Innovative approaches to entrepreneurship development

 

 

We all serve entrepreneurs. As such, we all preach the virtues of planning. If we are to commit ourselves to developing entrepreneurship, we should be putting our money where our mouths are and develop our own plan.

The first step is to define our goals. What exactly do we want to achieve by developing entrepreneurship? When you’ve been working in the area for years that may seem like a facile question, but it bears some thought. Entrepreneurship means so many different things to different people, that we can never assume common goals. This is particularly true in this country, with its centrifugal regions.

Just for the fun of it, I sat down the other night and tried to characterize the feelings of each region toward entrepreneurship. It turned out to be an interesting exercise and a critical one at that. The particular perspectives of each province are a major influence on the types of techniques each applies to its drive to develop entrepreneurship. As many have noted before me, the approach which any jurisdiction adopts to entrepreneurship development is careful balance between the expected benefits of entrepreneurship and the massaging of prevailing perceptions of entrepreneurship.

Regional perspectives on entrepreneurship

In B.C., entrepreneurship is a big crap shoot, a necessary pain that must be endured on the way to growing big indigenous enterprises.

In Alberta, entrepreneurship is a lifestyle choice; in a province that values loners and independence, entrepreneurship is an obvious vehicle for living the dream. It is part of the scenery. It’s nothing special, just integral to the region’s view of itself.

In Saskatchewan, it is an uncomfortable concept, alien to the fundamental ethic of co-operatives and farming. There’s enough gambling for everyone in the battle to tame the forces of nature, without having to import the extra grief of betting on elusive black ink on a bottom line.

In Manitoba, Canada’s most average province, entrepreneurship is a source of some pride, imparting a good feeling that local people can make good on a national scale, without having to bow to the big money “down east” in Toronto.

In Ontario, entrepreneurship is an alternate career strategy in a world where the big and huge corporations rule supreme. It’s a bit like naturopaths in a world run by doctors. It is frequently perceived as the second-best career choice for people who have failed to meet their goals in their first choice of a large organization. To be fair, there is a sense that entrepreneurship represents excitement and rapid growth, but in general the province likes entrepreneurship and dislikes entrepreneurs. Entrepreneurs are perceived as motivated by questionable goals. The excitement in entrepreneurship resides mostly in the admirable flexibility and innovation that is so common in entrepreneurial firms.

In Quebec, entrepreneurs are the new priesthood. They embody the collective ideals of a small province, all alone and making it in the cold, hard world. They are the heroes, the role models. The entrepreneurs understand this well; they see themselves as the standard bearers for their province, with a responsibility to carry the flag for the nation.

In Ottawa, entrepreneurship is, more than anything, the electorally attractive source of most new jobs. It is one among several parts of the mix that will bring the national economy more flexibility and growth. In the cerebral environment of the federal bureaucracy, entrepreneurship has little intellectual appeal, but its role is understood, even if faith in its potential is not widely shared. For the federal machine, the drive to international competitiveness may be compromised by entrepreneurs, because they are vulnerable and volatile, and they risk becoming the soft underbelly of the economy as much as they promise to lead the charge.

In the Atlantic region, entrepreneurship has for many years had two quite distinct faces. On the one hand, it conjures up visions of independent craftsmen in farming, fishing, manufacturing and retail; unambitious but solid salt of the earth. On the other hand, it has meant the big conglomerates built by dynamic and ambitious men who have left a legacy of some of the richest business families in the whole world. More recently, entrepreneurship has come to encompass a school of small fish circling around and living off the great regional whales in the public and private sectors.

Now, however, a new concept of entrepreneurship is growing in the Atlantic provinces. It is a perspective that frees entrepreneurs from their dependence on the big players in the region and asks them to make their own way, building on local strengths, creating their own environments. It offers the best hope yet to escape the cycle of unemployment and underperformance relative to the rest of Canada. It is still a relatively novel concept, not widely accepted, but its enormous potential has a lot of key people excited.

What does this mean for entrepreneurship development?

As one example, the difference between the perspectives of Ontario and Quebec has resulted in a radically different approach to entrepreneurship development.

Ontario seeks to build competence, making entrepreneurs as much like big companies as possible. Provincial programs seek the key to finding and supporting the rapid growth companies that will cross the threshold into the major leagues.

