Entrepreneurship. You can almost see the shudders -- and the hunger -- that word produces in the heart of corporate America.

Picture Exxon Corp. headquarters during a discussion of new ventures in the 1970s. Getting into the office-equipment and high-efficiency electric motors markets, Exxon Enterprises lost an estimated $600 million in the 1970s. Many of the original dreamers resigned, driven away by the corporate management style, while the companies themselves, starved for new ideas, floundered.

Or consider Hewlett-Packard Co. and Atari. In the 1970s each company failed to listen to a young employee with an idea for a new product. So Steven Job quit his post at Atari, and Stephen Wozniak left Hewlett-Packard, and together they formed Apple Computer, which currently holds 23% of the booming $2.4 billion personal computer market, leaving their former employers to try to catch up in the new industry.

The problem, says Gifford Pinchot III, president of New Directions Group in Norwalk, Conn., is that corporations don't manage people, they manage ideas. Attempts to integrate the entrepreneurial spirit inside large organizations have failed because corporations don't pay enough attention to the entrepreneur himself -- the gamesman and dreamer driven more by the need to see his vision in action than by money or the love of business. But Pinchot, 40, says he can teach businessmen, large and small how to incorporate the entrepreneurial mode into their operations. He calls his concept "intrapreneurship. ' '

Look at the difference between the relationship a venture capitalist has with an entrepreneur and the one a corporate new-venture group has with the manager of a new venture, Pinchot tells his clients. The first major difference, of course, is the success rate: Venture capitalists have been booming for a decade, while new venture group after new-venture group has shut its doors after five or six years. But that success rate is a direct consequence of differences in selection, management, and reward for the individual behind the innovation. The corporate venture group looking for a project generally considers such issues as projected return, fit with corporate strategy, market research results, and business plan. Venture capitalists, on the other hand, look primarily to the individual -- "They say, 'I would rather have a Class A entrepreneur with a Class B idea than a Class A idea with a Class B entrepreneur,' " Pinchot insists.

Once a venture capitalist selects a trusted team, that team is given a loose rein to follow its vision, since the development of any new idea demands rapid, on-the-spot, and often intuitive decisions. In a corporate setting, on the other hand, the original dreamers are often considered "too emotionally involved" with the idea to be trusted with major decisions or discretionary funds, so decisions are passed up the line to others less familiar with the situation. Corporations usually reward the innovator with bonuses, raises, and recognition; the entrepreneur who succeeds with a venture capitalist receives capital of his own to follow whatever dream may strike him next.

But it is possible, Pinchot argues, to follow the venture capital mode within an already established company, by adhering to his guidelines for intrapreneurship (sic). To begin with, the company has to recognize that intrapreneurs, like entrepreneurs, are largely self-selecting volunteers "in the grip of a vision, with a burning desire to execute it," rather than someone designated to be innovative. To be selected as intrapreneurs, Pinchot argues, candidates should be willing to take a risk themselves -- perhaps putting up 20% of the cost of the project, up to 10% of their salary over the project life -- assuming the future reward is clearly agreed upon.

Once chosen, the intrapreneur should be managed loosely, with his superior acting "as coach and mentor" rather than as an authority figure. While the corporation can legitimately insist on a frugal budget, the intrapreneur must have complete line discretion, since situations and priorities constantly change during the development of a new idea. Additional funding should be triggered by events -- increased sales, for example, or the completion of a prototype -- not by calendar time. Since Pinchot estimates that each handoff increases the probability of failure by 90%, the corporation must be willing to see the project through, letting the intrapreneur keep control of his project until second-generation products are successfully launched and the business reaches $5 million to $50 million in sales, a process he estimates should take 5 to 10 years.

It is Pinchot's idea for compensation of the intrapreneur, however, that is most innovative. "What the entrepreneurial personality really desires," he says, "is greater control of his or her own destiny, which means greater ability to execute his or her ideas. What they want is increasing access to corporate resources and discretion to spend corporate funds on further innovation. "

Pinchot's solution is called "intracapital." If, for example, a company's rerurn on an intrapreneurial project were $1 million, the intrapreneur's share might be 10% -- $10,000 in cash and $90,000 in intracapital, funds the intrapreneur could then invest on the corporation's behalf in future projects of his own choosing, either another new venture of his own or the project of a co-worker. Access to capital as a form of reward entails betting on winners, gambling that the intrapreneur, successful once, may be successful again. It gives the intrapreneur freedom, but also establishes a bond between the innovator and the company, since an employee who built up a large share of intracapital would be less likely to leave the vested interest he has developed.

Pinchot is himself a classic entrepreneur, a Harvard University honors graduate in economics, a former blacksmith, and a holder of multiple patents, who founded five different companies and brought some 200 new products to the market. And intrapreneurship is a classic American management innovation, developed in this country but first tested overseas, at a Swedish school for intrapreneurs that has produced 20 new businesses for 10 Swedish corporations over the past two years. In 1982 Pinchot and New Directions brought the idea home in a series of seminars across the country. And early this year New Directions will establish an American School for Intrapreneurs in Tarrytown, N.Y.

"We are finding," says Pinchot, "that high-tech companies whose fate depends on successfully competing for the best grade of talent welcome intrapreneurship. Our clients range from large firms, such as AT&T, to medium-size firms, such as Atlantic Cement Co. and Fairfield Engineering, looking for new ways to innovate."