Entrepreneurship (February 21, 2002)

The View From Taft, Business World

Studies of entrepreneurs have always highlighted their capacity for risk, their innovative bent and their persistence in the face of terrible odds. Entrepreneurs are the agents of Schumpeter's creative destruction who push the inventive limits of capitalism and render the old as obsolete and inefficient. The likes of Bill Gates come to mind, with his vision of a PC on every person's desk driving the relentless advance of the Windows operating system. Or of Jeff Bezos, founder of amazon.com, whose passion almost single-handedly created the online marketplace.

The image of the swashbuckling entrepreneur reaping unimaginable profits through new business ideas certainly appeals to the romantic imagination. But there is a lot more to entrepreneurship that needs to be recognized, especially the subtle building process that happens in the background and the many tough decisions that such building requires. These often downplayed decisions make entrepreneurship more an act of nobility than mere commerce.

Akio Morita, co-founder of Sony Corporation, recounted how, during the early days of Sony, an American buyer offered to buy 100,000 units of Sony's new miniature radio - much more than the company's 10,000-unit capacity could deliver. After careful consideration, Morita priced the tempting order much higher per unit because accepting the offer would have required the company to expand capacity and hire so many people, but could have led to bankruptcy if there was no return order at the end of the contract. Morita was not willing to contemplate letting people go after hiring them. Was he not thinking of the quick profits to be gained from pricing low to get this one order? He was, indeed. But Morita had a longer-term vision for Sony - a company that would employ people for a very long time as it contributed innovative and high value products to society.

The nobility of entrepreneurship as shown by Morita has been forcefully argued for by Pope John Paul II in the encyclical Centessimus Annus. The pontiff emphasized that the purpose of a business firm is to be a community of persons endeavoring to satisfy their basic needs and who form a group that serves society. Let us look at how entrepreneurs address this high calling.

Entrepreneurs build communities of persons and satisfy basic human needs in many ways. Those who do it best tend to see their workers as more than expense items to be minimized in their income statements. They see workers as individuals imbued with dignity and whose legitimate needs are worth attending to.

And what do people need? Stephen Covey answered this question in the simplest terms: people need to live, to love, to learn and to leave a legacy. An entrepreneur, by providing employment to people, affords them the dignity of earning a living. By giving workers decent pay, they are able to build families to whom they direct their love. Some entrepreneurs go a step further by building company communities that are imbued with love. For example, Southwest Airlines did not lay off employees after the 9/11 terrorist attacks. Its management chose to continue the legacy of caring of its founder, Herb Kelleher.

An entrepreneur involved in specialty garments told me about the training investments he made in his workers to make sure that they had the skills needed for the tough requirements of his customers. Armed with such skills, his workers were naturally more marketable and, therefore, had to be paid more to stay on. He did not begrudge the fact that he needed to pay his workers more. He had made the strategic choice early on to go for the high value-added part of the market and he knew that he needed knowledgeable people to serve this market. He also wanted to make sure that his workers had the pride of knowing that they were good, that they gave critical input to the business, and that their creative and technical contributions made a lasting impression on their customers - their legacy.

Serving society is often seen as an afterthought in business. MBAs are always asked to clarify the value propositions behind their product or service offering. What's the benefit of the offering to the buyer? Is it worth the cost? Is it competitive with others? Although useful, this approach tends to reduce value to a simple monetary formula of benefits over costs. In contrast, entrepreneurs often look beyond this limited business-school thinking and instead imagine how people's lives can be improved by their proposed products and services.

A better life is achieved when people are able to pursue positive values such as improved relationships with their families, a sense of personal growth and achievement, and access to more personally meaningful options. From this wider view, true value is equated not only with financial returns but also with time-honored values.

Entrepreneurship is, therefore, a force for the pursuit of positive values. Henry Sy envisioned ordinary Filipino families enjoying movies and inexpensive quality goods in climate-controlled havens.

SM malls have forever changed our concept of weekend afternoons, and I strongly suspect that the time spent by families strolling in malls have led to plenty of good.

Beyond the above, I see the real value of entrepreneurship as the propagation of hope. Entrepreneurship is a mindset that sees opportunity behind the poverty and corruption that one confronts everyday. It is a constant testimony to people's capacity to pull themselves up by the bootstraps when they aren't even sure if they're standing on solid ground and to resolutely march on to create a better world through genuinely valuable products and services. I salute the noble entrepreneurs.