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The important entrepreneurial decisions …

… are based on practical wisdom!

When entrepreneurs are asked how they reached their most important entrepreneurial decisions—they generally have trouble explaining.—Why?—Because these decision are based on following foundations:

  • The conscious knowledge of entrepreneurs and their organizations. This part is earier to explain.—It is founded on hard facts, figures, research, plans, tests, simulations, management skills, etc.

  • The subconscious wisdom of entrepreneurs. This is much more difficult to explain. It is based on life experience, intuition, practical wisdom, values, soft facts, visions, a belief in the future, meaning, heart, responsibility, liability, etc.

What does this mean for the development of Entrepreneurship?—In addition to all the knowledge of successfully managing a company, a second part is essential.—The Entrepreneurial Wisdom. Some scientists are thinking this cannot be taught.—It is the genetic ability of entrepreneurs which was passed down from the parents/grandparents. On the one hand they are right and on the other hand practice shows us that many more people than assumed have this capability. They can develop and practice these important entrepreneurial skills if the right framework is offered. This framework needs on the one hand smart management structures and on the other hand values, learning methodologies and room for practical wisdom. This enables the upgrading of management- and business-models into a third dimension.—We call this the “Integrative Management Approach”Footnote 1 which is based on a meaningful foundation.

Especially when focusing on Resilient Entrepreneurship a holistic and three-dimensional framework is essential. To have an entrepreneurial vision is one part, to bring that vision alive is the other part of success. An entrepreneur has the ability to do both. She or he is able to develop goods/services which are able to satisfy the future needs of society. Wise entrepreneurs focus on society not only as “markets”.—Markets are virtual parts of the society. The society itself is based on humans and their needs as a whole.—In the old management literature and education the practical wisdom pattern—“Economy has to serve humans”—had been taught. Successful entrepreneurs got this wisdom from their parents and grandparents!—But why is it so essential to focus on the whole system, not only on parts of it?—The system theory teaches us, that natural systems are always trying to become balanced.—Therefore …

… are gut decisions or intuitive decisions

… societies are in a continuous state of motion.—On the surface, it seems that this motion is happening in waves. A deeper look shows that a constant cycle founds this movement. This cycle is called the adaptive cycle.Footnote 2 Research in the area of resilience talks about the following four stages: exploitation or fast growth, conservation, release and reorganization. The Austrian School of Economics is naming the stages in this continuously and alternating cycle: boom (which is similar to fast growth) and bust (which is similar to release). The main difference between the two models is the concept that business has a responsibility for their impacts on society and that the societal change is influenced by business and vice versa. Today societal innovations should be a part of daily business to enable the sustainable and long-term development of enterprises.

Wise entrepreneurs are not only focusing on “markets”—which are virtual parts of the society. Only focussing on market developments is highly risky, because the on-going change cannot be identified in a holistic way. So why do so many enterprises choose this risky strategy?—The answer is easy.—The on-going progression of societies is highly complex and cannot be explained in a conscious way. Other skills of management are needed to be able to handle this complexity. The Austrian School of Economics calls this the “heterodox approach”. This is a non-linear and humane focused approach, which combines the conscious and subconscious sources of wisdom.

One foundation for this approach was figured out by Alfred Adler.Footnote 3 Based on his research about depth psychology we gained the knowledge that there is a subconscious part of wisdom. What does this mean?—Everyone knows the phenomenon by itself: You try to remember the name of a person, but you cannot remember. The harder you try to think about it, the further the answer. So you are starting to do something different. After some minutes or hours or days you have a “flash” and the name of the person you tried to remember is in your mind.—So what happened in the background?—Your conscious mind could not do the job, so your subconscious mind started to search for the name in the huge memory of your brain and nerves. This memory is vast and arranged in a chaotic and paradoxical order. The conscious mind is not able to deal with this chaos in your memory.—Only the subconscious mind is able to store and search information in these parts of your brain and nerves.—Some researches assume that some parts of this knowledge is stored in the solar plexus near the belly—That is the reason why people say—“This was a gut decision”. In a healthy and balanced body the conscious and subconscious mind have a healthy relationship and work closely together. After figuring out the required information the subconscious mind is able to deliver the results to the conscious mind (but only in a healthy body).

