Management Style
The success of organizations is critically dependent on the presence of an effective leader. Significant research effort has been expended on seeking to identify the behavioral traits that can distinguish between effective and ineffective leaders. Unfortunately, the outcome of this type of research is that, although important leadership traits have been identified, it has not proved possible to specify a universal model upon which to determine the overall effectiveness. This is because individuals have been found to exhibit different traits, but remain effective (Gehring 2007).
One solution to this dilemma has been to focus on the more generic issues of attitudes and behaviors as the basis for identifying different leadership styles and how these influence the organization. One major difference is that, which exists between transactional and transformational leaders (Sashkin and Rosenbach 1998). Transactional leadership focuses on behaviors related to basic administrative and management tasks required for groups to function well in stable environments. In contrast, transformational leadership is based on the ability to recognize followers’ needs, demands, and motivation plus how to satisfy the followers’ higher-level needs in a way that utilizes the full potential of these individuals. As a consequence, transformational leaders are more effective at creating and supporting a change, which is the reason why many technological entrepreneurial leaders exhibit a transformational style.
Sashkin and Rosenbach posited the critical characteristics of transformational leadership are self-confidence and being a visionary. In terms of fulfilling the latter role, it requires an ability to develop intuitive insights about the future based on limited or even no information.
The behavioral traits of transformational leaders include being creative and credible. These latter traits involve focusing on trust-building, caring, empowerment, and creating opportunities for all employees to maximize their contribution to the organization. Visionary leaders appreciate that their vision must align with the organization’s entrepreneurial capabilities in order that the organization is able to fulfill the key attributes of being proactive, innovative, and risk-taking (Ilies, Judge, and Wagner 2006).
The characteristics of a transactional leadership style are that authority and accountability reside within the leader who exhibits a controlling, top-down approach. Most entrepreneurship studies conclude that this is an inappropriate style for educating, inspiring, and energizing the workforce. Furthermore, it may create an environment where employees fear speaking out and are unwilling to be involved in decision making or becoming self-responsible.
Playbook Guideline 23: Senior successful technological entrepreneurs are likely to exhibit a transformational leadership style
Technological Visionaries
Case Aims: To illustrate how individuals who exhibit an entrepreneurial leadership style that results in the creation of new global businesses
United States’ move to become the world’s wealthiest nation in the late 19th century was assisted by being the home of a number of technological entrepreneurs. Included in the list of individuals with the technological foresight whose endeavors led to the creation of new global industries are Thomas Edison, Henry Ford, and Tom Watson Jr.
Edison was an amazingly prolific identifier of new technologies. His initial focus was on improving telegraph technology. From there, he moved onto to creating the phonograph and the carbon microphone. The technology that spawned most of his patents was in the field of electricity. A key reason for Edison’s success was that he established the world’s first industrial research laboratory in Menlo Park, New Jersey. He created this new institution with the specific purpose of achieving technological innovation. Like other entrepreneurial technologists, he relied heavily upon intuition to guide his decisions on which problems should be researched. In most cases, the research focused on opportunities for which initially there was little or no evidence of market demand (Vandervert 2011).
Henry Ford’s first attempt at creating a manufacturing business was the Detroit Automobile Company. However, the cars produced were of a lower quality and a higher price than Ford wanted. Backed by a new group of investors, he went onto establish the Ford Motor Company, and in 1908, launched the world’s first mass production car, the Model T. To achieve the aim of manufacturing the affordable motor car, Ford and his team of engineers created the first car plant that utilized mass production manufacturing techniques (Link 2014).
Tom Watson Jr. became the CEO of IBM company shortly before his father’s death in 1956. Until that time, IBM was dedicated to manufacturing electromechanical punchcard systems for managing data. Tom Watson Sr. had repeatedly rejected electronic computers as overpriced and unreliable. As the new CEO, Jr. hired a large number of electrical engineers and assigned them the task of designing mainframe computers at a time when most existing employees did not think computer products were a commercially viable proposition (Watson and Petre 1990).
The first development IBM 7030 Stretch was a not a commercial success, but the knowledge gained provided the basis to the next generation of products. Then, in 1964, IBM introduced the revolutionary System/360, the first of a large family of computers to use interchangeable software and peripheral equipment. Within two years, the System/360 became the dominant mainframe computer in the marketplace, so dominant, in fact, that its architecture became the industry standard.
