The paradigm of entrepreneurial leadership was developed at Babson College, the world’s top school for entrepreneurship. The book was written by professors Danna Greenberg, Kate McKone-Sweet and senior researcher H. James Wilson (see author bios on the book’s website). These co-authors, along with some of the top faculty at Babson College undertook two years of extensive research that uncovered three principles of successful business leadership in today’s world. Business schools have long taught that to be a successful business leader one must be confident, have a single-minded purpose, and plan strategically. However, the economic crises in the past several years in the U.S. have shown that these characteristics of business leadership are becoming obsolete.
The competitive climate is fiercer than ever with current technologies enabling new business ideas to be rapidly prototyped and tested in the marketplace for immediate feedback. Not only has the speed of technology increased dramatically, but the cost of creating a new product or business has significantly decreased. So, strategic planning is almost obsolete soon after it is completed because the competitive landscape morphs quickly in unexpected ways that continually creates uncertainty and even unknowability.
To add to this dilemma for business leaders is the fact that many customers and other business stakeholders are now demanding companies to advance the world’s environmental and social spheres of life, not just the economic sphere. Because the business world is inter-connected with every aspect of our lives, it is becoming more and more expected of businesses to positively change our environmental and social landscape. Therefore, a single-minded focus on increasing short-term profits to shareholders will likely lead to a shrinking customer base and missed opportunities for creating greater profit over the long-term.
As you can see, the old model of business leadership that emphasizes confidence, single-minded purpose, and strategic planning might be a handicap to business success. Therefore, the co-authors of The New Entrepreneurial Leader have derived a new model for leadership by doing the following over two years:
- Investigated the Babson College approach to management education, as well as that of other business schools in the U.S. and globally.
- Reviewed literature extensively across fields as diverse as management education, cognitive psychology, and financial evaluation.
- Conducted two global research studies on over 1,500 companies that confirmed the relevance and practicality of this new paradigm for business leadership.
This new paradigm called entrepreneurial leadership is inspired by, but distinct from, entrepreneurship. Fortunately, entrepreneurial leadership can not only be used in startups, but in any business organization including large corporations. The other good news is that entrepreneurial leadership does NOT depend on any pre-existing personality traits, but rather, depends only on developing a new mindset, which anyone can do.
What You’ll Learn
Entrepreneurial leaders are individuals who, through an understanding of themselves and the contexts in which they work, act on and shape opportunities that create value for their organizations, their stakeholders, and the wider society. Entrepreneurial leaders are driven by their desire to consider how to simultaneously create social, environmental, and economic opportunities. ~The New Entrepreneurial Leader
The three principles of entrepreneurial leadership are:
- Cognitive ambidexterity, a new decision-making approach that requires both creation logic and prediction logic.
- Social, environmental, and economic responsibility and sustainability (SEERS), a worldview in which there’s a simultaneous creation of social, environmental, and economic value by a company.
- Self- and social-awareness (SSA), which is when one understands oneself and their social context to guide effective action.
(see the book’s website for a complete Table of Contents)
1. Cognitive Ambidexterity
Entrepreneurial leadership requires cognitive ambidexterity—a way of thinking and acting that is characterized by switching flexibly back and forth between prediction and creation approaches. The prediction approach, which is based on analysis using existing information, works best under conditions of certainty and low levels of perceived uncertainty. Creation, on the other hand, involves taking action to generate data that did not exist previously or that are inaccessible. It is most effective in environments characterized by extreme uncertainty and even unknowability. ~The New Entrepreneurial Leader
The authors go on to explain that by starting with a creation approach to logic, for example, one can then inform and advance the use of the prediction approach when used along with the former during decision-making. One must be able to use both and switch seamlessly between the two to be an effective entrepreneurial leader.
My belief is that the Lean Startup approach to starting a business or launching a new product utilizes the Cognitive Ambidexterity principle when done correctly. In The Lean Startup, Eric Ries suggests that startups use a cycle he calls Build→Measure→Learn, to make progress toward finding a viable business model. During the “Build” phase, an entrepreneur first takes action by building a basic prototype (Minimum Viable Product) that generates feedback (data) from the marketplace. The prototype is built with features that the entrepreneur assumes are wanted in the marketplace, based upon her gut instinct. To me, this is synonymous with “creation logic”. Then, the entrepreneur enters the “Measure” phase in which she analyzes the data gathered during feedback using well-established analytical frameworks. This phase would be an example in which “prediction logic” is used. Finally, during the “Learn” phase, the entrepreneur makes a decision based upon what she’s learned from the previous stages, whether to build product with the features from the prototype or build and test a new prototype with different features.
