What is Entrepreneurship ?
Posted on April 21, 2024 by Martin Hahn, One of Thousands of Career Coaches on Noomii.
This article discusses the characteristics of entrepreneurs and the benefits of entrepreneurship.
P&G is a great company, but chances are most people reading this article won’t work for P&G, or for other giant companies like GM either. Most people work for small, entrepreneurial firms, firms with no more than perhaps 100 or so employees. And many business school graduates also go out and start their own businesses, or buy small businesses, or start franchises. Therefore, business students definitely should be familiar with small-business management.
Small entrepreneurial companies are important for another reason. Small firms are engines of inventiveness and innovation, the sort of inventiveness and innovation that produces the floods of new products that any society needs to grow and to thrive. After all, all those Google, MySpace, and Youtube dotcoms didn’t come out of some giant company’s lab. (Twenty-somethings Chad Hurley and
Steven Chen created Youtube in about one year.) And even most of the great and most innovative products around today (like the Apple computer, or even Gillette razors) originally came out of the work of a small band of people working together, often in the proverbial garage. The bottom line is that business students and management majors should know something about managing small entrepreneurial companies and about innovation.
In fact, innovation is a much more important topic for business success than most people realize. Xerox Corporation revolutionized the document-duplicating market with its first Xerox machine. It then watched feebly as Canon captured market share with innovative new-product improvements. Kodak owned the photographic film market for almost 100 years. It then watched helplessly for years as first Polaroid and then digital photography revolutionized the photography market. Americans once shopped for bargains in stores owned by companies named W. T. Grant and Woolworth’s. Then Sam Walton entered the scene with a new approach that basically put these giants and many small mom-and-pop retail businesses out of business.
Creative Destruction
The economist Joseph Schumpeter used the term creative destruction to describe the process through which entrepreneurs and companies introduce radical innovations like these that transform industries.
Basically, to paraphrase Schumpeter, no industry and no products are immune to being put out of business by some revolutionary new product; or new equipment; or new methods of organization, management, or communication. For example, think about the thousands of bookstores that Amazon put out of business with its first Internet website. Note how Monster is killing the market for newspaper help-wanted ads. And consider how even Microsoft, long the king of the hill of personal computers, is fighting to stay dominant now that people increasingly find and use the software they need online. For example, in June 2006, Google announced a new service that lets users access (online and for free) a spreadsheet package that rivals Microsoft’s Excel program.
Schumpeter’s creative destruction theory neatly sums up a fact of management life. The development and life of every product, no matter how innovative it is when first introduced, follows what business people call a product life cycle. An inventor or entrepreneur gets a new-product idea, develops it, introduces it to the market (to those buying the product), and then hopefully watches sales take off. Next, he or she turns (again, hopefully) to innovating improvements to the product as the market matures, for instance, as competitors like Canon and Wal-Mart clamber in.
Finally, as changing tastes and even more innovative new products cause the market for the original product to decline, our inventor/entrepreneur needs to decide what to do. What does P&G do as things get more and more competitive in the toothpaste market? Keep adding new innovations (whiteners, and so on)? Get out of producing toothpaste altogether?
No company that fails to innovate can survive, no matter how skilled its managers are in their other endeavors. And it is most often through the efforts of entrepreneurs that truly innovative new products and services arise to challenge the status of the former kings of the hill.
