Entrepreneurship is based on the same principles, whether the entrepreneur is an existing large institution or an individual starting his or her new venture singlehanded. It makes little or no difference whether the entrepreneur is a business or a nonbusiness public-service organization, nor even whether the entrepreneur is a governmental or nongovernmental institution. The rules are pretty much the same, the things that work and those that don’t are pretty much the same, and so are the kinds of innovation and where to look for them. In every case there is a discipline we might call Entrepreneurial Management.
Yet the existing business faces different problems, limitations, and constraints from the solo entrepreneur, and it needs to learn different things. The existing business, to oversimplify, knows how to manage but needs to learn how to be an entrepreneur and how to innovate. The nonbusiness public-service institution, too, faces different problems, has different learning needs, and is prone to making different mistakes. And the new venture needs to learn how to be an entrepreneur and how to innovate, but above all, it needs to learn how to manage.
For each of these three:
• the existing business
• the public-service institution
• the new venture
a specific guide to the practice of entrepreneurship must be developed. What does each have to do? What does each have to watch for? And what had each better avoid doing?
Logically, the discussion might start with the new venture, just as, logically, the study of medicine might start with the embryo and newborn baby. But the medical student starts out by studying the anatomy and pathology of the adult, and the practice of entrepreneurship is likewise best started by discussing the ‘adult’, the existing business and the policies, practices and problems that are pertinent in managing it for entrepreneurship.
Today’s businesses, especially the large ones, simply will not survive in this period of rapid change and innovation unless they acquire entrepreneurial competence. In this respect the late twentieth century is totally different from the last great entrepreneurial period in economic history, the fifty or sixty years that came to an end with the outbreak of World War I. There were not many big businesses around in those years, and not even many middle-sized ones. Today, it is not only in the self-interest of the many existing big businesses to learn to manage themselves for entrepreneurship; they have a social responsibility to do so. In sharp contrast to the situation a century ago, rapid destruction of the existing businesses – especially the big ones – by innovation, the ‘creative destruction’ by the innovator, in Joseph Schumpeter’s famous phrase, poses a genuine social threat today to employment, to financial stability, to social order, and to governmental responsibility.
Existing businesses will need to change, and change greatly in any event. Within twenty-five years (see Chapter 7) every industrially developed non-Communist country will see the blue-collar labour force engaged in manufacturing shrink to one-third of what it is now, while manufacturing output should go up three- or four-fold – a development that will parallel the development in agriculture in the industrialized non-Communist countries during the twenty-five years following World War II. In order to impart stability and leadership in a transition of this magnitude, existing businesses will have to learn how to survive, indeed, how to prosper. And that they can only do if they learn to be successful entrepreneurs.
In many cases, the entrepreneurship needed can only come from existing businesses. Some of the giants of today may well not survive the next twenty-five years. But we now know that the medium-sized business is particularly well positioned to be a successful entrepreneur and innovator, provided only that it organize itself for entrepreneurial management. It is the existing business – and the fair-sized rather than the small one – that has the best capability for entrepreneurial leadership. It has the necessary resources, especially the human resources. It has already acquired managerial competence and built a management team. It has both the opportunity and the responsibility for effective entrepreneurial management.
The same holds true for the public-service institutions, and especially for those discharging nonpolitical functions, whether owned by government and financed by tax money or not; for hospitals, schools, and universities; for the public services of local governments; for community agencies and volunteer organizations such as the Red Cross, the Boy Scouts, and the Girl Scouts; for churches and church-related organizations; but also for professional and trade associations, and many more. A period of rapid change makes obsolete a good many of the old concerns, or at least makes ineffectual a good many of the ways in which they have been addressed. At the same time, such a period creates opportunities for tackling new tasks, for experimentation, and for social innovation.
Above all, there has been a major change in perception and mood in the public domain (cf. Chapter 8). A hundred years ago, the ‘panic’ of 1873 brought to an end the century of laissez faire that had begun with Adam Smith’s Wealth of Nations in 1776. For a hundred years from 1873 on, being ‘modern’, ‘progressive’, or ‘forward-looking’ meant looking to government as the agent of social change and betterment. For better or worse, that period has come to an end in all non-Communist developed countries (and probably in the developed Communist countries as well). We do not yet know what the next wave of ‘progressivism’ will be. But we do know that anyone who still preaches the ‘liberal’ or ‘progressive’ gospel of 1930 – or even of 1960, of the Kennedy and Johnson years – is not a ‘progressive’ but a ‘reactionary’. We do not know whether privatization,1 that is, turning activities back from government to nongovernmental operation (albeit not necessarily to operation by a business enterprise, as most people have interpreted the term) will work or will go very far. But we do know that no non-Communist developed country will move further toward nationalization and governmental control out of hope, expectation, and belief in the traditional promises. It will do so only out of frustration and with a sense of failure. And this is a situation in which public-service institutions have both an opportunity and a responsibility to be entrepreneurial and to innovate.
But precisely because they are public-service institutions, they face specific different obstacles and challenges, and are prone to making different mistakes. Entrepreneurship in the public-service institution thus needs to be discussed separately.
Finally, there is the new venture. This will continue to be a main vehicle for innovation, as it has been in all major entrepreneurial periods and is again today in the new entrepreneurial economy of the United States. There is indeed no lack of would-be entrepreneurs in the United States, no shortage of new ventures. But most of them, especially the high-tech ones, have a great deal to learn about entrepreneurial management and will have to learn it if they are to survive.
The gap between the performance of the average practitioner and that of the leaders in entrepreneurship and innovation is enormous in all three categories. Fortunately, there are enough examples around of the successful practice of entrepreneurship to make possible a systematic presentation of entrepreneurial management that is both practice and theory, both description and prescription.
1 A word that I coined in 1969 in The Age of Discontinuity (New York: Harper & Row; London: William Heinemann).