The 3 Preconditions for an Entrepreneurial Society
by Julian Birkinshaw

guestPosted by

In 1985 Peter Drucker argued for a shift toward an entrepreneurial society, one where “executives in all institutions…make innovation and entrepreneurship a normal, ongoing everyday activity.” This intentionally broad view requires a fundamental change in mindset. Drucker was pushing us to think and act less like employees taking orders and more like free agents, alert and responsive to opportunities whether we work in a startup or in a large corporation.

Thirty years on, how far have we progressed toward Drucker’s entrepreneurial society? Many large companies are experimenting with ways to tap into their employees’ creative ideas. There has been a boom in startups, the number of freelancers is growing rapidly, and technology-enabled platforms such as Upwork and Amazon’s MTurk are helping people find work that suits their skills and schedules. And yet I would say the entrepreneurial glass is still half-empty, judging by the anaemic levels of engagement in work that we see today.

For the entrepreneurial society to properly take hold, we need three things as individuals: means, motive, and opportunity.

Consider our means first. Charles Handy once pointed out that Karl Marx was right all along. Marx’s goal was for workers to take ownership of the means of production, by which he meant factories and machinery. But in the post-industrial world, most of us are knowledge workers at least in part — the means of production is our brainpower, which we retain ownership of no matter what our job is.

Many of us also need access to technology and funding, and this is one area where the changes of the last 30 years have been profound. Internet technology has essentially democratized entrepreneurialism. To be a freelance worker today, you need an internet connection and a service to sell, whether it is coding, copywriting, or cartoon drawing. To be a taxi driver, you need a car and a GPS. To be a hotelier, you need a spare room. And if you need access to money, crowdfunding platforms and microfinance options make that easier than ever.

In the developed world, at least, the means of the entrepreneurial society are in place — and the developing world is catching up fast.

What about motive? Maslow’s famous hierarchy of needs reminds us that what drives us depends on our lot in life. The industrial era created salaried work as we know it, and for most people it took care of the lower levels of the hierarchy: shelter, security, and social interaction. Now that these things are taken for granted, many of us are reaching for the higher levels — that is, the desire to do meaningful work, develop expertise, and have freedom to make our own choices. When I ask my MBA students who belong to Generation Y what they really want to do, most of them express a yearning to be their own boss. They live in a comfortable world, and it gives them license for self-expression.

If means and motive are improving fast, what about opportunity? Here the story is mixed. In prior decades latent entrepreneurs had to overcome a lot of barriers — the red tape around setting up their own business, the difficulty of getting unsecured loans, the social pressures to climb a corporate ladder rather than work for themselves. But the opportunity for entrepreneurship in today’s business world is enormous. New technologies and economic and social changes have opened up vast new opportunity areas. The social acceptance of entrepreneurship has also improved, thanks to shows such as Dragons’ Den and Shark Tank and role models including Richard Branson, Elon Musk, and Mark Zuckerburg.

But despite all these improvements, much remains to be done before the entrepreneurial society truly arrives. Here are some of the obstacles:

  • Employment law says you are either an employee or a freelancer. But this is an outdated distinction, and it is creating all sorts of problems for companies like Uber and Airbnb, whose drivers and hosts are a bit of both. Some observers haveargued that we need a hybrid “third way,” designed for today’s gig economy.
  • Intellectual property rules were created on the assumption that ownership matters, but today we are more interested in access — to streamed music, to the use of a car, to information that we can use. Some progress has been made here, such as the general public license used in open-source software, but more needs to be done.
  • On the topic of governance, the original limited liability company was a clever invention, a mechanism to facilitate commercial risk taking by limiting the downside for owners. But today such companies seem to be stifling entrepreneurship; they have become short-term-oriented and unduly conservative. Various alternatives to the limited liability company have been invented over the years (for example, S and B corporations), and further creativity would be welcome to help latent entrepreneurs rather than frustrate them.
  • In education the school curriculum focuses on traditional subjects taught in traditional ways, and it pushes students into narrow specialties. Many entrepreneurs claim they succeed despite, not because of, their schooling. Maybe it’s time to put a bit more emphasis on creativity and commercial savoir faire in our education system.

There is a common theme here. While technology, commercial acumen, and social norms have evolved dramatically over the last 50 years, the institutions that govern capitalism are still stuck in the late 19th century. We are using industrial-age rules to oversee information-age business practices, and that is what is holding us back. I have written elsewhere about the need for management innovation in large firms to make work more engaging and fulfilling. An equally pressing need is for institutional innovation at a societal level so that today’s would-be entrepreneurs have the means, the motive, and the opportunity to succeed.


About the author:

Julian Birkinshaw is a professor of strategy and entrepreneurship at London Business School.


First published on Harvard Business Review.


Leave a Reply

Your email address will not be published.