Great entrepreneurs don’t write great books. In fact, they don’t write many books at all.
Neither fact is surprising. Successful entrepreneurs are typically too busy innovating to write down much of anything. And on those rare occasions when they attempt to create a book, it’s filled with what they did, and not what led to their idea in the first place. As a rule, they are not particularly introspective.
So if we want to know what makes them successful—in order to improve our own companies whether we work for a huge one or our own start up—we need to study them. And that is exactly what I have been doing professionally for the last 30 years.
Here’s what I have found.
1. Look at How They Think, Not at What They Do. If you just observed the actions entrepreneurs take, you would conclude there isn’t that much to be gained from studying them. Each entrepreneur’s behavior is as idiosyncratic as they are. You would have to be Larry Page and Sergey Brin to start Google; Oprah Winfrey to found Harpo Productions.
But—and it is a huge but—if you look at how they reason, you see remarkable similarities. The process just about all of them follows in creating their companies looks like this. They:
A. Figure out what they really want to do.
B. Take a small step toward that goal.
C. Pause after taking that small step to see what they have learned.
D. Build off that learning and take another small step.
E. Pause after taking that step.
F. Build off what they learned in step two. And then take another small step…
If we were to reduce it to a formula, it would be Act. Learn. Build Repeat.
Put simply, in the face of an unknown future, entrepreneurs act. They deal with uncertainty not by trying to analyze it, or planning for every contingency, or predicting what the outcomes will be. Instead, they act, learn from what they find, and act again.
2. They Start with a Market Need. Ideas are easy—I bet you can come up with 10 new product or service ideas within five minutes right now, if you had to. And because new ideas are plentiful, they are not worth very much. As with anything else, if there is a glut—of ideas, in this case—the value goes down.
Besides, there is no guarantee anyone will buy the great idea you have come up with. If you start with the idea, you need to go in search of customers. If you begin with the need, you already have a market—the people who need what you have.
If you can discover a market need you can make a fortune. But intriguingly, that is not the primary motivation of the most successful entrepreneurs, and that brings us to the next point.
3. Don’t Set Out to Be Rich. The best entrepreneurs don’t have making a fortune as their goal, as they start off. Wealth is just (an extremely pleasant) byproduct.
Why not focus on gaining wealth? Well, if your primary objective is to get rich quick, you are bound to cut corners, short-change your customers, and fail to take the time to truly understand what the market needs. And that is true whether you are trying to get your company off the ground, or are introducing a new product or service in order to make this quarter’s numbers.
Instead, they identify the market need we talked about in point 2, and get to work.
4. Marketing. (Psst. Compete Differently) The conventional wisdom—find a niche; zig when others zag—is right, but not particularly helpful. It lacks, to be kind, specificity. Far better is to describe what the best entrepreneurs do and that is “compete differently.”
How do they do it? Here are some examples:
–Make small bets. Your resources are limited and starting anything new is risky. You don’t want to compound those risks by betting everything on one role of the dice.
–Make those small bets quickly. No, you don’t want to lose money. But, since you are not risking much, you can afford to fail. Get out in the marketplace fast and let potential customers tell you if you are onto something. Action trumps everything—especially planning.
–Where do you place those small bets? (I) Obviously, in areas where competitors don’t exist, or are weak. Not so obviously, in places where you feel strong. That confidence will help you overcome the inevitable hurdles you will face.
–Where do you place those small bets? (II) No customer wants to be entirely dependent on just one supplier, no matter who it is. Ask yourself, what your competitor’s customers want. Better yet, ask those customers yourself.
–Let the market define you. People will tell you what they like, and what they don’t, about your product. Incorporate their ideas with yours. Making the world’s best videocassette recorder does you no good, if what people really want are DVRs.
–One step at a time. Be satisfied with making one significant improvement in a product or service. You’re bound to make mistakes just attempting one thing—many more if you try to do too much.
