The Business Entrepreneurship of David Sarnoff "The Innovator"

This report considers the nature of entrepreneurship and its theoretical constructs in the context of David Sarnoff, a Time Top 100 American entrepreneur who introduced radio and television as an entertainment and news medium to the world in the early part of the 20th century.

The aim of the report is to gain an insight into entrepreneurial business development at the initial stage of business formation and in so doing, to better understand the economic, political, and social significance of entrepreneurs as change agents within modern society.

Sarnoff was selected as an example of an innovative entrepreneur who had both technical expertise and the ability to translate vision into commercial reality within a corporate context. Radio’s inventor, Marconi, understood the scientific basis for wireless communication but thought it would be used primarily between two points where communication by wire was impossible, such as in the shipping industry. It took a leap of imagination by Sarnoff to envisage how the technology could be employed to transmit news, music and other forms of entertainment to a burgeoning marketplace in a profitable manner.

The report first carries out a literature review of academic thought on the definition of an entrepreneur and the entrepreneurial phenomenon with specific reference to the synergy between entrepreneurship and the capacity to innovate. It then summarises secondary research that provides an overview of David Sarnoff’s career at the Radio Corporation of America Ltd, (RCA) formed by General Electric (GE) in 1920.

The report then discusses the output of the literature review and analyses Sarnoff’s career in the context of the literature review. The report then draws conclusions on the nature of entrepreneurship using Sarnoff’s career as a case study.

LITERATURE REVIEW

The literature review considers the definition of entrepreneurship, the major schools of thought surrounding the concept and focuses on the role of innovation in entrepreneurship.

Definition of Entrepreneur

The accepted meaning of entrepreneur in modern English is associated with starting a business based on a new idea. The word “entrepreneur” had its roots in French economics of the 17th and 18th centuries meaning someone who undertakes a significant project or activity and in so doing stimulates economic progress by finding new and better ways of doing things. The French economist Jean Baptiste Say is credited with coining the term in 1803. Say suggested that an entrepreneur is the person both owning and running a business. In the 20th century, the economist most commonly associated with the term is Schumpeter who in 1934 described entrepreneurs as the innovators who drive the “creative destructive” process of capitalism.

Schumpeter’s view is that entrepreneur’s exploit technology to produce a new product or service in a different way and that they are the change agents of the economy. Schumpeter equated entrepreneurship with the concept of innovation applied to a business context. As such, the entrepreneur moves the market away from equilibrium. Managers of already established businesses are not viewed as entrepreneurs by Schumpeter. In a Delphi study, Gartner found eight themes expressed by the participants as to what constitutes the nature of entrepreneurship. They were the entrepreneurial personality traits, innovation, organisation creation, creating value, profit, growth, uniqueness, and the owner-manager. The themes could be seen as a derivative and expansion of Schumpeter’s earlier concept described above. Most contemporary writers focus on the process of entrepreneurship rather than entrepreneurship itself.

For example, Drucker stays true to the Say-Schumpeter paradigm but focuses on opportunity. He suggests that it is the process of identifying and exploiting change as an opportunity that defines the entrepreneur and hence entrepreneurship. Stevenson at Harvard University, who is one of the pioneers of entrepreneurial studies, added the concept of resources to Drucker’s opportunity based approach. He also emphasises the changing nature of entrepreneurship in the context of the globalisation of business and hence entrepreneurial opportunity. Drucker also introduced the notion of “intrapreneurship” to differentiate between entrepreneurship in large corporate organisations against that of individuals.

Howorth suggests that research on entrepreneurship remains fragmented and that a multi-disciplinary approach incorporating multiple paradigms should be followed if a substantive contribution and definition is to be achieved in order to contribute to management theory in a meaningful way. She recommends that researcher should employ a definition that is appropriate to “who” the entrepreneur is, as well as “what” the entrepreneur does.

From the viewpoint of growth oriented innovative companies, and for the purposes of this report, Ronstadt’s 1988 definition of entrepreneurship is considered appropriate. Entrepreneurship is defined as “the dynamic process of creating incremental wealth. The wealth is created by individuals who assume the major risks in terms of time, equity and or career commitment or whom provide value for some product or service. The product may or may not be new or unique, but value must be infused by the entrepreneur by receiving and allocating the necessary skills or resources.”

