Entrepreneurship
Entrepreneurs and entrepreneurship are closely related to innovators and innovation.
The typical usage of the words entrepreneur and entrepreneurship are completely at odds with the content below — total confusion.
Thoughts from Peter Drucker
“Entrepreneurship … converts problems into opportunities … Focuses not on tomorrow but on what has to be done today in order to have a tomorrow … Fuses internal corporate strengths with external stimuli.”
… It should have been obvious from the beginning that management and entrepreneurship are only two different dimensions of the same task.
An entrepreneur who doesn’t learn how to manage will not last long.
A management that does not learn to innovate will not last long.
Every institution—and not only business—must build into its day-to-day management four entrepreneurial activities that run in parallel.
One is the organized abandonment of products, services, processes, markets, distribution channels and so on that are no longer an optimal allocation of resources.
This is the first entrepreneurial discipline in any given situation.
Abandonment
Then any institution must organize for systematic, continuing improvement (what the Japanese call kaizen).
Then it has to organize for systematic and continuous exploitation, especially of its successes.
It has to build a different tomorrow on a proven today.
And, finally, it has to organize systematic innovation, that is, to create the different tomorrow that makes obsolete and, to a large extent, replaces even the most successful products of today in any organization.
See innovation in the existing organization requires special effort
I emphasize that these disciplines are not just desirable, they are three conditions for survival today.
These entrepreneurial tasks differ from the more conventional management roles of allocating present-day resources to present-day demands.
These entrepreneurial activities start with the outside and are focused on the outside.
But the tools we originally fashioned to bring the outside to the inside have all been penetrated by the inside focus of management.
They have turned into tools to enable management to ignore the outside.
Even worse, they are used to make management believe it can manipulate the outside and turn it to the organization’s purpose.
Take marketing (the strategy itself is the innovation)
The term was coined 50 years ago to emphasize that the purpose and results of a business lie entirely outside of itself.
Marketing teaches that organized efforts are needed to bring an understanding of the outside, of society, economy and customer, to the inside of the organization and to make it the foundation for strategy and policy.
Yet marketing has rarely performed that grand task.
Instead it has become a tool to support selling.
It does not start out with “who is the customer?” but “what do we want to sell?”
It is aimed at getting people to buy the things that you want to make.
That’s getting things backward.
American industry lost the fax machine business that way.
The question should be “how can I make things the customers want to buy.”
Executives of any large organization—whether business enterprise, Roman Catholic diocese, university, health care institution, government agency—are woefully ignorant of the outside, as everybody knows who has worked with decisions in a large organization.
These executives must spend too much of their time and energy managing inwardly rather than managing outwardly.
The inward focus of management has been aggravated rather than alleviated in the last decades by the rise of information technology.
Information technology so far may well have done serious damage to management because it is so good at getting additional information of the wrong kind.
Based upon the 700-year-old accounting system designed to record and report inside data, information technology produces more data about the inside.
It produces practically no information about anything that goes on outside of the enterprise.
Practically every conference on information deals exclusively with how to get more inside data.
I have yet to hear of one that even raises the question: “What outside data do we need, and how do we get them?”
Management does not need more information about what is happening inside.
It needs more information on what is happening outside.
So far no one has figured out how to get meaningful outside data in any systematic form.
When it comes to outside data, we are still very largely in the anecdotal stage.
It can be predicted that the main challenge to information technology in the next 30 years will be to organize the systematic supply of meaningful outside information.
It is understandable that management began as a concern for the inside.
When the first large, modern organizations first arose—around 1870—the first and by far the most visible need was to organize the enterprise itself.
Nobody had ever done it before on that scale.
But now we know how to do that.
Growth and survival both now depend on getting the organization in touch with the outside world.
Management has become an external, not an internal, task.
For results take place outside the organization.
Inside, there are only costs.
Attention
“To know something,
to really understand something important,
one must look at it from sixteen different angles.
People are perceptually slow,
and there is no shortcut to understanding;
it takes a great deal of time.” read more
 Innovation topic page. Tidbits about innovation. Entrepreneurship defined. The Entrepreneurial Business
Innovation and Entrepreneurship book outline with an exploration of Systematic Entrepreneurship.
Entrepreneurs and Innovation Peter Drucker interview conducted by George Gendron, editor in chief of Inc. magazine
Management, Revised Edition contains several innovation and entrepreneurship topics. A full text search for the word stem "entrepr" turns up additional references.