How could this huge memory be used to come to wise, intuitive and sustained decisions?—One answer is paradox or heterodox questioning. The bridge between the conscious and subconscious delivers wise answers for absurd questions (for simple questions, just simple answers). Entrepreneurs very often saw in their childhood their parents and grandparents dealing with complex situations and discussing challenging subjects on a heterodox way. This education and training fosters the ability for heterodox questioning.

But there is more.—A deeper look into the behaviour of successful entrepreneurs shows that these people are able to find and use a language that fosters heterodox questioning inside their organization. They have the ability to empower their leading staff to figure out important questions—in relation to their responsibilities.

How are able to establish this capability?—The main patterns behind it are:

  • Walk the talk/the entrepreneurs are able to conduct honest and critical self reflection

  • The language/entrepreneurs are forming a language which has paradoxical elements—very often this is shown by a certain kind of self-critical humour in the organization

  • Flexibility and agility/the management and the people in the organization know that good answers can come with delays and therefore they are willing to adapt plans—humane interactions are more important than following a plan/structure

  • In highly complex situations they trust their “gut” or “intuition”—They know that the answers are not visible at the moment, so they follow their intuition—an intuition that holds a deeper meaning to them and is founded …

  • … on ethics, values and virtues.

… have a meaning for humans

What makes sense for humans?—How are people able to find a deeper meaning in their life?—Victor E. Frankl delivered not only answers to this questions, he showed us how to form questions that help humans to find the fitting answers.Footnote 4—The founder of the “Logotherapy” demonstrated how humans can find a deeper meaning in life.—One important part of his approach is freedom of thought. This is in a direct relation with the shown behaviour of entrepreneurs.—For many entrepreneurs freedom is an important part of their personal wellbeing. But freedom always includes liability and responsibility. This is the second side of the coin. If you want to have the one you also have to accept the other.

For humans this is really a hard and on-going learning process, which already should be started in childhood. Wise parents form boarders and rules—which allows their children a kind of freedom that fits to their maturity level. Of course youth tries to push these boarders, which produces a relevant inconsistency between the rules and their behaviour.—Here begins the ethical part of education. Pushing boarders leads to the growth of self-responsibility. Only in a dialog-based conversation can young people learn what this possible change in their responsibility framework means for their personal life. This meaningful dialog reduces the relevant inconsistency.

Freedom (which allows for inconsistencies) is essential in the maturity process of young people—Inside this freedom, possibilities are showing up and they have to learn to find responses to open-ended questions. Of course they will make mistakes in their decisions, but this is also an essential part in the learning process. To be able to learn from mistakes and errors they need a strong backbone formed by values and virtues, mainly demonstrated by the behaviour of their parents. This developing backbone should later enabling wise decisions.—And they need the love of their parents and grandparents; otherwise they are not able to learn from their errors. Only in an appreciative setting sustainable learning can take place and wisdom can grow!

Wise entrepreneurs are acting like wise parents. They know that their organization is embedded in an ongoing maturity and learning process. The conditions in society and the environment are changing continuously. Big changes in society referred to as a paradigm shift. We are currently in the midst of such a paradigm shift. To be able to handle the upcoming big challenges a learning and maturity process of the organization is necessary. Now the question is, how can enterprises become prepared for this big challenge?—One answer was supplied by Heinz von FoersterFootnote 5 when he defined the ethical imperative:

Act always so as to increase the number of choices (for a mutual benefit)

But how can entrepreneurs and managers increase the number of choices, to find fitting answers for the ongoing change? To answer this, a deeper look into Cybernetics is useful. One of the most fitting definitions of Cybernetics is coming from Rodney E. Donaldson, the first president of the American Society for Cybernetics. He defines cybernetics as: “The science and art of the understanding of understanding”. This sentence includes a paradox message: “the understanding of understanding”. How are we able to understand what is changing in society/markets?—Which understanding of this understanding has the society itself and—especially the next generation?

