Resources as an Assets of Strategies - Essay Example

Question Resources have been described as assets, capabilities and all attributes that aide in the implementation of strategies that improve efficiency and effectiveness (Barney 1991). However resources, like individuals, become productive output only when combined with other capabilities (Grant 1991). Access to resources is the vital reason for the entrepreneur to engage in and look for Inter-organizational relationships. But being small means that such relationships are either denied or closed for them. Usually there are one on two individuals who start a technology based venture to realize a dream project and as the relationships grow they evolve into larger firms with growing access to resources. Resources are therefore the engines of growth and they depend heavily on them for nourishment and survival. When they move from survival to growth they need broader and more extensive resources to nourish their needs. The internet has indeed opened up a vast store of knowledge and information. Entrepreneurs and smaller firms usually face a resource constraint not only of capital but that of specified information. There are plenty of networking communities that help their members in getting information on vital aspects of marketing and availability of talent and other resources. These are the places where they can get sustenance and growth information. By nature technological entrepreneurship is looked upon as shaky, unreliable and flimsy. It has no legitimacy on its own and is considered as highly risky and not worth investing into. It is for these reasons that the entrepreneur and the smaller firms that associate with it are forced to look upon other avenues such as the Internet. Often when they show their prowess in the use of the web based business acumen, they attract Venture Capital. Another objective for entering and developing a networking relationship on the net is access to knowledge of markets and to understand and utilise their scarce resource in optimal ways. Most relationships expect and receive strategic advice that is valuable in developing competencies. This is the value-addition that the entrepreneurs look for from their networking communities as their own exposure is limited due to age and inexperience. Indeed strategic advice has been confirmed to be a sought after value addition (McMillan et al 1988). The use of Internet is however risky for entrepreneurs. They are usually new ventures; start-ups with high on idealism and short on knowledge and the Internet is full of out-dated information and untested theories. One needs to learn how to sift good usable knowledge from bad and risky information. The introduction of social media was initially hailed as the next best thing for getting information and widening the knowledge base. But knowledge comes from education, exposure, experience and is based on ground realities. There are few ways to determine the veracity of the information; verification of authorship, cross checking of information and matching of information with facts from other sources like academics and printed details. While the Internet can be a source of opportunities, it can easily become a threat for the unsuspecting and lead to disasters. There is no dearth of fake information and fraudulent offers that can lead the user to wrong avenues and blind belief will result in losses. There is also the case of over-enthusiasm that can easily become disastrous as soon as euphoria over and idea fades away. One of the worst cases of the Internet leading business to result in loss and disgrace was that of Webvan. The company started small with the idea of selling grocery online and the idea caught the fancy of Venture Capital. Soon the flamboyant company took to the IPO route and raised a huge capital of $375 million and opened stores in eight cities across the US East Coast, planning for a further 26 cities. However within just eighteen months it flopped and vanished leaving more than 2000 people jobless and several thousand investors lighter on their pockets. The reason was that it tried to grow too fast too soon. The idea was great but needed to test the waters over a period of time. Grocery business has wafer thin margins and the competition is intense. There was no innovation except the convenience of shopping, but the competition was too much in an overcrowded scene. The personal touch and the comfort a brick and mortar store offered was more important than the fancy of shopping online. Another interesting example of small business entrepreneurial venture is that of Hotmail. It was an innovative idea by Sabeer Bhatia, who rightly thought that if he could provide a free email account to everyone, in place of a paid one, he can get a lot more membership. As a revenue model he targeted product and service based companies and offered to place their advertisements in shape of banners onto these free emails. The member who got the free account was thus given the opportunity to own a mail id and a reasonable size of a mailbox in exchange for living with ads and banners on his incoming mails. This small annoyance was bearable for the price of being bombarded with advertisement. The advertisers got hold of another avenue to offer their products and services at a reasonable cost. The entrepreneur hit a jackpot. The idea caught on and started a revolution in the market and free email became the rage that carries on even today. When Microsoft saw the potential, it paid $ 400 million to Sabeer Bhatia to buy him out and Hotmail became Microsoft property. With the resources at their disposal it soon became the most favoured email id for everyone. The conclusion is that the Internet offers both opportunity and is a threat at the same time. Business, whether a traditional brick and mortar one or glamorous one on the net, works on sound principles of having a good revenue model backed by well thought out strategies both in management and marketing. Wise use of resources is as important as having them and innovations become acceptable only when they have a practical use for consumers. Question 2 An entrepreneur is a person whose 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. Profit is but a secondary motive to the individual entrepreneur although in a corporate environment, as he cannot ignore it, he skilfully builds his actions around it. Interestingly Bird (1988, 1992) says 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 characteristics can be individualistic or may even 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. They are known to possess proactive, prospector mindset that is in pursuit of attractive opportunities. They are capable of using the energies of others to focus on implementation of innovative ideas, are willing to take risks but are driven by a desire to be independent and be competitively responsive to customer needs (McGrath and MacMillan 2000). Personal factors, mixed with contextual situations and external