Derek Lidow, Author , Building on Bedrock: What Sam Walton, Walt Disney and Other Great Self-Made Entrepreneurs Can Teach Us About Building Valuable Companies
At crucial decision points for growing a business, leaders often find themselves in the position of fledgling entrepreneurs. They may have been tasked with launching a new business, entering a new market where past experience doesn’t apply, running a recent acquisition, or finding ways to revitalize an ailing product line. They may even have been encouraged to be entrepreneurial by the boss or the board. In those cases and others they can get ahead of the game by doing three things:
- Understanding the two kinds of entrepreneurship
- Recognizing that all successful entrepreneurs ultimately do the same thing
- Hone the five core skills of the entrepreneur
Bedrock versus high-risk entrepreneurs
There are two diametrically opposed forms of entrepreneurship. Confusing the two can lead to disaster. At one end of the spectrum are the high-risk entrepreneurs familiar from the media—the wizards of Silicon Valley hoping to disrupt entire industries and grow exponentially, at least in valuation by potential investors. At the opposite end are what I call “bedrock entrepreneurs,” the often unheralded people who painstakingly and methodically build a business from scratch over a period of years. Neither approach is necessarily superior to the other. For a company leader seeking to grow a business or take it in a new direction, the important point is to know the difference and be clear about which one is being pursued and why.
Bedrock entrepreneurs, whose businesses are usually funded initially out of their own pockets and those of their family and friends, invest time and effort to minimize risks associated with the steps they must take to grow the business. Success often requires the painstaking cultivation of personal relationships—winning the initial trust of customers, retaining them through the inevitable hiccups of a new enterprise, and collaborating with them on improving the product or service. Company leader-entrepreneurs may not be quite so personally invested (certainly not in terms of their own money), but the success of their business may depend on building relationships, especially if the new business is far afield of the company’s core business. Taking big risks in those situations could jeopardize those relationships if the risks don’t pay off and leave customers holding the bag and it could tarnish the reputation of the manager and the parent company.
On the other hand, high-risk leader-entrepreneurs may also feel personally uncomfortable with great risk. But they may have no choice other than to take big risks if they want to succeed where they have chosen to compete. For example, where competitive advantages come from network effects or economies of scale the race is to determine who can reach a critical mass of customers first. Think of all the companies currently investing enormous amounts of money in autonomous vehicles. Not all of them can win. Indeed, Apple recently dramatically scaled back its push into autonomous vehicles.
Without Silicon Valley’s high-risk “shoot for the moon” model, the US would not be the world leader in enterprise software, semiconductors, social media, biotech, and ecommerce. These industries all started as audacious dreams. No wonder entrepreneurs are constantly told they must disrupt an entire industry. And, increasingly, companies are being told the same thing, which could tempt leader-entrepreneurs to take the high-risk route when the bedrock approach might be wiser.
All successful entrepreneurs ultimately do the same thing
Bedrock and high-risk entrepreneurs may take starkly different paths to success, but both ultimately succeed because they make their customers so happy that the customers gladly give them money in return. Entrepreneurship is often seen as the ability to think up entirely new businesses or come up with ideas that disrupt existing industries. But Henry Ford didn’t think up the combustion engine or automobiles, Thomas Edison didn’t think up incandescent light bulbs, Larry Paige didn’t think up search engines. These great entrepreneurs succeeded by working tirelessly to tune existing ideas and inventions in ways that made vast numbers of new consumers happy enough to hand over money in exchange for the new product or service. So whichever path—bedrock or high-risk—you determine is most appropriate in the circumstances of the business you oversee, you need to keep foremost in your mind the fundamental truth that all entrepreneurship is about making customers happy.
The five core skills of entrepreneurs
To successfully launch, grow, or transform a business, company leader-entrepreneurs must be able to do four things uncommonly well:
- Maintain self-awareness. This is the ability to forthrightly acknowledge what you know and don’t know, what skills you have and don’t have: no illusions about your abilities, no faking it, no pretending a particular skill doesn’t matter. As soon as you realize you have a gap, such ruthless self-knowledge should spur you to acquire and practice the skills you need.
- Build relationships. Entrepreneurial leaders virtually never act alone in getting the world to adopt their ideas—they build strong relationships with people who will help them achieve their vision.
- Motivate others. You don’t need to be charismatic. You need to focus on making people feel good about themselves in the context of the work they are being asked to do. That means creating tasks that make people feel autonomous, masterful, and purposeful, and not controlled, insecure, or inconsequential.
- Lead change. Going from fine-tuning an offering to expanding the customer base to becoming a profitable, self-sustaining enterprise requires constant, sometimes sweeping, organizational change.
- Understand enterprise evolution. Enterprises go through stages of maturity, like infants becoming children, then adolescents, and then adults. In brief, those stages are: 1) validating a “customer” for the idea, 2) validating the value proposition around the idea, 3) scaling up to deliver that value widely and reliably, and 4) becoming a self-sustaining enterprise capable of innovating to stay competitive. As a company leader-entrepreneur you must understand where the business you are starting or that you have taken over stands in terms of maturity and then apply the right mix of skills at each stage to take the enterprise forward.
If you have been deemed the right person to guide a new business in your company you likely already have many of these leadership skills to some degree. And you no doubt understand the imperative to make customers happy. But when you harness those skills and that imperative to the form of entrepreneurship that is right for the enterprise you are leading, you can accomplish far more than if you simply paid lip service to the idea of being entrepreneurial and proceeded with business as usual.
About the Author
Derek Lidow is a successful entrepreneur, global CEO, researcher, innovator, and a startup coach. Today, he teaches entrepreneurship, creativity and innovation at Princeton University. He is the author of Building on Bedrock: What Sam Walton, Walt Disney and Other Great Self-Made Entrepreneurs Can Teach Us About Building Valuable Companies” (January 2018) @DerekLidow