Product and Enterprise Institutionalization - Striving to Last Indefinitely
For an enterprise to be sustainable, it must offer products or services that become institutionalized, regardless of whether the founding entrepreneur or lifestyle enterprise owner stays or not. Institutionalized products or services are those that have become permanent features in society or in a community as determined by the marketplace. As a consequence, the enterprise becomes institutionalized also. However, achieving the state of product and enterprise institutionalization requires an effective management team that can deliver the right products or services into the best markets.
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Thomas Edison once said that he had not failed, but just found 10,000 ways that didn't work. He also said that he didn't want to invent anything that wouldn't sell, because sales are proof of utility, and utility is success.
Upwardly mobile entrepreneurs start enterprises to transform innovative ideas into products and/or services that are attractive in large markets. One reason for doing so is to create wealth. Another reason is to make a statement by creating a product and/or service that delivers value and makes a difference in the marketplace. Yet another reason is to make a contribution to society and leave a legacy regardless of whether they create wealth for themselves or not.
High-tech enterprises usually have to be upwardly mobile. This is because the capital requirements for product, market, and infrastructure development require large markets that have enough critical mass to generate a return on investment. It is hard to generate a basic income from an upwardly mobile enterprise in the emerging and growth stages unless the idea is so compelling that it can attract capital to fuel growth early on.
Over the long haul, upwardly mobile enterprises can generate significant wealth as demonstrated by the energy providers, such as Exxon Mobil and Royal Dutch Shell. However, they can have downturns too as demonstrated in the automotive industry by Chrysler, Ford, and General Motors. Coca-Cola is an upwardly mobile enterprise with hugh brand equity.
Some upwardly mobile enterprises are unable to reach large markets but default to becoming lifestyle enterprises in a scaled down form.
Many lifestyle entrepreneurs and owners either start or acquire enterprises to provide a basic income to sustain themselves. This is a risky approach unless the owner puts the customers' wants and needs ahead of their own, and has sufficient working capital to survive until the enterprise makes a profit, if at all. These enterprises are found on Main Street as automotive body and repair shops, gas stations, restaurants, retail stores, and service providers. Many famous names such as Albertsons, Kroger, Macy's, Marriott, Walgreens, and Wal-Mart began as lifestyle enterprises.
Without attractive products and/or services, building empires of enterprises is a waste of capital, as is building enterprises on hope - it takes a compelling value proposition to achieve product and enterprise institutionalization, although convenience and quality of service can be differentiators also.
A lifestyle enterprise can migrate to an upwardly mobile enterprise if there is demand for its products and/or services in multiple markets. Franchising provides a way of transforming a lifestyle enterprise into an upwardly mobile by applying the duplicable principle to enable expansion in multiple markets. Kentucky Fried Chicken, Holiday Inn, and McDonald's reached multiple markets in this way.
Whatever the approach, founding entrepreneurs and owners strive to see their products and/or services and enterprises become permanent features of society, and to earn a return on their investment of time and money. Ideally the enterprise will become sustainable over time. Permanence is a condition of lasting indefinitely, but not necessarily forever.
Products and/or services become institutionalized within society or in a community over time if customers in the marketplace adopt, use, and rely upon them on an ongoing basis, regardless of the effort to promote them. If the products and/or services become institutionalized, then the enterprise that produces and sells them becomes institutionalized too. If not, the products and/or services and the enterprise will eventually blend into the background. For example, products from Campbell's, Colgate-Palmolive, Heinz, Johnson & Johnson, Procter & Gamble, and Unilever are institutionalized, as are the enterprises themselves.
If the product and/or service causes a paradigm shift through changes in assumptions, concepts, practices, and values, a major promotional campaign over a prolonged period of time may be necessary to achieve widespread adoption. Many high-tech products and/or services, such as automated teller machines, cell phones, portable digital assistants, radio, and television, have caused paradigm shifts, but over long periods of time.
Successful products and/or services institutionalize out of the wants and needs of the marketplace. Product and enterprise institutionalization is not an accident. It takes an effective management team to develop the right people, process, and product and/or service capabilities in large markets that are ready, willing, aware, and able to buy.
Founding entrepreneurs and owners may be able to translate an innovative idea into a product and/or service that earns and adds value. They may not necessarily have the leadership and managerial competencies to attract the right employee, customer, supplier, and investor constituencies through whom institutionalization can occur, or deliver results consistently through engineered processes.
Institutionalization starts with plans and policies. Attracting the right constituencies requires aspirational, inspirational, and motivational communications that entertain, inform, convince, and persuade. Delivering results requires organizing, executing, evaluating, and adjusting resources and activities based upon performance measures that can capture feedback from constituencies. Both new products and/or services and enterprises require adaption based upon how the marketplace responds. Adaption involves tuning and standardizing functions and features. As the product and/or service migrates through its life cycle, enhancement and maintenance will be required to optimize the value opportunities. Adaption is the intersection between what the entrepreneur had envisioned and how the marketplace responds. As the enterprise migrates through its life cycle, intrapreneurial, leadership, and management competencies are required to balance new innovation with improvement.
Through this approach, institutionalization can occur regardless of whether the founding entrepreneur or owner stays or leaves. Sometimes an entrepreneur takes on a new role, such as a chief technology officer, if a new management team comes on board. Sometimes the founding lifestyle enterprise owner sells to an experienced operator who can adapt a fledgling enterprise into one with traction. In such cases, the founder may become an employee of the new owner.
Entrepreneurs and owners must be willing to surround themselves with others that collectively have the enterpriship (entrepreneurship, leadership, and management) competencies to institutionalize products and/or services, and consequently the enterprise itself, by leveraging people, process, and product and/or service capabilities.
Achieving product and enterprise institutionalization is an enterpriship competency.
