The Entrepreneurs

Written by Larry Carr, PhD, and Neal Thornberry, PhD

Whether you’re in a military organization that is revitalizing its mission with fewer ships and more technology or a public corporation striving to improve profitability in an increasingly turbulent environment, today’s successful leaders are focused on creating value-generating opportunities despite the most limited resources. In order to survive global competitive pressures and a changing economic landscape, both public and private organizations across the world are becoming leaner in terms of people and more cautious in terms of dollar spent. Successful companies and their leaders are learning to create value despite those circumstances.

For servicemembers who are preparing for a promotion or are anticipating a move to the private sector, understanding the need for and application of entrepreneurial thinking can be the key to a successful transition. That’s because leaders of streamlined organizations—public or private sector—face what may appear to be an insurmountable challenge. Demotivated and often overworked employees are tired of hearing “do more with less.” Tight budgets can become the staff’s “out” for doing little more than maintaining the status quo. Successful organizations in the 21st century must learn to innovate in order to stay ahead of the competition, in whatever form that competition may take.

So how does a leader help a beleaguered organization with constrained resources create opportunities for a positive, fruitful future? Many larger, less agile organizations have looked to entrepreneurs as a source of inspiration for building more innovative, risk-oriented cultures in their own organizations to help offset the tendency for large companies to sink under their own weight. It is unlikely you will find better managers of limited resources than successful entrepreneurs. That gutsy attitude of “we’ll do what it takes to succeed” has been lost or severely eroded in many large organizations that have come to reward risk avoidance and rule following.

While established organizations clearly do face different risks than startups, leaders in organizations of all sizes can take some significant lessons from entrepreneurial thinking. As successful organizations grow, they often lose sight of the behaviors that made them successful in the first place—being innovative, listening to their constituents and customers, and adapting as needed to their environments. As a result of their growth, organizations become more focused on the business of managing that growth, including developing processes, implementing systems and maintaining structures.

As one common example, organizations typically have rules for budget approvals. These budget approval processes ensure the organizations make in-depth assessments of how dollars are spent. The servicemember or employee with a good idea that meets a quickly growing market demand must first make a business case for the idea. Many analyses, statistics, and presentation materials later, the would-be entrepreneur pitches the idea to a direct supervisor and revises it according to the supervisor’s input. The idea is then shared with the supervisor’s supervisor, revised again, and shared with the next level up. And so it goes until the idea is floated up the organization’s chain of command. If the pitch is successful, the idea may land at the feet of the budget department or even budget committee. The idea is now at the mercy of the other priorities facing the organization—capital expenditures, headcount requirements, infrastructure investments and more. Even if the idea survives budget approval, the process may have taken many months—enough time for competitors to react or market dynamics to change and the opportunity is lost.

While rules help govern what the organization will do with its resources and how it will do it, rules can also block new ideas or ways of doing business from forming or being nurtured into opportunities. While busy making rules about the resources, the organization may lose sight of the fact that it’s not doing enough to feed and nurture those very same resources.

So the quandary is that without rules, an organization cannot manage its resources; with rules that inadvertently constrain opportunities, an organization cannot adapt and grow its resources. Thus large organizations often face an increasingly difficult paradox: being large, organized and systematic while also being innovative, flexible and entrepreneurial.

It’s a paradox that is demobilizing for many public and private organizations, but doesn’t need to be. Balancing priorities and timing is the key. Processes are truly critical and should be upheld when it makes sense to do so. These same processes need to be adapted, or circumvented altogether, when they get in the way of innovation.

The decision on what is a priority—a process or an opportunity—and when, cannot be left to line managers who only follow the rules and work to avoid risk. Many line managers in large companies are either uncomfortable with risk taking or have been conditioned by their companies to play it safe if they want a promotion. This is especially true in organizations that tend to have risk adverse cultures, where line managers are safer erring on the side of rules over even the smallest opportunity for taking chances. If the rule indicates x, they feel safer and more justified in doing x even if y makes more sense for the customer or for the organization.

In order to offset the inertia that often accompanies organizational size, senior management must create and refine counter- balancing measures that surface and leverage people’s innate innovative capabilities. All humans are wired for innovation, but often this potential is not encouraged or is underutilized in highly structured and process-driven organizations. Startup entrepreneurs are successful because they understand and tap their own creative juices. Senior managers seeking more innovation and value creating behavior within their employees must develop leaders throughout the organization who can create environments where people get enthused and are rewarded for helping the company do business as unusual rather than usual. They need more leaders who can wear an entrepreneurial hat.

