MONDAY*

Issue #14 | November–December 2016

CREATING AN ENTREPRENURIAL SOCIETY

EXECUTIVE
BRIEFING

Real entrepreneurship, Peter Drucker wrote, is a practice of “purposeful innovation,” one that should be “normal, steady and continuous” in “our organizations, our economy, our society.” It is as appropriate to government and the nonprofit sector as it is to business. The entrepreneur is someone who is always seeking change, creating it and exploiting it. Seen in this light, the true entrepreneur is a rare breed. Rarer still are those entrepreneurs who leave people ever after influenced by their vision and their work. With a throng of executives and scholars descending this month on the Global Peter Drucker Forum in Vienna—the city where Drucker was born 107 years ago—we thought it appropriate to look back in history at three of these grandest of entrepreneurs.

CREATING AN ENTREPRENEURIAL SOCIETY

In a couple of weeks, hundreds of executives and scholars will gather in Vienna for the Global Peter Drucker Forum. The theme of this eighth annual gathering—“The Entrepreneurial Society”—is at once timely and timeless.

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“Entrepreneur” has many etymological explanations, most of them wrong. We know that the term was already in use during the 18th century, but “entrepreneurship” waited until after World War I to come into being.

According to Peter Drucker, the French economist J.B. Say, writing around 1800, defined the “entrepreneur” as someone who “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.” In modern parlance, by contrast, “entrepreneur” often refers simply to someone who has started his or her own business.

Drucker rejected the common description of the entrepreneur as someone who has launched an enterprise and considered Say’s characterization to be closer to the mark. But he also placed some additional requirements on the concept.

Real entrepreneurship, Drucker wrote, is a practice of “purposeful innovation,” one that should be “normal, steady and continuous” in “our organizations, our economy, our society.” It is as appropriate to government and the nonprofit sector as it is to business. The entrepreneur is someone who is always seeking change, creating it and exploiting it.

Seen in this light, the true entrepreneur is a rare breed. Rarer still are those entrepreneurs who manage to change basic assumptions about the role that their sector can play in the world, leaving people ever after influenced by their vision and their work.

With so many great minds descending on Nov. 17 and 18 upon the city where Peter Drucker was born 107 years ago—you can sign up for the live stream here—we thought it fitting to look back in history at some of these grandest of entrepreneurs, men and women who set an example of how to integrate entrepreneurship into life.

Here are the stories of three of them—one from each sector.

 

JOSEPH WHITWORTH: METTLE MEETS METAL

“Absolute truth is confessedly unobtainable,” Joseph Whitworth told the British Association for the Advancement of Science in Glasgow in 1840. “But it is certain that progress hitherto falls far short of this practical limit.”

Pursuing the practical limit of measurement and workmanship—and pushing hard against it—eventually made Whitworth rich and influential, with 48 patents to his name. It also made him the quintessential entrepreneur.

FRAME WORK

In this special issue of MONDAY*, focused on history, Phalana Tiller features some thoughts on entrepreneurship with a very special guest: Peter Drucker himself.

PRESSING THE ISSUE

Joseph Whitworth pushed forward the field of toolmaking by insisting on getting as close as possible to mechanical perfection.

Whitworth had a hard childhood. Born in 1803, the son of a teacher, he lost his mother when he was 11. Unable to support his family, his father sent Joseph and his two siblings into foster care. Joseph received a few more years of schooling and then, miserable with his new life, moved to Manchester in search of work. There he landed a series of jobs and apprenticeships at companies specializing in machine tools.

At age 21, he moved to London to join the 120-man workshop of Henry Maudslay, known for being at the forefront of mechanical engineering in England. Many of the great names of English industry passed through Maudslay’s, and Whitworth worked there for several years, learning about the latest advances in tool making.

In his spare time, Whitworth worked obsessively on production of what he called a “true plane,” a metal plate of such flatness that every point on its surface was weight bearing.

The “true plane” is something we take for granted today, but to create one from metal was a challenge no one in the early 19th century had mastered. The approach typically used was to grind the plate, much as we use a sander on a floor to ensure a flat surface. But, Whitworth argued, this led to “beautiful regularity” that served only to “conceal error.”

Whitworth’s method, which he seems to have arrived at through improvisation, was to start with three machine-planed metal surfaces and to smear each with colored oil, pressing each surface against the other in order to reveal any protrusions in the plate. Then he would use a special scraper to slice away at the tiny protrusions, a revolutionary technique that produced much cleaner results than grinding. (Picture slicing away a mountain versus sanding away a mountain, and it becomes easier to see why the former produces cleaner results.)

Whitworth’s planes were so “true” that, when placed gently together, one seemed to float above the other on a cushion of air. When pressed harder together, they’d stick and require force to separate, something scientists puzzled about well into the 20th century, when the phenomenon of “molecular cohesion” was discovered.

More important, the creation of true planes allowed for the construction of tools of unprecedented intricacy and reliability and measuring devices of unprecedented precision. Sliding surfaces based on true planes are crucial to nearly every sophisticated machine. The flat plane allowed for the later invention of a measuring device that could detect—Whitworth claimed—differences of a millionth of an inch.

whitworth_a

In 1833, just shy of 30, Whitworth returned to Manchester and went into business for himself, establishing a shop that bore the sign “Joseph Whitworth, tool maker from London.” Within a year, he employed more than a dozen millwright fitters and machinists, plus a clerk. A year later, Whitworth secured a patent for cutting screws; in the subsequent five years, he obtained nine more patents, most having to do with “turning, boring and planing.”

English industry was now growing with incredible speed, but in Whitworth’s view what stood in the way of mass production was a lack of precision and standardization. “The very soul of manufacture is repetition,” he pointed out, and for repetition to be effective you had to “reduce the number of sizes.”

One of the simplest and frustrating obstacles to this was the lack of a standard screw. Whitworth began to collect every variety of screw in England, and, averaging their pitch and depth, produced a paper in 1841 proposing a universal screw thread. This went into countrywide use—“British Standard Whitworth”—by 1858.

He also presented a paper imploring his fellow engineers to adopt a decimal system in measurement, rather than something based on eighths, and Whitworth’s “thou,” referring to thousandth of an inch, became the industry norm.

By 1853, when England went to war in the Crimea, Whitworth employed more than 350 people and had grown wealthy. The outbreak of hostilities inspired Whitworth to try something new. He invented a rifle.

The one he devised used a six-sided bore and required less gunpowder than other firearms, even as it achieved greater penetration. To Whitworth’s frustration, the British government chose to go with a different gun, but France became an enthusiastic purchaser of the rifle known as “the Whitworth,” as did the U.S. Confederacy, which found its precision invaluable for sniper use.

Consistently, Whitworth’s career illustrated Drucker’s dictum that “innovation and entrepreneurship are not ‘root and branch’ but ‘one step at a time,’ a product here, a policy there, a public service yonder.”

Thus it was that Whitworth’s foray into gun manufacturing caused him to become interested in metal quality. Steel was just coming into use for firearms, but impurities or air pockets in the metal could cause guns to malfunction or, in the worst cases, even explode. To address this, Whitworth devised a system of hydraulic compression that pressed down on the molten metal and expelled all gases. This he likewise patented, and, by 1880, when Whitworth was in his late 70s, he had established a large new plant that employed more than 1,000 people.

The very soul of manufacture is repetition.

JOSEPH WHITWORTH

People like Whitworth “are enterprising, imaginative and confident in their own judgment,” says Mark Casson, a scholar of entrepreneurship at the University of Reading. “They like tackling problems.”

The solutions reached by the most important among them not only delight their customers but go so far as to reshape the world.

To this end, by the time Whitworth died in 1887 at age 83, the “good enough” standards that had long characterized British engineering and manufacturing had become a thing of the past.

 

OCTAVIA HILL: R-E-S-P-E-C-T, FIND OUT WHAT IT MEANS TO ME

With “social entrepreneurship” all the rage, more and more nonprofit organizations have been looking to combine, as one set of experts put it, “a social welfare model” with a “revenue generation model that guides . . . commercial activities.”

Yet as 21st century as this approach may sound, it’s well worth noting that Octavia Hill was on to the very same thing—more than 150 years ago.