 Chapter 3, The Dimensions of Management ::: Administration and Entrepreneurship
Chapter 11, “Strategic Planning: The Entrepreneurial Skill” in Management, Revised Edition
Our entrepreneurial economy
Marketing and Innovation in a society moving in time
Council on Competitiveness Urges National Innovation Ecosystem to Lead Next Wave of U.S. Economic Growth
Find ‘entrepre’ in Management's New Paradigm
Find ‘entrepre’ in The Changing World of the Executive
The Definitive Drucker
Peter Drucker book list: Toward tomorrows, comprehensive management and time related
The Entrepreneurial Myth
Reality Check by Guy Kawasaki
“SOCIETY in this century has become a society of organizations.
Social tasks which only a century ago were done by the family, in the home, in the shop, or on the farm—from providing goods and services to education and care of the sick and the elderly—are increasingly performed in and through large organizations.
These organizations—whether business enterprises, hospitals, schools, or universities—are designed for continuity and run by professional managers.
Executives have thus become the leadership groups in our society.
The leadership groups of old—whether nobles, priests, landed aristocracy, or business tycoons—have disappeared or become peripheral.
The first job of the executive is to make his organization perform.
Results are always on the outside.
There are only costs on the inside.
Even the most efficient manufacturing plant is still a cost center until a distant customer has paid for its products.
The executive thus lives in a constant struggle to keep performance from being overtaken by the concerns of the inside, that is by bureaucracy.
Business at least stands under the control of the market, which forces even the most powerful corporation to subordinate its inside concerns to outside results and to performance.
But in the public service institution, where the market test is absent—and in many cases cannot even be simulated—bureaucracy constantly threatens to swallow up performance.
For the business enterprise in a market system we are gradually developing a discipline of entrepreneurship, that is, of performance.
But even the President of the United States fights a losing battle to preserve his capacity to give political leadership and to make political decisions in the face of the need to manage an unmanageably large, unmanageably complex, and self-centered bureaucratic machine.
The art and discipline of entrepreneurship to make organizations perform and to produce results will therefore be a continuing concern.
This concern will involve the public service institution as well as the business enterprise.
The executive as a person—as a key individual in society and as a member of his organization—becomes a matter of increasing importance.
Middle managers and other professionals working as individual contributors—as engineers, as chemists, as accountants, as computer programers, as medical technologists, and so on—have constituted the fastest-growing group in American society, and indeed in the society of all developed countries.
Careers in organizations—that is, careers as managers and other professionals—are the principal career opportunities for educated people.
Nine out of ten youngsters who receive a college degree can expect to spend all their working lives as managerial or other professional employees of institutions.”
Social theorists and political scientists still, by and large, divide the world into “bosses” and “working stiffs.”
But this was the reality of the nineteenth century.
The reality of today consists of people who are “bosses” but who also have bosses of their own; who are not “capitalists” but who collectively—through their pension funds and their savings—own the economy; people who consider themselves “professionals” but who are also “employees” as “professionals” traditionally were not supposed to be.
Who are they?
What do they represent?
Where do they stand?
What are their problems, their opportunities, their concerns?
How can they best use their organizations to achieve their own ends in life and work?
And what, in turn, do they owe the organizations that enable them to live comfortable, well-paid, middle-class lives by furnishing the capital they themselves lack and by taking the risks that they could not afford or dare to take themselves?
There are, of course, many other concerns of management and manager: the impact of new technology, labor relations, government regulation, and growing worldwide economic integration; taxation and compensation; rapidly changing internal organization; and the development of managers. …
… more in The Changing World of The Executive
(by Peter Drucker)
Entrepreneurship in the Public-Service Institution
From Chapter 16 of Management, Revised Edition
 
Public-service institutions—such as government agencies, labor unions, churches, universities and schools, hospitals, community and charitable organizations, professional and trade associations, and the like—need to be entrepreneurial and innovative fully as much as any business does.
Indeed, they may need it more.
The rapid changes in today’s society, technology, and economy are simultaneously an even greater threat to them and an even greater opportunity.
Yet public-service institutions find it far more difficult to innovate than does even the most “bureaucratic” company.
The “existing” seems to be even more of an obstacle for them.
To be sure, every service institution likes to get bigger.
In the absence of a profit test, size is the one criterion of success for a service institution, and growth a goal in itself.
And then, of course, there is always so much more that needs to be done.
But stopping what has “always been done” and doing something new are equally anathema to service institutions, or at least excruciatingly painful to them.
Most innovations in public-service institutions are imposed on them either by outsiders or by catastrophe.
The modern university, for instance, was created by a total outsider, the Prussian diplomat Wilhelm von Humboldt.
