President Obama declares November 19 as National Entrepreneur's Day.

President Obama Suggests Mentoring for New Entrepreneurs

President Obama declared Friday, November 19th to be National Entrepreneur’s Day. “NOW, THEREFORE, I, BARACK OBAMA, President of the United States of America, by virtue of the authority vested in me by the Constitution and the laws of the United States, do hereby proclaim November 14 through November 20, 2010, as National Entrepreneurship Week. I… Continue reading »

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Entrepreneurial Success Factors

Entrepreneurial Success Factors The Kauffman Foundation in Kansas City is one of the leading organizations promoting entrepreneurship worldwide. The Foundation supports a wide range of activities, including sponsoring university based initiatives, grass roots entrepreneur development efforts, and important research. Most entrepreneurs are not, by nature, interested in the results of academic research. They are too… Continue reading »

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Innovation and Entrepreneurship: The Keys to Wealth Generation

As a scholar who spends a great deal of time tracking developments in the global economy, I am struck by the amount of attention of late that has been afforded to “innovation”.  In states across the country there are numerous conferences, events, and awards being organized to promote innovation and innovators.  At the national level,… Continue reading »

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President Obama Suggests Mentoring for New Entrepreneurs Entrepreneurial Success Factors Innovation and Entrepreneurship: The Keys to Wealth Generation

Nov
29

President Obama Suggests Mentoring for New Entrepreneurs

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President Obama declared Friday, November 19th to be National Entrepreneur’s Day.

President Obama declares November 19 as National Entrepreneur's Day.

“NOW, THEREFORE, I, BARACK OBAMA, President of the United States of America, by virtue of the authority vested in me by the Constitution and the laws of the United States, do hereby proclaim November 14 through November 20, 2010, as National Entrepreneurship Week. I call upon all Americans to commemorate this week with appropriate programs and activities, and to celebrate November 19, 2010, as National Entrepreneurs’ Day.”

Recognizing the importance of new business startups to the health of the global and national economies, Obama said:
“All Americans can play a role in increasing the prevalence and success of new start-ups.  Business leaders can mentor a budding entrepreneur who has an original idea and the will to execute, but could benefit from the guidance of an experienced owner or operator.”

Let the Business Startup Institute be your personal mentor and guide as you embark on your entrepreneurial journey.  At the Business Startup Institute we believe that anyone can start a business, and we want to help you start your business.

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Nov
19

Entrepreneurial Success Factors

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Entrepreneurial Success Factors

The Kauffman Foundation in Kansas City is one of the leading organizations promoting entrepreneurship worldwide. The Foundation supports a wide range of activities, including sponsoring university based initiatives, grass roots entrepreneur development efforts, and important research. Most entrepreneurs are not, by nature, interested in the results of academic research. They are too busy taking action to stop and ponder what is being written and said by academics who aren’t building companies.

While it’s true, in my opinion, that much academic research into entrepreneurs and entrepreneurship lacks prescriptive impact, there is some value in descriptive studies. Describing not only what entrepreneurs do, but also how they have done it, can be useful—especially to people who are aspiring to their own entrepreneurial ventures, and to local regions seeking to become more entrepreneurial.

In that spirit, I relate the following descriptive data that was contained in a recent Kauffman foundation study titled “The Anatomy of an Entrepreneur: Making of a Successful Entrepreneur”. The study was released in November 2009. The researchers interviewed 549 entrepreneurs from a variety of industries, including aerospace and defense, computer and electronics, health care, and services. Some of the key findings include:

· 96 percent ranked prior work experience as an important success factor; 58 percent ranked this factor as extremely important

· 88 percent said learning from previous successes was important

· 78 percent said learning from previous failures was important; 40 percent said learning from previous failures was extremely important

· 82 percent said the management team they chose was important; 35 percent said this was extremely important

· 73 percent said “good fortune” was an important factor in their success; 22 percent ranked this factor as extremely important

· 70 percent said their university education was important

The factors noted above are ones that, other than “good fortune”, are controllable by the entrepreneur. These success factors can be learned by individuals aspiring to launch their own ventures, and used as guides to building successful ventures. For example, it’s fairly clear that some prior work experience, a good management team, and the ability to make and learn from mistakes are important success factors. It’s also clear that some university education can be useful, although it is well documented elsewhere that university education is not necessary to be a successful entrepreneur.