Playbook Guideline 24: Successful technological entrepreneurs are likely to perceive that scientific or technological problems can be eventually solved
Role Fulfillment
Gupta, MacMillan, and Surie (2004) perceived entrepreneurial leadership role as engaging in “scenario enactment” and “cast enactment.” These researchers presented scenario enactment as envisaging possible opportunities that can be exploited through new, unconventional solutions. Cast enactment involves assembling resources, including committed employees to deliver the identified scenario. A risk entrepreneurial leader scan run is that of pushing their team beyond the limits of their capabilities. Hence, the entrepreneurial leader will be forced to balance their desire for aggressive improvement with a pragmatic understanding of the capabilities of their team. This requires combining highly ambitious goals with insightful understanding of the limits of what can be accomplished (Chen 2007).
Playbook Guideline 25: Successful technological entrepreneurs require the ability to understand and inspire others
Entrepreneurial leaders must be able to anticipate and overcome potential resistance to their ideas. This will involve sustaining support from key stakeholders, both inside and outside the firm. A necessary skill is to inspire and mould a team that is highly committed to accomplishing the leader’s aims. Goldsmith (2010) posited that, to be successful, entrepreneurial leaders must avoid (i) the urge to win all battles, (ii) excessive stubbornness, (iii) punishing the messenger, and (iv) exhibiting goal obsession.
Playbook Guideline 26: Successful technological entrepreneurs must be able to carry their team with them, especially in the face of adversity
Swiercz and Lydon (2002) proposed two phases of entrepreneurial leadership: the formative growth phase and the institutional growth phase. They concluded that the transition between these two phases can be difficult because the entrepreneurial CEO has to learn to depend upon others, which involves developing a new set of leadership competences. The researchers classified these required competences into “self-competences” and “functional competences.” Self-competences include intellectual integrity, promoting the company rather than self, utilizing external advisors, and creating a sustainable organization. Functional competences are essential for successfully performing the challenging tasks and roles of leading an entrepreneurial venture. The differences between the two roles are summarized in Table 3.1.
Table 3.1 Role change*
Start-up leadership tasks |
Organizational leadership tasks |
Idea seeker |
Leveraging resources to support existing ideas and identifying a new idea |
Leveraging resources to support existing ideas and identifying a new idea |
Leveraging resources to support existing ideas and identifying a new idea |
Creating a viable new business |
Building a more complex organizational structure while sustaining entrepreneurial capabilities |
Leading and inspiring a small team |
Developing structures that ensure others take leadership role within individual teams |
Fostering limited resources |
Ensuring resources remain appropriately allocated to ensure ongoing entrepreneurial activities |
* Modified from Swiercz and Lydon 2002.
Playbook Guideline 27: To sustain their leadership role, technological entrepreneurs must revise their leadership role as their organization grows, by relying upon delegation and increased team member autonomy
Communication
Once an organization has progressed beyond the start-up stage, the entrepreneurial leader needs to develop the skills of listening, communicating, building trust, and exhibiting respect for the dignity and the creative potential of each person within the organization. The outcome is an organization in which change, value enhancement, and entrepreneurial orientation are the norms (Darling and Beebe 2007).
An aspect of successful communication is the effectiveness and appropriateness of the message. The message should be understood as the communicator intended. Message acceptance usually only occurs where the leader is trusted. This will be determined by the degree to which the entrepreneur is predictable, their opinions are well known and are consistent. Where the freedom of choice is acceptable within an organization, both the entrepreneurial leader and the employees should have the right to choose. Freedom of choice will enhance the degree of respect that employees hold about the leadership. Enhancing respect is achieved through the skill of effective listening.
Playbook Guideline 28: Technological entrepreneurs must have the ability to be effective, persuasive communicators and just as importantly, being competent listeners
The Dark Side
Entrepreneurs tend to be achievement-oriented, like to take responsibility for decisions, stay in control, and tend to avoid routine work. Such individuals can usually inject their highly contagious enthusiasm into an organization, conveying a sense of purpose convincing others of the appeal of working alongside them. Kets de Vries (1985) noted, however, that entrepreneurs may have personality faults that make them hard people to work with. Their bias toward action can result in outcomes that can have adverse organizational consequences. Furthermore, their sense of certainty can result in them rejecting other people’s suggestions or expressions of concern about what should be perceived as a high-risk activity. Accompanying this self-certainty, these individuals may actually distrust others, questioning their motivation in suggesting an alternative idea. Conger (1999) concluded that an entrepreneur’s excessively strong belief in their own ideas can result in a vision that is possibly not the most appropriate at a specific point in time.
