Fighting for leadership: Entrepreneurs vs. managers

Entrepreneurs or managers. These are two roles in business whose interests often clash to create problems and conflicts. How different are their priorities and what could be the outcome of this confrontation?

Roles, duties and resources

Entrepreneurs are better than managers at seeing market opportunities, new market situations as well as carrying all risks and turning these opportunities into actual market achievements. Managers, or hired leaders, are responsible for organizing stable operation in a company. They take charge of planning, making operative decisions, controlling and coordinating staff. Unlike entrepreneurs, they are less oriented externally, or at the market, and more internally, at their company’s effectiveness and stability.

Harvard Business School professor Howard Stevenson came up with probably one of the best definitions of entrepreneurship as “the pursuit of opportunity beyond resources controlled.” Based on this logic, he clearly separated two roles: people can be either entrepreneurs or managers, depending on their focus on controlled or uncontrolled resources.

A manager is an individual who directs their focus toward utilizing the resources available within the organization. When their growth involves leveraging new resources and opportunities outside the company, they become an entrepreneur.

At the same time, it is obvious that in quiet and predictable times, managers can easily assume control of the business because schedules, plans, contracts, rules, etc. work effectively under such conditions. However, during a ‘storm,’ managers very quickly discover that their tools are not as effective as before or may even fail altogether. This is where entrepreneurs take center stage, as their primary objective is to explore and generate new market opportunities, resources, and innovative ideas for business development.

Setting goals and outlining tasks

Another fundamental difference between an entrepreneur and a manager is who sets the goals and directions of activities. For instance, for a manager to be able to effectively use available resources, they must understand the practical implications, that is, they need clearly defined goals that establish a comprehensive set of criteria for evaluating effectiveness. The pivotal question, however, is where these goals come from. Typically, they are set by the business owner, a senior manager, or are outlined in the company’s internal corporate policy. While a manager has various means to acquire goals and explicit criteria for effectiveness, they often lack the autonomy to set them independently.

For an entrepreneur, the situation differs significantly. They determine their own goals, devise strategies and ways to achieve them, take risks and are responsible for the decisions they make. Although this choice may not be an easy one, fortunately or unfortunately, no one else can make it on their behalf.

Being in the same business ecosystem, entrepreneurs and managers not only have different points of view on the same problems, employ distinct methods and tools, but often have contrasting skills and abilities. Thus, an entrepreneur with well-developed business intelligence can discern potential where others might overlook it, forming innovative combinations of resources to realize their plans. The manager, in turn, is focused on optimizing and efficiently managing the assets already at their disposal. This fundamental distinction is a primary source of conflict between them. Entrepreneurs strive for growth and development by recognizing new market opportunities, often outside their organizations, while managers ensure stability and predictable performance of the company through the effective use of the resources under their purview.

Working in an era of change

In today’s ever-changing market landscape, we can see technologies developing and new opportunities emerging. Business success often depends on the ability to observe and recognize these changes as they are not obvious. It requires effort to spot a specific opportunity in the frenetic flow of information, events and developments, and properly assess its potential.

Unlike managers, entrepreneurs are always seeking their field of activity and looking for fundamentally new clients, products and markets, acting like builders who look through a pile of stones to differentiate valuable construction material from rubbish. For an entrepreneur, a failure to recognize the environment as an area of interest and to make attempts at research may lead to missing out on an opportunity for a prospective billion-dollar business idea. Oddly enough, entrepreneurs rarely consider this activity as market research.

We often see entrepreneurs and managers in a dynamic confrontation that manifests through various work aspects. For instance, entrepreneurs may oppose managers’ prompt decisions or their tough budget control, creating space for test sales and experimentation. In their turn, managers may view an entrepreneurial initiative that lacks proper substantiation and planning as hasty and risky.

Such strife of interests between entrepreneurs and managers is an essential part of business. Despite different approaches, these two roles are interconnected and can be complementary. When handling a business issue, entrepreneurs will develop specific ideas and solutions, while managers will create totally different ones; the former will be more efficient for certain tasks, while the latter will prove superior for the others. Entrepreneurs can achieve greater stability and structure for their projects through cooperating with managers, and the latter will receive an extensive scope of innovation ideas and proposals.

By Yaroslav Kaplan, President, Kaplan Research Company; author, Business Incognita: Expanding the Boundaries of Entrepreneurial Thinking

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