On entrepreneurship and 'entrepreneurial architecture'
Entrepreneur translates to ‘go-between’ in French and the concept has been around since the 12th century. Marco Polo would be one of the classic examples of someone
Dr. Boidurjo Rick Mukhopadhyay
(The author, international
award-winning development and management economist, formerly
a Gold Medalist in Economics at Gauhati University)
Dr B K Mukhopadhyay
(The author is a Professor of
Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at email@example.com)
Entrepreneur translates to 'go-between' in French and the concept has been around since the 12th century. Marco Polo would be one of the classic examples of someone who would 'go-between', having established trade routes to the Far East. To initiate the flow of goods and services across borders, Marco Polo would trade with a capital provider to sell his goods, which provided loans to the merchant at a high-interest rate, including insurance. Therefore, the capitalist bears the risk while the merchant gets to keep the physical and psychological risk of the trade. After all, goods were sold by the merchant, the profits were split between the capitalist who would take around 70-75 per cent, while the merchant gets to keep the rest. Slowly and steadily, such examples of trading multiplied and took various different forms over time and in markets.
A) Entrepreneurship: The 'what' and 'why'
The most widely used definition of entrepreneurship captures it as "a process by which individuals pursue opportunities without regard to the resources they currently control." In essence, it can be perceived as the process of creating value by combining a set of selective and unique combinations of resources to exploit an opportunity. A study by Barot captured entrepreneurship as "practice begins with action and creation of new organization" and therefore entrepreneurship helps in transforming old habits into new ones. While some studies capture entrepreneurship as being the process of a successful organisation that transforms ways of doing things differently, others define entrepreneurship as a process that enables building a progressive mindset and skills. One of the fundamentals remains, however, is that entrepreneurship generates jobs and contributes to economic development. This is also the reason why it is vital that Entrepreneurship is managed systematically, to identify the skill and impacts, so as to fully realise and actualise the benefits for wider benefits for the community and markets.
As an Economy and state of technology grow over time, newer forms of entrepreneurship and their ways of doing business along with competition also increase. Innovation becomes one of the outcomes in this scenario gradually. Joseph Schumpeter was the first person who connected entrepreneurship to innovation by defining the former as a process of 'Creative Destruction. In his words, as he tied innovation-entrepreneurship and how they contribute to economic development, "The function of the entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention or more generally, an untried technological method of producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or new outlet for products, by organizing a new industry".
In essence, newer ways of doing things as societies and businesses develop over time would replace existing practices. It remains true, for example, electric cars will replace conventional fuels for automobiles, hyperloop may replace trains and even flights one day, the same way smartphones replaced mobile phones. Previously dominating firms lose out and fade while newer ones take the lead. It is therefore important for firms to keep up with the innovation edge to survive, thrive and lead an industry. In order to do this effectively, firms also need to make sure that there is a system in place to capture creativity and innovation adequately.
The motivation and sources of entrepreneurship remain an active area of interest in contemporary research and for entrepreneurs. Some studies identify the sources, they are opportunity-based and market-driven entrepreneurship with essential skills that would combine creativity, market awareness, marketing and organisation building while addressing opportunities in the market. As Schumpeter also viewed, as mentioned above, Entrepreneurship and Innovation create value. Additionally, in light of industry 4.0 (automation, cloud, intelligent, agile) components in every business, including SMEs, Entrepreneurship is shaped by digital technology and adoption. Finally, entrepreneurship education would shape the mindset and build skills that would transform the society and well-being of communities and the economy. Once again, therefore, firms need a system in place that would capture and understand the interplay between leadership, management, culture, systems, and structure to continue riding on the entrepreneurial ambition. This is where the concept of Entrepreneurial Archit-ecture comes in handy.
B) Entrepreneurial Architecture, the 'What' and 'Why'
An entrepreneurial architecture understands how the overlapping components of a firm such as strategies, leadership, culture, structures, and systems could work together. Therefore, innovative and entrepreneurial firms capture the institutional, communicative, coordinating and cultural elements oriented towards innovation. In essence, this concept provides a conceptual understanding of how business architecture components come together to provide a cohesive and coherent view of an enterprise.
Burns in his study published in 2005 provides an understanding of entrepreneurial architecture in the context of corporate entrepreneurship. Since then, the concept has been used for other forms of enterprises. According to his work, this concept provides "a powerful tool to explain the dynamics of entrepreneurship and describes the relational contracts within and around firms or organisations". The entrepreneurial architecture, therefore, addresses the challenges of encouraging and leveraging entrepreneurship within innovative organisations.
As mentioned earlier in this article, firms need to have a system in place to methodically capture creative ideas and innovation – this could be done by identifying and capturing the routines, norms, structures and channels that influence the behaviour of individuals in a particular setting and enable the flow of knowledge and innovation from one level to another. The contextual influences in this regard are also very important, for example, not all creative firms are necessarily innovative, and certain markets (geographic and also industries) capture organisational structure, culture, and channels differently. So, each entrepreneurial and innovative firm, big or small, needs to identify its own routines and norms that would provide a structure through which knowledge and innovation could flow to other actors and the market while identifying the value created at each stage.
C) How to identify if an organisation has an Entrepreneurial Architecture?
Research by Stevenson identifies factors that encourage entrepreneurial processes and behaviour within firms. Firstly, firms should maintain a definite strategic orien-tation which basically means that since new opportunity identification drives organisational strategy, it is important for firms to keep an open eye out to recognise new opportunities; secondly, commitment and control of resources as new opportunities are spotted and seized in a market. For example, if a new business idea seems risky, a firm may choose to shell out only a limited range of resources to try out possibilities in the market at a reduced level of risk instead of investing heavy resources. This applies not only to the resources that a firm may have at a given point in time but also to resources/ assets that they may have access to from partners and third parties. At all times, therefore, it is critical to measure and keep stock of capital – financial, human, intellectual, and competencies.
Thirdly, firms need to maintain an organic and adaptable management structure, for example avoiding micromanagement, allowing decentralised decision-making and reducing levels of formality to encourage engagement and participation more effectively; and lastly acknowledging expertise power instead of position power. Surely, the list is not exhaustive. Fourthly, designing the reward system in a way that does not discourage employees from risk-taking and decision-making. Employees tend to be afraid of taking risks in organizations where the culture is dominated by fear and a low tolerance for failure. Fifthly, an entrepreneurial organization needs to provide space to take risks and fail to learn from experiences. A suitable reward structure helps in maintaining that flow.
Finally, it is essential that the vision and mission of the company are not only communicated effectively and widely but also that they guide every action and initiative. This defines the entrepreneurial culture and illustrates a growth orientation. Effective leaders should be able to articulate the entrepreneurial vision and resiliency since it does directly affect the culture and dynamism expected in creative and innovative organisations.