How An Entrepreneur Can Uild An Adaptive Firm

1. INTRODUCTION

Innovation is essential to the success of a firm in today's business environment. "Innovation is the lifeblood of the modern economy" (Bridgman, 2001, p.1). Firms must continue to become more and more adaptive and responsive to today's ever changing business environment if they are going to succeed.

The purpose of this report is to "explain how an entrepreneur can build an adaptive firm that balances entrepreneurial characteristics with managerial style." By researching a number of entrepreneurial texts discussions have been made on how this balance can be best achieved.

This report begins by explaining the great importance of innovation and change, and also the great importance of effective management. The many differences and similarities between entrepreneurs and managers are outlined and discussed. Various ways which change and innovation can be managed successfully while maintaining an adaptive and change responsive firm are then explored. These include the use of Lewin's three phases of planned organisational change, the importance of realising resistance to change and the reasons for resistance, and finally the significance of using flexible leadership styles in different situations. Conclusions are then drawn from these observations and discussions and are followed with a number of recommendations.

2. DISSCUSIONS

2.1 THE NEED FOR INNOVATION

The business environment that we operate in today is one of great uncertainty and continuous change. Over the past few decades New Zealand organisations have seen numerous and major advances in such areas as globalisation of business, technology, legislation and probably most importantly the introduction of e-business. To succeed in this ever changing business environment firms must also be adaptive and responsive to change. "Organisations and their managers must continually innovate and adapt to new situations if they are to survive and prosper over the long run" (Shermerhorn, 2001, p.378). This innovation and change must be implemented and maintained well, and this is where effective management is the key.

2.2 EFFECTIVE MANAGEMENT

Entrepreneurs are the people who see new opportunities and act on them. They begin new businesses, enterprises and ventures. Entrepreneurs are essentially risk takers, and may even take risks which do not end in positive results. This is indeed one reason why not all of these ventures and businesses succeed. In fact, the Ministry of Economic Development (2000) states that 60% of all New Zealand's small and medium enterprises fail or stop trading within 4 years of their start-up. Various entrepreneurial texts maintain that another more common reason for this high failure rate is that of mismanagement. "Entrepreneurs see opportunities, have a vision for a business, and set it up; managers put things in place to make the business run smoothly. Entrepreneurship cannot function for long without good management" (Shermerhorn, 2001, p.121). "Enterprise rather than management is the key driver of economies and employment. Management provides the guidance and balance to keep enterprise on track, but it does not generally provide the basic energy on which new ventures and innovative developments are built." (Inkson & Kolb, 2002, p.110) From studying the quoted, and other entrepreneurial theories, it can be concluded that not all entrepreneurs may make good managers.

2.3 MANAGERS VS ENTREPRENEURS

Inkson & Kolb (2002) believe that the general characteristics and qualities of managers and entrepreneurs are quite different. One such difference outlined is the way in which entrepreneurs and managers conceptualise business. Entrepreneurs are continuously and naturally looking for new business opportunities, while managers tend to focus on the resources they already have. Another difference identified is the difference in personal make-up. Managers are said to have a high need for power and authority while entrepreneurs have a high need for personal accomplishment and success. The relevant attitudes towards taking significant risks is also said to differ. Entrepreneurs are characterised as frequently taking many great risks while managers are said to be generally more cautious and risk-averse. This view is however, not upheld in all entrepreneurial texts. In fact, Timmons (1999) maintains quite the opposite, that entrepreneurs certainly can be, and in most cases, are, effective managers. "New ventures that flourish beyond start-up and grow to become substantial, successful enterprises can be headed by entrepreneurs who are also effective managers" (Timmons, 1999, p.240). Although such views differ between entrepreneurial theories, it is still consistently maintained that successful firms must have effective management.

Management in theory is the process of planning, organising, leading and controlling. This process is very important when operating a diversifying and growing organisation in a forever changing business environment. Organisations must be flexible and able to react and respond quickly to change, and workers must be lead effectively through this change. This is especially relevant in the initial stages of a new venture, when growth can be very rapid and innovation and diversification extreme. The founder of the venture must recognise that change is inevitable and therefore must be managed correctly. So from what has been outlined so far, it is now apparent that innovation is essential for business success, therefore change is inevitable, and it is imperative that change be managed effectively. So how does an entrepreneur build a firm that is both innovative and managed effectively? The first theory that can be explored in the aid of answering this question is that of the use of a planned change process.

2.4 PLANNED CHANGE PROCESS

Change in a business can be both planned and unplanned. Unplanned change happens very quickly and spontaneously while planned change is the results of a perceived need to change. "Planned change is a direct response to a person's perception of a performance gap, or a discrepancy between the desired and actual state of affairs" (Shermerhorn, 2001, p.384). By using a specific process for all planned changes, change can be implemented quickly, easily and effectively. Such a process is Lewin's three phases of planned organisational change.