Entrepreneurship & Intrapreneurship
Entrepreneur Success Series
Resource Note # 2
The manner in which an organisation creates value is affected by the forces in macro & micro business environment. Increased globalization has ameliorated this effect manifold. For instance, in the course of the commodities super-cycle that began in the early 2000s, many companies involved in commodity trading benefitted from surging exploration, investment, and production activities, which transformed growth prospects.
These patterns have been reversed in 2016, with oil and metals prices sliding 50-70 % below their early-2011 peak. This has adversely affected many companies who had a relatively large investment exposure in commodity trading. The World Bank has cut its price forecast for 80 % of the world’s major commodities, as oversupply and weaker emerging market growth prospects weigh on demand (World Bank, 2016).
In volatile, uncertain, complex & ambiguous (VUCA) environment organisations are required to constantly look for newer ways of creating value. Entrepreneurs and intrapreneurs play a decisive role in this regard, as they help the organisations (newly established or existing) to engage in new business and enter new markets.
1. The Meaning
Entrepreneurship has been defined as the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence (Hisrich & Peters, 2002). Entrepreneurship involves uncovering and developing an opportunity to create value through innovation and seizing that opportunity without regard to either resources (human and capital) or the location of the entrepreneur – in a new or existing organisation (Churchill, 1992).
The term entrepreneurship is popularly used in the context of small and new enterprises. But legendary management guru, Peter Drucker (1994) emphasizes that entrepreneurship is an integral part of all types and scales of organisations. He cites example of General Electric Company (G.E.), as one of the world’s biggest businesses which has a long history of starting new entrepreneurial businesses from scratch. G.E. has not confined itself to entrepreneurship in manufacturing. Its financing arm, G.E. Credit Corporation, in large measure triggered the upheaval in the American financial system which later spread rapidly to Great Britain and Western Europe as well. G.E. Credit broke the banks’ traditional monopoly on commercial loans.
Entrepreneurship within existing organizations is usually called ‘corporate entrepreneurship’ or ‘intrapreneurship’ (Parker, 2009). Antoncic and Hisrich (2003) define intrapreneurship as “emergent behavioural intentions and behaviours that are related to departures from the customary ways of doing business in existing organizations”. Intrapreneurship helps managers to renew and revitalize their businesses, to innovate, and to enhance their overall business performance. Since intrapreneurs act within organizational boundaries, they are less autonomous than independent entrepreneurs, reap fewer financial benefits of their entrepreneurial engagement and take fewer personal risks. The organizational context thus implies restrictions but also provides a considerable amount of security as the intrapreneur is not liable with his/her private means in case of failure. Intrapreneurs work in organizations that have their own policies, procedures and bureaucracy. Sometimes the intrapreneur becomes the revolutionary inside the organization, who fights for change and renewal from within the system.
Intrapreneurs exhibit three special characteristics. First, intrapreneurs are proactive individuals with a strong desire for action. Second, their proactive behaviour is focussed on the pursuit of an opportunity without regard to the resources they currently control. Somehow intrapreneurs always seem to find a way. And third, intrapreneurs often pursue something that in some sense is ‘new’ or ‘innovative’, i.e. intrapreneurial behaviours and actions deviate from the status quo.
Drucker distinguishes between a ‘business owner’ and an ‘entrepreneur.’ He says founders of one of the oldest banks, the Deutsche Bank, did not aim at ownership. The task of the banker as entrepreneur was to mobilize other people’s money for allocation to areas of higher productivity and greater yield. As against this ‘owner’ bankers, like Rothschilds, used their money primarily to finance their new railroad projects. The entrepreneurial banker, by contrast, never wanted to be an owner. He made his money by selling to the general public the shares of the enterprises he had financed in their infancy. And he got the money for his ventures by borrowing from the general public.
2. Entrepreneurial Leadership
Entrepreneurial leaders are those who influence their organizations/teams to develop and practice entrepreneurial orientation. Entrepreneurial orientation is seen in the way everyone in the organization thinks of new business opportunities in products, processes or business models.
2.1 The Phenomenon of Leadership
Leadership is the process of a leader exerting influence and power over a large group of followers in order to work toward a larger common goal.
Leaders exercise influence over a large section of people, and hence are generally seen to be public figures like Mrs Indira Gandhi (India), Lee Kuan Yew (Singapore) or Ho Chi Minh (Vietnam). As more and more of the workforce has turned into Knowledge workers, the old school of management – “command& control” or “reward & punish” – is no longer effective. Employees have their own mind and a unique thought process. We need managers who can motivate, inspire and influence their work groups and teams. In other words, leadership has become a part of the manager’s role in modern times.
