Why and how entrepreneurial mindset amplifies new business creation
Every day new start-ups are born, while others are failing. Creating a new business might come across as a journey against the odds.
How could it be possible to excel under uncertainty and significantly increase the probability of success?
A couple of months ago I wrote a Forbes article about how to kill the myth of entrepreneurship and follow the science. Creating a new business from scratch, especially in corporate settings, feels more like art than science.
However, what I’ve learned, behind successful growth there is a systematic process – rarely taught in engineering or average business universities.
A decade ago, when startups weren’t mainstream, I researched entrepreneurship and taught courses like business design and growth venturing at the University. Since then I’ve served as founder-CEO running a +70 people growth company on three continents as well.
What I’ve learned boils down to this: the underlooked key to success is understanding the difference between managerial and entrepreneurial thinking.
Managers and entrepreneurs differ drastically when it comes to adapting to uncertainty and scouting the untravelled paths. And the difference lies in their mindset.
A typical engineering/MBA-based business manager knows how to structure a business. She carefully creates plans with KPI’s and structures a business machine that operates on reaching predefined goals and finding the means to reach them. Sound familiar?
Managerial logic seeks how to adapt to future and external threats. It scouts best practices based on previous outcomes and relies on top-down market research.
The way corporate managers think is through causation logic. It’s a sound, predictive approach that relies on cause-and-effect.
In what kind of situations is this a viable way of thinking? In environments where uncertainty for insufficient market demand is low and you have the required resources available for executing the plan.
The challenges come when you are creating something fundamentally new, when there’s no data to support the decisions. And when it comes to something innovative, this is usually the case.
Amidst the fear of failure, a person with a managerial mindset rather does nothing, if the results can’t be predicted, than takes the action. For them, failure is falling down, especially if and when someone sees it.
I dare to claim, these business people equipped with #causationlogic can’t create a new business from scratch in corporations. This is not a species-specific environment for them – thinking like an entrepreneur and seeking the unknown.
Instead, managers excel once the business is already up and running; when it’s time to extract value.
Typically a person with an entrepreneurial mindset is someone who has done paper routes at the age of 14. She designed web pages for friends’ companies and had a YouTube gaming channel in her teens. Just for fun, because she felt like it.
A person with an entrepreneurial mindset is fueled by turning ideas into action and walking toward a vision. “Hey, this should exist”, is a typical phrase that connects entrepreneurs universally.
Entrepreneurial thinking builds on effectuation logic. It’s not about predefining long-term goals and finding the means to reach them. Rather, it’s focusing on what resources you currently have and starting from there.
Without knowing the certain outcomes yet, an entrepreneur is led by visions and operates by focusing on the next steps that could be taken. It’s speed over accuracy and iterative by nature, not reverse engineering from next year’s P&L.
The way entrepreneurs approach predicting the future is simply by creating it. External changes are seen not as existential threats, but as opportunities they proactively search, explore and exploit.
For entrepreneurs, failure is not falling down. Instead, it is getting up again. Their motivation is intrinsic by nature.
People with an entrepreneurial mindset use pattern recognition and find connections between trends and customer behavior. But at the end of the day, they can’t pinpoint the decisions into solid data – rather, they have a gut feeling.
In particular, entrepreneurs differ from managers in how they talk with customers. Instead of finding causes-and-effects from the market research as managers do, entrepreneurs talk with the customer – first-hand, bottom-up. They spot crucial information, not just based on what the customers answer, but what they said on a subordinate clause. It’s reading signals, finding clues.
When a company is about to create a new solution or enter a new market, people with an entrepreneurial mindset can be of great value. Due to temporary need, companies can utilize the skillset of a seasoned entrepreneur with a temporary engagement by hiring an entrepreneur-in-residence, EIR.
She knows ‘the art of the start.’ She doesn’t plan for weeks, but she takes action here and now.
At first, she figures out what the actual problem is that the new solution strives to solve. Then she calls through 15 customers to figure out what functions and features are genuinely needed among the end-users.
Based on my experience doing these projects, those 15 calls tell you more than months of market research on what to do next.
Building something from scratch is always unpredictable. Therefore a heuristic way of thinking, a passion for customer-oriented new solutions, and an intrinsic need to achieve results under uncertainty are great drivers for creating successful new solutions.
Choosing an entrepreneur to lead your new business creation process brings you a faster road to results and clarity on what to do next, than the typical innovation manager route.
You can hire even a part-time team of seasoned entrepreneurs to solve innovation ramp-up problems. They are fast to get from 0-to-1, saving you time, money and nerves.
This is because of the difference in the way of thinking: in the early days of a new business, it is more important to ask the right questions than to have answers we assume to be right.