5 Practices for Entrepreneurial Management
Leaders today often focus on fighting change, whether from competition, or uncontrollable forces. But often such change is inevitable, and as Buckminster Fuller’s quote tells us, those who avoid the fight and simply do things better often come out on top. To adapt to change in this way, and work to make the old obsolete, leaders must establish a company that fosters innovative and entrepreneurial behavior.
But How to Do That?
In his 1985 classic, Innovation and Entrepreneurship, business guru and father of modern management Peter Drucker outlined the practices of Entrepreneurial Management. These practices, he argues, are key to any company seeking to survive and thrive in an industry facing rapid change, and dependent on innovation. For those who live and work in the world of clinical ABA autism treatment, we are seeing this very process play out, with much similarity to how Drucker describes.
Drucker’s principles of Entrepreneurial Management provide an excellent framework for leaders to use in fostering innovation in their organization. This approach can be made even more effective when Drucker’s ideas are paired with behavioral approaches to supporting organizational performance – Organizational Behavior Management.
Drucker specifically outlines 5 tenets which when employed effectively, can support innovation, entrepreneurship, and organizational adaptability.
1. Entrepreneurial Policies
Formal procedures and “rules” that explicitly support entrepreneurial activities in the organization. Drucker states “Innovation must be part and parcel of the ordinary, the norm, if not routine”. For an organization to effectively support innovation, leaders must establish formal policies designed to support entrepreneurship. Drucker suggests these innovation-focused policies must encourage managers to abandon old practices in favor of the new, more effective practices. For example, every 3 years or so all aspects of the business should be put on the “chopping block” and evaluated in terms of its current utility. This is based on an understanding that at some point, almost all aspects of the business will become obsolete, so better to make them obsolete now before a competitor or the market does it for you. Opportunities that are identified for improvement must then be pursued aggressively and supported by an entrepreneurial plan for any new efforts.
How can OBM Support these policies?
- Analysis of the types of innovative behaviors required, and the antecedents, knowledge, skills, support, and reinforcement systems to ensure they occur. For example, one organization created a new marketing platform and performed a theoretical assessment using the performance diagnostic checklist. This assessment helped to establish performance contingencies which enabled performance from day 1 of the new venture.
- When obsolete products and processes are cut in favor of the new, ensure those involved with the older components are not fired, demoted, or shamed for having been part of a “failed” project. Such a punishment contingency could encourage harmful politicking, lying, and fudging results. The book How Google Works describes Google’s policy of “failing well”, in which people who try new things or work on projects that are ultimately cut are never fired, and are often heavily recruited.
- Establish opportunities to reinforce question asking and volunteering new ideas for innovation and entrepreneurship. Pixar exemplifies this with their “Braintrust” meetings in which new ideas are shared and discussed in an incredibly open, and safe way, which has no doubt contributed to their 17/17 record for hit movies.
2. Entrepreneurial Practices
Behavioral patterns among leaders, and the culture the organization establishes around innovation and entrepreneurship. Drucker suggests organizations focus leadership meeting time to the discussion of opportunities, not just problems. These meetings should be both monthly departmental operational meetings, and yearly/bi-annual companywide leadership meetings. Drucker also suggests senior leadership adopts practices that create feedback loops between themselves, and those closest to the customers, the products, and the processes.
How can OBM Support these practices?
- Define appropriate leader behavior during these meetings Often leaders have the bad habit of shooting down ideas that don’t immediately sound doable.
- Making the response effort to take action on a new project very low. Google is famous for this practice, in which people are strongly encouraged to go out and try new things to see if it will work quickly. Rather than requiring a lengthy proposal, budgeting, planning process, the attitude is to try it cheap, and if it works, keep going.
- Use meetings as an opportunity to reinforce and celebrate all who display innovative and entrepreneurial behavior. This should include recognizing those who succeed as well as those who tried and failed.
3. Measuring Innovative Performance
Key metrics to let you know “are you innovating enough?” and “is that innovation working?” This is a key tenant for all behavior analysts – measurement means data, and data is key to making real change. As Drucker states measurement allows us to “take purposeful action based on knowledge rather than on the opinion of guesswork” (p.161). At a project level, each innovative effort should be measured in terms of its objectives and outcomes, which should then lead to an understanding of what worked and what didn’t, and methods for making adjustments moving forward. Additionally, the company should measure itself every few years on all of its innovative projects, efforts, and overall goals, and allocate resources and make strategic decisions accordingly.
How can OBM Support measurement?
- Measure innovation at the individual performer level. Innovation occurs as the result of individual behavior, therefore that individual performance should be measured. This allows more precise and effective feedback and reinforcement.
- Create measures that are important to the organization and its leaders and aligned with the goals of the project and organization. These measures should also be clearly defined objectively and in a way that allows for consistent and easy observation.
- Pick measures that get you the right data. Eric Ries does an excellent job discussing measures of innovation and entrepreneurship in his book The Lean Startup.
The formal organization of the company, and how innovative activities fit within it. This essentially means, for innovation to thrive within a company, the new must be protected from the old. The organizational structure must not pit existing business needs against innovation needs, because the existing business will almost always win out. Drucker recommends assigning a representative for innovative efforts and having them advocate on the senior leadership team. He also recommends that innovation-focused projects be held to different standards than ongoing operations are held to, and that compensation and reward programs be structured in a manner that matches the contributions of the innovation team.
How can OBM Support these structures?
- Consider strategies to make everyone an entrepreneur, and distribute “ownership” of innovation. Take Google’s example of the 20% time, in which people are allowed 20% of their working time to work on new projects. In this way, you can tap into the innovative power of the whole organization.
- Behavioral System Analysis offers much insight into tools and techniques for understanding and defining the relationships between the innovation departments and existing businesses. While the new should be protected from the old, that does not necessarily mean isolated. A systems perspective can help to make innovation deliver more value to the organization and its customers.
- Bill Abernathy advocated for a complete system that creates organizational entrepreneurs. This system focuses on measurement, and paying for organizational effectiveness.
Getting the right people in place to innovate and foster entrepreneurship. Drucker’s point here is very behavioral – he suggests that there are no “entrepreneurial personality” or people who are born entrepreneurs. Instead, he suggests we look for those who have demonstrated willingness to learn and adapt and put them in a system that supports such behavior.
How can OBM Support entrepreneurial staffing?
- Define the behaviors that make a good entrepreneur in your organization. Not all organizations will have the same list of behaviors. For example, a clinical ABA autism company seeking research innovation might consider someone with a weaker research background, but a history of bringing new products to market in an existing company.
- Consider behavioral interviews for prerequisites that are harder to measure. For example, some companies will put candidates in groups and require them to complete stressful tasks to see how they perform with peers under pressure.
So what can we take away from this? Companies that want to do things better or faster, or do fundamentally new things need to focus on fostering innovation and entrepreneurship. Peter Drucker laid out several principles that can help companies support and develop innovation. Principles of Applied Behavior Analysis and OBM can help to support these efforts even further. For more great examples of companies who are living these principles of entrepreneurial management, check out How Google Works and Creativity Inc.