The Hobbit and Team Dynamic

                                                                       

Many entrepreneurs constantly face human resource (HR) problems. One predominant HR issue for start-up companies is having to manage their founding teams effectively. Start-up companies are inhered with 3 major difficulties in dealing with team issues:

1.       Under-Resourced. Most start-up companies lack finances to compensate member’s effort and their opportunity cost.

2.        High Level of Uncertainty. Start-up companies generally ignore detailed business planning processes. Most founders have rough business ideas, and just work with them. Therefore, start-up companies often change their demand on skill sets and capabilities rapidly to cope with unseen situations.     

3.       Loose Organizational Culture and Values. Founders often ignore the need strengthen their organizational culture and values, because they are too tied down by the day to day workload. 

Creative Destruction

The first Standard and Poor’s (S&P) index was created in 1920 in USA. 90 major companies were on the original list for a span of 65 years. In 1998, the S&P list was expanded to 500 companies and their average life spans were around 10 years. In 2000s, some studies suggested that the average life span of top companieswould be shortened to 5 years. This shocking trend is mostly caused by the effect of intensified creative destruction.

In a journal article titled Creative Destruction, it  describes interactions between companies and markets in the creative destruction process and implications for management to take advantage of the process. This summary is shown in a mind map at the end of this post.  

Creative destruction theory  explains how the economy evolves in a capitalist environment. This particular theory focuses on innovation aspects of economic development. The key concept of creative destruction is that innovative breakthrough can only be achieved by destroying some of the current economic system and status quo. This simply means that innovation can only created by changing the rules of game. As this happens in a rapid pace in the past 20 years, many companies which cannot catch up and adopt with the new rules, they have to leave the game.  Nowadays, if companies do not have the  ability to embrace creative destruction in their strategies and operations, they will  not survive very long in the game.