Work can be a source of ultimate personal satisfaction. It also contributes to the prosperity of cities, companies and countries. At best, both are connected. Unfortunately, this is not common. In this article I investigate how engagement and passion can enter again the workplace and how cities can contribute to achieving this goal.
The disappearance of art and craft
As the picture above shows, cities used to be breeding grounds for doers: craftsmen and artisans. They populated every street and during frequent processions their guilds presented themselves in all their glory.
Craftsmen, artisans, and not to forget traders made cities thrive. For centuries, entrepreneurship was linked to art and craft in exchange for rewards like personal fulfilment, satisfied customers, and a good life. Greed was prohibited.
The term entrepreneur is still associated with giving direction, form and content to new activities based on personal motivation and skills and thus creating value. A description that applies to the self-employed, business entrepreneurs, franchisees or intrapreneurs and includes both commercial, institutional and artistic activities.
Cities of doers is part ten of a series of essays on how cities can become more humane. That means finding a balance between sustainability, social justice and quality of life. This requires far-reaching choices. Once these choices have been made, it goes without saying that we use smart technologies to achieve these goals.
The essays that have already been published can be found here.
In less than one century the kind of entrepreneurship that dominated the Middle Ages to the 19th century disappeared and made room for ‘low strain jobs’ for operators, clerks, dockers and servants. Small-scaled workshops were exchanged for plants, offices, and department stores dominated by hierarchical management, a high degree of planning and control and cheap mass-production. This resulted in a fundamental change in the outlook of cities. Blooming city centers became overcrowded residential areas for the poor, surrounded by large industrial areas, offices, warehouses, railway yards and the like.
Arts & Craft and Makers movement
Due to the industrial revolution, artisans disappeared in large parts of Europe. But not entirely: The growth of mass production fuelled the Arts & Crafts Movement; thousands of scattered groups of artisans and artists, dedicated to the small-scale production of furniture, lamps, crockery, cutlery and the like. The short video from the Open University below is a nice illustration of the power of the movement, the integration of technology and craft.
The Italian company Alessi is a good example. The company succeeded in bridging the contrast between craftsmanship and industrial production, among other things by inviting prominent artists such as Philippe Starck and making their designs accessible to a large group of customers.
The Makers Movement is related to the Arts & Crafts tradition. It includes tens of thousands small craft businesses, which usually offer their products through sites such as Etsy. Etsy’s revenue for 2013 was $ 1 billion and there were 1 million customers that year.
The new industries, railways, trading companies, and department stores were the tangible appearances of 19th century entrepreneurialism, sometimes ruthless, sometimes charitable. A new generation of managers gradually took possession of the boardroom. It is questionable whether they still can be characterized as entrepreneurs because many companies started to look very much like bureaucracies.
Entrepreneurship continued to dominate in trade, retail and in agriculture. Not to mention developing countries where the informal economy is still a perfect breeding ground for entrepreneurial behaviour, albeit accompanied by harsh working conditions and poverty.
In the 20th century entrepreneurship flourished in the fast-growing number of small and medium-sized businesses operating in all sectors of the economy. In the Netherlands, there are almost 1.782.000 business with one to 10 employees. Together, they have around 2,3 million employees (including the owners). In addition, there are almost 70.000 companies and organizations with more than 10 employees, who together provide jobs to around 6,6 million employees (all data are from the Central bureau of Statistics).
Entrepreneurship is associated with drive, perseverance and passion and therefore has great potential value for growth and development. This potential is only partially used. In addition, it is necessary to make a distinction between large and small companies and organizations. Both are discussed successively.
Lack of engagement
Each year, Gallup collects data worldwide about the engagement of the workforce in companies and organizations with more than 50 employees. These are characterized as ‘engaged’, ‘actively not engaged’ and ‘passively not engaged’. The table below provides an overview, showing that in any country only a minority of this group is ‘actively engaged’. This means that they are enthusiastic about their work, their colleagues, praise their company, and do not worry if they have to work overtime.
Lack of engagement correlates strongly with the ‘low strain’ character of many jobs, but also with the management style of most bosses. This is apparent from The great job satisfaction survey of the Netherlands featured by Frits Galle and his colleagues from training and consultancy agency PER4MANCE. Most employees that participated in this study are dissatisfied with their boss. 62% of all employees have no or hardly any job satisfaction; 22% reluctantly go to work and long for the next weekend on Monday morning already. 11% calls the manager a dictator.
Often, managers are not involved with the employees, they lack inspiration and communicate in a short and directive way. Everything must give way to achieving the targets. However, this behaviour is counterproductive, because employees minimize their efforts under conditions of coercion.
