Why It’s Hard to Be Entrepreneurial

Why It’s Hard to Be Entrepreneurial

by Matt Reilly  |   9:00 AM January 7, 2014

For many years, I have talked with business executives about the need to reorient their attitudes toward failure. If they want their organizations to generate more good ideas, monetize the best of them, and in general innovate faster, they need to not only tolerate but celebrate the fruitless pilots and instructive flops that are an inevitable part of the process.So I was dismayed to learn, from a recent survey focusing on entrepreneurial activity inside corporations, how big an obstacle this continues to be for companies. In fact, it was the biggest disconnect the study revealed. Although 42 percent of the corporate professionals surveyed said that management’s tolerance of failure was “very important” to fostering an entrepreneurial attitude in an organization, only 12 percent thought their own companies were good at that.

It’s easy to make the logical argument for how an intolerance of failure cripples an organization’s innovation efforts. The saying “nothing ventured, nothing gained” dates back centuries, after all. But our survey provides some fresh statistical evidence of the impact. A depressing 27 percent of employees told us they had consciously chosen not to pursue an idea they felt had promise at their company, for fear of negative consequences.

What did employees themselves point to as the single biggest impediment to entrepreneurial activity in their organizations? The largest number (36 percent) blamed workloads that kept employees too busy to focus on entrepreneurial ideas. In second place, 20 percent thought it was the lack of management support for trying new things. Third most often cited (by 13 percent) was a lack of adequate incentives for pursuing entrepreneurial ideas.

Our findings were not all doom and gloom. In spite of the challenges, the majority of employees report having initiated an entrepreneurial pursuit at their companies (52 percent) and that their companies are more supportive of entrepreneurial initiative than they were five years ago (55 percent).

Looking more closely at these employee innovations, however, the overwhelming majority had to do with internal programs and processes; 54 percent were limited to the workings of the business unit in which the employee worked while another 31 percent improved processes or created programs that crossed unit boundaries. That leaves just 15 percent whose pursuits were focused on externally-focused products – the innovations that companies are most rewarded for in the marketplace.

One interpretation of these findings is that employees have an entrepreneurial impulse that even time constraints and unsupportive management can’t destroy, but it is being channeled in a direction that doesn’t match their companies’ urgent need for market-facing innovation. And what’s responsible for the diversion? Again, I would point the finger at the typical company’s unhealthy response to any foray that visibly fails.

If your objective is to nurture and enable an entrepreneurial culture, you should think about establishing some new rules for yourself and your team. Among them:

Communicate constantly that innovation is valued – and valued most when it serves customers directly and excites the marketplace.

Reward efforts, not just outcomes. Provide financial and nonfinancial incentives for the entrepreneurial behaviors the company wants to see more of – not only for the ultimate success that a precious few initiatives will achieve. (This is clearly not the norm today: 77 percent of people we surveyed said the rewards for entrepreneurial initiative come only when ideas have been implemented and proven to work.)

Learn to fail faster. Speed up the process of moving ideas to test phases where it’s possible to get an objective sense of their potential. The more you invest beforehand, the harder it is to see the truth – and the fewer ideas you can put to the test.

Cull ideas – without killing initiative. Focus is essential for new ventures to succeed, so hard decisions will have to be made on which to pursue. It is critical that the people whose ideas aren’tselected not be so discouraged by the experience that they don’t try again.

Celebrate learning. Nobody likes to see an idea they believed in fail. But remind them that any experiment that leaves the company smarter constitutes valuable progress.

Of course, good management is always a matter of striking the right balance. It’s easy to imagine the dangers of encouraging risk-taking, rewarding activity versus outcome, or celebrating failure too much. In today’s climate, however, that threat seems manageable. The more urgent problem is to spur greater levels of innovation, and to do that, most companies must encourage more entrepreneurship in their ranks. Only when they learn to fail, and more importantly to learn from failure, will they hold the keys to success.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: