Time to overthrow the existing order?

When Kodak chose not to develop the digital camera, which had been invented by their 24 year old employee Steve Sasson, in favour of sticking with their old and hugely profitable film business no-one should have been surprised.

Not surprisingly the main objections to developing the digital technology came from the marketing and business sides. Kodak had a virtual monopoly on the photography market, and made money on every step of the photographic process. It also had a huge investment in factories making photographic film.

It was only a matter of time before the 130 year old company filed for bankruptcy, which it did in 2012: yet another victim of ‘corporatism’.

Corporatism – a belief in hierarchy, certainty and risk-aversion – encourages managers to think that change can be resisted and problems can be anticipated. This makes established organisations vulnerable. Increasing bureaucracy and regulations makes them less adaptable and even complacent.

It wasn’t much different at the Xerox Corporation known for its photocopiers. In the sixties and seventies Xerox’s Palo Alto Research Company (PARC) invented just about everything you can imagine. That includes what was recognized as the first true PC – The Xerox Alto.

It was years ahead of its time. So what did Xerox management do with it? Just like Kodak they did nothing. They were too busy counting the money rolling in every time someone used their Xerox 914 photocopier, an unbelievable cash generating machine for the company, because you couldn’t buy one, you had to lease it and pay for every copy you made. It was a gold mine for years until the patents finally ran out.

And as everyone now knows, the main beneficiaries of all the incredible stuff coming out of PARC was the Steves, Jobs and Wosniak. In its infinite wisdom, Xerox gave Jobs a conducted tour of PARC, showing him everything they were up to, even watching him as he made notes of everything he was shown. Within months Apple had hired away some of PARC’s top talent and instituted a programme that resulted in the Lisa, the forerunner of the Mac.

For a more recent example think of Blockbuster and Netflix.

Although this may seem to have little to do with how entrepreneurial businesses operate, it is in fact among a number of examples of businesses that have missed out on a huge opportunity – by not appreciating the speed of technological advances – have failed or just been overtaken by technology.

By comparison entrepreneurs, despite having fewer resources, can often spot opportunities and outperform larger companies. Innovation and invention thrives outside rigid structures and cautious environments. Entrepreneurs succeed because they challenge the norm and make it their mission to overthrow the existing order. They start businesses and launch new products by embracing insecurity and willingly moving out of their comfort zone.

By definition, therefore, entrepreneurship is hard to comprehend. It is unpredictable and hard to categorise but without it there would be no wealth generation and no jobs. And if the state is prepared to get out of the way entrepreneurs will flourish for the benefit of all.

Sadly, too many people in positions of authority want more regulation, restrictions and intervention; they lack the necessary understanding of the power of markets, competition, incentives, choice, innovation, ingenuity and the drive possessed by wealth creators.

This lack of understanding of the power and importance of entrepreneurship is holding back the UK economy; perhaps it is time to overthrow the existing order.

Noel Guilford, Principal at Guilford Accounting
Noel Guilford is the principal of Guilford Accounting a small business accountancy practice specialising in advising owner-managed businesses on current accounting, finance, and tax matters. You can reach him via email at noel@guilfordaccounting.co.uk or by phone at 01244 660866. He is the author of the 'Figure it out - an entrepreneurs guide to understanding your business numbers' which you can obtain by visiting guilfordaccounting.co.uk.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ His latest book, How to Build a Successful Business' will be published in 2018.

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