Companies want to increase the engagement of their employees as the level of engagement correlates with productivity. Therefore, worldwide they spend billions on this goal and to train managers to support it. Without much result.
The wrong analysis: Not engagement but passion
According to John Hagel, managers are heading in the wrong direction by focusing on engagement. After studying individuals who are exceptionally productive in a wide range of professions, he concluded that what they have in common is ‘the passion of an explorer’. Listen to John who explains this in a short video:
Passion does not mean that these people are overly gifted, diligent, hardworking or smart. Instead, they are determined to achieve their goal in a certain domain, are excited when faced with challenges, and seek collaboration with others who can support them (Figure below).
In many ways, passion is the engine of entrepreneurial behaviour.
The difference between engagement and passion is clear. The first is an attitude and requires no special skills or knowledge. The latter is related to competences. To create engagement, employers must show respect, listen better and improve working conditions. As a result, most employees will work harder and the productivity of the company will increase. However, without the competencies of those involved improving at the same time.
The three aforementioned components of passionate behaviour – achieving goals, excitement when being challenged, and seeking collaboration – require a learning process and a supporting organizational structure and culture.
Unfortunately, the number of employees with passion is even lower than the number of engaged ones. The latest US survey of passionate employees shows that up to 13% of the workforce (managers included) have each of the three aforementioned attributes. An additional 39% have one or two attributes. 64% of all employees and managers are neither engaged nor passionate, or in other words they lack the essence of entrepreneurial behaviour.
This lack of entrepreneurship or intrapreneurship is understandable. The 20th century companies have organized their production according to principles of scalable efficiency and a system of planning and control, top-down assessment based on performance indicators (KPIs) and quarterly reporting to the next boss in hierarchy. Consequently, room for initiative is limited, neither expected nor desired.
In the meantime, the world is changing fast. Knowledge is widespread and is no longer the exclusive property of small groups of scientists in universities and R&D centers. Companies that have set-up well programmed and hierarchically controlled production systems must therefore cope and change radically. Engaging the workforce is not enough. Instead, it requires employees to be at the center of business operations and to have a significant degree of autonomy using their own knowledge of the changing environmental conditions. Instead of organizing employees in silos, they must form flexible, interdisciplinary teams with a high degree of self-government. Furthermore, smaller differences in pay, active promotion of (open) innovation and opportunities to collaborate outside the company are important.
As only a limited number of companies meet these conditions, many passionate employees consider to leave the behemoth companies to start their own business. Incidentally, to be assimilated again by another giant, who offers them – apart from lots of money – room for continuous learning and innovating. However, many passionate workers prefer to retain their independence after having started a business of their own. I will come back to this, later.
Below, I will discuss how companies can stimulate passion – and therefore intrapreneurship.
Self-organization and entrepreneurship
There are strong arguments for self-organization and -management by employees, just think of the book Reinventing Organizations by Frederic Laloux. However, little research has been done into the relationship between self-management, entrepreneurial behaviour and performance. The recently published HOW-report has changed this.
The report distinguishes three types of organizations: Organizations as mentioned above (62%) based on ‘achieving results, organizations based on ‘obedience’ (30%) and organizations based on ‘self-government’. The share of the last ones increased from 3% in 2012 to 8% in 2016.
Research in 17 countries (among others the Netherlands, Germany, the USA, India, Russia, China and Japan) showed that organizations based on self-government performed better (chart below).
The superiority of the scores of self-managed organizations is clear. The HOW-report has delved into the distinguishing characteristics of employees of these companies. These are: more trust, willingness to take risk, celebration of success as collective achievement, collaboration and mutual assistance, sharing information, and respect for personal judgement. These characteristics are closely linked to the structure and culture of the organization, to organizational learning and to the behaviour of the remaining managers.
The question is how to become such an organization. The Deloitte report Work environment redesign, written by John Hagel, John Seely Brown and Tamara Samoylova applies design principles to answer this question. A brief summary can be downloaded here.
The research agency behind the HOW-report – LRN – supports companies that want to strengthen the ethical foundations of employee behaviour and thereby also the moral basis of the company. The video below is an inspiring interview with the founder of this agency about moral behaviour of companies and ethic leadership.
Starters: opportunities for entrepreneurship
Every year, millions of people worldwide start their own business. In the US alone, around two million of employees give up well-paid jobs every year. The number of self-employed persons in the US is around 17 million.
The terms start-up and starter are often confused. The most important difference is that the passion of a startup is to commercialize a promising technological innovation and to grow rapidly at international level. That is why it must find substantial capital and there are usually more employees too.
For most starters the passion is to have their own business, which enables them to provide for themselves. In the Netherlands, new 127,000 starters registered with the Chamber of Commerce in 2018. Employment agencies, restaurants, day care centers, cafes, social work, and consultancy are the fastest growing starters. Only 200 (0.16%) meet the criteria of a startup and 10% of the startups are ultimately successful.
Startups, if successful, are engines of growth and innovation. Every year, the Global Startup Ecosystem Report, published by the Global Entrepreneurship Network (GEN) provides a picture of the development and growth of startups. The report is based on independent research using data on over a million companies across 150 cities worldwide. Additionally, the recent report Startups: Job growth engine in the Netherlands offers excellent documentation of the identity, growth and potential of the 4,311 Dutch startups.
Startups are responsible for the largest part of economic growth and the growth of new jobs. In fact, in the US the steady growth of startups compensates the losses in employment in the rest of the economy. The Dutch startups have created over 100.000 jobs. 20.000 of these jobs date from the past two years, more (in percentage) than any other sector in the economy. 36% are online marketplaces or e-commerce platforms, 30% are software providers (usually software-as-a-service), 20% are developing tech hardware, and 7% are biotech. 55% of all Dutch startups have fewer then 10 employees. Examples of successful startups in the Netherlands are ASML, Booking.com, Bol.com and not to forget fast growing Adyen.
Techleap.nl (formerly Startup Delta) is a non-profit publicly funded organization that helps to accelerate the growth of startups with programs and initiatives that improve access to capital, market and talent.
Worldwide, startups created $2.8 trillion in value between 2016 and 2018. Concentrations of startups are spread all over the whole world, albeit to a very unequal extent. Silicon Valley has by far the largest concentration, but in at least 30 cities (listed below) the number of and investment in startups are significantly growing.
Amsterdam Startup Delta
According to the Global Startup Ecosystem Report, Amsterdam Startup Delta is the region with the largest increase in the ranking in 2018. 34% all of Dutch startups can be found here. This increase is the result of the strong growth in funding, output and exit value, as well as strong performance in life sciences and deep tech. In addition, two billion-dollar IPOs were very helpful: Adyen (a fintech company now valued at almost $23 billion) and Elastic (a search and data company now valued at over $6 billion).
The graph below gives an overview of the global growth and decline of the early-stage funding in different categories of startups and in comparison with the growth in exit value also during the last five years.
Every year, thousands of startups are established worldwide, but only 1 in 10 succeeds.
It is clear that startups need support to survive. Support comes from incubators and accelerators in the first place.
It is fascinating to take a look at the world of incubators. UBI Global recently published its biennial ranking, which can be downloaded from its website. 364 programs have been assessed. A distinction is made between incubators and accelerators that are connected to universities, cities and private institutions.
In each category, a further distinction is made between the winner and the top 5, 10, and 25. Below, I focus on the largest category, university-related incubators. It should be noted that the absolute top is missing, as institutions must apply for being assessed. An institution like Stanford University feels that this is overdone for obvious reasons.
At the top of the 2019 ranking (as on a previous occasions) is SETsquared Partnership. This is a collaboration between five universities in the southern part of England: Bath, Bristol, Exeter, Southampton and Surrey. This incubator performs four tasks: (1) supporting and accommodating startups, often from outside the universities, (2) informing students about entrepreneurship, (3) help researchers make commercial use of their findings, among others through a comprehensive platform for open innovation and (4) mediating with regards to funding. As with most incubators, support does not stop with a successful start. There is an acceleration program that guides companies in their further growth. Remarkably, 90% of all supported startups are successful.
Of the 89 Dutch incubators and accelerators (31 in Amsterdam) two are among the first ten in the UBI ranking: Yes!Delft and UtrechtInc. Other prominent Dutch incubators and accelerators are Startupbootcamp (Amsterdam), Rockstart (Amsterdam), Collider (Amsterdam) and HighTechXL (Eindhoven).
Startup boot camp
Startup boot camp is an international organization that offers 3-month accelerator programs on various topics such as finance, commerce and fintech in cities like Amsterdam, Melbourne, Dubai and Milan. It is focuses on the selected companies, providing them with access to a global network of industry experts, business mentors, investors, and corporate partners. In addition, there are top-level masterclasses, pitching opportunities and networking events, working space and €15K to cover living expenses. All in return for 8% equity ownership in every startup.
In the video below, you meet the members of the 2019 Amsterdam startup boot camp commerce class, who talk about their company and what participation in the boot camp has meant for them.
