Executives Say US Does Not Welcome Entrepreneurialism

Executives Say US Does Not Welcome Entrepreneurialism

Even as the U.S. steadily climbs its way out of a recession, mid-market executives have little confidence in the American economy. This, coupled with the country's relatively high taxes and regulations, leads these professionals to view the U.S. as increasingly less accommodating to entrepreneurialism, according to a recent Deloitte survey.

The study, which polled 652 senior executives at American mid-sized companies, found only 59 percent of respondents ranked the U.S. as the most accommodating country for entrepreneurs. This represents a 32 percent drop from how the same respondents have replied in years past.

"Mid-market companies are the growth engine of the U.S. and entrepreneurship is critical to their success," said Tom McGee, national managing partner of Deloitte Growth Enterprise Services. "The good news is that entrepreneurialism exists everywhere and all of the factors cited as inhibiting it can be addressed."

Defining entrepreneurialism
The majority of Deloitte's respondents said any company, large or small, can behave in an entrepreneurial way, which consists of being creative, different and unique and taking risks while accepting potential failure. Only 35 percent of executives said their companies had grown more entrepreneurial this year. They cited innovation to create entirely new businesses, enhancing products and services and discovering and penetrating new markets as the primary actions fueling their organizations. Respondents who didn't consider their companies entrepreneurial stated decision makers were too risk averse and stuck too closely to traditional practices, from business intelligence to budgeting processes.

Meanwhile, companies that fit the description of entrepreneurial are doing better. They have higher capital investments, generate greater profit margins and experience greater worker productivity, according to Deloitte.

Environment selection

An organization's willingness to venture into new markets, take risks and test new practices often depends on its economic and legislative environment. Of the survey respondents who did not rank the U.S. as the most accommodating country, 42 percent selected China, 26 percent said India and 21 percent chose Brazil.

These three countries ranked high on Deloitte's separate "2013 Global Manufacturing Competitiveness Index." While the U.S., Germany and Japan have been the kings of manufacturing for decades, they're now confronted with competition from these developing countries' booming specialization in the industry.

Factoring in manufacturing
The U.S. Council on Competitiveness president and CEO Deborah L. Wince-Smith said the decline in American manufacturing is a call to action.

"We need to better understand the highly complex forces driving the future of manufacturing and many of the structural changes reshaping the global economy," she said. "Emerging nations are growing fast and strong. Wise policies and practices could unleash American strengths, turbo-charge our manufacturing engines and raise technology commercialization to new heights – driving U.S. economic growth and job creation."

While the U.S. is ranked third by Deloitte's index, it's expected to drop to fifth place in just five years. However, as manufacturing is increasingly centralized around technology, the U.S. will retain some leverage over other nations. Meanwhile, countries like Brazil and India will eventually need to reconcile their growth with the demand for regulatory legislation and economic infrastructure.

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Comments

Proformative Advisor
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I agree that the headline represents a "half-full" approach. However it is very telling that perceptions have changed among the same population (paragraph 2). Finance has a greater responsibility in this environment, as we can quantify or attempt to quantify risk and reward. Internal entrepreneurship is a little bit of a contradiction as by definition my employees will be functioning outside of my policies and procedures if they are assuming risk. I want my employees to be productivity focused vs entrepreneur focused.

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To your point, it is important for employees to fully carry out their assigned responsibilities. However, they also have detailed knowledge of product or operations that inspire possibilities that are invisible to senior management. As a result, many innovation-focused companies have created mechanisms for employees to suggest new products, product lines, or markets for existing products.

Arguably the most famous intrapreneurial products are Post-It brand notes, the original Apple (well, it *could* have been an intrapreneurial product), and many Google features, like bus routes on their maps, their email system, and others.

In a slightly different vein, Toyota's "Kata" practice teaches employees how to think like process engineers. As a result of this highly structured method Toyota is very effective at leveraging line-level knowledge to improving line-level performance. Their line level workers are much more effective at finding improvements than employees at other companies. The result is that their cost of production is significantly less than their competitors... even those who try to implement some Kata techniques. They have, in essence, micro-innovations constantly being deployed in their factories. Sometimes these changes involve risk, sometimes big risk (e.g. the "andon" cord that allows an employee to stop an entire production line if they find a single defect). But over time, they are right much more often than they are wrong... and the result is nearly impossible to duplicate.

A company that can effectively combine the detailed knowledge held by line-level employees with the business/strategy awareness held by senior management can get the best of both worlds: good ideas are selected, investigated, and tested. In this type of company, "finance done well" has an enabling role of providing expertise in assessing the value of various ideas. I suspect there are very few companies where finance plays an active role in filtering and prioritizing ideas developed by line-level employees. Achieving successful cross-functional cooperation takes thoughtful design and smart management. In reading some of Gifford Pinchot's work, I've come across a few very clever designs from his work with various companies, organizations, and government agencies. It takes thoughtful effort, but the return can be substantial.

In any case, more about intrapreneurship here:
http://www.pinchot.com/2011/11/the-intrapreneurs-ten-commandments.html
http://en.wikipedia.org/wiki/Intrapreneur
http://www.cbsnews.com/8301-505125_162-51196888/great-intrapreneurs-in-business-history/

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Proformative Advisor
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As a finance person, stick to sound financial management of your projects. This will involve reviewing ROI's to determine what will benefit the company the most. I will say that we pay closer attention to government programs to determine what grants or incentives exist to generate additional growth.

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This article is disappointing because the sensational approach clouds and distorts the statistics from the Deloitte press release. For example, given that 59% of executives polled listed the US first among countries that support entrepreneurialism, an equally valid headline might have been "US Again Ranks Top in Support for Intra/Entrepreneurialism."

The big focus was the 30 point drop from last year's survey, but an analysis of percieved causes gets largely ignored. Some points from reading the Deloitte report give us hints about what execs might think the causes are:
- 59% say complexity of large companies make entrepreneurialism difficult
- 50% say uncertain economic outlook is the biggest obstacle to growth
- 60% say the tax environment is not accomodating to entre companies
- 57% say the regulatory env is not accomodating to entre companies

From this we see that there are both internal and external concerns raised -- internal obstacles rank more highly than the concerns about the taxes and regulation in the minds of senior executives.

Out of this data we might say a few things, but my takeaways are the following:

- we in senior management need to take more responsibility for reducing internal organizational obstacles to intrapreneurship (the proper term for "internal entrepreneuralism"), and this is largely in our own hands

- policy makers need to look for ways to reduce the unnecessary costs of regulations

The more interesting question for this community is what role do the Finance people in a company play in promoting intrapreneurship? How does it work at your company?

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The concept of "intrapreneurship" is new to me. I am curious to how your question will be answered by others. Perhaps an intrapreneurship environment is not welcome in many companies. My thought of this is that someone else built the business, thus they are holding onto the pride of their intellect, feeling they do not need the input of another employee regardless of experience.

You mentioned senior management in your takeaway. I will encourage readers that are not in a senior management position (such as myself) to continue presenting your ideas. Eventually someone will listen, either within the company, or someone you connect to through another avenue.

I am eager to hear more on the role finance people in a company play in promoting intrapreneurship.

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