This paradox is very useful for management. Why?—It helps to form questions on the level of cybernetics second order, which directly empowers the subconscious mind to generate wisdom. An example, which shows the difference that makes the difference, is:

  • Cybernetics I. Order: “What is the problem?—How should we solve it?” → Linear answers are the result which reflects on the exiting problem (but nobody asks if the problem is really the problem)

  • Cybernetics II. Order: “What do we have to solve here and now, that helps most to meet future needs?” → No quick fixes are possible, because the situation is now related to the larger focus. Based on this question not only one answer is possible, because people have to figure out, what helps most. Now a dialogue can start. During this dialogue nonlinear answers (which are coming from the subconscious—but people do not know this because the subconscious is working invisibly in the background) will show up. At least a decision between more useful answers is necessary. Enabling decisions means living and fostering responsibility.

The idea of Cybernetics is founded on the science of metaphysics. In Holland for example metaphysics is an integrated part of high school education. In other countries people have to learn this kind of thinking on their own or with the help of religion.—Nearly all leading religions in the world have a heterodox language in their charters and documents. This language is founded on the idea of metaphysics. In international education programs (e.g. the reap26 program from the United Nations Industrial Development Organization) metaphysics and cybernetics are also essential parts in the education programs. In many programs in the area of change management and organizational development, elements of cybernetics are included.—Why?

It bewares people of making the same mistakes again and again and again. Very often recurring patterns of making mistakes are part in an organizational culture and behaviour. A deeper looks shows, that they have developed efficiency in consistently the same mistakes.—This is like a vicious cycle, which constrains the necessary maturation process. Cybernetics second order and further on third order (in relation to the integrative management approach) can put an end to this dangerous cycle. In many local societies mechanisms for ending the vicious circle is a part of practical wisdom.—This mechanism helps people to find a deeper meaning in their life, but only if they are established by …

… are orientated on humane values and virtues

… values and virtues.—Values and virtues are the foundation of practical wisdom. Human activity always orientates from values and virtues. That is the reason why values are an important part of the foundation of organizations and societies.—Without a common set of values (mainly 3–7) actions inside an organization will be chaotic and uncoordinated. A common set of values enables operations in the same direction without reducing the freedom of self-responsibility. This sounds logical, easy and clear.—But it is not easy and clear.—The way to identify and live a common set of values is hard work.—Why?

Victor E. Frankl figured out, that values cannot be taught on a conscious way: “We cannot teach values, we just can live them.”3—Practice shows us, that he is right.—Values are forming a kind of backbone inside the subconscious wisdom. This backbone helps the subconscious mind to figure out the right answers on heterodox questions. Heinz von Foerster4 mentioned: “Only those questions that are in principle undecidable, could be decided by us”. To come over this paradox a personal countenance is necessary. This mind-set finds its orientation in humane/organizational values and virtues. The main question is—Which set of values and virtues are the most useful to enable a beneficial mindset for complex decisions?

For Europeans the set of “Kardinalstugenden”/“cardinal virtues” is useful.—These virtues form the foundation of the practical wisdom in the European society:

  • Justice:—In the meaning of balancing societal order.—This virtue has a strong relationship to the values of Solidarity and Integrity.

  • Temperance:—In the meaning of enabling the wellbeing of the “whole society”.—Wellbeing can only show up, when people can live in freedom with their own personality—in liable interactions with others. Therefore the values of Respect, Appreciation, Personality and Freedom are strongly related to this virtue.

  • Fortitude:—In the meaning to enable humans to decide principle undecidable questions.—This virtue has a strong connection to the value Subsidiarity, which is a key value for Innovations.

  • Prudence:—In the meaning of practical wisdom.—People should proof all visible and invisible impacts of their decisions before they start acting. This virtue has a strong connection to the values Responsibility, Accountability and Liability.

What about other areas of the world?—Each culture/continent has a nearly similar set of virtues.—For example the Chinese constant/cardinal virtues define as essential: humaneness, righteousness or justice, proper rite, knowledge or wisdom and integrity. It is interesting to see that people in China are recalling these virtues. Another useful set can be found in the “Declaration Toward a Global Ethic”. It was formed by the “Council’ of the Parliament of the World’s Religions”. This declaration includes principles like: nonviolence, solidarity, justice, tolerance, truthfulness, equality, humanity and responsibility.

The closer a society comes to a paradigm shift, the more people search for orientation. Today many people, especially youth, are searching for a deeper meaning in life. Today for companies it is highly important to offer respectable products and services, an interesting workplace and opportunities for career development. Young people are always critical (like each youth was in the past), but this kind of “thinking out of the box” can be a door opener to reach the next maturity level in the organizational development. At least the youth (or young-minded people) are essential for the maturation of an organization.

