Why do we love entrepreneurs? Because they’re risk takers. They’re mavericks. Their fools. They’re geniuses. They’re creative, crafty, clever. They move. They shake. They make somethings out of nothings. Then innovate. Most of all, though, we love entrepreneurs because we love underdogs.
What’s an underdog? It’s someone who is underrated. Someone who is not favored. Someone who will probably fail, but if they don’t they will be amazing.
And that’s why we love the underdog – because they came out of nowhere, beat all the odds, and came out smelling like a rainbow-scented unicorn fart.
How do entrepreneurs beat these odds? How does one acquire this desirable yet allusive scent of success?
Let’s be clear, the odds are against the startup entrepreneur. Odds of success have been estimated at between 3% – 10% at best.
But most of us aren’t entrepreneurs. So how do entrepreneurs – or the entrepreneur’s mindset – fit into traditional business? “Intrapreneurship” has been gaining momentum for more than two years now, with organizations as conservative as Pricewaterhouse Coopers getting in on the action. Most view entrepreneurs as an individual who embodies all qualities listed above. An entrepreneur, though, isn’t necessarily some rogue fool looking for a genius outcome. Every business, every organization needs elements of an entrepreneur on their team.
In my post on Business Strategy I summarized a recent conversation with folks from my Executive Leadership program at the Stanford GSB. This post is a continuation of the topic on leadership in entrepreneurship. And the the focus is on three aspects of entrepreneurship: Discovery, Product-Market Fit and the Learning Process as presented, in part, by Stanford GSB professor Bill Barnett.
When it comes to a new or old venture, how is one to know what innovation will be the next darling of the market, the next big hit? Through a process of discovery, of course. And any process of discovery is woven into every business’s strategy, right? Not necessarily. In fact, rarely is this the case. Barnett argues that discovery is rarely part of any company’s (original) strategy.
Examples abound: Trader Joe’s, a boutique specialty retailer in the U.S., once made its money selling cigarettes and ammunition – a far cry from the microwavable organic meals and fancy cheeses one can get there today. Honda Motors, famously, planned to sell big motorcycles – “choppers” – in the U.S., and ended up discovering the market for small “minibikes.” The list of examples goes on, including many entrepreneurial firms that discover a strategy better than the plan their founders once pitched.
The reason strategy does not effectively give way to grand slam product-market fits is because for the most part we are bad planners. And consumers are a fickle lot.
As well, most good strategies require failure. Sometimes, as in the case of Apple, it might require cannibalizing your (currently) very successful/profitable business. As such, most established businesses are bad at discovery because they avoid failure at all costs. Instead of viewing discovery processes as failure, businesses should reframe it as R&D.
“A business (venture) should be – if taking a scientific approach – a hypothesis worth testing. Prove that it’s worth testing. Create an MVP and then try to make it fail.”
Product-Market Fit & Process of Learning
Product-Market fit is usually the result of two things: (1) a business fitting with its environment and (2) the ability to engage in a process of learning. Fitting with your environment means knowing, intimately, who your current and potential clients are. To be able to achieve a long tail view you need to develop some process of learning, a process for mapping clients and potential markets. It could be formal (through some qualitative and/or quantitative data collection) – or it could be informal (listening to customers, taking notes and proposing a solution). I call this “listening.” Whatever you want to call it, your listening should be systematic and organized.
Entrepreneurs are particularly good at this. And it’s one of the reasons people love entrepreneurs.
Steve Jobs, for example, spent a lot of time thinking about and learning about the long tail view of the potential marketplace for music and technology and who the potential clients might be. Contrary to popular belief, the iPod was not some whimsical puff of creativity dreamed up by Steve Jobs. The MP3 player was not a new technology. What was new, what was disruptive, was the logic. The iPod represented a new application of – a new logic for – existing technologies: matching device to music and a seamless, beautiful marketplace for the two to live in. And it came into being through a process of learning.
In Silicon Valley we produce so many successes because we retain our failure rate. In a microcosm, you can look at Qualcomm as an example for how it stays on the bleeding edge of innovation. In many ways failure is a badge of honor around Silicon Valley because even in failure the entrepreneur takes away numerous invaluable assets that many equate to the knowledge and experience gained through the process of earning an MBA. By “retaining failure” a person, a business, an ecosystem retains all the lessons learned from launching the new venture.
Entrepreneurial Leadership Within Your Business
Check the tone of your business. What is your culture like? How are you encouraging discovery? How are you building learning processes? How are you retaining failure? As Barnett points out in his post on Leading by Design, it’s not a leader’s job to know what is next. It’s your job to design the system, the culture, that discovers what’s next.
Entrepreneurs are fools…except for when they turn out to be geniuses. That’s what is costs to uncover a genius or two: foolishness. So if foolishness is the price of genius, how are you leading your team into a safe space to be a little bit foolish?