By Sudam Chandima Kaluarachchi
A well defined and proactive strategy is central to an innovative and entrepreneurial organisation. Such an organisation needs internally focused strategies that propel growth and stimulate change within the organisation as well as externally focused strategies that actively seek out new ventures, acquisitions, mergers or joint ventures to achieve commercial success through innovations.
Entrepreneurship helps in setting up such strategies and allows innovative features which characterise entrepreneurial behaviour. These features can be found in unique individuals and within various business functions. In addition to the size of the organisation, cultural and structural elements play a crucial role in determining the extent of organisational capability in entrepreneurship.
A staff with entrepreneurial skills to convert the insights into profitable business propositions and the style of management are key features which help in implementing strategies successfully.
Entrepreneurship is a relatively young concept in management against its counterpart, leadership which can be traced back to ancient times. It is an emerging and evolving field of inquiry, currently being researched heavily. Since the 1980s, a huge growth in studies on entrepreneurship is visible across the globe.
Entrepreneurship has been defined in many different ways (Littunen, 2000). For instance, Brockhaus (1976), as cited in Littunen (2000), says entrepreneurship means activities connected with owning and managing a business firm. In another view, it is about creating something that did not previously exist (Zhao, 2005).
Stoner et al. (2002) describe entrepreneurship as “the seemingly discontinuous process of combining resources to produce new goods or services”. This concept facilitates the process of creating new organisations, more specifically “small businesses”. Daft (2006) agrees that entrepreneurship is involved in the initial stage of a business.
“Entrepreneurship is the process of initiating a business venture, organising the necessary resources and assuming the associated risks and rewards” (Daft, 2006).
As cited in Cope (2003), Deakins and Freel (1998) have described the entrepreneurship as a non-linear and discontinuous process that is characterised by significant and critical learning events. Their idea of non-linear and discontinuous nature of entrepreneurship is in line with Stoner et al. (2000)’s argument on entrepreneurship.
Schumpeter (1934) argues that entrepreneurship is a creative destruction in the sense that it reconfigures, reorganises and recombines. “It changes and through the change it destroys the mould and puts something new in place” he further elaborates. He also mentions that no one is an entrepreneur forever. They are only entrepreneurs when they are innovating. Therefore, it is a discontinuous process.
Entrepreneurship helps to synthesise the available information and clarify patterns which escape others. McGrath (1997; cited in Thompson, 1999) says that entrepreneurship is not a flash of inspiration or luck; it is the conscientious application of discipline to exploit resources. It is rooted in flexibility and a willingness to embrace and champion change.
However, it does not mean that entrepreneurship is a concept limited to the creation of a new business. It is a broad concept which can be categorised as but not limited to individual entrepreneurship, corporate entrepreneurship, institutional entrepreneurship, social entrepreneurship and environmental entrepreneurship.
The corporate entrepreneurship often refers to the introduction of a new idea, new products, a new organisational structure, a new production process or the establishment of a new organisation by or within an existing organisation (Zhoa, 2005).
It is important to distinguish the meaning of leadership, entrepreneurship and management when discussing the concept of entrepreneurship. It is also worth to establish the relationship between entrepreneurship and the entrepreneur, and explore how entrepreneurship stays in various levels of an organisational structure.
Entrepreneurship, leadership and management
It is not easy to define and distinguish these concepts as separate theories. Leadership would be described as a process of influencing others to work willingly in pursuant of another’s goal or even a common goal. A leader influences others towards a goal (Hunt, 2004). However, an entrepreneur is not only seeing opportunities but also organising resources to carry out his or her vision (Gartner et al., 1992).
Accordingly, an overlap between leadership and entrepreneurship is quite possible and found in various theories in management and also in the explanations of various authors. For instance, according to views of Joerges and Wolff (1991); cited in Vecchio (2003); entrepreneurship is merely leadership in a special environmental situation or context.
Further, Schumpeter (1934) has explained that entrepreneurship is a special case of leadership and distinguished it from other forms of leadership in terms of one who created a company rather than managing an existing one. Some other authors argue that leaders need to develop new and creative ideas and encourage creativity and innovation in others; though in many texts the innovation is only linked to entrepreneurship.
For instance, Joseph Schumpeter (1883-1950) mentions that entrepreneurship is about making innovations rather than inventions where invention focuses upon the conception of an “idea” and innovation converts the idea into a new product, practice or service.