From the perspective of regional and state interventions that are designed to promote and/or support entrepreneurs and entrepreneurship, several interesting findings were revealed:

· The vast majority of those surveyed (86 percent) ranked the assistance provided by the state or region as “not at all” or “slightly” important

· Only 19 percent indicated that university or alumni networks were important

· 68 percent considered availability of financing/capital as important; 96 percent of those who had actually raised external capital ranked this factor as important

· 73 percent said professional networks were important to the success of their current business; 62 percent said personal networks were important

From my perspective the key takeaways from this research are that the primary factors for entrepreneurial success reside primarily with the individual. Only the individual entrepreneur can decide to enter the competitive fray, knowing full well that the uncontrollable “good fortune” factor will play some role in their success. Of course, the good fortune involved in entrepreneurial success is not the same as that needed to win at the gambling table. Entrepreneurs improve their chances by learning both from their successes and their failures. They also hedge bad luck by surrounding themselves with professional and personal acquaintances that possess critical knowledge and skills.

The current study also echoed findings from other studies regarding the role of regional and state initiatives to promote entrepreneurship. Such initiatives, although well intended and politically popular, generally do not have impact on entrepreneurial success rates. The state or regional administrators of such programs often measure their success by the number of aspiring entrepreneurs in their programs. In contrast, investors, who must generate return on invested capital, focus more on the quality of the entrepreneurs they support. Investors must use as careful due diligence to select potential winners. Public programs to support entrepreneurs normally aren’t as selective.

If we want to create a vibrant entrepreneurial culture we need to adopt the disciplined approach of the investor in the entrepreneurs we support and in the programs we create. Mix in a little capital, and a little luck, and we might just create a new dynamic in our community.

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Nov
15

Innovation and Entrepreneurship: The Keys to Wealth Generation

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As a scholar who spends a great deal of time tracking developments in the global economy, I am struck by the amount of attention of late that has been afforded to “innovation”.  In states across the country there are numerous conferences, events, and awards being organized to promote innovation and innovators.  At the national level, the federal government has initiated a variety of blue-ribbon panels and task forces to study our innovation capacity and to make recommendations on how we can maintain our leadership.  Globally, many national governments are studying ways to enhance their respective innovation capacity.  What’s up?  Why all the attention to “innovation”?

There is a generally accepted belief among our nation’s political leaders that the modern global economy presents unprecedented economic conditions.  They assert that all economics are now global, and that no business—large or small—is immune from competitive pressures from abroad.  The key to remaining competitive, they conclude, is the ability to innovate.  That is, they believe we need to increase our capacity to create new things, design new fashions, sing new songs, write new words, grow new plants, concoct new potions, and many others.

It is hard to argue with the emphasis on innovation, but innovation alone is not enough to generate new wealth for our families and our communities, and to remain competitive.  We must not overlook the other essential ingredient of wealth creation: Entrepreneurship.  The two terms are often confused, but they have distinctly different references.

Innovation is the ability to create something new—usually as an attempt to solve a specific problem.  In fact, most of us have probably created innovative solutions to personal, household, or business problems.  Occasionally, we have gladly passed on our innovation to family, friends, and neighbors—and left it at that.  The innovation benefits a few within our personal networks, but does not lead to economic development.  Some of us may have pondered the potential for our innovation to be successful in a broader market, but few have taken that extra step.  The reason is that most innovators are simply not entrepreneurs.  The innovator is primarily motivated to solve problems.

Entrepreneurship is the vital capability to take innovations from wherever they are created and develop a system for delivering that innovation to markets near and far.  The entrepreneur is motivated by the opportunity to create profit from the systematic delivery of an innovation to a market.  Some innovators are also skilled entrepreneurs, but that is not always, and probably not often, the case.  Many innovators that I have known not only are unlikely to be successful in bringing their creations to market, many simply do not want that burden.  They prefer to tinker away in their basements, garages, and laboratories on their next innovation.  The entrepreneur, by way of contrast, generally is not interested in tinkering with the innovation.  The entrepreneur is impatient to explore opportunities to diffuse the innovation ever more broadly in the marketplace.  In a word, the entrepreneur is motivated by economic opportunity.

