Clever Geek Handbook
9 March 2026

The Little Book that Saves Your Assets

Recommendation

A successful football team needs a strong offense to gain ground and score points, a sturdy defense to hold firm under attack and a decisive coach to make intelligent substitutions when necessary. These are exactly the characteristics you need to manage your investment portfolio, says David M. Darst, chief investment officer at Morgan Stanley. Darst is an acknowledged expert on asset allocation, a “fundamental principle of investing,” which stipulates that you shouldn’t put all your financial eggs in one basket. Instead, you should spread your wealth among various diversified, “uncorrelated” investments. Although Darst’s numerous analogies are oversimplified, and his information on how to rebalance your portfolio is fairly general, his skill at breaking financial concepts down into simple terms makes his libretto very useful to rookie investors. BooksInShort recommends his basic, savvy book to anyone who may be confused by the financial jungle, or anyone who wants to invest simply and smartly.

Take-Aways

  • Effective wealth building depends on intelligent asset allocation.
  • This requires investing in a portfolio of assets that behave differently depending on the financial environment. Termed “noncorrelation,” this is the essence of diversification.
  • Your portfolio should contain a careful mix of financial assets: bonds, stocks, real estate, cash, commodities, gold, and so on.
  • Before investing, work out how risk averse you are and what you need your portfolio to do for you. Clear goals will make the job of allocating your assets a lot easier.
  • Routinely rebalance your portfolio according to the “buy low, sell high” principle.
  • Adopt both a strategic (big picture) and tactical (trend responsive) approach to asset allocation in light of your financial objectives.
  • Carefully choose an asset manager. Feel free to quiz potential managers on their expertise before agreeing to do business.
  • Don’t ignore the risks or become an overly active, aggressive investor.
  • At the same time, don’t sit back and do nothing or meekly follow the crowd.
  • You will make mistakes, but to become an intelligent investor you must learn from them.

Summary

Asset Allocation

Investing requires common sense. If you place all your money in only one or two types of investments, or in assets that are all in the same class (only stocks or only real estate, for example), you risk losing everything if that sector goes sour. The best way to organize and manage your financial portfolio is through a balanced asset allocation. This approach means investing in a mix of financial assets – bonds, stocks, real estate, cash, commodities, gold, and so on – to achieve your investment goals. Each class of assets responds differently to shifts in the economy and financial markets. Therefore, diversifying your assets enables you to minimize the risk of loss while maximizing your potential gain. Failure to do so can be a major mistake for any investor. Asset allocation is important for three primary reasons:

  1. Diversification – Regardless of the economic and financial environment, some kinds of investments will continue to earn. Thus, you can build wealth over time. Invest in “uncorrelated” assets, that is, asset classes that react differently to market forces or changes in the economy. For instance, bonds are a wise investment during periods of deflation, real estate is preferable when inflation is high, and equities perform well during periods of low inflation and economic recovery.
  2. Protection – Asset allocation reduces your exposure to financial risk and leaves you less vulnerable to changes in the economy. To reinforce your portfolio, regularly rebalance the proportion of money invested in each asset. You can base this decision either on time (rebalance every three months or once a year, for instance) or on price (rebalance whenever asset prices deviate, say, 10% from the original allocations).
  3. Reality-check – Asset allocation requires you to rebalance the “long-term weightings” of your financial assets. To do this properly, routinely stay abreast of what takes place within the financial marketplace. How do your assets perform during economic ups or downs? Will an investment’s value change? How predictable are your returns?
“Asset allocation has helped build wealth, protect wealth and extend wealth.”

Prior to starting your investing program, you need to get a few things straight: First, figure out what kind of investor you are. What are your strengths and weaknesses? Analyze your “mental makeup and psychology.” Are you a bull or a bear? Evaluate your capital. What are you likely to earn over the course of your life? This helps you gauge how much risk to take and what assets to focus on at different stages of your life. “Lifecycle investing” requires making good use of “diversification, rebalancing, risk management and reinvesting.” Your fiscal goals and risk tolerance will change as you age, so plan and allocate your assets based on portfolio size, need for “loss control,” immediate financial needs and “future liabilities...income and expenses.”

“There is no magic formula for success in asset allocation.”

Next, appraise whether you can realistically take care of your assets yourself or whether you need to enlist an expert. Then, find a trusted friend or relative, an “Uncle Frank” or an “Aunt Sally,” who can advise and mentor you. Such a person can become, without a doubt, your “most valuable resource.” He or she should be savvy and wise, and should have a strong investment philosophy.