environments combine to shape intentions. Most individual intentions tend to influence decisions. They are affected by personal factors that are a product of experiences gathered in positions of employment or individual earlier entrepreneurship as well as personal traits and characteristics including abilities. The contextual characters comprise of changes in the market, social, economic and political changes and other variables like government regulations (Bird 1988). When there is talk of a mindset it leads to the study of the psychological make-up and Stewart et al (1999) have concluded that these attributes have contributed to sound predictions of a person’s capability and initiative to pursue entrepreneurship. Kourilsky (1980) also believes that the attributes like the craving for achievement, creativity, initiative, risk-taking and setting objectives along with self-confidence and internal control; and the underlying emphasis on independence and autonomy, motivation, energy and commitment and above all persistence against all odds are the psychological factors that can foretell an entrepreneur. Several other academicians have described the attributes differently laying emphasis on one or the other but all pointing to them as the vital characteristics that describes an entrepreneur. For instance 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. Similarly, McClelland (1965) have projected achievement motivation, risk taking and control as important features that prevail in any entrepreneurial venture. The result of these characteristics and traits is that the entrepreneur becomes self confident and self sufficient and reaches a state that may be described as self efficacy. This self efficacy is described as the belief by a person on his own capabilities (Bandura 1982). In such a state he is able to perceive how to perform certain tasks and uses all his personal skills to achieve this target or goal with excellence. This self perception is born out of the cognitive abilities and tendencies that he possesses and uses to obtain his objective. This is then converted into intentions and finally onward to activities. Bandura (1991) further describes that such a person is able to make choices, seek goals, and make additional efforts; his special trait being perseverance in the face of adversities. Self efficacy also becomes the stepping stone to higher ambitions and performance on the strength of skills acquired through experience (Herron and Sapienza 1992). Efficacy develops in individuals on the four pillars of experience, observations, social persuasions and judgment of personal physiological state (Bandura, 1982; Wood & Bandura, 1989). In other words his exposure and encounters in the professional and social fields develop this acumen in him over a period of continuous experiences. This is strengthened further as the experience that builds on this four-fold information shows up in his performance (Gist & Mitchell, 1992). When an individual is able to evaluate the availability and constraints of his resources, both internal and external, and understands its implication on his performance, his self efficacy enables him to make judgments for the future (Gist & Mitchell, 1992). The net effect is that the self efficacy of the entrepreneur is the cornerstone of his ability and his special characteristic The above arguments, descriptions and evaluations lead to a simple conclusion that an Entrepreneur can be bred as all the qualities and traits that have been described can be developed given the right environment and by ensuring right proportion of education and training. But nothing can be farther from the truth. Indeed all the training and the background cannot produce a person like Sim Wan Hoo of Creative Technologies who ventured into the unknown and invented the sound blaster that revolutionised the world of sound for ever. He did not have the advantage of training or exposure for what he did. Similarly nobody can emulate Bill Gates who created Microsoft and its operating systems almost singlehandedly. Both are visionaries that were born and were not bred. They are both contemporaries belonging to the same age of Information Technology and have contributed hugely to this new field as entrepreneurs. They both have certainly learned to use their environment to their advantage but most others who were better trained, had better resources and better backgrounds have failed to even visualise what they passionately believed in and capitalised upon. Unfortunately entrepreneurs cannot be bred for a simple reason that personality is not transmitted by DNA alone. It is strongly believed that traits, habits and like-mindedness are hereditary. That this is largely false is proven by facts that geniuses rarely have genius parents or offspring’s. This is despite the fact in both cases extra care is provided in their developmental stage and they have a more mature and prepared environment that encourages special abilities, but it is extremely rare that the best of conditions can breed a genius. It is the rare insight, that exceptional psychological bent of mind and the extraordinary ability to envision something non-existent, that enables them to transform some ordinary resource into an outstanding useful object or to altogether think up of an innovation that is desirable to fulfil needs that were dormant and not evident. Question 3 The ream of the entrepreneur is usually in the individual stream. Entrepreneurship is mostly considered an individual trait and in the confines of small and medium scale enterprises. Entrepreneurs are also associated with highly individualistic actions and are not associates with large group of people, except when such groups are subordinates. It is normally understood that at the innovative and policy level an entrepreneur is almost always an individual with exceptional qualities. But does that mean that large enterprises, especially the Multinationals are deprived of such talent and they are incapable of innovations like those offered by the individual entrepreneurs? Facts do not bear this out. A company like Toyota or Sony is always offering innovations and they have products that are not only new but truly unique in nature. How is it that they compete globally on a much larger scale with entrepreneurship qualities but are not termed as Entrepreneurs? The heart of competitive advantage is strategy and it is the leader who formulates the strategy in large organisations that have very large resources. He is faced with the task of managing his resources to their optimum and in this he finds innovative ways to build strategies. This is the entrepreneurship role he plays where he uses his resources in different ways to achieve corporate goals. Therefore he acts as an entrepreneur by using his entrepreneurial traits on a very large scale and opens up opportunities for talents available to him in shape of resources and is able to draw upon this to innovate and invent products for his