1 The Maturity Model in Relation to Entrepreneurial Wisdom

Each entrepreneur knows that she or he has to invest in the development of her or his company, to enable the next generation to run a good business. The main question of many entrepreneurs today is: “Which investments are more useful to enable sustainable development that helps my children or grandchildren run a good business?” Is it investment in efficiency or in the effectiveness of the organization?—A wise entrepreneur knows that it is both.

“Reactive entrepreneurs”Footnote 6 are not really investing in the future development of their organization.—Two main groups are visible in this category: The first group doesn’t see a deeper meaning in living responsibility for the next generations.—Most of them just want to get rich (money) quickly at the cost of others. At the end of their life they are rich in money and poor in reputation. Normally they are unhappy with their life, but then it is too late to change and invest differently. For the second group the credibility and reputation of their family name is very important.—Mainly they are craftsman, tradesman or small sized companies. They try to deliver high quality with fair prices. They don’t have the time and the capability to invest in structures and a systematic management in their organization. At the end of their life they are rich in reputation (as a kind of a local brand of their name) but poor in money. If the next generation is taking over the responsibility in business they have a good foundation in reputation, but mainly weak management and low capital.

To increase equity capital, efficiency, product quality, innovation and credibility management systems are used by “active entrepreneurs”. Installed management systems like Innovation Management, Quality Management, Environmental Management, Lean/Kaizen Management, Risk Management, Health and Safety Management, CSR/Sustainability Management and others have grown over the past 20 years and are more or less functioning well. These investments are good investments, because they help the organization to bounce back from normal disturbances from the markets/society/environment. Very often these systems are running parallel and uncoordinated in the organization. BAT (Best Available Technology) today combining them into an integrated—linear designed—management system. Especially the idea of CSR/Sustainability, with its holistic and stakeholder orientated approach, can be a door opener for this next logical step. The main question now is: Is this enough to ensure the long-term survival of a company?—I am sorry to say: The answers is NO!

A “proactive entrepreneurial” behavior is necessary.—Why?—In good times (e.g. in times of a prospering economy) an active behavior normally is enough to ensure the long-term survival of an enterprise. In times where the society and economics are in a kind of a shift of paradigm—a proactive behavior has to be shown, that the organization can be prepared for future disturbances. This should be part of a shown responsibility for the next generations—it is also called sustainability. To be able to develop this proactive behavior in entrepreneurship new management dimensions are needed.

All the installed management systems have to be brought together into an integrated management system and then this integrated management system has to be expanded into the third dimension of management—the ethical or meaningful dimension. The management approach moves from integrated (two dimensional) to integrative (three dimensional—including the humans) management. This change process opens new opportunities to develop practical and entrepreneurial wisdom. It leads to new forms of innovation. Beside classical innovations, societal innovations are showing up and fostering the effectiveness of the company.

A wider lock on long time existing enterprises (some of them are existing 150, 250 or even 400 years) shows an interesting fact. A common pattern gets visible.—At the latest by each second generation an evolutionary development of the core business took place. Of course they normally stayed in the main domain of their business (e.g. working with leather, brewing beer, working with glass, construction industry, food industry, working with wood, …) but they innovated and deeply changed their business and management models. How were they been able to do this without losing their purpose, identity and license to operate?—Who made these wise decisions and—these are key questions—when, why and how?—The common patterns shows, that wise entrepreneurs or wise top managers made these decisions, long before the shift of paradigm took place in the society. They had the ability to listen to the people and to see what was coming up.

But how they had been able to figure out what was coming up?—Was it a decision behind closed doors or together with others?—Was it one huge decision or the sum of many small and wise decisions?—You will not believe it.—It had been both.—A meaningful vision came deep from their subconscious entrepreneurial mind. This vision leaded to many, many small agile steps and empowered others to follow. A lot of trials and errors leaded to an appreciative based learning organization, which was enabling them to re-question their own core business and purpose. At least their own organizational DNA.Footnote 7 changed (as part of a kind of evolution).—This evolution came before the societal change took place.—At least they influenced, with their own organizational behavior, the societal shift of paradigm. Such developments need time.—At minimum 5–7 years, in most cases one to two decades.

