Definition and Meaning Entrepreneurship - Research Paper Example

1.0 Introduction The objective of management is to work for competitive advantage (Porter M.E. 1980). But successful business needs innovative strategies to do so. Porter M.E., (1996) has redefined strategy to be a combination of differently performed activities. He states that activities are largely the same but they are performed in different and often innovative ways, to make the difference. The outcome is unique strategy; one that results in the competitive edge for one firm. The uniqueness of the strategy is what appeals to and attracts customers. One way to achieve this uniqueness is to develop competencies in the firm. Innovations create core competency of a firm (McCarthy et al, 2006). Some firms are already blessed with competencies in the form of their entrepreneurs who come with unique ideas and concepts that relate to the markets. They are gifted people who understand what the customer needs and offer this to the market. A successful product innovation has also been considered a key requirement for business success (Chapman et al, 2001). Innovations create unique advantage that leads to competitive edge. Entrepreneurship however is a limited phenomenon and not everyone with a bright idea can become an entrepreneur. Also this category of people is restricted to small firms. In corporate environment, where there are boards governing the policies, a leader has little scope to exercise the entrepreneurship qualities. Still there are corporate examples of this kind of leadership. They are termed as Intrapreneurs. It has been realised that the workers of the firm can also contribute to entrepreneurial efforts if they are empowered to do so. Some large firms have experimented with this idea with great results. Large corporations are now undertaking this as a serious strategy and considering spreading intrapreneurship at this level. 2.0 Strategies There are still some critics that claim that all strategies are the same and that there is no uniqueness when strategy is implemented. Indeed Gardiner (2004) claims that the process for converting strategic plans into the day to day actions by which they are realised is still largely a ‘black box’. He means to convey that strategies are not deliberate but a mixture of experimentation coupled with finding facts after events have occurred. He refuses to give credit to entrepreneurship as well as intrapreneurship. This paper does not agree with this statement. Such a myopic outlook needs to be corrected and this paper will attempt this by explaining entrepreneurship, intrapreneurship, innovations, strategies and empowerment through a literature review as well as examples from industries where adoption these strategies have paid rich dividends. 3.0 Literature Review It is argued that since competitive advantage is the basis of business, this brought about with a combination of entrepreneurial or intreapreneurial acumen using innovations as springboards for development of unique strategies. Trueman, (1998) has stated that unique values are created by companies and their employees when they develop new products and services. 3.1 Entrepreneurship An entrepreneur is a person who’s chief and distinctive abilities are to take risks, has knowledge of market functions and manufacturing know-how, has marketing and management skills and finally possesses the ability to co-operate with others (Littunen 2000). He is able to foresee the unknown, and be daring enough to try it out of absolute desire to take risk. He identifies an opportunity, goes against conventional wisdom and pursues an untried strategy for the joy of achievement of his desired intention. Bird (1988, 1992) say that entrepreneurship is a state of mind that reflects how a person focuses his attention and uses his experience and behaviour to a specific objective. Intentions are what differentiate an entrepreneur from a normal person. According to Wiklund and Shepherd (2003) they have a mindset that has a strategic orientation for decision making in a specific style, method and practice. These are usually individual but may exist in a team and are capable of making strategic responses to situations in a different manner as these people are always on the lookout for opportunity. In the self-actualization theory of McGregor (1960) the emphasis is that all workers are inclined to achieve better results for el-satisfaction and achievement motivation, risk taking and control are important features that promote the urge to self actualise. 3.2 Innovations It is believed that innovations are the way to achieve competitive advantage. It can indeed be said that innovations are the future needs of the consumers (Trott & Hoecht, 2007). Doyle (1988) has defined innovation as a new perception of consumer need resulting in creation, development or modification of either a new or improved product or service. Trott (2005) describes product development as the designing of a product at acceptable price and performance to meet the desires of customers. In another view Zang et al (2004) conclude that creativity is the root of product development. In truth this is the uniqueness that creates the competitive edge over other similar product or service. There is a delicate difference between innovation and invention although one leads to the other. Innovation is the first happening or germination of an idea for a new product or a process while the first attempt to make it or practice it is what invention is all about Fagerberg (2003). Innovation is therefore creation of a new value and invention is the creation of a new product or service that offers this value to the customer. Innovations also carry a great risk as their acceptability is an unknown factor (Zhan and Doll 2001). Sometimes additions to existing products are also called innovations as they enhance the value or are value creators and generate revenues. But a better way of describing an innovation is the discontinuation of an old value and replacing it with new value. As a consequence discontinuation becomes a source of an innovation. 