Startup governance and the transition from craft to enterprise

When choosing to go into business, the majority of individuals often make this decision in order to move away from a ‘job’ and towards the freedom and opportunity that the concept of being ‘in business’ carries. However, they do not realise that there is a critical difference between creating a business that will function as a craft, and creating a business that functions as an enterprise.

In my view, most SMME owners are simply craftsmen and women who own a job, rather than owning an enterprise. And the reality is that unless you truly understand this difference and then work towards making your SMME an enterprise, achieving the freedoms and opportunities that being in business may provide, quickly becomes more of a mirage than a reality.

To help understand how this relates to governance and the role of governance in your business, it is important to understand the difference between being a craft and being an enterprise.

You see, as a craftsman your journey is about your skill set, your knowledge and your understanding. You lead the business, you lead the team, you interact with the clients and fundamentally the business’s success has a direct connection, indeed a lifeline, to you. Yet being an entrepreneur is not about you. Being an entrepreneur and creating an enterprise is about the promise your organisation makes to your clients, stakeholders, suppliers and your team.

Think of Disney’s ‘Creating Magic,’ Virgin Group’s ‘Being the Underdog for the Consumer’ and Sirdar Global Group’s ‘Empowering Communities through Enterprise.’ Organisations that have a fundamental promise bigger than the owners, managers, profit itself, have an energy that enable them to succeed at a completely different level.

Moving from being a craft to being an enterprise is a significant change in thinking for small business owners. It forces us to stop thinking about “my business,” and move to talking about “our business.” A small change in language perhaps – but an example of the changes in language that enables an organisation’s transition towards ultimate success.

As a craft, a business owner can drive the business, its decisions and maintain ultimate control. For an enterprise to succeed, the shareholders, directors and managers need to move from running their business by the ‘game rules’ of a craft, to running the business by the ‘game rules’ of an enterprise.

The game rules of a craftsman (or small business) enable them to be just that. But to truly be successful as an enterprise, you have to utilise its game rules. These include both understanding and effectively implementing governance .

It is about a fundamental change in the way the business operates.

Governance has a critical role to play in this transition for any enterprise. Governance forces a distinction in the roles of owner (shareholder), director and manager that we do not see in a small and medium business. It also forces accountability of the ‘manager’ on a day-to-day basis regardless of the manager’s other ‘hat’ as a shareholder.

Ultimately however, it forces a business to operate from the perspective of the enterprise, and what the enterprise itself must achieve, rather than driven by the personal perspective of the ‘small business owner.’

Around the world, I find that this transition is one of the most challenging realities that any small or medium business owner must face if they truly want to achieve success in business. Indeed, what we like to call Extreme Business Success – but more on that topic in a future column.

In the next column I will share with you how the perspective of a small business owner can be their biggest ‘flaw’ or challenge in accepting the need for this transition, and ultimately how this inhibits their growth.