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Challenges of Organisational Maturity in Entreprenuerial Organisations

In today’s post we look at the challenges faced by entreprenurial organisations as they mature and become bureacratic.

As the banking organizations grew larger, their nature and methods of operation changed. More formalized structures, processes, information systems and controls became necessary, thus producing several layers of management. This bureaucratic structure distanced the entrepreneurs from the customer while creating a layer of middle managers who have been billed as “enemies of innovation”. The organisations became bureaucracies, which hindered innovation. As Nigel Chanakira of Kingdom observed, “As the bank grew it lost its agility and got buried in a bureaucracy.”

The challenge for entrepreneurs is discovering how to instil and extend the recognition and capture of innovation throughout the organization while maintaining customer orientation. Franky Kufa at Kingdom created time to visit with large customers in their offices offering advice and counsel without directly soliciting their business. He contends that this process has been possible because he has let go of managerial work and focuses on the strategic issues. On one such visit to Bulawayo he noticed how the client was losing value and advised him on how to make more
money. When this was followed up, the client’s performance greatly improved. Benefit accrued to Kingdom as the client’s banking with Kingdom increased while at the same time the client’s board members requested Kingdom to create more financial structures for them.

Chris Goromonzi and the team at Trust reduced the distance between the entrepreneurial founders and the client by making sure that on most financial structures at least an executive director would be actively involved and visit the clients. The clients appreciated that they were not relegated to junior bankers. These strategies kept the entrepreneurial bankers close to the action while they mentored the younger bankers. It created an opportunity for customer loyalty as well.

Evidently, as the organisation grows, an entrepreneur has to actively and intentionally seek to preserve and maintain entrepreneurship and innovation, for without constant attention the forces of bureaucracy would stamp it out. It has been noted that with the growth of the industry a significant number of banking services became generic as banks copied each other rather than producing innovative services and products.

Entrepreneurial growth is usually good and desirable as larger companies have more resources, greater credibility, and a deeper and more varied human resource skill set from which to draw. However it is easier to be nimble and change with new knowledge and innovations when you are small. Finally only the constant attention of entrepreneurial leadership can provide the force necessary to keep the company entrepreneurial and opportunity seeking.

Another critical role of entrepreneurial leaders at this stage is to a) provide the vision, b) participate in its dissemination, c) share in its interpretation and d) support and coach during its execution.


Extract from Entreprenurship On Trial 2011 Rapha Trust

Understanding Your Operating Environment

Entrepreneurial Principles extracted from Entrepreneurship On Trial Dr T. A. Makoni

Entrepreneurs build their business within the context of an environment which they sometimes may not be able to control. The robustness of an entrepreneurial venture is tried and tested by the vicissitudes of the environment. Within the environment are forces that may serve as great opportunities or menacing threats to the survival of the entrepreneurial venture. Entrepreneurs need to understand the environment within which they operate so as to exploit emerging opportunities and mitigate against potential threats.
There is critical need for entrepreneurs to appreciate and understand the salient issues in the operating environment. It also demonstrates how the regulatory environment opened an opportunity for entrepreneurs. Some banks failed because they did not recognise the potential impact of the changes in the environment. This underlines the susceptibility of entrepreneurs in volatile environments to policy changes and reversals. The effect of the macro-environment on banking was highlighted. The underlying forces in the industry were revealed by the industry analysis.
The change in the regulatory environment brought in by the new governor resulted in the collapse of about ten financial institutions. Some of these had been deemed to be strong and thriving. In one year the financial services moved from the greatest growth industry in Zimbabwe to a virtual collapse.
The lesson learnt is that entrepreneurs need to scan the environment regularly and position their businesses appropriately. Entrepreneurs should to understand that the environment is always in a state of flux and hence has to be monitored to enable their businesses to exploit opportunities while mitigating against potential threats.
It is critical for entrepreneurs to recognise that the rules of the game in business are not cast in stone, these can change dramatically overnight to the detriment of the entrepreneurial venture. It is therefore imperative for entrepreneurs in volatile environments to maintain strategic flexibility.
Within each industry there are differing market penetration strategies open to entrepreneurs.
Another important principle is the need to analyse and understand the underlying forces driving the industry in which one does business. Banking entrepreneurs could have benefited from this analysis. In high flux environments it is important to recognise the presence of key uncertainties both “known unknowns” (things we know that we do not know) and “unknown unknowns” (things we do not know that we do not know)24.

Ensure that you seek to understand the underlying forces at work in the environment in which your business will operate. The environment can provide either great opportunities or send some threats to your survival. Continue scanning your environment. Entrepreneurs become astute at managing their environment to exploit opportunities and reduce risks. Entrepreneurs learn to handle what ever hand they are dealt with by the environment. Manage your environment. Stop crying foul. Entrepreneurs are not cry babies.