The Entrepreneurial Exec
Why a large enterprise should think more like an agile startup
Paul Hannam is a mentor and executive coach. He offers a personal perspective on what experienced executives can learn by thinking like ambitious beginners, as the business landscape is transformed by small teams with big ideas.
There’s no question that corporate executives think and act differently to small-business owners. But while a whole raft of management courses encourage entrepreneurs to act professionally by applying the best practices of large corporations, very few explore what the leaders of large organisations can learn from entrepreneurs.
That imbalance must be redressed, because more and more large organisations are being told to be as ‘agile’ and responsive as a startup, but often without having the first idea of how to do it.
There have been some attempts to integrate entrepreneurship into larger organisations and these initiatives have variously been described as ‘corporate venturing’ or ‘intrapreneurship”.
Google, for example, has set out to engender a culture in which ideas can bubble up from across the company. Its employees are encouraged to spend up to 20 per cent of their time on their own projects, and the best of these have developed into new products and services, such as AdSense.
But Google, Facebook, and other ventures that have arisen from the digital economy have the advantage of still being young businesses themselves and so are closer to their roots than most.
But they have also grown at unprecedented speed and, as a result, have recently begun experiencing the internal and external tensions that can arise when the perceived needs of international commerce come into conflict with their founding ideals – Google has been heavily criticised in Europe for its stance on data protection and privacy, for example.
‘Intrapreneurial’ initiatives will flourish over the next decade within all types of organisation, as medium to large companies are forced to think like startups by the need to respond to new opportunities and technologies quickly. This will require both new skills and new management/leadership models. The ‘entrepreneurial executive’ is one such emerging trend.
First, we need to be clear about the differences that have long existed between entrepreneurs and salaried executives. These have not just been restricted to issues of ownership, legal status or company size; there is also the widely held belief that entrepreneurs and executives have distinct roles at different stages of an organisation’s growth.
The accepted wisdom has been that entrepreneurs are responsible for conceiving the initial business idea and taking it through the startup phase. They then hand management over to executives, who take the organisation on to the next level of growth and maturity.
It has also been widely accepted that these roles are – with a handful of exceptions – mutually exclusive. In simple terms, the entrepreneur starts and the executive completes. There have also been significant differences in style, performance and mindset.
These include the beliefs that entrepreneurs:
• Take more risks than executives. They are more financially committed as their earnings are solely based on their own performance.
• Tend to be more independent minded. They relish the freedom to build businesses without restriction, complexity, or control.
• Learn through their mistakes and failures, while executives strive to avoid failure by being risk averse.
• Tend to make decisions based on their own intuition, while executives follow established processes and refer to historical data.
• Have a primary goal of innovating and bringing about change, while an executive typically focuses more on implementing corporate strategy and adhering to systems.
But why should established, successful executives consider modifying their approach?
The answer lies in changes that are impacting on all large organisations as they are forced by a range of competitive pressures – smaller competitors with cloud-based platforms, for example – to innovate and reinvent themselves.
This has created a sense of urgency and risk that, in many ways, better suit the entrepreneurial mindset, because it’s familiar territory. Entrepreneurs need to be more flexible; they need to identify and adapt to changing market conditions continuously, or they fail. As a result, there is an urgency in startup businesses that is often absent in larger ones.
The most successful entrepreneurs are also good at reinventing their businesses. They learn by trial and error, and optimise their approach with what they have learned. They make continuous adjustments through testing, observation and action until they hone their business models.
Not only that, but they do it rapidly and are more like ‘dinghies’ than ‘supertankers’ when it comes to changing course. For large organisations to compete, a new management methodology and culture are necessary to not only encourage but also accommodate more entrepreneurial approaches to business.
The innovation problem
‘Innovation’ is a much-overused word, such that its constant appearance in marketing spiels, sales pitches and presentations (as opposed to genuine products and services) has diluted its meaning. There’s too much noise and too little signal. That said, all companies need to develop new products and services – real products and services, not smoke and mirrors – and there is a strong argument that entrepreneurs are better at doing it.
They tend to think more creatively, and that encourages innovation better than the formal, structured processes that are found in longer-established organisations.