Your Portfolio is Like Your House

A house is a good analogy for your investment portfolio. Some assets must be “functional” (like an attic), and some must be “relaxing” (bedrooms) or “enjoyable” (TV room). Stocks represent the latter category. You purchase them when economic times are good. Bonds and other fixed-income investments are like bedrooms, chambers where you want to feel sheltered and safe. Some areas are set aside for a specific individual (Dad’s den). These represent “alternative” investments, such as precious metals or real estate. Functional spaces, such as the basement with its water heater and electrical panel, equate to cash investments or their equivalent.

“Too many people make the mistake of buying investments without any regard for what they want the investment to do for them (except make money in a very general sense).”

How you decorate your house depends on your personality and psychology. Will you choose carpets, floorboards or tiles? The specific investments that you make will be equally idiosyncratic. Do you feel equipped to decorate your home by yourself? Or, would you prefer to hire a decorator? Similarly, do you feel competent to manage your own assets? Or, would you prefer to select an expert asset manager? If so, choose your manager with the utmost care.

Your Asset Manager

A horse with a 350-pound jockey is not going to win any races. Similarly, an asset allocation plan without an able asset manager will not protect you or build wealth. Indeed, for certain asset classes, including private equity and real estate, your choice of manager can mean a 5%-20% difference in returns annually. Read and research sources, such as Barron’s, Forbes, The Wall Street Journal, Morningstar and FactSet, among others. When it comes to highly specialized assets such as hedge funds, you may need to rely on an expert to help you pick the right manager. Here are 10 important questions you should ask any prospective asset manager:

  1. “Ethics” – Do you have a document that outlines your principles and code of ethics?
  2. “Philosophy and approach” – What are your investment beliefs? How do you handle your business?
  3. “Investment edge” – How do you personally establish this sharpness?
  4. “Disciplines and tools” – What special measures do you employ to determine whether to buy, sell or retain an investment?
  5. “Human capital” – How do you train and motivate your employees? How do you evaluate their performance?
  6. “Performance history” – Can you explain the “market conditions of your returns, standard deviations of returns and correlation of returns with other asset classes”?
  7. “Lessons learned” – What have your investment mistakes taught you?
  8. “Costs” – Can you explain “the costs, turnover and tax efficiency” of the management services that you render in terms of investment assets?
  9. “Capture ratios” – When asset prices rise, “what percentage of the upside” have you been able to attain? When asset prices fall, what is your percentage of the decline?
  10. “Capabilities” – What have I failed to ask you concerning your investment management approach that I should know about?

“Objective-Based Asset Allocation”

Define your financial goals and figure out what mix of assets is optimal for achieving them. For example, if you want to save for your child’s college education 18 years from now, you should choose aggressive high-yield stocks over steady income bonds. Stocks can oscillate violently in the short term but tend to provide the highest returns over time. Knowing what you want your investments to do for you is the essence of objective-based asset allocation, the guiding light for your investment decisions. Generally, investors aspire to achieve one or more of the following goals:

  • Protect against inflation – Stocks can shield you from low and medium levels of inflation. But beware: During periods of high inflation, companies struggle to keep costs down and to borrow less, making it difficult for them to grow faster than inflation.
  • Profit from growth – International stocks can expose your portfolio to faster-growing economies. “Equity asset classes” are a good choice during long periods of growth.
  • Provide security “from bad times” – Fixed-income assets, such as “high-grade bonds, cash investments and...inflation-indexed securities,” can shelter your savings.
  • Generate income – The whole point of an investment is the cash it will eventually provide. The best “payment” assets are “dividend-paying stocks, preferred stocks and real estate investment trusts.” Inflation-indexed securities also perform well.
  • Create stability – Depending on how risk averse you are, your portfolio will need some steadiness to protect it from sudden market changes. Stable assets include “cash accounts, precious metals and professionally managed futures funds.” You may also want to consider special-purpose hedge funds and exchange-traded funds.
  • Counter currency depreciation – One good method is to denominate some investments in foreign assets, for example, “emerging-market stocks and bonds.”
“Blindly investing with the crowd is like letting a random group of people manage your portfolio and dictate your asset allocation.”

An objective-based asset allocation approach enables you to develop a portfolio mix that fits your goals. This approach reduces costs since you undertake less buying and selling. You can handle asset allocation strategically or tactically. “Strategic Asset Allocation” involves setting long-range percent-of-portfolio allocations for your assets, then maintaining these percentages for an extended period. “Tactical Asset Allocation” entails routinely adjusting your asset mix to take advantage of market trends. Think of tactical asset allocation as a responsive mechanism that enhances your strategic approach. By keeping a careful eye on your portfolio’s performance, you can sell off assets that have been doing well and, thus, have grown to represent a “larger-than-targeted percentage” of your portfolio. Use the proceeds to buy assets that have recently lost value. Rebalance your portfolio according to the classic investing maxim: “Buy low, sell high.”

