Abstract
Peter Lawrence’s work on comparative management is better known than his work on entrepreneurship. However, his extensive interviewing experience in organisations of all sizes and most sectors in many different countries, combine here with his comprehensive interpretive ability to produce a masterclass in entrepreneurship. He provides a very clear and realistic analysis, using well-chosen examples including ones from education, hospitality, offshore oil, waste disposal, the licensed trade and electrical power supply, which results in an unusually stimulating mix of evidence and wisdom.
Chapter 1 discusses how entrepreneurial opportunities arise through sector-specific economic, technical and societal changes, some broadly good and some not so, including developments in regulation. Chapter 2 addresses core competence which, Lawrence suggests, every firm should draw on wholeheartedly for its defining activities. He regards it as a strong focus for understanding improving fits between technical and social divisions of labour within and between firms under contemporary alliance capitalism. He discusses how firms increasingly outsource and offshore material and human assets, and how such developments have been increasing opportunities for new businesses. An excellent account of the history of the Anglophone core competence movement is marred slightly by permissiveness towards the misleading idea that services are replacing, rather than being increasingly entangled with, industry in economic life. New businesses needed to be truly differentiated and innovative, particularly in mature markets and when facing lack of demand.
The main message of the first two chapters is that entrepreneurs need to have serious levels of relevant specialist expertise and constantly look outward to identify opportunities.
Chapters 3 and 4 concern originality and new businesses. In mature economies, with increasingly diverse, new and sophisticated activities continually supplementing existing ones, opportunities have tended to cluster in the vanguards of activity and in interstices between sectors. Product innovation was less starkly dominant than hitherto, with reconfiguration of existing sectors more prevalent, embodying greater emphasis on developing marketing and services. The range of business opportunities had increased and configuration, ‘the essential entrepreneurial act’ (p. 48), had many more possibilities. Originality, often achievable cheaply by configuration, was the most important competitive weapon, particularly for protecting new firms against predators.
The very often personal and specialised character of originality, based on the entrepreneur’s ‘imagination, experience, contacts, tacit knowledge and know-how’ (p. 77), was hard to imitate. Thus, configuration and reconfiguration had infinite flexibility and possibilities. However, originality did not inevitably produce commercial success. Entrepreneurs were rarely unaware of possibilities, but often lacked the necessary time and finance to exploit them.
Chapter 5 considers entrepreneurs’ characteristics, notably experience, arguing that those ‘who lack [relevant] experience go naked along wolves’. Different kinds of experience are examined: technical expertise, related scientific knowledge, and above all, diverse mixtures of ‘know-how, know-about and know-who’. (p. 114). Ability to learn from experience varied: the process was not a box-ticking one. Entrepreneurs tended to be practical, self-directed, intuitive and independent doers and lifelong learners. Originality, focus, determination and energy made them successful.
Chapter 6 evaluates the related ideas of niche market and entry barrier. Niches often overlapped geographically and were varied and shifting. However, large, single established companies often could dominate local ones by acquiring and deploying established specialist brands. The discussion of niches includes exploration of industrial business-to-business markets, especially some German Mittelstand ones, which tended to be ‘older, larger and more culturally embedded’ (p. 143), along with other countries’ small and medium-sized enterprises (SMEs) serving wide ranges of niche markets.
The competitive advantages of niche market firms acted as entry barriers to potential competitors in unique, deeply-rooted, sector-specific ways. Ongoing success generally occurred when entrepreneurs maintained entry barriers in their firms’ evolving market contexts, by continuously investing in originality. Lawrence discusses the seductive notion that material cost entry barriers reduce while more intangible ‘talent assets’ become more important, as innovation moves through product-based, process-based and systems-based kinds towards more services-focused ones. Reality was much more complicated: evidence from services showed that sector entry costs varied from minimal to very high.
Established companies often strengthened entry barriers by multiplying their competitive advantages. Also, innovative companies often used configuration and reconfiguration as entry barriers. While the niche and entry barrier phenomena were important, their use was varied and complicated, with market developments unpredictable and often perverse. The entry barrier notion was being muddled by the expanding number and interdependence of markets, and consequently the growing number of routes for bypassing them.
The mature economy was a developing mixture of production and, in general, newer, services in which:
service provision and resourceful configuration [were moving] back to where the entrepreneurialism of the industrial age began – back to invention and product innovation. Or, to put it more modestly, all the changing forms of originality that come after the starting point of product innovation now seem to redefine it. (p. 141)
Perhaps this is because most services are production-driven, with the so-called industrial age simultaneously a work in progress and a permanent feature of the economic landscape. Having argued that in order to innovate, businesses need change, originality and relevant experience on the part of their prime movers, and having demonstrated the complexity and variety of their contexts, in Chapter 7, ‘Cruising Altitude’, Lawrence turns to companies’ actions and experiences after they had been launched and built up in the short term.
