Why is it difficult for existing businesses to be entrepreneurial?

Question

I was just wondering if anyone knows why is it difficult for existing businesses to be entrepreneurial? Thx

Answer 1

This is kind of a human economics question, so really it comes down to common sense, like most econ does.

Entrepreneurs are people who come up with new ideas, try new things, and take risks. This is important when one is trying to establish oneself, but I would imagine that it's difficult for businesses to maintain such a trend for two reasons:

First, once a business is successful, it probably isn't interested in taking risks that could compromise the success it has already found. (How much can be gained vs. how much can be lost.) This is why big, monopolistic companied like Microsoft don't think as much as they should about R&D. If what they're doing gets them money and they don't have a lot of competition, why change it?

Second, entrepreneurs can get lost in the buerocracy of a big business, which may have strict guidelines and managers without a lot of foresight meant to prevent idiots from making easily avoidable mistakes, but with the side effect of squashing any entrepreneurial instinct in their workers.

Keep in mind that this is mostly theory with supporting bits and pieces from the high school AP econ class I took a while back. But it's the best I can do without expertise and a textbook.

Answer 2

Long term growth can only come from finding ideas that result in new products and processes that allow a company to more deeply penetrate an existing market, or that reach new markets and this requires entrepreneurship. But like all other approaches to business strategy entrepreneurship has its own unique challenges to be overcome, especially when you try to apply it in an existing organization with its own well established sense of values and processes. There are many environmental factors that can prevent your people from thinking and acting innovatively. To think innovatively of course a manager must think differently than currently accepted wisdom, yet some company value systems and strategies can crush innovation before it starts. There are many such factors that may need to be changed before your company can become a successful innovator. Creating new entrepreneurial organizations, or instilling that entrepreneurial spirit into an existing company is a difficult task and one that usually requires much preparation and significant effort. Didn’t it take Herb Kelleher more than 25 years to turn Southwest Airlines into a significant force in the air travel business? So too the road to success for Fred Smith at Federal Express was anything but overnight. Even mighty Intel struggled with massive setbacks in its business that forced them to think beyond their existing products and markets. The story is the same wherever you look at real entrepreneurial success. Clearly the lesson is that turning innovation into continuing business profits requires diligent preparation, much analysis and a long term commitment. Perhaps this conclusion is best left to the words of Tom Stemberg founder of famed retailer Staples who said: "the single greatest myth about entrepreneurs is the swashbuckling, seat-of-the-pants image. Most great entrepreneurs are extremely analytical . . . calculating the downsides and the risks very, very carefully."

Answer 3

Ever heard the saying, "You can't teach an old dog new tricks?" That's reason number one. They get stuck in a rut.

Additionally, if they've made a name for themselves with a certain product, the public may not react well to new ideas. People are creatures of habit.