Seven Primary Portfolio Pratfalls

You must make good asset allocation decisions. A series of bad choices could lead you to financial ruin, but investors commonly make the same mistakes. Be sure that you don’t:

  • Ignore the risks – This is the quickest way to turn your assets into liabilities, and it is particularly easy to do during bull markets or when “investment conditions” are most favorable. Differentiate the types of risks you may encounter – excessive stock valuations, currency movements, and so on.
  • Become one of the crowd – People often feel more at ease when they fail as part of a group than when they succeed alone. Don’t be a herd animal.
  • Be overly bullish – Markets get hot and then they cool. The values of investments do the same. Just because an investment’s value is on an upward swing today does not mean it will remain so tomorrow. Always be conscious of the “reversion to mean” principle, the tendency of an asset whose value changes over time to return to its “long-term average” value after a period above or below that figure. In other words, “what goes up must come down.” Reversion is connected to another principle that is dear to financial advisors: standard deviation, or the average asset return over a set time period. Note this figure. Also observe the number of times an asset’s returns have been better or worse than this average, and by how much. These calculations help you determine an asset’s volatility. Plus, they can illustrate “when a specific asset class might be about to revert to its mean.”
  • Pursue hasty results – Immediately getting rid of an investment asset class, or even an asset manager, because of a temporarily low return is not smart. Indeed, when you chase performance, you often end up selling when you should buy. Does the asset possess intrinsic value? If so, its poor performance will probably turn around.
  • Do not act – Research concerning more than one million investors in 1,500 retirement programs found that 80% did not adjust their portfolios during a two-year period. Consequently, even those who began with smart asset mixes ended up with combinations that did not still meet their goals. Don’t let your asset allocation drift. Rebalance your portfolio regularly.
  • Be emotional – “Fear and greed” can quickly steer you off the right investment and allocation course.
  • Think short-term – A microlevel approach gives you tunnel vision and prevents you from understanding trends that can make or cost you money. But, employing only a macrolevel approach to asset allocation is not smart. You cannot ignore the details. You need to combine both methods, which is not easy. It means you must carefully monitor individual assets while still focusing on your long-term goals.
“Studies have shown that 90% of the differences in returns for large U.S. pension funds over the years is from differences in their asset allocation.”

No matter how well you plan and allocate your investments, results will not always turn out as you hope. It is important – indeed, essential – to learn why. Did you research properly? Were your sources flawed? Were your assumptions misguided? Great investors and asset allocators always gain knowledge from their errors. Indeed, “It is not really a mistake if you learn from it,” so be sure that you do.

About the Author

Chartered financial analyst David M. Darst is a managing director at Morgan Stanley, and the chief investment strategist for its Global Wealth Management Group. He chairs the firm’s Asset Allocation Committee.

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The Little Book that Saves Your Assets

Book The Little Book that Saves Your Assets

What the Rich Do to Stay Wealthy in Up and Down Markets

Wiley,
 


9 March 2026

A Woman's Place Is in the Boardroom

Recommendation

In their earlier book, A Woman’s Place Is in the Boardroom: The Business Case, executive coach Peninah Thomson and management consultant Jacey Graham, working with Tom Lloyd, identified a universal problem in corporate boardrooms around the world: a dearth of female members. The reasons, they explained, are a shortage of qualified female candidates and a biased selection process. As a sequel to that book, The Roadmap plots a route guiding women executives to board positions. The journey includes eight main milestones they must pass on their way to landing their desired positions. The book is not without its detours, however, and some chapters meander slightly or delve into seemingly tangential topics. Some of the material is targeted only at women executives in the U.K. Still, BooksInShort considers this a trip worth taking for any woman seeking a coveted board position. Businesses that want to remove the roadblocks for women board candidates will also benefit from each chapter’s “Reflections for Companies.”

Take-Aways

  • The FTSE 100 Cross-Company Mentoring Programme offers a “roadmap” to help more women executives attain board positions. It outlines eight major milestones:
  • First, weigh the benefits and responsibilities of board membership and make a firm commitment.
  • Second, learn the rules and regulations of board governance.
  • Third, understand board interactions, dynamics and corporate culture.
  • Fourth, identify and research companies where you’d like to attain a board position.
  • Fifth, make yourself board-ready by adapting the right persona and cultivating “gravitas.”
  • Sixth, create a “personal marketing plan” to convince the selection committee that you are a good choice for the board.
  • Seventh, use self-reflection to gain insights about your strengths and behaviors and to reach your full potential.
  • Eighth, get experience by sitting on a board in a community or industry organization.
  • Chairmen and CEOs can pave the way for future women directors by implementing a few policies. For example, they can make sure every list of board candidates includes women.

