Wednesday, April 23, 2014

Entrepreneurship = Work

As long ago as 1984, management guru Peter Drucker predicted a profound shift in the United States from a "managerial" to an "entrepreneurial" economy. He was a visionary and his prediction, like so many others, was correct. Today's economy is deeply tilted toward entrepreneurship over manufacturing, toward knowledge over labor-intensive production.

The Kauffman Foundation reports that, from 1980-2005, small firms less than five years old accounted for all net job growth in the United States.  Entrepreneurship curricula on college campuses is burgeoning. Entrepreneurs of all types and business sizes are repeatedly in the news. The wretched excess of the financial industry in the last two decades was a manifestation of zealous and innovative, one might say entrepreneurial, scheming untrammeled by professional ethics or appropriate regulation.

Having just reread Drucker's book, Innovation and Entrepreneurship, I suggest it to others for classic background. It is less clever entertainment - a la today's business books - than a jam-packed, fast-moving information blast that goes beyond conventional wisdom about entrepreneurship. Based on research and vast experience, Drucker concludes that entrepreneurship can be taught and systematically applied to build a successful innovative business. He makes a persuasive argument. Here are some highlights.

Successful entrepreneurs are not simply "Eureka moment," risk-takers hit by one bright idea. They may show elements of that behavior but, more than anything, when sparked with an innovative idea, they do their homework. They become purposeful and systematic about creating, designing, manufacturing, marketing, and selling their product or service. They work hard to adhere to well-known, critical business practices. They research their market deeply and from the field. They persist - and they adapt to their market when products are used in a different way than originally intended. Further, ongoing innovation and internal entrepreneurship are critical for any company's durability (e.g. DuPont and 3M) and not just typical of skunk works.

Drucker identifies several drivers of innovation. The "super-star," as he calls the most familiar, is knowledge-based innovation, whether scientific, technical, or social. It is also the most demanding to bring to life. On the other hand, one of the least commonly mined stimulants is seizing "the unexpected." Both new and well-established businesses must avoid the inertia that can lead to overlooking unexpected successes or trying to correct unexpected failures when each might reveal great opportunities for growth.

Bloomingdale's has had an ever-changing self-presentation since the '50s. In those years, appliance sales began to top fashion sales. Bloomie's responded by full-steam creation of a housewares department and reshaped fashion lines, while Macy's, its major (and stagnant) competitor fell behind. Similarly, an entrepreneur with an unexpected failure in sales goals might discover that the market for a given product has begun to split itself in two - pointing the observant entrepreneur toward a new second product. 

Drucker provides rules of thumb for new businesses concerning their market focus, financial foresight, and management team. These emphasize that entrepreneurs must and can learn management practices specific to start-ups and innovative businesses. The growing wealth of on-line and in-class entrepreneur curricula proves his point. Learning is a life-long process. What we know now will be virtually obsolete five to ten years from now, so businesses must stay on top of new ideas, new skills, new data, new knowledge.

Drucker emphasizes that "entrepreneurship is not natural; it is not creative. It is work. Entrepreneurship and innovation can be achieved by any business.  The practices can be learned and require effort."  In praise of entrepreneurs, Drucker adds, "Entrepreneurial businesses treat entrepreneurship as a duty. They are disciplined about it...they work at it...and they practice it." Great advice!

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