Hill was born in Cambridgeshire into a comfortably upper-middle-class existence, but when she was still young, her father lost his money through bad decisions and suffered a nervous breakdown. After that, he ceased to be capable of making a living.

VOX BOX

WHO PLAYED AN INTERESTING HISTORICAL ROLE IN CREATING AN ENTREPRENEURIAL SOCIETY?

—Interviews by T.A. Frank

ROB MARTELLO

Professor of the History of Science and Technology, Olin College

CLAIRE GAUDIANI

Author, Daughters of the Declaration; Adjunct Professor of Philanthropy, New York University

JOSIAH OBER

Professor of Political Science and Classics, Stanford University

Most Americans know Paul Revere as a patriotic Midnight Rider at the start of the Revolutionary War, but he was also a remarkable innovator and entrepreneur. Revere was an accomplished silversmith, and he used his profits from silver sales to build a foundry after the war. He learned to cast utilitarian iron goods, hundreds of bronze church bells and cannon for state governments, as well as for the War Department. At the age of 65 he adapted a manufacturing technology for rolling and annealing copper sheeting, a technical secret guarded by the English up to that time. Copper sheeting had many critical uses, primarily to protect wooden hulled naval vessels against the ravages of barnacles and shipworms. Revere received substantial contracts to produce this sheeting for the U.S. government, and grew wealthy. When he died in 1818 at the age of 83, he’d become a quintessential American entrepreneur who helped his country advance the state of its technology and cross the threshold of the industrial age.

Katy Ferguson is an early American social entrepreneur few people know about. She was born a slave in 1779 but purchased her freedom, with some help, and lived in New York. When she was just a teenager she founded the country’s first “Sabbath School,” which was school on Sunday for children who had to work on the other days of the week. She baked wedding cakes to pay for it. She also started taking in many poor children, both black and white, and became a foster mother to 48 of them during her life. The Sabbath school, which gave people an education on Sunday, was an idea that spread all over the country. It’s clear that entrepreneurs come in all races, colors, ages and income levels.

In the late 6th century B.C., Athenians overthrew a family of tyrants who’d been ruling the city-state, setting off a power struggle. Cleisthenes, who was a member of an aristocratic family, was one of those competing for power, but a rival, Isagoras, was becoming the most powerful person in the city. At this point, Cleisthenes did something radical: Instead of appealing to fellow aristocrats, Cleisthenes appealed directly to the people and suggested they have a role in the governance of their state. That was an entrepreneurial moment: You can’t win by the old rules, so you try something new. Isagoras wanted to suppress these ideas and called in the Spartans, and Cleisthenes was forced to flee. But Cleisthenes had reached the ordinary people, and they staged a massive uprising and expelled the Spartans. Cleisthenes got called back in. Suddenly, conditions were different, and Cleisthenes had to deliver fast. He wound up creating the basic structure of Athenian democracy, one that lasted for 180 years in Athens and even longer in other city-states, which copied it. This was entrepreneurialism in crisis: innovation being stimulated by profound challenges that cannot be addressed in the old way. And it worked.

ROB MARTELLO

Professor of the History of Science and Technology, Olin College

MORE

Most Americans know Paul Revere as a patriotic Midnight Rider at the start of the Revolutionary War, but he was also a remarkable innovator and entrepreneur. Revere was an accomplished silversmith, and he used his profits from silver sales to build a foundry after the war. He learned to cast utilitarian iron goods, hundreds of bronze church bells and cannon for state governments, as well as for the War Department. At the age of 65 he adapted a manufacturing technology for rolling and annealing copper sheeting, a technical secret guarded by the English up to that time. Copper sheeting had many critical uses, primarily to protect wooden hulled naval vessels against the ravages of barnacles and shipworms. Revere received substantial contracts to produce this sheeting for the U.S. government, and grew wealthy. When he died in 1818 at the age of 83, he’d become a quintessential American entrepreneur who helped his country advance the state of its technology and cross the threshold of the industrial age.