Theoretical Models of Entrepreneurship

As indicated in the discussion of a definition of entrepreneurship, a consistent universal theory has not emerged in the study of entrepreneurship but it rather consists of several different approaches including psychology, sociology, anthropology, science, and economics. Similarly there is no consensus on the link between entrepreneurship and innovation. Writers such as Cox and Jennings approach the issue from a perspective of characteristics and consider early formative experiences, significant career events, motivation, personality, and values. Timmons and Spinelli describe the entrepreneurial mind to include the attitudes and behaviours of the entrepreneur. From a sociological perspective, Reynolds suggests that social and cultural context drives entrepreneurial opportunity including social networks, life course stage, ethnic identification, and population ecology within an economic context. This is echoed in the European Commission’s (EC) view on innovation as “a synonym for the successful production, assimilation, and exploitation of novelty in the economic and social spheres.”

Innovation

Miller and Morris suggest that research and development is closely associated with the narrowest form of innovation being invention. Drucker maintains that there are four categories of innovation incorporating seven sources at the organisation level of which invention is but one. It follows therefore that innovation has many facets and is multi-dimensional. Zhao argues that innovation dimensions should be seen as complementary rather than dualistic in nature. Dimensions include radical versus incremental innovation, product versus process innovation and administrative versus technological innovation. Innovation can therefore be both radical and incremental in nature. A radical innovation may be original and pioneering that complements incremental small improvements to enhance established products and processes. Another example is product innovation that represents changes in a product or service whilst process innovations are changes in the ways products or services are produced. These dimensions align with Schumpeter’s theory of innovation described earlier in this report. Conceptually therefore, the relationship between entrepreneurship and innovation exists. It is therefore the paradigm of the inter-relationship that differs between an entrepreneurial, economic / technology and strategic paradigm. Innovation should be regarded as the specific tool of entrepreneurship by which “entrepreneurs exploit change as an opportunity for a different business or service.”

According to Johnson and Scholes organisational culture can affect levels of entrepreneurship and innovation at an organisational level. Organisational culture has been defined as the “assumptions and beliefs that are shared by members of an organisation.” If innovation within an organisation is important to achieve a sustainable competitive advantage, a questioning and challenging culture is necessary to foster that innovation. The alternative is a mimicry and institutionalisation of similar strategies across enterprises in the same industry that creates the environment for rival firms to establish entrepreneurial advantage. Key features of entrepreneurial cultures in large corporations are small agile divisions with a tolerance for failure that encourages employees to take risks, find problems and develop the know-how to solve them.

An Entrepreneurial Model

McCarthy highlights the importance of strategic planning in organisations but draws a distinction between entrepreneurial planning and formal models proposed by the literature. Although entrepreneurship is seen as a critical part of effective, formal strategic planning, she suggests that entrepreneurial planning is not grounded in rationality but reflect experimentation, intuition, instinct, and learning. Bhide argues that strategic planning still occurs, but not in a formal sense and that entrepreneurs retain ideas within their minds that are largely short term in nature. Effective strategic decision making depends on the nature of the environment, and whether it is stable or unstable. Entrepreneurs operate in high pressure, uncertain and intense situations requiring short term decisions to take advantage of high risk opportunities. The approach therefore contrasts sharply with the structured planning process advocated by strategy theorists.

Nonetheless, the output of both the processes of entrepreneurship and strategy is a competitive advantage that is sustained through innovation. Accordingly, Zhao’s abridged adaptation of the McKinsey 7-S strategy model to entrepreneurship is a useful framework to assess entrepreneurial organisations. He acknowledges that the complex and evolving nature of the field of entrepreneurship and innovation means that the model may not address all issues in the organisation through which the entrepreneur achieves success. Zhao’s 5-S model represents Strategy, System, Staff, Skills, and Style and adapts work by Bartol, Robbins, and Drucker.

Strategy in this context should foster innovation and entrepreneurship and requires an organisational capacity to transform products and services into something new that add value to existing and new businesses. It also ensures a solid foundation after the departure or retirement of the founding entrepreneur. A good strategy requires effective execution which in turn depends on an appropriate system, capable staff, a wide range of skills, (represented by Drucker’s seven sources of innovation), and an effective management style that supports innovation.

The literature review has provided a base from which to compare and contrast Sarnoff’s successful career to academic theory.

