Entrepreneurs And Entrepreneurship

Born or Made, Art or Science

When it comes to entrepreneurs and entrepreneurship, the age-old question is, “Are entrepreneurs born or made?” For example, would Apple become the powerhouse it is today if Steve Jobs had never been fired, journeyed through the “wilderness,” and then come back to lead the company a different man? So, is entrepreneurship a talent or genius, or is it something that can be learned and developed?

Previously, we briefly discussed Schumpeter’s thoughtson the entrepreneur. My introduction to Schumpeter came from Peter Drucker (1909-2005), another seminal 20th Century figure in the study of entrepreneurism. Drucker gave Schumpeter stout praise, saying, “Of all the major modern economists only Schumpeter concerned himself with the entrepreneur and his impact on the economy.”

While not an economist himself, Drucker was no slouch when it came to exploring the role and impact of the entrepreneur on organization and society.

Social Ecologist

According to his bio on his institute’s website, Drucker described himself as a “’social ecologist’ who explored the way human beings organize themselves and interact much the way an ecologist would observe and analyze the biological world.” As with Schumpeter before him, the role entrepreneurs play in society fascinated Drucker.

After many years of “observation, study, and practice,” Drucker came to see entrepreneurship as a discipline that requires an interdisciplinary approach. He did not see it as a “mysterious gift, talent, inspiration, or flash of genius,” but more as what he describes as “purposeful tasks that can be organized” as “systematic work.”

Systematic Practice

In his classic business tome, Innovation and Entrepreneurship, Drucker argues that entrepreneurship is neither science nor art, but rather a systematic practice. It also not relegated only to the founders of new enterprises, but is part of every executive’s job.

Entrepreneurship, in Drucker’s mind, is the “new applications of knowledge to human work” and its “new technology” is what he calls “entrepreneurial management.” It is not speculation. Most failure is the result of taking action without thinking. It is knowledge work. So, entrepreneurs use their knowledge to come up with new applications to innovatively change the way we do things and thus create competitive advantage. It is a thoughtful process of experimentation and practice. Peter Drucker, “social ecologist.”

Not All New Ventures Qualify

So, for Drucker, not everyone who starts a business is necessarily an entrepreneur. To be entrepreneurial, “an enterprise has to have special characteristics over and above being new and small. Indeed, entrepreneurs are a minority among new businesses. They create something new, something different; they change or transmute values.” Drucker also shows us that an entrepreneurial enterprise need not be a for-profit venture as evidenced by the rise of the social enterprise that employs entrepreneurial approaches to creating new value.

While many things may have changed since Drucker wrote this book, the fundamentals still hold true—the practice and principles of innovation and entrepreneurship can be observed, studied, learned, adapted, and practiced in a systematic way.

The Role of the Dynamic Entrepreneur

Swarming, Creatively Disrupting the Status Quo, and Agent of Creative Destruction

People who know me tease me that I can’t have a discussion about innovation or entrepreneurship without somehow inserting a certain Austrian-American economist and political scientist into the dialogue.  So, rather than disappoint anyone, let me start this blog with Joseph Schumpeter.

Entrepreneurs are often equated with innovation because their start-up businesses and inventions usually disrupt the status quo by introducing some new innovative product, service, or business design.

Schumpeter called this phenomenon “creative destruction,” which he writes about in his book on business cycles.  Schumpeter’s business cycles are waves of creation and destruction working in a synergistic fashion.  They are not linear, but rather, what today we call emergent, organic, and holistic.  In Schumpeter’s mind, the spark behind these waves is the dynamic entrepreneur.

For Schumpeter, the entrepreneur can best be described as an “innovator of business advantage.”  The entrepreneur does not simply have an idea, he is able to implement an idea, turn it into action, and validate it in the marketplace in an advantageous way.  Thus, for Schumpeter, the entrepreneur is the key to understanding economic systems—a mover and shaker who can “just as easily turn economies upside down as take them from one general equilibrium to another.”

Entrepreneurship, in Schumpeter’s thinking, is not a profession or a position that could be handed down from one generation to the next, but rather a special kind of leadership—not a glamorous kind based on military achievement, executive rank, or political power, but a talent for seizing business advantage through disruptive innovation.

The entrepreneur in other words, is not chosen by blood, breeding, popularity, service, or tenure, but by intellect and will; Schumpeter called entrepreneurs an “aristocracy of talent.”  To Schumpeter, the entrepreneur’s achievements are the result of a noble spirit, the expression of a Promethean mind, independent thinking, and creative genius.

And, when Schumpeter’s “noble creators” come together, they “swarm” around innovation, collaborating in a way most others simply can not understand because it lay outside the realm of routine in an environment that resists conformity and blind obedience to authority and standard practice.  Maybe that’s why places like Silicon Valley, Seattle, RTP, Austin, and other tech hubs are such dynamic and interesting communities in which to live and work?

“To act with confidence beyond the range of familiar beacons and to overcome that resistance,” Schumpeter said, “requires aptitudes that are present only in a small fraction of the population and that define the entrepreneurial type as well as the entrepreneurial functions.”

At the end of the day, if Schumpeter had been a novelist, his heroes would be innovators and entrepreneurs, his villains would be Keynesian-type central planners, and they’d all be involved in an epic struggle that would determine the fate of humanity.  Wait a second…that sounds familiar…someone actually wrote that book.

Based on this Schumpeterian concept of the dynamic entrepreneur and his role in the diffusion of innovation and economic process, it’s easy to get passionate about being a catalyst and evangelist for such endeavors.