Management theories come about in response to particular problems. At the turn of the 20th century, the most notable organizations were large and industrialized, and carried out routine tasks to manufacture a variety of products. This led Frederick
Taylor to develop the scientific management theory, which advocated optimizing tasks by breaking big, complex jobs into small ones, measuring what workers did and linking pay to performance.
The management practice of that era was designed to seek out efficiencies, improve productivity and make “the trains run on time”. The theory started to evolve by the 1930s, when unions began to reject the dehumanizing effects of earlier practices. This formed the beginning of the human relations movement, when researchers started realizing that treating people nicely was even better for productivity.
These management theories, however, have a disadvantage in today’s business world. They were founded on the assumption of stable environments and the preeminence of shareholder value as a central motivation in business. They work poorly in more dynamic environments, where -creating stakeholder value is equally, if not more, important.
Filling the gaps
I would posit that entrepreneurial leadership will (and should) define the next era of management theory. Entrepreneurs have always existed to improve society by spotting gaps and filling them. Henry Ford’s mass market automobile made travel exponentially more efficient and comfortable. The iPhone put a portable computer in our pockets, giving us information on demand. Entrepreneurs today are going one step -further, from addressing market opportunities to market failures.
James Chen’s new venture, Adlens, which aims to provide adjustable and affordable spectacles to the visually challenged, with goals of eventual profitability, is one such example. It has a related social venture, Vision for a Nation, that aims to make the glasses available in the developing world.
Ninie Wang, an INSEAD alum and CEO of Pinetree Care Group, is another. She addresses the urgent need of home care for the aged in China who have been left behind by their migrating children and a government healthcare system starting to feel the strain of an ageing population. Her latest innovation is automated in-home healthcare systems that can put them in touch with doctors, nurses, nutritionists and even their own children.
From healthcare to the environment to education, governments are facing budget constraints that leave many citizens underserved. The need for entrepreneurial ideas and strategies to address this shortfall has never been greater. Furthermore, business leaders already have to grapple with new strategies for growth, innovation, regeneration and turnarounds, whether they’re in start-ups or multinational companies. Therefore, all organizations require entrepreneurial mindsets and entrepreneurial leaders.
Entrepreneurship as a continuum
Entrepreneurship in its different forms is a continuum of behaviors related to strategy and leadership, often driven by organizational lifecycles. The challenge for all organizations is sustainability based on creating value for stakeholders. I teach my students that there are four entrerpreneurial contexts, which require different types of entrepreneurial leadership and strategies.
1. Achieving organizational innovation: This requires leaders to strengthen the alignment between strategy and culture by providing leadership that enables creativity and change.
2. Starting a new venture: Leaders need to be more hands-on, identifying new opportunities and engaging teams and investors. They have to operate differently to big organizations that have access to resources by low-cost probes, teams and partnering. They have to be flexible and closer to customers and aim at ensuring the venture survives.
3. Social ventures: The main purpose is meeting unaddressed social or economic needs. Leaders in social ventures should spend more time on partnerships, developing relationships with -the community, the government, NGOs and foundations. Funding is less conventional, coming from a combination of sources, including sales of products and -services, government and NGO grants, and project loans with social impact as the main aim.
4. Family enterprise: Leaders in this environment have to focus on the parallel
planning of the family and business to ensure a successful transition to the next generation. They’re backed by family values and capital and have the ability to play the long game. Ultimately, their aim is grow the family capital, be it economic, emotional, social or spiritual.
Therefore, the challenge for management educators is to teach managerial practices that focus on entrepreneurial strategy and leadership, and can be applied across a range of organizational contexts. It is clear that new approaches are needed and the evidence suggests that entrepreneurship, in most organizational contexts, works.
Randel S Carlock is senior affiliate professor of Entrepreneurship and Family Enterprise and the Berghmans Lhoist Chaired Professor in Entrepreneurial Leadership at INSEAD.