Thirty years on, how far have we progressed toward Drucker’s entrepreneurial society? Many large companies are experimenting with ways to tap into their employees’ creative ideas. There has been a boom in startups, the number of freelancers is growing rapidly, and technology-enabled platforms such as Upwork and Amazon’s MTurk are helping people find work that suits their skills and schedules. And yet I would say the entrepreneurial glass is still half-empty, judging by the anaemic levels of engagement in work that we see today.

For the entrepreneurial society to properly take hold, we need three things as individuals: means, motive, and opportunity.

Consider our means first. Charles Handy once pointed out that Karl Marx was right all along. Marx’s goal was for workers to take ownership of the means of production, by which he meant factories and machinery. But in the post-industrial world, most of us are knowledge workers at least in part — the means of production is our brainpower, which we retain ownership of no matter what our job is.

Many of us also need access to technology and funding, and this is one area where the changes of the last 30 years have been profound. Internet technology has essentially democratized entrepreneurialism. To be a freelance worker today, you need an internet connection and a service to sell, whether it is coding, copywriting, or cartoon drawing. To be a taxi driver, you need a car and a GPS. To be a hotelier, you need a spare room. And if you need access to money, crowdfunding platforms and microfinance options make that easier than ever.

In the developed world, at least, the means of the entrepreneurial society are in place — and the developing world is catching up fast.

What about motive? Maslow’s famous hierarchy of needs reminds us that what drives us depends on our lot in life. The industrial era created salaried work as we know it, and for most people it took care of the lower levels of the hierarchy: shelter, security, and social interaction. Now that these things are taken for granted, many of us are reaching for the higher levels — that is, the desire to do meaningful work, develop expertise, and have freedom to make our own choices. When I ask my MBA students who belong to Generation Y what they really want to do, most of them express a yearning to be their own boss. They live in a comfortable world, and it gives them license for self-expression.

If means and motive are improving fast, what about opportunity? Here the story is mixed. In prior decades latent entrepreneurs had to overcome a lot of barriers — the red tape around setting up their own business, the difficulty of getting unsecured loans, the social pressures to climb a corporate ladder rather than work for themselves. But the opportunity for entrepreneurship in today’s business world is enormous. New technologies and economic and social changes have opened up vast new opportunity areas. The social acceptance of entrepreneurship has also improved, thanks to shows such as Dragons’ Den and Shark Tank and role models including Richard Branson, Elon Musk, and Mark Zuckerburg.

But despite all these improvements, much remains to be done before the entrepreneurial society truly arrives. Here are some of the obstacles:

• Employment law says you are either an employee or a freelancer. But this is an outdated distinction, and it is creating all sorts of problems for companies like Uber and Airbnb, whose drivers and hosts are a bit of both. Some observers haveargued that we need a hybrid “third way,” designed for today’s gig economy.
• Intellectual property rules were created on the assumption that ownership matters, but today we are more interested in access — to streamed music, to the use of a car, to information that we can use. Some progress has been made here, such as the general public license used in open-source software, but more needs to be done.
• On the topic of governance, the original limited liability company was a clever invention, a mechanism to facilitate commercial risk taking by limiting the downside for owners. But today such companies seem to be stifling entrepreneurship; they have become short-term-oriented and unduly conservative. Various alternatives to the limited liability company have been invented over the years (for example, S and B corporations), and further creativity would be welcome to help latent entrepreneurs rather than frustrate them.
• In education the school curriculum focuses on traditional subjects taught in traditional ways, and it pushes students into narrow specialties. Many entrepreneurs claim they succeed despite, not because of, their schooling. Maybe it’s time to put a bit more emphasis on creativity and commercial savoir faire in our education system.

There is a common theme here. While technology, commercial acumen, and social norms have evolved dramatically over the last 50 years, the institutions that govern capitalism are still stuck in the late 19th century. We are using industrial-age rules to oversee information-age business practices, and that is what is holding us back. I have written elsewhere about the need for management innovation in large firms to make work more engaging and fulfilling. An equally pressing need is for institutional innovation at a societal level so that today’s would-be entrepreneurs have the means, the motive, and the opportunity to succeed.

About the author:

Julian Birkinshaw is a professor of strategy and entrepreneurship at London Business School.

First published on Harvard Business Review.

It goes without saying that big companies are complex. And it is also pretty obvious that their complexity is a double-edged sword. Companies are complex by design because it allows them to do difficult things. IBM has a multi-dimensions matrix structure so that it can provide coordinated services to its clients. Airbus has a complex process for managing the thousands of suppliers who contribute to the manufacturing of the A380.