He founded the University of Berlin in 1809, when the traditional university of the seventeenth and eighteenth century had been all but completely destroyed by the French Revolution and the Napoleonic wars.
Sixty years later, the modern American university came into being, when the country’s traditional colleges and universities were dying and could no longer attract students.
Similarly, all basic innovations in the military in the twentieth century, whether in structure or in strategy, have followed on ignominious malfunction or crushing defeat:
the reorganization of the American army and of its strategy by a New York lawyer, Elihu Root, Teddy Roosevelt’s secretary of war, after its disgraceful performance in the Spanish-American War;
the reorganization, a few years later, of the British army and its strategy by Secretary of War Lord Haldane, another civilian, after the equally disgraceful performance of the British in the Boer War; and
the rethinking of the German army’s structure and strategy after the defeat of World War I.
And in government, one of the greatest examples of innovative thinking in recent political history, America’s New Deal of 1933-1936, was triggered by a Depression so severe as to almost unravel the country’s social fabric.
Critics of bureaucracy blame the resistance of public-service institutions to entrepreneurship and innovation on “timid bureaucrats,” on time-servers who “have never met a payroll,” or on “power-hungry politicians.”
It is a very old litany—in fact, it was already hoary when Machiavelli chanted it almost 500 years ago.
The only thing that changes is who intones it.
At the beginning of the twentieth century, it was the slogan of the so-called liberals and now it is the slogan of the so-called neoconservatives.
Alas, things are not that simple, and “better people” that perennial panacea of reformists—is a mirage.
The most entrepreneurial, innovative people behave like the worst time-serving bureaucrat or power-hungry politician six months after they have taken over the management of a public-service institution, particularly if it is a government agency.
The forces that impede entrepreneurship and innovation in a public-service institution are inherent in it, integral to it, inseparable from it.
The best proof of this are the internal staff services in businesses, which are, in effect, the “public-service institutions” within business corporations.
These are typically headed by people who have come out of operations and have proven their capacity to perform in competitive markets.
And yet, the internal staff services are not notorious as innovators.
They are good at building empires—and they always want to do more of the same.
They resist abandoning anything they are doing.
But they rarely innovate once they have been established.
There are three main reasons why the existing enterprise presents so much more of an obstacle to innovation in the public-service institution than it does in the typical business enterprise.
First, the public-service institution is based on a “budget” rather than on being paid out of its results.
It is paid for its efforts and out of funds somebody else has earned, whether the taxpayer, the donors of a charitable organization, or the company for which a human resource department or the marketing services staff work.
The more efforts the public-service institution engages in, the greater its budget will be.
And “success” in the public-service institution is defined by getting a larger budget rather than obtaining results.
Any attempt to slough off activities and efforts, therefore, diminishes the public-service institution.
It causes it to lose stature and prestige.
Failure cannot be acknowledged.
Worse still, the fact that an objective has been attained cannot be admitted.
A service institution is dependent on a multitude of constituents.
In a business that sells its products on the market, one constituent, the consumer, eventually overrides all the others.
A business needs only a very small share of a small market to be successful.
Then it can satisfy the other constituents, whether they are shareholders, workers, the community, and so on.
But precisely because public-service institutions—and that includes the staff activities within a business corporation—have no “results” out of which they are being paid, any constituent, no matter how marginal, has, in effect, a veto power.
A public-service institution has to satisfy everyone; certainly, it cannot afford to alienate anyone.
The moment a service institution starts an activity, it acquires a “constituency,” which then refuses to have the program abolished or even significantly modified.
But anything new is always controversial.
This means that it is opposed by existing constituencies without having formed, as yet, a constituency of its own to support it.
The most important reason, however, is that public-service institutions exist, after all, to “do good.”
This means that they tend to see their mission as a moral absolute rather than as economic and subject to a cost-benefit calculus.
Economics always seeks a different allocation of the same resources to obtain a higher yield.
Everything economic is therefore relative.
In the public-service institution, there is no such thing as a higher yield.
If one is “doing good,” then there is no “better.”
Indeed, failure to attain objectives in the quest for a “good” only means that efforts need to be redoubled.
The forces of evil must be far more powerful than expected and need to be fought even harder.
For thousands of years the preachers of all sorts of religions have held forth against the “sins of the flesh.”
Their success has been limited to say the least.
But this is no argument as far as the preachers are concerned.
It does not persuade them to devote their considerable talents to pursuits in which results may be more easily attainable.
On the contrary, it only proves that their efforts need to be redoubled.