CLAIRE GAUDIANI

Author, Daughters of the Declaration; Adjunct Professor of Philanthropy, New York University

MORE

Katy Ferguson is an early American social entrepreneur few people know about. She was born a slave in 1779 but purchased her freedom, with some help, and lived in New York. When she was just a teenager she founded the country’s first “Sabbath School,” which was school on Sunday for children who had to work on the other days of the week. She baked wedding cakes to pay for it. She also started taking in many poor children, both black and white, and became a foster mother to 48 of them during her life. The Sabbath school, which gave people an education on Sunday, was an idea that spread all over the country. It’s clear that entrepreneurs come in all races, colors, ages and income levels.

JOSIAH OBER

Professor of Political Science and Classics, Stanford University

MORE

In the late 6th century B.C., Athenians overthrew a family of tyrants who’d been ruling the city-state, setting off a power struggle. Cleisthenes, who was a member of an aristocratic family, was one of those competing for power, but a rival, Isagoras, was becoming the most powerful person in the city. At this point, Cleisthenes did something radical: Instead of appealing to fellow aristocrats, Cleisthenes appealed directly to the people and suggested they have a role in the governance of their state. That was an entrepreneurial moment: You can’t win by the old rules, so you try something new. Isagoras wanted to suppress these ideas and called in the Spartans, and Cleisthenes was forced to flee. But Cleisthenes had reached the ordinary people, and they staged a massive uprising and expelled the Spartans. Cleisthenes got called back in. Suddenly, conditions were different, and Cleisthenes had to deliver fast. He wound up creating the basic structure of Athenian democracy, one that lasted for 180 years in Athens and even longer in other city-states, which copied it. This was entrepreneurialism in crisis: innovation being stimulated by profound challenges that cannot be addressed in the old way. And it worked.

CLEAN LIVING

Octavia Hill, a pioneer in social entrepreneurship, provided healthy, clean places for the poor to live—and, in return, expected them to pay their rent on time.

His wife took the children, including 14-year-old Octavia, to London and secured a job as a manager of the Ladies’ Co-operative Guild, established by a group called the Christian Socialists. Hill worked as a supervisor of a toy production shop staffed by girls who attended a school for the poor. Hill’s manner was kinder and more compassionate than the girls had previously encountered, and she came to know each of them well.

When she visited their homes, however, the level of squalor shocked her. She began to think of ways to improve housing conditions for the poor.

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In 1864, an unexpected opportunity arose. Her friend John Ruskin, the painter and critic, came into an inheritance, and he asked Hill for ideas about what to do with it. Hill carefully shared her dream: to purchase a “small lodging house, where I may know everyone and do something towards making their lives healthier and happier.”

Ruskin, to Hill’s delight, replied that it would give him “one of the greatest pleasures yet possible to me” to help with the effort. But he imposed one condition: a return of 5% on his capital. This, he said, was not due to avarice but to the desire to see Hill’s example, if profitable, replicated by others.

“Who will ever hear of what I do?” asked Hill in response.

In 1865, Ruskin acquired three houses in a court in the central London neighborhood of Marylebone. According to Hill’s records, maintenance problems included plaster crumbling off of walls, rain coming in through the roof and dark stairwells that lacked banisters. Tenants had long since chopped them up for use as firewood.

Like many London slum dwellers, the tenants were accustomed to a traditional arrangement in which, in a variation on an old joke, the landlord pretended to offer housing and the tenant pretended to pay for it. Many were weeks in arrears. Hill, however, broke with such custom, insisting on coming by in person, weekly, to collect rent. She also made efforts to get to know each of her tenants, despite their reluctance to speak to her.

As time went on, Hill’s tenants warmed to her, growing to respect her for her tenacity and goodwill. She immediately began to repair windows and whitewash the walls.

Seasoned landlords warned her that the tenants would pilfer and break things as fast she could fix them, and this turned out to be the case. But Hill spoke to her tenants and proposed a deal: If the money she had set aside for repairs didn’t have to be used, she would spend it on improving their units, adding things like “safes and washing-stools and copper lids,” as she wrote to Ruskin. This worked.

She also organized teenage girls among the tenants to clean the passages of their building for six pence a week, leading them to enjoy both new levels of cleanliness and the money in their pockets.

