Think like an entrepreneur

Saras Sarasvathy, a professor at Duke University, undertook some research to see if entrepreneurs thought, acted and decided differently. Her conclusion was that this is the case. At its most basic level, she says that rather than set a goal and work out how to get there, entrepreneurs start with the means at their disposal, collaborate with others and go on a journey to see where they end up. Her work has attracted much attention and is taught in many entrepreneurial courses the world over. The process is portrayed below (you may need to click on the picture for a clear view):

effectuationI have read her research papers and various other materials, but the best explanation of her process I have come across is displayed in this video from the University of Gallen:

The 10 myths of entrepreneurship

So, through trial and error, together with discussion with stakeholders and customers, and a clear understanding of the means at your disposal, you develop a new product or business even if your original goals need to shift substantially in the process.

At Genesis we have a view on Saras thinking – although it may go a little against the crowd at the moment. Although I am not certain how academically robust was her research, intuitively there are some great ideas embedded in the theory. Base your business on your own means (including competences), spend more time experimenting and market testing (than in-office analysis), share your ideas and get inputs, … these are all good. They also dovetail nicely with other entrepreneurial thinking such as that of Alex Osterwalder (Business Model Generation) and Steve Blank (The Start-Up Owners Manual). These concepts are particularly useful when dealing with “fuzzy” markets where you have really new products or are developing a new market or market niche.

Where do we think this could be dangerous? Taken to its extreme, we believe the process could lead to laziness and sloppy thinking if it is used totally outside causal thinking. We accept that a new start-up is not the same as a microcosm of a large enterprise, but there are some excellent analytical tools and strategic thinking that can play an important role in the entrepreneurial process. From the humble SWOT through Porters competitive strategy and on to Christensen’s disruptive technology – all could guide the process (depending on the venture) and could also help to reduce risks of ending up in the wrong place and/or with the wrong product.

Furthermore, one of the things that we believe is a characteristic of great entrepreneurs is to persevere and continue far beyond the point when other more “sensible” people have thrown in the towel. That attitude does not sit well alongside the idea that goals can be changed whenever things seem to be going against them.

 

Our conclusion, Saras has begun an interesting “movement” and there are many important principles that should be used in the “0 to 60mph” phase of the start-up. But do not throw the baby out with the bathwater – recognize that causal thinking, modelling and other scientific business principals can enhance the effectuation process.

We are about to launch a new company: Mashauri Limited aimed at helping entrepreneurs through the process from start-up to stable business where we have cobbled together a mixture of the types of thinking discussed above. We have produced a process that we believe will really enhance the entrepreneurial journey and greatly increase the chances of success. If you are an entrepreneur in the early stages of start-up and would be interested in trialling the product, contact me at sgifford@genesis-esp.com to discuss it.

 

 

 

Peter Drucker on strategy for entrepreneurs

There are some brilliant authors who write about strategy: Porter, Prahalad and Hamel to name a few. But I am constantly amazed at how timeless is the advice of Peter Drucker. I was re-reading his work on strategy and entrepreneurs the other day in a book called The Essential Drucker (click on book to see contents) which is a collection of his best essays. The essay I am discussing today is called Entrepreneurial Strategies, which came from a book he wrote in 1985 – when only a handful of people had even heard of the internet.

Although one must consider the concepts in the light of today’s environment where technology and other conditions have changed the playing fields for entrepreneurs, the four strategies that he suggests are as applicable today in Silicon Valley as they were in the manufacturing era in which they were written. Below is a summary of his set of entrepreneurial strategies:

  1. “Being fustest with the mostest”
    That is being the unchallenged leader in your field – and staying there. Would this be Facebook in its early days? Or Pinterest? They certainly started that way and have attempted to maintain dominance even if the field is cluttered with would-be successors. Blackberry was another example here with its mobile email system. Peter Drucker recognises it as a potentially highly rewarding strategy but also warns it is the most risky – and it is often a challenge to maintain the position.
  2. Creative imitation
    1. Creative imitation: “Hit them where they ain’t”
      Instead of designing something brand new, try to exploit potential opportunities of someone else’s innovation – but who have failed to exploit the opportunity to date. The teenage son of a friend of mine takes apps designed for Apple and converts them into apps for the Android – and makes a fortune. I am not debating the morality (or even legality) of this, but it is an example of this type of strategy.
    2. Creative imitation: entrepreneurial judo
      Here the entrepreneur tries to succeed in a market which someone has created but for some reason is not concerned about. The two examples used are where an organisation develops a product but does not capitalise on it through arrogance; or where an organisations simply picks out the high profit sector of the market and leaves the rest. Many companies operating at the “bottom of the pyramid” (such as mobile phones in Nigeria) are operating here and finding ways to make money and provide a valuable service.
  3. Finding and occupying a specialised “ecological niche”
    This is where a company obtains a practical monopoly in a small area that, in itself, does not offer much incentives for others to compete in, as it is too small and/or requires highly specialist skills. An example is an Israeli company (Givun Imaging) that makes ingestible video cameras (fits into a pill) and allows Doctors to see the inside of the intestine of their patients.
  4. Changing the economic characteristics of a product
    Here the entrepreneur takes an existing, well-known product  and positions it differently in the market through better adapting it to the customers requirements such as changing the pricing model and so it is generally based on the premise of creating new customers for an existing product (Drucker mentions 4 ways of doing this in the article).
    Netjet may be an example of this whereby it puts the use of a private jet within the price range of executives who could not afford their own jet.

In the essay, Drucker considers the risks and downsides and opportunities of each strategy with examples. He explains how a strategy may actually be a mixture of several of those described individually. He also discusses how different strategies require different behaviours on the part of the entrepreneur and require a different type of innovation.

As part of the Genesis Strategy Genie process we discuss and challenge entrepreneurial strategies with this type of thinking, together with tools such as the Business Model Canvas. The work is useful to organisations doing well, but who would like to grow more rapidly as well as companies suffering low or negative profits who would like to see how a shift in strategy or focus can cause a quick turnaround.

If you would like to review and possibly strengthen or refine your strategy, please contact us for a no obligations discussion – either go to the “RUB THE LAMP” link in the menu or the “Genie for entrepreneurs ONLY” link and you will be given a route to contact us.

Below is a link to a brief summary of Drucker’s essay, but I strongly recommend getting hold of a copy of the book and going through it in detail – or speaking to someone at Genesis and finding out how to put the theory into valuable practice.

Summary of Drucker article.

 

 

 

Entrepreneurial Spirit in Action

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Here is a great story about a 9 year old boy who shows true entrepreneurship. Not only is the story inspiring, it is guaranteed to bring a smile to your lips. The video clip is 10 minutes long but trust me, it is time well spent.

Not only is it a fun video, it is also full of good lessons for entrepreneurs too. What you take out of it may depend upon your personal context, but for me some of the entrepreneurial qualities Cain displayed were:

  • Working in an area that was his true passion
  • Creative use of what is it hand if other resources not available
  • Dedication to the business – even when things go slowly
  • A keen understanding of pricing points and how to up-sell a customer
  • A focus on the experience he was creating – not the financial returns,
  • Constant innovation – but within a clear strategic direction (cardboard arcade machines)
  • An infectious enthusiasm that inspires others to help.
Please visit our welcome page to find out more about The Genesis Strategy Genie and how we can help you live your dream.