Fig. 1
figure 1

The maturity model of corporate resilience

Today we call this kind of entrepreneurship: “Resilient Entrepreneurship”.Footnote 8—To reduce the costs of trials and errors and to shorten the time in the ongoing change process, new dimensions of management are useful. The foundation to be able to do this is the “Integrative Management Approach”. The integrative management approach is fostering the management skills on a level of cybernetics second order. But this is not enough to mature an organization into this dimension of entrepreneurship. Additionally critical thresholds have to be managed, to be able to bridge the ongoing adaptive cycle of change. To be able to handle these invisible thresholds management on cybernetics third order is useful. In this management approach apparent invisible things were made visible to be able to measure and control them. Practical wisdom enables the visibility; entrepreneurial wisdom enables the management!

2 The Integrative Management Approach: A Framework to Foster Entrepreneurial Wisdom

The Integrated Management, which operates mainly on a two dimensional management level, should be part of BAT (Best Available Technology) in each management model of mature enterprises. What is included in this BAT (Best Available Technology) in the year 2015?

  • The holistic approach of management.—The common pattern of this holistic approach (based on the ISO 26000, UN Global Compact, OECD Guidelines, German Sustainability Codex, GRI, …) includes the following: Organizational Governance, Human Rights, Labour Practices, the Environment, Fair Operating Practices, Consumer Issues, Community Involvement and Development and Taxation

  • The stakeholder orientation to enable the control of the impact on society/environment

  • The Integrated Continuous Improvement Process, attended by internal and external audits

  • The idea of a Learning Organization to foster knowledge and competences

  • Integrated Reporting along international standards

  • Ethical behavior—in the meaning of following international accepted ethically standards of behavior like anticorruption, antidiscrimination, equality, transparency, paying taxes, ensuring living wages, ensuring human rights, following the precautionary principle, …

  • “Active Entrepreneurs” are already on the way to ensure this BAT (Best Available Technology) or they have already implemented it. For them this was a good investment, because they now have a stable two dimensional framework which ensures the capability to bounce back from “normal” disturbances—which are coming from ongoing changes in society/environment.

But they are still dealing with a huge problem.—It is called the “relevant inconsistency” between governance and behaviour. In chapter 1.1.3 this problem already showed up.—The inconsistency between parents and children.—In these small systems the meaningful dialog was the key to reduce this dangerous gap.—But how is it in the organizational context?—To be able to explain it, the St. Galler Management-Model had been chosen:

Fig. 2
figure 2

The two dimensional St. Gallner management-model

The main activities and investments developed by combining the different management approaches and systems into an integrated management system affect and strengthen the structures of enterprises (in the St. Galler Model the left column). Stable structures are an essential foundation, if they are designed well.—Today these structures are too limited to enable innovations, practical wisdom and self-responsibility. They are hindering freedom—and freedom is needed to enable a maturity process. The structures, norms, policies, figures, compliance rules, laws, codes, charters, documents are too excessive. People inside the organization cannot follow these structures or they do not understand the meaning behind them. Based on this lack of understanding and/or meaning, the shown behaviour in daily activities differs completely from the designed and planed behaviour on the normative level.

In some organizations this inconsistency between governance and actual behaviour is about 66–80 %. Every gap that is higher than 1/3 (33 %) is dangerous for the organization and, at the least, represents a waste of the investments into the structures of an organization. A wise entrepreneur knows this.—The main question now is how can this relevant inconstancy be reduced?

There are some patterns identified which are useful in this:

  • Reduce governance to a useful minimum. On the way to an integrated management system many redundant structures, processes, procedures, figures, papers and documents become visible.—This waste has to be removed and …

  • … the governance charters have to be translated into a corporate language.—Many enterprises are making the mistake of using old language of international norms (or in the language they saw used by their competitors).—People are however, not able to understand this “strange language”.—They need their charters (policy, code of conduct, strategy, process descriptions, procedures, leading documents, check lists …) in their language, stated in a simple way. A reduction to only the essential is hard work, but it is possible and highly useful!