In Hill’s view, the worst thing one could do for people was to make them dependent. The way to help people was by showing them respect. In her own case, that meant an ethic of mutual obligations. Hill kept her buildings in good repair and always followed through on promises. In turn, tenants were to pay up on time.

octavia_hill_residence

REBEL REBEL

In 1868, Okubo Toshimichi helped to do away with the shogunate and transform Japan into a modernized nation-state.

Hill acquired additional properties, becoming more renowned than even Ruskin had anticipated. By 1874, a decade after she began, she had more than 3,000 tenants. Others had begun to imitate her methods.

Because Hill’s goal was to help people rather than make money—and she kept none for herself—she took great interest in philanthropy overall and became closely involved with an entity called the Charity Organisation Society, founded in 1869.

WATER 
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Silicon Valley pioneer Bill Hewlett once said that HP had to place 100 small bets on products in order to yield six breakthroughs. Tweet this


Among the countless innovations of Benjamin Franklin is one that has had a lasting effect on the nonprofit world: the matching grant. Tweet this


One of history’s greatest entrepreneurial failures was that of Motorola’s Iridium, a $5 billion project offering one-world telecom service that bypassed cellphone towers in favor of a network of 77 satellites. Launched in 1998, Iridium was simply too expensive for the consumer. Tweet this


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hat-tip to: Peter Sims; Philanthropy Roundtable; Eccentric Orbits: The Iridium Story by John Bloom; and the Information Technology and Innovation Foundation, respectively.

As the name suggests, the Charity Organisation Society had the aim of bringing more order and rigor to efforts to help the poor. Blind donations were often leading to dependence—a great sin, in the view of Hill, whose first paper delivered to colleagues at the society was entitled “The Importance of Aiding the Poor without Almsgiving.” At the same time, disorganized distribution often led to waste or unfairness, with resources clustering in some areas and failing to reach others.

The society also conducted investigations into what was working and what wasn’t—a forerunner of the assessments that many nonprofits conduct today to gauge the impact of their programs.

Hill’s critics viewed her as inflexible, and it has been suggested that even Hill herself eventually came to have second thoughts about the strictness with which she had espoused certain principles.

However, many of the results she achieved would surely be the envy of social entrepreneurs today. So, too, would be her relentlessly forward-looking worldview.

“When I am gone, I hope my friends will not try to carry out any special system, or to follow blindly in the track which I have trodden,” Hill said late in life. “New circumstances require various efforts, and it is the spirit, not the dead form, that should be perpetuated.”

 

OKUBO TOSHIMICHI: A CLASS ACT

For centuries to come, historians will debate Japan’s Meiji Restoration, which saw the abolition, in 1868, of a largely decentralized shogunate and a return to centralized rule, with an emperor at the helm.

How did this all happen?

Within the space of less than a decade, Japan went from being an extraordinarily isolated nation to an emerging world power that had adopted Western learning and institutions with a speed unequalled by any non-Western society in history. The samurai class, one that had enjoyed centuries of privilege, effectively discontinued itself, and previous class distinctions were officially erased.

Among the figures at the forefront of this titanic transformation was a young samurai named ­Okubo Toshimichi.

Born in 1830, Okubo was the son of a low-ranking samurai in Satsuma Province, at the southwest extremity of Japan, on the island of Kyushu. Family income was modest. But because he lived in the main castle town of Kagoshima, the seat of Satsuma’s government, Okubo got a thorough education by local standards, and his devotion to reading helped him land a job as an aide in the local archive when he was 16.

Thanks in part to his maternal grandfather, who had gained a lot of knowledge of Western technology and science from having lived in Nagasaki, where Dutch traders had been granted a limited concession, Okubo came to believe that Japan lagged the Western world in technological development.

Unfortunately for Okubo, his father, who was a minor official in the government of Satsuma, became tangentially embroiled in a plot to assassinate some conservative advisors of the local governor. His father was exiled, and Okubo lost his job in 1849, leaving him in dire poverty.

