Although my business card says “Professor of Entrepreneurship,” I spend a good deal of time talking with senior executives of multinational companies throughout the world, because among business schools, INSEAD is one of the most active providers of executive development programs.
“You study entrepreneurship,” they say, “so tell me what I can do to make my company’s culture more entrepreneurial?”
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| Philip Anderson |
What do they mean by that? Of course they wish their large enterprises were more nimble and agile, but these words express a deeper longing. At first, they say, “I wish middle managers behaved as if they were owners.” Why shouldn’t a person running an IT operation behave as if he led a small IT company providing outsourced services to the firm? Wouldn’t he or she then naturally provide excellent service and strive for continuous improvement?
If you probe a little more deeply, however, you find that they really don’t want managers to behave as if they were owners; if they did, they would have outsourced more functions to real owners. The problem with owners is that they act in their own self-interest. The reason a function is kept in-house instead of being outsourced is to ensure responsiveness and predictable behavior when incentives aren’t necessarily aligned, when a function has conflicting priorities, and/or when time or cost pressures demand that management issue directives instead of negotiating agreements.
What senior managers really mean by “a more entrepreneurial culture” is that they wish senior managers were more proactive. Why don’t the spot and solve problems before their superiors notice? Why don’t they identify and seize opportunities without needing direction or approval? Why don’t they find ways to make their operations leaner, faster, and more efficient without anyone telling them to do so?
So why do companies become less entrepreneurial as they get bigger and older? Many explanations have been suggested, and the most popular seem to rest on complacency in some fashion. One way or another, middle managers in established firms become fat, dumb and happy, such thinking suggests. Yet my own experience with multinationals suggests that the managers I meet work hard, genuinely care about their employers, and wish they were permitted to be more entrepreneurial. To say these managers lack hunger and drive seems simplistic and wrong to me.
Entrepreneurial firms start off with a huge number of disadvantages. Usually, they lack capital, brand equity, established processes, credibility, connections, channels of distribution, and so on. So why do they survive and thrive? Their core advantage is that they can adapt to today’s environment without having to manage change. They don’t have to shake free of legacy obligations and mindsets. I once saw a bumper sticker on the back of a car that expressed this thought neatly: “God created the world in seven days because he had no installed base.”
Entrepreneurial firms start off as very simple organizations, and that is a huge advantage. Middle managers are not as entrepreneurial or proactive as their bosses might wish because they have to proceed carefully in order to coordinate complexity. Big organizations have a lot of moving parts. To ensure they fit together, you have to go slow; you need lots of approvals; and you have to move forward one step at a time, checking that a move that looks logical locally doesn’t have unforeseen consequences outside your range of vision.
Consider an analogy. In every country that has paved roads, a convention has emerged: either everyone drives on the right or everyone drives on the left. It doesn’t matter which convention a country adopts, as long as everyone conforms. Otherwise, you end up in the situation of the elderly woman who calls her husband’s cell phone and says, “Anil, I’m watching the television and it says that on the road you always take, there is a car driving the wrong direction!” “One car?” the husband replies. “Good heavens--I see hundreds of them!”
A convention such as “drive on the right” is simple to institute because everyone has to do the same thing. In contrast, consider the problem of driving in the Etoile, the round-about in Paris that has the Arc de Triomphe at its center. Twelve roads feed into the Etoile, and at any moment, cars are entering from or exiting into all of them. Simple rules make that possible—a car driving into the Etoile has right of way over any that is already in the loop and traffic flows counterclockwise—but driving is slow, stop-and-go, because coordinating twelve streams of traffic is very difficult. There is just no way to get through the Etoile without paying close attention to every move and anticipating what dozens of other drivers will do.
Because entrepreneurial firms start off simple, they can be nimble and agile because it is easy for everyone to adapt to one another’s expectations. If you only have to coordinate with one or two people, it is easy to adopt an agreed-on way of doing things and move forward swiftly. People behave proactively in a venture because they can; young organizations have enough elbow room for a person to take up a problem, opportunity, or chance to improve and execute without needing coordination or approvals. Ventures inside established organizations can be just as proactive and supple as independent startups, as long as they keep things simple.
This insight is the key to developing a high-performance entrepreneurial culture. But first, it’s important to understand what the essence of a culture is, from a commercial perspective. Consider why people behave as they do. The most important cause of behavior is habit: people do what they are used to doing, often without much thought. The second most important cause of behavior is a person’s wants. Either through preference or incentives, people tend to do what they think will benefit them. However, the third most important cause of behavior is the expectations of others.
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think about how certain problems require that you do quite a bit of research before
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