Building an Entrepreneurial Organisation

Simon Mosey, Hannah Noke, Paul Kirkham

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317505938
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Entrepreneurship is often focused on understanding new ventures, but the entrepreneurial flame is required in growing organisations too. This textbook examines how organisations can become more entrepreneurial to achieve sustainable growth.

The authors show how entrepreneurship can be used to address crisis points of growth within small firms and to overcome the limitations of stagnation within large firms. By integrating entrepreneurship and innovation management, the book presents a framework to diagnose entrepreneurial behaviour within existing firms. Drawing upon research and reflecting practice across a range of industries, from football, through Silicon Valley, to the retail sector, it includes insights from leading practitioners.

The authors build an understanding of entrepreneurship in context to provide diagnostic tools to help organisations make entrepreneurship central to their culture. This unique text is therefore useful reading for business students from advanced undergraduate to executive education.

1 How to build an entrepreneurial organisation

Simon Mosey and Paul Kirkham

1.1 Introduction

Entrepreneurship and innovation are commonly considered to be exceptional activities carried out by heroic individuals. We contend, however, that successful innovations can be created by any organisation that chooses to make entrepreneurship the ‘way we do things around here’. In this chapter we explain how innovation really works from considering prosaic developments such as ‘ready meals’, through to the life-changing challenges of creating better neonatal incubators. We explain how such innovations are realised by counterintuitive practices such as asking ‘what can we do without’ and ‘what can we do differently’. We conclude by proposing a decision-making approach that any manager can use to examine their own entrepreneurial practices and explore alternative approaches to deliver sustained innovative performance.

1.2 What is an entrepreneurial organisation?

What is an entrepreneurial organisation? We all know what an organisation is and have some idea of what an entrepreneur is, but what makes an entrepreneurial organisation? Because the word entrepreneur is associated with individuals, our immediate thoughts about entrepreneurs may be influenced by celebrities such as Richard Branson or Donald Trump and not the organisations they lead. There’s no shortage of business people who have become famous as entrepreneurs: retailers; inventors; industrialists like Anita Roddick, James Dyson and Lakshmi Mittal; the techies like Steve Jobs, Bill Gates, Mark Zuckerberg et al. They tend to attract (sometimes deliberately) myths around themselves: that they are risk takers; that they are ruthless; that they are lucky; that they are loners – that they are ‘special’.

It’s all very well to pick and choose favourite individuals but an academic definition needs a little more rigour. Academics, as might be expected, propose different approaches: in the French tradition the entrepreneur is a ‘middleman’; in the classic tradition – any business owner; the neo-classical tradition – a rational manager; the Austrian tradition – a radical innovator; the modern Austrian tradition – a recogniser of opportunities and in the Chicago tradition – a calculated risk taker. And so on.¹

When we look at the best-known entrepreneurs we find a great variety of often conflicting characteristics: some left school early, others are highly educated; some are technically accomplished, others couldn’t mend a fuse; some have narrow expertise, others have broad experience; some are primarily motivated by money, others only want autonomy. It is fair to remark that the famous names are preponderantly white and male.

To reconcile this diversity, modern theoreticians lean towards a behavioural approach – what are the actions that lead to success? And a consensus is emerging that entrepreneurship is concerned with recognising opportunities, coming up with alternatives and choosing the best one.²

Economist Joseph Alois Schumpeter is usually held responsible for popularising the word ‘entrepreneur’. His entrepreneur identifies and creates opportunities and takes action to realise those new possibilities. And the essence of this definition is action. Once the innovation is established the entrepreneur’s role is over.

everyone is an entrepreneur only when he actually ‘carries out new combinations,’ and loses that character as soon as he has built up his business, when he settles down to running it as other people run their businesses. This is the rule, of course, and hence it is just as rare for anyone always to remain an entrepreneur throughout the decades of his active life as it is for a businessman never to have a moment in which he is an entrepreneur, to however modest a degree.³

Seen this way, concentrating on behaviours – the parts they play rather than the personalities of the actors themselves – it’s clear that entrepreneurial thinking need not be limited to superhero individuals. It should rather consider special actions; roles that are taken up for a time and then put down again. And so entrepreneurship can apply to any of us whether as individuals or as organisations or as parts of organisations (regardless incidentally of ethnicity or gender).

To clarify our approach, take this historical example to answer an important question: is an organisation that is founded by an entrepreneur necessarily entrepreneurial?

Henry Ford was a dynamic personality who revolutionised the world by putting together his business in an entirely new way, arguably without being responsible for any original invention, certainly neither the motor car nor the assembly line. But does that make the Ford Motor Company an entrepreneurial organisation? The company is still going but the wreckage around it that was once the city of Detroit is a stark reminder that things can go very wrong indeed. It is the ongoing behaviour of the organisation that counts. Many of the most famous entrepreneurs in history did not manage to bequeath an entrepreneurial legacy. Their business empires died with them or, if passed on, failed to survive beyond one generation. On the other hand, as we shall see, certain organisations that have not had an entrepreneurial reputation can make the decision to change. So we will be discussing entrepreneurship rather than entrepreneurs – entrepreneurship as a deliberate action of bringing about innovation, another word which has become very popular, albeit equally contentious.