The Risk of Technological Fixation
Case Aims: To illustrate how a leader’s incorrect convictions can adversely impact an organization
Edwin Land’s invention of the Polaroid camera permitted instant photography to exist and also led to the creation of an alternative business model. This was that of the real profit not being from sales of the camera, but from huge profit margin generated from the sale of film. The model was subsequently described as “a razor-blade strategy” where the profit is not in the razor, but from the sale of razor blades (Hintz 2016).
Polaroid was admired for sustaining a high level of ongoing R&D expenditure. Unfortunately, Land was a dominant figure in the organization, determining what he perceived were areas of future opportunity and in defining the company’s research focus. One such example of his influence was on the firm’s Polavision product, which the company eventually had to write off $89 million and led to Land’s resignation as chairman in 1981.The most dangerous aspect of Land’s influence, which was eventually to lead to the closure of the company, was an inadequate understanding of the eventual impact of the newly emerging field of digital photography. Land was firmly convinced that the future for Polaroid Corporation would always be through new developments in chemistry, especially in the area photographic chemistry. Hence, despite the company engaging in research in digital photography, Land’s influence did mean the company culture was biased against electronics (Ozanian 1995). Another of Land’s convictions was his belief that customers would always want a hardcopy print. This perspective was reflected by the establishment of a research team to develop a “printer in the field,” an instant camera that would produce a film-based print from a digital image. The error of this perspective eventually became apparent as people began to store digital images on their camera or download the image to a computer for later viewing.
Playbook Guideline 29: No technology can be expected to go on forever
Working Alongside Entrepreneurs Can Be Uncomfortable
Case Aims: To illustrate that working for visionary entrepreneurs may not always be pleasant experience
Jeff Bezos, the founder of Amazon, is an entrepreneur who excels at having visionary ideas. Having disrupted the concept of retailing by creating his online book-selling operation, he has continued to seek new innovative opportunities for his business operations. Although Bezos is clearly the leader and source of the overall corporate vision, he understands the benefits of granting teams the right to be independent thinkers. He calls this philosophy “distributed innovation.” It is an important aspect of the organization’s flexible mindset that allows Amazon to identify and exploit new opportunities (Lashinsky, Burke, and Mangalindan 2012).
Although Bezos can be charming and supportive, the alternative aspect of his personality is he can be very unforgiving of anyone who is ill-prepared or he believes is making a mistake (Anon 2013). He has a reputation for sending out “Bezos question mark e-mails” to employees over any issue that concerns him. Entire teams are expected to drop everything and to rapidly respond to a question mark communication. Senior managers have learned to carefully review their answers before they respond to the original e-mail. Such activities are a reflection of the fact that Amazon’s culture is accepting of individuals being confrontational. This culture originates with Bezos who believes that, in many cases, the only way to discover the truth is through confrontation.
Playbook Guideline 30: Technological entrepreneurs may be difficult to work with, so a “thick skin” is an important attribute for those working alongside them
Appropriate Structure
Entrepreneurial success is fuelled by creativity, imagination, visionary zeal, and a willingness to move into uncharted waters. However, as organizations grow in size, the tendency among senior managers is to seek order, control, and access to detailed information. The conventional solution is to create a hierarchical structure based on layers of management, with specialist managerial tasks assigned to specific departments such as marketing or manufacturing. However, as the world has become a more volatile place with new technologies challenging conventions, these management systems can become a barrier to sustaining a competitive advantage (Ghoshal and Barlett 1995).
Within hierarchical structures, information and decision requests flow upward to the top of the organization; thereby enabling corporate executives to make decisions, assign resources, determine levels of responsibility, and retain control. In these vertically driven, financially oriented organizations, authority-based processes may dominate, thereby acting as a block on horizontal communication processes across departmental boundaries. The most deleterious effect of the growth of bureaucratic structures within corporations is the erosion of entrepreneurship with employees no longer exhibiting externally oriented, opportunity-seeking attitudes. Employee-led initiatives rarely survive because top managers believe they are the best visionaries and should remain responsible for leading their companies in new directions. Employees’ ideas are likely to be crushed in the documentation, review, and approval processes that senior managers demand prior to approving the commencement of any new projects (David 1995).