3.2.1 Discontinuity Another name given to technological innovations is Discontinuity. Such technological breakthroughs help to create entirely new products or even new industries. This is the way the rules are re-written. It is part of corporate strategy to find new ways and means to improve products and services and discontinuation of one preceded the other. It is brain wracking exercise that brings about breakthroughs and they arise unexpectedly with experiments. Such results can bring about new or improved technologies. Most innovations come from the workers themselves who handle the product or component manufacture and thus are able to understand the result of minor variations. A technologically new product means that its technological features or projected uses are drastically different from those of former produced products or processes. Such innovations can involve basically new technologies or can be based on merging existing technologies for new uses, or can be an offshoot of the use of new knowledge (Trott 2005). A technologically improved product would mean that current performance has been considerably enhanced or upgraded. A relatively simple product or process may be improved, in terms of either better performance or lower cost, through use of high-performing components or materials or a use of a complex product or process which encompasses a number of integrated technical sub-systems may be improved by partial changes to one of the sub-systems. Therefore discontinuous innovation means creation of new forms of customer value within existing or new markets and by pursuing discontinuous innovations, business creates new markets or displaces existing techniques of bringing value to customers. The source of innovation could be the technical idea to improve or replace a product or service. The object of innovation is to do something more or something else, to deliver better use or service to the customer and to create a new market or to increase market share. Again such suggestions and ideas are generated at the worker level. Innovative options open to an enterprise may either be strategic, research and development (R&D) results or non-R&D results. Strategic Innovations are those that emanate out of decisions to serve a specific market or segment by creation of a different perception or usage of an existing product. Experimental development that goes beyond applied research forms the basis of Innovations that are results of R&D. They constitute basic research for intensifying knowledge about fundamental processes related to the production processes in the company. It is the non-R&D: activities that do not have straight forward relation to R&D, and are not defined as R&D, that are the real domain of an intrapreneur. 3.3 Intrapreneurs It is a common belief that innovations are the realm of entrepreneurs. However when entrepreneurial qualities are demonstrated in corporate environments, they too use innovations as strategies. The leaders become Intrapreneurs and demonstrate the same vision as that of an Entrepreneur. The difference is that they work in larger environments, have access to larger resources, yet they take the same risks and have the same ambitions to change the world or at least to shake it up. However they work for the benefit of the company and not for personal profit. Today the global corporations innovate on a much larger scale. The example of Toyota or Sony in the East to Philips and Nokia in the West are enough to prove the point. Even the corporate bosses have these qualities and have shown them to be of the same value for huge organizations. Gorman et al (1997) state that the tendency toward entrepreneurship is related to several personal characteristics like values and attitudes, personal goals, creativity, risk-taking propensity, and locus of control. These characteristics are in fact enhanced by the enormous resource, both in terms of financial and human capital at their disposal. Gifford Pinchot (1985) describes such a leader and calls him an Intrapreneur as a person who acts like an entrepreneur but is actually employed by a company and has to work within its confines. He takes risks but his only personal risk is losing the job. The company does not go down with him as is in the case of an entrepreneur. It is true that the Intrapreneur has a lot of leeway in terms of resources but he needs to be innovative in a different way by getting his human resources to work for him and the company. He has to build a team and lead by example. There are some typical leadership behaviour patterns that are very critical. Jerry Porras and Susan Hoffer (1986) opine that open communication meaning sharing of intentions, listening and