Creators of the New Economy
The Next Generation
Amateur entrepreneurship is over. THE PROFESSIONALS have arrived
I recall how sorry I felt for one of my schoolmates in 1956 when she told me that her dad had no job. He owned a company instead. We drove past the building once--a sad, single-story brick structure with venetian blinds in the windows. Even the name, Colbert Enterprises Inc., spelled out in metal letters over the lintel, seemed unfortunate to my 1950s sensibilities; it implied that my friend's father could be doing anything in there.
Socially, entrepreneurs simply didn't count for much during the middle of this century, and that's putting it nicely. Not many American parents who came of age during the Great Depression wished that their sons would become entrepreneurs or that their daughters would marry them. If entrepreneurs weren't actually disreputable, they were nonetheless suspect. They were the cultural misfits of business. That's not to say that there weren't entrepreneurs starting companies during the 40-year stretch that began in the 1930s--think of Henry Kaiser, of Kaiser Steel, or of Bill Hewlett and Dave Packard, who came later--but entrepreneurs weren't what America was celebrating.
During the depression and Dust Bowl era, my parents and their friends lionized the noble poor and went to the movies to forget their own problems. In the '40s, the collective American mind was on the war. And in the '50s and '60s, American men put on their gray flannel suits or tucked union cards into their pockets and went to work. Many of the women, meanwhile, became stereotypical moms.
Yet ask any group of businesspeople today whether they consider themselves to be entrepreneurial, and, says Harvard Business School's Bill Sahlman, professor of business administration and senior associate dean, "most of them will raise their hands. That doesn't mean that they are entrepreneurial, but they would certainly not like you to think they aren't."
It is clear that something has changed. Entrepreneurship achieved cult status in the '80s and has become de rigueur in the '90s. "The public's perception of people who start their own companies has dramatically improved. They're not outcasts anymore," says Sahlman. "They're in the mainstream." But something not so obvious is happening, too. A new group of people is emerging out of the swelling entrepreneurial mainstream: genuinely professional entrepreneurs.
Inarguably, Americans are starting businesses today at a dizzying rate. A study by the Entrepreneurial Research Consortium finds that more than 35 million U.S. households--roughly one in three--"have had an intimate involvement in a new or small business." Paul Reynolds, professor of entrepreneurial studies at Babson College and the consortium coordinator, finds that number astonishing. "It's twice the level I expected," he recently told a Wall Street Journal reporter.
But the mainstreaming of entrepreneurship in the United States isn't very surprising, considering that for the past 15 years or so there has been growth in both motive and opportunity. First, let's look at motive.
The downsizing of large, established corporations has given many people reason to think about starting their own companies. "The notion that smart people could join a big firm and be assured of making continuous progress and feeling good about themselves has largely disappeared," observes Howard Stevenson, a Harvard professor who wrote his first entrepreneurial case study more than 30 years ago. "I don't think anybody who's got a brain feels that assurance today. So they look around and see that entrepreneurship is an alternative. They think, 'If I own a $10-million business that makes 6% in sales, I'm making $600,000 a year. How many people in my company make that?' Smarter and better-educated people are looking at entrepreneurship as a better use of their skills."
Likewise, it has dawned on members of the baby-boom generation that not all executive aspirants are going to find themselves in corner office suites. There isn't room. When the early '80s brought the very public successes of company builders such as Apple cofounder Steve Jobs, entrepreneurship began to look like a materially rewarding alternative. The much-chronicled entrepreneurial lifestyle--beer blasts on Friday afternoons and a new BMW in the driveway--didn't sound so bad, either.
As for opportunity, globalization--the increasing permeability of national boundaries to the flow of technology, trade, capital, information, and ideas--now demands entrepreneurial behavior from companies large and small, old and young. Information technology itself has erased much of the advantage that large, asset-rich companies have long held over small, capital-starved start-ups. In fact, today's start-ups might have seized the advantage in many cases, being unencumbered by the clunky technology that old capital acquired and had to work with. Consider also the now well-established entrepreneurial infrastructure that has been constructed in the United States over the past 20 years. More people and institutions--from bankers to real estate agents, from accountants to office-furniture suppliers--know how to recognize and support promising entrepreneurs. If they don't, they're ignoring a sizable chunk of business. The trend includes venture capitalists: an article in the January 25 issue of The Economist, "Venture Capitalists: A Really Big Adventure," rhapsodizes over the ability of Americans to move capital quickly into the hands of people with promising but risky business propositions.
Out of this happy confluence of motive and opportunity have come millions of independent business owners and the prototype of a new business practitioner--someone different from the corporate manager and the small-business owner. That someone is the professional entrepreneur.
People who flout prevailing cultural norms often take pride in their idiosyncrasy--maybe even brag about it. The traditional entrepreneur was stereotypically a male, usually lacking significant educational credentials, who operated from the gut. He followed no plan and did things his way. He took risks, and what he built, he owned. In his company, he made the rules. Employees could choose: they could do what the boss said, or they could leave. The entrepreneur didn't expect bankers--or anyone else, for that matter--to understand what he did because entrepreneurs were, after all, born, not made. Entrepreneurship was an art, and entrepreneurs were artists.
But we have made a discovery. Little by little, over the past 15 years or so, we have come to realize that entrepreneurship--stereotypes notwithstanding--is not wholly art, any more than, say, medicine is. We'd all like our surgeon to have a knack for his or her trade, but most of us feel a lot better knowing that he or she has also gone to medical school. Likewise, a great deal of what entrepreneurs do can be taught, learned, and practiced. In fact, management sage Peter Drucker argued a dozen years ago that entrepreneurship, as distinct from entrepreneurs, hadn't even been invented until people began to study it. "Look," he said in an interview with Inc. in October 1985, "if you can't replicate something because you don't understand it, then it really hasn't been invented, it's only been done."