BIOGRAPHY OF DAVID SARNOFF: 1891 - 1971

David Sarnoff was born in Uzilan, in the Russian province of Minsk in 1891, where he spent his early years studying to be a rabbi. His family emigrated to the United States of America (USA) in 1900, where he supported his family by selling newspapers and odd jobs. After a period as a messenger at the Commercial Cable Company, he taught himself Morse code, beginning a lifetime of self education and improvement, where after he joined the British Marconi Telegraph Company as a junior operator in 1908. He was a quick learner at self promotion and networking and acted as Marconi’s personal messenger when the inventor was in town. On 14 April 1912, whilst on duty as an operator at the Marconi station of top of a department store, he heard the faint reports of the Titanic disaster, out of which grew the legend that he stayed on duty 72 hours to report the story. Aided by Sarnoff’s political acumen combined with a genuine technical ability, he propelled himself quickly through the ranks at Marconi.

In 1915, he wrote his famous “Radio Music Box” memorandum to Marconi management suggesting a consumer application for radio as an entertainment medium to the public, at a time when radio was mainly used for shipping communication. It was considered commercial folly by Marconi, but Sarnoff was given another opportunity to pursue the idea when RCA was formed in 1919 and Marconi’s USA assets were absorbed in the new venture now owned by GE. After the broadcast of the Dempsey-Carpentier prize fight in 1921, the radio music box took off and sales of $83.5 million were achieved by 1925. With the chairman of RCA, Owen Young, acting as his mentor, his career took off and was appointed as the general manager for broadcasting in 1926 and was integral in the formation of the National Broadcasting Corporation (NBC) as a subsidiary of RCA.

In 1927, Sarnoff was elected to RCA’s board. By 1930, he had successfully negotiated contracts to form Radio-Keith-Orpheum (RKO) motion pictures, to introduce radios as fixtures in automobiles and to consolidate radio manufacturing by the Victor Company under the RCA banner. By 1930, the 39 year old Sarnoff was appointed as RCA’s president.

The early 1930’s were pivotal with USA government attacks on RCA for monopoly and restraint of trade. This gave Sarnoff the opportunity to realise his dream of a personal RCA empire. The USA government announced its intention of pursuing anti-trust actions based on a complaint from smaller companies that RCA and GE operated a patent sharing system that resulted in unfair competition. Two years of personal lobbying resulted in agreement that breaking up the patent sharing system would result in the crippling of the USA communications industry already constrained by the Great Depression and would pave the way for foreign control of the airwaves. The result was GE’s divestiture of RCA with a two year non competition agreement in the field of radio which meant that Sarnoff was then at the helm of an independent empire for the next thirty years where he would oversee an exponential increase in communications and entertainment at RCA.

During the Second World War, and as head of the largest communications network in the world, Sarnoff served as a communications consultant to General Eisenhower. He successfully directed the press communications for D-Day, earning the rank of Brigadier General. The title stuck and he became known as the “General” at RCA.

Sarnoff was capable of visionary and compassionate leadership but was equally capable of despotic cruelty. He had a capacity to listen to input from all levels of employees. He rewarded loyalty and supported his engineers unreservedly. He seldom raised his voice and was unfailing polite in public. However opposition was met with vitriolic rebuttal and often instant dismissal. His assault on those who opposed him outside of RCA was equally brutal. His autocratic management style was considered ruthless and often unethical. Sarnoff once said , “Competition brings out the best in products and the worst in men.”

He understood the power of patents and marshalled an army of lawyers to bankrupt the businesses who challenged him. For example, Howard Armstrong, a friend of Sarnoff’s since 1914, devised a new technology for radio broadcasting called frequency modulation (FM). Armstrong had proposed that RCA change to this superior technology which Sarnoff vigorously opposed. Armstrong then set up his own FM station and sued RCA and NBC in 1948, alleging a conspiracy to influence the USA government in limiting the development of FM radio. Sarnoff sent in his lawyers and after six years in court, Armstrong, now destitute, committed suicide.

Sarnoff also opposed Communism and all that it stood for. During the 1950’s and 1960’s he used his empire to communicate his viewpoint and influenced the decision to start the Voice of America service as an effective propaganda mechanism. He supported the witch hunt against communism internally at RCA allowing Senator McCarthy free access and condoned the blacklisting of suspects.

Sarnoff had also seen the potential of the iconoscope, a prototype television, developed by Vladimir Zworykin in 1923 based in part on work by Philo Farnsworth and set up a special NBC station to experiment with what became known as television. The experiment was delayed by the First World War, but it became a reality in 1941 with the WNBT station in New York. He also acquired patents from inventors Charles Jenkins and Lee De Forest but could not acquire those held by Farnsworth. Farnsworth had won a legal battle against Zworykin and he in turn took on RCA. After several years of legal battle, Farnsworth had won, but his will was broken and his patents were nearly run out. RCA had again the advantage.