On the other hand, according to Kotter (1990), management is “a set of processes that can keep a complicated system of people and technology running smoothly”, while keeping the eye on the bottom line. Accordingly, Stoner et al. (2002) argue that entrepreneurship is different from management. Paul Wilken, as cited in Stoner et al. (2002), distinguishes entrepreneurship from management as follows.
“Entrepreneurship involves initiating changes in production, whereas management involves in the ongoing coordination of the production process. It is a discontinuous phenomenon, appearing to initiate changes in the production process... and then disappearing until it reappears to initiate another change.”
Entrepreneur and entrepreneurship
Entrepreneurs are different from small business owners, if the later is concentrating only on income generation to meet immediate liquidity needs without engaging in long term strategic innovation. Only a person who founds a new company on the basis of a new idea can be called as an entrepreneur (Zhao, 2005).
Daft (2006) defines an entrepreneur as someone who engages in entrepreneurship. “An entrepreneur recognises a variable idea for a business product or service and carries it out”, he has further added. However, Shane and Venkataraman (2000) argue that entrepreneurship focuses not only on the entrepreneur, but on the intersection of that enterprising person and his/ her ability to grasp lucrative or entrepreneurial opportunities.
As cited in Stoner et al. (2002), a well known management writer Peter Drucker and popular Austrian economist Joseph Schumpeter (1940s) have mentioned that entrepreneurship is about change and an entrepreneur sees change. However, an entrepreneur may not bring about the change himself or herself like an inventor. On the other hand, invention itself is not sufficient for the growth and development of a firm.
When there is an invention, the entrepreneur searches for change, responds to it and exploits it as an opportunity. He or she activates and implements an invention and contributes towards the innovation. An entrepreneur may hire a creative individual (manager, technician, accountant etc.) to ensure the change to take place under his or her entrepreneurship.
Entrepreneurship and organisational structure
The traditional view is that entrepreneurship is found at the top of the organisation. Supporting this view, in a proprietorship, owner is also filling the top management position. Contradictorily, Alford (1997) and Foxall and Minkes (1996) argue that the entrepreneurship is diffused throughout the organisation.
Schumpeter explains that an entrepreneur may not necessarily be the same as the financial risk taker i.e. the capitalist or the owner. Risk taking entrepreneurs do start businesses. On the other hand, the financial risk takers or, in other words, owners of the business venture can hire entrepreneurs to run the business. In some literature they are called intrapreneurs.
Intrapreneurship has been described by some researchers as an entrepreneurial behaviour of managers throughout the organisation. This clearly indicates that entrepreneurs are not necessarily placed only at the top levels of organisational structure.
It is clear that entrepreneurship is the process of anticipating future opportunities in the uncertain environment and making a judgment while tolerating ambiguity of objectives, in decision making under the novel and complex situations. Therefore, entrepreneurship can prevail in all types of organisations and in all levels of those organisations. Entrepreneurship helps to convert the insights and opportunities into actionable business propositions.
Entrepreneurship and implementing strategies
First, it is vital to understand the concept of strategy implementation. Strategy implementation is basically the managing administrative tasks needed to put strategy into practice (Stoner et al.2002). The process of converting insights into actionable business propositions consists of several steps. It ranges from implementing strategies to monitoring implementation.
Simplify the proposition into a small meaningful statement, clearly indicating the expected change
Defining the long term and short term goals clearly and preciously
Identifying risk involved and absorbing uncertainty, encapsulating the key issues of risk and crisis management
Obtaining commitment and getting a strong sense of resolve from others in the organisation
Managing resistance, managing the change
The above stages run though the management process, starting from planning through to controlling through organising and leading of tasks and related resources in implementing strategies. The above process talks about the environment, values and resources of an organisation.
A key premise in the creation and early development of organisations is the importance of the role played by individuals, structured process and environments (Williams and Tse, 1995). The individual is viewed as being responsible for influencing the organisation’s direction, particularly through infancy to the growth stage.
Strategic planning in a small, entrepreneurial company is usually done by the individual entrepreneur. Bhide (1994; cited in Thompson, 1999) argues that entrepreneurship deals with risk in strategy creation or formation with a quick initial screening using a careful, but limited, analysis to evaluate the quality of an idea, but then it stays flexible throughout the process of implementation.
Therefore, the level of support the entrepreneurship provides in carrying out the administrative tasks in terms of structure, systems, style, staff, skills, strategy and super-ordinate goals needed to put strategy into practice is important to achieve an effective and efficient strategy implementation. Super-ordinate goals refer to guiding concepts, values and aspirations that unite an organisation in some common purpose (Stoner et al., 2002).
