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The Entrepreneurial Business 163

down the hierarchy. They should never report to line managers charged
with responsibility for ongoing operations.
This will be considered heresy in most companies, particularly
“well-managed” ones. But the new project is an infant and will
remain one for the foreseeable future, and infants belong in the nurs-
ery. The “adults,” that is, the executives in charge of existing busi-
nesses or products, will have neither time nor understanding for the
infant project. They cannot afford to be bothered.
Disregard of this rule cost a major machine-tool manufacturer its
leadership in robotics.
The company had the basic patents on machine tools for automat-
ed mass production. It had excellent engineering, an excellent repu-
tation, and first-rate manufacturing. Everyone in the early years of
factory automation—around 1975—expected it to emerge as the
leader. Ten years later it had dropped out of the race entirely. The
company had placed the unit charged with the development of
machine tools for automated production three or four levels down in
the organization, and had it report to people charged with designing,
making, and selling the company’s traditional machine-tool lines.
These people were supportive; in fact, the work on robotics had been
mainly their idea. But they were far too busy defending their tradi-
tional lines against a lot of new competitors such as the Japanese,
redesigning them to fit new specifications, demonstrating, marketing,
financing, and servicing them. Whenever the people in charge of the
“infant” went to their bosses for a decision, they were told, “I have no
time now, come back next week.” Robotics were, after all, only a
promise; the existing machine-tool lines produced millions of dollars
each year.
Unfortunately, this is a common error.
The best, and perhaps the only, way to avoid killing off the new by
sheer neglect is to set up the innovative project from the start as a sep-
arate business.
The best known practitioners of this approach are three American
companies: Procter & Gamble, the soap, detergent, edible oil, and food
producer—a very large and aggressively entrepreneurial company;
Johnson & Johnson, the hygiene and health-care supplier; and 3M, a
major manufacturer of industrial and consumer products. These three
companies differ in the details of practice but essentially all three have
the same policy. They set up the new venture as a separate business
from the beginning and put a project manager in charge. The project