Corporations and Entrepreneurs: Paradox and Opportunity Joel Ross igement at joc Raton, His "Computers: ‘Their Use and Misuse” appeared in the April 1972 issue of Busi nes Horn Joel Ross profesor of Torida Atiantie Universi The intrapreneur is the corporate entre- preneur. But some people consider “cor- poration” and “entrepreneur” so opposite that “intrapreneur” is an oxymoron, a con- tradiction in terms. Not so, says the author, who argues that an organization without an entrepreneurial spirit becomes a bureau- cracy. On the other hand, the small firm cannot depend on entrepreneurship alone. Without professional management it may stay small—or worse, go broke. ntrepreneurship isa much ad- mired characteristic in Amer- ican business today. It is curally present in the self-starter that individual who goes into business for himself or herself and takes the necessary personal risk. This is the e- reprenewr. ‘The intrapreneur has similar char- acteristies but operates in a corporate environment, actively seeking oppor tunities and deliberately risking the introduction of change and improve- ments. What cor merica needs is more intrapreneurs. The decade of the 1980s marked the arrival of the entrepreneur as the business hi America. From soap operas (°Guiding Light” and “Dy- ‘Copyright © 2001 All Rights Reserved nasty"), to TV commercials (“I liked itso much I bought the com (© product promotions (the Brothers’ wine and Famous Amos cookies), the entrepreneur is the new in-character ‘This hero phenomenon the entreprent moter (“tell you what I'm go for at best someone who h sophisti w grow up to be d porate manager. Business school courses were tuned to the Fortune 500, and success in society meant up- ward mobility in the established cor- poration,Corporations and Entrepreneurs: Paradox and Opportunity “The size and complexity of the modern business demand the use of procedures, rules, policies, organization charts, position descriptions, budgets, and the like. And therein lies the paradox. How can we encourage a sense of innovation, autonomy, and entrepreneurship despite the organizational trappings?” EVERYBODY LOVES AN ENTREPRENEUR Ihe turnaround has arrived As long ago as 1956, William H. White, Jr, in his book The Organization Man, deplored the shift in dominant patterns of behavior in the American middle class from in- dividualistic modes to organizational modes. White was alarmed by the trend toward bureaucratic or orga- nizational men who take no risks, al low themselves to be shaped by the organization, and cloak themselves in the security of that organization. Thirty years later, Business Week proclaimed in a cover story, “The Or- ganization Man Is Dead.”! An ex amination of business journal articles, in recent years reveals a growing number of entries on the topics trepreneur,” “small business, porate venturing,” and “intrapre- Today, business school curricula on small business management and en- trepreneurship are accelerating. State governments are sponsoring’ Small Business Development Centers (SBDCs). The number of research parks for “incubating” innovative product ideas has grown dramati- cally, Public policy programs are being developed to create or stimulate busi- ness formation. Thisis ast should be. It reflects the widespread recognition that new and small firms are important in job gen- ration and economic development, 1. See “The New Corporate Elite," Business Work, January 21, 1985, p63 The entrepreneur energizes the economy that energizes the nation. Even supply-siders and promoters of Reaganomics agree. ‘THE CORPORATE, ENTERPRENEUR s there a lesson here for the cor- poration? What actions can it take that might release the innovative in the established organi- potenti zation “The real significance of this recent awareness is not so much the popu- larity of the entrepreneurs but the in- novative characteristic they represent. Tom Peters and Robert Waterman, in their remarkable best-seller In Search of Excellence, suggest that the most dis- couraging fact of life in big corpora tions is the loss of what got them big in the first place: innovation. Can innovation be taught? Can this dimension of entrepreneurial behav- ior be operationalized and become a part of company culture? Can man- shed organizations be in short, can you be big and act small? If the answer to these questions is yes, there would seem to be an enormous potential for productivity improvement in all com- panies, large and small. The concern for innovation in cor- porate America is genuine. A first step in claiming innovation for the orga- nization is to review those desirable characteristics of the entrepreneur 2. See Thomas J. Peters and Robert H. Waterman, tn Search of Everllonr (New York! Harper & Row, 1982), py 200, Copyright © 2001 All Rights Reserved that may be transferable to or adopted by the corporation. A second step might be to compare the entrepre- neur with the corporate manager, the potential intrapreneur. Managing a business corporation does require a certain degree of trepreneurial skill, but itis true that ‘managers are as much functionaries and administrators as they are entre- preneurs. They are not so much peo- ple as position descriptions and boxes. on the organization chart. While most people recognize the names of such entrepreneurs as Ray Kroc, Ted ‘urner, Victor Kiam, Steven Jobs, and the soap opera characters, itis doubt- ful that the average citizen’s name recognition of corporate leaders ex- tends beyond Lee Iacocca. What Is a Corporation? ‘There can be little doubt that the cor- poration is the central institution in our society. Those who manage these institutions are the business elite. Pe- ter Drucker, in his monumental book Management, concludes: “Manage- ‘ment is the most important activity in our society” and “The emergence of ‘management may be the pivotal event of our time.”