THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP

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Entrepreneurship MGT602

Lesson 6

THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued...)

LEARNING OBJECTIVES

To explain the aspects of the entrepreneurial process.

To explain the differences between entrepreneurial and managerial domains.

To explain the organizational environment conducive for entrepreneurship.

To identify the general characteristics of an entrepreneur.

To explain the process of establishing entrepreneurship in an organization.

CORPORATE VERSUS ENTREPRENEURIAL CULTURE

Smaller, aggressive, entrepreneurial firms are developing more new products and becoming dominant in

certain markets. Many companies are attempting to create the same spirit, culture, and rewards of

entrepreneurship in their organizations.

The typical corporate culture has a climate and reward system that favors conservative decision making.

Emphasis is on gathering large amounts of data as the basis for a rational decision. Risky decisions are

often postponed until hard facts are gathered or a consultant is hired.

Often there are so many approvals required that no individual feels personally responsible for the project.

The guiding principles in a traditional corporate culture are:

1. Follow instructions given

2. Do not make mistakes

3. Do not fail

4. Do not take initiative

5. Stay within your turf and protect your backside

6. This restrictive environment is not conducive to creativity, flexibility, and risk taking

The guiding principles of entrepreneurs

Aspects of an Entrepreneurial culture are quite different:

Develop visions, goals, and action plans

Be rewarded for actions taken

Suggest, try, and experiment

Create and develop

Take responsibility and ownership

There are differences in the norms of the two cultures.

The traditional culture is hierarchical in nature, with established procedures, lines of authority, and

control mechanisms. These support the present corporate culture, and do not encourage new venture

creation.

The culture of an entrepreneurial firm has a flat organizational structure with networking, teamwork,

sponsors, and mentors. Close working relationships help establish an atmosphere or trust that facilitates

accomplishment of visions. Individuals make suggestions across functional areas, resulting in cross-

fertilization of ideas.

The two cultures produce different types of individuals and management styles.

Motivation

Traditional managers are motivated primarily by promotion and typical corporate rewards.

Entrepreneurs and entrepreneurs thrive on independence and the ability to create. Entrepreneurs expect

their performance to be suitably rewarded.

Entrepreneurship MGT602

There are also time orientation differences.

Managers emphasize the short run, entrepreneurs the long run, and entrepreneurs somewhere in between.

Entrepreneurs use a midpoint mode between delegation of managers and direct involvement of

entrepreneurs.

Entrepreneurs and entrepreneurs are moderate risk takers; managers are much more cautious. Most

entrepreneurs fail at least once, and Entrepreneurs learn to conceal risky projects from management until

the last possible moment. Traditional managers tend to be most concerned about those at higher levels,

entrepreneurs serve self and customers, and Entrepreneurs add sponsors.

CLIMATE FOR ENTREPRENEURSHIP

In establishing an Entrepreneurial environment, certain factors and leadership characteristics need to be

present. The first of these is that the organization operates on the frontiers of technology. Since research

and development are key sources for new product ideas, the firm must operate on the cutting edge of

technology and encourage and supporting new ideas instead of discouraging them.

Second is experimentation, or trial and error, is encouraged. Successful new products usually do not appear

fully developed; instead they evolve. A company wanting to establish an Entrepreneurial spirit has to

establish an environment that allows mistakes and failures. Without the opportunity to fail, few corporate

Entrepreneurial ventures will be developed.

Third an organization should make sure that there are no initial opportunity parameters, such as turf

protection, inhibiting creativity in new product development.

Fourth, the resources of the firm need to be available and easily accessible. Often, insufficient funds are

allocated not to creating something new but instead to solving a problem that have an immediate effect on

the bottom line. Some companies, such as Xerox, 3M, and AT&T have established separate venture capital

areas for funding new internal ventures.

Fifth a multidisciplinary team approach needs to be encouraged. One key to Entrepreneurial success is the

existence of "skunkworks" involving key people. Developing the needed team work for a new venture is

further complicated by the fact that a team member's promotion within the corporation is related to

performance in the current position, not in the new venture. The corporate environment must establish a

long time horizon for evaluating the success of the overall program.

Sixth the spirit of entrepreneurship cannot be forced on individuals; it must be voluntary. Most managers

in a corporation are not capable of being successful Entrepreneurs. Those who do emerge from this self

selection process must be allowed the latitude to carry a project through to completion. An Entrepreneur

falls in love with the new venture and will do almost anything to ensure its success.

The seventh characteristic is a reward system. The Entrepreneur needs to be appropriately rewarded for

the energy and effort expended on the new venture. An equity position in the new venture is one of the

best motivational methods.

Eight a corporate environment favorable for entrepreneurship has sponsors and champions throughout

the organization that supports the creative activity and resulting failures.

Finally the Entrepreneurial activity must be whole-heartedly supported by top management.

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