Change and the “Entrepreneurial Society”
by Walter McFarland

Although thirty years after the writing of Innovation and Entrepreneurship the entrepreneurial society does not formally exist—the prospect of one still fires the imagination.  As many on this Board have elegantly noted—ideas from the book continue to influence thinking and action.  One such idea—and one of special interest here—concerns the role of change in the entrepreneurial society.

I imagine the entrepreneurial society as a vibrant place in which entrepreneurial leaders in government entities, commercial organizations, and not-for-profit institutions work together to “…make innovation and entrepreneurship a normal, ongoing and everyday activity….”[1] . Because of this, the entrepreneurial society is also a place of continuous change—and therein lays the rub.  Continuous change is something that organizations find extremely difficult to do [2].

How does continuous change unfold in the entrepreneurial society?  More importantly what, if anything, can the entrepreneurial society teach today’s organizations’ about continuous change?  The following sections explore this question by examining Drucker’s perspectives on “the nature of change” and on “the nature of change leadership.”

 

The Nature of Change

On one hand, Innovation and Entrepreneurship is not a book about organizational change—at least in the usual sense.  However, it is all about change—because change triggers the opportunity for “systematic innovation.”  In Drucker’s words:

Systematic innovation therefore consists of the purposeful and organized search for changes, and in the systematic analysis of the opportunities such changes might offer for economic or social innovation [1](p. 35).

The “changes” referenced above flow from a unique perspective on the nature of change—and one very different from the orthodoxy of the field of organizational change.

To Drucker, change is not something an organization occasionally does to align itself better with its market.  The need for continuous change is an immutable force of history arising from a particular kind of entropy—the entropy of the “artifacts” of humans.  In Drucker’s words:  “…we also know that theories, values, and all the artifacts of human minds and human hands do age and rigidify, becoming obsolete….”[1] (p. 254).  Because everything created by humans inevitably becomes obsolete, opportunities for innovation are constantly presenting themselves in organizations and societies.  It is the job of the entrepreneur to recognize this ongoing obsolescence and use it as an opportunity for innovation.

This notion of change arising from obsolescence is a very different perspective than that of the organizational change community—at least in the US.  In that community, the need for change arises primarily from shifts in the market.  When the market shifts in a significant way, so too must the organization to remain viable.  The focus is not on innovation but quick reaction.

This difference in perspectives is important for several reasons, but a key one is that the perspective in Innovation and Entrepreneurship is proactive while the perspective of the change community is reactive.  In the entrepreneurial society:  “…the entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”[1] (p.28).  In the change community, organizations wait for market changes and focus resources on trying to anticipate better and predict these changes.

One lesson from the entrepreneurial society is that using continuous change for innovation demands a more proactive stance–constantly seeking change and acting on opportunities.  This proactive stance by entrepreneurial change leaders might lead the market instead of following it.

 

The Nature of Change Leadership

In the entrepreneurial society, leadership is all.  It, therefore, requires a process for creating and reinforcing entrepreneurial leadership across both the leadership corps and the workforce.  In the section entitled, “entrepreneurial practices”[1] (p. 155).  Drucker makes three recommendations for accomplishing this.  The first one is “focusing managerial vision on opportunity” [1] (p.155). This practice assures that managers are not only focused on problems but also on successes—on understanding what is working better than expected and why.  As an aside, this focus on success has recently been highlighted by neuroscientists as a key factor in brain performance. [3].

The second practice is “generating an entrepreneurial spirit among the entire management group.”[1] (p. 157).  This practice focuses the entire leadership corps on “units that do better and do differently”[1] (p. 157) and ensures that learning from the highest performing parts of the organization is shared organization-wide.  This practice also unites the leadership corps and contributes to creating an entrepreneurial culture.

The third practice is “systemically listening to and interacting with the workforce.” In this, senior leaders listen to and engage members of the workforce in discussions about opportunities for innovation and entrepreneurialism.  Leaders not only draw out the best ideas of the workforce—but actively engage them as fellow entrepreneurs. Recent research has highlighted this approach as a critical factor in increasing employee engagement and decreasing resistance to change [4].  The alignment of the workforce with the leadership corps is a major step in creating the entrepreneurial culture.

Historically, the change community has viewed the leadership of change very differently.  Change leaders—or change agents—are not focused on discovering opportunities for innovative change but on leading change efforts initiated by someone else.  In the context of large-scale change, for example, these leaders focus on topics like the cost, schedule, and performance of change efforts.  Their function can be as much administrative as entrepreneurial.

Another lesson for change from the entrepreneurial society is that change leadership has little to do with administrative chores and much to do with continuously searching for opportunities for innovation—and putting these in motion.  Because the entire leadership corps and the workforce are united in this, continuous change can fuel innovation across the organization.

 

Innovation and Entrepreneurship has been largely ignored by the change community in the US and potential lessons missed.  Even so, I believe several ideas are worth considering by today’s change leaders.  First, perspective matters.  A review of the change literature reveals that many change scholars are “admiring the problem too much.”  Much is said about difficulties arising from increases in the volume and complexity of change but little about how to use this situation for advantage.  The entrepreneurial leader’s perspective is that continuous change is fuel for continuous innovation.

Second, leadership matters.  Entrepreneurial leaders are not “fast followers” of change and innovation but initiators of them.  They consider risk but are not captured by it.

Finally, culture matters.  Continuous change affects an organization as a system—and affects different parts of the system differently.  Organizations must, therefore, respond to changes effectively and creatively.  To accomplish this, the leadership corps—and the workforce of the organization—must be united in common purpose:  to find change and use it for innovation.

Thirty years after its publication, Innovation and Entrepreneurship challenges us to see change with better eyes.  Continuous change is not a problem to be solved, but fuel for continuous innovation

 

About the author:

Walter McFarland is the founder of Windmill Human Performance and co-author of Choosing Change.

 

References

1. Drucker, P., Innovation and Entrepreneurship. 1985, New York: Harper.
2. LaClair, J. and R. Rao, Helping employees embrace change. McKinsey Quarterly, 2002.
3. Brains, S., 4 Ways to acquire Navy Seals’ mental toughness. 2014.
4. McFarland, W., Managers in the Digital Age Need to Stay Human. Harvard Business Review, 2015.