Corporate versus Entrepreneurial Culture conducive for entrepreneurship

Corporate versus Entrepreneurial Culture conducive for entrepreneurship

Smaller, aggressive, entrepreneurial firms are developing more new products and becoming dominant in certain markets. Many companies are attempting to create the same spirit, culture, and rewards of entrepreneurship in their organizations.

The typical corporate culture has a climate and reward system that favors conservative decision making. Emphasis is on gathering large amounts of data as the basis for a rational decision. Risky decisions are often postponed until hard facts are gathered or a consultant is hired. Often there are so many approvals required that no individual feels personally responsible for the project.

The guiding principles in a traditional corporate culture are:

1. Follow instructions given

2. Do not make mistakes

3. Do not fail

4. Do not take initiative

5. Stay within your turf and protect your backside

6. This restrictive environment is not conducive to creativity, flexibility, and risk taking

The guiding principles of entrepreneurs

Aspects of an Entrepreneurial culture are quite different:

1. Develop visions, goals, and action plans

2. Be rewarded for actions taken

3. Suggest, try, and experiment

4. Create and develop

5. Take responsibility and ownership

There are differences in the norms of the two cultures.

The traditional culture is hierarchical in nature, with established procedures, lines of authority, and control mechanisms. These support the present corporate culture, and do not encourage new venture creation.

The culture of an entrepreneurial firm has a flat organizational structure with networking, teamwork, sponsors, and mentors. Close working relationships help establish an atmosphere or trust that facilitates accomplishment of visions. Individuals make suggestions across functional areas, resulting in cross-fertilization of ideas. The two cultures produce different types of individuals and management styles.

Motivation

Traditional managers are motivated primarily by promotion and typical corporate rewards. Entrepreneurs and entrepreneurs thrive on independence and the ability to create. Entrepreneurs expect their performance to be suitably rewarded There are also time orientation differences. Managers emphasize the short run, entrepreneurs the long run, and entrepreneurs somewhere in between. Entrepreneurs use a midpoint mode between delegation of managers and direct involvement of entrepreneurs.

Entrepreneurs and entrepreneurs are moderate risk takers; managers are much more cautious. Most entrepreneurs fail at least once, and Entrepreneurs learn to conceal risky projects from management until the last possible moment. Traditional managers tend to be most concerned about those at higher levels, entrepreneurs serve self and customers, and Entrepreneurs add sponsors.

CLIMATE FOR ENTREPRENEURSHIP

In establishing an Entrepreneurial environment, certain factors and leadership characteristics need to be present.

The first of these is that the organization operates on the frontiers of technology. Since research and development are key sources for new product ideas, the firm must operate on the cutting edge of technology and encourage and supporting new ideas instead of discouraging them.

Second is experimentation, or trial and error, is encouraged. Successful new products usually do not appear fully developed; instead they evolve. A company wanting to establish an Entrepreneurial spirit has to establish an environment that allows mistakes and failures. Without the opportunity to fail, few corporate Entrepreneurial ventures will be developed.

Third an organization should make sure that there are no initial opportunity parameters, such as turf protection, inhibiting creativity in new product development.

Fourth, the resources of the firm need to be available and easily accessible. Often, insufficient funds are allocated not to creating something new but instead to solving a problem that have an immediate effect on the bottom line. Some companies, such as Xerox, 3M, and AT&T have established separate venture capital areas for funding new internal ventures.

Fifth a multidisciplinary team approach needs to be encouraged. One key to Entrepreneurial success is the existence of "skunkworks" involving key people. Developing the needed team work for a new venture is further complicated by the fact that a team member's promotion within the corporation is related to performance in the current position, not in the new venture. The corporate environment must establish a long time horizon for evaluating the success of the overall program.

Sixth the spirit of entrepreneurship cannot be forced on individuals; it must be voluntary. Most managers in a corporation are not capable of being successful Entrepreneurs. Those who do emerge from this self selection process must be allowed the latitude to carry a project through to completion. An Entrepreneur falls in love with the new venture and will do almost anything to ensure its success.

The seventh characteristic is a reward system. The Entrepreneur needs to be appropriately rewarded for the energy and effort expended on the new venture. An equity position in the new venture is one of the best motivational methods.

Eight a corporate environment favorable for entrepreneurship has sponsors and champions throughout the organization that supports the creative activity and resulting failures.

Finally the Entrepreneurial activity must be whole-heartedly supported by top management.