Understanding Entrepreneurship

What is entrepreneurship?

Understanding entrepreneurship is not easy, though the basic definition of an entrepreneur is pretty simple. There are many variants, but they all boil down to pretty much the same ingredients. Do not get hung up on the idea of being an entrepreneur. If you are determined to start a business, then you are one.

An entrepreneur is a person who starts and/or operates a business, assumes the financial risk, and relies upon creativity and personal motivation to achieve results.

There is a huge volume of research on understanding entrepreneurship–aiming to come up with the definitive list of characteristics of an entrepreneur. But in my experience, any profile that is developed can be disproved many times over by instances of entrepreneurs who do not fit the model. It is nonetheless important for you to figure out whether it is the kind of activity that is likely to suit you.

Are you the right age to start a business? There is no right age.

Is it the right moment to start a business? There is no right time.

How will you be a successful entrepreneur?

For success in entrepreneurship, or venture creation, I consider four things need to be present for success in starting a business ‘The Owl’s Four Ds’:

• DREAMS: for without them, nothing will enable the world to change; your passion will drive success.
• DATA: without data, you will have no idea where you’re going, how you’re progressing, or whether you’re successful.
• DOLLARS: sales are what differentiates aspiration and achievement; with no revenue, there’s no business.
• DOGGEDNESS: everything changes and nothing works out as planned; stay awake and pivot on a dime.

Many moons ago, I was lucky enough to work with the late Jeffry Timmons who taught entrepreneurship at Babson College and understanding entrepreneurship was his special skill. Jeffry defined sustainable success in creating a new venture in terms of five central themes. 1. It must be pportunity-driven. 2. It has to be driven by a lead entrepreneur AND a team. 3. It must be resource-parsimonious and creative. 4. It depends upon the fit and balance among those factors. 5. It must be integrated and holistic. That gave me a lot to ponder on when I first set up in business in 1982.

Another Babson Professor, Andrew Zacharakis, created Zach’s Star of Success. Of course, there’s PASSION, but the way he describes it, there’s also Knowledge, Network, Energy and Commitment. Jeffry and Andrew, together with Stephen Spinelli are the authors of THE book on business planning: Business Plans that Work.

Without a doubt Guy Kawasaki’s The Art of the Start: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything is THE book not to miss for anyone who thinks they might want to start a business. Guy pulls no punches. read his book and you will not only save the price of buying it, but a whole load of wasted time. It does not matter whether you have in mind a high tech venture or even a home business, the principles he defines are the same.

His advice is practical, and will save you a great deal of mis-spent time. Don’t waste another minute, order it right now and you wil really start understanding entrepreneurship.

You might want to take a look at a course on Coursera by James Green, who teaches at the University of Maryland: Developing Innovative Ideas for New Companies: The First Step in Entrepreneurship. It’s free!

Are you an entrepreneur?

Not understanding entrepreneurship need not deter you, for you will learn soon enough. Are you cut out to be an entrepreneur? Only you can answer that, but my suspicion is that if you are unsure of the answer, it probably means that you are not.

Can you learn to be an entrepreneur? Sure, in theory at least. In the US alone there are hundreds of schools of entrepreneurship. For a list of the Top 25 Undergraduate and Graduate Schools, see the Princeton Review & Entrepreneur’s Ranking. They attract hundreds of thousands of students, have great research programs and many are incubators for business startup, frequently offering generous business plan prizes Rice in Houston, Texas offers more than $1 million.

That should not daunt anyone, since the vast majority of startups are built by people who did not go to business school. If you remain a bit dubious you could take a couple of pop quizzes. Have a look at a Quiz for Small Business Success developed by the US Small Business Administration. The questions are challenging (I scored 93/100 – see how you do). You can also try the Risk Assessment Quiz for Starting Your Own Business, by Georgia State University SBDC.