collaborating through making team decisions were most relevant for success in organisational development efforts. Similar conclusion was drawn by Covin and Kilmann (1990) when they surveyed several individuals. They noted two more traits of leaders. One, that they demonstrated discernible and unfailing support for the change programs, and secondly, they related the change to business needs. This calls for building of teams towards the effort and communicating the expected results in terms of profits, productivity, quality, performance, quality of work life etc. 3.4 Empowerment It is widely thought that strategy is dictated by the external environments and that it is the domain of the leaders or the elite of the company. This paradigm is challenged by Smirchich and Stubbart (1985) who claim that current theories wrongly perceive that environments dictate strategies and that environment themselves are a creation of actions of organisations. They argue that all actions by all people in the organisation contribute to the development of the environment. This is almost diagonally opposite thinking. They insist that the existing assumption that organisation is entrenched in and confined within the environment is restrictive and kills innovation. Here is where the innovative thinking f the worker gets to work for both self actualisations as well as for intrapreneurship at the lower level. This also suggests that the centre of innovations is really elsewhere and it can be seen in a different light. The workers who make a product are closer to its functionalities, the marketing staff is closer to customer desires and the purchase managers understand the capabilities of the supply chain to tweak costs. They are equally positioned to be creative and should they have the incentive, can be a great asset in the strategy for both innovations and inventions. However this great potential human capital remains largely untapped. Yet it seems feasible that, if employees are empowered, this can add real value to the competitiveness of a company. 3.5 Strategies Both entrepreneurship and intrapreneurship are personal traits of leaders and are developed through experience and exposure they cannot be taught. It is believed that they are in-born qualities and as such get expressed when the person is in power. While this is largely true that unless such an individual is in power he/she will not be able to make use of these exceptional qualities, yet some of this spirit is present in all individuals even when they are not in power. Every person feels self satisfaction through better performance (McGregor 1960). This demonstrates to him that he is capable of realising a goal and that he can contribute towards the betterment of the company. Therefore if this opportunity for self actualisation is provided, the employee will avail of it, thereby not only improving his performance but also delivering value for the company. 4.0 Discussion The question under discussion was the statement by Gardiner (2004), “The process for converting strategic plans into the day to day actions by which they are realised is still largely a ‘black box’.” The above literature review has clearly indicated that this is not the case. It has been found that strategies my look similar, just like similar products or services but what distinguishes them from each other is the success or failure of one over the other. The success indicates that while the apparent strategy was same or similar, yet the pursuit of the strategy was done in some quantifiable different way that produced the success rate. There are several ways of differentiation in the execution of a strategy, but the most remarkable are those that are carried out by individuals. They have been seen as the entrepreneur, intrapreneur or empowered employee. In all cases it is the innovative capability of the individual that has produced the competitive edge. Innovations are also products of individual, and sometimes team efforts. The literature review has highlighted the qualities of the Intrapreneur as a corporate leader. He is one with risk taking and innovative tendencies; converting opportunities into strengths and converting them into profits and growth for his company. On a more elaborate level, it is his ability to imbibe the same spirit of intrapreneurship into his subordinates; managers, supervisors as well as workers; that bring the results. The leader is not only able to innovate himself but is also able to get others at all levels to bring in innovations for the eventual competitive advantage of the company. For this he plans self actualisation opportunities and rewards the innovators and is able to draw out and promote the intrapreneurial capabilities of his subordinates. 