The Benefits of Rule Breaking
Case Aims: To illustrate the steps needed to accelerate innovation in a hierarchical organization
Tom Watson Jr., as well as spearheading the development of the mainframe computer that made IBM so successful, was also the architect of the firm’s highly structured hierarchical organizational system. The drawback to this approach in the face of technological change was demonstrated by the company’s failure to recognize the growing importance of minicomputers. To avoid the same outcome with the advent of the PC, the company’s highly unusual solution was to give approval to Bill Lowe, the Boca Raton Florida laboratory director, the freedom to act autonomously to work on developing a new PC. (IBM archives, accessed 2015).
Lowe claimed his group could develop a small, new computer within a year. He appointed a small team to develop a specification covering hardware, software, manufacturing, and marketing. It was decided that to meet deadlines, the group had to stick to the plan of using tested vendor technology, a standardized, one-model product, open architecture and use outside sales channels for quick consumer market penetration. These decisions meant the team would be breaking the company’s product development rules and procedures. To create the operating system and software, the team linked up with Bill Gates of Microsoft. They agreed with his idea that instead of selling IBM his operating system, Microsoft would license the system to the company. To create a sufficiently powerful data-processing capability, it was decided to break with current procurement rules and to adopt an Intel 8088 microprocessor. By breaking all of the company product development rules, the team created the IBM PC within 12 months. At that time, this was the fastest “idea to market launch” project in the company’s history.
Playbook Guideline 31: Sometimes, the only solution is to ignore or break existing organizational rules
Organic Structures
Recognition of the problems created by hierarchical organizations has led to the emergence of the alternative perspective that to sustain an entrepreneurial orientation requires the adoption of an organic structure (Miller 1983). This involves creating much flatter structures by removing layers of management, delegating decisions downward to frontline employees, and promoting high levels of horizontal and vertical information flows. Authority is vested with those who have the appropriate expertise. The work process is typically based around small teams who have the expertise to identify problems and develop solutions.
Keeping an organic organization on track is no simple process. It is critical, therefore, that there is an organizational culture that is orientated toward co-operation, collaboration, and a commitment to solving whatever problems emerge (Covin and Slevin 1990). A recognized benefit of startups is their small size permits a rapid and flexible response. To replicate these benefits within large organizations usually requires the utilization of an organic structure constituted of small autonomous teams. A key aim of senior management is to ensure there is an effective flow of knowledge both vertically and horizontally within the organization.
Playbook Guideline 32: Organic structures are more likely to lead to entrepreneurial success
Exploiting Autonomy
Case Aims: To illustrate how a belief in empowerment and autonomy can sustain entrepreneurial success
A classic example of a large entrepreneurial firm that is committed to the concept of autonomous entities is 3M, a manufacturer of abrasives and adhesives. At 3M, respect for the individual as an unquestioned article of faith was first articulated by William L. McKnight, the company’s leader from 1929 to 1966. Another of McKnight’s belief was the company is best served when management trusts those with direct knowledge of the market, internal operations, or the technology, which can lead to innovation. This view, accompanied by a belief in people and recognition that mistakes should be both expected and accepted, has rewarded 3M with thousands of breakthrough entrepreneurial initiatives (Coyne 2001).
Another important aspect of the company philosophy is the expectation that change will continually occur, accurately predicting future markets is rarely possible, and hence, there is a need for ongoing adaptation. This perspective requires the company to continually be undergoing change and a perspective that the majority of sales will come from products that have only been developed in the last few years. To achieve this goal, 3M empowers employees and an understanding that leaders who seek excessive control over an innovation projects will fail.
Recognition of the importance of exploiting new knowledge means there is strong emphasis on communication and knowledge sharing in order that new discoveries can to be fully exploited. To maximize entrepreneurial thinking, employees have the option of engaging in self-directed activities for 15 percent of their time. They can work on projects of their own choosing, their own design, and without management approval. Senior management at 3M views their organization as growing from the bottom-upward through the utilization of small project teams (Ghoshal and Barlett 1995).