Summary

“The State of Play”

A gender-balanced board is more than a diversity issue; it makes sound business sense. In fact, research shows that companies with three or more female board members achieve higher-than-average levels of corporate performance. Although the number of women board members in the U.S. and the U.K. dipped in 2006, the setback was temporary. In 2007, the number of Fortune 500 directorships held by women in the U.S. grew slightly to 14.8%. In the U.K. that year, women accounted for one-fifth of all new board appointments in the Financial Times Stock Exchange 100 companies – a record high for the Female FTSE.

“Companies in all industries are engaged now on the new gender front in the war for talent, and are trying hard to attract and keep able women.”

However, there’s still plenty of room to grow. To address the shortage of women on U.K. boards, many FTSE 100 chairmen agreed to become mentors in the FTSE 100 Cross-Company Mentoring Programme. This program helps women executives within two levels of the board become attractive candidates for directorship. Upon its 2004 launch, the program appointed seven mentors to the candidates. By 2007, the pool of mentors had expanded to 30. As part of the program’s ongoing development, the authors created a “roadmap” to guide women executives in becoming a desirable board candidate. Its eight steps are:

Step 1: “Deciding to Engage”

Preparation for board membership begins long before a firm offers you an appointment. Ensure that you are emotionally ready for the role by carefully weighing its benefits and drawbacks. Then make a deliberate decision about whether to pursue it. Stay alert to signals that people may see you as board material. For instance, a seemingly offhand remark at a business dinner might really be an invitation to apply for a promotion. Condition yourself to react quickly and decisively. If you’re not prepared, you may waste a strategic opportunity.

“If one woman is a token and two’s company...it seems that three’s a competitive advantage.”

Be aware that the board member’s realm is not just the physical boardroom, but rather “boardspace,” which extends far beyond that room’s four walls. Directors’ work takes place in corporate hallways, on the golf course, in restaurants and around the water cooler. Understand the strategic importance of conversations that occur in these informal settings. The boardroom may be “the place where important decisions are made, but it’s not generally the place where minds are made up [or] arguments are put forward.” Boardspace is unavoidably political, and many of politics’ “unwritten rules” seem to have “been unwritten by men.” However, being political shouldn’t mean subjecting yourself to constant discomfort or being untrue to who you are. Though you must “play the game,” strive to find an approach you can stomach.

Step 2: “The Written Rules of Engagement”

All board members are subject to various rules and regulations. These codes and the principles of corporate governance are crucial knowledge for any board candidate. The “corporate governance system” includes:

  • “Laws” – The U.K. Companies Act 2006 and the U.S. Sarbanes-Oxley Act are prominent examples.
  • “Regulations” – Entities such as the U.K. Financial Services Authority create and enforce these standards.
  • “Contractual obligations” – These include “the provisions of listing agreements” with markets where a company is listed.
  • “Codes of practice” – U.K. directors should be familiar with the Financial Reporting Council’s Combined Code.
  • “Accounting standards and informal...controls” – Accounting rules, as well as shareholder and public opinion, can influence decisions about executive compensation and other issues.
  • “The environment, and social and community responsibility” – Directors must not neglect these vital considerations.

Step 3: “The Unwritten Rules”

In addition to corporate politics and governance codes, women board candidates must understand board dynamics and culture. In a 2007 Harvard Business Review article, Alice Eagly and Linda Carli outlined two challenges that the traditionally male “board milieu” presents for women. First, people tend to resist female leadership. Second, they consider women who exhibit “male” leadership characteristics, such as “aggression [or] ambition,” inauthentic. Yet when women lead in a way that is conventionally feminine – for example, by being empathetic or soft-spoken – their peers consider them too weak to lead. What should women caught in this “double bind” do?

“It may be years before the right opportunity arises, but you have to be prepared, emotionally, when it does arrive.”

The key is to “be yourself,” not a “woman playing a man’s game.” Don’t be afraid or reluctant to engage in corporate politics. Look for things you have in common with others to enrich your conversations. Develop interests and hobbies that can serve as conversational topics. Lastly, don’t confuse being charming with being manipulative. Most people in high-level leadership positions use their charm to get ahead; think of former U.S. President Bill Clinton.

“Being a director is more than having access to a particular room, to which nondirectors are denied entry.”

