Excerpt from The Entrepreneurial Imperative
contintued ...
Digging Deeper
This book discusses what it means to see entrepreneurship as our central comparative advantage and its impact on the way we:
- Start companies
- Lead large, existing companies
- Run universities
- Make our personal job decisions (where and how we choose to work)
- Conduct foreign affairs
The starting point is to define what I mean by both entrepreneurship and being entrepreneurial, then talk about how the concepts can be applied in each of the preceding areas to provide us with the greatest comparative advantage and personal freedom and enjoyment.
Entrepreneurship is the process in which one or more people undertake economic risk to create a new organization that will exploit a new technology or innovative process that generates value to others.
The entrepreneur is one who undertakes personal economic risk to create a new organization that will exploit a new technology or innovative process that generates value to others.
As you can see from these definitions, entrepreneurship is an infinitely renewable resource. Every time an entrepreneur starts a business, convinced that she has spotted a niche in the marketplace or that it is the best way to control her economic fate, it is another step forward for democratic capitalism, a system of widespread participation and opportunity that protects political and economic liberties.
As renowned economist William Baumol has observed, the entrepreneur is "an indispensable component" of growth and prosperity-"the bold and imaginative deviator from established business patterns and practices, who constantly seeks the opportunity to introduce new products and new procedures, to invade new markets, and to create new organizational forms.''
We must make such trailblazing occur more often so that America can maintain and strengthen its position in the world marketplace. Generating additional ways to help us become more entrepreneurial as a people and as a nation, however, will not involve institutionalized programs or new bureaucracies. Trying to make entrepreneurship formulaic is both impossible and a strategy that repeatedly has proven to fail. The Small Business Administration (SBA) is an excellent example of this within our government. To be blunt, very few entrepreneurial businesses owe their genesis to the SBA.
A government agency like the SBA cannot be effective in fostering innovation for two reasons. First, in the broadest sense, government was never intended to predict what entrepreneurial activities will succeed. Government employees, many of whom have never worked in the private sector let alone run a business, cannot be expected to distinguish good ideas from bad ones or offer valuable advice to an entrepreneur.
Second, in the SBA’s case, the problem is compounded by political capture. The agency is constantly used to advance the ideas of small businesspeople who are well connected to politicians. The agency will serve the political interests of the White House of the day, and reality also dictates that this includes offering help to businesses they wish to reward.
If the agency wanted to make (low-interest) loans to everyone on the same terms, it might be effective in fostering the development of entrepreneurs. As it stands now, however, from the perspective of generating and supporting entrepreneurial ventures, it is not a wise use of resources.
But it is not just government that needs to change its structured approach to entrepreneurship. Businesses, especially large businesses, must embrace the creation of entrepreneurial cultures; universities must fundamentally change the way they operate to have more of an impact on the nation's economy. All of us need to become more entrepreneurial.
The Impact on Corporations
If large corporations are to survive, they must become much more entrepreneurial—the key is to make strategy part of every corporate conversation, big and small. Focusing on where every idea under discussion fits within the overall corporate objective is the prerequisite for making the corporation more entrepreneurial—this keeps the company focused on what it is trying to accomplish and allows it to respond faster to changes in the competitive landscape.
Typically, corporate conversations are devoted to three areas: customer relations (marketing, sales, service), product and production, and the firm's finances. Making strategy the fourth conversation is essential. Moreover, part of this strategy discussion clearly requires a global component. Even a new technology-based firm in the middle of Alabama must contemplate the world as its market, not the state, region, or nation.
Start-up companies are particularly good at having all encompassing strategy discussions, global and otherwise. This fourth conversation dominates discussion at all levels of such firms, because they realize that their survival depends on it. Bigger companies—where strategy discussions become more sporadic—need to model the approach of their smaller brethren if they are to become more entrepreneurial.
Accordingly, several key ideas will reshape large companies as we know them. First, bureaucracies will be radically streamlined. As companies move to closely align their organizational structures with their overall objectives, departments, functions, and people perceived as obstacles must be either repurposed or left behind.
Second, the trend of pushing authority down through the ranks to allow the organization to move faster must be accelerated, as companies realize that:
- Being entrepreneurial is their only true source of competitive advantage,
- It is imperative to execute strategy before the
- competition does, and
- The most effective way to make that happen is to give real authority to people who deal with customers every day.
Third, companies must actively try to hire people with the ability to operate on their own with a minimum of supervision. These people must incorporate strategy into every conversation so the organization will become continuously more focused and entrepreneurial.
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