2. SEERS: Social, environmental, and economic responsibility and sustainability
The entrepreneurial leader is aware that while financial viability and sustainability are core to a successful business, social and environmental value are also inputs for decision-making. Again, this goes back to the need to consider the demands of all stakeholders, not just shareholders.
…entrepreneurial leaders scrutinize the common assumption that maximizing shareholder wealth will maximize value for the society at large over time. By juxtaposing short-term economic impact against long-term and wider societal, environmental, and economic impacts, actions that are technically feasible from a narrowly constructed economic standpoint can be challenged. ~The New Entrepreneurial Leader
The book explains that entrepreneurial leaders understand that creating environmental and social value in society can reduce costs, increase revenues, and reduce business risk. The authors show how management educators can teach the connection between these three sets of value through traditional investment analysis.
On a related note, I recently came across an article in FAST COMPANY that mentions an exhaustive study that surveyed 64,000 people in 13 countries to identify qualities they want in leaders. One of the report’s co-authors concluded that tomorrow’s leaders will be flexible, selfless and ready to collaborate because society is becoming more social and transparent.
…a new breed of innovative leader is profiting by envisioning business models with “multiple positive outcomes” for as many players as possible. ~ John Gerzema, in a FAST COMPANY article on 5/16/2013
3. SSA: Self- and social-awareness
At the core of entrepreneurial leadership is an individual’s deep understanding of him- or herself, the context in which he or she is operating, and his or her network of relationships. ~The New Entrepreneurial Leader
The co-authors discovered that entrepreneurial leaders cannot be successful if they do not have a very realistic and strong understanding of themselves in terms of their values, drives, background, capabilities and limitations. An entrepreneurial leader is self-aware and therefore able to shape social and economic opportunities that personally excite themselves and are connected to their strengths/background.
The following story is not from this book but from recent events. For an example of a leader who tried carrying out a mission that did not align to their background or capabilities, look at Ron Johnson who failed miserably as the leader (CEO) of JC Penney. In early 2013, Johnson was ousted as CEO of JC Penney after his disastrous attempt over the preceding year to reinvent the JC Penney brand. Some say he failed in large part due to his lack of ability to seek out customers’ opinions as well as his disdain for the buying behavior of a large segment of JC Penney’s customers. If this assessment is true, one could reasonably conclude that Ron Johnson set himself up for failure when he chose a mission that wasn’t aligned with his values, strengths, or background.
The authors’ goal in writing this book was to begin a conversation with management educators that suggests a way to reshape management education toward entrepreneurial leadership. I believe the authors have accomplished their goal. They very clearly and persuasively made the case that modern business leaders should consider the three principles as necessary in order to see success. The authors provide names of specific cases as well as discuss these cases in the book as to how they can be used to teach the principles. In fact, the book opens with a very compelling case of Clorox Green Works that drew me in with its intriguing story and nicely exemplifies much of what the rest of the book explores in further detail.
If I were to choose one flaw with the book, I would say that it is with how it lacks any mechanism for educators and readers to keep in the know on the latest advances of entrepreneurial leadership being taught in business schools. The book provides many great ideas as to how the principles of entrepreneurial leadership can be and have already been integrated into certain classes at Babson, but the authors don’t provide updates on their website of the latest advances on this front.
Although this book is directed towards management educators, I gained a lot by reading this as a business professional. If you’re a business leader or want to be one, you will benefit from learning in depth about the three principles that can transform you into an entrepreneurial leader. Successful leaders of yesterday adhered to principles that likely will no longer lead to success. By adopting some of the skills that make entrepreneurs successful, every business leader can improve their rate of success leading in today’s highly uncertain and even at times unknowable competitive landscape. This book is a must-read for anyone wanting to teach others or themselves how to be a successful business leader.
Click here to check out The New Entrepreneurial Leader on Amazon.com
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