A SUMMARY OF THOUGHTS: INNOVATION & ENTREPRENEURSHIP II

[continued from the Last Post.]

In the practice of entrepreneurship, Drucker embeds the innovating agency within an organization and tries to answer the question: “what kind of organization encourages and exploits innovation?”

Drucker looks at three types of organizations:

• the established private sector business;

• the established public sector service institution; and

• the new start up business;

The established private sector business, despite the prevailing idea of innovation only happening in new ventures, is the major wellspring of innovation.

The reasons for an established company spewing out innovation are:

• the established company usually has the financial resources as well as

• the knowledge base to innovate.

Unfortunately, established companies have a track record of not exploiting innovation; this situation is taken advantage of by disenfranchised employees opting to start their own enterprise around the spurned innovation.

Several organizations started by entrepreneurial founders have languished once the founders have left their companies; the innovative drive emerged solely from the efforts of those founders rather than from the existence of an organization-wide entrepreneurial culture.

Large established companies such as 3M and Procter & Gamble have built entrepreneurial management into their organizations. In both cases, innovation is expected and encouraged throughout the organization.

Both companies have established processes that encourage innovation and provide methods for employees to fund innovative efforts.

In an interesting sidebar, Drucker warns:

ACTION:

A non-innovative company, acquiring an innovative one, in the hope that the newly acquired company will inject it with a strong dose of innovation.

RESULT:

Usually results in failure of the objective, as well as the destruction of the acquired company.

EXAMPLE:

The acquisition of Burgmaster machine tools by Houdaille Industries in 1964 followed by a slow decline of Burgmaster until the liquidation of the its assets in 1986, as described in 'When the Machine Stopped: A Cautionary Tale from Industrial America' by Max Holland (1989).

[to be continued in the Next Post. Excerpted from the 'Lifescaping' seminar participant's manual. The 'Lifescaping' seminar is conducted by Dilip Mukerjea about four times a year under the auspices of the Singapore Institute of Management.]