Re-Entrepreneuring

How Organizations Can Reignite Their Entrepreneurial Spirit

Charles-Edouard Bouée, Stefan Schaible

• Publisher: Bloomsbury Business
• Year: 2018
• Print ISBN: 9781472948243
• eBook ISBN: 9781472948250
• Edition: 1
• Topic: Business
• Subtopic: Entrepreneurship
• Index: Business

Re-entrepreneuring shows how organizations must re-invigorate entrepreneurial spirit at all levels to create new value and stay ahead in turbulent times. It has long been assumed that, in the development of any organization, the time for entrepreneurial activity is right at the beginning. Once an organization is established, qualities that were virtues in the organization's start-up and early stages can become vices, and the entrepreneurial founders must cede control to professional managers who can nurture the fruits of their original vision more efficiently. One unintended consequence of this assumption is that large, established organizations tend to be entrepreneur-free zones. Entrepreneurial thinking is tacitly discouraged because it can create novelty, and novelty is a threat to established organizations with large market shares. Re-entrepreneuring argues that organizations must revive the entrepreneurial out-look of their founders in order to survive in today's market. In an organization that encourages and nurtures an entrepreneurial outlook, everyone has the potential to unleash their inner entrepreneur and bring new and dynamic ways of thinking into their work environment. It has more to do with the ways of thinking encouraged by the organizational culture than by any inherent differences in talent or aptitude. The solution presented in this new book from ROLAND BERGER, edited by Charles-Edouard Bouée and Stefan Schaible, is piecemeal yet targeted 're-entrepreneuring'. With the help of international case studies and first-hand testimony from business leaders, the authors show how the entrepreneurial approach can be applied to any organization and at all levels, in order to spark innovation, remove operational obstacles and – ultimately – to create new value.

1

Reculer pour mieux sauter

All companies begin with an entrepreneurial act, but successful companies usually lose that youthful impulse over time. As the firm becomes an institution, managers’ concerns typically shift to preserving the company’s franchise. They begin to pursue a more conservative strategy, doing more of whatever won them their initial success. They add tangible assets (plant, buildings, cash, inventory, etc.), develop intangible assets (intellectual property, reputation, structure and culture), and extend their distinctive ecosystem of like-minded partners and vendors.

Sooner or later, however, the times in which the company found its original niche begin to change. Maybe the market declines and a set of key customers move on. Maybe new competition reduces the profitability of the old business model. Or maybe technology eliminates the profitability of an entire industry, destroying the value of formerly prized assets and expertise. In any case, executives realize that their winning formula does not seem to win quite so often any more.

Now the company must reinvent itself. If it is to thrive again, managers will need to find some entrepreneurial instincts within themselves or recover a dormant entrepreneurial impulse from the company’s youth. Then, looking at their current assets and liabilities, and after thinking through the true mission of their business, they make a decision about where the firm will go from here. We call this process re-entrepreneuring.

The French saying reculer pour mieux sauter (step back, to go forward more strongly) sums up the idea. To cross a stream, you don’t step into it; you retrace your steps, run at it and jump across. Similarly, we find that despite all the new opportunities created by technology, the solutions to the key problems the organization faces today or anticipates facing tomorrow often lie in its past. In particular, they lie with those entrepreneurial qualities that were considered relevant at an earlier stage of the organization’s development but have atrophied in maturity.

Entrepreneuring by its nature is a youthful act. Howard Stevenson, Emeritus Sarofim-Rock Professor at Harvard Business School, defines ‘entrepreneurship’ as a ‘pursuit of opportunity without regard to resources currently controlled’. Entrepreneurs ‘see an opportunity and don’t feel constrained from pursuing it, because they lack resources. They’re used to making do without resources’. (1.1)

Re-entrepreneuring is an older and wiser version of the same act. In many ways, it is a braver one, as the leaders making the new bets understand more clearly all that is at risk. It entails nothing less than the innovative realignment of an existing set of assets and processes in pursuit of a new opportunity or to create new value.