But complexity has a dark side as well, and companies like JP Morgan, IBM and Airbus often find themselves struggling to avoid the negative side-effects of their complex structures. These forms of “unintended” complexity manifest themselves in many ways – from inefficient systems and unclear accountabilities, to alienated and confused employees.

So what is a leader to do when faced with a highly complex organisation and a nagging concern that the creeping costs of complexity are starting to outweigh the benefits?

Much of the advice out there is about simplifying things – delayering, decentralising, streamlining product lines, creating stronger processes for ensuring alignment, and so on. But this advice has a couple of problems. One is that simplification often ends up reducing the costs and benefits of complexity, so it has to be done judiciously. I have written about this elsewhere.

But perhaps the bigger problem is this advice is all offered with the mentality of an architect or engineer. It assumes that Jamie Dimon was the architect of JP Morgan’s complexity, and that he, by the same token, can undo that complexity through some sort of re-engineering process.

Unfortunately, organisational complexity is, in fact, more complex than that. To some extent, organisations are indeed engineered systems –we have boxes and arrows, and accountabilities and KPIs. But organisations are also social systems where people act and interact in somewhat unpredictable ways. If you try to manage complexity with an engineer’s mindset, you aren’t going to get it quite right.

I have been puzzling over complexity in organisations for a while now, and I reckon there are three processes underway in organisations that collectively determine the level of actual complexity as experienced by people in the organisation.

1. There is a design process –the allocation of roles and responsibilities through some sort of top-down master plan. We all know how this works.

2. There is an emergent process – a bottom-up form of spontaneous interaction between well-intentioned individuals, also known as self-organising. This has become very popular in the field of management, in large part because it draws on insights from the world of nature, such as the seemingly-spontaneous order that is exhibited by migrating geese and ant colonies. Under the right conditions, it seems, individual employees will come together to create effective coordinated action. The role of the leader is therefore to foster “emergent” order among employees without falling into the trap of over-engineering it.

3. Finally, there is an entropic process – the gradual trending of an organisational system towards disorder. This is where it gets a bit tricky. The disciples of self-organising often note that companies are “open systems” that exchange resources with the outside world, and this external source of energy is what helps to renew and refresh them. But the reality is that most companies are only semi-open. In fact, many large companies I know are actually pretty closed to outside influences. And if this is the case, the second law of thermodynamics comes into effect, namely that a closed system will gradually move towards a state of maximum disorder (i.e. entropy).

This may sound like gobbledegook to some readers, so let me restate the point in simple language: as organisations grow larger, they become insular and complacent. People focus more on avoiding mistakes and securing their own positions than worrying about what customers care about. Inefficiencies and duplications creep in. Employees become detached and disengaged. The organisation becomes aimless and inert. This is what I mean by entropy.

The trouble is, all three processes are underway at the same time. While top executives are struggling to impose structure through their top-down designs, and while well-intentioned junior people are trying to create emergent order through their own initiatives, there are also invisible but powerful forces pushing the other way. The result is often that everyone is running very fast just to stand still.

So let’s return to the leader’s challenge. If these three processes are all underway, to varying degrees, in large organisations, what should the leader do? Well, sometimes, a sharply-focused and “designed” change works well, for example, pushing accountability into the hands of certain individuals who are much closer to the customer.

But more and more the leader’s job is to manage the social forces in the organisation. And in the light of this blog, it should be clear that this effort can take two very different forms:

1. Keeping entropy at bay. This is the equivalent of tidying your teenager’s room. It involves periodically taking out layers of management, getting rid of old bureaucratic processes that are no longer fit for purpose, or replacing the old IT system. It is thankless work, and doesn’t appear to add any value, but it is necessary.

2. Inspiring emergent action. This is the equivalent of giving a bunch of bored teenagers a bat and ball to play with. It is about providing employees with a clear and compelling reason to work together to achieve some sort of worthwhile objective. It isn’t easy to do, but when it works out the rewards are enormous.

And here is the underlying conceptual point. The more open the organisation is to external sources of energy, the easier it is to harness the forces of emergence rather than entropy. What does this mean in practice? Things like refreshing your management team with outside hires, circulating employees, making people explicitly accountable to external stakeholders, collaborating with suppliers and partners, and conducting experiments in “open innovation”.

A lot of these are initiatives companies are trying to put in place anyway, but hopefully by framing them in terms of the battle between emergence and entropy, their salience becomes even clearer.