Entrepreneurial Management

In our article on "Innovation", we had mentioned the meaning of the term "entrepreneur". "An entrepreneur shifts a resource from a lower yielding area to a higher yielding one by innovating". In this page we will stress on managing entrepreneurship. The principles of entrepreneurial management are the same, whether it is a large existing business, a public service institution or a new venture, big, medium or small.
Many of today's businesses may not survive, in a rapidly changing world with new innovations, unless they acquire entrepreneurial competence. In the words of Joseph Schumpeter, the great Austrian economist, who unfortunately was born a century earlier, the age of 'Creative Destruction" has arrived. The world manufacturing output will go up threefold but unfortunately, the labor force required will shrink to one third of the present requirement. Many new businesses will be started and many existing ones will disappear. This will lead to financial destabilty, social unrest and unemployment. The disparity between the haves and have-nots will further increase. All governments and institutions, whether public or private, have a social responsibility and should be prepared for this eventuality, as and when it occurs. In the words of Drucker, it is the medium sized businesses which have the best capability and necessary resources, especially human resources to innovate. Does it mean that big businesses do not have the capacity to innovate and practice entrepreneurial management ? The answer is a definite no. There are quite a few companies like J&J, 3M, DuPont, Hoechst, ASEA and Sony as some of the examples. There are many more companies around the world which are exceedingly good. However, only 20 % of the Fortune 500 may survive in the next 25 years to be on the list. These 20 % of the companies will control 80 % of the world's economy. In this elephantine race, there will be many dead elephants on the way. This will lead to loss of jobs. Individuals will be forced to go on their own and start small businesses for sheer survival. More SOHOs will appear on the scene. The problem will be financial and need for working capital. Any country which encourages such small enterprises will solve and avoid social problems like unemployment. Mr. Charles Handy has covered this beautifully in his book "The Elephant and the Flea".The above development will have a different kind of economic fallout. When individuals start small businesses, they will depend upon their savings to meet their personal expenses, till their business picks up. Most of them will enter the services sector as investments are comparatively low. However, the payback from such business takes a longer time. The savings will not be enough and majority will get into debt trap. The microfinance institutions give very small loans to individuals and SMEs are beyond their capacity. After some time the savings of many such people will disappear. It is rather sad that commercial banks do not take interest in SMEs. How will the economy improve ? How will the commercial banks lend their money and to whom, when savings of people start disappearing ? There is a niche market here to be tapped. However, this will require a change in commercial banks approach to lending. In all countries monetary and lending policies are decided by the central banks like Federal Reserve Board, Bank of England, RBI etc., Such agencies also have large roles to play in helping SMEs. Right now the economic and monetary policies are all skewed in favor of big businesses.    
It is time, that developing countries make a note of this and take timely action. More so for countries like India with its billion strong population. There is hardly any choice. In fact there is only a Hobson's' choice. Either insulate yourself by creating artificial barriers and get into trouble with WTO and G7 and face their wrath or open up and face unemployment and social unrest in your own country. There is however one choice for all. Become a world class player yourself. But this calls for ingenuity, hard work, discipline, entrepreneurship, innovativeness, managerial and financial skills and that is a tall order.

This is an abridged version of our pay article written on March 11, 2000.

© Copyright, Aug-08 . Without prejudice. All rights reserved

Entrepreneurial Management - To learn more about this author, visit Madhavan T Gopalachary's Website.

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