Quebec wants to help its entrepreneurs any way it can. It has engineered a massive outpouring of public support to cosset the local business samurai. Financial support is abundant, particularly through the Caisse des Dépôts and the QSSP. But also the labour funds, entrepreneur networks and countless other support mechanisms.

A new direction for Atlantic Canada

In the Atlantic provinces, the big decisions that have to be made are as follows:

  • Should we expand the supply of entrepreneurs or try to make the ones we have more effective?
  • Should we concentrate on the young people in schools, community colleges and universities? Or on people who are trying it for the first time? Or on the people who are already out there making all the usual mistakes?
  • Should we concentrate on the values and attitudes of entrepreneurship or on the nuts and bolts of running successful enterprises?
  • Should we be offering money or advice?

The answer is, of course, all of the above. But each player in the game of entrepreneurship development must choose a niche. It is an endless subject, one in which you are all experts, so I won’t attempt to preach on it.

I will concentrate on the climate for entrepreneurship. If you want anything to grow and develop, you have to find or create an environment which is supportive of and nurtures your project.

Right now, entrepreneurship is a buzz word, but the climate is not generally supportive. I think the general public – which includes the people in politics and the media who reflect the men and women on the street – senses that entrepreneurship is important but doesn’t understand why. This means they cannot integrate entrepreneurship into their attitudinal framework.

If we are to nudge entrepreneurship into its rightful place in the grand scheme of things, we have to follow a two-pronged strategy:

  1. We must sell entrepreneurship as a valuable and viable occupation, BUT we must not try to make it all things to all people.
  2. At the same time, we must give the general public a context that will help them understand how the lessons that entrepreneurship has to offer can help them create a more effective society. What I’m talking about here is a fundamental realignment of our power structure.

Let us not be shy about this. In the context of our national economy, entrepreneurship is all about power.

        Entrepreneurship is not an all-purpose tool

But before we get into this, let’s talk about the first prong of the strategy first.

It is enormously tempting to turn entrepreneurship into a generic concept, applicable to disciplines other than owner-managed business. The argument is compelling: Entrepreneurship draws out innovation, creativity and flexibility from the people involved in it. We need these qualities everywhere in our economy if we are to be competitive internationally. Ergo, let’s apply the principles of entrepreneurship everywhere.

But entrepreneurship is not the cure for the absence of creativity, innovation and flexibility. The conditions that make entrepreneurship work are unique to businesses managed by their owners.

This conclusion is disputed by some. Peter Drucker, for one, uses entrepreneurship interchangeably with innovation and creativity. He says entrepreneurship can be practised just as effectively in non-profit organizations, big firms and big governments. In fact, he says small firms are least able to be entrepreneurial.

For us people who study and promote entrepreneurship the Drucker viewpoint is attractive. It gives us instant relevance to every corner of our economy.

But it’s a trap. It dilutes the concept and obscures the elements of the environment in which entrepreneurial behaviour occurs naturally.

There have been a number of studies that have purported to demonstrate entrepreneurship in large organizations. Perhaps the best is a book called The Change Masters by Rosabeth Moss Kantor. She studied some significant firms like General Motors and a large electronics manufacturer and analyzed just how difficult it is to create an entrepreneurial environment in a big firm. Believe me, it’s tough. At the end, she gave her recommendations and they reveal just how difficult it is: the only way she can see entrepreneurship working is to create a sort of organized chaos that requires such superb leadership that it’s doubtful we will ever find the people who will make it feasible.

Her approach is supported by Tom Peters, the co-author of In Search of Excellence and the strong proponent recently of management by chaos or anarchy. These people may be right, but they are asking a lot from managers.

More important, however, their solution is really not realistic. Any large organization needs control. It is almost impossible to lead these organizations without an extensive control system. Otherwise it is likely to spin out of control.

I am convinced that people who try to apply entrepreneurial concepts to large or non-profit organizations will fail. And, in the process, they will kill entrepreneurship as a viable model.

Entrepreneurship is one of many tools that can help create a more dynamic society. It has its place, just as big organizations have their place. The secret is not to make one like the other; it is to encourage the right kind of organization for any particular situation.

