First, all companies were once entrepreneurial ventures. Entrepreneurship is a constant source of new ideas and new competition for incumbent firms, no matter how large they are. Skype is now a major player but was once a startup. Corporations need to watch innovation and competition from new ventures.
Second, entrepreneurship often yields an alternative form of R&D for corporations. The organizational design of a startup often yields better innovation than that of a large corporation, so many important new advances do not come from [large] corporations. But those firms often acquire the technology or new ventures. Cisco, for example, has long employed a strategy of innovation through acquisition of creative new startups.
Finally, corporations have to try to be as innovative as they can to evolve and survive. Many of the principles of entrepreneurship are relevant for large, mature corporations too, even if they play out slightly differently. Certainly, the academic principles are the same. For example, I teach a course on organizational design, and a key emphasis is on how that design affects innovation and risk management. I teach those principles about both mature corporations and new ventures at the same time, as the ideas apply to both.
Yes and no. There are many things that are very difficult to teach completely in a classroom, as you have to experience them personally. Leadership and managing people are two other examples.
However, we can and do complement personal experience by teaching students how to think about and learn from their experiences in more systematic and rigorous ways. One can observe leaders in practice, but one can also benefit from having academic experts and classmates talk about and debate general principles. In addition, a classroom gives the student access to many people with varying experiences, a rich source of additional data.
In the area of entrepreneurship, there is a great deal of useful academic research, for example on technology strategy, product design, marketing, and entrepreneurial finance. We teach courses in all of these areas.
Entrepreneurs need a lot more than a good idea. They need to understand basic accounting, finance, marketing, operations, organizational design and general management. An MBA is often a perfect complement for someone who has a good product idea, because it teaches the other skills needed to execute the plan, work effectively with investors and partners, etc.
Yes. Innovation is a broader idea. A company can be innovative even without developing new products or businesses. Good organizational design leads to large and small innovations of all kinds, such as continuous improvements in quality, costs or customer service. But there is also overlap. Innovation inside a company can lead to new products and market segments as well, very much like traditional entrepreneurship.
Our program is an example. We founded the very first Executive MBA program. It was a new “product” that opened up a new segment in our “industry.”
I would have to say that perseverance is probably one of the most important. Taking an idea and refining it, and building it up step-by-step – usually without funds and while doing a full-time job – is hard. It takes patience and resilience. It is not easy to get funding, and the entrepreneur needs to be able to take rejection and not give up.
Also important is the ability to work with others and cede some control. Most entrepreneurs want to run their companies their way. However, investors usually will not permit that. They have their own experience – usually more than the entrepreneur – and are putting in their own capital.
Finally, a good entrepreneur needs to be good at execution, particularly in managing people. Assembling and keeping together the right team is essential to getting the venture to start. Once that happens, scaling up and evolving the organization successfully seems to be a major hurdle for many new ventures.
One benefit is that it provides a “safe place” to try out ideas, make mistakes, and say stupid things in public without it harming the venture. It provides the ability to practice things like presentation skills, and refine business plans and financial projections, before subjecting them to the rigors of the real world. Because the stakes are low, mistakes are not costly, so students are able to take more risks. They are also able to move up the learning curve by practicing.
Another benefit is collaboration with classmates and teachers. The student gets to share new ideas, learn different perspectives, and enjoy insights that come from combining different pieces in unexpected ways.
Yet another benefit is access to potential business partners. Many of our students end up working together on new ventures after they graduate. An MBA classroom includes people with a wide variety of skills, experiences and connections that can be very useful to an entrepreneur.
How does the globalization of business and the shrinking of borders work for or against entrepreneurs?
Globalization complicates because a new venture may have to think about how to operate across borders. That is a complex issue involving legal, tax, accounting, intellectual property and cultural issues. Most industries have been affected to some extent by globalization, so it is likely that a successful new venture will have to eventually try to internationalize, or will face new entrants mimicking the business in other countries.
Globalization can also be an opportunity. One simple way is to take a business idea that has been successful elsewhere and implement something similar in a country that does not yet have that type of business. Another is that it greatly expands the potential for a successful business. For instance, eBay was highly successful in the US, but was also able to open up divisions in other markets.
Our program is highly global. We operate on three campuses – Chicago, London and Singapore. Our students come from almost every corner of the globe, flying to these three campuses to take classes. Thus, our students are deeply involved in globalization in their work, and they bring their experiences to the classroom. The depth and breadth of international experience, networks and sophistication in one of our classrooms is astonishing. That, in turn, helps our professors learn from globalization. We have to adapt our classes to meet the needs and expertise of our students. Our professors use international cases and examples wherever possible. We also have courses such as Global Economics.
We design our program to emphasize this. Though the students are on three different campuses, they are part of a single annual cohort. They take classes that mix the three campuses four different times throughout the program, starting with the very first week. All students spend at least some time at each of the three campuses. We want to mix the students and encourage them to build relationships and networks with each other, and learn from each other.
Professor Michael Gibbs is Faculty Director of Executive MBA programs at The University of Chicago Booth School of Business’ Chicago, London and Singapore campuses. He is also Clinical Professor of Economics and studies the economics of human resources and organizational design. He recently coauthored the second edition of Personnel Economics in Practice. Professor Gibbs’s research has been published in the Quarterly Journal of Economics, Industrial & Labor Relations Review, Accounting Review, and other journals. Professor Gibbs is a research fellow of the Center for the Study of Labor in Bonn and on the boards of Cummins Western Canada and Friends of the Orphans.
In 2007 Professor Gibbs received the Notable Contribution to Management Accounting Literature from the American Accounting Association. He has received two Hillel Einhorn Excellence in Teaching Awards from Chicago Booth.
Professor Gibbs earned a bachelor’s degree, master’s degree, and doctoral degree in economics all from the University of Chicago.