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August 13, 2004
Entrepreneurship as an Alternative to Outsourcing?
In a commentary on outsourcing, Edward D. Hess, executive director of the Center for Entrepreneurship and Corporate Growth at Emory University suggests that an alternative is for corporations to become more entrepreneurial. The argument is that outsourcing is only a short-term fix for corporate profits, and not a viable long-term solution. While this part of Hess' essay is correct, his solution is not viable.
I began work on this notion of helping corporations to become more entrepreneurial in the 1980s. We amassed a large data base, we published papers, and I even wrote a book on the topic. Even after I had taken my nine year entrepreneurial "sabbatical" from academics, I came back to continued interest in this notion. So I agreed to several consulting projects and seminars addressing making large corporations more entrepreneurial.
In fact, there is evidence of what makes some large corporations more entrepreneurial than other more "traditional" corporations. The differences cut across many issues. It starts with the culture of the organization, but is also affected by its strategy, structure, communication flows, and control systems. At the heart of the difference in culture and strategy is how the business engages its competitive and general operating environment. The culture of an entrepreneurial organization has a proactive strategy that views the external environment as one that is full of new opportunity. Traditional corporations, on the other hand, have defensive strategies that view the outside world as a series of threats to the core business that need to be thwarted.
So how does a corporation change its culture? Well there in lies the rub. It is difficult to make even small changes in corporate culture, and to make the kind of fundamental changes in culture that are required to become an entrepreneurial organization are generally insurmountable. Very few, if any, corporations have done so effectively, and those that have did so under conditions of imminent failure.
When I worked with large businesses on becoming entrepreneurial, I would explain in detail what changes were needed in culture and what it would take to make these changes. Inevitably, I would get one basic response from top management. "We're not the problem, you just need to make our managers more entrepreneurial." However, just as we have found that the culture in a country predicts how entrepreneurial its citizens are (for example, America compared to just about any country in Europe), so too does the corporate culture impact its employees. In fact, it has a profound impact as corporate culture is much more contained and focused. In a corporation that does everything to stifle entrepreneurial thinking and action through its structure, reward system, strategies, and so forth, telling its managers that they just need to be more entrepreneurial doesn't work.
Mature large corporations will continue to do what they have done for generations. They focus on defensive strategies to hold on to their share of a waning market. Outsourcing is a logical solution. We cannot change this with legislation or false hopes of some miraculous transformation. So what's the solution? Real entrepreneurs building and transforming our economy is the best hope. They have been the only real source of job growth over the past twenty years. And given that employment has seen record levels, they aren't doing such a bad job at this, after all.
Thanks to Bill Hobbs for sending the Hess essay to me.
Posted August 13, 2004 07:19 AM
at Belmont University in Nashville, Tennessee. He consults with a variety of businesses on start-up and growth related issues, and with larger corporations on re-establishing entrepreneurial cultures within their organizations. Dr. Cornwall's current research interests include entrepreneurial finance and entrepreneurial ethics. He has authored or co-authored four books.