The success stories of boot camps and accelerators provide a picture of their critical success factors: (1) good professional and commercial guidance, which (2) moves with the life phase of the company (3) with a strong sense of customer needs and innovation (4) a relationship with scientific fields of which leading scientists are willing to guide startups and spin-offs; (5) scouting in the own university of potential knowledge to be commercialized and (6) last but not least own financing possibilities or active mediation towards capital providers. The winner of the Global UBI 2019 excels in all areas.
Entrepreneurship and the city
In the last part of the first part: The relation between economic activity and the city. Thriving business in all shapes and sizes is a necessary condition for cities to offer jobs and income to their residents, in combination with educational and other institutions. The city government plays an important role in enabling economic growth and at the same time be a guard of the environment, health and quality of life.
I will first of all draw attention to starters and start-ups and next to larger companies and organizations.
From a perspective of economic growth, startups are more important than starters in general, who usually employ only one person, albeit the number of starters outsizes by far that of start-ups. In many countries the Chambers of Commerce offer modest support to starters and my impression is that more support could improve their impact. City governments are interested in the first place in retail, services, commerce and workshops that are located in central part and therefore contribute to its revitalization.
As mentioned before, ‘makers’ are a specific category of starters that incidentally become a startup. Initially, they hardly have the opportunity to develop new products due to lack of resources. In the US and Canada, some public libraries offer facilities. The Edmonton library (Canada) has set up a laboratory in which 3D printers and powerful computers and design software are available. Many other cities follow this example by creating fab labs: workshops where (starting) makers find necessary tools.
From a point of view of improving the local economy, startups receive the most attention. At first glance, this role for the city government seems to be limited. Referring at reports from the European Union, only the provision of capital seems to be helpful. Seoul understood this and in 2012 the city supported the creation of Dream Bank, a non-profit foundation funded by the Korean banking industry to provide financial support to the Korean startup scene.
Startup in residence programme
The Startup in Residence programme enables startups to tackle social challenges for public administration. It started in Amsterdam; now around 20 other Dutch cities, regional governments and ministries also offer programmes. The programme is open to both Dutch and foreign entrepreneurs. It offers intensive training and support by professional coaches. Workspace is also available. Under certain conditions, local, regional and national governments become launching customer or partners.
Recently, the Startup in residence impact report has been published. It offers detailed insight on the programme in Amsterdam and its meaning for the participants and the community.
The Global Startup Ecosystem Report 2019 shows that governments can help startups with much more than financial support. The overview below shows the options, arranged by the frequency of their occurrence. Funding is at the top, but other possibilities are making available specific organizations and programs such as incubators and accelerators, the admission of brilliant foreign scientists and entrepreneurs, including competent refugees, export support and so on. The lower on the list, the less the frequency of the actions mentioned and the greater the possibility of comparative advantage.
Incubators and accelerators
The best any city can do is becoming an active participant in one or more incubators and accelerators, preferably in partnership with universities and regional companies. Incubators can become a one shop-stop for all prospective participants and offer virtually all support that is mentioned in the table above.
Within an incubator, the city government could be the first responsible party for legal affairs, creation of working-spaces (initially for free and later rented out at attractive rates), and procurement.
A growing number of cities and their neighbouring regions have set up co-called ‘Economic Boards’. The Amsterdam Economic Board, for example, is a platform for regional companies, educational and other institutions that, among other things, actively encourage the connection between larger companies and startups.
Collaboration between big companies and startups
In the US, an increasing number of organizations, for instance Techstars, the Vault and Plug and Play serve as innovation networks or platforms where startups, VC’s, and corporate innovation teams – like Target, Panasonic, Coca-Cola, Allianz, and Honeywell – connect to develop new products or services.
According to Bill O’Connor who runs the Vault Innovation Academy, that is empowering startups and corporations under a single innovation ecosystem large organizations can now tap into networks of entrepreneurs, technology, and disruptive business models faster and more effectively than ever before.
Revitalization of cities
Stimulating the growth of starters in general and startups in particular must, where possible, be accompanied by increasing their visibility. Fortunately, a policy of strict zoning of urban activity is giving way to creating of mixed functional territories, where people live, learn and – as far as possible – work. Many shops close in city and neighbourhood centers and this enables the use the vacant space for a variety of non-conflicting other destinations at reasonable rent. Unemployed citizens who live close to the newly created workshops can occasionally offer a helping hand and possibly become a starter as well. It is clear that reuse of empty shops contributes to the liveliness of the city center and the neighbourhoods of a city.
The short video below illustrates how the presence of virtually everything – businesses, colleagues, competitors, customers, meeting opportunities, universities, bars, restaurants, immigrants, and sun – has contributed to the tremendous growth of successful startups in Tel Aviv. These conditions cannot be duplicated, nor can Silicon Valley be copied. But it indicates that the growth in the number of startups does not depend on just one factor.