Under his leadership, RCA won the battle for standards in colour television in 1953 by persuading the USA government to reverse a decision on standards that would have made RCA manufactured sets redundant because of compatibility issues. NBC went on to make the first videotape telecast and the broadcast the first made for television movie.

However he had an immense faith in science and technology, and predicted a future with long lasting peace, prosperity and increased leisure time. Working well into his seventies, Sarnoff pushed RCA and it’s subsidiaries into information technology and satellite industries. Sarnoff retired as Chairman of RCA in 1971 and died a year later. At his funeral he was eulogised as a visionary, a man of insatiable ambition and entrepreneur extraordinaire. The New York Times summed up his career saying, “He was not an inventor, nor a scientist, but he was a man of astounding vision who was able to see with remarkable clarity the possibilities of harnessing the electron.” After his death, RCA became a conglomerate, diversifying unsuccessfully before being taken over in 1986 by GE, the firm that was forced to sell its interests in 1932.

Based on the biographical information, and press acclaim, Sarnoff can be considered the epitome of innovative entrepreneurship.

ANALYSIS

This analysis seeks to integrate findings from the literature review with David Sarnoff’s career and seeks to identify those characteristics and enabling factors that allow Sarnoff to achieve his success. The analysis follows the sequence of theory raised in the literature review and relates the theoretical constructs to the reality of Sarnoff’s career.

Sarnoff as an Entrepreneur

Sarnoff matches Schumpeter’s idea of the entrepreneur as innovator. The Schumpeter’s concept of “new combinations” (new products, production methods, markets, sources of supply, or industrial combinations) shaking the economy out of its previous equilibrium through a process of “creative destruction” where the entrepreneur is not the inventor of a discovery but the one who introduces the discovery into an industry and is the person responsible for its diffusion. Sarnoff identified an opportunity to leverage off existing wireless technology created by Marconi with a limited business application and created a new entertainment market in the USA. He later exploited other inventors such as Zworykin, Jenkins, De Forest and Farnsworth in the areas of television, radio receivers and FM technology with little benefit to the progenitors of the technology. It required a Schumpeterian “new combination” in that affordable radio sets were required to access the service at household level which he was able to provide through his manufacturing plants. He continued this process with the introduction of television as a carrier of entertainment. The creation of radio and television networks as distribution channels through NBC across the USA and the backward integration of suppliers in manufacturing equipment allowed a process of “diffusion” of the new industry.

According to Schumpeter, innovation is a creative response to obstacles. He identified three major types of resistance to innovation. First, the entrepreneur-innovator acts in a context of uncertainty and risk. The second type of obstacle is described as difficulty in innovation with unproven ideas rather than established concepts. Lastly, the third type of obstacle involves the reaction of the social milieu to the innovation. Sarnoff assumed personal career risk with his “Radio Music Box” memo to Marconi management and chance intervened with public interest in the Titanic incident that reduced the unknown to manageable proportions. Chance again intervened with the formation of RCA but he capitalised on the public interest with the broadcasting of events such as prize fights. According to Drucker, an entrepreneur uses innovation to exploit change and create opportunity. Sarnoff was certainly opportunistic in using events (such as the Titanic) to promote his ambitious ideas. Equally Stevenson’s notion of a resourced based view of entrepreneurship holds true for Sarnoff who pursued opportunities well beyond the resources of his organisation and the resources that he personally possessed. This equates to Drucker’s concept of intrapreneurship where an organisation allows the individual to practice entrepreneurship for both personal gain and the benefit of the organisation itself.

Ronstadt’s definition of entrepreneurship arguably applies to Sarnoff and highlights Zhao’s contention of the complementary nature of radical and incremental change in the original and pioneering application of innovation. Sarnoff fought for resources to realise his dream and in so doing created value for his organisation RCA and enriched society with the provision of a spectrum of entertainment that changed the leisure structure of the world.

Gartner’s eight themes on the nature of entrepreneurship were developed from his conceptual framework of four perspectives on the variation between “entrepreneurs and non-entrepreneurs.” This framework supplements that of Zhao’s 5-S paradigm of entrepreneurship and innovation. It serves as a useful basis for discussing the theoretical overview from the literature in the context of Sarnoff’s career.

The Innovative Entrepreneur Paradigm

Gartner’s framework involves the characteristics of the individual starting a venture, the organisation they create, the environment surrounding the venture and the process by which the venture is started.