The initial focus is on revenue growth as the main key to business development. Lawrence re-emphasises the importance of prior experience as the main source of success of start-ups. Then he explores the role of acquisition in different western national SME contexts, finding it not to be very great, and discussing why it occurs when it does. On revenue growth, he develops a revenue enhancement matrix that compares the likely effects on companies of selling existing and/or new products to existing and/or new customers. He has tested this and found it useful for explanation and diagnosis. He discovered that revenue growth benefited from company resourcefulness and quality of execution (producing positive feedback), and enhanced reputation along with income. It sustained profitability as a major and vital key performance indicator, but over-emphasis on it could hamper achievement of key performance indicators with more innovative and/or long-term attributes, such as investment, market share, product quality and staff expertise. Further, he argues that key performance indicators for different activities of companies should become more differentiated over time.
Chapter 8 considers family firms that have lasted for more than 100 years in the face of economic, technical, political and social changes, in different historical and geographical contexts. Endurance was due to three kinds of overlapping response: transformational, whereby firms reinvented or transformed themselves radically; transgenerational progression, whereby they dealt with external changes such as recessions, war and even more diffuse developments such as globalisation, as well as the (re)generational internal familial changes of generational succession and related processes of amassing abilities and resources; and adaptation, as firms accumulate their unique mixes of expertise and capabilities organically. For example, as firms develop they become more likely to use acquisition, better at organisational structuring, configuration and reconfiguration, and at hiring external talent. Over lengthy periods they improve at improvisation, adaptation and running varied operations and activities side-by-side. For Lawrence, all this counterbalances their external challenges. The chapter’s main message is that the power of the family firm is in the mind.
The last two chapters (9 and 10) reinforce the simple yet demanding, highly varied and often deceptive argument of the whole book. Thus, these chapters demonstrate how such major attributes of successful entrepreneurship as deep expertise, understanding of context, staying power and adaptability are virtually always needed, but also always need to be used in different contexts and ways. Chapter 9 uses owner-managed garden centres and taxi firms as examples of familiar sectors that configure and use experience capital in many unique ways, for many varied and idiosyncratic reasons. Location is clearly a major factor with garden centres, and communications between drivers and passengers is crucial for taxi firms, but their handling of even such fairly obvious influences is highly unpredictable to outsiders in most cases.
Chapter 10 takes the book’s themes through to a broad and positive – yet in no sense an easy or simple – set of conclusions. To do this it employs a final example – that of a grouping of retail wine merchants – that shows how SMEs can succeed when corporate entities become over-managed, remote from action and passive, clumsy and slow. It is very brief in its summary of the book’s main points about change, experience, originality, quality of execution and long-term survival. The book culminates in a 12-point list of ‘action propositions’ (p. 246). One or two inevitably verge on the banal, but all are needed to signal the importance of adaptability to ever-changing contexts.
The main and most obvious strengths of the book are its use superb organisation of ideas, its powerful understanding of relevant background events, and its use of case studies and other examples. It does not address the standard literature in detail or in general, but its main implication is highly and usefully theoretical, not least because it is strongly in accord with the history and general direction of economic development. Thus, its arguments tend to oppose those of managerialists who believe that if someone can manage ably in one sector, usually they can do so in others. Lawrence suggests that as sectors become more numerous and diverse, sector-specific and organisation-specific, technical expertise of many (not only material) kinds becomes ever more crucial for effectiveness (Fores and Rey, 1979; Glover, 2013). He also implies that people from very diverse backgrounds can be highly competent entrepreneurs, as long as they have relevant expertise. Further, this implies that there is a strong affinity between entrepreneurship and democracy, insofar as both thrive on useful expertise and on flexible and open-minded thinking about development, deployment and practice (for a wide-ranging, historically-informed discussion of such issues, see Hannan, 2013).
All of these issues, raised by thinking about the influences and examples covered by Lawrence, reinforce the three notions that entrepreneurship is likely to be a sine qua non of competent economic activity for the foreseeable future, that groundings in scientific facts and humanities-based understanding are likely to be more effective as underpinnings of effective SME expertise than formulaic business and management ‘education’, and that immanence – every situation containing the elements of its own destruction – should be permanently incorporated in the mindsets of all those employed to be entrepreneurial. The subject most likely to infuse entrepreneurs with awareness about human nature, and immanence, is history.
Two final points are worth making. First, this book is evidence of the great value of academic maturity and reflexivity. Lawrence, in his mid-70s and neither a novice nor mere reporter of research, knows his subject backwards. In our profoundly ageist age, such people are rarely over-valued in British universities, but more of them should be. The times when universities were expected to be repositories of collective wisdom should return. Second, for a senior undergraduate or a masters’ degree student of entrepreneurship only to read standard textbooks without reading this book would make their formation much less meaningful and motivating. Practitioners would also develop greatly in confidence and understanding.