* It is not unfair to say that most, if not all, large and medium-size busi- nesses tend to take on the characteris- ties of a bureaucracy. These charac- teristics, as formulated by German so- Giologist Max Weber in the early 4. Power F. Drucker, Management Tass, Re sponses and Pratcr (New Vork: Harper & Row, 1973), p. 1. 778 Business Horizons / July-August 1987 1900s, include di alization), the hierarchy of author- ity, rules and standards, a spirit of formalistic impersonality, and ployment based on technical qu: ‘ations.t Hence, the focus on structure, not people. These characteristics are not all bad. Indeed, the size and complexity of the modern business demand the use of such bureaucratic trappings. Proce- dures, rules, policies, organization charts, position descriptions, budgets, and the like are part of corporate life. ‘And therein lies the paradox. How can we encourage a sense of innova- tion, autonomy, and entrepreneur- ship despite the organizational trappings? Who Is an Entrepreneur? ‘A classic definition is that the true en- trepreneur is one who creates an o} going entity out of nothing. This definition may be too limited if we classify entrepreneurs broadly as business owners. This ownership can be achieved through a number of paths, including: © Starters; © Buyers; © Inheritors; and © Promoters or people brought in from the outside. One would expect that the extent and depth of entrepreneurial behav- ior should increase along these paths ‘on a continuum from 1 10 4." What is entrepreneurial beh: Popular conceptions of the term evoke various images. An entrepreneur is born, not made. An entrepreneur is a gutsy individual who braves uncer- tainty Whatever the perce son normally has coneei business or shaped an ongoing one. This achievement involved personal risk-taking and a degree of y and innovation not learned from a book or a classroom. 4. See Max Weber, Theory of Social and Feo nomic Orgamzation (Landon: Oxlord University Press, 102), 5. Another continuum of entrepreneurial activity is proposed by John G. Burch, “Proll ing the Entrepreneur,” Business Horas. 29 (Geptember-October 1986): 1316. Entrepreneurship is not knowledge but behavior. It’s one of those things that cannot be learned at the Harvard Business School. According to H. Ross Perot’s gospel: “To get things done, you're just going to have to slug it out.” Previous studies have classified en- trepreneurs by their personality char. acteristics, paths to ownership, or by the designations craftsmen or man- agers.* Craftsmen. Crafismen fit the above description of the entrepreneur. They are motivated by freedom of choice in work and a desire to be their own bosses. Technical work, such as en= gineering or selling, is preferred over administration, such as planning and control. Managers. ‘The managerial entre- preneur is the corporate manager. Managers feel at home with the cor- porate or bureaucratic environment and prefer administrative duties to technical work. They are motivated bya desire to climb the corporate lad~ der and achieve economic gains. Sat- isfaction is achieved by doing the work 6. Sce Arnold Cooper and Witham C, Dun= kelberg, “Entrepreneurship and Paths to B ness Ownership.” Siac Management Journal 7 Uanuary-Febraary 1986): 53-68, Oxher sun rmaries include Timothy Mescon and John K. Montanari, “The Personalities of Independent and Franchise Entrepreneurs: An Empirial Analysis of Concepss, ournalaf Entveprencunal Managenent 3 (1981) 149-5 ant Danny Miller, the Correlates of Entrepreneurship in Three Types of Firms,” Management Srience 2 (July 1689): 770-1 Copyright © 2001 All Rights Reserved rather than contemplating the com- pleted product or end result. In short, they tend to focus on activity, not re- sults THE ENTREPRENEUR AND THE MANAGER COMPARED Ihe managerial activity of the entrepreneur and the com- pany executive are at once the same yet different. The general man- agement process (plan, organize, con- trol) and the functional tasks (sales, operations, finance) are similar. Moreover, the entreprencurial envi- ronment is, in broad structure, the same, However, there are some ob- vious differences in both cireumstan- ces and perceptions. Plans and Controls The entrepreneur is results-oriented. but tends to avoid the mental strain of organizing and documenting the details of a plan. The entrepreneur is above all a projector, an idea person who perceives a new product or mar- ket adaptation and the organization of resources leading to making money. For an ongoing enterprise, the ten- dency is to subordinate planning in favor of the immediate problems of the short run. Despite the short-run orientation, the goal is perceived as increasing success in the longer run. The corporate manager, on the other hand, is comfortable with plans, budgets, schedules, and projects These are frequently seen as the end rather than the means. The manager may focuson the efficiency of activity. doing things right—rather than the effectiveness of results—doing the right things. When it comes to controls, the en- trepreneur views them as a bother and is less likely to maintain written prog- ress reports. The corporate manager is deeply involved in standards, reports, and the cal control techniques. In an extreme case, the manager may play the role of the police. Authority and Organization Throughout the literature on entre- preneurs, one characteristic seems toCorporations and Entrepreneurs: Paradox and Opportunity “True