WHAT CAN LEADERS LEARN FROM ENTREPRENEURS?

Leaders who want to apply entrepreneurial thinking in their organizations must have the mindset and skill set to create a culture conducive to innovation. This means that leaders must develop skills to start thinking like entrepreneurs. One thing that cannot be overstated about successful entrepreneurs is that they are masters at managing resources. Their pursuit of innovative opportunities is balanced with their management of assets and motivation of people.

Leaders of organizations desiring greater innovation and new ideas for business growth need to learn that same balance. In an organizational setting, leaders must know cash flow, net present value and current market dynamics. They also need to be able to influence without authority, as many of the resources needed to drive an idea may not fall within their direct responsibility. Negotiating to create optimal solutions for as many people within the organization as possible is a sure way to get an idea heard if not approved. And they need to practice these managerial skills while always keeping an eye on identifying and capturing new business opportunities.

HOW IS ENTREPRENEURIAL LEADERSHIP APPLIED IN ORGANIZATIONS?

The organizational culture must be flexible enough to support the implementation and sustenance of new practices. This will likely require identifying and changing current processes that inhibit innovation. For instance, how many levels of approval does funding an idea require? If it is an arduous process that is likely to cripple if not kill the idea, revise the process to ensure it meets due diligence requirements but is streamlined to be timely enough to capitalize on the opportunity.

While change is hard in any organization, it is part of the innovation process. Changes in the organizational structure that necessitate changes in the operating environment are critical to successfully delivering the intended results. The organization must recognize the shifting environment and respond. The enterprise management effort in the U.S. Navy is an excellent example of this innovation. Once inhibiting processes are identified and addressed, strategies to drive innovation must be implemented. Several innovation techniques and tools exist that will allow leaders to plan and use innovation for strategic execution. Education that equips leaders with these tools should become part of every organization’s leadership development process.

For example, most managers are good at developing marketing plans which show how their company could profit from a new business idea, but they are not usually as good at developing business plans. These plans are not based on wild projections from market research but on real data from the street. Start-up entrepreneurs don’t predict who will buy their new product or service; they go out and find the real check writers. Part of their success is because they have feet on the street, and hands on the customers’ needs.

Once a leader gains the skills required to think and act more entrepreneurially, the application of the innovative process is not only a matter of creating an innovation strategy. Rather, the entrepreneurial leader must develop the people, processes and culture within the organization that will support the strategy.

Developing and supporting an innovation strategy is the first step towards sustained innovation and the identification, development and capturing of new business opportunities. Formalizing the innovative process within the organization helps ensure an opportunitygenerating culture is maintained. But the organization must also find, develop and recognize leaders who display entrepreneurial traits as well. Innovative processes must go hand in hand with entrepreneurial people. The processes lead to systematic opportunity identification, but organizations need enough entrepreneurs willing and able to turn these ideas into commercial reality. Additionally, to bolster the success the innovative process must be implemented in ways that can be measured against organizational objectives.

It may sound strange to talk about entrepreneurship in the military but it is very apt and probably needed now more than ever. With tight budgets, huge pressures to innovate in fastmoving and unpredictable warfare theaters and requirements for creative asset management, the time for entrepreneurially oriented command leadership is clearly here.

For military leaders who are on their way to becoming flag officers or leaders in the private sector, applying entrepreneurial thinking means identifying and capitalizing on innovative thinking and increased value-creating opportunities.

These value-creating opportunities could come in the form of creative asset management, innovative approaches to warfare fighting, new technologies or innovative applications of old technologies, and new organizational models. The ultimate beneficiaries? The command structure, soldiers on the ground, taxpayers and a safer America.

Changing your mindset, balancing priorities, and sustaining an innovative organizational culture are all aspects of successfully managing and nurturing your resources. For the leader who is successful in this endeavor, charting new courses for the future will be a clear, promising reward. ♦
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Larry Carr is a professor of management accounting at Babson College. Neal Thornberry is a professor of management at Babson College, faculty director at Babson Executive Education and academic director of the Innovation & Corporate Entrepreneurship Research Center.

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