By Danna Greenberg, Kate McKone-Sweet, & H. James Wilson
In recent years, leaders are finding themselves managing through historic levels of complexity. This complexity stems from a diverse set of environmental shifts. There are the continuous increases in globalization and outsourcing. Ongoing technological changes demand leaders to consider the impact of virtual communication and social media on all aspects of their organizations. The scrutiny brought on by the recent financial crises and the demands for better stewardship of our planet is requiring leaders to rethink why and how they build their organizations. Finally, the changing demographic landscape means that leaders and organizations must find ways to create economic opportunities for a rapidly growing population in developing areas of the world. Demographic change in the developed regions also brings a distinct set of challenges; for instance, in North America, organizations must motivate and engage the millennial generation who will face greater uncertainty in their careers than that of their parents.
When amassed, these contextual changes mean that today’s business environments aren’t simply uncertain, they are unknowable. In uncertain situations, leaders can still rely on their analysis of the past or available data to make appropriate decisions for the future. Yet in an unknowable world, neither past experience nor data offer much reliable insight into the future. When the situation is characterized by unprecedented levels of complexity and uncertainty, analytic calculations become nothing more than guesses as they are often based on inaccurate assumptions around controlling the future (Schlesinger & Keifer 2010). While leaders can use numbers and historical information to guide decisions in an uncertain environment, the only way to lead in an unknowable environment is through action.
To successfully lead in both uncertain and unknowable situations, we need leaders who rely upon a fundamentally different rationale for the existence of business and are leveraging a different logic of business decision making. Profit maximization and shareholder value creation, long considered an adequate basis for businesses, are no longer sufficient. Maximizing the common good and minimizing social injustice and environmental impact is the order of the day. Similarly, the logic of business decision making that emphasizes prediction and analytics as the way to handle “uncertainty” must come to grips with how to discern and respond to “unknowability” as well. In our recent survey of more than 1,000 global organizations, we found that leaders are not simply trying to “analyze their way out” of uncertainty through traditional predictive, quantitative models; rather they are “acting their way out” by behaving like startup entrepreneurs and redefining the context (Wilson & Eisenman, 2010). In the future, we will need leaders who can shape and make opportunity amidst social and economic unknowability.
We refer to this conceptualization of leadership as entrepreneurial leadership. Through an understanding of themselves and the contexts in which they work, entrepreneurial leaders act on and shape opportunities that create value for their organizations, their stakeholders, and the wider society. Entrepreneurial leaders are undiscouraged by a lack of resources or conditions of unknowability as they experiment with new solutions to old problems. These individuals do not cynically or lethargically resign themselves to the problems of the world. Rather through a combination of self-reflection and resourcefulness, they find ways to inspire and lead others in taking on seemingly intractable problems. Perhaps most importantly, entrepreneurial leaders are needed in spaces far beyond the traditional boundaries of business organizations and the discipline of entrepreneurship. Entrepreneurial leaders are needed to introduce new products or processes into established organizations, to establish social ventures and build engagement in social and political movements, and to start for-profit and nonprofit endeavors.
The good news is we don’t believe entrepreneurial leaders are individuals who are born with this set of characteristics; rather, they have developed unique mental models that support the power of human action to create and build a better world. This unique mental model, which we label as Entrepreneurial Thought and Action (ET&A™), can be taught. It can be taught in business schools, it can be taught in executive education courses and in corporate leadership development programs, and it can be taught through mentoring and coaching.
To help you better understand (ET&A™), we use the case of Clorox and the Launching of Green Works™ product line to illustrate entrepreneurial leadership in action.
Entrepreneurial Thought and Action: A New Mental Model for Leadership
The unfortunate reality is today’s models of management education and development are not likely to teach students to use the knowledge and approach that we see with Mary Jo Cook and Clorox. Mintzberg (2004) argues that management education is too analytical and focused on concepts. Without teaching management students to reflect on their actions and connect to their passions, we are unlikely to teach students to engage in the entrepreneurial leadership that we see in Sengelmann and Cooke. Other criticisms of management education have stressed the need for business schools to teach students to consider objectives beyond just profit maximization and shareholder value (Khurana, 2007). As such, we join a large group of esteemed management education scholars who are calling for reform in management education practices (i.e. Khurana, 2007; Mintzberg, 2004; Moldoveanu & Martin, 2008).
While criticism of managers and management education has been widespread, clear solutions to creating a new path for leaders has not been articulated. Actions, such as the introduction of an MBA oath, increased emphasis on ethics, leadership, and corporate social responsibility, and the use of design thinking, are all important steps in the right direction—but they are just that: steps. Leaders need to be taught a revolutionary new model of thinking which begins with a fundamentally different world view of business, and engages a different decision-making logic. Entrepreneurial Thought and Action, evinced and practiced by entrepreneurial leaders, is this new mental model. The three principles that underlie this mental model of entrepreneurial leadership are presented in Exhibit 1.