The concept of entrepreneurship has contributed vastly in theory on implementing strategies. Various studies have found that the personality and the management style of the entrepreneur and his or her perceptions of the opportunities and threats in the external environment all significantly affect the strategic decision making (Williams and Tse, 1995).
In the literature it is found that small organisations can be influenced dramatically by the type of individual in determining strategies and structure. There are various typologies that deal independently with each environment, structure or strategy, each of which has been shown to influence the nature of entrepreneurship. Many of the research efforts have suggested that a relationship between entrepreneurship and strategy is likely to exist.
The success of any business is dependent upon the ability to find a valuable strategic position, whereby the company’s resources, competencies and capabilities are deployed and managed to meet and satisfy the demands and expectations of key stakeholders. The sustained success requires that positioning is strengthened constantly in a dynamic and competitive environment, and changed, perhaps dramatically, from time to time.
This represents continuous improvement on one hand, and discontinuous change to a new competitive paradigm on the other hand (Thompson, 1999). In implementing strategies, entrepreneurship supports to clarify which strategic competencies from a long list of generic competencies can make a real difference (Thompson and Richardson, 1995; cited in Thompson, 1999).
Miller (1983) as cited in Zhao (2005) argues that entrepreneurship represents organisational behaviour. The key elements of entrepreneurship include risk taking, pro-activity and innovation.
However, Slevin and Covin (1990; cited in Zhao, 2005) have argued that three elements above are not sufficient to ensure organisational success. They maintain that “a successful firm not only engages in entrepreneurial managerial behaviour, but also has the appropriate culture and organisational structure to support such behaviour”.
The E-V-R congruence model
The E-V-R (Environment-Values-Resources) congruence model provides an ideal framework for examining how entrepreneurship helps in achieving organisational effectiveness and success through successful implementation of strategies (Thompson, 1999).
Thompson (1999) further says that what entrepreneurs achieve strategically can help foster enterprise in a wide range of organisations. The environment is the source of opportunities and threats, the external key success factors. Resources constitute strengths and weaknesses, strategic competencies and capabilities which either match, or fail to match, environmental needs.
Key factors vary significantly from industry to industry and from market to market, and consequently there can be no common formulae for successful strategic positioning which the entrepreneurship would facilitate. Moreover, the matching of environment and resources (E&R) should be managed in a dynamic environment.
It is the values and culture, which the entrepreneurship can influence, of the organisation which determine first, the effectiveness of the current match between E&R, and, second, the ability and will of the organisation to change and strengthen this matching.
Entrepreneurs and entrepreneurial managers obtain resources and exploit organisational competencies and capabilities to seize or even open windows of opportunity in their selected environments for better positioning. They are opportunity driven. It is, therefore, an implicit assumption that a truly entrepreneurial organisation creates E-V-R congruency and sustains the match with measured strategic change (Thompson, 1999).
It is widely acknowledged that entrepreneurship is not confined to any one type of business. Some build business from nothing, invariably with determination and commitment. These can be profit seeking business; equally they can be community based initiatives by “social entrepreneurs”.
One key challenge of entrepreneurs is dealing with the strategic and structural changes required with growth. Lack of entrepreneurship would lose the direction and momentum of business. The entrepreneurial behaviour is a ubiquitous need for all types and size of organisations.
The importance of entrepreneurship as a pattern of behaviour or a style of management has risen drastically today due to economic changes, globalisation and increased competition, advancing technology and new opportunities and market niches, which demand efficient and effective implementation of strategies to create a competitive edge (Daft, 2006).
In many countries, entrepreneurship is the engine for job creation and innovation. In the real competitive world, many organisations find themselves unable to compete due to the lack of suitable vision to understand the change happening in the environment and implement strategies accordingly.
This inability, which is often seen as a problem of management, has demanded leadership, more increasingly entrepreneurship to meet the complexity and turbulence of the environment within which managers need to implement strategies.
Opportunity recognition is at the heart of entrepreneurship. Both opportunity seeking behaviour (entrepreneurship) and advantage seeking behaviour (strategic management) are necessary for wealth creation. These two are complementary and entrepreneurship facilitates the implementation of strategies in the dynamic environment.
(Sudam Chandima Kaluarachchi – MBA (Finance) (UK), BSc (Agri) Hons, MCIM (UK), MICM (UK), AIB (SL), MSLIM, MAAT (SL), Chartered Marketer – is Director, College of Banking & Finance, Institute of Bankers of Sri Lanka (IBSL))