Entrepreneurship is extraordinarily powerful and effective, and it can be used as a model in building other tools that will help transform our economy. But we should not try to make it carry all the load in our drive to create a more dynamic, flexible and creative workforce.

Entrepreneurship and creativity

Some people have already tried to turn entrepreneurship into an all-purpose tool. In Ontario, the curriculum for Grade 12 students has recently been expanded to include a course on entrepreneurship. This is a wonderful step for the development of entrepreneurship, but its effectiveness is yet to be proven. Reading the course notes for teachers, it is clear that the designers have decided that the school system should be producing students with initiative, creativity, adaptability and the ability to see opportunities. They call this entrepreneurship and claim that it can flourish in any forum, including non-profit organizations, governments and big firms. They therefore have to reject owner-managed small firms as a primary model for the teaching of entrepreneurship. They have turned the “entrepreneurship” curriculum into an elaborate attempt to teach creativity and opportunity identification, without acknowledging the situational and motivational context of owner-managed businesses.

I believe this to be a hopeless task. Creativity is a process, not a goal. It’s a paradox of life that, if you set yourself a goal, you become whatever it takes you to reach that goal. If you commit yourself to making a million dollars, you will succeed, but you will be whatever you had to become to make that kind of money. If we set out to teach children creativity, we will produce a bunch of experts on creativity. It will be pure coincidence if they learn how to apply that creativity to succeed in any real-life venture.

We should pause, at this point, to think about what we mean by creativity. We’re not talking here about artistic creativity, which is self-expression combined with highly developed skills in painting, music or whatever. One could argue that entrepreneurship, too, is a form of self-expression. In this context, however, we are talking about creativity as the ability to cause something new to appear or happen in the process of living, working and leading. If you have $1 million in your pocket and you decide to embark on a $100,000 project, you don’t have to be creative. You merely have to convert money into a result. That requires implementation skills, not creativity.

You become creative when your available resources are inadequate for the goal you want to achieve. The genius who invented the cliché was right: necessity is the mother of invention.

It’s also important to understand opportunity, which can mean quite different things depending on the degree to which it relies on the behaviour of other people. You can identify an opportunity to perform charitable work, or travel to India, or go to university. But these demand no skills in opportunity identification. It’s a whole different story to identify situations where you can produce a product or service that other people are willing to buy at a price substantially higher than your cost of production. Now that takes real skill; an understanding of human nature; a comprehension of how actual and potential competitors will respond to the initiative; and a knowledge of your own skills and capacity to put it all together.

How can you replicate this in a large, bureaucratic organization where the resources are all available? And where market research can fill in all the gaps of personal insensitivity to market needs? There are many opportunities in large firms or in non-profit organizations, but their context is quite different and they demand quite different skills.

Mike Potter is the CEO of Cognos, a highly successful firm that has developed some software which it sells to programmers in more than 50 countries around the world. It has annual sales of more than $100 million. It is one of Canada’s most stunning success stories. Yet Mike Potter says he’s not creative….

When you come to think of it, the mere idea of teaching creativity is strange. All children are creative. Unfortunately, through our confusion between the twin goals of preparing them for adult social interaction and developing their emotional and rational power, we contrive to kill most of their creativity by the time they reach high school. Surely, the answer is not to kill their creativity and then teach it back to them through an artifice like entrepreneurship; it is to stop killing it in the first place.

Intrapreneurship

There are, of course, some significant implications in restricting the vision of entrepreneurship to generally smaller firms run by their owners. Important as this sector of the economy is, it is largely irrelevant to a large number of people who do not want to make the sacrifices necessary to succeed as an entrepreneur.

For these people, we need to develop some kind of generic formula to which they can relate and which will give them an appreciation of entrepreneurship. There are five elements to this generic formula:

  1. A challenging situation;
  2. Clear evidence that an individual’s actions will make a difference;
  3. The self-confidence to believe that their actions can, in fact, make a difference; and
  4. The freedom to make decisions that that individual believes are most appropriate; and
  5. Some ownership of the outcome.

Our job in promoting the development of entrepreneurship is to give this formula away and concentrate on perfecting our particular application of it.

We must be the best model, not the all-purpose solution. Some would call that all-purpose model “enterprising”. That’s reasonable, but it must be clearly distinguished from entrepreneurship.