  • Clear rules are necessary for how to deal with violations. For some violations hard punishments are useful and others should be treated as a learning process.—At least, the organizational charters should follow changes in behaviour and society/environment. Therefore a learning organization is not only creating knowledge, it is also continuously adapting the structures to be able to deal with the upcoming needs of the future. To make this work the structures have to be designed in a humane wayFootnote 9

  • The “new freedom” in the structures may confuse people in the organization.—Therefore new methodologies and skills in leadership are necessary. The people should to be empowered to fill the new freedom with innovations based on practical and entrepreneurial wisdom. Especially methodologies that follow the idea of cybernetics second order are very useful to enable wise and sustainable decisions.

If these patterns are implemented in an organization it can be considered an integrative management approach.Footnote 10—The management is now acting in three dimensions that include the humans and their purpose to form an ethical foundation.

Fig. 3
figure 3

The integrative management approach

At least there is still one open question: How must this foundation be structured, so that all that was described until now can happen?—The circle is closing and we are back to entrepreneurial wisdom.—Referring to chapter 1.1.2—where heterodox questioning, intuition and empowerment by using entrepreneurial wisdom had been discussed.—Perhaps you remember.—What is necessary to enable practical wisdom inside the organization?

  • Walk the talk/the entrepreneur and top management need an orientation to be able to figure out the right way to proceed.—The golden rule of business ethicsFootnote 11 helps them.—Therefore they have to consider the impact on society that important decisions have. Only if it is an investment into a social/societal cooperation for a mutual advantage—it is a meaningful decision. At least the society will honour that decision with trust and credibility.

  • The language/the entrepreneur, top management and leading staff are forming a language, which opens opportunities for all relevant stakeholders. Therefore, the language needs elements which enable self-reflecting and self-responsibility based on appreciation. Therefore the ethical imperative from Heinz von Foerster4 is useful: “Act always so as to increase the number of choices (for a mutual benefit)”.

  • Flexibility and agility/the entrepreneur, the management and the people in the organization know that the best answers can come with a delay and therefore they are willing to be open to changing plans—humane interactions are more important than following a plan or the organizational structure.—If the existing structure hinders employee actions more than once, it has to be adapted to be able to ensure a mutual benefit in the future. This agility needs the methodologies of an integrative learning organization, otherwise people get lost in it.

  • In highly complex situations they trust their “gut” or “intuition”—They know that the answers are not always visible at the moment, so they follow their intuition—to enable others to do this …

  • … a common set of organizational values is useful. This set of values has to fit together with the purpose, the vision, mission and the long-term objectives of the organization. A common corporate language ensures that these values and virtues have deeper meaning for the people in the organization.

Based on this described pattern a “proactive entrepreneurship” can be developed. The relevant inconsistency between governance and behaviour still exists, but is reduced to a healthy margin. Inside these tensions an ethical force can exist, which enables an integrative learning organization.—On this foundation entrepreneurs and top managers are able to make wise and brave decisions. If now appreciative feedback loops enable circularity, the organization automatically starts a heterodox re-question process.—This circular re-question process makes critical thresholds visible. The answers to overcome these thresholds are stored in the capability of autopoesis, which is deeply located in the core of the organizational DNA. This core starts to change itself, which is an evolutionary process of a resilient organization.

3 Summary and Conclusions

This was a short overview of a useful journey to corporate resilience. One the one hand the integrative management approach was explained and, on the other hand the door to the important source of unconscious wisdom was opened. It became visible, that the structure of entrepreneurial wisdom (unconscious mind) follows humane virtues and values. All together—combined in a professional way—this enables the management of enterprises and societies to achieve a new level of cybernetics third order. Critical thresholds became visible and manageable. Based on these insights the immune system of enterprises (and societies) is strengthened. Founded on this learning process the organizational DNA will develop. A development that influences our future and the future of coming generations. Wise entrepreneurs (and politicians) should have an idea how to professionally handle the on-going societal paradigm shift. Through a holistic understanding of entrepreneurial wisdom an advantage has been created.

If my appreciative investment into this article increased the number of choices for you, I did a good job. Now it is your responsibility to use these ideas in practice. Following the actual BAT’s (Best Available Technologies) is one of your responsibilities. To foster an on-going maturity process, by using the idea of the integrative management approach is another. Please trust in your competencies, your intuition and your own entrepreneurial wisdom!