Senior management has created mutual dependence and reciprocity within the organizational environments. At 3M, technologists in more than 100 laboratories around the world work openly with one another without secrecy, protectiveness, or the “not-invented-here” syndrome, which often inhibits free exchange of ideas in other companies. As a result of the many knowledge-exchange channels that 3M has created, the company has grown from its base of expertise in abrasives and adhesives to develop a portfolio of more than 100 different technologies. It is the company’s well-oiled technological entrepreneurial competence-building process that has become a hallmark of 3M’s ongoing success.
Playbook Guideline 33: Technological entrepreneurs perform better when granted the freedom to make their own decisions
Ambidextrous Organizations
Innovation can be exploitative or explorative. The former is incremental in nature, undertaken with the purpose of meeting the needs of existing customers or markets (Benner and Tushman 2003). Explorative innovations are radical and designed to meet the needs of emerging customers or new markets. March (1991) opined that exploitation is about efficiency, control, certainty, and variance reduction, whereas exploration is about search, discovery, autonomy, and innovation. He expressed the opinion that the basic problem confronting an organization is to engage in sufficient exploitation to ensure its current viability, and at the same time, devote enough energy to exploration to ensure its future long-term viability.
Figure 3.1 Alternative innovation philosophies
When exploration is a priority, Christensen and Overdorf (2000) proposed the approach of complementing traditional organizational practices with the creation of new organizational structures, such as spinouts and acquisitions, to sustain the exploration-oriented objectives of an innovation strategy. This perspective has led to the view that what is required is an “ambidextrous organization” within which both types of innovation are being exploited (O’Reilly and Tushman 2004). This perspective is reflected in Figure 3.1, which suggests four alternative options and revenue outcomes.
Firms with greater technological capabilities tend to have benefitted from ambidexterity. O’Reilly and Tushman found that, within many ambidextrous organizations engaged in both exploratory and exploitative innovation, these activities usually occur in structurally independent organizational units, but which remain strategically integrated within the senior management hierarchy. The different nature of the two types of innovation does mean that conflicts may arise. The likelihood of conflict is further exacerbated by the fact that different senior managers’ teams are responsible for exploratory or exploitative organizational units. This can lead to self-interested behavior in which senior managers perceive direct competition with their senior colleagues when it comes to decisions over the allocation of scarce resources. Clearly, such tensions must be avoided, while concurrently, there is emphasis on achieving cross-fertilization and synergies between the various business units. For this to occur requires a need of common vision, with everybody understanding the critical need for both types of innovation, a culture based on collaboration and an accepted managerial trait of seeking to avoid conflict between different units within the organization.
Playbook Guideline 34: Ambidextrous organizations are difficult to create and operate, but are critical for ensuring long-term success
Ambidextrous Exemplar
Case Aims: To illustrate the operation of an extremely successful ambidextrous organization
Google was founded by Larry Page and Sergei Brin, who met in 1995 while they were PhD students at Stanford University. Their joint interest was in organizing the world’s information in a way that could make it universally accessible. The search engine they developed provided the basis for a business idea. In itself, however, the search engine did not generate revenue. This only occurred when they linked their search system to selling online advertising. Even today, this business model remains the core of the company’s operations, generating a major proportion of the total revenue (Gertner 2014).
Google’s mission is not based on money alone, rather it is also to improve the world. The heart and soul of Google is based on entrepreneurship and innovation. The company has a flat, open organizational structure that supports a highly democratic culture in which employees are encouraged to question things. Strategy tends to come from bottom-up. The founders’ commitment to innovation has resulted in the emergence of an effective ambidextrous operation. While incremental innovation continues to be utilized to further enhance their Ad Works operation, the company uses generated revenue to support radical innovation and knowledge expansion through acquisition. An example of this latter approach is Android, which went on to become the Android operating system for Google’s smartphone operating system launched in 2008.
The company has a long-term orientation toward the development and launch of new radical innovations. This attitude is reflected in Google’s driverless car concept. This project started some years ago, long before the car industry perceived the potential benefits of the technology, and it is only now that the point has been reached where a viable commercially feasible product proposition is beginning to emerge.
A core constituent of the company’s radical innovation projects is Google X, which is tasked with making actual objects that interact with the physical world. In addition to being responsible for the driverless car operation, three other important projects are Google Glass, high-altitude Wi-Fi balloons, and glucose-monitoring contact lenses. Usually, there is a preference for the criteria that X projects should exhibit. These are to (i) address a problem that affects millions of people, (ii) utilize a radical solution that has at least a component that resembles science fiction, and (iii) must tap into technologies that are now or very soon will become available.