Exhibit 1: The Three Principles of Entrepreneurial Thought and Action
We call the first principle, which introduces this different way of thinking and taking action, cognitive ambidexterity. Entrepreneurial leaders need to learn to be cognitively ambidextrous, engaging both prediction logic and creation logic, in their decision-making approach. When an organization’s future goals and environment reflect the past, entrepreneurial leaders can engage traditional analytic models to predict and manage the situation. However, when the future is unknowable and bears little resemblance to the past, entrepreneurial leaders must learn how to create the future through action and experimentation. Through cognitive ambidexterity, entrepreneurial leaders learn to balance and engage both of these decision-making approaches.
The principle behind cognitive ambidexterity is that entrepreneurial leaders must rely on varied, yet complementary, analytical approaches to thought and action in order to develop and implement solutions that are socially, environmentally, and economically sustainable. On the one hand, entrepreneurial leaders must understand how and when to use the analytic approaches that have always been central to management education. Prediction logic, our phrase to describe the use of a traditional analytic approach, is an extension of the scientific method in which students learn to think, evaluate, and then act in order to manage situations and move an organization toward it goals. The premise underlying prediction logic is that through detailed analysis one can protect against the unexpected situation and plan and control the future. Students learn how to engage data mining, market research, and traditional statistical tools to identify and develop opportunities. A prediction approach to thought and action is most applicable in situations when the goals are predetermined, the issues are clear, the cause and effects are understood, and the data is reliable and available. A prediction approach to thought and action assumes that an uncertain future can be predicted and that decisions can be made based on these predictions.
Yet, entrepreneurial leaders also will find themselves in situations where novelty or complexity limits their predictive capabilities. In fundamentally new or complex situations where traditional cause-and-effect relationships are unknown, it is not always possible to gather the appropriate data or use the historical trends to engage a prediction analytical approach. In these situations of unknowability, entrepreneurial leaders must learn to engage a different logic that is based in action, discovery, and creation. We label this complementary decision approach creation logic.
With creation logic, students learn that the future is created, not predicted. In unknowable situations, action is needed to learn about the new situation, to further assess the problems and opportunities, and to select the next course of action. With creation logic, students learn to examine who they are, what resources they have access to, and the context in which they operate as they identify a first course of action. Students also learn that as they begin this first course of action, they will engage with a network of stakeholders, including both allies and adversaries, with whom they will co-create their goals. As surprises arise, for which they will be given an unknowable environment, students learn how to overcome or adapt to them. Thus, creation logic teaches students how to make decisions by beginning with thoughtful action that gives rise to new data and information which can then be analyzed to guide future action.
All entrepreneurial leaders will need to employ both creation and prediction approaches and become adept at cycling between the two as they try to introduce new ideas and initiatives. It is this continuous process of engaging creation and prediction approaches to thought and action that enable individuals and organizations to innovate and manage change effectively. Cognitive ambidexterity involves not just teaching entrepreneurial leaders about the two logics, but teaching them how to choose the appropriate logic, how to apply each logic, and how to alternate between the different approaches.
Yet, behind this different way of thinking is the fact that entrepreneurial leaders are taking action based on a fundamentally different world view of business and society. This different world view starts from understanding a different value base for business that we refer to as Social, Environmental, Economic Responsibility, and Sustainability (SEERS). Entrepreneurial leaders must know how to navigate social, environmental, and economic value creation and the inherent tensions and potential synergies therein. Moreover, they must learn to engage social, environmental, and economic value creation simultaneously rather than sequentially.
Beyond SEERS, entrepreneurial leaders also leverage their understanding of themselves and the social context to guide effective action. This third principle of Entrepreneurial Thought and Action we refer to as Self and Social Identification (SSI). Through an authentic and insightful understanding of their own sense of purpose and identity, and how they are affected by the context around them, entrepreneurial leaders make more effective decisions in uncertain and unknowable situations.
These three principles that comprise Entrepreneurial Thought and Action are the foundation for a different way of leading and a different way of educating leaders. If we are able to develop entrepreneurial leaders who think and act based on a different world view of themselves, business, and society, organizations will be better prepared to shape sustainable opportunities in an ever-changing world.
This article is based on the forthcoming Babson book, The New Entrepreneurial Leader: Developing Leaders Who Shape Social and Economic Opportunity (Berrett-Koehler Publishers 2011), by Danna Greenberg, Kate McKone-Sweet, & H. James Wilson.
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