Avoiding the “sins of the flesh” is clearly a “moral good,” and thus an absolute, which does not admit to any cost-benefit calculation.
Few public-service institutions define their objectives in such absolute terms.
But even company human resource departments and manufacturing service staffs tend to see their mission as “doing good,” and therefore as being moral and absolute instead of being economic and relative.
This means that public-service institutions are out to maximize rather than to optimize.
“Our mission will not be completed,” asserts the head of the Crusade Against Hunger, “as long as there is one child on the earth going to bed hungry.”
If he were to say, “Our mission will be completed if the largest possible number of children that can be reached through existing distribution channels get enough to eat not to be stunted,” he would be booted out of office.
But if the goal is maximization, it can never be attained.
Indeed, the closer one comes to attaining one’s objective, the more efforts are called for.
For, once optimization has been reached (perhaps between 75 and 80 percent of theoretical maximum), additional costs go up exponentially while additional results fall off exponentially.
The closer a public-service institution comes to attaining its objectives, therefore, the more frustrated it will be and the harder it will work on what it is already doing.
It will, however, behave exactly the same way the less it achieves.
Whether it succeeds or fails, the demand to innovate and to do something else will be resented as an attack on its basic commitment, on the very reason for its existence, and on its beliefs and values.
The Need to Innovate
Why is innovation in the public-service institution so important?
Why can we not leave existing public-service institutions the way they are and depend on new institutions for the innovations we need in the public-service sector, as historically we have always done?
The answer is that public-service institutions have become too important in developed countries, and too big.
The public-service sector, both the governmental one and the nongovernmental but not-for-profit one, has grown faster during the twentieth century than the private sector—maybe three to five times as fast.
The growth has been especially fast since World War II.
To some extent, this growth has been excessive.
Wherever public-service activities can be converted into profit-making enterprises, they should be so converted.
This applies to not only the kind of municipal services the city of Lincoln, Nebraska, now privatizes.
The move from nonprofit to profit has already gone very far in the American hospital.
It may become a stampede in professional and graduate education.
To subsidize the highest earners in developed society—the holders of advanced professional degrees—can hardly be justified.
A central economic problem of developed societies is capital formation.
We therefore can ill afford to have activities conducted as “nonprofit”—that is, as activities that devour capital rather than form it—if they can be organized as activities that form capital, as activities that make a profit.
But the great bulk of the activities that are being discharged in and by public-service institutions will still remain public-service activities, and will neither disappear nor be transformed.
Consequently, they have to be made producing and productive.
Public-service institutions will have to learn to be innovators, to manage themselves entrepreneurially.
To achieve this, public-service institutions will have to learn to look upon social, technological, economic, and demographic shifts as opportunities in a period of rapid change in all these areas.
Otherwise, they will become obstacles.
Such public-service institutions will increasingly become unable to discharge their mission as they adhere to programs and projects that cannot work in a changed environment, and yet they will not be able or willing to abandon the missions they can no longer discharge.
Increasingly, they will come to look the way the feudal barons came to look after they had lost all social function around 1300:
as parasites, functionless, with nothing left but the power to obstruct and to exploit.
They will become self-righteous while increasingly losing their legitimacy.
Clearly, this is already happening to the apparently most powerful among them, the labor union.
Yet a society in rapid change, with new challenges, new requirements and opportunities, needs public-service institutions.
The public school in the United States exemplifies both the opportunities and the dangers.
Unless it takes the lead in innovation, it is unlikely to survive, except as a school for the minorities in the slums as parents of middle- and high-income families send their children to private and parochial schools.
For the first time in its history, the United States faces the threat of a class structure in education in which all but the very poor remain outside of the public school system—at least in the cities and suburbs where most of the population lives.
And this will squarely be the fault of the public school itself, because what is needed to reform the public school is already known.
Many other public-service institutions face a similar situation.
The knowledge is there.
The need to innovate is clear.
They now have to learn how to build entrepreneurship and innovation into their own system.
Otherwise, they will find themselves superseded by outsiders who will create competing entrepreneurial public-service institutions and so render the existing ones obsolete.
The late nineteenth century and early twentieth century was a period of tremendous creativity and innovation in the public-service field.
Social innovation during the seventy-five years until the 1930s was surely as much alive, as productive, and as rapid as technological innovation, if not more so.
But in these periods the innovation took the form of creating new public-service institutions.
The need for social innovation may be even greater now, but it will very largely have to be social innovation within the existing public-service institution.
To build entrepreneurial management into the existing public-service institution may thus be the foremost political task of this generation.
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