The Innovator’s Advantage: How to Unlock Employees’ Entrepreneurial Spirit

Do Innovative People Make the Best Leaders?

Our research findings carry two important implications for top management teams and HR leaders.

First, they present an effective method for identifying leadership potential within organizations. Predicting an employee’s ability to succeed as a future leader sometimes feels like a low-
probability game of chance. Managers and HR professionals often rely on pastperformance to predict future leadership effectiveness. Yet, in a study of nearly 2,000 employees who were identified as having high potential based on typical metrics of past performance (i.e., being in the top 5% of performers), nearly 50% of those people were rated below average in leadership effectiveness based on feedback reports (Zenger and Folkman, 2017).

According to the study, general measures of past performance are not sufficient to predict future leadership success. This underscores the fact that past job performance may not always serve as a reliable indicator of underlying leadership qualities.

Our research offered an alternative to relying solely on historical performance metrics. HR leaders can enhance their promotion screening processes by considering candidates’ experience in corporate entrepreneurship. Employees who successfully launch internal ventures demonstrate their value in ways that extend beyond conventional performance metrics, showcasing their initiative, vision, and leadership capabilities that are crucial for shaping the company’s future.

Second, our research indicated that merely paying lip service to innovation and entrepreneurship is not enough. To truly harness the talents of entrepreneurial employees, organizations must create a supportive ecosystem that not only encourages innovation but also empowers employees to take ownership of their ideas and see them through to fruition.

Such an environment will benefit both entrepreneurial employees by advancing their careers and the organizations themselves by giving them a competitive edge and long-term sustainability.

6 Ways to Build a Pipeline of Innovation

Given the impact of innovation skills on career success, how can HR leaders take full advantage of corporate entrepreneurship to build a high-octane talent pipeline? Here is your playbook:

1. Train for Entrepreneurial Behaviors

Innovation is not just a random spark of genius, it is a skill that can be developed. In the bestselling book, The Innovator’s DNA: Mastering the Five Skills of Disruptive Innovators (Harvard Business Review Press, 2011), Jeff Dyer, Hal Gregersen, and Clayton M. Christensen identified key skills that distinguish innovative entrepreneurs and executives from ordinary managers. Building on their work, HR leaders can implement programs designed to teach employees these entrepreneurial skills: questioning, observing, networking, and experimenting.

Training programs that focus on developing and encouraging these behaviors help build a foundation for internal innovation and empower employees to take ownership of their ideas.

2. Create a Framework for Internal Venture Creation

HR should establish formal mechanisms for employees to pitch, develop, and implement new ventures. For example, Amazon has its well-known “working backwards” process, while Nike has a dedicated space known as the “Innovation Kitchen,” where teams are encouraged to experiment and develop new products and technologies.

By giving employees a clear process for translating their entrepreneurial efforts into concrete projects, HR can promote a culture where innovation and venture creation are both encouraged and achievable.

3. Recognize and Reward Internal Entrepreneurship

To reinforce the value of entrepreneurial efforts, HR must design recognition and reward systems that align with new venture creation. These should go beyond financial incentives and spotlight successful intrapreneurs through internal communications, provide them with additional professional development opportunities, and fast-track them for promotions.

For instance, Intuit has an Innovation Catalyst program that trains employees to become champions of innovation within their teams. Employees who successfully implement innovative ideas receive formal recognition, such as the Scott Cook Innovation Award (named for Intuit’s co-founder) or opportunities for career advancement. This approach not only incentivizes employees to pursue entrepreneurial activities but also signals to the entire organization that innovation is a valued pathway to leadership.

4. Champion Cross-Functional Networking

One of the most critical components of entrepreneurial success is the ability to build diverse networks. HR can facilitate cross-functional networking by organizing workshops, networking events, and collaboration platforms to focus on innovation.

For instance, Deloitte’s Greenhouse locations invite clients and their teams to participate in workshops, bringing together stakeholders from various functions to address specific challenges. By connecting employees with peers from different departments, industries, and external experts, HR creates a fertile environment for idea exchange and innovation.

5. Differentiate Talent Management in Large Organizations

In large companies, where the sheer scale can make it difficult for managers to observe individual contributions, HR can use new venture creation as a key indicator of leadership potential.

By tracking employees who successfully initiate and manage new projects and ventures, HR leaders can more accurately identify high-potential candidates for leadership roles. This is particularly important given that traditional performance metrics may not fully capture an employee’s capacity for strategic thinking and risk management.

6. Address the Negative Image and Risks

It is equally important to acknowledge the risks and potential downsides faced by entrepreneurial employees.

Those who challenge established norms or experiment with new ideas may sometimes be seen as rebels, nonconformists, rule breakers, or uncoachable players. HR must take a proactive role in mitigating these perceptions by educating managers about the value of entrepreneurial activity and establishing policies that support constructive feedback and failure as an important part of being a learning organization.

When It Comes to Encouraging Innovation, Org Size Matters

The benefits of corporate entrepreneurship don’t play out the same way in all companies. In larger organizations, where it’s easy for employees’ day-to-day activities to go unnoticed, the impact of new venture creation is even more pronounced. It’s a way for high-potential employees to raise their hands and say, “Notice me—I’m ready to lead.”

Smaller organizations, where everyone’s contributions are more visible, may see fewer direct financial rewards from internal ventures. Instead, promotions may be the outcome because smaller companies often reward success with career growth rather than hefty bonuses.

HR leaders need to understand how organizational size influences the signaling power of new venture creation. In large corporations, the focus should be on making these entrepreneurial achievements as visible as possible. In smaller companies, tying promotions directly to entrepreneurial activities can provide the incentive employees need to take risks and innovate.

Build a Culture That Fuels and Supports Innovation

Our findings provide an important road map for how executives can leverage corporate entrepreneurship to drive both company growth and employee career success. Encouraging employees to engage in entrepreneurial behaviors, such as questioning, observing, networking, and experimenting, is crucial. However, to fully realize the benefits of these activities, leaders must provide structures that allow employees to turn their innovative thinking into actionable projects, new programs, or internal corporate ventures

Moreover, leaders should recognize that the signaling effect of new venture creation can be especially powerful in larger organizations, where it can serve as a key indicator of an employee’s leadership potential.

In essence, corporate entrepreneurship is not just about driving new business growth, it’s about building a dynamic workforce equipped to navigate and lead in a rapidly evolving marketplace. By nurturing a culture that values entrepreneurial behaviors and supports and even rewards new venture creation, executives can position their organizations for sustained innovation and their employees for long-term career success. This is likely to pay off, especially in the long term, as employees are less likely to leave to start their own ventures.  

Jeff Dyer is the Horace Beesley distinguished professor of strategy at Brigham Young University and the author of two books on innovation.

Alyssa Liang is a visting assistant professor of organizational behavior at the Olin Business School at Washington University in St. Louis.

Markus Baer is a professor of organizational behavior at the Olin Business School at Washington University in St. Louis.

Zachariah Rodgers is a global programs lead at McKinsey & Company and a social impact fellow at the University of Pennsylvania.

Brad Winn is a professor of leadership and strategy in the Huntsman School of Business and executive MBA director at Utah State University.