A celebrated software company had managed to accumulate 600 vice presidents by the time it reached USD 4 billion in revenues [ Gary Hamel ].
Early stage companies have a hard time staying entrepreneurial for long. As young companies identify a possible path to scale, they start repeating and fine-tuning the way they scale and maximise value. That’s why we think they are a great companies – because they generate value.
A company is by definition not innovative
Scaling effectively means dealing with demands of size and complexity – dealing with bureaucracy.
Like the incumbents they challenge, scaleups are not immune to bureaucratic sclerosis. As bureaucracy deepens, layer by layer and rule by rule, the sparks of entrepreneurship get snuffed out.
Logically, there is a trade-off between creating new value drivers and maintaining value. The latter becoming marginally smaller despite of scale due to decreasing product-market fit, which is by nature driven by innovation.
Entrepreneurship is declining
So, we need more entrepreneurs? Unfortunately not. The thing is (on contrary to common belief), entrepreneurship is declining in comparison with the growting conglomeration.
In terms of value contribution this means that whereas entrepreneurship and all the clusters of entrepreneurs around the world are critical important to society, the concerted effort should primarily focus on unleashing the latent entrepreneurial energy that resides deep within large corporations.