This word means so many different things to different people that its real meaning has long since been buried. To some people, entrepreneurial means innovative and bold; to others it means shady and probably illegal; to still others, it means high-risk and likely to fail.

To many, it just means small business, although some big businesses have adopted the word for activities that are only remotely connected to entrepreneurial behaviour. There is, however, a specific definition for entrepreneurship that is precise and limited in its application — without losing the capacity to define modifications of this behaviour that apply in a wide range of activities.

Entrepreneurship is when the leader of an organization sets goals for which the resources available to him or her are inadequate — and then achieves those goals. We’re not talking about half-assed efforts here! Everything flows from the conditions and pressure imposed by inadequate resources combined with the willingness to reach for the sky:

• the need to innovate in order to do more with less
• the freedom to set goals that most would consider to be outrageous — as illustrated by the many of the great organizations that have been built in the past three centuries
• the willingness to take calculated risks and
• the competence to pull it off.

There is one other condition that makes entrepreneurship real — the leader has to own the organization. People simply won’t put themselves through the wringer to make a silk purse out of a sow’s ear if all the profits flow to someone else — and they won’t pay close enough attention if all the losses are picked up by someone else. This means that all the financial rewards, if any, and all the financial loss, if any, accrue to the leader. We can broaden this definition considerably if we say the financial rewards don’t have to be cash. They can be recognition and reputation, just as the financial losses can also be accepting blame. Charities are a good example. There are some fine entrepreneurs in charitable organizations who are more than happy to be rewarded with their community’s respect or a prestigious government award.

Of course, leaders worth their salt will invariably share those profits with the people who contributed to the organization’s success — and that’s where the concept gets muddied. As soon as you slip outside the realm of owner-operated businesses that are usually (but not always) relatively small, it becomes difficult, if not impossible, to identify what contributions were made by whom and in what proportion. In these circumstances, the allocation of rewards tends to be skewed toward the grandeur of the title rather than the genius of the entrepreneur.

Under this broader definition, entrepreneurship can exist in big businesses and charities — even in governments — but once they get beyond a certain size (maybe 1,000 employees), this tends to a theoretical possibility rather than a realistic expectation. Bureaucracy and CYA destroy most putative entrepreneurs in big business and the manic aversion to risk in governments makes entrepreneurial activity there a suicide mission. (I did actually meet one entrepreneur in government, who achieved some amazing results but she lasted only four years before being manoeuvred out of the civil service with barely any recognition for what she had done.) Nonetheless, it is possible to create an entrepreneurial environment in these large, even massive, organizations; there are some large businesses that have generated impressive entrepreneurial activity, but the leadership requirements to make a success of it go against the grain of the alarming egos of too many big-time CEOs.

There is almost universal agreement that the Western economies need to improve their performance in innovation if they are to prosper in the next generation. Innovation is not the same as entrepreneurship, as some people imply. It is a part of entrepreneurship, which can best be characterized as the necessary context for innovation. We don’t want innovation at all costs — we could do with a little less innovation on Wall Street, for example, and the professions have to beware of trying to achieve their goals with inadequate resources — but there is lots of room to move in the right direction. The major institutions in our developed economies need to dial back on the power and the glory and launch into the down and dirty. But first, they need to understand the meaning of entrepreneurship.