TO REALLY LEARN ABOUT

ENTREPRENEURSHIP, LET’S

STUDY HABITUAL

T his forum piece is being written on behalf of an extremely successful entrepreneur who prefers to remain anonymous for personal reasons. He challenges the focus

of most of the current research on entrepreneurship. He argues that we are focussing most of our effort on the wrong type of entrepreneur. As a result we will continue to learn little that is of help to those who wish to start a new business.

There are three broad types of successful entrepreneur. Type one is the group of entrepreneurs who manage to survive the perils of start up and “graduate” to the position of successSful chief executive officer of their corporation. If this corporation grows to be large enough they receive a lot of public attention and scholars flock to study them in search of clues for what it takes to be a successful entrepreneur. Yet they have really only had a single experience at entrepreneurship. The second group of successful entrepreneurs are those who build a successful business before either selling out or being forced to move out of the firm they created. These entrepreneurs then “drop out” and invest the proceeds of their single entrepreneurial effort in safe investments which assure their continued wellbeing. They never again venture into the perilous waters of entrepreneurial endeavor. These wealthy, visible “drop out” entrepreneurs are also avidly studied for clues to solving the problems of starting new businesses. Once again, the problem is that this type of entrepreneur has also had only one experience of entrepreneurship.

‘The Executive Forum is an invited, and therefore, unreviewed con~bution

Journal of Business Ventu~ng 1, 241-243 11986)

0 1986 Elsevner Science Publishing Co.. Inc.. 52 Vanderbilt Ave.. New York. NY 10017

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Research which studies only such “one-shot” entrepreneurs tends inevitably to focus on the entrepreneurs themselves and the obstacles they encounter rather than focussing on the development of a comprehensive theory of entrepreneuring. With only one experience, neither type one nor type two entrepreneurs are able to develop an experience curve with respect to the problems and processes involved in starting a new business. Therein lies the fundamental flaw in much of today’s research: since these one shot entrepreneurs do not develop experience at coping with the problems of start up, by studying them we frequently reach the erroneous conclusion that the common obstacles that these entrepreneurs encounter are necessary evils+-obstacles and problems that all entrepreneurs must encounter and over- come on the road to success.

Not so! There is a third type of habitual entrepreneur who might be called a “business generator.” This entrepreneur is an individual who starts a new business and enjoys the excitement and challenge of the startup. Once the business is operating successfully and smoothly, the business generator gets bored and hands it off to professional management and then turns around and starts another business, then another, and so on. It is this group of habitual entrepreneurs that should be of particular concern, since they have had the opportunity to learn how to efficiently and swiftly overcome the stumbling blocks they encountered in their first efforts. in the absence of real knowledge of the phenomenon of entrepreneurship we are unable to see these mistakes. On the other hand business generators have had many an opportunity to attempt a business, analyze the attempt, and after several attempts recognize their mistakes and correct them in subsequent ventures-they build an “experience curve” for entrepre- neuring.

It is by studying the experience-driven skills and techniques that these business gen- erators develop that we will eventually learn the “technology” of entrepreneurship. If this technology can be uncovered and codified, so that the techniques can be conveyed to others for rapidly overcoming or even avoiding the traditional obstacles to entrepreneurship, then huge strides can be made towards making the process of entrepreneuring much more efficient for those that start up for the first time.

Discussions with business generators have revealed many commonalities in the tech- niques they develop to overcome obstacles encountered by novice entrepreneurs. This pro- vides some evidence that such a “technology of entrepreneurship” does exist. We suggest that if this is the case then scholars interested in entrepreneurial studies should make a more concerted effort to uncover and understand this hitherto elusive technology.

The particular individual who issued the above challenge is a good example of such a business generator. He and two partners have generated thirty successful companies (and have had no failures) in the past 10 years. These 30 companies were created from more than a dozen unique business ideas, and the sale of these companies have delivered returns on the original investments ranging from 500% to 5000%.

The business generators employ a formal set of well-honed techniques to deliver such returns on investment. First they have carefully crafted, and constantly nurture, several networks that are used at different stages of their ventures. The first network is a network of people (such as consultants) who uncover new business opportunities. These people are in constant contact with firms facing strategic problems and know that the business generators have a proven track record in creating solutions to the network’s problems by forming a business to do so. Thus the business generators have created a win-win situation where their network has a significant vested interest in alerting the business generators to business opportunities for which there may be significant demand, and identifying for the business

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generators a target client who already has an interest in supporting the business since the business brings a solution to the client’s strategic problem. Once the opportunity is identified it is a relatively inexpensive matter to use other network members to explore the pervasiveness of the problem and assess market potential. If there is no clear and pervasive need in the market place the idea is dropped-there are many others.

The next step is to assess whether the technology is available to solve the problem. This is where the second major network is involved-a network of technologists, scientists, and R&D managers who can be called on to determine if current technology resolves the problem. If not, the business is put on “sleeper” status until technology catches up.

If current technology can solve the problem, one of the partners may elect to initiate the venture in their “incubator” facility. This incubator facility is much like the conventional incubator in that it consists of a building which houses the embryonic businesses as well as a third network. This is a network of companies delivering top quality business support services such as word processing, design, patent search, telecommunications, and so on. The major difference compared to conventional incubators is that these services are businesses in their own right who are required to gamer at least 60% of their revenues from sources outside the incubator. Thus all these services are revenue generators rather than fixed cost burdens on the incubator and its resident embryonic ventures.

Thus. once the decision is made to start up, several of the critical factors for success are already in place:

1. The entrepreneur is experienced, committed and has a significant track record. 2. A wide variety of experts have evaluated the idea and found it technically feasible. 3. There is a clear and pervasive need in the market place for the business idea and clients

with a vested interest in the success of the venture (it solves their problem). 4. Virtually all costs are variable costs, particularly costs of excellent support services. 5. Banks, when finally approached for funding have ample evidence of the market and

technical feasibility of the idea and have confidence that the experienced entrepreneur will be able to pull it off.

The result is literally a “business engine” which has spawned nearly three dozen highly successful new firms and continues to spawn more. In the process of developing this business engine, all three entrepreneurs have constantly increased their skills at anticipating or ov- ercoming the obstacles that usually plague the fledgling businesses of those novice entre- preneurs that do not have the benefits of such experience.

Surely it is in the interest of society as a whole to capture and distil the technology of entrepreneurship that is being developed by such business generators?

From the Editor