Entrepreneurship helps in implementing strategies
Sudam Chandima Kaluarachchi
Chartered Marketeer
Director - College of Banking and
Finance
Institute of Bankers of Sri Lanka (IBSL)
A well-defined and proactive strategy is central to an innovative and
entrepreneurial organization. Such an organization needs internally
focused strategies that propel growth and stimulate change within the
organization 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 to synthesize the available information
and clarify patterns which escape others |
Entrepreneurship helps in setting up such strategies and allows
innovative features which characterize entrepreneurial behaviours. These
features can be found in unique individuals and within various business
functions. In addition to the size of the organization, cultural and
structural elements play a crucial role in determining the extent of
organizational 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 implementing strategies successfully.
Entrepreneurship
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 1980’s, 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 organizations,
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,
organizing the necessary resources and assuming the associated risks and
rewards” (Daft, 2006).
As cited in Cope (2003), Deakins and Freel (1998) have described
entrepreneurship as a non-linear and discontinuous process that is
characterized 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, 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.
Entrepreneurship helps to synthesize 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
categorized 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 organizational structure, a new production
process or the establishment of a new organization by or within an
existing organization (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
the entrepreneurship and entrepreneur, and explore how entrepreneurship
stays in various levels of an organizational structure.
Entrepreneurship, leadership and management
It is not easy to define and distinguish these concepts as separate
theories. The 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 toward a goal (Hunt, 2004).
However, an entrepreneur is not only seeing opportunities but also
organizing 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.
Strategic planning in a small, entrepreneurial company is
usually done by the individual entrepreneur. |
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), the 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 the 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 recognizes a variable
idea for a business product or service and carries out it”, 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 or her ability to grasp lucrative or
entrepreneurial opportunities.
As cited in Stoner et al. (2002), a wellknown 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 organizational structure
The traditional view is that entrepreneurship is found at the top of
the organization. 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 organization.
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 behavior of
managers throughout the organization.
This clearly indicates that entrepreneurs are not necessarily placed
only at the top levels of organizational 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, the entrepreneurship can prevail in all types of
organizations and in all levels of those organizations. 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.
(1) Simplify the proposition into a small meaningful statement,
clearly indicating the expected change
(2) Defining the long term and short term goals clearly and
preciously
(3) Identifying risk involved and absorbing uncertainty,
encapsulating the key issues of risk and crisis management
(4) Obtaining commitment and getting a strong sense of resolve from
others in the organization
(5) Managing resistance, managing the change
(6) Monitoring implementation
The above stages run though the management process, starting from
planning through to controlling through organizing and leading of tasks
and related resources in implementing strategies.
The above process talks about the environment, values and resources
of an organization.
A key premise in the creation and early development of organizations
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
organization’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 organization 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 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.
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 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 environment-values-resources (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
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.
Entrepreneurs and entrepreneurial managers obtain resources and
exploit organizational 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 organization 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 organizations.
The importance of entrepreneurship as a pattern of behaviour or a
style of management has risen drastically today due to economic changes,
globalization 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 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 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. |