Of course, the very same argument could be applied to venture capitalists, whose interests may not always coincide with those of the entrepreneurs they back. Then, too, Sevin and Rosen are venture capitalists and, as such, are hardly disinterested observers of the trend to form alliances, with which they find themselves in competition.
But perhaps this debate misses the point. After all, planners at large corporations are well aware of the dismal history of corporate venturing and of the potential conflicts between the participants in an alliance. The fact is, despite the pitfalls, they continue to seek such alliances at an ever-quickening pace.
TREND OR FAD
So what finally does all this add up to? Is the new spirit of entrepreneurism simply the current corporate fad, or do its roots go deeper? Has there been a fundamental shift, a change in the fabric and structure of American capitalism?
Allan Kennedy, co-author of Corporate Cultures, a book that anticipated the trend sees it as part of an historical movement. "My perspective is that we are looking at an historical wave crashing on a beach that formed in the early days of the Industrial Revolution."
Until the 1920s, says Kennedy, workers were generally viewed as cogs in a machine. Then came the first attempts at decentralization, which have since recurred periodically, each time taking the process of fractionalization a bit farther. Now, he says, both academic research and empirical evidence are leading to the same conclusion: The smaller the business unit, the better the results. In other words, entrepreneurism has taken hold in large par because people have noticed that it works.
At the same time, says Kennedy, big corporations have been feeling internal pressure to create entrepreneurial work settings. Some of that pressure comes from an increasingly wealthy work force. As Kennedy points out, two-income families can be choosier about things like work environment. A company that does not pro vide the right atmosphere and incentives is liable to start losing key employees.
Kennedy disagrees; moreover, that envy is a necessary consequence of attempts to promote the entrepreneurial spirit in large corporations. About 20 years ago, he notes, James J. Ling spun off parts of LTV Corp. as a financing ploy, and the effect was not to generate envy, but rather to create incentives for managers. A similar phenomenon can be seen today in the leveraged-buyout trend and the attempts of various large companies to spin off "overhead" departments into freestanding economic entities. Kennedy notes that a recently formed group at Control Data Corp., Control Data Business Advisers Inc., now has a mandate to generate a progressively increasing portion of its revenues -- ultimately, 50% or more -- from outside sources. He expects that major corporations will even begin to spin off their personnel departments, and that, in general, operations traditionally viewed in terms of cost will increasingly be seen as potential profit centers.
If Kennedy sees corporate entrepreneurism as the crest of a wave, other observers view it more as the arc of a pendulum. James Brian Quinn at the Amos Tuck School of Business Administration at Dartmouth College, an expert on American industrial innovation, notes that management strategy tends to swing between centralization and decentralization. "If you are in an expanding market, as we were until the late 1970s," he says, "you tend to experiment on lowering costs of products you already have." This means looking for economies of scale, which may, in turn, demand a rational analytic model of management. On the other hand, says Quinn, when the market starts to turn down, as it did in 1981 and '82, two things happen: You turn back from economies of scale because you don't expect the markets to grow rapidly, and you look for more radical solutions. And "you can't get that with large units."
Market conditions aside, Quinn also notes that some businesses never lend themselves to entrepreneurial structures and strategies. "To put it bluntly, the strategy of Bell Labs has to be different from the strategy of Hewlett-Packard. Bell's products are supposed to be in place and competitive for 50 years. Similarly, a pharmaceutical company has to put a product in the market that is very safe and very effective, and so you have to centralize testing and the like. Therefore it's partly in the nature of the strategy and the product itself that centralization is appropriate or inappropriate."
In a similar vein, Bill Buster of NCR observes that "most companies in the U.S. and around the world were in a more centralized way of doing their business two years ago . . . because that was perceived to be the most logical and most effective business management process you could come up with. I have no doubt that that will happen again sometimes. . . . I don't think that there is any structure that is appropriate to all times."
But for now, at least, big business has discovered the tremendous liberation of human energy that flows from an entrepreneurial setting. The pendulum has not yet reached the apex of its swing.
It is worth remembering, moreover, that a pendulum does not just swing; it also proceeds. With each swing of the management pendulum, the model of decentralization has become more and more entrepreneurial. Experience with the productivity and inventiveness of people working in small, highly motivated operations seems to have had lasting effects in corporate America. Perhaps this is what the entrepreneurs have given large corporations -- proof of what people can accomplish when treated as "individuals rather than imbeciles," in the words of Allan Kennedy. And this raises a question as to whether we will ever totally return to large-scale, highly centralized, rationally managed corporate paradigms.