We must concentrate on nurturing and developing a very particular class of economic players who act as catalysts in the growth of the economy and employment.

Power

Let me turn now to what the generic formula means for the rest of our society.

The key to the emergence of a social climate that is conducive to entrepreneurship is the reconstitution of our power structures. Of course, entrepreneurship is not alone in needing such a reconstitution in order for it to flourish, but that is another speech another time! Nonetheless, the movement toward a new power structure is already far advanced, although we may not recognize it as such.

There are two principal forms of power:

  • The power of position or bureaucratic power, where the right to exercise power derives from a position or rank rather than from personal authority; and
  • The power of influence, which is the opposite; some people call this empowerment, I like to call it the joys of powerlessness.

The exercise of power

Within these broad categories of power there are seven techniques for exercising power, ranging from one extreme of bureaucratic to the other extreme of empowerment. In these techniques, power is exercised:

  • By force or fear
  • By veto
  • By control over the allocation of resources
  • By personal reward for compliance
  • By persuading/motivating people to do what you want them to do.
  • By allowing them to change your mind about what you want them to do.
  • By example

Bureaucratic power is generally exercised through 1-4. This is not intended as a criticism, it’s just the way it is; the nature of bureaucracies is such that it cannot be otherwise. The power of influence uses techniques 5-7.

Bureaucratic imperatives

I’d like to explore for a minute why bureaucracies cannot easily change the power structure under which they operate.

  • There is little stability in the job. People are moved around all the time because no bureaucracy can afford to allow individuals to get too entrenched. Personal expertise at a functional discipline threatens political expertise at playing the power game. Also, individuals don’t want to get stuck in any one job too long – if they stay in the same place too long, they risk being recognised for their failures on the job. [It is out of the question to even consider the possibility of receiving full credit for successes.] Also, every job is a challenge that engages the person’s interest for a while until they have learned what they can from it and they are starting to put more into the job than they’re getting out of it. It’s time to move on.
  • Bureaucratic leadership confers status through position. This means that leaders can afford to allow themselves to become isolated from their subordinates. They therefore spend their time on power negotiations with their superiors and peers and just don’t bother with subordinates. In the cathedrals of commerce, status is very public, through the look of the offices, the stretched limos, the private washrooms and other company perqs. In a bureaucracy, power is doled out in little doses by the senior people to their juniors, so that no-one gets the wrong impression. Take a look some day at the regulations surrounding the limits of a person’s authority to sign cheques for a big company!
  • People who wish to succeed must gain promotions. Doing a good job and being promoted have nothing to do with each other, though organizations pretend the two are linked. To be promoted, you have to persuade your boss you are trustworthy and reliable. These two concepts both relate more to your willingness to bow to the boss’ needs than to your ability to do a good job. There is nothing in bureaucratic systems that enables managers to really get a good feel for how their subordinates are doing. That would require them to spend a lot of time in the trenches and the requirements of politicking make it impossible to spend time doing that.
  • Control is imperative in a large organization because there are simply too many opportunities to overspend. So the organization has to erect elaborate controls over people’s power to spend the organization’s money. The whole emphasis therefore is on control. That’s why power is exercised through veto, resource allocation, fear and personal reward (patronage).

The joys of powerlessness

Entrepreneurs cannot operate in environments that assume the boss knows best.

More important, neither can a growing number of other employees. To an increasing extent, people are demanding that economic power be exercised in a different way.

Entrepreneurship can ride this wave and amplify it.

There are many trends that are making it impossible to operate other than through empowerment:

  • No-one has any time any more. We are all so busy just keeping up with what’s happened that there is no time left for initiatives and certainly almost no time for leisure. This is, of course, because the pace of change is accelerating. There are a lot more meetings, bigger and more dispersed networks, so much information to absorb.The cure for this is simple, even if it seems we have to approach breaking point before we’ll submit to it! That is delegation. The top echelon of Canadian leaders have hogged all the power for too long. They are sincere and earnest; they work diligently. But they have so far refused to give the people below them the authority to assume more power so that they themselves can cope with change and leadership. Leaders in every field in other developed nations recognised the necessity of letting go a long time ago.