As you get closer to directorship, become a diligent observer. Watch how board members interact, and try to understand the group’s dynamic. Be selective in what you say; let your actions “weigh more.” Finally, seek feedback. That is the most valuable tool for understanding your strengths and weaknesses and the impressions you make.

Step 4: “A Sense of Direction”

Now, define your aspirations to the board more specifically. For example, do you want to join a subsidiary or main board? And do you seek a nonexecutive or executive directorship? What is your timeline for advancement? Analyze your skills, experience, interests, talents and passions. Then consider which industries could use someone with your skill set. When selecting a target organization, do your homework. Visit its websites, read its annual reports, search for relevant articles in trade magazines or the general press, and study its mission statement. Identify who holds positions on its board. Are women serving as directors? Next, ask yourself what you need to do to become board-ready for that organization. Break your list down into manageable steps and place them on a timeline. For instance, you might create a plan to serve on a community board within one year to gain experience.

Step 5: “Cultivating Board Qualities”

Throughout history, women have masqueraded as men so society would take their achievements seriously. Charlotte Brontë submitted the Jane Eyre manuscript to a publisher under the pseudonym Currer Bell, since the literati of her time considered writing novels a man’s pursuit. And French novelist Amantine Aurore Lucile Dupin went by the alias George Sand. Even Harry Potter series author Joanne Rowling goes by the initials J.K. because her publisher thought boys would prefer books written by a man.

“Pre-presentations and corridor work, water-cooler chats, canvassing, lobbying – boards couldn’t operate without these.”

All humans assume different “personae” in various situations. In one environment, a woman may be a mother. In others, she might be a wife, a friend or a co-worker. So adopting different roles at work doesn’t make you inauthentic. Instead, think of the process as deploying different aspects of your character. To develop a credible board member persona, become aware of your actions and skills, then adapt them to the situation.

“Feedback provides the self-awareness you need, if you are to project the three Cs – confidence, competence [and] contribution.”

The word “gravitas” means “dignity or solemnity of manner.” For a board member, that means projecting qualities such as experience, authority, power, intelligence, confidence, astuteness and self-assurance. Gravitas is crucial to those aspiring to board positions. Candidates who demonstrate this quality will create a noteworthy impression on board selection committees. Look the part, act the part and project a professional image, so people want to place your name on the short list for board membership.

Step 6: “Setting out Your Stall”

Your résumé is an important part of your “personal marketing program” in that it represents you in the first step of the selection process. Always include three types of data: “qualifiers,” which include your educational and professional credentials and the skills that make you a viable candidate; “differentiators,” or the experiences and abilities that set you apart from competitors; and “personality markers,” or details about your life and interests that hint about your character.

“Ambition and aspirations gain power and energy when they become more specific.”

As you develop your résumé, think about what your target organization is looking for in a candidate. Know what you will say to persuade your interviewers that you are a good choice for the board. Many women struggle to “put their heads above the parapet” as they get closer to attaining board positions. Speaking at conferences, publishing articles and submitting letters to newspaper editors may help build your reputation and increase your visibility. Once you land an interview, emphasize your strong points by telling stories that demonstrate your successes.

Step 7: “Mind the Gap”

Women who wish to realize their potential in the workplace need to understand what makes them tick. Self-reflection is a powerful tool for understanding your own strengths and limitations and for “reading” others more effectively. Moreover, if you feel stuck, becoming self-aware will help you close the gap between who you are and who you want to be.

“Those with a plan do better than those who let their lives unfold and react to the opportunities and problems that fortune throws at them.”

Begin your “journey of self-discovery” by asking people you trust and respect for feedback. Personality tests, such as Johari’s Window or the Myers-Briggs Type Indicator, may also provide useful information. Confide in someone at work who is in a position to offer help and support, or urge your company to hire an executive coach to help you look at things from a fresh perspective. Acquire a mentor – someone to advise you and give you the benefit of his or her experience. Try new behaviors, even if that means operating outside your comfort zone.

Step 8: “Board Games”

Hundreds of organizations – including clubs, nonprofits, church groups, hospitals and industry associations – self-govern through boards. These groups present valuable opportunities not only to gain board experience, but also to network, learn about governing rules and conventions, and contribute to your community. A board position with these types of organizations also looks good on your résumé. However, take care to choose an appointment that provides the right experience for your long-term goals. Ensure that the board position will help you make a worthwhile contribution, gain new contacts, and increase your visibility in your community and industry.

“Don’t be tempted to regard your first board position as a reward for all your networking and hard work and start to coast.”

