Entrepreneurship in practice

Sudam CHANDIMA KALUARACHCHI-Chartered Marketer Director - College of Banking and Finance Institute of Bankers of Sri Lanka (IBSL)

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 organizations, more specifically "small businesses".

Daft (2006) agrees that entrepreneurship is involved in the initial stage of a business. According to him, "Entrepreneurship is the process of initiating a business venture, organizing the necessary resources and assuming the associated risks and rewards".

Schumpeter (1934) argues that entrepreneu rship is a creative destruction in the sense that it reconfigures, reorganizes 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.

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".

Implementing strategies

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 organizations 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.

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 organizational 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 organizational success.

They maintain that "a successful firm not only engages in entrepreneurial managerial behaviour, but also has the appropriate culture and organizational structure to support such behaviour".

The E-V-R (Environment-Values-Resources) congruence model provides an ideal framework for examining how entrepreneurship helps in achieving organizational 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 organizations.

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 organization which determine first, the effectiveness of the current match between E&R, and, second, the ability and will of the organization to change and strengthen this matching.

It is, therefore, an implicit assumption that a truly entrepreneurial organization creates E-V-R congruency and sustains the match with measured strategic change (Thompson, 1999).

Entrepreneurship in practice

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 organizations.

Some examples;

Virgin Atlantic Airline (VAA) Vs British Airways (BA)

BA has experienced substantial change as it has emerged from privatization to become one of the world's leading airlines. It has worked hard on its culture and values to establish and exploit E-V-R congruence. Naturally it views the other leading global players as its competitors.

These include US, European and Far Eastern airlines. Nevertheless, the much smaller, focused and entrepreneurial VAA has also proved to be a competitive threat.

Richard Branson at VAA has deliberately targeted selected routes and destinations for business people and holiday makers, gained access to prime slots at London Heathrow and offered a high level of service at competitive prices.

VAA is clearly differentiated and successful. BA underestimated the threat and was forced into reactive mode for not losing major presence in important sectors of the short haul market.

Southwestern Airline (SWA)

The pioneer of this competitive paradigm is the visionary and entrepreneurial Herb Kelleher, founder of the very successful Southwestern Airline in the USA.

SWA concentrates on domestic US routes and flies between cities rather than adopting the hub-and-spoke patterns of the more established US airlines.

With the objective of flying people safely, cheaply and conveniently, SWA does not serve meals during flights; seats are not pre-assigned, even at the airport; and hand baggage is limited.

Travel is ticketless because bookings are direct with the airline by phone or internet and fully computerized; travel agents do not sell tickets for SWA.

The successful implementation of all of these strategies curtails costs and speeds up the turnaround time at airports.

Waterstone's Bookshop

In the 1980's Tim Waterstone left W H Smith after the company's US interests, for which he was responsible, failed to meet their targets. Using part of his redundancy money he opened the first Waterstone's bookshop, and from this base helped to build a substantial chain.

Waterstone appreciated that a wide choice of titles and the opportunity, even the encouragement, to spend time browsing and looking through the stock result in purchase.

Unlike most other retailers, Waterstone empowered individual store managers to select their own stocks; typically that is the centralized decision for retail chains. Eventually, Waterstone's was sold to W H Smith. The underlying success of Waterstone's lies in its vision about bookselling.

Ford, Starbuck and Sony

The stories of above companies demonstrate the success gained through implementing strategies towards innovation in a different way by the relevant entrepreneurs.

Henry Ford invented neither the automobile nor the division of labour. He applied the division of labour to the production of automobiles in a new way i.e. the assembly line.

Akio Morita, the president of Sony, saw that his company's existing products could be adapted to create new Walkman. Though grinding coffee beans and selling brewed coffee are not new, the quality and ambience that Starbucks gives to production process is a new offering.

All of above strategies have contributed positively for the growth of respective business.

The following SME business cases will also provide practical examples for successful implementing strategies through entrepreneurship or how some factors have not supported entrepreneurship to implement strategies successfully.

Example 1: The entrepreneurial spirit of top management of a electronic trading company has helped to implement distribution strategies of the company successfully and achieve 32 percent growth recently. The entrepreneurial culture and organizational structure have supported for the success.

Example 2: A construction company has achieved a substantial improvement in its construction process by changing the procedures in an innovative way. The entrepreneurial behaviour of the new Managing Director joined the company helped to manage the change successfully.

Example 3: A vegetable growing company was expecting a 10 percent growth every year after implementing new strategies in terms of development of new products and markets.

The company had proactively analyzed opportunities and threats and was always looking for little opportunities and new ways of exploiting such opportunities.

Example 4: A food processing company which was about to go bankruptcy has been turned around due to an entrepreneurial consultant with the support of the company's culture, structure, skills, strategies and systems.

The company has implemented a number of changes over the past three years including interdepartmental communication, streamlined accounting processes, a competitive marketing strategy, new design of labels and bottles and new ways of selling.

In many countries, entrepreneurship is the engine for job creation and innovation. In the real competitive world, many organizations 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 weakness, 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.

Ultimately, entrepreneurship facilitates the implementation of strategies in the dynamic environment.