As we shall see in the following case of TUI, the German travel giant, sometimes companies survive this phase by acquiring new assets. Other times, as with Apple and the iPod, they win that new lease on life by creating new products. Either way, the essential quality of re-entrepreneuring is that it is not a matter of thinking ‘outside the box’ – it is about thinking with the box, applying the company’s existing assets and distinctive qualities to a new purpose, using the box itself as a stepping stone that will carry the company across a difficult time to a better time.

The emergence of TUI

The Great Depression tanked many businesses, but those that survived went on to prosper. One unlikely survivor was Dr Tigges-Fahrten, a holiday company founded in 1928, just before the stock market crash. The recession was not the best of times for leisure and entertainment businesses, but Tigges-Fahrten sailed through by smartly focusing on budget tours. It wasn’t smooth sailing all along though, and the business had to go into a hiatus during World War 2. Despite the adverse circumstances, it continued to adapt its strategy and by 1953 it had organized its first air tour and, over the next decade, it had diversified well beyond Europe and organized its first world tour.

At this time, the firm came to realize that the future of tourism was in air travel, and that this would demand a different kind of business organization. Buses were cheap. Airplanes were not: air tours were cash-intensive because of the need to pre-book seats for chartered flights. But to succeed, substantial financial and organizational resources would be needed to operate on a scale the market had begun to demand. Only a larger company could maintain the necessary level of working capital to keep the business afloat. To prepare for these new conditions, Tigges merged with Touropa and Scharnow-Reisen and, later, a long-standing joint venture partner, Hummel Reisen. In 1968, the four companies rebranded themselves as ‘Touristik Union International’ (TUI).

The team designed a robust management structure that would play to the strengths of the constituent companies’ leaders, and the TUI group adopted a full-range approach to cover all segments of the market.

Each constituent company concentrated on those segments in which it had a competitive advantage – Tigges: study trips, expeditions and adventure tours; Hummel, Scharnow, Touropa: sport trips; Scharnow, Touropa: health and convalescent trips. The aim was to sharpen the focus of the group companies, reduce competition between them and, by working together, offer a range of products that covered the most lucrative segments of the market.

By adopting the holding company model, TUI aimed to achieve substantial cost savings by taking over administrative tasks from the four companies so that they could focus their attention on the operations. Central units were formed for accounting, review, tax and materials purchases. A group marketing department, supplying market research, advertising, and sales promotion services was also developed. As these services did not differentiate each company’s offering, they could be centralized to save costs.

But differentiation was still necessary in the product ranges, and so the managing directors of the individual brands retained the responsibility for their tour line-ups. In this way, TUI distinguished between ‘initial’ (entrepreneurial) creativity, which was the responsibility of the group companies, and ‘selective’ creativity, such as brochures and advertisements, which fell under the purview of central management.

The merger worked. In 1969, annual customer numbers exceeded a million for the first time, and services and product lines were extended.

Over the next two decades, TUI continued to expand its portfolio of high-quality travel products and services. In 1970, it formed its travel services division, TUI Service, and substantially increased the range of services offered by its operators. The broad spectrum of packaged and individual trips by air, train, car and ship was complemented by new holiday formats ranging from club holidays and stays at country farms, to trips to nudist beaches for sunbathers, tennis and sport centres, and a special youth travel programme, ‘twen-tours’.

The company launched a joint venture as well that would prove significant in the coming years. In 1971, TUI, Germany’s airline, Lufthansa, and the Bundesbahn (the state-owned rail network) formed a joint venture to develop a new electronic booking system.

In the early 1970s, TUI also stepped into the hotels and hospitality business by laying the foundations of the Robinson Hotels brand along with Steigenberger Hotelgesellschaft. The first Robinson Club – the Jandia Playa – was set up in Fuerteventura in 1971. Then in 1972, TUI acquired Iberotel, the Spanish hotel chain.

