3 Reasons Why Intrapreneurs and Entrepreneurs Play a Very Different Game

This post originally appeared on RocketSpace and written by Kati Holland.

Let’s cut to the chase: Intrapreneurs and entrepreneurs are very, very different.

An entrepreneur is someone who innovates by starting his or her own company (e.g., a startup), whereas an intrapreneur is an employee of a larger organization (e.g., a Fortune 500 company) whose job is to innovate within the corporation.

Intrapreneurs and entrepreneurs are clearly not the same, so corporations looking to innovate need to treat them accordingly. There are three important areas of difference that corporations must understand in order to increase their chances of successful innovation: risk and reward, company culture, and allocation of resources.

Risk and Reward

Risk-taking is practically synonymous with entrepreneurship. That’s because the most successful entrepreneurs accept the possibility of failure (and even value failure), as long as there’s a higher likelihood of success later on. However, unlike entrepreneurs, intrapreneurs don’t necessarily exhibit risk-tolerance attitudes.

After all, they’ve deliberately chosen to receive a steady paycheck from a corporation instead of a larger (but less certain) payout down the road. For intrapreneurs, the main risk is career-related; a significant mistake can cost them a beloved job and the steady paycheck they value so much. On the other hand, for entrepreneurs, making a poor business decision can oftentimes mean saying goodbye to a much-loved company—and to a product or service that they invested their heart, soul and maybe their retirement fund in. Any corporation seeking to innovate needs to recognize this major psychographic difference.

To some extent, financial rewards can help keep intrapreneurs motivated. These generally take the form of raises, bonuses and promotions. But current research suggests that money alone isn’t enough to increase motivation over the long term. It’s also important to provide intrapreneurs with non-financial incentives, such as one-on-ones with CEOs, peer recognition, achievement awards and public thank-yous. Because the structure of a corporation inherently places an upper limit on the amount of compensation that any intrapreneur can receive, employers need to encourage and reward risk-tolerant intrapreneurs by clearly valuing their accomplishments—and not punishing them for pursuing ideas that don’t materialize.

Company Culture

Entrepreneurs create their own company—and their own company’s culture. But intrapreneurs generally function within a corporation that already has an established corporate culture. This means that many intrapreneurs battle a long history of deeply ingrained behaviors and beliefs, many of which actually contradict intrapreneurship itself.

So how can a corporation create an intrapreneurial culture? Contrary to popular belief, building a corporate culture that genuinely fosters intrapreneurship isn’t about “creating” intrapreneurs—they already exist within the corporation. In fact, 20 percent of all employees exhibit some sort of entrepreneurial activity. But ignoring such actions or dismissing ideas because they stray from the norm leads to intrapreneurial activity and attracts less intrapreneurial talent.

Intrapreneurs need to be nurtured and encouraged. Here are eight pillars Google abides by in order to create a culture of innovation:

1. Try to improve something by 10 times rather than by 10 percent.
2. Launch innovation projects slowly, and wait for feedback before expanding them.
3. Share information openly.
4. Hire the right people.
5. Use the 70/20/10 model: 70 percent of projects are dedicated to one’s core business; 20 percent of projects are related to one’s core business; 10 percent of projects are unrelated to one’s core business.
6. Crowdsource innovation whenever possible.
7. Rely on data, not opinions.
8. Focus on users, not competition.

Allocation of Resources

Entrepreneurs are in charge of allocating limited resources, as they directly hire sales, design, marketing, operational and engineering talent. But intrapreneurs are employees and need to negotiate for resources, which can be scarce due to competing projects within the corporation.

Steve Blank, a Silicon Valley serial-entrepreneur and expert on corporate innovation, explains where corporations can go wrong: “Rather than realizing that managing the present and inventing the future are equally important and should be equally resourced, they often fight for the same resources. Often the execution engine deprives the innovators from access to valuable resources, like customers, brand, or skills. That means the innovators end up competing without any competitive advantage against the more nimble and agile startups.”

So, after determining that a corporate innovation project is worth the risk, corporates seeking to boost innovation must give intrapreneurs time to succeed and provide the needed financial resources. It’s also important to stick to your commitment after you settle on an innovation budget.

Corporate innovation experts Brad Power and Steve Stanton explain why organizations must fight the urge to tap into their corporate innovation resources to extinguish non-innovative, short-term problems: “In the battle between today and tomorrow, today will win every time unless the organization consciously, strategically decides to extend a helping hand to tomorrow.”