Only with the ascent in 1851 of a new governor, called a daimyo, did things look up. Okubo was pardoned and restored to his former post. He quickly advanced up the ranks of local government, taking a quiet but active role in supporting modernization in the province. Such efforts had gained urgency after 1853, when Commodore Perry sailed in from the United States and forced a treaty upon Japan.

choshu_expedition

Before long, a more hidebound governor came into power. But Okubo was cautiously persistent in promoting reform. Gifted at office politics, and widely resented for it, Okubo employed tactics like seeking out chess lessons from a priest who was known for playing the game with the father of the new daimyo. Okubo would then use these sessions to confide in the priest, in the hopes—correct, as it turned out—that his chess teacher would prove a useful conduit to higher-ups.

Okubo kept rising in local government, finally ascending to one of the most prestigious and senior roles possible: direct advisor.

At this time, rebels in the provinces of Satsuma and Choshu were becoming leaders in a quiet movement to do away with the shogunate and transform Japan into a modernized nation-state. In 1868, they hatched a series of plots, unleashing a short but bloody burst of battles that left 3,500 dead.

It was then that Okubo and other rebels realized a long-cherished plan: to get the shogun to step down and cede all authority to Japan’s emperor. The decade that followed this event, much like the decade that had preceded it, has been much studied ever since.

If, as Drucker has written, the groundwork for entrepreneurial opportunities includes unexpected failures, new threats and changes in perception, then Japan had many such conditions to offer. In addressing them, “creative imitation” and “planned abandonment”—getting rid of systems that have become obsolete—were central.

Okubo spent the first few years following the restoration helping to set up a new government—often using measures that were flatly autocratic. One of the most dramatic early reforms was to do away with official class distinctions. Samurai, who had lived by decree as a mostly idle aristocracy of warriors, were now free to engage in commercial activities. Nobility could marry commoners. The outcast eta group was no longer to be designated as such.

Okubo also joined an extended mission abroad, visiting the United States and Europe, in an attempt to renegotiate treaties and learn more about Western administration. In Prussia, he met with Otto Von Bismarck, who advised that Japan rely for its security on strong self-defense and not on international law.

In 1873, Okubo became home minister, giving him control of local government appointments, and he oversaw the establishment of an agricultural school, the promotion of industrialization and construction of extensive infrastructure, including roads and bridges.

Okubo had a plan: to get the shogun to step down and cede all authority to Japan’s emperor.

In 1876, to widespread consternation, the government prohibited samurai from carrying two swords, a traditional badge of prestige. And in a policy that would further squeeze the erstwhile samurai class, Okubo helped to do away with much of its income, which had initially taken the form of rice tributes from peasants. First, the central state assumed the obligation, but, seeing how much it strained the treasury, Okubo proposed instead that the privileges be commuted into long-term government bonds paying 5% to 7% interest. This freed up much more funding for building up Japan’s military and infrastructure.

All of this became too much for some of the samurai, including, inconveniently, some of Okubo’s old friends and colleagues in Satsuma province, where a major rebellion broke out in 1877. As home minister, Okubo was forced to take a lead role in crushing the rebels, a conflict that left more than 6,000 dead.

If Okubo already had many enemies, he now had more. The following year, traveling on the road in a coach, he died as no one should: of assassination by beheading. Okubo’s killers, who took their own lives as well, had been motivated in part by desire for revenge for Satsuma and in part by hatred of Okubo’s highhanded rule.

Few historians would deny that Okubo took an authoritarian approach to governance, and after his death democratization picked up speed. But he had left his nation considerably strengthened and drastically changed, and he is widely considered to be one of the founders of modern Japan.

Despite the public sector’s reputation as a laggard when it comes to innovation, stories of successful entrepreneurship in government are not that hard to find. But success on the scale of what Japan enjoyed under Okubo is exceptional indeed. *

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Monday Mandate*

What will you do on Monday that’s different?

GO TO VIENNA

Join the Global Peter Drucker Forum on Nov. 17 and 18, where this year’s theme is “The Entrepreneurial Society,” or patch in to the live stream by registering here.

EXPLORE YOUR ‘AMBIDEXTERITY’

Gather your team and question how your organization could become more “ambidextrous”—that is, able to serve existing markets where efficiency is prized while also competing in new areas where experimentation is needed.

SEARCH FOR CHANGE

Survey everyone in your organization, from the front lines to the executive suite, and ask them, “What are the best opportunities that we are missing, and how could we exploit them?”