Entrepreneurship in Organizations:
Entrepreneurship can also practice in large organizations. As conventional wisdom says, ‘ Big businesses don’t innovate. But there are plenty of exceptions like J & J, 3M, Citi Bank, etc., who constantly spent their efforts in developing new products, businesses or services. They outrun their competitors mainly because of their innovations. In India too, companies like Ranbaxy, Hindustan Lever Limited, etc., have also innovated continuously and hence have given their competitors run for their money.
NEED FOR BLENDING ENTREPRENEURSHIP WITH PROFESSIONALISM
The next question is, should the organizations practice professionalism or entrepreneurship or both. Success cannot, one might say be continued forever. Businesses are, after all creations of man which have no true permanence even the oldest businesses are creations of recent centuries. But a business enterprise must continue beyond the lifetime of the individual or of the generation, to be capable of producing its contributions to economy and to society. The perpetuation of a business is a central entrepreneurial task – and ability to do so may well be the most trenchant and definitive test of a management.
A business enterprise can exist in an expanding economy, or at least in one which considers both natural and acceptable. And business is the specific organ of growth, expansion and change. The second function of a business is therefore innovation – the provision of different economic satisfactions. It is not enough for the business to provide just any economic goods and services; it must provide better and more economic ones. It is not necessary for a business to grow bigger; but it is necessary that it constantly grow better.
The most productive innovation is a different product or service creating a new potential of satisfaction rather than an improvement. Innovation is not invention. Innovation converts society’s needs into opportunities for profitable business.
Everyone of the greatest business builders we know of – from J.R.D. Tata to Subash Chandra of Zee TV, had a definite idea, had, indeed a clear theory of the business which informed their actions and decisions. A clear, simple and penetrating theory of the business rather than intuition characterizes the truly successful entrepreneur, the man who not just amasses a large fortune but builds an organization that can endure and grow long after he is gone. The individual entrepreneur does not need to analyze his concepts and explain his theory of the business to others, let alone spell out the details. He is in one-person thinker, analyst and executor. Business enterprise however requires that the theory of the business be thought through and spelled out. It demands a clear definition of business purpose and business mission. It demands asking, “ What is out business and what it should be?”
Unlike the single entrepreneur, business enterprise requires continuity beyond the life span of a man or of any one generation. The word entrepreneur is derived from German ‘Unternehmer’, which means the top man and especially the owner-manager. He alone knows what the business is all about and alone makes decisions. Everybody else is essentially a technician who carries out prescribed tasks. No one but the Unternehmer needs to understand the mission and purpose of the business. Indeed, no one should really know and understand. Unternehmertum – Entrepreneurship is a mystique that better is kept hidden from the uninitiated i.e., ordinary managers and professionals.
This may have been adequate in the 19th Century business in which there were a few men at the top who alone made decisions, with all the rest manual workers or low-level clerks. It is a dangerous misconception of today’s business enterprise. Today’s business enterprise brings together great many men of high knowledge and skill at practically every level of the organization. But high knowledge and skill also mean decision-impact on how the work is to be done and on what work is actually being tackled. They make, by necessity, risk-taking decisions, that is, business decisions, whatever the official form of organization. This led to professionalism in management in the early 1900s. This gave rise to the inception of management sciences as a separate subject of interest.
Management sciences:
Management science talks about a systematic way of managing business, understanding various concepts and applying them in managing organizations. It deals with organized thought in managing the enterprise risk making, risk-taking and decision-making. Management science supply systematic supply of organized knowledge for the risk-taking and risk-making decisions of business enterprise in a complex and rapidly changing technology, economy and society.
The Entrepreneurial Manager:
From now on, managers will have to concern themselves more and more with creating the new in addition to optimizing the already existing. Managers will have to become entrepreneurs, will have to learn to build and manage innovative organizations. We face a period of innovation such as the one in which the modern industrial economy was born in the last half of the nineteenth century. Practically, all the industries that we consider modern today including aircraft and electronics grew out of these innovations in the late 19th and early 20th centuries. Now we face another period of major technological change in which the thrust of economic and industrial development will come from industries based on new technologies and their development. In sharp contrast to the late 19th century, much of the new technology will have to be developed and above all, will have to be applied in and by already existing businesses.