Feeding the passion of the young explorers
More young people than before are attracted to entrepreneurship, in particular the development of useful goods, services or both. This applies most to white boys; girls and people of colour stay behind, with the exception of people from Asia. For a long time, schools gave priority to working with the head instead of with the hands. This short video shows how a growing number of schools have rediscovered the value of ‘making’, opening the way to an entrepreneurial or otherwise creative future.
Cities must keep an open eye on companies that look for a suitable location. Innovative companies must be given absolute priority and a campus location is attractive for these companies. A campus offers space for several, preferably complementary, companies, large and small, and offers facilities to collaborate with scientists. A campus can easily be integrated into residential areas and facilities such as parks and ponds. The Eindhoven High Tech Campus is an excellent example. The video below gives an impression of life and work on this campus.
Amsterdam Smart City
Co-location of supplementary startups and other company definitely is a favourable condition, but given the potential large number of companies, this is not always possible or even desirable. An important step is therefore the creation of a (virtual) community, such like Amsterdam Smart City. This is a platform for (starting) entrepreneurs, self-employed people, volunteers, and big companies and not-for profit organizations.
A humane approach to entrepreneurship
Passion is probably one of the most unique human characteristics that contribute to the fulfilment of our lives. Passion can, for example, underlie entrepreneurship or intrapreneurship, the engine of well-being and prosperity.
In this essay, I recalled the disappearance of craftsmanship in Western European cities during the industrial revolution. Today, most people in Western countries are employed, although the number of small and medium-sized businesses is growing considerably. There is room for entrepreneurship, and the fast-growing number of startups illustrate this. As this article emphasizes, larger companies can enable employees to become intrapreneurs. For a long time that was not the case. Industrial production was guided by strategic plans, translated into detailed assignments for employees. Hierarchical control mechanisms, monitored the execution by employees of their assigned roles. Labour lost its intrinsic value and its motivation was one-dimensionally reduced to financial compensation. Involvement and passion in the workplace disappeared.
Joseph Stiglitz has warned that the creative power of entrepreneurship can easily turn into a destructive one. A ‘maker’ becomes a ‘taker’ as soon as creating value becomes making money. This often happens when companies grow and the passion of the founder is replaced by growth, profitability, maximization of shareholder value and remuneration of senior management.
Rapid societal changes are making the current organization of work and labour obsolete and call for new relations within businesses and organizations. The smartest organizations have started to reinvent themselves and give free way to self-government, intrapreneurship and cooperative ownership.
Startups too are at risk of turning their passion for making valuable products into the primacy of money. The largest startups in the world, Amazon, Google and Facebook, are striking examples of this. I have no idea where the fast-growing Dutch startups are on the continuum between ‘making’ and ‘taking’ or creation and destruction. The amount of income that the founders allow themselves – usually is an indication.
Below I summarize the essence of a humane approach to entrepreneurship
Principles for a humane approach to entrepreneurship
- Everyone who is involved in providing work must start from the fundamental understanding that the ultimate aim of work is personal satisfaction and a contribution to well-being and just prosperity.
- To become a more entrepreneurial organization or business, intrapreneurship of a significant part of the employees has more impact than entrepreneurial behaviour of managers ‘at the top’.
- The most effective way to develop entrepreneurship is by enabling starters to behave as entrepreneurs.
- Entrepreneurial behaviour is one of the most effective drivers for welfare and prosperity as long as the pursuit of new products and services is guided by ethical and sustainability related principles in addition to a fair income.
- To increase employee engagement, labour relations based on trust, respect and flexibility are indispensable. To enable passion, labour relations must also be based on (psychological) ownership, challenge and autonomy, included distributed leadership.
- Hierarchical organizations do not align with the democratization of knowledge and will alienate the core of the labour force, which results in decreasing turn-over and profit.
- The ultimate proof that self-governing organizations make better use of human resources than hierarchical organizations is that they perform better in all respects.
- Cities need to institutionalize contacts with companies and organizations to create ongoing discussion and experimentation regarding the humanization of labour relations, self-government and learning.
- City government can be a forerunner of improving labour relations by supporting self-government and intrapreneurship in the own organization.
- City government can help improve the entrepreneurial qualities of starters and start-ups, as part of their contribution to incubators and accelerators, together with knowledge institutions, companies and other organizations.
- City government must make every effort to offer affordable locations for starters, startups, companies and campuses. This also contributes to the reinforcement of the urban structure and to improve environmental quality.
- The creation of fab-labs, consulting services and affordable workspaces will help citizens to become starter.
Header image: a medieval market, from an unknown painter (Wikimedia, licensed under Creative Commons).