Although currently popular topics and concepts, innovation and entrepreneurship are ways of being and doing that have been with us since the first economic exchange.  Innovation is simply solving a problem in a new way; and entrepreneurship is simply finding a way to make profit doing it.  Both are essential for wealth creation in modern society.  In our quest to build a society that promotes and nurtures innovation, we must be careful as well to ensure that we are promoting and nurturing entrepreneurs and entrepreneurship.

How can we best achieve these twin goals?  History has clearly shown that, left to their own devices—without “helpful” government support or scholarly advice—the innovators in a society will inevitably emerge and thrive.  In fact, throughout human history government has usually done more to stifle innovation and entrepreneurship than to accelerate it.

We are fortunate to be living in a period of time where entrepreneurship is a common subject of study in high schools and colleges.  Students today are learning about career options that include entrepreneurship and new venture creation.  They are being encouraged at Arizona State University and elsewhere around the State to seek economic opportunity with innovations they and their peers are creating.  It is a good thing that we celebrate their achievements. As far as supporting what they do, it is quite possible that our best strategy, once basic skills have been taught, is simply to stay out of their way.

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Nov
05

The Mindset of the Entrepreneur

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Five Mindsets for Entrepreneurial Expertise

I have written in this column before about whether entrepreneurs are made or born (January 18).  As I noted in that column, the issue is no longer the subject of debate.  Entrepreneurs can be made, that much is clear.  Unfortunately, the culmination of that debate begs a new question:  What do aspiring entrepreneurs need to learn?

The most fruitful research into this question has identified a number of cognitive skills that “expert entrepreneurs” possess.  Cognitive skills are, in short, unique ways of thinking.  Entrepreneurs who have been examined to reveal the cognitive skills they possess are usually NOT able to articulate them.  They are aware that they’ve developed capabilities to convert disparate resources into profitable opportunities, but they can’t exactly say how they do it.

Research has identified distinct patterns in the thought processes in an exceedingly diverse set of entrepreneurs.  Scholars have translated these patterns into terms that can be used by people who teach entrepreneurship and, more importantly, those who practice it.

In another field of study, Harvard psychologist Howard Gardner wrote a book titled “Five Minds for the Future”.  The rationale for Gardner’s work is that: “One cannot even begin to develop an educational system unless one has in mind the knowledge and skills that one values, and the kinds of individuals one hopes will emerge at the end”.  His book focuses on the five “mindsets” that he believes essential to general education:  the disciplined mind, the synthesizing mind, the creative mind, the ethical mind, and the responsible mind.

While Gardner’s minds are debatable, his perspective that the way people think largely defines who they become is instructive.  In light of his work, it seems natural to wonder whether it is possible to identify five specific “mindsets” that are important to entrepreneurial success.  My own research has identified five such mindsets:  the opportunity recognizing mind, the designing mind, the risk managing mind, the resilient mind, and the effectuating mind.

The opportunity recognizing mind is cultivated by identifying “pain points” in industry-specific value chains.  Expert entrepreneurs rapidly go from spotting a pain point to analyzing the size of the market opportunity.  Aspiring entrepreneurs, in contrast, are more likely to extrapolate from limited experience, and they tend to neglect analyzing the SIZE of the opportunity.

The designing mind has learned how to create repeatable production processes that consistently create valuable output for an identified market.  In fact, one of the main differentiators between entrepreneurship and small business is the entrepreneur designs and develops of production processes that do not require his or her constant attention.  Small business owners generally enjoy working in their business.  Entrepreneurs prefer the design approach of working on their business.

Risk management is a too-often overlooked element of entrepreneurial expertise.  A common belief is that entrepreneurs are risk takers.  In reality, entrepreneurs have learned to be highly effective risk minimizers.  Where others see intolerable risk, the expert entrepreneur has learned to reduce the risk to an acceptable level.  For example, expert entrepreneurs operate according to the “principle of affordable loss” when launching a new venture.  They don’t risk more than they can afford to lose.

The resilient mind is simply the ability to bounce back from the inevitable failures and setbacks that all entrepreneurs encounter.  Expert entrepreneurs have learned to distinguish their business failures from personal failure.  Without question they still experience disappointment and frustration, but they don’t turn their negative emotions inward.  They view their business experiences objectively, and they strive to learn as much or more from their failures than they do from their successes.