This ‘merger strategy’ proved to be the right one. By creating communalities of challenges and solutions, it allowed TUI to stand out from the mass in a more and more competitive market. Several decades later, TUI has changed, of course. But it is still operating in this ‘re-entrepreneuring’ mode, relying on effective governance and efficient back-office functions, and with a strong focus on content, at a time when tourists are looking for authentic and personal experiences.

Another company that has been strong with its re-entrepreneurial instincts is Apple. Apple entered its ‘re-entrepreneuring’ stage shortly after founder Steve Jobs walked back into Apple’s headquarters in January 1997, 12 years after being fired as CEO. (1.2)

First, he took a step back. He cut Apple’s product line back by 70 per cent, eliminating problematic products such as the Newton, a precursor of the Palm Pilot and the other Personal Digital Assistant electronic note-keepers, and cut the workforce as well by about 3,000 employees, out of a total of 11,000. ‘Deciding what not to do is as important as deciding what to do,’ he later explained. ‘It’s true for companies, and it’s true for products.’

Then, he took a surprising step forward, one that would transform both the computer business and the entire music industry – but not without a little wobbling on its back foot first.

In the late 1990s, the popularity of online music exploded, as consumers began to take advantage of the digitalization of music that had begun in the 1980s with the mass adoption of the compact disc (CD). College students, and later other music listeners, learned to share music files. Napster and a number of file-sharing sites attracted millions of followers. In the year 2000 alone, 320 million blank CDs were sold in the US, which consumers used to store music they had ‘ripped’ from Napster and other file-sharing sites. A new era in digital entertainment had begun, but without Apple.

The catch-up campaign began with the addition of a CD burner on the iMac, but that was not enough. Jobs wanted an MP3 player. To the techno-zen culture nurtured by Jobs, the MP3 players then on the market were clunky, ugly and seriously lacking in storage capacity. Jobs and his colleagues listened to a lot of music and knew what ‘good’ would look like in an MP3 player: elegant, easy to use, and capable of storing a 1,000-song playlist.

As he had with the Macintosh computer nearly 20 years earlier, Jobs and his team looked at the clumsy, inelegant technology and saw a transformational opportunity.

This time around, however, they had more than the eye for design and obsession for quality they had in 1984: they realized that they already owned some of the key elements of an entire new music ecosystem.

Apple already had the key component in FireWire (an IEEE 1394 serial port), which it had developed a decade earlier to transfer files from one device to another. It was just a matter of reaching back, and deploying it in new applications.

Apple had also already launched its own music service, through another act of re-entrepreneuring: the company had found a music file-sharing start-up run by three members of its alumni network. They recognized that SoundJam could be designed to be more attractive than Napster and the other pirate music sites. Apple acquired and then rebranded SoundJam as iTunes in early 2001, releasing it as an application free to all Mac users.

It also went beyond the other file-sharing sites at the time by creating a legal market for online music that hadn’t really existed before, giving Apple a new role in the music business as a retailer.

The decision to develop what became the iPod was a violation of a time-honoured management axiom that a company should stick to its knitting. But Jobs and his team understood that Apple’s true value was not as a computer company, but as a maker of consumer-friendly digital tools. By going back to Jobs’ initial unde...

Table of contents

• Cover
• Half-Title Page
• Dedication
• Title Page
• Contents
• Preface
• Introduction
• 1 Reculer pour mieux sauter
• 2 Re-start: Finding opportunities in discontinuities
• 3 Re-structuring: New configurations, new beginnings
• 4 Re-form: Re-entrepreneuring in non-entrepreneurial contexts
• 5 Re-conceiving: Finding value beyond the core
• 6 Re-model: Renew your business model before you have to
• 7 Re-organize: Chaotic environments, agile structures
• 8 Re-envision: Imagining and creating limitless possibilities
• 9 Own the future: Don’t ask what tomorrow might hold. Imagine it. Make it happen.
• 10 Epilogue
• Notes
• Sources
• Index
• Copyright