Although networking can help you make progress toward a board position, at some point you’ll likely need to enlist a headhunter. Find out which headhunters work in your field and make board placements. Introduce yourself and explain all your qualifications. Then, touch base regularly.

What the Business Community Can Do

Chairmen and CEOs can take steps to increase the number of women board members. For example:

  • Make sure every list of possible candidates, even the short lists, includes women.
  • Ask search consultants to look for female contenders.
  • Help women executives find positions as nonexecutive directors in other companies.
  • Emphasize diversity in all aspects of business.
  • Keep old-boy networks and masculine pastimes from dominating networking and socializing within the firm.
  • Remove biased selection criteria that exclude candidates from “pink-collar functions,” such as human resources.
  • Promote a gender-neutral environment in the boardroom.

About the Authors

Peninah Thomson is an executive coach and partner at Praesta Partners in the U.K. Jacey Graham specializes in diversity strategy and is currently a partner at Brook Graham. Tom Lloyd has authored five books, including The Nice Company.

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A Woman's Place Is in the Boardroom

Book A Woman's Place Is in the Boardroom

The RoadMap

Palgrave Macmillan,
 


9 March 2026

Corporate Entrepreneurship

Recommendation

Much of the business world’s enchantment with entrepreneurialism focuses on new start-up companies. Time to reboot. This textbook by professor Paul Burns explains how an established company can recapture the innovative magic of entrepreneurialism. BooksInShort recommends this guide to combining the creativity, agility and innovation of an entrepreneurial start-up with the market power, reach and security of a big, established company. Burns covers many facets of the management tactics needed to bring an entrepreneur’s creative drive into the realm of the settled corporation. In this chunky manual, he draws on numerous examples from well-known companies such as Dell and Virgin Airways to put entrepreneurialism in an overall economic context, and he teaches managers how to propel their firms forward by being flexible, eager, and inventive.

Take-Aways

  • The “entrepreneurial revolution” affects how companies work and how their leaders think.
  • Entrepreneurs are not necessarily small-business oriented.
  • Even large, established companies can develop an innovative entrepreneurial spirit.
  • Try to balance large-business security, resources and structure with small-business inventiveness, drive and creativity.
  • Entrepreneurs are goal oriented rather than procedure oriented.
  • They must be creative, innovative, realistic and aware of consumer needs.
  • Entrepreneurs tend to focus on action, not planning, but they must create flexible plans.
  • People inside large firms who sell and shepherd innovation are called “intrapreneurs.”
  • To invigorate entrepreneurial energy in your organization, encourage creativity as much as possible.
  • Ideally, innovation will have a market application, but leaders must foster inventiveness even if it doesn’t immediately sell.

Summary

The “Entrepreneurial Revolution”

A business revolution is underway – not just in how businesses operate but in how their leaders think. Actually, this entrepreneurial revolution has been in motion for several decades. Commentators often refer to entrepreneurship as a “slippery concept,” an asset that everyone wants but no one can define fully. People tend to confuse the term “entrepreneur” with “small-business” owner. Some people with smaller companies may be quite happy to have their firms reach a certain level, sufficient to supply a good living, and later to maintain that level. They are a valuable part of the overall economy, but they are not entrepreneurs – businesspeople who seek profit by taking risk and showing initiative. Entrepreneurial people and companies often concentrate on some form of innovation, whether in products (Dell), services (Virgin Airlines), prices (Walmart), marketing (McDonald’s), or a combination of these areas.

The New World of Entrepreneurship

Economic development efforts often focus on small companies as the likeliest source of new methods of wealth creation, innovation and jobs. Small businesses have room to learn by trial and error, while large, more mature businesses potentially could threaten their survival or even the larger economy if their plans go awry. Small firms are often more agile in the face of change than large firms.

“We are in the middle of a business revolution.”

Take Dell Computers, which Michael Dell started in 1984 as a small business. Dell is now a major corporation. It even exhibits some of the “bad habits” of big companies, such as overseas outsourcing. Dell outsources production that doesn’t fit its core business, particularly the manufacturing of microchips, which computer companies do not make. Over time, it has adapted more readily to market needs than IBM. Another established firm, Royal Bank of Scotland, found new, entrepreneurial ways of building on retail banking, the core business it does best. It expanded that foundation by adding online services. Having such flexibility and being able to adapt to technological change is the primary factor behind the accelerating growth of small entrepreneurial businesses. Government should promote the growth of small businesses – especially innovative small businesses that seem likely to grow – but it also needs to assist big businesses in coping better with change, development, and competition. Large companies should embrace the entrepreneurial way of thinking.