These days increasingly, often-large organizations have to look for innovation for the simple reason that both the trained people and the money needed to develop the new are concentrated in existing and usually large organizations. Managers will therefore have to learn to run at one the same time, an existing managerial organization and a new innovative organization. Such a manager is called an entrepreneurial manager.
An entrepreneurial manager, apart from managing and improving what already exists and is already known, has to redirect resources from areas of low or diminishing results to areas of high or increasing results. He has to slough off yesterday and to render obsolete what already exists and is already known. He has to create tomorrow. He has to make the business of tomorrow. Inherent in the task is innovation.
Making business of tomorrow starts out with the conviction that the business of tomorrow will be and must be different. But it also starts out of necessity with the business of today. Making the business of tomorrow cannot be a flash of genius. It requires systematic analysis and hard rigorous work today and that means by people in today’s business and operating within it. The specific job of Entrepreneurship in business enterprise is to make today’s business capable of making the future, of making itself into a different business. It is the specific job of Entrepreneurship in the going business to enable today’s already existing and especially today’s already successful business to remain existing and to remain successful in future.
Professionalism without Entrepreneurship:
Hindustan Motors which is a professionally managed company, is not able withstand the competition. Their sales have declined continuously. The main reason for that they have not innovated. They have not practiced Entrepreneurship. They had not introduced new models in the market and were totally caught unawares when the market was flooded with plenty of models from other automobile companies including MNCs. But recently, they have woken up and started working towards improving the efficiency of the organization.
Today’s businesses, especially the large ones, simply will not survive in this period of rapid change and innovation unless they acquire entrepreneurial competence. In many cases, the Entrepreneurship needed can only come from existing businesses. Some of the giants of today may well not survive the next twenty-five years. But we now know that the medium-sized business is particularly well positioned to be a successful entrepreneur and innovator, provided only that it organizes itself for entrepreneurial management. It is the existing business – and the fair-sized rather than the small one – which has the best capability for entrepreneurial leadership. It has the necessary resources, especially the human resources. It has already acquired managerial competence and built a management team. It has both the opportunity and the responsibility for effective entrepreneurial management.
HOW TO BLEND ENTREPRENEURSHIP WITH PROFESSIONALISM?
So far we have seen the importance of Entrepreneurship for a Professional organization. But the process of making an existing organization entrepreneurial is not so easy. Conservatism along with bureaucracy will stand against all entrepreneurial efforts of the organization. Moreover the existing business itself will, if it is very successful, prevent the organization from going entrepreneurial. Because any existing business will have daily crisis, which is to be attended without any delay, the organization will tend to spend all its energy in this fire fighting. It will try to modify, to improve the existing business condition, and all the entrepreneurial efforts will get lost in the process. This is because of the unpromising, puny nature of any innovation in front of an existing successful business.
The growing business must not only recognize that customer needs will be constantly changing, but must also make all of its business processes more effective by devising a strategy to enable the development of a continuous improvement culture. It must be geared to the elimination of waste in all its forms so that price pressure can be met from reducing operating cost rather than through reduced margins.
The focus of management has to change from being directive – passing down rules and regulations to the work place to being supportive- customer focussed in a learning, no-blame environment, to create an empowered, highly skilled work force, who had been trained in all of the tools and techniques like Kaizen or continuous improvement. The acceptance of the need for a continuous improvement culture involves a radical change in the way we think about the structure of an organization.
The Metal Box India Ltd., which was the leader in making metal tins, continued to fight against the market, when the market was going for plastic boxes, and finally got wiped of from the scene. The mistake on the part of metal box was that it did not change itself even when the market demanded, when others were doing proactive innovation. The company had thought that it was in the business of making metal tins, and not in the business of making containers. This kind of ‘marketing myopia’ will hinder Entrepreneurship in a company. How to avoid all these obstacles and make a company entrepreneurial forever?