Finally, the effectuating mind is simply the ability realistically to assess one’s talents, situation, and prospects.  Any particular entrepreneurial opportunity could be pursued by anyone, but not everyone can pursue each opportunity.  Some people simply will be better prepared to capitalize on an opportunity than others.  This may be due to their life history, family circumstances, genetic gifts, or other factors.  Expert entrepreneurs have learned honestly to assess their own unique talents and to leverage them in pursuit of opportunity.  They do not care that others may be better suited to pursue other, potentially more lucrative, opportunities.

The five mindsets entrepreneurial expertise are targets for lifelong learning and development.  No matter your current level of expertise in any of these mindsets it is likely that you have room for improvement.  If you deliberately practice and develop skills in these specific mindsets over time, the chances for your entrepreneurial success inexorably will improve.

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Nov
04

Busting a Few Entrepreneurial Myths and Illusions

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The entrepreneur has risen to near mythical status in American culture over the past several decades.  One example of this rise is the many academic programs that now purport to teach the craft.  In 1985, fewer than 100 universities and colleges offered entrepreneurship education.  Today, the number is greater than 2,000.  In addition, most of these higher learning centers offer entrepreneurship courses in a variety of academic units.  What began as primarily an offering in business schools is now found in engineering, fine arts, natural sciences, theater, journalism, and many others.

The rise of entrepreneurship as a career or lifestyle choice is widely touted as a good thing.  This publication and this column also unabashedly promote entrepreneurship.  Still, the “entrepreneurship bandwagon” has become something of a contagion—and it is increasingly difficult to distinguish good advice from bad, hype from reality, and fact from fiction.

Fortunately, a new book written by prominent entrepreneurship scholar Scott Shane addresses some of the myths and illusions surrounding entrepreneurship in America.  Aptly titled “The Illusions of Entrepreneurship”, Shane helps us understand what entrepreneurship is, and, importantly, what it is not.

For example, entrepreneurship education often highlights the youthful founders of Google, Facebook, and Yahoo! as examples of why students should study the subject.  In reality, the average founder of a company in the United States is 35-44 years old.  Less than 15 percent of the self-employed in America are younger than 34 years old.

Another of the myths about entrepreneurs is the amount of money they make.  Popular media love to highlight the astronomical wealth that some have created.  That YouTube was sold by its founders for $1.65 billion in its second year of existence is beyond comprehension for most of us.  In reality, entrepreneurs don’t make that kind of money.  In fact, they usually make less money in their self-employment than they would be able to make as a full time employee.  According to Shane, first time entrepreneurs do not launch their ventures for the money—they do it because they are sick of working for someone else.

Another common myth is that the United States is a uniquely entrepreneurial society.  We often read about the important role that entrepreneurship plays in the wealth of our nation.  In reality, the United States is less entrepreneurial today than it was 100 years ago.  In 1908, Americans were moving from the farm to the city, and many started small businesses because there were not enough jobs.  Today, jobs are plentiful for low-skilled laborers, and many pay a living wage.  The research clearly shows that entrepreneurship rates decline as a nation’s wealth increases.  For example, Turks are four times as likely as Americans to start their own businesses, and Peruvians three-and-a-half times as likely.

So what is the point of busting entrepreneurial myths?  Can’t we just encourage entrepreneurs and let them be sorted out by the market?  The major problem is that believing entrepreneurial myths can be costly.  It can be costly to individuals who have unrealistic expectations about their chances to succeed.  Not only may they lose money in pursuit of an ill-fated entrepreneurial dream, but they may also incur serious opportunity costs by not working and advancing within a large enterprise.  Believing in the myths can also be costly to society.  Policies and support programs, and the people they employ, may be misguided and aim at producing unrealistic outcomes.

In summary, the American economy today is one primarily of large enterprises.  Most Americans work in big companies, and big companies control the lion’s share of the economic resources.  Entrepreneurs play a role in the evolution of our economy, but they do so primarily on the margins.  Large companies occasionally atrophy, or they become overly enamored with themselves and lose their focus on serving customers.  In these instances, the “creative destruction” wrought by entrepreneurs helps clear the dead wood of the past.

