Traditionally to make a product or provide service you need three primary factors. First, we need resources: like land, water or wind. Let’s call these resources. Secondly we need time and money, starting or scaling capital. For the sake of simplicity let’s referred to this as the monetary component. Third, we need labor resources, or human resources: people. to create it. Now, these three primary needs: resources, money and people together we call them input factors. By connecting them we can create. The input factor will indeed make creation possible is the fourth one: entrepreneurial ability. And this factor is becoming the differentiating factor in our current economy. In this article we will explain what entrepreneurial ability (in short Entrepreneurability) is and how we can plant its seeds, cultivate and grow from it.
Stick and stones
In the first human labor practices we used primarily natural resources like sticks and stones, nature provided us to fulfill our primary needs. As we developed into tribes and later smaller communities, we started to specialize and focus on a particular product (farming, blacksmith etc.) doing so people we no longer able to fulfill in their basic needs by themselves. They would withdraw from consuming to produce their product, in order to do so they would need capital to bridge this gap hence we were introduced to an economy in a smaller scale.To accommodate this withdrawal we created financial institutions like banks to facilitate the exchange of products and service. This resulted in an enormous growth in productivity and wealth (for some).
This worked well for smaller communities, however we were unable to scale to larger groups of people. Until the industrials revolution. This is where we began utilizing the potential of the combined efforts of machine and labor forces. This led to significant economies of scale and enabled organisations to reach a global market. At that point, those who were able to control and utilize these three primary factors were successful. Large corporations dominating the markets because competitors are unable to obtain the natural, monetary and labor resources and to maximize these rewards we adopted numerous ways to optimize them.
Optimizing the primary factors
Since the industrial revolution we have been trying to optimize our production processes. We have created an impressive number of ways to govern it. In the past couple of decades we introduced Projects and Project management frameworks like Prince2, to optimize our productivity we introduced Lean and to facilitate in creative environments we introduced Agile values and principles along with numerous frameworks and practices. All to optimize our labor resources. Capital resources are nowadays heavily regulated and controlled (for obvious reasons) and we try to be more careful in using our natural resources by focussing on circularity.
Applying and optimizing these three factors alone, won’t make your organization a successful organization in these times. Adding entrepreneurship to your mix might do the trick. Here are the key ingredients.
The ability to optimize the utilization of the production factors is entrepreneurship. This involves four elements:
- Taking initiative – Action oriented and driven by forward motion
- Strategic business decision making – Based on a clear vision and strategy being able to make decisions
- Innovation – Exploring and experimenting
- Bearing risk – taking the consequences of the previous three elements regardless the outcome.
In future posts, we will elaborate on these factors. These four elements determine if a product or service produced will actually come to life. Go to market needs these skills. Improvements to keep going and arriving at a market need this way of thinking. And with an increase in the number of independent professionals, the purpose economy and a generation entering the workforce that is raised with Entrepreneurability, so the skill are already available too. This might explain why more and more organizations are exploring concepts like ‘ Lean startup’ and organize hackathons to facilitate in Entrepreneurability.
What hasn’t evolved though is the organisational structures of companies and the rewards and compensation structures. So if we need these skills to work, how we will adjust our organisation formats? And maybe more important, how will we rewards people if we expect entrepreneurial behaviour from them. Will we get away with just paying them a monthly salary?
Where the three primary factors generate income through rental income (natural resources), interest (capital) and wages (labor). The fourth factor , Entrepreneurability, is compensated through profit and loss. Owning a company you only earn when profit is made, if not, you get nothing. With the rise of Entrepreneurability in our labour force we need to radically rethink our organisational structures and rewarding and compensation structures.
Entrepreneurability is already happening. There are several companies already experimenting with elements of Entrepreneurability.
A small student startup RYSST (Rent Your Student Scrum Team) founded by two software engineering student as part of a school assignment. They identified the need for companies to early bind talented engineers and students wanted to have a meaningful job to build experience and earns some money as well. A great combination and continuation for companies since students are available to work at night and during holidays. You rent a team of students and when they graduate you get first pick in hiring them. Onboarding is a piece of cake since they are already familiar with the product. A completely new concept using the rise of popularity of the Scrum Framework and a shortage of software engineers. Within a year they employ over 30 students and starting a new branch in another university city.
A machine manufacturer for among others the tobacco industry. A highly competitive market where ITM is able to do things differently. Self-organising production teams are responsible for the development, assembly and aftercare of a production line. This organisation’s leader took a conscious choice to delegate a portion of the entrepreneurial abilities to their employees. There is no innovation department.“I honor personal initiatives from the work floor by challenging my employees to work on innovative projects. They will also be inspired to take responsibility of the future of the customer relations though.” Of course that requires a special kind of leadership.(source)
This IT company is only steering on happiness. They believe that when their employees are happy, they make their customers happy. Having a no-policies-policy and teaching people to balance both the personal, company and customers’ interest has resulted in more and sustainable growth in profit and headcount since 2012. While continuously experimenting with stock options for employees (that is not really creative of course) or having employees dividing the budget for raises themselves and where people are encouraged to start new services and adopt new technologies they have expanded their portfolio in various directions. Starting and stopping services when needed and continuously looking for new interesting opportunities, not by a sales team or innovation team but by its own employees. Teaching them to act as an entrepreneur.
An internet bureau with more than 50 internet professionals, with clients like Dick Bruna’s Nijntje, NautaDutilh and Karcher Netherlands. Their bureau does not employ a single manager. Each and every one of their employees applies Entrepreneurability and takes it to a next level. If you are selected to be their client, the work to be done is posted on the intranet, for all employees to look at, who has the most interest, the best fit. When a team has been formed, the client has an official place in the team.
Since teams apply the Scrum framework, each client becomes a Product Owner. Being part of the team, part of the process and always aligned with what’s being created. Often Netvlies adds value to their clients’ teams because they not only deliver the requested product or service, but also a way of working, insights in how to work with high performance teams and maintaining the power of collaboration, while honoring individual talents too.
As all these four companies acknowledge that enabling Entrepreneurability is necessary, a great way to work and of course all of them are struggling too. Experimenting to find the ideal culture and governance structures. We want to help them and inspire them to find formats, models and ideas to enable Entrepreneurability.
We are curious whether you have other examples of organizations experimenting with Entrepreneurability (or elements of it). Please leave a comment.