The quiz I like best is from Daniel Isenberg, a Professor of Management Practice, Babson College (a place where understanding entrepreneurship comes naturally):

1. I don’t like being told what to do by people who are less capable than I am.
2. I like challenging myself.
3. I like to win.
4. I like being my own boss.
5. I always look for new and better ways to do things.
6. I like to question conventional wisdom.
7. I like to get people together in order to get things done.
8. People get excited by my ideas.
9. I am rarely satisfied or complacent.
10. I can’t sit still.
11. I can usually work my way out of a difficult situation.
12. I would rather fail at my own thing than succeed at someone else’s.
13. Whenever there is a problem, I am ready to jump right in.
14. I think old dogs can learn — even invent — new tricks.
15. Members of my family run their own businesses.
16. I have friends who run their own businesses.
17. I worked after school and during vacations when I was growing up.
18. I get an adrenaline rush from selling things.
19. I am exhilarated by achieving results.
20. I could have written a better test than Isenberg (and here is what I would change ….)

How did you do?

The Alphabet of Entrepreneurial Types–what type are you?

My quest is for understanding entrepreneurship. I have been a student of entrepreneurs for many years and watched many types of people creating ventures. The Alphabet of Entrepreneurial types below is how I have typified what I have observed. There is no ‘one best way’ to be an entrepreneur and each type has an Achilles Heel that can trip them up. See if you can put a type to any of the entrepreneurs you know, or you know about.

Who	What	Advantage	Achilles Heel
Artisan	Practical craftsperson	Produces the goods	Stick-in-the mud
Bootsratrapper	Ingenious non-cash finance	Keeps equity; saves cash	Energy diverted
Copycat	Me-too business	Well-traveled road	Crowded marketplace
DIWO	Do It With Others	Crowdsourcing	Collaboration takes time
Edewalker	Walks between two worlds	High ambiguity tolerance	Falls between 2 stools
Fireball	Never a dull moment	Sets everyone alight	Slashes and burns
Guardian	Supervisor	Checks up on things	Creativity block
Healer	Attentive & cooperative	Brings people to the table	Impatient with routine
Ideator	Endless innovator	Problem-solver	Dropping balls
Juggler	Lots of balls in the air	Keeps market’s interest	Forgotten when it’s over
Kestrel	Always hovering for prey	Very good eye	Never satisfied
Lone Ranger	One man band	Answers only to self	Blind to mistakes
Missionary	Social Entrepreneur	Do well by doing good	Dual purpose
Noodler	Always aiming to improve	Keeps on trying	No finished prototype
Opera singer	Hits the high notes	Practices a lot	Recitals repetitive
Pivoter	Can change path quickly	Very responsive to change	May lose the plot
Quartermaster	All resources marshaled	Got what it takes	Never quite sells
Rainmaker	Makes it happen	Great producer of deals	One-offs, not consistent
Strategizer	Vision and clarity	Knows where to go	At a loss as to how
Tap-dancer	Delights the audience	Draws the crowd	When it’s done, it’s over
User	Knows who can do what	Gets others to do it	Gets found out
Vagrant	Moves on without regret	Spots chances on the go	Never reaps reward
Wonk	Studies in depth	Knows it all	Misses wood for trees
X-er	Born 60s-70s	Natural partner	Lacks clear direction
Yeoman	Stays in own backyard	Minimizes risk	Stays small
Zapper	Covers the field	Always on the ball	Goals are elusive

Are you an achiever?

Despite the debate on understanding entrepreneurship, one entrepreneurial characteristic does stand out. Most entrepreneurs are driven to achieve. The seminal work on human needs was done by the social psychologist David McClelland in the 1960s. He noted that for entrepreneurs, the achievement motivation¹ generally comes out as having greater importance than need for affiliation or power. The latter two characteristics are generally more prevalent among managers.

The need for achievement is expressed by the achievement of goals, together with a strong desire for feedback and a sense of accomplishment. There are some people who exhibit this, but they are in a minority. It seems that achievement motivated people set achievable goals to stretch themselves, and over which they can have some influence.

It is interesting to note that, contrary to popular opinion, most entrepreneurs are more satisfied by achievement than financial reward. At the same time, it is often the case that the focus on achievement does bring monetary reward!

Many years ago I took part in an exercise based on one of McClelland’s experiments. It was during an investment assessment of a group of entrepreneurs by a VC firm. We had to throw rings over pegs set at different distances. We were betting our own dollars on success and could choose the pegs at any distance; the further they were, the higher the value. There were three rounds so that we could learn from experience. The foolhardy players went for the far peg every time, and lost money. The unambitious dropped the rings over the peg at their feet and simply retained their bets. Two of us had the same tactic and chose mid-way pegs and went further or nearer based on the first and second throws, winning the top dollar.

