Entrepreneurs are often admired for tossing aside conventional management theories and forging a unique path towards success. So what’s an entrepreneur to do when the organizational growth resulting from that success brings pressure to adopt some formal management disciplines?
Any problem that results from growth is a nice problem to have, but entrepreneurs do need to figure out how to find a balance between the innovation that made them successful and the formal organizational discipline that can make success sustainable.
The Advantage Of Rebellion
Entrepreneurs often are rebels. Many success stories start with someone dropping out of business school to start a venture, or with a young executive turning away from a large organization because the corporate fast track wasn’t fast enough.
In fact, the career arc from rebellion to success has become something of a classic American business journey. While foregoing Wall Street for a risky start-up venture is now almost cliché, that was not the case when TIGER 21 Member, Carter Reum, left his career in investment banking at Goldman Sachs to launch a liquor company. Alongside his brother, Carter saw an opportunity in the market to create "a better way to drink" focused on better ingredients and a strong brand, leading the duo to create VEEV, an award-winning artisanal spirits company with a focus on sustainable practices. One can also think of Travis Kalanick who dropped out of UCLA to start his first business. He went on to found Uber, which in addition to making Kalanick a billionaire has helped redefine how Americans think about getting transportation, in particular, and obtaining services, in general.
Of course, the modern tech industry is well versed in this type of career arc, with both Bill Gates and Steve Jobs founding their respective companies shortly after dropping out of college. They not only became two of the world’s wealthiest people, but they also could fairly claim to have changed the world.
Though this type of story does have a distinctly Silicon Valley feel to it, the pattern is much older than that. For example, Thomas Edison didn’t even attend high school, let alone college or graduate school. He not only became one of history’s greatest inventors, but also earned a reputation as a shrewd businessman. In fact, he may have pioneered the practice of harvesting massive amounts of patents for strategic purposes, something that has become de rigueur for today’s technology giants.
One lesson suggested by the stories of the trailblazers above and those of many other entrepreneurs is that they succeeded because they are rebels, not despite it. Meanwhile, a certain orthodoxy has grown up around formal management theory as the number of adherents to that kind of theory has proliferated. According to the National Center for Education Statistics, the number of master’s degrees in business being conferred annually these days is more than seven times what it was in the early 1970s.
Not that there is anything wrong with a formal business education. The point is that there was a time when having an MBA was uncommon enough to give a person an advantage. Now that these degrees have become more widespread, the competitive advantage they represent has been diminished. Many entrepreneurs have found that their competitive advantage comes from finding a different way to approach their businesses—that there is an edge to being a rebel.
Face it—if entrepreneurs didn’t rebel, how could a start-up ever compete? When it comes to following an orthodox approach to business, the advantages of scale and name recognition are squarely in favor of the established players. It takes disruption rather than orthodoxy to break into an established market or create a new one. The innovation doesn’t necessarily have to be in the product itself—often it can be in the things like promotion or distribution.
Without the willingness to rebel, entrepreneurs might never find those competitive edges.
Pressure To Conform
Since there is a competitive edge to rebellion, why is there so much pressure in business to conform with management orthodoxy?
Well, for one thing, not all new ideas are better ideas. Some people aren’t comfortable going out on a limb in the first place, while others find it to be a dead end. After all, rebellions are more likely to fail than to succeed.
Even when a rebellious start-up succeeds, there are pressures to conform. The sheer challenge of growing an organization may require some elements of formal management. One of the biggest frustrations for successful entrepreneurs is hiring. When the demands of the business become such that the entrepreneur finds he or she can’t do it all, recruiting people with similar creativity, decision-making instincts, and work ethic can prove incredibly difficult.
Besides, what the organization needs in order to grow might not be to replicate the founder’s skills, but rather to add complementary skills. However, just defining an appropriate complementary role and measuring achievement in that role requires some organizational discipline. The more hires the organization makes, the more need there is for such formalities.
Additional pressure towards conformity may come from outside investors. This might be a necessary evil for the sake of achieving the scale required for success, but it does create a source of formal accountability for the entrepreneur. Investors love the idea of innovation from the standpoint of opportunity, but they also tend to demand formalities such as a detailed business plan and performance metrics when it comes to knowing how their money is being spent.
The bottom line is that it is one thing to manage a small start-up on instinct, but a larger organization tends to require more formal management in order to keep operating efficiently. Ironically, decades after Thomas Edison, one of the original successful business rebels, Jack Welch, helped run General Electric and became one of the gurus of formal management discipline. While that might be a particularly extreme contrast in styles, some evolution of that nature may be inevitable when a company grows to the extent that GE did.
Write Your Own Textbook
Of course, most successful companies are somewhere between the extremes of a start-up and a mega-company like GE. For such organizations, is there a workable middle ground between rebellion and management orthodoxy? The true value of studying business as an educational discipline might be to learn to think of management broadly as a process rooted in the unique characteristics of a venture, rather than narrowly as a routine which mimics what other companies are doing.
This means identifying and formalizing methods and decision approaches that might come naturally to the company founder, but which need to be taught to others in order to become repeatable and scalable. In other words, don’t reject the idea of a formal process; just be willing to define your own process.
A little peer-to-peer exchange of ideas, such as the ones that take place in TIGER 21 meetings, can also help keep your methods fresh. Often when we meet another business person we ask “what do you do?” but perhaps a more interesting question would be “how do you do it?” The real lesson may not be in a particular product or service, but rather be in the approach the organization has taken to finding a competitive edge.
It may even help to know a little formal management theory so you can judge for yourself which aspects of it you want to retain, and which you want to toss aside. Understanding the prevailing orthodoxy at least helps you know how much of the competition is thinking.
After all, even rebels should know what they are rebelling against. Beyond that, creating proprietary business processes based on your own inspiration and a thing or two you’ve picked up from people you admire is the way you can write your own textbook for how you want the people in your organization to approach the business.
Barbara Goodstein is CEO of TIGER 21, a high-net-worth investment group.
