While entrepreneurship is the act of starting up an enterprise from scratch, intrapreneurship is that of doing so within an existing larger organisation. There’s been a lot of focus on the rewards of entrepreneurship and the asymmetric and exponential returnsone can make if the idea succeeds. This potential for phenomenal returns has led to an expansion in venture capitalism (VC).

Since it takes only two out of ten investments to succeed and lead to an Internal Rate of Return (IRR) as high as 20 per cent, entrepreneurs are a lucrative proposition for VCs.

While the challenge in entrepreneurship lies in its entry barriers, the fruits of success — its returns — make it worth the trouble.

Ab ovo

Starting with a clean slate can be extremely risky, especially when building a new enterprise.

In its formative stages the enterprise is sensitive not only to vagaries of macro-economics , but also the absence of deep pockets needed to take on larger competitors pose challenges. Thus at infancy most VCs and start-ups fail.

In the end the returns are worth the risk, you may say, but what if similar returns can be generated without the same levels of risk?

When established companies venture into new products/services or new businesseventures under the umbrella of the larger organisation they become entrepreneurs, as an entity now termed ‘intrapreneurs’.

What-preneurship?

Intrapreneurship can generate the returns equivalent to a new venture but with limited downside risk.

The reduced risk comes from the existing organisation’s established goodwill, network, people, processes, learning and so on which can be tapped by the new experiment — thus improving its odds for success.

In addition to reduced risk, intrapreneurship has the benefit of lower costs since support systems and vital processes such as finance, IT and so on can be tapped from existing cost centres .

To that extent intrapreneurship ventures can also get off the ground faster in comparison to first-time start-ups.

Many large organisations have successfully diversified with this. Titan, for example, entered the jewellery (through Tanishq) and accessories (through Fastrack) markets, Horlicks ventured into biscuits and nutri-bars from beverages; similarly Indian banks went into insurance and asset management.

There have also been cases of new business spawning into entities larger than the parent, such as Apple.

The good news for investors here is that word about most of these intrapreneurships go public early in the day; if the investors think the idea is hot, they can participate as well by investing in the listed parent company.

Trade-offs

A lot of times established companies feel limited by the stage of the life cycle that they find themselves in and are resigned to the average returns generated by mature companies. But they can change this and accrue the high returns generated in their early stages through new entrepreneurial ventures; through intrapreneurship ideas.

On the one hand, some CEOs believe such experimentation could threaten the existing reputation of the company or brand if the new idea were to fail. Likewise, a few others believe these experimentations to be an anathema to the idea of core competence.

On the other, it can be argued that in today’s world of disruptive change, the risk of falling prey to an upstart is far higher than the risk of small failures in trying to stay relevant to customers.

Plus, there are various ways to hedge the risks of intrapreneurship for instance by way of sub-brands, entering into related areas, and testing through pilot launches.

In fact core competence itself, if defined in the right manner, can aid creative growth while reducing the risk of failure.

Apart from issues on consensus of it being a good ‘way forward’ or not, there are other systemic issues which plague intrapreneurship activities in comparison with entrepreneurship. Bureaucracy, lack of nimbleness and passion, pulling the plug too early, or allowing problems to fester until it’s too late are some.

All in all, given the risks and rewards enumerated, the onus to decide falls on you — entrepreneur or intrapreneur?

(The author is a business consultant and views are personal. Feedback can be sent to >perspective@thehindu.co.in. )

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