* * *
Can Large Companies Foster Entrepreneurship?
Inc.: Back in the 1980s we heard a lot about "intrapreneurship," but it all seemed very faddish. Now that the hype has died down, can large companies really foster entrepreneurship?
Drucker: Of course it's possible. Quite a few do it. And many midsize companies are even better at it. But it's different from what most books mean by the term entrepreneurship. Most books take their cue from the last great entrepreneurial period in Western history before ours -- the 60 years before World War I. All our major institutions, not just our business institutions, were created and shaped in that period.
The period began with the Great Exhibition, in London, in 1851, which ushered in the Second Industrial Revolution. The 1850s saw William Henry Perkin, in England, invent the first aniline dye and with it the modern chemical industry.
That was the decade that saw Werner von Siemens, in Germany, invent the first electric motor and with it the modern electrical industry. That was the decade that saw the triumph of Cyrus McCormick's reaper and with it the invention of mechanized agriculture. That was the decade that brought the first transatlantic cable and the first regular transatlantic steamship service. That was the decade in which Bessemer, in England, invented the steelmaking process, and the brothers Pereire, in France, founded the CrÈdit Mobilier and with it modern finance.
From that point until 1914, we had a major new invention every 14 months or so, each immediately creating a new industry.
* * *
Inc.: How was that period of innovation different from today's?
Drucker: All those new industries moved into a vacuum. There were no large corporations when the railroad in this country became one. And there was no competition. The railroad didn't displace anybody, didn't cause any dislocation. But now the world is full of organizations. And we're in turmoil because so many of the organizations whose roots go back 100 years or more are not going to survive.
* * *
Inc.: What does that mean for entrepreneurship in large companies?
Drucker: The large organization has to learn to innovate, or it won't survive. For some companies that means reinventing themselves. Increasingly, large companies are growing through alliances and joint ventures. Yet very few of the big boys know how to manage an alliance. They're used to giving orders, not to working with a partner, and it's totally different. In an alliance or a joint venture, you have to begin by asking, "What do our partners want? What are our shared values and goals?" Those aren't easy questions for somebody who grew up at GE or Citibank and is now at the top or near the top of a huge worldwide enterprise.
But innovation also means changing your products and services to keep up with markets that are changing faster than anybody has ever seen. Look at what's happening with banks. There are only a few large banks today in this country that make a profit out of doing the things banks traditionally do -- commercial loans or deposits, for example. Banks are making profits out of credit cards, ATM fees, currency trades, and mutual fund sales. To stay in business, the large organization has to innovate.
* * *
Inc.: But can large companies foster entrepreneurship?
Drucker: They have to, to compensate for the difficulty they usually have learning how to work in a partnership or alliance. What do they do? They set up a unit internally that behaves quite differently from the rest of the company. The more successful the unit, the more difficult it is to make sure that the large company doesn't put the same expectations on it as it does for the rest of the company.
When it's a new venture, whether it's outside or inside the business, it's a child. And you don't put a 40-pound pack on a 6-year-old's back when you take her hiking.
* * *
Inc.: What are some examples of companies that have been successful at internal entrepreneurship?
Drucker: There are companies that are good at improving what they're already doing; the Japanese call this kaizen. There are companies that are good at extending what they're doing. And finally there are companies that are good at innovation. Every large company has to be able to do all three -- improve, extend, and innovate -- simultaneously. I don't know of any large companies that can do that yet. But they're learning.
* * *
The Rise of Social Entrepreneurship
Inc.: Could you step back and summarize your views about social entrepreneurship?
Drucker: First, it's as important as economic entrepreneurship. More important, perhaps. In the United States, we have a very healthy economy but a very sick society. So perhaps social entrepreneurship is what we need the most -- in health care, education, city government, and so on. Fortunately there are enough successes around so that we know it can be done -- and also how to do it.
* * *
Inc.: For instance?
Drucker: You have to start small -- the big cure-alls never work. That was the problem with President Clinton's health careÑreform plan. Now we are experimenting in health care all over the lot, and the outline of a new American health-care system is slowly emerging out of literally hundreds of local experiments. We still talk about big, ambitious, nationwide educational cure-alls, yet in a lot of places local schools -- public, parochial, and private -- are having successes based on local entrepreneurs. And we know that the American public -- especially the young, educated, double-earner family -- is ready to support social entrepreneurship, especially as volunteers.