Obviously for an organization to be entrepreneurial, entrepreneurial spirit and creativity should be developed. Not just the creation of such motivation is enough for maintaining the same. In many organizations, which were found by entrepreneurs, the entrepreneurial enthusiasm dies as the company stabilizes itself in a business. In few cases like Walt Disney in US, after the death of the founder, the companies went down, if not collapsed. Hence even if the CEO of a company is entrepreneurial and he is able to articulate the spirit inside the organization, unless some kind of a system is developed for innovations, the company would lose all the spirit of entrepreneurship and would perish.
For an organization to be structurally entrepreneurial, the following are required. They are:
- Entrepreneurial policies
- Entrepreneurial practices
- Measurement of innovation
- Structure for innovations
Entrepreneurial Policies
- Innovation rather than holding on to what already exists, must be made attractive and beneficial to managers. There must be clear understanding throughout the organization that innovation is the best way to preserve and perpetuate that organisation, and that is the foundation for the individual manager’s job security and success.
- Importance of the need for innovation and the dimensions of its time frame must be both defined and spelled out.
- There must be an innovation and the dimension of its time frame must be both defined and spelled out.
How to make innovation attractive to managers?
There is only one way to make innovations attractive to managers - a systematic policy of abandoning whatever is outworn, obsolete, no longer productive, as well as the mistakes, failures and misdirected efforts. Every three years or so the enterprise must put every single product, process, technology, market, distribution channel, not to mention every single internal staff activity on trial for its life. It must ask, “Would we now go into this today?” If the answer is “No”, one does not respond with, “Let’s make another study”. One asks, “What do we have to do to stop wasting resources on this product, this market, this distribution channel, this staff activity?”.
The second policy needed to make an existing business ‘greedy for new things’, is to face up to the fact that all existing products, services, markets distributive channels, processes, technologies, have limited and usually short health and life expectancies.
An analysis of the life cycle of existing products, services and so on should lead to a diagnosis. This in turn requires judgement. It requires knowledge of the business, of its products, its markets, its customers, its technologies. Peter Drucker calls this analysis “Business x-ray”. This analysis challenges all the knowledge that can be found in a company. It will and should promote dissent. It declares the action that follows from classifying this or that product as today’s breadwinner is a risk-taking decision, since today’s breadwinner may be on the verge of becoming yesterday’s breadwinner or having unjustified specialty or as an investment in managerial ego.
How much innovation, in what areas?
Michael J Kawi’s model comes with an answer for this. In this approach, the company lists each of its products, also the markets each serves and the distributive channels it uses in order to estimate their position on the product cycle. How much longer this product still grows? How soon can it be expected to age and decline and how fast? And this then shows the gap between what can be expected realistically and what the company still needs to do to achieve its objectives, whether in sales, in market standing or in profitability.
The gap in the minimum that must be filled if the company is not to go to downhill. Hence the entrepreneurial achievement must be large enough to fill it before the old become obsolescent.
Systematic Abandonment
To render an existing business entrepreneurial, management must take the lead in making obsolete its own products and services rather than waiting for a competitor to do so. The business must be managed so as to perceive in the new as opportunity rather than a threat. It must be engaged to work today on the products, services, processes and technologies that will make a different tomorrow.
Entrepreneurial Plans
Business x-ray of existing products, services, markets, technologies and this definition of innovation gap and innovation need, and these together enable a company to formulate an entrepreneurial plan with objects for innovation deadlines. Such a plan ensures that the innovation budget is adequate. It determines how many people are needed with what abilities and capacities. Only when people with proven performance capacity have been assigned to a project, supplied with the tools, the money and the information, they need to do the work, and given the clear and unambiguous deadlines, only then we have a plan. Until then we have ‘good intentions’ not ‘plans’.
Entrepreneurial practices
An entrepreneurial organization should also follow certain managerial practices, which enable the company to move ahead in the entrepreneurial path.
Almost all companies have monthly reports submitted to the management, on operating performance, once a month or so. All these reports talk about shortfalls, problems and the achieved performance against the budget or plant. What they completely ignore are the opportunities. All unexpected successes are the symptoms of innovative opportunities. The normal tendency of people, who look for problems, will be to ignore these unexpected successes, as they are already good without their messing up. An entrepreneurial company should have monthly reports and meeting especially to discuss the opportunities identified in the month.
