Faculty Column: Entrepreneurs (Corporate Entrepreneurs) are Important

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Courtesy: Thunderbird School of Global Management
Courtesy: Thunderbird School of Global Management

By Professor Robert Hisrich

Being an entrepreneur and creating value by establishing a new organization plays an important role in profit and non-profit organizations, in medicine, religion, science, the arts, and in the growth and prosperity of regions and nations. Large-scale outcomes in each of these areas can have quite humble beginnings: the entrepreneurial opportunity begins at the nexus of an enterprising individual solving a need that is the basis for a lucrative opportunity.

For entrepreneurs to flourish and for new organizations to be created both inside and outside an existing organization, four elements are required: an infrastructure that is supportive, an idea with unique value propositions, capital to get started and grow, and an entrepreneur to work toward making the venture a reality. While this sounds simple, it’s not. Laws and tax structures are not always encouraging, not all ideas are viable in a given market, capital is often not readily available for risky start-up opportunities, and, of course, the right person has to be the driving force behind it all. Thinking of entrepreneurship in this way, it is no wonder strong business ventures do not emerge overnight. Traits needed include: being a visionary, being able to fail, persistence, being a team player and commitment. For the entrepreneur today who starts their own enterprise, the experience is filled with enthusiasm, frustration, anxiety and hard work. There is a high failure rate due to such things as poor sales, too high costs, lack of capital, hypercompetition or lack of skills or managerial ability. Even though the financial, social and emotional risk can be high, so can be the rewards.

Take for example Tim and Karrie League who founded Alamo Drafthouse. Year-round, crowds of locals in Austin, Texas flock to treat themselves to their favorite aspects of this unique experience that centers between a movie theater and a restaurant. Whether it’s sipping a pint of local beer at the full bar in the lobby or enjoying a nibble from the long menu of fresh and tasty entrees delivered right to your seat, or even simply coming for the mélange of indie, cult-classic and first-run films, Alamo Drafthouse offers a fusion of services truly unique to the cinema industry. The Leagues have been movie lovers from childhood into adulthood. Garnering that love of the cinema, the two leased a small, abandoned movie theater in the mid-90s and remodeled it to run cult classics and second-run films, sometimes incorporating unique add-ons like sing-along lyrics or live music. Taking advantage of Austin’s creative and business-friendly culture, the Leagues turned their passion into a business that not only caters to the diverse tastes of their movie-obsessed audience, but also incorporates their own values into their business model taking out what they hated most about theaters and putting in more of what they loved. After 20 years, Alamo Drafthouse has established itself as a proud staple of the “keep Austin weird” culture and has been recognized nationally as an innovator of the recently lacking-of-luster cinema industry.

This same creativity can take place inside an organization as well—corporate entrepreneurship. Let us look at Ken Kutaragi in Sony Corporation founder of the Sony PlayStation. Ken Kutaragi sat in his Tokyo living room watching his daughter immersed in the new Nintendo game console he had just brought home. Listening along to its music and sound effects, he noted that the game’s audio was subpar. If only there was a way to improve this. Kutaragi mulled over this issue and finally came up with a possible solution—Nintendo could develop an advanced chip dedicated only to the console’s sound, effectively improving its quality. Receiving permission from his managers at Sony, Kutaragi began working on a side project with Nintendo, aiding in the creation of the SPC7000 chip that enhanced Nintendo’s consoles and increased their product’s value.

At the time, Sony’s senior executive management had not known of Kutaragi’s collaboration with Nintendo. Once word had gotten around about the success of Nintendo’s new sound chip, they opposed Kutaragi’s involvement and attempted to fire him. However, Norio Ohga, Sony’s CEO at that time, stopped them. Witnessing Kutaragi’s innovative spirit and entrepreneurial drive, Ohga could not simply allow the release of an employee of such caliber, even if it meant another company was benefitting from it. After all, any technological innovation, even if not from his own company, would benefit the future of electronics. Ohga kept Kutaragi in Sony Corporation and encouraged him to continue his consulting projects for Nintendo.

Kutaragi realized that the next step would be to continue advancing the consoles themselves by pushing out the use of large, blocky game cartridges and ushering in thinner CD-ROMs. Kutaragi worked incessantly on his new idea and finally developed a system using the newly developed CD-ROM technology. Soon after, Nintendo unexpectedly cancelled the project. Kutaragi refused to let his project fall by the wayside even though at that time Sony was not interested in moving into the gaming industry; their primary focus being on other types of consumer electronics. Head management unsurprisingly bucked the idea and brushed Kutaragi’s project off as a mere child’s toy. CEO Norio Ohga once again saw the potential of the new gaming console and, convinced of the console’s inherent capabilities, accepted Kutaragi’s project and effectively entered Sony into Japan’s gaming industry. The console was named the Sony PlayStation and was released to the public in 1994. Thanks to the support of Sony CEO Norio Ohga, Kutaragi stayed on with Sony, continuing to contribute to the development of the PlayStation line, being forever immortalized in history as the “father of the PlayStation.”

You can read more of these illustrations and obtain an understanding of both in my 33rd book—Understanding Entrepreneurship—to be released soon by Edward Elgar Publishing, Inc.

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