organisation. One such contribution as an ode to leadership is the article “GUTS! Companies that blow the doors off business-as-usual”. The authors, Kevin and Jackie Freiberg have portrayed the leader as a person with Guts. They have analysed this to be the result of some exceptional qualities of those successful leaders who have said a go-by to conventional wisdom and pursued different methods to achieve their vision and goal. They have shown remarkable versatility and have produced startling but effective results and they have managed to make their organisations role models of excellence. Lee Iococca is one such person that transformed a losing company like Chrysler to become not only profitable but the envy of rivals. Indeed the Entrepreneurs are of the view that given the extraordinary resources, the large companies are in a better position to employ talent and innovate products and services. But there is an incongruity here. The fact is that individual entrepreneurs are free to think out their strategy and force their opinion on their subordinates and face no resistance. But the “intrapreneur” or the entrepreneuring leader in a large company has to face resistance from the culture and the habits of the existing staff as well as the inherent culture of the company. Their role requires them to fight their environment in order to be innovative. Gifford Pinchot (1985) describes and Interpreneur 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. The work of an Interpreneur is different from an entrepreneur in the sense that he largely tries to be innovative with the resources at this disposal. He tends to shake up his resources, especially the human ones, to come out of their habits and set attitudes and like a transformational leader attempts to try out new strategies by building their support. He has the mindset of an entrepreneur and according to Wilkund and Shepherd (2003) has their decision making style, method and practice. His strategic response to situations is not on the individual scale but is built through teamwork. He seeks opportunities using his proactive capability with a prospector like attitude while at the same time he infects and engages other members of the team to follow his way of thinking and actions. In this pursuit his willingness to take risk is driven by the competitiveness he has to develop in response to the needs of his customers (McGrath and McMillan 2000). This group of people or the team he nurtures works on the same principle and develops a new culture that Schein (2004) describes as norms, values, personal visions, goals and how things should be done; much like an individual entrepreneur’s way of cognitive process. Schein has defined this culture as “a pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems” (Schein 2004: 17). In a different approach to leadership an interesting proposition was made by Burns (1978) and was further developed by Bass (1985). He made a distinction between transactional and transformational types of leadership. He stated that transactional leadership was the traditional leadership which involves the leadership-subordinate roles where the subordinate is rewarded for compliance with the leader’s wishes (Doherty and Danylchuk, 1996). As against it in case of transformational leadership the subordinate is encouraged or motivated by the leader to improve him, raise his bar in order to serve the organisation better. (Doherty and Danylchuk,1996; Soucie, 1994; Yukl, 1989). According to Armstrong (2001) the four main characteristics are ethical behavior, sharing a vision and goals, improving performance through charismatic leadership, and leading by example. However, Bass (1990) had a more comprehensive description, his four Characteristics are: Intellectual stimulation which refers to the leaders capability to inspire followers to be more inquisitive and inventive in thinking and problem solving Individual consideration revolves around interaction between leaders and followers on two dimensions. First is developmental orientation wherein tasks are assigned to enhance an individuals potential, abilities, and motivation; second is individual orientation where the leader accentuates shared understanding and experience through one-on-one dealings and two-way communications. Inspirational leadership, refers to the idea that leaders inspire and encourage subordinates to create greater emotional attachments to leaders and greater identification with leaders visions of organisational goals Idealized influence refers to the fact that the charismatic traits of a leader will be idealized by followers through their commitment and will tap their full potential. In yet another description the four characteristics have been referred to as the four "Is" by Avolio, et al (1991) with which transformational leaders stimulate and engage their followers. Individualized Consideration: The leader gives personal attention to others, making each person feel outstandingly valued. Intellectual Stimulation: Encouraging a new look to old methods, inspiring creativity, encouraging others to look at problems and issues from a different angle. Inspirational Motivation: By increases optimism and enthusiasm the leader communicates higher expectations and points out new possibilities. Idealized Influence: The leader provides a vision and a meaningful role thereby gets respect, trust, and confidence from followers. The conclusion drawn from the above is that an Intrapreneur is very much like an Entrepreneur except that he works in a collaborative environment. This does not rob him of his individual traits that are very necessary for the entrepreneurial venture he undertakes, but the difference lies in that he carries out his activities taking the group along with him and enforces his will through transformational leadership. In order to become competitive and then remain ahead of rivals, larger organisations and companies need to encourage their leaders and managers to become innovative. For they have to recognise that such people have to be given a free reign to think out of the box and allow them to experiment and try new methods and ideas; just like an entrepreneur, to use the company resources, human as well as financial, and evolve new managerial strategies in order to produce goods and services that are different from existing patterns. This will be the call of the owners, through their Board of Directors, to approve of entrepreneurial leaders, or to employ people with such orientation, and to encourage them to build upon there rare capabilities to achieve the organisational objectives of profitability and excellence. Chrysler did this and came out of the rut; GM did this and shed off several businesses that were not its core competencies; and Sony practices it at all times to be able to remain ahead of competition thus creating exceptional brand value. Bibliography Armstrong, S. (2001). Are you a "transformational" coach? 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