An entrepreneur expressed the following view: "Start up companies flourish on change in the business environment and are continually reorganizing themselves to take advantage of it. But in established firms there is strong resistance to change, especially change imposed internally." What evidence leads you to assent or dispute his views? Could established firms introduce innovations more effectively by adopting practices used by new firms?
This essay examines the internal resistance against change within established firms in comparison to entrepreneurial firms and discusses their possibilities of adopting entrepreneurial practices to generate effective changes.
Is it within the nature of entrepreneurial enterprises that they are often the agents of innovation and change. In order to survive and achieve continuous success in the competitive business market, it is crucial that they possess the capability to recognise and explore opportunities ahead of everyone else. They are often constrained by limited resources and lack of experience. However the relatively flexible organisational structure within smaller enterprises allow them to pursue opportunities and obtain resources through a much faster route than those in large organisations who awaits budgetary authorisation to take action through the hierarchical structure. The unusual business model that small firms operate on forms the basis for short cycles of firm growth and product introduction therefore enables rapid realisation of changes and adaptation of existing technology or service ideas. This iterative process of seeking alternative solutions nurtures changes and even transformations within the firm.
In comparison, established firms are known to be bureaucratic and operate through complex internal reporting procedures to communicate generated changes throughout the whole organisation. The prestigious traditions that all employees are familiar with also hinder the progress of introducing new work methods or operating systems. People often fix their mindsets to "the way we do things here" hence cannot easily see the benefits of the change and sometimes even fear the damages it may bring to the "comfortable" established practices and their own job security. Yet again the difference in business model and strategic objective between entrepreneurial and established firms determines their different attitudes towards change. Small firms prosper through continuous re-positioning their competitive advantage and re-assessment of opportunity and resource match whereas big ones pursue consistency and stability. Established firms often deal with a large amount of projects and hence the focus of their efforts is highly dependent on their business priority. It is not surprising that employees are often lacking motivation for generating or carrying out change activities due to the long list of jobs within pressing deadlines to be finished.
As the previous arguments illustrate, there are usually more resistance within the established firms against entrepreneurial innovation due to the incompatibility of business model within entrepreneurial mechanisms. However this does not necessarily apply to all organisations. A number of more advance thinking firms have successfully developed effective practices that are coherent within their business principles and systems. For instance, many firms are introducing improvement activities to tackle specific problem with concentrated efforts from a team of employees. Such programs are often scheduled as an independent project and act as an opportunity for employees to contribute their knowledge and skills that are normally inhibited during daily work routines. A good example would be the "Single Week Improvement Program" introduced in Rolls-Royce. In addition, having recognised the competition in today's market, many companies are increasingly investing in R&D and NPD (New Product Development) and providing supports from all associative function (e.g. HR, marketing, sales, engineering) to enable the success of new product launch or consolidation of core technology. Last but not least, the introduction of incentive schemes that associate with business improvement in some established firms have proven to be an effective way to motivate employees to participate in generating positive changes to their work processes as well as for the business as a whole.
In conclusion, established firms do exhibit stronger resistance to change and innovation comparing to the entrepreneurial firms due to a combination of organisational and strategic reasons. However more and more firms have identified and successfully adopted entrepreneurial innovation principles and have generated effective methods to create and implement changes that are compatible with their business needs and empower the sustainability of their competitive advantage.