The first step in true innovation lies in identifying opportunities, and the best entrepreneurs also excel at exploiting them. In dynamic markets, entrepreneurs tend to be better at reacting to change and are also more proactive in identifying the implications of it. They are typically more externally focused than executives, who are preoccupied with administrative issues and office politics.
A successful entrepreneur has one ear to the ground, and spends a lot of time listening to people and evaluating new markets. Entrepreneurs also question assumptions and know that ‘accepted wisdom’ may be closer to blind faith than to verified fact.
‘Passion’ is another word that’s been so undermined by advertising that it’s just a flag in the ground outside many a tired organisation. But entrepreneurs are often more passionate about their businesses than many salaried executives because a passion for making or doing something is the reason many started their businesses in the first place.
Yet there is something more here. Whether by virtue of innate or acquired traits, most entrepreneurs tend to be more positive, dynamic and visionary than salaried executives – even the many entrepreneurs that don’t succeed. Many of them started in bigger organisations but could find no place within them to apply their energies and aspirations. This forced them to set up on their own.
Billions of pounds have been lost by corporations due to their failure to harness the entrepreneurial energy that they already have. Imagine if those many long-established businesses that have failed, over the years, to understand disruptions in their marketplace had been able to attract and retain real entrepreneurial talent.
But to attract such people demands a transformation in culture, systems and practices, and a supportive environment. You can’t build such a culture overnight, or bolt it on; it needs to be embedded. Inviting entrepreneurs into a rigid, hierarchical and risk-averse structure is like mixing oil and water.
There is another, less obvious plus to encouraging executives to be more entrepreneurial, and that is the benefit to their own personal growth and motivation. Entrepreneurs tend to be more energetic, engaged and optimistic than many executives – put simply, they seem to enjoy life more, even if they don’t always succeed.
If organisations begin to see entrepreneurship as a philosophy as much as a business activity, then employees may start thinking in ways that embrace change, risk, adventure and personal development.
Young people want those things out of life, and many a well-intentioned leadership and/or team-building course aims to provide them, but if real opportunities within the organisation are absent and rigid hierarchies remain, then they’re a waste of time. Courses that pay lip service to these ideals produce tiers of demotivated, cynical people.
To build a business from scratch is to create your own learning experiment that illuminates all of your strengths and weaknesses. To embrace all of this learning – the good points and the bad – helps drive personal growth towards greater resilience, self-discipline and resourcefulness. But so what? Why should executives care?
The reason is that these issues can only become more pressing over the next decade, as the trend towards more flexible and mobile working becomes the norm. People are considering more deeply the ways in which their private and working lives intersect.
Employees of large organisations, including at the most senior level, may become dissatisfied and restless if their working lives remain too restrictive while more attractive alternatives are available. Some will explore the idea of starting their own businesses so that they can find an outlet for their energy and aspirations.
Computing, communications and data-analysis infrastructures are increasingly available on demand, without the capital outlay and massive on-premise investment that were once the preserve of multinationals.
The smarter way
Smart employers should offer ambitious people more entrepreneurial opportunities internally, so that they can find fulfilment within the organisation. This will be a potent retention strategy, and in the 21st Century hanging onto talent will be the critical success factor for long-term growth.
The ideal business combines entrepreneurial vision, energy and passion with the resources, systems and processes of a large corporation. So how do medium to large companies get the best of both worlds?
Integrating these two, distinctive cultures and practices requires careful planning. Decision-makers need to create the right internal framework to encourage entrepreneurs to work autonomously within the organisation and then divert the appropriate resources, systems and processes to help them succeed.
The entrepreneurial executive needs the support of his or her peers, while striking a difficult balance between their own independence and their adherence to corporate culture. But it’s not just about them: all large organisations would benefit from being more entrepreneurial and the entrepreneurial executive is the critical change agent for making this happen.
Entrepreneurship should bleed into all levels of the organisation – for example: at the individual level, in terms of entrepreneurial executive practice; at the structural level, within each new business venture; and at the cultural level, in terms of rewarding entrepreneurial values and norms.
There are many more ways to introduce entrepreneurship into your organisation, but the first step is to commit to the process and identify the opportunity for a new product or service that would benefit from a more entrepreneurial approach. Just do it and experiment until you get the results you want. After all, that is the entrepreneurial approach to business, so why not embrace it? TS
The Strategist says
Signal, not noise.