All corporations have the challenge of trying to infuse an entrepreneurial spirit into their workforce. As the theory goes, when employees act like entrepreneurs, they put themselves in the mind-set of business owners with a bias for action, which results in good decisions and good outcomes.
To get employees to act like entrepreneurs, then, companies have often taken a structural approach. For example, Google and Microsoft organize into small units of 50 to 100 employees to maintain a sense of entrepreneurial spirit and eliminate bureaucracy. The trade-off is that small groups can create silos across units, leading to duplication of efforts and squelching synergy. But if a company chooses to organize to achieve maxim efficiency and scale, it risks creating behemoth departments that crush the natural entrepreneurial spirit that lies within its employees.
After a career as both an entrepreneur and a venture capitalist, I have come to conclude that creating an entrepreneurial spirit within the corporation is only half the battle. I have seen too many situations where acting like an entrepreneur was not a business panacea: Unbridled, unfocused entrepreneurial energy can easily be squandered and misdirected. In my last six years as a VC, I developed an appreciation for the attitude and vantage point that VCs have when sifting through business proposals and allocating scarce capital to the best opportunities.
Through these two career experiences, I have come to realize that the true question corporations need to ask is: "How do I get my employees to think like VCs but act like entrepreneurs?" In other words: What's the best way to impose the challenge of complex, competing priorities on employees who must, in effect, be adroit at living with split personalities? This new frame of mind requires the corporate manager to extract the best from both worlds—entrepreneurs with a bias for action, and VCs with a bias for analysis. Elements of both are required.
The VC industry is a small, arcane field that isn't well known to many outside of the mere hundreds of professionals who practice it every day. So let me explain a bit more what I mean when I promote this way of thinking for the corporate manager.
In short, VCs are trained to:
• Survey and network with smart people to find the best ideas out there (what's known in industry parlance as deal flow).
Corporate managers, in turn, should be encouraged to spend time networking with outside experts who can expose them to a broader range of ideas than what might emerge from within the walls of their corporation.
• Be notorious cynics who swiftly reject hundreds of these ideas, setting a high bar before something is deemed worthy of their attention.
Once they've attracted numerous wacky and credible ideas to transform their business, managers need to follow the VC model of being a pessimistic cynic, challenging every assumption and having a sensitive "BS" detector that allows them to dismiss the majority of suggestions as unworthy of further consideration.
It is tricky to encourage a lot of new ideas without pandering to the sources of the ideas. If the ideas are not worth pursuing, managers need to feel comfortable (and supported by their chain of command) to not waste time on them, even if the most senior executives or most important customers provide ideas.
• Assess risk and rewards and apply ruthless judgment to select the handful of big ideas that they want to put their time, energy, and resources into every day.
Look for situations where the team or company has a distinct advantage against competitors; where you can leverage your resources, expertise, and relationships to create value.
Once the big ideas are chosen, there needs to be a shift in emphasis. The key to successful implementation is to act like an entrepreneur. Specifically:
• Attract world-class talent.
Great entrepreneurs don't settle for working with whoever is available. Instead, they take the attitude that their mission is to be inspiring enough to attract the best and brightest, and they don't waste time with B teams.
• Attack the opportunities as if the structural barriers in front of you don't exist.
There's a pattern of young entrepreneurs achieving greatness in areas where their older, wiser colleagues were scared away because they "knew better." At a time when IBM (IBM) and Compaq Computer (HPQ) were dominating the emerging PC market, who would have thought to challenge them with a new direct-to-consumer business model but a young kid named Michael Dell selling computers out of his dorm room at the University of Texas? Corporations need to allow their managers to be naive enough to not "know better."
• Don't be afraid to be wrong—just don't stand still.
For managers to truly foster innovation within the corporation, they can take the best of both of these perspectives—the VC and the entrepreneur—and apply them in their own environment.
Jack Welch had a similar mind-set when it came to balancing competing priorities. "You can't grow long-term if you can't eat short-term," he states flatly. "Anybody can manage short. Anybody can manage long. Balancing those two things is what management is."
I might argue the same is true for instilling a similar entrepreneurial/analytical approach in the minds of corporate managers there are those that are able to sit back and analyze what idea is the best one, while others who are good at acting with the raw, unbridled enthusiasm of an entrepreneur. The best managers will do both. And the best corporations will help them figure out how.