Entrepreneurial School of Thought free essay sample

The Design school resembles to the entrepreneurial school of thought to some extent. The extent being that it took central leadership as important, making the CEO- the architect of strategy. The difference however lies that it stopped short of working around that leadership and emphasized on conceptual framework and dismissed intuition. Entrepreneurial School of thought has however focused on the leader and the mental processes that the leader goes through such as Intuition, Experience, Insight, wisdom, and judgement. This relates the strategy with a perspective that formulates a vision and a sense of direction (namely vision) and all this is related to the leader himself. Entrepreneurial school states that one leader has the say that makes the mare go. The organization and all the constituents of his business empire are responsive to his dictates. He moves carefully within the environment creating his own territory in the niche segment. The most central concept of this school is the vision that the leader creates. This image is broad and the guiding star in the pursuit of which the leader takes the organization along. This may never be fulfilled and along the pursuit many other rewards are received such as expansion, profits, market share, etc. The Entrepreneur may adapt the strategies according to the changing environment but the overall vision may remain to be unchanged. This makes the strategy both deliberate in the broader sense and the direction and emergent in its details that can be adopted and adapted according to the requirement of the route that the organization is on. Origin in economics The Origin of the entrepreneurial school can be traced back to the neo classical era of economics. The concept of what to produce, how to produce, how to distribute and on what price, was attached to the birth of entrepreneurship. Different economists held different views of the entrepreneurs. Karl Marx praised entrepreneurs as agents of economic and technological change. Joseph Schumpeter on the other hand brought into light other than profit maximization perspective of entrepreneurship. To which he related that it is also about creating new structures, destroying current ones, and solving problems creatively. He introduced the notion of creative destruction which meant that entrepreneurs challenge the current status quo in the search of change for the better. They do things better with creativity and innovation. This he explained as entrepreneurs making good things happen (Better and unique products) by employing current resources in a different way. He went to the extent that entrepreneurship ends where creativity and innovation comes to a halt. Knight (1967) on the other hand related entrepreneurship with bearing of heavy risks and a handling of uncertainty. Peter Drucker explained entrepreneurship in the light of management explaining that central to business enterprise is the activity of entrepreneurship which means economic risk taking. What can be concluded is the fact that an entrepreneur can be, Founder of an organization. The manager of a self owned business. Innovative leader of an organization owned by others. However Cole (1959) who popularized the phrase â€Å"Bold Stroke† to define entrepreneurship mentioned four types of entrepreneurs which are, The Calculating inventor The Inspirational Innovator The Overoptimistic Promoter The Builder of Strong Enterprise Regrettably few of the economists shared the vision as Cole and Schumpeter rest of the economists have related entrepreneurship in terms of the competitive market and the likes of a skeletal manager. Framework Seeing that this school links strategies with visions it concludes that the most important characteristic required here is of entrepreneur is the ability to â€Å"see†. The ability to see of course isn’t the same as everyone else. This requires the leader to be able to see things that are normally missed and from multiple perspectives going back and forth and in many directions. This framework is taken from the work of Nasi (1991). It explains how the leader who makes the strategy must be able to see through multiple dimensions while making the strategy. His ability to see forward into the future creating a mental construct of how things would be done differently creating a discontinuity of the current practices, must come from having a look behind in his past understanding how things have progressed, the trends, capabilities etc. This framework requires also for the leader to be able to see the big picture i. e. seeing above and to do that he needs to be able to spot an idea that leads to that big picture within the current system by inductive thinking i.  e. seeing below. It is also crucial while the entrepreneur is moving through this process he should be creative by looking at things that others missed, challenge the conventional practices and wisdom, unveil capabilities that can bring the required change, this is called seeing beside. However the leader is also required to be able to fit in this newly fo und brilliant idea or capability or creativity into the environment weighing its possible outcomes i. e. It creates the future in other words it constructs the world which would otherwise not be, this is called seeing beyond. The final requirement of this framework is related to the drive to get the job done (strategy) or in other words it means that the leader should to