Those who possess the talent, inclination, and requisite resources to become entrepreneurs should by all means be encouraged to do so.  But we must encourage and support the entrepreneurs among us in a wide-eyed manner that fully prepares them for the difficulties of the entrepreneurial journey.  Neither teachers, policy makers, nor the many others who carry the flag for entrepreneurship can have much impact on the challenges entrepreneurs face.  All supporters of entrepreneurship should, at least, be guided by the mantra “do no harm”.  Understanding the myths surrounding entrepreneurship may help.

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Oct
31

Anybody Can Be An Entrepreneur

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Anybody can be an Entrepreneur, But Not Everybody.

I’ve been using this little phrase for a number of years to express the view that literally anyone can be an entrepreneur.  However, not everyone should be encouraged to follow the entrepreneurial career path.  This perspective has been fashioned over the years by both personal experience, and by a careful reading of the scholarly research.

It is quite clear from the research that there is no such thing as an “entrepreneurial personality”.

More than 20 years of research into the “entrepreneurial personality” has revealed that entrepreneurs are as varied in their personality as is the general population.  That is, despite extensive efforts to define this or that personality trait as essential to entrepreneurial success, none has been found.  As it turns out, some entrepreneurs are extroverts, some are introverts.  Some entrepreneurs are risk takers, some are highly risk averse.  Some entrepreneurs are humorous, some are serious.  In a word, they are just like you and me.

What this research says is that there is nothing about your personality that naturally predisposes you to entrepreneurship, or constrains you to a “paycheck lifestyle”.  Either career path is available to you.  As such, literally anyone could become an entrepreneur.

Of course, that is not to say that we will all succeed equally in the entrepreneurial career path.  There clearly are some things that will predispose some to greater entrepreneurial success.  Talent that is appropriate for one’s time and place is one thing that may provide a better chance for success.  For example, over the last 30 years or so, individuals born with a natural ability to understand and process technical algorithms and computer programs have had a better chance of entrepreneurial success than those who don’t possess this talent.  Many of the leading entrepreneurs of the past quarter century have been software or Internet entrepreneurs who were born at a fortunate time when such talents are in high demand.  Imagine the tech-savvy entrepreneur of today were he or she to be transported to the 18th century.  It’s not likely their talent would be so valuable in that pre-computer era.

Although entrepreneurship does not require any specific personality traits, there are some cognitive skills that entrepreneurs develop that differ from the general population.  For example, one of the primary cognitive skills that entrepreneurs develop is the ability to minimize risk.  That is, where many people look at a venture opportunity as too risky for them to jump into, the entrepreneur has learned to remove excess risk.  In fact, that may be where the mis-perception that entrepreneurs are risk takers came from.  Most people don’t realize that the entrepreneur is no more risk tolerant than the average person.  The entrepreneur has simply learned how to minimize the risks involved in new ventures.

Entrepreneurial expertise is now being studied by scholars in great detail.  In the coming years, it may become possible to teach entrepreneurship far more effectively than we do today.  In the meantime, it is worth pointing out that the road to entrepreneurial expertise can be long and arduous.  The research indicates that it can take 10 years or more to develop any type of expertise, including entrepreneurial expertise.  That’s probably why most first time entrepreneurs fail.  They need to cycle through several failed ventures to learn what is necessary to be successful.

The point of this article is that anyone who is considering venturing out on their own must weigh the opportunity costs of doing so.  I’ve already said anyone can be an entrepreneur.  What needs to be examined carefully is whether it is worth it for you.  Entrepreneurship, just like any other career path, takes time to learn. The more you learn the more you will be able to earn.

Can you afford to be an entrepreneur right now?  If you are currently unemployed, the answer may be “yes”.  If you are fully employed in an engaging and well-paying career, the answer is probably “no”.  Everyone has to decide for themselves whether they can leverage their unique talents better through entrepreneurship or through a traditional career.

Policy makers often believe that entrepreneurship should be encouraged as extensively as possible.  They set up programs and support functions to help all aspiring entrepreneurs, when in fact many of them would make better use of their time and talents working in a traditional career.  Just because anybody can be an entrepreneur doesn’t mean everybody should be.

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