens of thousands of websites was. Unfortunately, our parent organization was averse to data-centric business models and we weren't given the freedom to pivot. Intrapreneurs are plagued with an inability to respond to the needs and demands of the market, which takes an already difficult task (finding product-market fit) and makes it almost impossible.

Leadership Conflicts 

One of the few red flags that will always kill an investment deal with a venture capitalist is when a company's founders claim to be "co-CEOs." This doesn't work. In the context of intrapreneurship, there are always multiple CEOs. At a minimum, there are two: the intrapreneur and the parent organization's CEO. In some instances, there might be someone like a VP of Product, complicating matters even further.

With multiple CEOs, strategy and priorities are bound to shift over time, and team members could get confused and ultimately frustrated with dealing with inconsistent leadership. The parent organization's CEO of one intrapreneur I have worked with dictated a list of product development priorities to the intrapreneur's team, while the intrapreneur gave the team another set of priorities. In an environment like this, progress cannot be made.

Hiring Issues 

Top talent can choose between two kinds of companies: They can pick blue chip organizations, which while maybe less interesting can offer larger salaries and clear paths to advancement and stability. On the other hand, they can pick a startup where they will earn less in salary and where advancement options are less obvious, but they'll have substantial control over company's direction. Intrapreneurial companies usually end up with the worst of both worlds.

As an intrapreneur trying to hire talent, I was always asked what kind of equity package we could put together for prospective hires. Unfortunately, the answer wasn't a particularly attractive one. This meant we couldn't attract the kind of diehard talent startups typically seek. Rather, we attracted people interested in a corporate culture. Without the tools or structure to hire and retain top talent, intrapreneurial endeavors are operating at a disadvantage from the start.

Resource Conflicts

Intrapreneurial companies have complicated capitalization issues. Often, they are funded from corporate cash flows. This can be great when times are good, but it introduces uncertainties entirely outside the intrapreneur's control. If the parent has a bad quarter, funding may dry up for the intrapreneurial endeavor. Similarly, a slight shift in the parent organization's priorities may result in engineers or other resources being taken from the intrepreneur and put into other projects. I'll admit that when I was overseeing intrapreneurial teams, I would occasionally "steal" resources for other projects I was working on. Even with the best of intentions, these kinds of resource shifts happen all the time.

Culture Problems 

If you're an intrapreneur and you manage to avoid all the above problems, you're then likely to fall victim to culture issues. Running an intrapreneurial endeavor inside a larger organization successfully requires setting your own culture and following your own strategy. It might mean different face-time expectations, and it almost certainly means a more nimble operation. People in the parent organization who are not part of the intrapreneurial endeavor could potentially develop feelings of resentment.

Being an entrepreneur is extremely difficult, so it's not surprising many are attracted to the idea of intrapreneurship. It promises the same creative outlet as entrepreneurship with the stability of a traditional career. However, given the additional hurdles faced by intrapreneurs, most entrepreneurs would be better off taking the plunge and launching their business as an independent company.

Jake Chapman founded Gelt Venture Capital, where he leads seed stage investment in innovative and scalable technology companies.

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