be able to see it through. Literature Review At the start, Entrepreneurship was referred as creation of own business but now it is a personalized, proactive, single-minded leadership, in other words we called it visionary leadership. Now we relate it with the literature review. Entrepreneurs are great leader: Entrepreneur is great leader having personalized and visionary leadership which became the success of business (biweekly, fortune) Personality of Entrepreneur: The second part is related to the personality of entrepreneur, it is not to study the decision, vision of an entrepreneur but to study the traits of successful entrepreneurs (Collins and Moore,1970) states that when a person have strong need for achievement and independence in their early childhood he became an entrepreneur, he proved it by studying his whole life from education till the creation of enterprise. This study gave the attributes of entrepreneurial personality i. e. strong need of achievement, independence, control, authority and also having the ability to take risk. Bauman summarized McClelland’s (1961) states that entrepreneur are not risk taker (speculator) but a value creator to their business. Stevenson and Gumpert say that entrepreneurs and administrators behave differently while making decision. For example administrator asks; what resources do I control? What opportunity is appropriate? While entrepreneur ask, what resources do I need? Where is the opportunity? They also says that entrepreneur constantly change with change in environment and avail opportunity, they are proactive while administer are reactive to change and want to save resource. Entrepreneur are revolutionary and administers are evolutionary. Busenitz and Barney (1997) state those entrepreneurs are overconfident and over generalized. Palich and Baghy (1995) also stated those entrepreneurs are significantly more positive than others. They think only about the strength, opportunity, performance in contrast of weakness, threats, deterioration. What are the chief characteristics of the approach of such personalities to strategy making? Mintzberg suggest four approaches: 1. Enterpreneurial mode: The entrepreneurial organization main strategy is to search /find new opportunity. As Drucker (1970) says entrepreneurship required to hire more employees to search for opportunity instead of hiring employees for problem solving. 2. Entrepreneurial organization: They have centralized power; power is in the hand of chief executive who is committed toward organization goals and takes all decision and action in organization. 3. Strategy making in the entrepreneurial mode is characterized by dramatic leaps forward in the face of uncertainty: Chief executive of an organization should be ready to deal with any uncertainty that comes; moreover, he should also have plans for how to make profits in the times of uncertainty. 4. Growth is the dominant goal of the entrepreneurial organization: An entrepreneur believes in doing something for the good of himself first and then others, i. e. he is driven by the need for achievement. The goals he sets for the organization are an extension of goals he has set for himself. The most important goal would be growth. Entrepreneurship and Planning: Research on 500fast growing companies in the US suggested that entrepreneur spend little effort on business plan. 41% entrepreneur had no planning 26% had little planning 5% works on projection  28% makes full planning Entrepreneur did not spend much effort on planning because they change with the change in trend and demand. Visionary leadership: Every organization needs a vision to understand what it aspires to be in future. A true vision is one which everyone can visualize in their mind. A vision also differentiates an organization from another organization. To choose a direction, a leader needs to develop an image of the actual and desirable future state of the organization. The vision should also work as a bridge between the present state and the future state. When the leader has a clear vision in his head, he operates on the emotional and spiritual assets, on the values, commitment and aspirations. A leader must also be able to pick out an image from all the images in his mind, one which is understood clearly, simple, desirable and energizing. The studies of McGill University on role of vision and where vision comes from: 1. Vision as Drama: Westley and Mintzberg contrasted two views of leadership. First, the vision is formulated and implemented on the employees. This vision is such which motivates the employees to achieve a common goal. Another view presented was of â€Å"vision as a drama†. In a theatre, the drama is the contribution of â€Å"rehearsals† of the performers, the â€Å"performance† of the drama which depends on the â€Å"attendance† of the audience. Similarly, a vision consists of â€Å"Repetition† it means that a person should have deep knowledge and understanding of the problem faced (comes from experience), â€Å"representation† the vision should be translated into actions (leader must able to make others see things from different perspective), and â€Å"assistance†, similar to Attendance, both the leader and the employees support each other. Visionary leadership constitutes of the leaders style along with the strategy, it is drama and leaders are born it and can be made visionary. 