The invention of entrepreneurship--in the sense that Drucker means--and of the professional entrepreneur arguably began in 1979, when David Birch, a researcher associated with the Massachusetts Institute of Technology, shocked and upset the disbelieving establishment of academics and policymakers with the news that the Fortune 500 had stopped creating jobs. Birch's research showed that small business--later emended to "growth companies," a minuscule but incredibly fertile subset of small business--had become the principal creator of jobs in the United States. (See " Help Wanted," an interview with Birch.) It took a few years, but from that time on, managers' gray flannel suits ineluctably began to yield to entrepreneurs' khakis and jeans; the manager gave way to the entrepreneur as symbol and icon, respectively, of a new business age.
The jig was up for the old-time entrepreneur who liked to think of himself as a specialist just because he had a knack. People--academics, consultants, journalists, and entrepreneurs themselves--began to figure out what entrepreneurs did, how they did it, how it could be taught, and even how it could be improved.
The academic establishment, also not blind to opportunity, expanded its offerings to would-be entrepreneurs. As Sahlman points out, Harvard Business School, which used to have three or four faculty members who would teach courses relating to small business, now counts 17 full-time members on its entrepreneurial-studies faculty. Bill Wetzel, a University of New Hampshire professor, observes that whereas 10 years ago standard finance textbooks assumed that students would be employed by businesses that were already well under way, they now routinely include chapters on early-stage companies. Entrepreneurial seminars with daylong or weekend sessions on how to start or grow nearly any kind of business are buzzing. The truth is, there aren't a whole lot of secrets left about the techniques, tools, and processes of entrepreneuring. You want to learn them? You can buy a book, read a magazine, take a course, get an M.B.A.
No honest purveyor of entrepreneurial expertise believes or advertises that tools alone make the entrepreneur. As In Search of Excellence coauthor Tom Peters puts it, "The fact that you can download a spreadsheet for free off the Internet does not make you a better business planner than back in the days when you were doing it with a number-two pencil on the back of an envelope. It looks a lot prettier, but the odds are at least as high as they ever were that the information is total B.S."
That's true, but the fact that bankers, venture capitalists, and angel investors, as well as potential suppliers, alliance partners, and customers, have come to expect well-executed spreadsheets means that not even great ideas will capture their attention these days if they come scrawled on the back of an envelope. Professional entrepreneurs today don't just have great ideas; they have great ideas and know how to plan their execution and know which capital sources to approach. Professional entrepreneurs don't just do, they understand what they're doing.
I guess it's good news that along with sports stars and rap artists Americans have even begun to celebrate business stars. Maybe they're not as famous, but readers of business periodicals and books now recognize right off names like Packard, Grove, McGowan, Iverson, Fields, Kapor, Perot, Kelly, Stemberg, and Dell--entrepreneurs all. Not to mention Gates, of course. And there are scores more who could make the list--Jim Clark at Netscape, and maybe even Bill Gross, who was featured on the cover of Inc. in February.
While the professional entrepreneur raises the general level of professionalism now required of anyone trying to break into the business, it is in many ways easier to be an entrepreneur today than in the '50s, '60s, and '70s. For starters, your character is not immediately suspect. It is more pleasant to be admired than disrespected, or worse, pitied.
But it's not that easy. After a few minutes of conversation, Bill Wetzel allows that the term professional entrepreneur strikes him as oxymoronic. "Starting a business is still a sloppy process," he says, "even if some of the sloppiness has been removed."
To find out what we at Inc. think the professional entrepreneur of today looks like, turn to " The Evolution of the Professional Entrepreneur."
Tom Richman is an editor at large at Inc.
If you're serious about sharpening your business skills, you could do worse than begin your course of study with Peter F. Drucker's venerable (1954) Practice of Management (HarperCollins, 800-207-7000, 1993, $16). A more recent addition to business libraries, Michael E. Porter's Competitive Strategy (Simon & Schuster, 800-223-2336, 1984, $37.50; a reprint is due out this year), recommends ways to evaluate the strategic viability of individual industries. W. Edwards Deming made a name for himself in the emerging industries of post-war Japan, and the success of his systematic approach to quality improvement eventually registered in the United States. Out of the Crisis (Massachusetts Institute of Technology, 617-253-6128, 1986, $29.50) is a practical professional-management tool.
Should you care to register for formal instruction, consult Peterson's Guide to M.B.A. Programs (Peterson's Guides, 800-338-3282, 1996, $21.95). Some 900 institutions offer courses of study in business administration; Peterson's gives you the specifics you need to narrow the field to a more manageable selection. And check your local library for Bricker's International Directory, 1997: University-Based Executive Development Programs (Peterson's Guides, 800-338-3282, 1997, $325), arranged by management discipline. Experience always counts, though, so you may want to consult your library's copy of the student assessments that Albert & Co. publishes in its Executive Development Programs Guide (Albert & Co., 561-697-3430, 1997, $450).
PAUL REYNOLDS, Center for Entrepreneurial Studies, Babson College, Forest St., Wellesley, MA 02157-0310; 617-239-5608; firstname.lastname@example.org 44
BILL SAHLMAN, Harvard Business School, Soldiers Field Rd., Boston, MA 02163; 617-495-6000 44
HOWARD STEVENSON, Harvard Business School, Soldiers Field Rd., Boston, MA 02163; 617-495-6000 44
BILL WETZEL, Center for Venture Research, Whittemore School of Business and Economics, University of New Hampshire, Durham, NH 03824; 603-862-3341 44
PRINT THIS ARTICLE