The Heart of Entrepreneurship
So you want your business to be more entrepreneurial and your employees more innovative and productive? But what does that really mean to you? I suspect that you want your employees to still provide the service and quality on which you have and are building your reputation but with the added ability to add value to your business without you having to be there all the time to tell them how.
So how do you go about creating a more innovative and entrepreneurial environment?
Firstly we need to understand what entrepreneurship means. The press often define the term as starting and operating a new business. Managers on the other hand describe entrepreneurship in such terms as innovative, flexible, dynamic, risk taking, creative and growth oriented and these views are often used to describe the success of organisations such as Apple Computer, Google and General Electric.
However none of these definitions are precise enough for managers wishing a more entrepreneurial organisation. For every successful company there are thousands of new restaurants, clothing stores, and consulting firms who have tried to be innovative, creative and growth oriented – yet have failed.
So how can you be different? How can you make innovation, flexibility and creativity operational? To help answer these questions, we need to look at entrepreneurial behaviour.
Numerous writers on the topic suggest that the best approach is to view managerial behaviour in terms of extremes. At one extreme you have the entrepreneur who feels confident of his or her ability to seize opportunities, expecting surprises and the need to adjust to changes, with the ability to make the most of these changes and to make things happen. At the other extreme, you have the administrator who is fearful of change and the unknown and whose inclination is to bring things back to the way they were.
Most of us exist between these two extremes and research has shown that there is a close relationship between opportunity and individual needs. Companies of all sizes have difficulty in encouraging entrepreneurship when the individual’s needs and the company’s interest do not coincide. It is not an easy task.
The pressures that push a company to either end of the scale are often determined by factors of timing and resources coupled with personal, organisational and competitive forces.
However, the difference in approaches becomes apparent in response to the following questions.
Where is the opportunity for my business?
The first step to identify an opportunity requires a market or external approach rather than an internal or resource approach. It is important to remember here that most readily available information is generalised and intended to inform in a general way. Rarely is generalised information, which just about anyone can access, tailored enough to support business decision making, which has to occur in the context of a particular company’s situation.
The entrepreneur however is attuned to environmental changes, constantly scanning information, which may provide a favourable opportunity, while the administrator seeks to preserve resources and reacts defensively to possible threats.
Administratively oriented companies approach new opportunities more cautiously, while successful market oriented businesses are aware that change is inevitable and therefore keep their organisations learning.
Entrepreneurs are however not just opportunistic gamblers. They are also creative and innovative. They many not necessarily break new ground but perhaps may mix old ideas in such a way as to provide new services or applications. Some new software companies for example are simply altering slightly existing technology or repackaging it to accommodate new perceived market segments.
What resources do I have and how do I control them?
Necessity is the mother of invention and many people who start a business make imaginative use of their limited resources. An engineer may discover selling skills which she or he never knew they possessed or a restaurant owner may quickly adjust to waiting on tables. Most of the risk in entrepreneurial management lies in the effort to pursue opportunities with inadequate or inappropriate resources.
The only control that an entrepreneur needs from a resource is the ability to use it while an administrator believes that resources are inadequately controlled unless they are owned or on the payroll. Using external resources as required is in itself an opportunity to maintain costs while providing a service equal to or better than larger competitors. Entrepreneurs learn to use other people’s resources well while keeping the option open on bringing them in-house.
A small publishing company may hire a free lance to make editorial improvements, or contract with a typesetting company or binding company and even contract with a public relations firm to sell the book to stores. There is no need therefore to control all the resources necessary.
It should be remembered however that apart from the effective allocation of scarce resources, successful entrepreneurs seek plateaux of success where they can consolidate their gains before moving to pursue further opportunities. It is important, when possible, to pause to give both employees and internal systems time to adjust. This may not always be possible however as booming markets often don’t allow growing companies the luxury of a pause.
What structure is best?
In organising business, there is a distinct difference between the entrepreneur and the administrator. The entrepreneur tries to “feel” the way events are unfolding. The administrator on the other hand views organisational relationships more formally ie rights, responsibilities and authority.
Power and status, expressed in a hierarchy and financial rewards, push companies towards the administrative end with the control of the resources also influencing the approach to a business operation.
Businesses that use or rent resources by necessity develop informal networks both internally and externally from which new opportunities may be gleaned.
It is up to individual companies to allow favourable conditions for entrepreneurship to flourish. That means encouraging the pursuit of opportunity, the most appropriate commitment and use of resources and the breakdown of hierarchy. These goals are not that easy to reach particularly if your company needs to be turned around.
It is much easier and safer for companies to stay with the familiar than to explore the unknown. Only by encouraging change and experimentation can companies of all sizes adapt and grow in the midst of uncertainty.