–Keep looking for places…where you have a genuine competitive edge. That’s where profitability and security lie. Tempting as it may be, don’t try to buy your way into markets where you offer the same product at a lower price. That’s where you’ll be vulnerable.
5. Financing. This is perhaps the biggest area people fail to understand. With all the attention paid to venture capitalists, there is a mistaken impression that the best entrepreneurs begin their companies with millions of dollars in start up financing. That simply isn’t true.
The actual number is $109,416, according to the Kauffman Foundation, and that figure includes the (relatively few) companies, such as biotech firms, that needs millions to begin.
Sure, $109,416 isn’t chicken feed, but the figure is not particularly daunting.
Why is it so relatively low? It relates back to the ways that the best entrepreneurs think about starting their companies. Since they are taking small steps, they only need sufficient financing to accomplish the next one.
6. Team Building. Yes, of course, the company founder needs to delegate early. You can try to micromanage but there are four large obstacles if you do:
–-The business will never grow bigger than one person (you, the CEO) can handle effectively;
–-Your company won’t be able to move very quickly. Since everything will have to flow through you, you will create a bottleneck;
–-You won’t get the best ideas out of your people. Once they understand the company is set up so everything revolves around you, your employees are not going to take the time to develop their best ideas. “Why should I,” they’ll ask. “He is just going to do what he wants anyway.” And
7. They play to their strengths. The biggest surprise, when it comes to people, is that the best entrepreneurs find a Yin to their Yang, someone who offsets their weakness and compliments their strengths. This allows them to concentrate on what they do best, leaving the things they are not good at to someone else.
Walt Disney had Roy Disney. Steve Jobs had Steve Wozniak and Orville Wright had Wilbur Wright. Wherever there is great innovation, there is a dreamer and an operator; an “idea man” and someone who turns those ideas into reality.
8. Turning Obstacles Into Assets. I am not big on clichés like “every time God closes a door he opens a window,” or “there are no problems, only opportunities.”
But the best entrepreneurs believe and act as if everything is a gift. Well, maybe not every single thing imaginable. But assuming that everything is a gift is a good way of looking at the problems and surprises you’ll encounter in any endeavor, such as getting a new venture off the ground, obtaining buy-in from your boss, or launching a new product line in an ultra-competitive market.
Why take this seemingly Pollyannaish approach? There are three key reasons.
First, you were going to find out eventually what people did and did not like about your idea. Better to learn it as soon as possible, before you sink more resources into the concept, venture, or product line. You always want to keep potential loses to a minimum.
Second, the feedback could take you in another direction, or serve as a barrier to your competitors. You thought you wanted to start a public relations firm but a quick survey told you potential customers thought the field was saturated. But more than a few of them said they would love someone who could help with their internal communications.
Third, you got evidence. True, it was not what you were expecting or even wanted, but that still puts you ahead of the person who is just thinking about doing something (like opening another p.r. firm.) You know something they don’t, and that is an asset. You are ahead of the game.
But what if it’s really bad news? It’s a disappointment. You were absolutely certain that your boss would approve your idea for a new software program, and she said no in a way that is still echoing down the corridor. No reasonable person can define what you’ve encountered as anything but a problem, and most people will try to solve the problem. (“Maybe she will like the idea if I go at it this way instead.”) That’s fine if you can. The problem has gone away and, again, you’ve learned something that others might not know. (The boss hates Y, but she loves Z.)
But what if you can’t solve it? (She hated “Z,” too.) Accept the situation to the point of embracing it. Take as a given that it won’t ever change, and turn it into an asset. What can you do with the fact that it won’t ever change? Maybe it presents a heretofore unseen opportunity. Maybe you build it into your product or service in a way that no competitor (having not acted) could imagine. Could you do it on your own? Could you take the idea to a competitor and use it as your calling card to look for the next job?
The thing to remember is this: Successful people work with what they have at hand—whatever comes along—and try to use everything at their disposal in achieving their goals. And that is why they are grateful for surprises, obstacles, and even disappointments. It gives them more information and resources to draw upon.
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