<\/p>\n
Entrepreneurial management, Drucker wrote, requires very different managerial practices including (1) focusing managerial vision on opportunity; (2) generating an entrepreneurial spirit throughout its entire management group and (3) systematic listening to and interactions with the staff.[2]<\/a><\/p>\n <\/p>\n \u201cToday\u2019s businesses, especially the large ones,\u201d Drucker wrote in 1985, \u201csimply will not survive in this period of rapid change and innovation unless they acquire entrepreneurial competence\u2026.Existing businesses will need to change, and change greatly in any event\u2026And that they can only do if they learn to be successful entrepreneurs.\u201d[3]<\/a><\/p>\n <\/p>\n Drucker also foresaw a time when entrepreneurship and innovation would be \u201cnormal, steady, and continuous\u2026 innovation and entrepreneurship have to become an integral life-sustaining activity in our organizations, our economy, our society. This requires of executives in all institutions that they make innovation and entrepreneurship a normal, ongoing, everyday activity, a practice in their own work and in that of their organization.\u201d[4]<\/a><\/p>\n <\/p>\n Yet thirty years later, in many publicly-owned organizations, the pervasive shift to innovation and entrepreneurship that Drucker had foreseen hasn\u2019t happened. As Larry Fink, CEO of BlackRock, the world\u2019s largest investor, wrote in a letter to all the CEOs of Fortune 500 companies in February 2016: \u201cMany companies continue to engage in practices that may undermine their ability to\u00a0invest for the future\u2026 <\/strong>We continue to urge\u00a0companies to adopt balanced capital plans, appropriate for their respective industries that\u00a0support strategies for long-term growth.\u201d[5]<\/a><\/p>\n <\/p>\n Why are firms failing to be entrepreneurial and invest in long-term growth? The answer isn\u2019t hard to find. Once a firm embraces maximizing shareholder value and the current stock price as its goal, and lavishly compensates top management to that end, management naturally focuses on exploiting the existing business and bolstering the stock price by increasing dividends and share buybacks, at the expense of innovation and investing in the future.[6]<\/a><\/p>\n <\/p>\n Sadly, the trend is increasing. \u201cDividends paid out by S&P 500 companies in 2015,\u201d Fink wrote, \u201camounted to the\u00a0highest proportion of their earnings since 2009. As of the end of the third quarter of 2015,\u00a0buybacks were up 27% over 12 months. We certainly support returning excess cash to\u00a0shareholders, but not at the expense of value-creating investment.\u201d<\/p>\n <\/p>\n Even worse, shareholder value theory has joined forces with hierarchical bureaucracy. Once a firm embraces shareholder value theory, the C-suite has little choice but to deploy command-and-control management. That\u2019s because making money for shareholders and the C-suite is inherently uninspiring to employees. The C-suite must compel employees to obey. With only one in five employees fully engaged in his or her work, and even fewer passionate, innovation and entrepreneurship are even less likely.[7]<\/a><\/p>\n <\/p>\n Yet some firms have taken a different path. They have committed themselves to the kind of entrepreneurship and innovation that Drucker envisaged back in 1985. They have recognized that power in the marketplace has shifted from seller to buyer. These firms have seen that \u201cbetter, cheaper, faster, smaller, more convenient, and more personalized\u201d is the new norm, and the ability to innovate with committed employees is critical. These firms aim to generate an entrepreneurial spirit not only in the management group but throughout the entire organization.[8]<\/a><\/p>\n <\/p>\n Even better news: firms that embrace entrepreneurship and innovation are handsomely rewarded by their customers and the stock market for doing so. The combined market capitalization of four firms alone\u2014Apple, Amazon, Facebook and Google\u2014now amounts to around $1.3 trillion.<\/p>\n <\/p>\n Every aspect of business is changing. \u201cSmartphones and tablets,\u201d writes economist Geoffrey Moore, \u201care reengineering whole swaths of the consumer economy, from information access (Google) to communication (Facebook and Twitter) to media and entertainment (YouTube) to transportation (Uber) to hospitality (Airbnb) to dining (OpenTable and Yelp), and beyond.\u201d[9]<\/a><\/p>\n <\/p>\n And it\u2019s not just firms in the digital economy. Whole Foods, Starbucks, Costco and Zara are using the same management practices in the non-digital world. Even big old firms, like Haier, Microsoft and Ericsson are also making the transition.[10]<\/a><\/p>\n <\/p>\n \u201cTraditional, MBA-style thinking,\u201d as Eric Schmidt and Jonathan Rosenberg write in their book, How Google Works<\/em>, \u201cdictates that you build up a sustainable competitive advantage over rivals and then close the fortress and defend it with boiling oil and flaming arrows.