2.2 Leaders and Managers
Vineet Nayar, former CEO of HCL Technologies (IT Major in India) cites three key differences between Leaders and Managers.
a) Leaders ‘add value’ by setting an example to the team and by enabling team members to do more and better. They are not content with current levels of performance. Managers are concerned first with performing well under the circumstances. Leaders work to change the circumstances.
b) Leaders create a ‘circle of influence’ as contrasted with the ‘circle of power’ which managers are generally concerned with. The circle of influence is the number of people other than direct reports who look up to the leader for direction and guidance. The circle of power constitutes those direct reports over whom the manager exercises position power.
c) Leaders influence the ‘thought’ process and the ‘mindset’ of the people, while managers direct their subordinates’ actions toward accomplishment of tasks. The leaders thus connect with people at a deeper level.
The difference is usually captured in this graphic way: managers have subordinates, while leaders have followers.
Entrepreneurial leaders need to create environment which fosters entrepreneurial / intrapreneurial activities, behaviours and skills.
3. Intrapreneurial Behaviour and Activities
According to de Jong and Wennekers (2008), intrapreneurs exhibit some unique behavioural traits. We discuss here seven important intrapreneurial behaviours & activities.
3.1 Personal Initiative
Personal initiative means to be self-starting, proactive, and persistent (Frese & Fay, 2001). Personal initiative involves overcoming barriers to achieve a goal. This is different from passive approaches which are characterized by behaviours such as doing what one is told, giving up in the face of difficulties, not developing plans to deal with future difficulties, and passively responding to environmental demands.
Self-starting implies that a person does something without being told, without getting an explicit instruction, or without an explicit role requirement. Thus, personal initiative is the pursuit of self-set goals in contrast to assigned goals. Personal initiatives can be found in both high- and low-level jobs. An example would be a blue-collar worker who attempts to fix a broken machine even though this is not part of his or her job description. Another example would be a middle level manager who initiates a quality control program, even if he is not supposed to do so (Frese & Fay, 2001).
Proactiveness means having a long-term focus, not waiting until one must respond to a demand. Such a long-term focus enables individuals to consider things to come (new demands, new or recurring problems, and emerging opportunities) and to do something proactively about them. Thus, problems and opportunities are anticipated, and the person prepares to deal with them immediately.
The third dimension of personal initiative is persistence. Individuals need to overcome barriers in order to reach their self-started and proactive goals. Generally, personal initiative involves some sort of change. Changes usually do not work out perfectly from the very beginning; they often involve setbacks and failure. People affected by the changes may not like having to adapt to something new and being forced to abandon their routines. This requires persistence from the person taking initiative in order to pass technical barriers and to overcome other people’s resistance. Sometimes, persistence also has to be shown towards supervisors who do not like their subordinates going beyond the boundaries of their jobs (Frese & Fay, 2001).
3.2 Opportunity Exploration
An entrepreneurial opportunity is any possibility for a recombination of resources that an individual expects to be profitable. Thus an entrepreneurial opportunity may manifest in the form of a new product or service, a new geographical market, a new operational process or a new management practice. According to Sarasvathy et al. (2003) opportunities can be either recognized, discovered or created. Recognition relates to opportunities like exploiting an existing market, competing for a share of a market or responding to an increase in demand. Discovery implies that there is a latent market, for instance related to deregulation, or because only demand exists (such as a new consumer preference or a needed cure for a disease) or only supply (such as a product or commercial formula from abroad). Creation means that there is no obvious supply and demand yet, such as for applications of new radical technologies or for a new recreational concept. The perception of opportunities is more valuable if it is not shared by many- others. Thus entrepreneurs and intrapreneurs ‘must either possess different information than others or interpret the same information differently’ (Shane, 2003).
Sources of opportunity, as defined by Peter Drucker, relate to the factors that can initiate innovations. These sources will be discussed in detail in next edition of Sattva.
3.3 Idea Generation
An idea is a necessary condition for innovation as it precedes the exploitation of opportunities. Idea generation includes behaviours directed at generating concepts for the purpose of improvement. The generation of ideas may relate to new products, services or processes, the entry of new markets, improvements in current work processes, or in general terms, solutions to identified problems. According to Jeffrey Dyer, Hal Gregersen, and Clayton Christensen (2009); innovative entrepreneurs exhibit creative intelligence comprising five discovery skills to create new ideas. These skills will be discussed in next edition of Sattva.
3.4 Issue Selling and Championing
Once an idea has taken shape it must be ‘sold’. Issue selling has been defined as ‘a voluntary, discretionary set of behaviours by which organizational members attempt to influence the organizational agenda by getting those above them to pay attention to issues’(Ashford, Rothbard, Piderit & Dutton, 1998).
Although ideas can have some legitimacy, especially when they fill a performance gap, it is uncertain if ideas will result in successful new applications. Only if creative ideas are marginal (appear off-the-field so they can slip in unnoticed) or idiosyncratic (can be accepted by a few people without requiring much additional support) they are easy to implement (Kanter, 1988). However in most cases innovative ideas face resistance. First, innovations are usually accompanied by new tasks or ways of usage. When ideas are proposed, recipients will first explore how it will affect them or their functioning. In case their current knowledge and skills would be outdated, resistance is more likely. Second, people have a general tendency to perceive information selectively, i.e. consistent with their existing views. This implies that extremely innovative ideas receive no priority. A third source of resistance is a shared preference for familiar actions and events. People have a built-in tendency to return to their original behaviours, a tendency that sabotages change (Jones, 2004). As a consequence there often is a need for coalition building in order to implement ideas.