Sarnoff displayed classical entrepreneurial characteristics. According to Cox and Jennings Sarnoff can be classified as a modal entrepreneur who started his career with no particular family advantages and possibly influenced by childhood trauma and poverty after the family immigrated to the USA. He had a driving ambition and a strong need to achieve. He is quoted as saying "A life that hasn't a definite plan is likely to become driftwood." The role of the Owen Young, the Chairman of RCA is acting as a mentor to Sarnoff in the late 1920’s in helping him adjust to corporatism should not be underestimated. Politically adept, Sarnoff was accustomed to calculated risk as demonstrated by his devastating legal attack on Farnsworth in the battle for FM technology rights. He was astute and an innovator by nature. Kirton suggests that there are two types of entrepreneurs: adapters and innovators.   He states that “the innovator in contrast to the adapter is liable to be less respectful of the views of others, more abrasive in the presentation of solutions and more at home in a turbulent environment” which all characteristics that Sarnoff indicated in his company baron approach to managing RCA.

Gartner suggests that very few studies focus on the industry or organisational type through which an entrepreneur achieves success and proposes that is a area of further research. Organisationally, Sarnoff structured RCA as a personal fiefdom that created an intrapreneurial base for further entrepreneurial expansion. With effective centralised strategic decision making in his hands, he took a decentralised approach to research and development which was the lifeblood of the company. In 1930, RCA possessed most of the elements of its future research program, scattered among and con¬trolled by the manufacturing and service organisations at its subsidiaries. There remained the task of bringing these elements under a single unified direction in the corporation after separation from GE in 1932.   The process was to take some time which created inefficiencies in the system due to Sarnoff’s management style. For example, a memo to Sarnoff in 1939 stated, “the personnel is on several different payrolls. Unity of control and purpose is lacking, making it difficult to formulate and execute broad research and engineering policies and plans for the RCA organisation as a whole, and to obtain adequate coordination and direction of the programs and work of so many laboratories.” Sarnoff recognised the business need and by 1941 a new research facility was under construction at Princeton. The opportunistic nature of the innovative entrepreneur is mirrored in the dominance of Sarnoff as an autocrat at RCA where the lifeblood of the company in technological excellence was allowed to organisationally suffer at the expense of growth in his power.

Gartner argues that the environment can either be deterministic in nature and a set of conditions to which an organisation must adapt, or a reality that organisations create through there own perceptions. Sarnoff’s identification of a series of opportunities within an environment with high occupational and industrial differentiation, a large industrial base, and access to financial resources meant that he was able to create a reality for RCA that was independent of events such as the Great Depression and indeed thrived on the war economy of the 1940’s due to his constant product innovation, effective self promotion, and adept manipulation of competitors and government bodies. An example is the government reversal of the competitor driven colour television standards which would have seriously affected RCA.

This analysis has already discussed the process through which Sarnoff acquired control of RCA through political manoeuvring and government lobbying but it is a credit to Sarnoff that he was able to build upon and maintain the momentum of RCA through a continuous cycle of Schumpeterian innovation.

The Innovative Intrapreneur Paradigm

RCA as an organisation was the vehicle through which Sarnoff achieved his success as both an entrepreneur and intrapreneur. Entrepreneurs seek opportunities and innovations the process through which success is achieved. Corporate entrepreneurship or intrapreneurship refers to the introduction of a new idea or product. Herbig, Golden and Dunphy observe that “Innovation in this context requires three basic components: infrastructure, capital and the entrepreneurial capacity to make the first two work.” It follows that innovation addresses market needs but entrepreneurship allows commercial success. It is therefore important to consider RCA as an enabling factor to Sarnoff’s commercial success.

Zhao’s 5-S framework of strategy, system, staff, skills, and style in organisations that support entrepreneurship and innovation contrasts sharply with the RCA mileau. The demise of RCA after Sarnoff’s death and subsequently break up and sale supports the contention that Sarnoff was a charismatic entrepreneur that carefully constructed a culture based on a mixture of legend and fact that supported his messianic strategic role rather than that of a structured strategic planning process. An example is Sarnoff’s self promotion in respect of the Titanic reporting. A well defined strategy is central to an innovative and entrepreneurial organisation in order to address a range of technological, financial, and human issues. A defined strategy avoids Greiner’s crisis of leadership in the development of organisations that is caused by inadequate managerial structures to deal with exponential growth. The strategy builds on the intrapreneurial success of the founder and seeks to replicate innovative processes that meet changing market needs. The organisation rather than the intrapreneur should be the vehicle through which innovation and concomitant culture is driven and developed. Sarnoff retained central control of strategy through to retirement and actively sought to disempower opponents to his viewpoint using historical precedent as the basis for his continued success. According to Zhao , organisational size does not reflect the extent of capability in entrepreneurship and innovation but rather that the cultural and structural elements that play a crucial role. The control and management of research and development should remain flexible with an effective balance between freedom and control to promote innovation. Sarnoff personally directed research and development at RCA, recognising the importance of his scientists and engineers to realise his vision for the organisation. He commented, “Freedom is the oxygen without which science cannot breathe” and tried to create a culture within which innovation could flourish. Sarnoff recognised that people are the most important assets but limited the power of employees and management whom he perceived as a threat to his dominance.

