Thursday, March 15, 2012

Entrepreneurship and Entrepreneurs

“I have not failed. I’ve just found 10,000 ways that won’t work.” - Thomas Edison 

“My son is now an “entrepreneur.” That’s what you’re called when you don’t have a job.” - Ted Turner

We've decided to take a brief break from our series on deciding whether or not to start a business to take a look at the business starters themselves. We'll begin here with entrepreneurial thinking and "what is entrepreneurship" and then continue next week with a discussion of some common traits and behaviors and a look at "why" entrepreneurs start companies.

First of all, what is entrepreneurship? It is a difficult subject to discuss. According to the Small Business Administration over 600,000 new businesses are started per year in the U.S. alone. The process of forming an organization therefore can take many paths and the people behind the process come from a wide variety of backgrounds. It can be very difficult therefore, to find commonalities and it is probably impossible to say "this is what makes an entrepreneur"! For that reason, in discussing entrepreneurship we will be talking a lot about "tendencies" as opposed to "certainties".

In academia there is even debate about how to study entrepreneurship. Some advocate "behavioral approaches" focusing on the process whereby organizations come into existence. This removes the entrepreneur's personality characteristics from the equation and instead focuses on his/her actions and behaviors. The other approach, the "trait" approach focuses on the personality of the entrepreneur, seeking to identify key qualities and characteristics held in common among entrepreneurs in order to explain entrepreneurship[i]. The basic idea behind this debate is this - how do we define or explain entrepreneurship? Is it  what the entrepreneur does or who the entrepreneur is?

At, fortunately, we do not have to answer such questions. Instead, we can look at a wide range of common tendencies, behaviors and attitudes that help explain entrepreneurs and entrepreneurship without having to settle any academic debates (and therefore avoid having to read dozens of journal articles dating back to 1816). 

In a previous article "The Idea" we looked a bit at entrepreneurial thinking, specifically focusing on the "pains" in life and looking for solutions to those pains. In her article "What Makes Entrepreneurs Entrepreneurial", Saras D. Sarasvathy discusses different forms of reasoning - causal, strategic, and effectual:

Causal reasoning - (also called "managerial thinking" by Sarasvathy) a person identifies a goal and their given means, and then identifies paths from their means to their goal.

Strategic reasoning (or "creative causal reasoning") -  a person identifies their goal and their given means, and then identifies paths from their means to their goal, however, they may also identify or imagine new or other means, and new ways to reach the goal provided by these new or other means.

Effectual reasoning (also called "entrepreneurial thinking") - a person identifies their given means and then imagines multiple possible ends that may be reached by these means[ii].

The "pain" focused thinking comes into play more prior to developing a product or idea while effectual reasoning takes place more post-business-launch but what these two modes of thought share is that they are opportunistic. Entrepreneurs tend to benefit from flexibility and adaptability. 

The ability to re-imagine the company or the company's product in order to fit the present opportunity can be an entrepreneur's key to success. Target markets and target customers may need to be very fluid as entrepreneurs adapt to new information and head towards their next (or first) customers. This is exemplified in the "ready, fire, aim" approach -- study, research, decide and launch a company, then adapt that company to market realities.

An important part of entrepreneurial thinking therefore is in their view of the future.  Looking for and attempting to predict change is a way of identifying new opportunities and anticipating obstacles in the road ahead, but entrepreneurs often also try to shape the future. They believe that the future can be controlled by their actions and that "To the extent that we [entrepreneurs] can control the future, we do not need to predict it."[iii]

In our next installment we will look at some more common entrepreneurial traits and behaviors, and also discuss "why" entrepreneurs do what they do.

[i] Gartner, William B. "'Who Is an Entrepreneur?' Is the Wrong Question" American Journal of Small Business Spring 1988
[ii] Savarsthy, Savars D. "What Makes Entrepreneurs Entrepreneurial" University of Washington 2001
[iii] Savarsthy, Savars D. "What Makes Entrepreneurs Entrepreneurial" University of Washington 2001

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