Secondly, entrepreneurial companies should always look for the people and units that do better and do differently. They single them out, feature them and constantly ask them ‘What are you doing that the rest of us are not doing and what are you not doing that rest of are?’ For this purpose few corporations have annual or biannual meetings for the whole company where entrepreneurial groups or entrepreneurial managers or units who have innovated in the recent past are asked to present a report on their success, how and where they found their opportunities, etc.
The third practice that will be of particular importance to large companies is a session in which a mentor of top management sits with senior people from all departments and asks them about their aspirations, the opportunities and threats for the company according to them. These sessions are to be informed and at the same time scheduled and well prepared. These sessions are excellent vehicles for upward communication, to serve as means to enable lower and middle management professionals, to look up from their narrow specialization and see the organization as a whole.
Research work:
Some of the research findings by Prof. Deshpande of Harvard Business School are given below: Generally organizations adopt any of the following 4 practices in management:
- achievement-oriented and competitive,
- more flexible, creative, and entrepreneurial.
- teamwork and loyalty
- strong hierarchies, organization, and order.
Once again the research showed that the prevalent organizational culture varies among countries. While Japanese firms, for instance, typified the clan-like culture, the Chinese companies tended to be more formally organized yet also entrepreneurial. However, it was also discovered that joint-venture firms in China were more competitive and less bureaucratic than state-owned enterprises. But despite these differences, the similarities of corporate culture among the most successful companies continued to prevail—even when the companies were state-owned rather than privately held, as in China.
The role of innovation among high-performance companies in developed nations notwithstanding, the most significant lever among emerging-market firms is customer orientation. The reason for this difference is that since Western firms have already reached a threshold in customer orientation, they have to try other approaches to succeed. This is one of several exciting areas for further study.
The consistently high emphasis on marketing found among the most successful firms appears to hold true within different contexts. The rapid dissemination of learning in regard to corporate performance enables executives to effect organizational innovation very quickly. And despite differing political systems, there is a growing convergence toward free markets. The research team’s sampling method enabled them to compare consumer-goods organizations with industrial firms, product companies with service providers, and small operations with large ones. In each environment, the reigning corporate culture was market-driven and competitive.
Assigning top priority to innovation and customer orientation really does pay dividends. It is also clear that building and sustaining a strongly entrepreneurial culture drives companies toward success and high performance. But no organizational culture should be of just one type. Executives must create a blend to achieve optimal results. The ideal corporate culture, therefore, is “The best representation of all,” that combines the disparate and frequently beneficent attributes of lesser beings into one of extraordinary capability and power. In the best companies, the whole is truly the sum of several parts.
Measurement of Innovation:
For any organization to be receptive to entrepreneurship, the innovative performance is to be measured regularly. This measurement should take place in the overall control mechanism of the organization itself. Without such measurement, the innovation will not get activated at all.
Firstly, for each entrepreneurial project, the company should have targets and time frame. A report on the achievement against the targets is to be reviewed once for a quarter. This will give the effectiveness of the entrepreneurial plans and the efforts in the implementation of those plans.
Secondly the organization should have a system for annual review of all the entrepreneurial projects. Here the decisions are made as to which projects are to be expedited by means of more funding and more manpower and which are the under-performing projects whether to abandon them or not or how to turn them around. These decisions are to be taken depending on the nature and importance of the projects.
Finally the organization has to review its overall innovative performance against its objectives and market position. The top management takes decisions regarding the plans of future course of action. Main idea behind this is that the organization should not fail to see new opportunities when it is involved in ongoing entrepreneurial projects.
In all these reviews the relative importance between projects can not be quantified exactly but judgements can be made depending on the long-term goals of the company, predicted market conditions for the future etc.
Structure of an entrepreneurial unit
In any organisation the entrepreneurial unit or project has to be organized separately from the existing one. The reason behind this is that the existing business will always requires time and effort. If an innovative business is clubbed with an existing one., the people responsible will be tempted to give more attention on the day to day affairs of the existing business, postponing anything related with the new one, until it is too late. Hence existing unit will be able to extend, modify and adapt the existing unit and can not develop something new.
