January 2, 2014 4:02 pm

Encouraging entrepreneurs keeps companies forever young

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©Bloomberg

Shell claims its GameChanger unit has invested over $250m in more than 3,000 ideas, turning about 300 into commercial projects

Encouraging an entrepreneurial spirit among staff is vital to keeping companies forever youthful, according to experts in business psychology.

Contrary to common perception, entrepreneurs fit well in big corporate cultures, say the professors from University College London and Goldsmiths.

Their research on “the entrepreneurial organisation” has caught the attention of companies such as UK retailer J Sainsbury. Professors Tomas Chamorro-Premuzic and Gorkan Ahmetoglu have themselves set up a business, Meta, to pinpoint innovators within companies’ workforces.

Bernie Smith, Sainsbury’s head of business intelligence, says: “We are interested in using [Meta’s] scientific approach to identify people within our business who have strong entrepreneurial aptitude.”

Executives, management gurus and academics have argued over the place of entrepreneurs in big organisations since the 1980s. The debate took on a new urgency during the recent recession, with politicians highlighting the link between entrepreneurialism and growth in tough times, and between innovation and job creation.

Julian Birkinshaw, professor of strategy and entrepreneurship at London Business School, says that for decades multinationals from IBM to Unilever have made stabs at creating divisions devoted to nurturing innovative ideas and developing new products. Even Marks and Spencer, the UK retailer, had a go during the dot.com boom. Google has gone a step further and applied the notion across the organisation, encouraging all staff to dabble in pet projects. One of the successes of this approach was the development of Gmail.

Meta

Meta has come up with a tough to-do list for companies that want to break out of the cycle. For a start, companies should rid themselves of hierarchical management structures. In the best entrepreneurial organisations, people are led rather than managed, it points out.

The job of top brass is to provide vision – that is, articulate the behaviour expected of staff and create a common purpose to pull people in the same direction.

Ban centralised command systems that prevent innovators seizing opportunities, urges Meta. Give staff autonomy and encourage them to take risks and share ideas. Abolish divisions of labour and departments that help to narrow staff horizons, reducing their sense of responsibility for projects.

Eliminate the office politics and infighting that allow entrenched employees to protect their own interests and inculcate a debilitating sense of apathy and inertia.

Meta highlights the dangers of group think, where staff adopt commonly accepted short-cuts in thinking and end up making poor decisions.

However, Google is an exception. The majority of initiatives to foster entrepreneurialism in the workplace just fade away, says Mr Birkinshaw. “It is frustrating. In theory, they should work. But these divisions are fragile and there are so many ways they fail,” he says. Projects are killed off because either they are compared unfavourably with existing revenue-generating products or they are not deemed core to the parent group and funding dries up.

The best chance of these units working is if they are championed by top executives who can mentor entrepreneur-employees. But even then, with the exception of new venture units within companies including IBM and Royal Dutch Shell, most disappear after a few years, says Mr Birkinshaw.

A survey by Accenture, the US management consultants, of 1,000 US staff and executives shows that, while executives in the past five years have become more focused on entrepreneurialism, their staff say bosses need to do more to make it happen. The danger is they lose entrepreneurial staff if they don’t, it warns.

Ian Gordon, head of leadership and management at Lancaster University Management School, says that organisations fail to nurture innovation because it challenges the corporate culture. He points out that most British businesses are risk averse and intolerant of mistakes. Corporate entrepreneurialism emerges from “networks committed to change”. To build these networks takes a long time, he says.

But Messrs Chamorro-Premuzic and Ahmetoglu argue that mature businesses must embrace entrepreneurship at all levels if they are to escape the normal corporate life cycle.

Meta paints a gloomy picture of corporate evolution, starting with innovation and growth moving to protectionism to atrophy, crisis and ultimately extinction.

Shell

Shell claims its GameChanger unit, which was formed in 1996, has invested over $250m in more than 3,000 ideas, turning about 300 into commercial projects. One example is a toy rubber dinosaur that expanded when put in water. It inspired a senior research scientist to invent a synthetic rubber seal that swells on contact with water and can withstand enormous heat and pressure underground. The seals are now used widely to stop water from entering wells and keep oil flowing, lengthening the life of an oilfield.

It is a fact of business life, they say, that strong growth often leads to rigidities that hinder groundbreaking ideas. It can take a hundred years from start to finish, but the end stage is when companies either disappear, are broken up or taken over.

That said, it is possible to break the circle. Meta attributes the success of Amazon and Apple to their continuing entrepreneurial spirit. It contrasts them with Microsoft, which Meta claims has lost its vision, allowing vested interests and bureaucracy to strangle creativity. This has cost Microsoft, and its shareholders, huge amounts of money in missed opportunities, Meta said.

Meta concludes that corporate cultures have to change. Companies have to “embrace freedom of thought and freedom of expression; where co-operation and the sharing of knowledge is the norm; where leaders . . . articulate a guiding vision, empower people and value creativity; and where teams are made up of people with complementary traits and skill sets who believe in each other and who are willing and able to challenge the status quo”. It is either that, or atrophy.

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