Entrepreneurship: The most important – and misunderstood – economic function for all businesses.

Entrepreneurship is often misunderstood as starting a new business from scratch, or sometimes as owning and operating a so-called small business. Entrepreneurship is not usually understood by most people as a function within big business. 

In fact, entrepreneurship is not only a function of all businesses of all sizes and all levels of maturity, from new to established, it is their most important function. Entrepreneurship gives businesses their most critical success factors.

Customer Value Creation

All the buzz in the business press and the financial sector is for shareholder value maximization. This doctrine holds that the purpose of business is to please and reward shareholders first. That’s mistaken on multiple fronts. Firstly, customers are the only reason a firm exists – without customers, there is no business. The only way to grow is to add more customers and increase the revenue that existing customers are willing to generate by buying the firm’s products and services. They do that when they experience value – the feeling that they’re better off having made the purchase and experienced the benefits than they would have been had they not done so. The experience must meet their prior expectations otherwise they won’t come back. Successful businesses pursue customer value maximization, not shareholder value maximization.

Customer Centricity

The process of Entrepreneurship is one of working from the customer backwards. It defines the purpose of any business firm of any size as pursuing new value for customers, and receiving the market’s rewards for doing so. At the core of entrepreneurship is choosing which customers to serve and developing an understanding of them and their preferences and wants so deep as to constitute a competitive advantage over all rivals. 

There are examples of brands and companies forgetting about their customers. The recent controversy over the Anheuser Busch brand Bud Light’s wading inappropriately into transgender politics seems to be a result of them insulting their own customers (whom they referred to as fratty). Those customers responded with a boycott.

Knowledge-building

Entrepreneurship is not magic and it’s not luck and it’s not purely the result of pouring venture capital into new tech ideas. It’s a function of knowledge-building. Specifically, it is the combination of two kinds of knowledge: customer knowledge and technical knowledge. Entrepreneurial firms are unceasing in their investment in acquiring customer knowledge to develop a unique and competitively advantaged understanding of customers’ needs, preferences, hopes and fears and dreams. They combine this knowledge with an equally deep and detailed mastery of a particular technical solution to deliver on these customer needs and preferences. It’s the combination of the two kinds of knowledge that results in commercial solutions that win in the marketplace. Entrepreneurship is accumulated and polished knowledge.

Innovation

Entrepreneurship exhibits the property of never standing still. There is no end point. There is only endless improvement, demanded by customers who are continuously learning what’s possible for them, and competitors who are striving to earn that customer’s dollar. In business terms, this means that innovation is imperative – always making the customer’s world better, always investing in new capital, new technology, new designs and new presentations. 

Many large companies exercise this form of entrepreneurship – we can think of Apple and Amazon but also of Ford and Boeing and Procter and Gamble. But maybe we exclude companies like Mars who continue to present customers with their horribly unhealthy candy bars while innovators like Lily’s are exploring and experimenting with non-sugar sweeteners to deliver a new kind of experience for sweet-toothed, health-conscious consumers.  Big corporations can be entrepreneurial, but not all are committed to the pursuit of new value.

Decentralized organization

Entrepreneurship is built on individual creativity and imagination. It can be achieved in teams of people working together, and therefore in firms and corporations that prize individual contributions and empower them to collaborate in agile, self-organizing teams that cross-functional silos and don’t respect hierarchical control. This is very difficult for conventionally structured corporations, but the new innovative firms of the digital era start from concepts of flat, networked organizational structures that enable the unobstructed high-speed flow of information. Tesla/SpaceX is a leader in this type of management. Steve Denning, writing at forbes.com, describes Tesla/SpaceX as 

• A firm where all managers and staff are expected to work as entrepreneurs, 
• With no budget limits or constraints on spending. · 
• No job descriptions. · 
• No approvals needed. · 
• Performance reviews done by the staff, not by bosses. · 
• Practically no managers.

This is how entrepreneurship replaces conventional forms of management.

https://www.forbes.com/sites/stevedenning/2023/06/12/how-world-domination-is-within-teslas-grasp/

Entrepreneurship is not only the most important economic function for business, it’s the pointer to the future of business and value creation for all companies.