Why entrepreneurial thinking is as vital as ever
In business, the received wisdom has generally been that while small may be beautiful, bigger is ultimately better. In everything from resources and economies of scale to global reach and access to talent, big corporations just have too many inherent advantages over their smaller entrepreneurial counterparts to be ignored.
So why is it that so many of these apparently all-powerful giants are increasingly turning to entrepreneurial skill sets to help them cope with 21st century challenges like urbanization, rising customer expectations and the breakneck pace of new digital technologies?
“When companies become too big, they can’t really move; they become like a dinosaur.”
— Creative freelancer
It’s because that received wisdom no longer applies. From car-sharing companies to online lodging marketplaces and music streaming services, smaller, more agile entrepreneurial businesses are increasingly setting the pace in markets that have traditionally been dominated by large incumbents.
The usual explanation for this change is that these upstarts are just better at exploiting new technologies than their “old school” rivals, but that’s only part of the story. The other, less commonly addressed factor is cultural: entrepreneurial businesses are more innovative fundamentally because they are instilled with the “founder mentality.”
Businesses with a founder culture are agile, iterate more quickly and are more responsive to customers because they are driven by an urgency and strategic focus that comes from the top — from the founder — and percolates throughout the organization. In these organizations, innovation is everyone’s job and it’s not confined to one function or department. Small teams often work with limited resources and are pushed to take risks and seek radical new business models, rather than just tweaking the ones they already have.
Flat structures mean minimal hierarchy and few organizational barriers to sharing ideas and experience. Mistakes and dead-ends are encouraged as an integral part of the journey to success. One of Elon Musk’s favorite mantras — “make failure an option” — turns the more conventional saying “failure is not an option,” on its head, precisely to make that point.
By comparison, innovation in large corporates tends to be the responsibility of R&D. This machinery may be slick and well-oiled, but it is distanced from both the strategic decision-makers at one end and the customer at the other. Consequently, large companies tend to deliver steady, incremental improvements in products and services, rather than big, game-changing transformations.
In a world defined by disruptive change, this is no longer good enough. You could be making the best fax machine in the world, but you won’t last long when email arrives if you cannot adapt, and fast, to a radically new environment.
So the writing is on the wall. Entrepreneurs are better at innovation, they are bolder, more responsive and faster to market, and corporations need to learn from them. That means recognizing and rewarding entrepreneurial qualities like zeal, customer focus and a willingness to take risks.
“The main problem with corporate is that it’s always slow.”
— FinTech entrepreneur
Efforts are being made both to collaborate with external entrepreneurs and to encourage the latent entrepreneurial qualities of existing people. These programs range from bootlegging policies and entrepreneurial pitch-style competitions to raising the engagement of hiring Entrepreneurs in Residence to try and kick-start the creation of a founder mentality.
But if you’re not one of the big tech companies, finding enough of the right kind of people to move the dial is difficult. They tend to not advertise themselves, they can be dismissive of corporate modus operandi and they are hard to evaluate using conventional HR and recruitment processes. In the automotive sector, 64% of C-suite executives surveyed believe that talent is essential to achieving operational excellence, but only 15% say they are well-prepared to attract or retain that talent.
Furthermore, these individuals are often questioning, restless and independent-minded, which makes them challenging to retain and manage in a corporate environment. Culture clash has derailed many attempts at “intrapreneurship” because mismatched expectations of autonomy, bureaucracy, sense of ownership, flexibility and mutual respect can be very hard to deal with.
So, can you create a founder mentality, without a founder? At EY, we believe you can, but our experience is that these current models rapidly run out of road. Something more is required to really embed the founder mentality and to connect corporations with the entrepreneurial talent and cultural influences that will enable them to become inherently more innovative, more agile and faster to market. To make big not only better, but a bit more beautiful and a lot more innovative, too.
“We know that introducing change in big corporations is not an easy thing to do.”
— Director, startup company
Global Future of Mobility Leader
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Kristin M. Schondorf
North America Future of Mobility Leader
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Randall J. Miller
EY Global Automotive and Transportation Leader
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EY Global Automotive and Transportation Lead Analyst
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Global Automotive & Transportation Marketing Leader
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