2. Entrepreneurial strategy formation in supermarket chain: The company â€Å"Steinberg’s† is a Canadian retail chain. Sam Steinberg joined the company when he was eleven and after two years he made the decision of expansion, and he had managerial control over the crucial decisions of the business. Two major changes in strategy were made, move into the self-service in 1930’s and shopping centre business in 1950’s. in 1933, one store was incurring heavy losses. He closed the store one Friday evening, converted it into self-service store, renamed the store, decreased the prices, printed handbills, and mailed them. He reopened the shop on Monday. He used this one store to create a new vision. He had deep knowledge of the business. The so-called image of leader as â€Å"conventional strategist† was proven wrong in this case. The knowledge of business proves good when the business is simple and focused within one person’s mind so that quick and fast decisions can be made. Another problem is faced when the leader leaves the business, and the new management might not prove good for the company. Three stages model of change (kurt lewin’s 1951) Unfreezing-change-refreezing it is one of the oldest models but it is still effective. Kurt Lewin developed this model and it helps organizations to adapt towards changes by using three steps, they are: 1. Unfreezing In unfreezing stage you break the old mindset of the organization people and reduce the natural resistance and defense mechanism so that they listen to what you are delivering. (Do shock therapy) 2. Change Change is the stage where you develop new entrepreneurial and strategic mindset in the organization so that employees think in a new way to develop the strategic vision. 3. Refreezing Refreezing is the stage where you freeze the new strategic and entrepreneurial mindset. Obsession is ingredient of effective organizations. That certainly seems to be the case in this period of refreezing. Organizations should do exercise of above model so that everyone follows the vision of the organization and to keep on the right track. Usually organizations skip the unfreezing stage and directly jump into the change stage that’s why they face the huge resistance from the organization people and at the end they failed to change the old mindset. Premises of entrepreneurial school Strategy exists in the mind of the leader as a perspective, a vision of the organization’s future. The process of strategy formation is semiconscious at best, rooted in the experience and intuition of the leader. The leader promotes the vision under close personal control in order to be able to reformulate specific aspects if necessary. The strategic vision is thus malleable, and so the entrepreneurial strategy tends to be deliberate and emergent. The organization is likewise malleable, a simple structure responsive to the leader’s directives. Entrepreneurial strategy tends to take a form of a niche, one or more pockets of market position protected from the forces of outright competition. Contribution, critique and context of the entrepreneurial school Contribution It’s highlighted the critical aspects of strategy formation, especially proactive nature and importance role of personalized leadership and strategic vision. This school also define that visionary strategies stand sharp in all common strategies and gives the point of difference which leads the organization toward the creative work. Critique The Stacy critique that one person make the strategy and do not define the actual process of making strategy at the other hand this school focus on visionary leaders instead of when and how we get visionary leader and how we develop leaders. The decisions are centralized and only one person take initiative and entrepreneurship is less glorious as described but also more functional. Harmful consequences of vision The advice to form a vision is neither concrete enough to be useful, nor is it possible when the future is unknowable. Its fix managers too tightly in one direction. Vision places great and unrealistic burden on leader. Organization relies on one or two gifted leaders while others are followers which introduce the culture of dependence. Distracts the attention of the people in which they are expert, towards the unknowable future. According to Collins and Porras Role of charisma in establishing a vision is very much overrated. The role of leader to catalyze a clear shared vision for the organization can be accomplished through wide variety of management styles. Context It is clearly, as already noted, startup is one situation in need of forceful leadership and rich vision, since direction must be set and niches secured. Conclusion The Entrepreneurial school of thought focuses on a single leader who envisions the future and incorporates that into the organization towards which the business strives. The Leaders strategy formulation revolves around his personal attributes and characteristics and the strategy formulated remains deliberate in the broader sense and emergent en route. This requires the entrepreneur to be well equipped with the ability to see things in multiple perspectives as suggested by Nasi (1991), and only then he will be able to make a strategy that will possibly do wonders but this also comes with constraints as it is done by one man only there are probabilities that it might not work. However it is important to note that this school does bring into account that while making strategies the thinkers must use a multiple perspective lens to be able to craft a perfect strategy.