Hence all entrepreneurial efforts in a company should be given a separate organizational structure. It could either be a separate unit reporting to the head of the organisation or a special project reporting to a top level manager of the organisation, one of the major responsibilities of whom will heading all entrepreneurial projects in the organisation. In the later case as it grows the project develops into a separate unit. In no case any entrepreneurial project should be attached to a department or division which is heavily involved to the regular operations of the company.
The locus of the new – entrepreneurial unit must start from the higher level. This will enable the entrepreneurial unit or project which is feeble and week, to get enough representation and support from the top management. The top man involved, should get the needed resources for the new project and should constantly evaluate the progress of the project and report them to the top management regularly apart from directing it closely from within it.
Specific Organizational Structure
Conclusion:
Professionalism in management as a concept is fairly young. Management as a field of study began receiving attention only from the beginning of this century. Until 1900, there were only small scale traders in operation. Hence entrepreneurship has always been there, from time immemorial. As the size of the businesses grew and as difficulties arose in managing large numbers of workers and an even large number of tasks, people started thinking about whether there was a more systematic way of going about things.
This need for an organized way of working led to the early schools of management thought such as Taylorism and the 14 principles of management of Fayol. Since then there have been hundreds of new theories as will as improved versions of the original ones. As a race, some of us have become so involed with our “here and now”, that we have forgotten why we are and where we are.
Professionalis was developed not as a subsititute for, but as a complement to entrepreneurship. Professionalism might tell you the various steps to be followed in starting a business and the best way of dong things once you are in it. But to do all this, one still has to START a business, which is why entrepreneurs are indispensible. Professionalism simply makes the entrepreneurs job easier by giving him a set of rules he can follow at his own discretion and the so-called professional methods are nothing but the wisdom accumulated over the decades through experience.
To draw a simple analogy, professionalism is to an entrepreneur is like what a road map is to the traveller. The map has been drawn by persons who have travelled along the same road earlier. The map shows the different routes through which the traveller may reach his destination. It is upto the traveller to choose the route that will suit him best. Maps can also be confusing at times and its always possible for the traveller to reach his destination via obsucre foot paths and short-cuts which might not be featured on the map. In strange lands if the traveller chooses not to use the map, he always carries the risk of getting lost or wasting time in roundabout journeys while there was a shorter route available. And the map by itself does not a journey make. To serve its purpose existence, the map must be used by a traveller.
Similarly, professionalism and entrepreneurship should not be viewed as separate entities. Both of them complement each other. Success is not impossible for a person who chooses to exclusively follow one or the other. But a blend is always desirable, if not imperative as the case may be.
From a psychological study conducted by Mr. K. Ravichandra3, it is patent that in order to be successful, the entrepreneur of today can ill-afford to be in the dark about the rules of the game. Crucial areas such as financial management, inventory control, market research, support organizations, etc., can make or break your business. It no longer suffices to have just the ‘drive to succeed’, one has to have the complete know-how of the nitty-gritties involved as wlell. Starting and running a successful organization is a massive, complex task. The entrepreneur has to be aware of professional management techniques because they will help him to break down the mammoth task ahead of him into smaller, easier-to-handle tasks. And once broken down, the tasks can be delegated thus allowing the entrepreneur to do what he does best – INNOVATE.
From the professionally managed organization’s point of view, it pays to encourage entrepreneurital styles of functioning, with a shift towards leaner, flatter systems. For any industry, the pace of change is so fast that unless a company constanly innovates, it cannot dream of holding on to its market share.
Hence blending entrepreneurship and professionalism is not a choice but a necessity for the organizations to succeed.
Reference:
- ‘Going for it’, by Victor Kiam
- ‘Innovation and Entrepreneurship’, by Peter Drucker
- ‘Entrepreneurial Success – A Psychological Study’, by K. Ravichandra
- ‘Management – Tasks, Responsibilities and Practices’, by Peter Drucker
- ‘Harward Business Review’, issue
- ‘Manageing Strategic Innovation and Change’, by Michael L Tushman, Philip Andersen.
- ‘Creating Markets across the globe’,by Ashok Korwar
- ‘Going International’, B. Bhattacharya
- ‘Corporate Culture, Customer Orientation, and Innovativeness in Japanese Firms: A Quadrad Analysis.’ Journal of Marketing, vol. 57 (January 1993).