Champions are the ones who put effort into creative ideas. They are individuals in informal roles that push creative ideas beyond roadblocks in their organizations. Innovative individuals who take prime responsibility for the introduction of innovations are often not formally appointed, but rather those who feel strong personal commitment to particular ideas and are able to ‘sell’ it to others (Shane, 1994). Championing includes behaviours related to finding support and building coalitions, such as persuading and influencing other employees and pushing and negotiating.
3.5 Taking Charge
Taking charge is defined as voluntary and constructive efforts by individual employees to effect change with respect to how work is executed within the context of their jobs, work units or organizations (Morrison & Phelps, 1999). Idea of ‘taking charge’ is slightly different from proactiveness. While the scope of proactiveness is wider like anticipating new demands, opportunities or threats, scope of ‘taking charge’ is restricted to effecting change in execution. But at its essence, taking charge is change-oriented and geared toward improvement. It is similar to other forms of proactive behaviour in that it is discretionary (not formally required).
Taking charge is motivated by individuals’ desire for organizational improvement and is not necessarily rooted in beliefs that current practices are wrong or bad. In contrast with confronting behaviours such as whistle blowing and grousing, taking charge is aimed at implementing something positive.
3.6 Overcoming Obstacles
According to Pinchot (1987) entrepreneurs / intrapreneurs are “the dreamers that do”. He stresses that ‘vision and imagination make up half of “the dreamers that do”. Action is the other half’. Intrapreneurs have to believe very strongly in their idea in order to find the energy and courage to overcome the many obstacles on the road to success, and to convince all the stakeholders(Ministerie van Economische Zaken, 2001). Potential obstacles are many and include scepticism, technical and logistic problems, resistance by stakeholders, retaliation by competitors and legal barriers. The intrapreneurs constantly explore all kinds of possible problems in their imagination and consider alternative ways to overcome these barriers.
3.7 Bearing Uncertainty and Risk
As discussed earlier, unlike entrepreneurs, the intrapreneurs do not face personal financial risk. Nevertheless like entrepreneurs, they are required to make decisions in the face of incalculable and uninsurable business hazards. They frequently have to take decisions with incomplete information, and thus must have considerable tolerance for ambiguity (Cromie, 2000).
Mr R. P. Singh was entrusted with the responsibility of revamping Blast Furnace-F at Tata Steel. The old furnace had outlived its utility and had to be totally upgraded. Reputed foreign project consulting firms came up with a ‘best estimate’ of 210 days and a cost of INR 5 billion (Exchange rate in October 2016, 1$ = INR 66). The Blast Furnace is a massive set of equipment that forms the heart of any integrated steel plant. There are thousands of jobs to be executed in revamping a Blast Furnace involving interactions among dozens of agencies. The impact of every day delay in executing such a project is several tens of millions of Rupees for the company.
After careful evaluation of all the factors, the contractual shut-down period was fixed at 150 days. However, Singh felt that his team could surely do better than this and called for a meeting of all the experts including the key managers of his team, technical collaborators, and lead project contractors. After a detailed study, this team felt that the shut-down period of 130 days could be achieved with careful planning. Singh believed that the team could do better than this. After further meticulous planning, including day-to-day and hour to- hour planning, the team came up with a stretch target of 110 days for the completion of the project and a project cost of INR 2.1 billion.
The foreign consultants felt that this was not a practical target even by western standards, leave alone for a project that was to be executed in India. When the project was finally completed in 104 days, Mr. Jain, the Ex-Chairman of Steel Authority of India Limited (SAIL), the giant government-owned steel company, in his talk at the inaugural function, told the audience that the revamping of Blast Furnace-F would normally have taken six months. He also told the audience that while he thought that Singh had started with a good plan, he was sure that Singh would fail in its execution because it was an impossible schedule.
(Source: Adapted from Seshadri, D V R and Tripathy, A. (January – March, 2006). ‘Innovation through Intrapreneurship: The Road Less Travelled’. Vikalpa, Vol. 31, No. 1)
This example clearly illustrates strong intrapreneurial behaviour traits of Mr Singh. Even when the Tata Steel board had approved a shut down of 155 days, Mr Singh took the initiative of reducing the shutdown period further. Even when foreign consultants came up with the best estimate of ‘210 days’ for project implementation, he convinced the management that it can be done in lesser number of days (issue selling). His emphasis on meticulous day-to-day and hour to- hour planning was aimed at reducing uncertainty and proactively preparing for overcoming obstacles.
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