Management Futures: An entrepreneurial mindset for a changing world
05 November 2013
An old saying among investors in British industry used to be to start selling a company’s shares once the chairman bought himself a Rolls Royce. There is a tinge of wisdom to this adage: companies can be at their most vulnerable when they seem to be at their most successful. They become, in the vivid expression used by Sir Stuart Rose in a keynote speech at the CMI annual conference last month, ‘fat and happy’. It has happened to Nokia – though the latest signs are it is catching up with competitors; it was the case at Marks & Spencer a decade ago.
We all know that demographic, consumer and technological change is inevitable and often rapid, and companies have to adapt.
A vivid portrayal of the recent transformation in the music industry was presented by Peter Ayliffe, CMI President, also at the annual conference. Relatively recently, the vast bulk of sales and profits came from physical sales of CDs, with live performances, licensing and advertising together comprising a small proportion. That has now been completely inverted with the rise of the download. Initially, big music companies made the mistake of resisting change with lawyers, and it was Apple that showed the way, creating legal downloads.
The next big technological change set to disrupt business models is 3-D printing, and manufacturers need to welcome and adapt to the imminent transformation.
A business has to be continually reshaping its approach to deal with disruptive technologies, unexpected competitors and changes in demography and consumer tastes. So why do companies keep falling prey to the oldest mistake in the management library – complacency?
Well, the answer may lie in the complexities of leadership at an individual and team level. A company is not a single entity that can just decide to adapt and switch course: it is a complex web of inter-related teams, often working with strategic partners. Executives can’t be off inventing and researching all the time.
Another complication is that not all innovation is effective. Some strategic errors in recent decades appeared to be modernisation at the time. Examples include the ‘business process re-engineering’ fad which ‘forgot the people’ and ignored the huge economic contribution of employee engagement. Another is securitisation in financial services, which was intended to reduce risk but sometimes has had the opposite effect.
The change that is necessary can be subtle and complex, not a return to ‘Year Zero’. For example, in many cases of disruptive technology, use of the old technology doesn’t disappear, but rather forms part of a more diverse offering. In book and periodicals publishing, for example, digital media have transformed product offerings, marketing and distribution, but printed products still have a role for many brands.
Perhaps a distinction can be made between being an entrepreneur, and having entrepreneurial awareness; combined with sound risk assessment. In healthy companies, senior executives do not keep themselves in glass boxes, shielded from reality by a wall of PAs. They talk to staff and to customers; they are relentlessly curious. They encourage and welcome views and intelligent criticism. They listen to people of all ages and backgrounds inside and outside the company; they encourage discussion of the business and its prospects at all levels. And to guard against excessive or reckless innovation, they have a strategic Board, where risk can be intelligently assessed.
As discussed at the entrepreneurs’ panel at the conference, entrepreneurs are restless people. A common misunderstanding is that they are motivated by money: a genuine entrepreneur is more like a creative artist – looking to create something new and enhance people’s quality of life.
But does this mean there can be an entrepreneurial role for the operational manager? Your job might be to ensure a building project keeps to budget and deadline; or to run an HR shared service centre for the EMEA region. Daily responsibilities are more about management and operations than entrepreneurship.
Yet a good manager should always have awareness of new trends and innovations. Peter Ayliffe identified four key disciplines for the entrepreneurial company and manager, in his keynote speech:
- Embrace change
- Innovate the business model
- Understand what customers value
- Create partnerships
An example of a traditional management team thinking like entrepreneurs is Tesco’s acquisition of a stake in the video-on-demand company blinkbox, and the launch of its Hudl tablet, featuring blinkbox videos and a host of other services. A retailer, like a book publisher, can become a technology firm.
Not all managers will be equally responsible for all four disciplines listed above, but they should at least be aware of them. It would be unstable for all managers to act like an entrepreneur all the time; but if we all think like one, the results can be transformational.
Submitted by Philip Wood