As an academic studying entrepreneurs, and a former serial entrepreneur, the questions I’m most often asked are: “Why do some people become entrepreneurs, and what determines whether they succeed?”
Is there an entrepreneurial personality?
The popular media, of course, alternately idolizes and stigmatizes the most elite entrepreneurs (Jobs, Branson, Musk, and others) with arguments about creativity, passion, determination, and ruthlessness. Surely, these are the same talents and characteristics we’d find in successful investment bankers, car salesmen, and politicians.
After decades of rigorous research on entrepreneurial traits, behaviors, and outcomes, the balance of knowledge about entrepreneurial motivation and success remains unknown. Yes, entrepreneurship runs in families – but that might just be a special case of behavior driven by exposure and familiarity. Yes, networks are important, but then again so is geography and local access to finance. We used to think that entrepreneurs are risk-takers; it turns out that they are actually more analytical than the average decision-maker, but tolerant of ambiguous conditions.
Theories of “outliers” are attractive for simplicity, but ultimately less than convincing. Yes, Bill Gates and Steve Wozniak had the requisite 10,000 hours of experience, but so did hundreds, if not thousands of other nascent geeks. The birth-month effects that are relevant for children’s sports teams simply are not relevant for venture formation. And, for every “rule” of entrepreneurial process, we can always find exceptions. Each term, I tell my students that for any given theory in the textbook, we can find an entrepreneur or a firm to serve as a counterexample.
So what is it, really, that differentiates entrepreneurs? And why do some succeed so spectacularly when so many others fail?
Truly innovative entrepreneurs
Professor Gerry George (Imperial College) and I have been studying two sets of unusual entrepreneurial populations.
First, we looked at academic entrepreneurs – university scientists who commercialize their research innovations (Inventing Entrepreneurs, Prentice-Hall 2008).
Second, we looked at innovative entrepreneurs developing entirely new business models, seeking to fundamentally change industries and markets. This most recent research, reported in our book, Models of Opportunity (Cambridge 2012), revealed something new about entrepreneurs and their behavior.
As business strategists, entrepreneurs are sense-makers.
In other words, they seek to simplify and integrate vast amounts of information into explanations that make sense. But the distinguishing element for truly innovative entrepreneurs is that they become sense-givers.
The master entrepreneurs, like Jobs and Branson, or Return Path CEO Matt Blumberg, go beyond making sense of the environment to recrafting it into an entirely new vision. That new vision has two key characteristics.
First, it appeals to target customers, markets, and partners via new and beneficial forms of value creation.
Second, it specifically leverages unique assets or capabilities of the venture that make it difficult for competitors to offer the same value.
iTunes wasn’t just a new pricing mechanism for music singles. It was a revolution in content management tightly linked to Apple’s core strength of premium design value. Bharti Airtel didn’t just offer cheap mobile services in India. It turned the traditional model of cell phone sales on its head by co-opting India’s massive base of local and rural retail stores. And Return Path wasn’t just another spam management system. It became the global leader in email whitelisting and marketing services by filtering the good email in rather than the bad email out.
What these have in common was the willingness to take otherwise implausible opportunities and convert them into convincing, coherent stories.
Research on creativity shows that the most creative people, measured by output, start with more ideas, because they defer judgement. Outlier entrepreneurs start from the same place.
They may be coldly analytical, they may be slightly manic, but when they look at the landscape of opportunities, they don’t instinctively exclude the ones that don’t make immediate sense. Instead, they assume that some of those opportunities don’t make sense at the moment, and they devote themselves to reinterpreting how they could make sense under other circumstances.
For Matt Blumberg, the idea that email inbox integrity could be managed by selecting in the good email simply required a mechanism to score email sender reliability. The fact that doing so would require a database of billions of email senders was a technicality – if you had the database, then email whitelisting was a far better option than spam content filtering. Matt and his team at Return Path used all the traditional entrepreneurial skills to create that database, and they now have more than 70% global market share. But what made Return Path possible was crafting an entirely new narrative for the industry, rather than simply making do with what was already out there.
We may never know what leads any one person from recognizing an opportunity to starting a new venture. But when some of those people make the leap to truly revolutionary businesses, they aren’t just marching to a different drummer. They’re composing an entirely new score, and convincing customers, partners, markets, and entire industries to sing along.
Adam J. Bock is Lecturer in Entrepreneurship at the University of Edinburgh Business School. He is also an experienced entrepreneur and venture financier. He co-founded three medical device companies and managed three angel investor networks in the United States, facilitating more than $10 million of investment into start-up companies. His research focuses on how innovative entrepreneurs create extraordinary companies.
Check out his entrepreneurship site here.