entrepreneurs have a compulsion to be on their own. The corporate manager has a different perception. The goal, the avenue to success, is to occupy increasingly important positions in be common: the inability to play the role of employee and subordinate. Entrepreneurs have difficulty in re- lating to authority figures, a difficulty that frequently can be traced to re- lations with teachers, bosses, and even parents. This reaction to authority is the very style of entrepreneurship. It makes this person a weak link in the chain of command in the corporate hierarchy of authori The corporate manager is right at home in the hierarchy of the bureau cracy. Indeed, the company is per ceived as a battleground to be con- quered, and much energy is directed to climbing the ladder of this hier- hy. Thus, political skill, combined ‘occupational or functional com- petence, determines success. Entre- prencurial characteristics, if present, are generally discouraged, and in- novative ideas are set aside in favor of the status quo. Success becomes a function of occupational parochial ism and conformity to top manage ment values. Whereas corporate culture and corporate values pay lip service to innovation, the facts of cor porate life discourage it. Identifying with the Organization True entrepreneurs have a compul- sion to be on their own. The ultimate “high” is the prospect of creating something out of nothing. Most will say, “The joy of business is in the cre- ation.” The entrepreneur is likely to refer to the business as “my baby.” The corporate manager has a dif- ferent perception of the organization. ‘The goal, the avenue to success, is to an already established structure.” occupy increasingly important. posi tions in an already established struc- ture. The complexity of the company requires division of labor, and the corporate manager looks for a niche in sales, accounting, or engineeri is an elusive entity managed by a remote executive team. known as “they”: “They say it’s not in the budget,” or “They say it's against policy.” THE INTRAPRENEUR: THE BEST OF BOTH WORLDS ore and more managers of established corporations are accepting two. conclusions about bureaucracy and innovation © The complexity and structure of the modern corporation inhibits in- novation and change: Some way should be found to courage the entrepreneurial the corporation and release th Copyright © 2001 Alll Rights Reserved novative potential among its mem- bers. ‘And therein lies the paradox. It is necessary (0 retain many of the clas- sical trappings of the organization, yet to encourage the innovation that the trappings inhibit. It would be fool- hardy to suggest that plans, structure, controls, research, and the like be dis carded. So how can we get the best of both worlds? Evidence suggests that, at some stage in company growth, seat-of-the- pants management is no longer suf- ficient. The era of the swashbuckler is over. Some of the founders whose entrepreneurial mode proved inade- quate in later stages of growth include such folk heroes as Nolan Bushnell (Atari and Pizza Time Theaters), Lore Harp (Victor Graphics), and Steven Jobs (Apple Computer). Jobs, who fired his professional managers and characterized them as “bozos,” was himself fired by Apple’s board for lack of this same professional manage- ment skill, The conclusion emerges that the skills of both the professional corpo- rate manager and the entrepreneur are needed. Neither alone is enough. “The gunslinger approach that takes a shot in the dark is not the answer. ‘This approach, which is frequently at tributed to the entrepreneur, reason for tens of thousands of fail- ures, For every firm that prospered and became a media event, hundreds, of others failed, despite an initial cli mate of enthusiasm that was not jus- tified by rational expectation. The suceess stories are for the most part not shots in the dark but reasoned80 Business Horizons / July-August 1987 gambles based on superior know! edge and a superior competitive strat- ey. All. corporations were initially founded by entrepreneurs: the Henry Fords, the Andrew Carnegies, the Tom Watsons. In some of them, growth resulted in bureaucratization and ossification. The challenge and the opportunity today is to develop and maintain an environment and culture in which entrepreneurship can flourish, Recent research and experience in- dicates the need for combining man- agerial and entrepreneurial skills. arcup firms, particularly those in high-tech, were more successful if the founders had prior experience in the relevant markets and technology and obtained this experience with “large corporations (those with more thar 500 employees)” Perhaps they suc- ceeded because they had the best of both worlds: freedom to innovate, 7. See, lor example, Arnold C. Cooper and Albert V. Bruno, "Success aniong High-Te Firms" Busnes Hors 20 (April 1977) 16:22 In this study of 250 high-echnology firms founded in the San Francisco Bay Area in the 1960s, 80" percent of the founders of ‘high growth firms came from organizations with ‘more than 509 empoyees who utilized the same technology and served the same markets as the nev firme, Copyright © 2001 All Rights Reserved combined with the required mana- sgerial background. he best of both worlds, then, is the company managed by three-dimensional individu- als, First, they learn and practice the fundamentals of professional man- agement: planning, organizing, con- cating, and rational -y adopt entrepreneurial behavior as part of the basic company culture, removing the bureaueratie roadblocks that inhibit innovation And finally, they encourage inno- vation and entrepreneurship among subordinates. C)