I work for a large company that does this. Granted it's all consulting, but promotion into the upper reaches depends on creating a successful nitch which is effectively an autonomous business. It’s not uncommon for someone to internally develop a piece of software, “sell” it to a government and then get a support contract. Pay is also directly linked to how successful their mini businesses are. However, they decided to mostly stick with consulting and don’t sell products directly to customers.

It's been tried in a lot of different settings, generally with very mixed results in my experience.

I started my career at Acxiom (think data warehousing/personal information data mining/etc...). Each division in Acxiom was split up into business units that all operated fairly autonomously. If you wanted to use company resources outside of your unit, you had to pay for them in real dollars from your business unit.

It led to all sorts of really bizarre product development. The particular product I was working on was one of three (that I knew of) within the company all doing almost exactly the same thing with very minor differences between them. One customer would ask for the tool and far to often business units would just start building it themselves.

Really the issue seemed to be that the failure rate for these business units was pretty close to startup failure rates. Which is simply intolerable for most companies. Your business shouldn't essentially be a big VC firm fronting a lot of small internal 'startups'.

I've run across several other examples at various levels of scale. Microsoft, in some ways, is organized along the same lines for one instance.

Isn't Google a good example of this with 20% time?

No because the reward is small compared to starting a startup. You might be lucky at Google and get a huge bonus, but it is not the same as having a cut of the money generated by your product.

Agreed...the system doesn't fully work. This is why people have to leave, create value, and then sell their companies back i.e. Vark

If Google gave employees even just 20% of profits generated from the products they build or prototype, that system would fully work for everyone.

You don't think 7 figures is enough of a bonus?

Considering the employees are taking zero risk, I'd say it's perfectly fair compensation.

http://news.softpedia.com/news/Chrome-Team-Gets-Millions-in-...