1.3 Understanding innovation

We live in a world where innovation seems more important than ever before. Whether used in promoting the latest technology or being included in the mission statements of organisations from multinational manufacturers to financial services to the public sector, the word is everywhere. And yet there was a time when innovation was not very popular as a concept. The mere idea of doing things differently has been regarded with suspicion for most of human history. Most people were content to do more or less exactly as their forebears had done: change was seen as a dangerous novelty. By the twentieth century, however, innovation had come to be seen as the driving force of economic development, a bright hope, to be encouraged rather than resisted. And so nowadays innovation is omnipresent, there are government departments for innovation, and it is generally thought of as a good thing.

Canadian academic Benoît Godin puts it thus:

A firm cannot ignore investing in innovation or, if ignored, it pretends it does innovate.⁴

How much of the rhetoric of innovation is ‘lip-service’ remains debatable. But most organisations and businesses seem to want innovation, and many have departments and individuals specifically tasked to be responsible for innovation. However, a 2013 survey of organisations with revenues exceeding £80 million shows that although ‘the vast majority of executives (93 percent) continue to regard their company’s long-term success to be dependent on its ability to innovate’, ‘at the same time less than one out of five (18 percent) believe their own innovation strategy is delivering a competitive advantage.’⁵

As we shall see in Chapter 2, this presents a challenge for those of us in the innovation business. The fact that the demand for innovation is not being satisfied, even in the largest organisations – those which have devoted time and resources for it – suggests that the whole area is not very well understood, that effort may be being misdirected and even counter-productive.

When asked what innovation means and what they want from it, people give widely differing and uncertain responses:

There are ideas around creativity; about creating something new, maybe a product or maybe a process. There are ideas around making life simpler – inventing or discovering something that makes it easier or makes it better.

So innovation could be about improvement.

In business it could be making yourself stand out and gaining a competitive advantage.⁶

It may then be a matter of maintaining the position that you have in the market. And there is a difference between line extensions and step changes; disruptive innovations that threaten the status quo.

So there is the idea of innovation as an entrepreneurial tool.⁷

Another aspect is that we have to react to new inventions or discoveries – innovation as imitation, a process of keeping up, a fear of being left behind.⁸

And in opposition to the idea of progress, and of progress being inevitable, is the attitude that ‘if it ain’t broke, why try to fix it’.

We can see a few key words emerging: creativity, invention, discovery, improvement, disruption, which we need to pick apart if we are to understand the dynamics of innovation and therefore entrepreneurial action.

Clearly innovation is about change but sometimes it is unclear exactly what has changed. See, for example, the following case study.

CASE 1.1 HOW INNOVATION REALLY WORKS: ‘READY MEALS’

Consider the following somewhat puzzling piece of news:

Sales of luxury ready meals from the chilled cabinet in many UK supermarkets actually rose during the financial crisis of 2008 onwards. A very basic understanding of markets would lead one to expect luxury items to be the first to feel the pinch in straightened times.

The explanation comes when we look at the question from a different point of view; the real competition for ready meals of this type is clear in some promotional copy: ‘dine in for £10’. The prime competitor is the restaurant - a ‘luxury’ night in is more economical than a cheap night out or even a takeaway meal.

It is possible to speculate that the dominance of chilled foods in the UK is the result of the success of one entrepreneurial supermarket, Marks & Spencer, introducing a new category – the luxury chilled meal – which was itself arguably a response to image problems caused by the move to manufacturing their clothes range overseas. As an organisation, Marks & Spencer also pioneered the concept of ‘luxury’ chilled supermarket food items in the UK with the ‘Chicken Kiev’, first introduced in 1979 (priced at £1.99 for two). The origins of the recipe are disputed amongst chefs, yet Marks & Spencer clearly paid no royalties to any inventor before ‘launching’ their ‘new’ product. Equally, rival supermarkets paid no royalties to Marks & Spencer as they quickly developed their own versions. The changing fortunes of the Kiev in recent times can be regarded as a convenient marker of a change in consumer attitudes. Economies of scale and competition from other retailers have meant that the price has not risen significantly despite nearly 40 years of inflation. And so what was seen as a ‘dining out’ experience at home has been devalued almost to junk-food status and replaced by more complex ‘gourmet’ collections that all UK supermarkets now offer with very little distinction between them.

Interestingly, the meteoric growth of the chilled food sector was not driven by new practices in supermarket marketing, as is commonly assumed. The enabling innovations came from somewhere else – developments in IT which revolutionised supply-chain logistics and enabled ‘just in time’ delivery of more perishable items.⁹

So instead of a nice neat chain of cause and effect, we see a complex web of players with different agendas, organisations making short-term gains enabled by innovations ‘borrowed’ from elsewhere.

There are some who conclude that innovation is inherently muddled and unpredictable, for e...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• List of cases
• List of guest contributors
• Preface
• Acknowledgements
• 1 How to build an entrepreneurial organisation
• 2 Entrepreneurial strategy
• 3 Strategy in practiceinsights from an entrepreneurial multinational
• 4 Entrepreneurial culture and leadership
• 5 Building a culture of entrepreneurship in practice
• 6 Entrepreneurship with external stakeholders
• 7 Managing uncertainty and failure
• 8 Building an ambidextrous organisation
• 9 Diagnosing an entrepreneurial change programme
• Index