Drucker maintains that systematic innovation requires the capturing and monitoring of seven sources of opportunity: the unexpected, incongruities, process need, industry and market structures, demographics, changes in perception and new knowledge. . By implication the organisation requires the range of managerial and entrepreneurial skills to deal with innovation. Whilst Sarnoff demonstrated a capacity for all seven sources he did not create the corporate environment from which RCA could continue as a corporate entrepreneur after his departure. Sarnoff demonstrated a clear ability to search for and identify innovative opportunities ranging from radio through to satellite technology. He had a proactive attitude to the promotion of innovation through a personal strategic vision as head of RCA. He created a supportive environment for his research and development team that fulfilled his technology dreams of entertainment for the mass market, whilst ensuring commercial success and had the ability to integrate research, design, and market innovation into profitable operations. The fifth “S”, Style, suggests that an open supportive management style fosters entrepreneurial innovation by encouraging the identification of market needs and should provide employees with a culture of empowerment and encompass reward systems for innovative and entrepreneurial behaviours. This contrasts sharply with Sarnoff’s autocratic and brutal management style that focussed on hierarchal and transactional power structures within RCA when he was contradicted which in some cases led to the summarily dismissal those who opposed him.

Baumol argues that an innovative entrepreneur transfers talents and knowledge as a legacy to the corporation. By implication entrepreneurship and innovation are separable from the individual which links to the development of corporate entrepreneurship through a framework such as the 5-S model to anticipate the departure of the leader and entrepreneur. The passing of power at RCA to his son David after his retirement rather than appointing the best candidate available marked the end for the corporate empire that Sarnoff had established. Sarnoff’s failure to establish a dynamic and holistic culture that would continue to fulfil his vision meant the unbundling of the group after his death.

CONCLUSION

This report has considered the career of David Sarnoff in the context of entrepreneurial business development. It has sought to establish a theoretical base from the field of innovative entrepreneurship and has sought similarities to Sarnoff’s career at RCA in order to understand his inclusion as a “builder and titan” in the Times list of twenty individuals from the 20th Century who changed how the world works. Arguably radio and television has shaped the world view on current event and leisure. Sarnoff’s drive and ambition led to the development of an international entertainment industry. He was regarded as visionary and clairvoyant in his anticipation of how the mediums would develop, and more importantly from a capitalist perspective, how the opportunities could be translated into a profitable commercial venture.
His success was a combination of determination, technical knowledge, and chance in that he was “in the right place at the right time” and seized the opportunity to create an empire with limited resources in a high risk environment.
The uncertainty and risk associated with innovation is a main ingredient of economic growth. Technological invention without entrepreneurial spirit limit commercial success and history has shown a range of technically successful innovations that have not been translated into profitable business venture.
Sarnoff’s success is the embodiment of the Schumpeterian view on the entrepreneur as innovator and exhibited characteristics such as Drucker’s views on opportunism to exploit change and Stevenson’s risk taking view on resource utilisation in entrepreneurship. Sarnoff’s success mirrors the American dream and the potential of capitalism in society. Arguably his personal management style and abuse of the legal system and personal power in achieving his ambition leaves much to be desired. Equally his empire building and autocratic structuring of RCA meant that the group was personality rather than business driven. The consequences were clear after application of Gartner analysis of the themes underlying entrepreneurship and Zhao’s 5-S model which indicate that innovation and entrepreneurship are not transferable assets without a structured approach to organisational design and strategy in anticipation of a founding entrepreneur’s departure. Zhao’s 5-S model indicates Sarnoff’s personal ability in the context of both radical and incremental entrepreneurial innovation, but indicates an absence of the requirements of corporate entrepreneurship as a substitute for Sarnoff’s innate ability as a genius entrepenuer.
Sarnoff’s retirement and exit from RCA led to its unbundling and subsequent sale to the founding partner who had created the platform for Sarnoff’s spectacular career at the beginning.