Characteristics of Entrepreneurs

Entrepreneurs are both born and made. They are a product of their personal characteristics and their environments. Entrepreneurs know how to respond to the business setting that affects their goals. In general, they are flexible, creative and realistic. They learn from experience. Entrepreneurs tend to be goal oriented rather than procedure oriented; they are more intent on getting things done than on how things get done. They frequently pay too much attention to action and do not give sufficient effort to planning. Entrepreneurs need plans as a basic structure, but they must try to anticipate problems, even far-out issues, and to build flexibility into their plans.

“Large organizations are desperate to learn from the entrepreneur and become more entrepreneurial themselves.”

The world of the entrepreneur, in a small business or a large one, is never problem free. In big companies, entrepreneurs often encounter obstacles when they want to move beyond set procedures. Those managers who have entrepreneurial personalities often come to recognize that the security and structure of a larger business may come at the cost of spontaneous action, and they must be able to judge which bureaucratic procedures are holding back innovation and which ones work. Entrepreneurship depends on change, which is why it seems to be a more natural fit for a newer, probably smaller, business.

Managing Change

Figuring out how to change an organization when change is advisable, necessary or inevitable is an immense managerial challenge. History is riddled with the remains of large organizations that failed to adapt. People resist change when they feel it will hurt them, when circumstances force them to change, and when the change alters their longstanding habits and relationships. Employees also fight reform when they don’t understand its advantages – usually due to poor communication from their managers – or when the company has not adjusted its internal structure and rewards systems to fit a new situation. To avoid roadblocks, managers should address the cultural aspects of organizational shifts.

Entrepreneurs “shape the organization they start up. They dominate it to the extent that it takes on many of their characteristics.”

To manage change effectively, consult with your staffers, ask for their input and explain the need for change. Subordinates are more likely to buy into change that emerges from a “shared vision of the future.” To earn employee support, clear results must materialize right away, so do what has to be done in the short term, and do it quickly. You will face both political and organizational needs and personnel needs when you manage change. Identify staff members who are likely to resist, and work to win them over, isolate them, or remove them. Bring internal or external change agents into the arena.

“Some of the personal characteristics of entrepreneurs are unwelcome as the organization grows. In particular, entrepreneurs are reluctant to delegate, and this can inhibit growth.”

New CEOs who must confront the reality of change and the need for fast action often act in a “dramatic, symbolic” way by replacing their inherited management team to gain a new perspective. When you institute a change, garner political support from your stakeholders – employees, shareholders, suppliers and customers – early. Use a task force to implement change. Monitor the process, since midcourse corrections are almost inevitable.

“In the last 20 years entrepreneurs establishing new firms have done more to create wealth than firms at any time before them – ever!”

Louis Gerstner, the CEO who turned IBM around in the 1990s, decided management had to communicate a vision to IBM employees – not just explaining where IBM had to go but offering assurances that it could get there. The firm conveyed the need for change and boosted workforce confidence that it could achieve real reform. IBM became more responsive to its market and, after a hiatus, again emerged as a major competitor.

Managing Entrepreneurs

Use a “light touch” to manage entrepreneurial individuals. Give them the power to make decisions in the context of keeping their managers informed and following general corporate policy. Entrepreneurial staffers seek as much independence as possible, but managers also need methods for linking them more firmly to the organization, financially and psychologically. Create a culture that gives people the feeling that they can accomplish what they wish and that the company will embrace their achievements.

“Intrapreneurs are results-oriented, ambitious, rational, competitive, and questioning, and must be adept at handling conflict and the politics of the larger organization in which they operate.”

Large companies should learn from their in-house entrepreneurs (called “intrapreneurs”) and adopt an entrepreneurial spirit. That’s why keeping entrepreneurs in the fold is worth the effort; or else they’ll leave to start their own businesses. Relationships are central to the entrepreneurial approach to business, although an independent entrepreneurial personality is not always a perfect personnel fit in a growing business.

“Effective teams...do not just happen, they have to be developed, and that can take time.”

Leading and managing organizations require distinct but related skills. A large business needs effective leadership and effective management, however, both skills require accepting mutual goals. Leaders create strategy, set a direction and motivate people. A leader should communicate a vision and the steps needed to reach it, think strategically, develop the corporate culture, and encourage top performance. Leaders trust managers to carry out the company’s objectives and to treat employees fairly. Trust is the basis for teamwork. Managers, in contrast, focus on the work needed to carry out the vision and strategy. At times, they must “give up control in order to gain control” by letting employees act. One significant way is to lessen strict budgetary controls in exchange for a better information flow, up and down the ladder. The motto of this management style is “keep me informed.” Employees know their managers will hold them accountable for results. Carrying out instructions, regardless of the outcome, is not sufficient.