Where does the quest for achievement come from? Inside. Now. That is why it is so hard to categorize what traits are most associated with people who start businesses.

Do You Recognize Yourself Here?

Understanding entrepreneurship may always elude me, but I keep trying. The behaviors that I describe below come from my many years of personal entrepreneurial experience and observation of entrepreneurship in practice. You may recognize some of them.

The entrepreneur…

1. envisions the future now, like a tennis player who sees his ace on the far side of the net, rather than focusing on the position of his feet behind the service line; can take a small idea and turn it into a significant revenue stream;
2. tolerates ambiguity, is open to uncertainty & change and hence, not blind to future difficulty;
3. on the other hand, is not dissuaded by negative feedback, and is dedicated to the validity and integrity of the business idea… when I failed to get a sale, I reacted by assuming the prospect was silly;
4. … with a passion for the big idea, as well as having the ability to communicate the vision simply and strongly.

… is predisposed to action

1. recognizes that the first sale defines being in business;
2. knows that a delayed product launch is likely to result in more lost profit than cost overruns—the sooner a product is on sale, the sooner revenue and feedback flow—once you are burning cash, time is your enemy;
3. strategizes as a way of life, but avoids analysis paralysis;
4. values time—non-productive activity is kept to a minimum, and focuses on opportunity.

… experiences learning as a way of life

1. accepts process failures as good teachers while persistently pursuing goals – problem-solving is normal;
2. puts experience to use and is endlessly curious, continually sucking up information;
3. is proactive in seeking better ways of doing business, avoiding more of the same;
4. competes, often with self, to perceive what works—in the school of hard knocks (likes to work alone and yet be recognized for winning).

… is not a risk taker (contrary to popular belief)

1. calculates the downside and prepares potential remedies;
2. judges the value of things carefully;
3. starts small and avoids over-reaching (except where technology demands a certain initial size for viability);
4. considers both lowering the water as well as raising the bridge, e.g. seeks funding from up-front payment by customers or lower stocks, versus external capital investment (with all its obligations). See Bootstrap Finance–Thrifty is Nifty for more on this.

… and is able to put vision into practice

1. fixes clear goals for action and measurement;
2. avoids ‘buts’, staying focused on the vision;
3. builds strengths and knows the idea will work;
4. feels prosperous in the process toward achievement.

… while remaining very much in the present

1. stays vulnerable and open to possibilities;
2. is honest with self, while knowing that nothing is fixed;
3. in consequence, avoids undue attachment;
4. remains authentic and true.

Here’s another entrepreneur behavior: 24/7/365. Know what I mean? An entrepreneur works on the business twenty-four hours a day, seven days a week, three hundred and sixty-five days a year. That’s why you better love what you’re doing!

However, working should not mean beating your brains out or making yourself sick. You need to look after your spirit, avoid stress and maintain your body in a healthy way. It does mean focus, while very much living in the present.

Nine Ways to Test an Entrepreneurial Idea

I really like the innovation specialist, Scott Anthony suggests that you can test entrepreneurial ideas:

1. Talk to a prospective customer to get their perspective.
2. Go to where prospective customers might hang out and watch them for an hour.
3. Research an analogy.
4. Talk to someone who you think has good innovation instincts.
5. Begin to network toward an expert.
6. Visualize it.
7. Do a back-of-the-envelope calculation.
8. Conduct a broader assumption identification exercise.
9. Spend an hour conducting a past pattern exercise.

Scott is the author of Talk to a prospective customer to get their perspective. The Silver Lining: An Innovation Playbook for Uncertain Times. He talks more about his 9 Ways on an HBR blog.

You may want to visit the United States Association for Small Business and Entrepreneurship whose mission is to advance knowledge and foster business development through entrepreneurship education and research. You are likely to find all kinds of ways that you will be able to enhance your career as an entrepreneur.

Watch some entrepreneurs talking here.

1. If you want to know more on the subject, read the psychologist David McClelland’s book, The Achieving Society; it’s a bit heavy and ‘researchy’, but very interesting and he studied India and Italy as well as the US. It is the starting point for much of the subsequent research on entrepreneurship. When I took the McClelland Quiz my results on achievement/affiliation/power dimensions were: achievement 66; affiliation 41; power 37.