\u201d That doesn\u2019t work anymore, because competitive advantages are less and less sustainable. The firm has to go on innovating, in order to be continuously successful.<\/p>\n <\/p>\n Conclusion<\/strong>: Business is splitting two distinct groups: firms that are exploiting their existing business and firms that are continuously innovating. It is only the latter group that will survive: Peter Drucker\u2019s message becomes even more urgent: innovate or die!<\/p>\n <\/p>\n <\/p>\n About the author:<\/strong><\/p>\n <\/p>\n <\/p>\n <\/p>\n [1]<\/a> Drucker, P. Innovation and Entrepreneurship<\/em>, (1985) HarperCollins, pages 1, 14. Drucker also saw management as \u201cabout to make America into an entrepreneurial society,\u201d with \u201csocial innovation in education, health care, government, and politics.\u201d<\/p>\n <\/p>\n [2]<\/a> Ibid, pages 155- 157.<\/p>\n <\/p>\n [3]<\/a> Ibid. page 144. Drucker saw the needed entrepreneurship coming mainly from existing businesses, because they have the financial, human and managerial competence for effective entrepreneurial management.<\/p>\n <\/p>\n [4]<\/a> Ibid. Conclusion.<\/p>\n <\/p>\n [5]<\/a> Turner, M. \u201cHere is the letter the world’s largest investor, BlackRock CEO Larry Fink, just sent to CEOs everywhere.\u201d February 2, 2016. http:\/\/www.businessinsider.com\/blackrock-ceo-larry-fink-letter-to-sp-500-ceos-2016-2<\/a><\/p>\n <\/p>\n [6]<\/a> Denning, S. \u201cMaximizing Shareholder Value: The Dumbest Idea In the World,\u201d Forbes.com, November 28, 2011. http:\/\/www.forbes.com\/sites\/stevedenning\/2011\/11\/28\/maximizing-shareholder-value-the-dumbest-idea-in-the-world\/<\/a><\/p>\n <\/p>\n [7]<\/a> Hagel, J. Brown, J.S., Ranjan, A. & Byler, D. \u201cPassion at Work.\u201d October 7, 2014. http:\/\/dupress.com\/articles\/worker-passion-employee-behavior\/<\/a><\/p>\n <\/p>\n [8]<\/a> Drucker, op. cit. page 157. In 1985, Drucker saw the entrepreneurial side of the organization being kept separate from operations: \u201cthe entrepreneurial, the new, has to be organized separately from the old and existing. Whenever we have tried to make an existing unit the carrier of the entrepreneurial project, we have failed.\u201d Today, firms like Apple, Amazon, Google and Facebook make innovation and entrepreneurship an integral part of every part of the organization.<\/p>\n <\/p>\n [9]<\/a> Moore, G. \u201cThe Nature of the Firm\u201475 Years Later,\u201d (2014); https:\/\/www.bbvaopenmind.com\/en\/article\/the-nature-of-the-firm-75-years-later\/?fullscreen=true<\/a><\/p>\n <\/p>\n [10]<\/a> Denning, S. \u201cA Learning Consortium for the Creative Economy,\u201d Forbes.com, November 20, 2015. http:\/\/www.forbes.com\/sites\/stevedenning\/2014\/11\/20\/exploring-innovations-in-management-through-a-learning-consortium\/<\/a>; Denning, S. \u201cSurprise! Microsoft Is Agile.\u201d Forbes.com, October 27, 2015. http:\/\/www.forbes.com\/sites\/stevedenning\/2015\/10\/27\/surprise-microsoft-is-agile\/<\/a>; Denning, S. \u201cMicrosoft: 16 Keys to Being Agile At Scale,\u201d Forbes.com, October 29, 2015. http:\/\/www.forbes.com\/sites\/stevedenning\/2015\/10\/29\/microsofts-sixteen-keys-to-becoming-agile-at-scale\/<\/a> Denning, S. \u201cCan Industrial Giatts Reinvent Themselves?\u201d May 13, 2013, http:\/\/www.forbes.com\/sites\/stevedenning\/2013\/05\/13\/the-creative-economy-can-industrial-giants-reinvent-themselves\/<\/a>; \u201cLarge Scale Agile At Ericsson\u201d January 20, 2016, https:\/\/www.scrumalliance.org\/why-scrum\/learning-consortium\/learning-consortium-webinars\/large-scale-agile-at-ericsson<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" In his book, Innovation and Entrepreneurship (1985), Peter Drucker argued that the US was experiencing \u201ca profound shift from a<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":""},"categories":[142],"tags":[141,21],"_links":{"self":[{"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/posts\/1155"}],"collection":[{"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/comments?post=1155"}],"version-history":[{"count":4,"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/posts\/1155\/revisions"}],"predecessor-version":[{"id":1159,"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/posts\/1155\/revisions\/1159"}],"wp:attachment":[{"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/media?parent=1155"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/categories?post=1155"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.druckerforum.org\/blog\/wp-json\/wp\/v2\/tags?post=1155"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"2015_steve_denning_portrait\"](\"http:\/\/www.druckerforum.org\/blog\/wp-content\/uploads\/2015\/10\/2015_steve_denning_portrait.jpg\")
Stephen Denning is the author of The Leader\u2019s Guide to Radical Management<\/em> (Jossey-Bass, 2010), which describes management principles and practices for reinventing management to promote continuous innovation and adaptation. Over 600 of his essays on these themes are available at: http:\/\/blogs.forbes.com\/stevedenning\/<\/a>.<\/p>\n