5.0 Whirlpool Case Study A case study of Whirlpool (Donepudi and Mathew 2006) will be able to demonstrate this quite considerably. Whirlpool is the largest White Goods manufacturer in the world. It has arrived at this position after a very difficult period during the nineties which saw a decline in consumer loyalty and mounting losses everywhere. For a turnaround the company adopted several strategies like introduction of Enterprise Solutions, realignment of databases and introduction of Knowledge Management. But by far the largest contribution came from its adoption of the theories and concepts of Innovations. The company imbibed and nurtured the innovative habit at the grass root level. This has proved to be the turning point in the company’s remarkable turnaround from losses to profits, from loosing market share to generating customer loyalty, and from cutting down jobs to increase in manpower. It has introduced the concept of “Innovation from Everyone, from Everywhere and for Everyone”, that has proved to be a runaway winning idea. The source of innovation could be the technical idea to improve or replace a product or service. The object of innovation is to do something more or something else, to deliver better use or service to the customer and to create a new market or to increase market share. Whirlpool has pooled internal resources by drawing out talent from within its employees to create an entire division to invite, investigate, research and develop innovative ideas into innovative products with new or better usage. They have lined up monetary and recognition incentives for employees which has created anticipation and involvement of the workforce and resulted in rise in productivity as well. This has also brought about customer loyalty through better brand value and enhanced product value. In August 1999, Nancy Snyder, vice president of leadership and strategic competency development was assigned the responsibility to make Whirlpool the market leader in the white goods industry, by creating a culture of innovation throughout the organisation that would eventually become its core competency. She started out by selecting 75 people, including some vice presidents, directors, secretaries and even workers from the assembly line. They were relieved of their regular job responsibilities and were trained in innovation, to dream up products or services that would truly differentiate Whirlpool from its competitors. A year later, they came up with great ideas like Gladiator line of cabinets and appliances for the garage. But most of the projects like games (bike racing) on the Internet were not feasible. "We knew from strategic point of view what we needed to do, but from a practical point of view we didn't know how to do it at all”, said Jeff M. Feltig, the chairman and CEO of Whirlpool. One of the main reasons for the problems faced by Whirlpool was the lack of a proper internal communication system. The company followed a traditional paradigm of organisational communication that was slow and inaccurate. Communication was top down and information flow was single dimensional. Whirlpool had a strong engineering and manufacturing culture, and design. They tended to look at designs in a different way. Issues like colour, space, psychographic profiling of products and ergonomics were discussed within the context of engineering without taking into consideration customer needs. Industrial designers, usability researchers, graphic artists, and engineers worked as separate teams. The Whirlpool teams started afresh on every new project. This wasteful and inefficient as it resulted in delayed introduction of new products to the market. This was changed. Communication was made multi directional and information flew from all corners. This made all teams aware of each others work and coordination followed. The main change was in the outlook and every one became customer centric. Another drawback was, a lot of valuable time was lost in searching for information and resources which required further processing to make it fully available and useful. Huge amounts of important data and useful information that had already been processed and tested in the company were lost in the shelves of headquarter archives or computer hard disks. Sometimes, company experts were not available to provide insights into the impending problems. The employees lost the ability to be creative or to be innovative. The solution to this problem was through the use of Enterprise solutions that enable the different departments to receive useful information, duly processed for onward work. This cut down wastages, increased productivity and efficiencies and resulted in shorter deliveries at better costs. 5.0 Conclusions The statement by Gardiner is proved by the Human Resource theory of the past. Amongst the many theorists of HR one outstanding contribution by McGregor is still practiced today. According to him a negative attitude of the management, theory X, presupposes that workers are lazy, passive, without ambition, willing to be led and resist change. Hence management is through control, coercion, threats and punishment. This results in low productivity, antagonism, unionism and subtle sabotage. In contrast positive management, theory Y, believes that people are motivated, active and interested, ambitious, prefer to lead and are interested in change. Hence management is through open systems, communications, self-managing teams and peer controlled pay systems. The result is high productivity, bonhomie and care for the organization. This is the foundation of empowerment that leads to development of intrapreneurial values at the grass root level and brings out the best from the worker for the benefit of the company. On the other hand, using the human capital as a competency through empowerment has been proved by a very large corporation. This has proved two important points. One is that even large companies are capable of using the entrepreneurial skills through their intrapreneurial leadership. 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