U.S. Supreme Court Justice Potter Stewart famously
said of pornography that he couldnt define it, but I know
it when I see it.
One might very well say the same thing about entrepreneurship. We all
encounter entrepreneurs in our work. We recognize them when we see them.
But when pressed for a definition, we might find it difficult to come
up with a concise answer. What makes an organization entrepreneurial?
What are the distinguishing characteristics of an entrepreneur? Is entrepreneurship
a trait people are born with, or can it be taught and learned? A survey
of STERNbusiness diverse readership would undoubtedly yield dozens
of answers.
Of course, in todays economy, when no
market leaders status is secure and competition can rise from
myriad sources, the ability to act like an entrepreneur is crucial to
survival whether youre a car manufacturer or a university.
Indeed, in the lead article of this issue, Professor Ari Ginsberg, director
of NYU Sterns Berkley Center for Entrepreneurial Studies, examines
how managers in larger, mature corporations have focused on the important
role of entrepreneurship in creating opportunities for corporate growth
and renewal (p. 12). In fact, Ginsberg notes, all sorts of firms are
using corporate venturing to leverage their assets and capabilities
and create new businesses.
Of course, classic entrepreneurs are individuals
who start businesses from scratch, or take tiny enterprises and grow
them into something much, much larger. Thats why the trio of successful
entrepreneurs whose appearances at Stern are chronicled in this issue
are particularly appropriate. Taken together, the words of these three
CEOs constitute a sort of first-person manual on how to start, grow,
and re-start businesses. And there are some valuable lessons to be learned
from their experience.
An often overlooked component of entrepreneurship
is knowing when to sell. That frequently excruciating decision, after
all, can often mean the difference between survival and extinction.
Kenneth Cron (p. 2), who led the Uproar Network, an Internet-entertainment
start-up, through the dot-com shakeout, recognized the necessity of
joining up with a larger outfit and engineered the sale of his company
to Vivendi. While many of its independent rivals have been relegated
to the dot-com dustbin, Uproar is still alive and well.
The essence of entrepreneurship is seeing an
opportunity where others do not and making the most of your resources.
In 1994, upscale urban coffee shops were popping up like wildflowers
after a spring rain. But Andrew Stenzler (p. 6), who received his Stern
MBA that year, saw a niche. He founded Xando, Inc., which combined the
coffee house concept with a neighborhood bar. Most restaurants
get three usages out of their real estate, i.e. breakfast, lunch and
dinner, he said. We get five full day parts. The company,
since renamed Xando Cosí, now has an impressive 55 outlets.
What else defines an entrepreneur? How about
resilience? J. Peterman, co-founder and former CEO of J. Peterman Company,
was rejected by 100 venture capitalists before an advertisement in The
New Yorker helped coax an investor to fund his catalog of off-beat products.
The rest is history: the company grew rapidly, Peterman evolved into
a cult hero, and the firm ran into troubles and went bankrupt. But Peterman
himself was undeterred by the failure. Im presented with
another opportunity in life, he says. Peterman took some time
off, worked on a book Peterman Rides Again and, naturally,
has started a new company.
Theres also much to be learned by studying
those who wrote and thought about entrepreneurship. Take Pulitzer-prize-winning
historian Thomas McCraws profile of the leading theorist of entrepreneurship
Joseph Schumpeter (p. 18). Although he died a half-century ago,
Schumpeter is enjoying something of a present-day vogue. After all,
he coined the term Creative Destruction, a buzzword of the
New Economy. But the economists legacy was far greater than a
few catchy terms, McCraw argues. Schumpeter delved into history, sociology,
and psychology to make penetrating observations on the workings, motivations,
and effects of entrepreneurs.
In their article, Anthony Afuah and Christopher Tucci put some of Schumpeters
theory into practice (p. 24). The authors wondered exactly how one of
the great vehicles for entrepreneurship the Internet acts
as a force of creative destruction. They constructed a theoretical model,
which they then applied to three broad industry groups, defined by the
ways in which they use technology. Their conclusions may prove valuable
to managers and executives.
The relationship between patents and entrepreneurs has always been complicated.
Patents, after all, have long provided inventors and innovators a way
to protect their new products from imitation. On the other hand, patents
have also been wielded by their holders as a blunt instrument in warding
off potential competition. In the Internet economy, patents covering
business models have emerged as a topic of great controversy and litigation:
think Priceline.coms shopping system or Amazon.coms one-click
ordering method. William Greene provides some valuable perspective on
the history of business-method patents (p. 30).
Aside from the United States Patent and Trademark Office, theres
another government agency that has occasionally proved something of
a challenge to entrepreneurs: the Federal Communications Commission.
Among other responsibilities, the FCC manages the airwaves, which have
been a platform for entrepreneurship dating back to the first radio
stations in the 1920s. And analysts are placing great store in the publicly-managed
spectrum as the host to wireless and other next-generation Internet
applications. But Lawrence White (p. 42) argues that the FCCs
spectrum management philosophy, rooted in thinking that may have made
sense in the 1920s, is outdated and serves to stifle entrepreneurship
and innovation. White proposes a radical, but logical alternative: regulators
should think of the airwaves as another form of real estate, and enact
a regulatory regime similar to that which governs the use of property
in this country.
Its precisely this sort of entrepreneurial thinking that makes
this issue of STERNbusiness an enjoyable, interesting, and useful read.
Daniel Gross is editor of STERNbusiness.