Recently, I came across a very informative HBR blog on corporate entrepreneurship written by Chris Zook, partner in Bain & Company’s Boston office and co-head of the firm’s global strategy practice. The blog based its narrative on Chris’s research focused on how large companies find their next wave of profitable growth. Here is an excerpt from the blog:
Bain’s analysis shows that large companies that leverage the strengths of their strong core business have on average about a 1-in-8 chance of creating a viable, large-scale new business. Compare that to the typical entrepreneur incorporating a start-up. Bain’s research concludes that of all new businesses registered in the US, only about 1 in 500 will reach a size of $100 million—and a mere 1 in 17,000 will attain $500 million in size and also sustain a decade of profitable growth.
The author also cites a Bain research paper that he co-authored “Harnessing the power of the Founder’s Mentality” that states the prerequisites for the corporates to achieve such a growth as: (1) a sense of insurgent mission, (2) obsession with the front line (an intellectual curiosity about every detail of the customer experience and of how everything in the business works), and (3) an owner’s mindset (antipathy towards bureaucracy and bias towards speed and action).
Indeed, during my own encounters with many entrepreneurs – individual and corporate alike – I noticed many facets of what Chris calls the founder’s mentality. But I have also noticed that this needs to be backed by a builder’s vision for an enterprise “to sustain a decade of profitable growth”. Business leaders can be vastly different in their approach towards building a business based on the timeframe they attach to their insurgent mission. I call it the depth of entrepreneurial vision. It is the depth of vision that dictates many of the strategic choices that a business leader makes. These choices may relate to making long term investment in people, building a strong organizational culture, or investing in technology & information systems. Some business leaders are builders – they believe in building a long sustaining business and some are riders – they target to ride on a wave in pursuit of a quick market-pleasing growth spurt or a profitable exit. Many of today’s technology start-ups tend to be the riders but there are many examples of riders in the large-cap corporate world as well. Financial meltdown of 2008 would not have happened had the Big Banks decided to build instead of ride! Leaders with the longer depth of vision – a builder’s vision – tend to build viable, large-scale businesses such as Hewlett Packard, GE, Microsoft, Apple, and Facebook.
Without judging whether one approach is better than the other, it is safe to say that if entrepreneurial success is to be judged on the basis of a long sustaining valuable business, both, the Founder’s Mentality and the Builder’s vision, are equally important.