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This Is the Kind of Leadership Start-ups Need

Good entrepreneurs decide early on how they're going to manage their companies. Great ones manage them like this.
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A founder faces a crucial decision at the outset of any new entrepreneurial venture. He or she must choose between two competing leadership styles. And the choice can make all the difference.

In our book, Breakthrough Entrepreneurship, we interviewed and analyzed the personalities behind a large number of successful (and unsuccessful) new ventures.  In short, we found that entrepreneurial leadership styles fall roughly into two categories:

An empowering leader employs a relatively decentralized leadership approach that builds consensus and squeezes every bit of knowledge, wisdom, and drive possible out of the team, laying the groundwork for long-term success.

An assertive leader, in contrast, lays out his or her vision and drives the team to meet the goals--and use the methods--that the leader expects.

Be an Assertive Leader

Most leadership experts and books will advocate for some form of empowering leadership. But in the context of a young start-up, we think that's wrong. Assertiveness wins. Here's why:

As an entrepreneur, you don't often have the luxury of making the long term your very top priority. You'll almost certainly face significant constraints in terms of time, people, and money. You're going to have to find ways to do more than your competitors with less. That means you don't have time to build consensus. You need to move fast, apply the 80-20 rule, and get things done.  Empowerment would be ideal, but often it's neither practical nor possible in the early days.

Now, there's one very important caveat to all of this: It's that it means an entrepreneur really has to know what the heck he or she is doing. That may seem obvious, but let's drive the point home with an analogy from the investment world.

Investors can beat the market in one of two ways. Either they can obtain unique information, or they can find unique ways to analyze information that everybody can access.

 Find Unique Information

There are legitimate ways to obtain unique information, of course. If you've tested ideas and done independent research, then you've created an advantage as an entrepreneur. Nothing else matters if you haven't obtained valid data and insights that others don't know.

Unfortunately many new ventures launch without any true, tested insights into what the market wants, what problem their venture proposes to solve, or how valuable their proposed product or service is to customers. Too often they stumble around, wasting resources, always ready to "pivot." It's a lot like Don Quixote tilting at windmills. On a large scale, therefore, people studying these kinds of phenomena must presume that at best everyone can access the same information. The result is that they focus largely on smarter ways to process information.

This makes plenty of sense for larger companies in established industries. It's not as if Procter & Gamble is likely to develop a unique insight about, say, social networking. More likely, the company has built a solid, predictable management structure that can make incremental improvements to existing products such as Tide laundry detergent. That's fine. It's what P&G is structured to achieve. In fact, shareholders likely want that kind of predictability. You don't want to invest a pension fund in a game of blackjack.

 It's Lonely at the Top

But you're not P&G. As an entrepreneur, you are continually trying to develop unique information for the least investment: Where does the unmet customer pain lie? How can you improve your value proposition? How large is the market? Once you've developed those insights, the appropriate management style isn't one where you leverage everyone's talents to design a process to manage resources. Instead, we believe the appropriate management style is one where you act more like a coach, a ship captain, or a military commander.

That's leadership. They say it's lonely at the top, but it's a lot worse down below.

(In an upcoming column, we'll explain a few specific, practical strategies that assertive leaders use.)

Last updated: Jun 26, 2012

JON BURGSTONE | Columnist | Professor, UC Berkeley

Jon Burgstone was co-founder of SupplierMarket, acquired by Ariba for $1.1B. He now teaches at Berkeley, where he helped launch the Center for Entrepreneurship & Technology. He is co-author of Breakthrough Entrepreneurship.

BILL MURPHY JR. | Columnist

Bill Murphy Jr. is a journalist, ghostwriter, and entrepreneur. He is the author of Breakthrough Entrepreneurship (with Jon Burgstone) and is a former reporter for The Washington Post.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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