    We are sadly behind the times in this respect. Many of our leaders would argue that they cannot let go, because the next generation is not ready. But will they ever be so? It is just not possible to prepare for leadership – it’s something you learn on the job.

    The last era of industrial management was built on loyalty. This era will be built on trust.

  • The service economy has been growing in importance for a relatively long time. More recently, however, the quality of service has become an issue. Customers demand quality in a way they never did before. And the leaders of Canadian (and other countries’) firms are beginning to understand that the only people who can deliver this quality of service are the people on the firing line. The day of quality control is gone; today, total quality management is the only option. This means building quality into the organization at every level and in every function. The person on the firing line is the company’s face to the customer and, as such, is the delivery point for quality goods and services. The telephonist, the bank teller, the sales clerk are finally being recognised for their importance. There is an important corollary to this, however. If we want to acknowledge their responsibility, we have to give them real authority, real power.
  • The Japanese have long understood all this. We westerners thought we could copy their quality circles and various other techniques they developed – but we never understood the whole system and how these techniques were only a part of the whole. TQM, for the first time, begins to approach the issue in a serious way.

For entrepreneurs, much of this is already a way of life. Smaller firms have to deliver superb quality, because that’s the only way they can compete against their rivals. The people on the firing line have to be given power, because the firms are too small to tolerate responsibility without authority. I should add, in passing, that I’m talking here about the new entrepreneur, not the traditional stereotypical cowboy who likes to fly alone, by the seat of his, note his, pants. This type of entrepreneur is becoming rarer and rarer.

The new entrepreneur has to get the best out employees, if only because resources are so stretched that underperforming employees can sink the business. The small firm, moreover, doesn’t have to worry about control like big firms, because entrepreneurs, by their nature, are in constant touch with their employees so they know what’s going on first hand. They don’t need systems to control things.

Entrepreneurs whom I have interviewed have a fairly consistent view of the people who work for them. They see them as the agents of success who have minds of their own. They understand you don’t try and change people because that’s impossible. The best you can do is create an environment in which people want to change themselves. They try and align their employees’ goals with their own – and if they cannot, they let them go. It has to be clear-eyed, decisive and sensitive. Business is not a social service agency, but it works with real, whole people with all their idiosyncrasies. The new entrepreneur doesn’t have power relationships. He or she has creative interaction with employees.

The era of management is going. The era of leadership is here.

To put this in context, all this is part of TQM. Some of the leading mega firms are already putting these ideas into practice. It may be harder for these firms to understand, but at its base, the new style of leadership acknowledges that success must now be achieved in an environment where many of the major influences are beyond their control. This has always been second nature for entrepreneurs, but it’s still new for big companies.

If we want to develop entrepreneurship, and make it relevant to our society at large, we must demonstrate how entrepreneurship embodies many of the elements of leadership that will carry the day in years to come. We have to align ourselves with other agents of change in the battle to redefine the power structures that rule our society.

In the process, we’ll do our region and our country a big favour as well as help the entrepreneurs we want to help.

Last word: Why develop entrepreneurship?

  1. For governments: they create most new jobs; they are innovative and flexible – a clear need for the modern workforce. Also, more than half the workforce in the private sector works in small firms, so a lot of voters can be reached through programs to assist small firms. On the other hand, governments do not look to small firms to make major capital investments; to export; to train their employees. In short, governments know small firms are good at a number of important activities, but these are all activities which they do not understand. Big firms are good at the things they can see, touch and feel. And understand.
  2. For entrepreneurs themselves: the more support they can get from governments, big businesses, financial institutions, the better.
  3. For big businesses: Small firms have shown themselves to be better at new product introductions; their R&D is generally more cost-effective; they can run small operations at a fraction of the overhead. Small firms are therefore a useful development tool; they do not wield a lot of power, so they are malleable to the corporation’s interests. Finally, and most importantly, their flexibility and innovativeness are admirable and they would like to be able to emulate some of it in their own organizations.
  4. The education system knows that it needs to produce people who are more adaptable and creative if this country is to survive in the modern global economy. In the Atlantic provinces, it also subscribes to the notion that our economy needs more entrepreneurs if it is ever to work its way out of the rut it has been in for the last few decades.