Friday, January 6, 2012

Can an entrepreneur develop managerial talent?

Narayan has started three companies in three different segments in last 20 years. First it was coke-based fuel company which did not work out because of the technical glitches of the innovation. Next he ventured in starting an automobile ancillary company, supplying to Maruti, which he ran successfully for 12 years. Then he went on to innovate another product, an automated chair for physically handicapped. The product could not be marketed successfully because it could not be aligned with the existing business model. He asked me a very pertinent question "Haven't i developed a managerial talent'.

As you would have noticed from the above example, Narayan seems to have developed an entrepreneurial talent. Entrepreneurial talent is about finding a 'new need' that is unmet by the market, bringing together the resources required to 'convert that need into a product', and then finding a business model to 'manufacture and market the product'. As Eric Beinhocker, author of the Origin of Wealth, says wealth is created by finding solutions to problems. Entrepreneurs do this marvelously. Even when they make mistakes, like Narayan has done, they know how to 'learn' from the mistake in time and develop talent to 'find new solutions to existing or new problems' all the time.

Managerial talent

Managerial talent building is more complex because 'manager's job is not of one single type; it has many variations. For instance, first level of management which we discussed earlier is easier to understand. The manager of a 'functional department' like marketing, sales, production or administration is the first level of hierarchy in an organisation. At this level, the managerial jobs look similar.

However, as you view the hierarchy beyond that level in a typical organisation, you will find considerable variations in a managerial job between companies. In order to understand the variation of a 'managerial' job in a company, let me give you a 'classical' definition of different managerial functions (according to VSM model of management)

System 1        The entire collection of interacting Operational units.
System 2The system responsible for stability/resolving conflict between Operational units. ( Inside view)
System 3The systems responsible for optimisation/generating synergy between Operational units. ( Inside)
System 4Future plans and strategies. Adaptation to a changing environment. ( Outside view)
System 5Policy. ( setting the ground rules) 

To simplify the above, System 1 is called operating system, while system 2,3,4 and 5 functions together are grouped under a Metasystem. Although System 1 functions are easy to understand, it also has many variations, as we  found in the project manager's job of a software company. That increases the complexity of developing managerial talent of even the first level job of system 1. Because of this variation, someone who can do a job of System 1 in a company may not be able to do the same job of System 1 in another company. For instance, a project manager of BI project cannot do a project manager's job of Java development project in a software company, because of a completely different skillset, unless additional support is provided to him.

In contrast to operating system, Metasystem functions are distributed unevenly in a managerial hierarchy in a company. Every company distributes it differently. In some company, system 2 and 3 are conflated in one managerial job. In some, system 1 and 2 are mixed. Variations in managerial job at a metasystem level are huge. Many professionals are not even aware of these variations, because they are invisible to the eye. Only when they move from one company to another (with the same designation), they find the difference because they fare poorly in a new job. Very few professionals realise that their poor performance is due to mismatch between system functions. They simply assume that they fared poorly in a new job because of 'bad boss' or 'wrong culture' !

Some of the functions are more confusing. For instance, the 'rule setting' function of System 5 like Quality or Process are sometimes 'devolved' to such a low hierarchy in a company, that senior management does not even 'realise' that they are the 'owners' of these system 5 functions.

Entrepreneurial talent

As you would understand from the above explanation, entrepreneur is perhaps doing all the five system functions together. In an automobile ancillary company, Narayan may have had a different 'functional' manager, but he seem to be doing all the five system functions. This diffuses the focus, because of which Narayan may not have done enough work in a System. For instance, because he was supplying only to one supplier (Maruti), his experience with working on System 4 would be limited. Because he was the owner, his ability to perform System 1 and 2 functions paradoxically would not have got developed. In short, his managerial skill is likely to have remained at a very low level. Due to the above situational dynamics, an entrepreneur will always find it difficult to develop managerial talent.

In contrast to his managerial skills, Narayan's entrepreneurial talent seem to have developed to a significant extent. His skill of reading a business model must have developed to a significant extent. His technical skill of understanding need and converting into a product also seem to be exemplary. He also must have developed a wonderful 'network' of resources who he can use for 'innovating' a product. In short, his entrepreneurial talent is well honed.

If you are an entrepreneur, you have to understand your strength to develop your entrepreneurial talent.  Narayan's strength seem to be 'technical skill of innovation'. What is your strength?