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Jeff Chiu / AP
This week’s much-anticipated Facebook IPO has stimulated a healthy national discussion about the nature of innovation and the role of entrepreneurship.
An outstanding op-ed by Rich Karlgaard in today’s WSJ focuses squarely on the key question raised by the valuations of contemporary Silicon Valley innovation success stories such as Facebook, Instagram (and we could include Pinterest), and basically asks whether these companies have generated light or merely heat – in a world with real problems, are we just getting mindless apps? As one self-described manifesto put it: “We wanted flying cars. Instead, we got 140 characters. What happened to the future?” (See here for the back story, via the New Yorker).
Karlsgaard’s response: the future is on the way. Leading-edge innovators, we are assured, have already moved on, and are earnestly focusing on the just the sort of problems – manufacturing, energy, transportation (and I’d add healthcare) – that urgently require imaginative solutions.
While I’m not sure every leading-edge investor would agree that social networks are over – see this recent WSJ interview with Benchmark’s Bill Gurley, an investor in Nextdoor and Edmodo -I suspect Karlsgaard is spot on in his assertion that revolutionary innovation, when it arrives, is almost certain to be delivered by an upstart entrepreneur.
In my view, the defining characteristic of entrepreneurial organizations is that they are built around a compelling narrative – they were created to answer a question, solve a problem, meet a need, and – at least at the early stages – attract people largely on the basis of this vision.
Listen to almost any seminar from the wonderful Stanford Entrepreneurial Thought Leader Seminar Series, or consider this Quora post (via TechCrunch) from an engineer, Robert Cezar Matei, explaining why he declined an offer from Instagram to work at Quora:
“I ended up going to Quora, because I was even more passionate about the vision and the role. I had a chance to help build what could become the platform for all human knowledge, which I thought could be a revolution on the same level as Google. Little else mattered in the end.”
Matei’s ambition, like so many drawn to start-ups, is to make a dent in the universe.
Matei’s mindset, attitude and expectations seem strikingly different from those of most employees at most conventional companies.
I’ve come to believe that this lies at the heart of our innovation culture: entrepreneurial companies are drawn by vision, while conventional companies are driven by process.
Sure, conventional companies tend to have a well-crafted Mission Statement, Core Values, perhaps even a Credo – but these carefully-polished words tend to be irrelevant at best, and more typically, painfully ironic to the employees grinding out the day-to-day work.
At conventional companies, the successful employees tend to be responsible, professional, competent, and typically focus primarily on their specific assignments, their obligatory deliverables, their small circle of colleagues who either enable or obstruct them, and spend little time if any thinking about their company’s overall mission, whatever it might be.
While entrepreneurial companies are brought into existence with much difficulty and through the exercise of considerable will explicitly in order to create something new, different, or qualitatively better, most conventional companies thrive through incremental change, and eventually exist simply to exist. Their size, mindset, and the realities of internal politics (as Dave Chase points out eloquently here) don’t allow for really profound innovation. It’s just not what conventional companies do. Moreover, from what I’ve seen, most people who’ve remained and climbed the ladder at conventional companies have succeeded by accepting and working within the system (however flawed), rather than by radically reinventing the system or working around it.
It’s not surprising, then, that as David Brooks has pointed out (and as I have occasionally discussed – see here and particularly here) – most leading CEOs turn out to be diligent managers, rather than inspirational visionaries. Most business succeed by doing things slightly better, or slightly differently – by making incremental, evolutionary changes – though often invoking the language of innovation and entrepreneurship. (Not surprisingly, there’s now an entire Steve Jobs section at Successories – as I discuss here).
Can conventional companies change significantly, think differently? In general, I’ve come to believe the answer is no. Profound change is far more likely to originate not from a process-laden organization leveraging scale but rather from an impassioned, narrative-driven company, formed around a compelling idea that’s engaged the mind and spirit of small number of highly motivated people, viscerally driven to pursue this vision.
To be sure, the fact that a small group of people are impassioned about an idea doesn’t mean it’s a good idea, much less a compelling business; there are a lot of dumb ideas out there, and a lot of would-be entrepreneurs passionately pursuing them.
Moreover, even the best and most ideas require scale, resources – and yes, eventually reproducible, well-executed processes- if they are ultimately to have the world-changing impact their originators envision. This lesson is one many young founders have learned the hard way.
For industries that urgently need to move in new directions – and healthcare stands out in my mind front and center here – the great new ideas are almost certainly going to arise from the next generation of entrepreneurs. The conventional companies that continue to succeed in these areas will be those wise enough to recognize their own limitations, and prescient enough to adapt through acquisition – aqui-pivot? – before it’s too late.
Will entrepreneurs save healthcare?
If not us, who? If not now, when?
David Shaywitz is an Adjunct Scholar at AEI.
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