Rethinking the value of large companies
When I started my career in the 90s, big companies were where all the talented people went to work. Partly, this was because bigger companies had the means to do work that made a big impact – it took big budgets to get things done. Getting a job at a big company was the ticket to professional success and social recognition.
Somewhere along the way, things changed. Entrepreneurship became more celebrated and startups were lauded as the hotbed of innovation and job creation. Today startup entrepreneurs are like rock stars – glorified, mythologized – while their big company brethren are talked about like dinosaurs.
I fell into the camp of admiring startups over large companies, and spent much of my last 15 years working for tech startups. But last month, while attending the amazing BIF Summit, I was challenged to think otherwise by Len Schlesinger.
Len is well respected in executive circles. He spent time in management positions at Au Bon Pain and Limited Brands and recently served a 5-year term as President of Babson College, a top-ranked school for entrepreneurship (and my alma mater). Now he has returned to Harvard Business School where he teaches MBAs how to get things done in large organizations.
According to Len, there is very little empirical research that validates the common perception of entrepreneurship being the most powerful force for economic and social value creation. One study that looked at venture-backed startups specifically found that the majority of them fail.
Len challenged our thinking that the world would be a better place if everyone was an entrepreneur. He went as far to say it was an issue of sustainability.
“There are embedded customer relationships, there are embedded resources, there are embedded capabilities and to write off the large organization, to presume that the world will be a better place because of a group of self-organizing loosely connected networks of self-interested individuals is the most egregious waste of resources imaginable.”
(Not to mention that the 1% of American companies that are publicly listed employs one-third of the US workforce).
His opinion was echoed by NYT columnist David Brooks, who wrote about the essential role that large institutions – public and private – play in creating and delivering the infrastructure needed for society to function. He uses the comparison of two towns, one with a fire department and one that brings together an adhoc collection of volunteers when there’s a fire. Which one would you want to have when your neighbourhood is on fire? And what about when problems like Ebola or a global financial crisis are spreading like wildfire? With this in mind, Brooks says that administrative execution is as vital as creativity and disruption.
The problem is, people feel their large institutions are so broken, that they are beyond being fixed.
Len acknowledges it’s not an easy task to keep a large institution functioning well and moving forward. But large companies, with the right people and processes, can manage incredible complexity to deliver a long lasting impact. Not only that, but they can bring new innovations to market at a scale startups would need years or decades to develop. Len believes this so much that he’s doing his part to interest people in pursuing a career as a General Manager of a large organization. It looks like he’s off to a great start — 50% of this year’s Harvard MBA students have elected to take his course.
Of course the answer is not to disregard one type of business over the other. Startups by design are in a better position to create new markets because they are not focused on defending their existing business model. And large established organizations are equipped to deal with scale and complexity at a level few startups can. How can we bring these two complementary organizational models together? Is it through acquisitions, or intrapreneurship or something else altogether?
I don’t have the answers but I am curious to consider a “third way”.
This post was first published on the Normative blog.
Image: NASA
