The notion of corporate entrepreneurship has been around since the 1970s. But only recently has anyone candidly stated what history could have already taught us: “There is no such thing as a corporate entrepreneur.” So wrote Scott Kirsner for Harvard Business Review last year.
Kirsner ably analyzes five ways in which real entrepreneurs differ from their corporate counterparts: entrepreneurial freedom versus corporate bureaucracy, huge financial upside versus limited compensation inside corporations, gut-wrenching fear of failure versus the knowledge that the corporation isn’t going to go under, a do-anything persistence versus the possibility of getting fired for going too far, and a longer time horizon for success versus the pressure for quarterly results.
But at an even more fundamental level, what proponents of corporate entrepreneurship misunderstand is the very nature of entrepreneurs and their activities. Ask what entrepreneurship means and you’re likely to get a giant word-cloud in answer: innovation, creative destruction, opportunity, job creation and much else. But these aren’t descriptions of entrepreneurship; they’re descriptions of its results.
We should know better by now. Though many economic historians lazily assume that entrepreneurship didn’t exist before the word was coined in 1723, it has existed as an identifiable activity since humans first became sedentary. The dirty little secret of entrepreneurial research is that nobody can agree on the definition of entrepreneur (though we can mostly agree on what we’d like to see as outcomes of entrepreneurship).
In researching a book on the history of entrepreneurship, looking in the archeological record as well as the written record to understand entrepreneurs since they first appeared thousands of years ago, I can’t claim to have arrived at a definition that would satisfy everyone. But I have found in all times and places three fundamental attributes of entrepreneurs:
- Entrepreneurs are self-directed, with the aim of establishing self-worth.
- They innovate by applying highly specialized skills to deliver something society considers valuable.
- They have the value of their actions determined through cooperative exchange; what individuals or the market are willing to give in return for an innovative product or service.
It is the combination of self-directed action with highly specialized skills and cooperative exchange that often results in the innovation, creative destruction and other outcomes of entrepreneurship. If one of these pieces is missing, then the activity is not entrepreneurial. It can still be innovative, but it must rely on some other underlying drivers to push it forward.
Established businesses get into trouble when they exhort their managers and employees to be more entrepreneurial (which is like exhorting someone to be a better person). How can employees be totally self-directed, motivated only by their desire for self-worth? What company can let its employees determine how they will acquire and apply their special skills? And what company would want any employee to capture the value of their actions through a process of cooperative exchange: key people would ceaselessly be haggling with one another and going directly to potential customers.
There have been some noble experiments. As described in Leslie Berlin’s book Troublemakers: Silicon Valley Comes of Age, Xerox PARC assembled perhaps the greatest team of computer experts ever seen. They produced a long list of innovations—networked computers, graphical user interfaces (GUIs) and personal computers. But the structure of PARC did not reward their computer scientists either in pay or prestige based upon a market valuation of their innovations. So none of these products ever were commercializedand many of the researchers went on to found startups or work in them.
The research pipelines of many major industries like big pharma have resulted in important innovations. But those innovation processes, as they have been defined and structured, differ sharply from entrepreneurial behaviors. Big enterprises feel comfortable with project definitions, timelines, budgets, projected paybacks and periodic reviews by senior management. Good scientists are often recognized by senior managers who are great scientist themselves, who know how to make the high-potential new generation feel recognized and rewarded for being good at their discipline.
Exhorting scientists to be more entrepreneurial just confuses them as to how they’ll be recognized and rewarded for doing what they’re already motivated to do and already good at. Encouraging them to take risks compounds the confusion. Designing a good experiment has nothing to do with risk. The precise understanding that comes from performing a good experiment isits value. Taking more risk with an experiment means an ill-considered experiment. And where’s the cooperative exchange in doing work that’s budgeted? Good science is not entrepreneurial.
Similar arguments can be applied to the engineering work done in many tech R&D labs. The highly skilled work in such settings is also controlled by committees and budgets, not self-direction and cooperative exchange. That’s how such operations produce incremental improvements.
Steve Jobs was successfully entrepreneurial in re-inventing Apple because nobody told him what to do. He assembled a team of uniquely skilled engineers and designers who were motivated only by how the public valued their creations.
When CEOs try to make their managers and R&D team more entrepreneurial they put these potential innovators into double-binds:
- Should I be more self-directed, which means potentially not doing what I have been told?
- Should I develop my skills according to where I see the possibility for future innovation, or where the company sees it?
- Should I insist that my work be evaluated and rewarded in terms of the value the public places on the finished product, or should I do what my boss values and be rewarded as he or she see fit?
These are dilemmas that can’t be papered over by square-the-circle terms like corporate entrepreneurship or intrapreneur. Insisting that your people be more entrepreneurial gives you the worst of all possible worlds: Unleash the employees who are genuine entrepreneurs and you are likely to have organizational chaos. Meanwhile, employees who are best at innovating within familiar corporate constraints (or the constraints of their discipline like science or engineering) will likely be confused, frustrated and looking to jump ship.
Entrepreneurs have existed and been innovating for at least 8,500 years. For all that time, they have determined what they’ll do next. They have worked hard to develop skills they feel are superior to others. And their success or failure has always been determined by the value the public places on their activities, not by committees or market analysts. There is indeed no such thing as a corporate entrepreneur and, as history teaches us, there never has been.