“Trust is the cornerstone of a good team and the cornerstone of an effective organizational culture.”

Corporate culture describes the basic beliefs and assumptions within a company and about a company – what it is trying to do and what is acceptable for it to do to achieve its goals. A truly entrepreneurial organization needs an appropriate corporate culture, starting with adaptability, which can make the difference between failure and success. Flexibility is a survival skill at any time, not just in an uncertain business environment. Corporate culture evolves and changes over time, but not in a vacuum. The dominant national culture has a strong influence on the culture within a company.

Corporate Structure and Strategy

An organizational structure creates order and provides the foundation for people to operate. No single structure is best; different purposes require different structures. Smaller units can be more adaptable. Frequently, corporations create several small, semi-independent units to achieve flexibility within the scale, security and resources of a big organization. Structures in a company also evolve and change as circumstances shift.

“The strategic process is more of a distinguishing feature of an entrepreneurial organization than the actual strategy it adopts.”

Strategically, a company can grow in four ways: entering a market by selling more to existing customers and finding new customers, developing new products, developing new markets within existing product areas, or diversifying into new areas. Perhaps the most effective strategy combines all four. To advance, companies must build on their strengths and competencies, shore up their weaknesses, and develop a realistic marketing strategy for each product and market. Whichever strategies you prefer, stay flexible enough to adapt to new ideas from your intrapreneurs. Channel them to focus on priority areas.

Encouraging Invention and Creativity

Invention and creativity, the “soul of entrepreneurship,” provide the raw materials for innovation. The primary task for any organization is to encourage individual creativity and to find ways to translate it into market value. To have practical meaning, innovation has to fill customer demand. McDonald’s found new ways to market hamburgers, but that achievement would have accomplished little if people did not want hamburgers. However, letting your employees know that the company recognizes, appreciates and rewards creativity is critical, even if their creative efforts have no immediate use.

“Establishing an appropriate corporate culture is vital if you want to development an entrepreneurial organization.”

Innovation includes presenting new products, services or methods; opening new markets; finding new supply sources; creating new types of organizations; or improving processes or procedures. It covers finding fresh ways to respond to the market or to create a market for new products. Truly effective innovation combines several areas – such as finding new ways of selling new products. Amazon used the relatively new method of Internet marketing to sell an old product, books, and a new product, e-books.

“Cultures evolve over time under a multitude of influences. Cultures therefore change over time and can also be shaped and influenced over time.”

The best way to run an innovative firm is not to say how things should be done – that is, outlining the task – but to say what should be done – that is, establishing the mission – and to let your employees decide how to carry out that mission. Setting a vision and offering guidance is more important than command and control. Invention and innovation go together. Invention requires innovation; innovation is necessary to find a practical use for invention. Encourage both. Give your employees a stake in the results.

“We learned the importance of ignoring conventional wisdom...It’s fun to do things that people don’t think are possible or likely. It’s also exciting to achieve the unexpected.” (Michael Dell)

On the other hand, to discourage innovation, stifle creativity, undermine invention and protect the status quo, just approach new ideas with suspicion, set up cumbersome rules, encourage destructive competition, criticize but do not praise, treat problems as failures, micromanage, reorganize in secret, conceal information, delegate unpleasant tasks, and assume that the manager knows everything. Instead of making these mistakes, heed the experiences of big, successful innovative companies, which share six traits:

  1. “Atmosphere and vision” – The corporate culture cherishes innovation and knows that it matters. This requires a dedicated leader who encourages ongoing innovation.
  2. “Market responsiveness” – The leader’s dream of the future must mesh with “the reality of the marketplace.” The company works to foster lengthy relationships with long-time customers.
  3. “Small flat organization” – Innovative companies use “multidisciplinary” teams to handle projects and bypass bureaucratic processes.
  4. “Skunkworks” – Small teams work “outside traditional lines of authority” to cut through layers of red tape. Their agility reduces bureaucracy and bolsters efficiency.
  5. “Multiple approaches” – Taking on several jobs at once is tricky, especially when they cluster together, but testing a few possibilities simultaneously leads to quick “learning by doing.”
  6. “Interactive learning” – Cut through divisional barriers and soak up information. Demonstrate best practices wherever you can.

About the Author

Paul Burns is professor of entrepreneurship and dean of the University of Bedfordshire’s school of business in the United Kingdom. He is a former visiting scholar at Harvard Business School.

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Corporate Entrepreneurship

Book Corporate Entrepreneurship

Building an Entrepreneurial Organisation

Palgrave Macmillan,
First Edition:2005
 



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