The Evolution of the Professional Entrepreneur
Creators, Part Two
|Also read Creators of the New Economy, Part One by Tom Richman. "A new group of people is emerging out of the swelling entrepreneurial mainstream: genuinely professional entrepreneurs..."|
Characteristics of the prototypical company builder, then and now
Local > > > > Global
Local: Export was for big companies or for small companies that had become established in their domestic niches.
Global: Name a "domestic" business--just one--where foreign competition isn't (or couldn't be) a factor. Local is global.
Snap decisions > > > > Consensus
Heart > > > > Market
Heart: Rick Duhé believed in Cajun Cola. Never mind that distributors weren't moving it and consumers weren't buying it--and that he was hundreds of thousands of dollars in debt with nothing to show for it. "You can get so connected with a dream that you lose touch with where you are. We had gotten so much acceptance in such a short time. What else was I going to think but that I'd pulled off a pretty incredible thing." The dream ended in bankruptcy court in 1989.
Market: Although Steve Gottlieb had always wanted to break into the music business, he waited until his graduation from Harvard Business School, in 1984, to choose his approach. He started TVT Records because, of the 12 distinctly different business plans he had shopped around, TVT had gotten the best response.
Lone Ranger > > > > Networker
Knockoffs: > > > > Innovations:
Knockoffs: Burger King: it's like McDonald's, only different.
Innovations: Fuddruckers offers premium burgers at thrice the price (with service and venue to match).
Idea > > > > Execution:
Idea: In 1982, 80% of Inc. 500 CEOs credited their companies' success to novel, unique, or proprietary ideas.
Execution: In 1992, 80% of Inc. 500 CEOs described the ideas for their companies as ordinary or mundane. It was superior execution, they said, that brought them success.
The only thing a good idea guarantees today is that it will be quickly copied. Tom Stemberg may have invented Staples, the office superstore. But Staples rose to the top of what quickly became a crowded field because Stemberg didn't roll out the business until he had the capital and the management he needed for growth.
With information-based companies, it's not scale that matters--the incremental cost of distributing one more page of data is zero or close to it--but speed. "Speed," says Idealab founder Bill Gross, "is the ability to execute without making mistakes."
Knows the trade > > > > Knows the business
Knows the trade: Eddie Rickenbacker, a pilot, headed one of the country's first airlines: Eastern.
Knows the business: Fred Smith, an M.B.A., created Federal Express from a business plan he wrote as a classroom assignment. (Smith earned a C on his paper. "The concept is interesting and well formed," the professor noted, "but in order to earn better than a C, the idea must be feasible.")
Secretive > > > > Open
Secretive: My books are my business.
Open: Our books are our business.
Novice > > > > Veteran
Novice: As long as entrepreneurs stayed with the companies they started, not much learning took place. Onetime entrepreneurs had little information to pass on, and the pool of knowledge about entrepreneurship stayed shallow.
Veteran: More entrepreneurs are like Ruth Owades, founder of Gardener's Eden, a catalog retailer. She sold the business to Williams-Sonoma before launching Calyx & Corolla, which sells mail-order flowers. "Gardener's Eden gave me credibility," she says. Not to mention experience. With more people like Owades launching multiple start-ups, the pool of experience--and knowledge--grows deeper. Entrepreneurism, in other words, breeds entrepreneurs.
Self-reliant > > > > Inquisitive
Self-reliant: I'll figure it out for myself, thanks.
Inquisitive: Professional entrepreneurs thrive on the experiences of others.
Steve Leveen, founder of Levenger Co., a reading-accessories catalog, filled many three-ring binders with advice sent to him by Ric Leichtung, a three-time Inc. 500 winner with his own successful catalog company. "I felt like the Karate Kid, or like Luke Skywalker getting the Force," Leveen recalls.
When asked, people running the best companies will tell you about their boards, advisers, and mentors. Entrepreneurs are people who need people, too.
Pro-phobe > > > > Pro-phile
Pro-phobe: "A consultant is someone who borrows your watch to tell you the time."
"A banker is someone who will lend you money only when you don't need it."
Pro-phile: "When should a founder bring professional management into a new business? Immediately."
--Phil Romano, founder, Fuddruckers
Start-up > > > > Start-up or whatever
Start-up: "Real" entrepreneurs start companies from scratch.
Start-up or whatever: Real entrepreneurs take on start-ups, spin-offs, buyouts, or purchases; it's how you grow the company, not how you get it, that matters.
Organizationally orthodox > > > > Organizationally innovative
Organizationally orthodox: "It used to be that our companies' organization charts looked like trees. Now our organization charts are beginning to look like webs, the quintessential biological structure."
--Paul Saffo, a director of Institute for the Future
Organizationally innovative: Here are a few examples:
- Trammell Crow Co.: has local equity partners in every development project
- Re/Max: 100% of commission goes to brokers
- W.L. Gore: matrix organization
- Springfield Remanufacturing: open-book management
Trade association member > > > > Web surfer
Self-sufficient > > > > Virtual
Self-sufficient: Entrepreneurs who wanted something done did it themselves --or added someone to the payroll.
Virtual: Paul Farrow calculated that it would cost $1 million in capital to design, manufacture, and market a molded plastic kayak. He didn't have $1 million. But within a year, Walden Paddlers did all that for less than one-tenth of the estimate--and with only one employee: Farrow. He'd contracted everything. "The access to sources is fantastic," says Farrow. "We have more design and manufacturing horsepower than any of our competitors do. There are a lot of creative people out there."
Think small > > > > Think big
Think small: Carterphone's inventor just wanted to plug his little device into AT&T's network.
Think big: MCI founder Bill McGowan wanted to replace AT&T's network.
Small-business founder > > > > Entrepreneur: "It's totally inappropriate to equate small-business founders and entrepreneurs," says Bill Wetzel, of the University of New Hampshire. "One's looking for an income. The other has the intention of building a significant company that can create wealth for the entrepreneur and investors."
Seat-of-the-pants > > > > Business plan
Boss > > > > Leader
Boss: "My way or the highway."
--Sign on CEO's desk
Leader: Jack Stack owns less than 20% of Springfield Remanufacturing's stock. Employees own the rest. Stack could have owned more of the engine-remanufacturing company's stock. "But that was plenty for me. Not wanting to be accused of being greedy probably had something to do with it, but more important, I didn't want to be alone. I was going to be leading the charge up the hill. I wanted to make sure that when I got to the top and turned around, there were people coming with me."
Male > > > > Mixed: In 1980, women owned a quarter of all sole proprietorships; in 1993, they owned one-third.
Supportive spouse at home > > > > Spouse runs own business
Automation > > > > Innovation
Automation: Big companies used expensive technology to automate the work people had always done. Often, the high price of that technology was a barrier that kept small businesses out of certain markets.
Innovation: Professional entrepreneurs use today's cheap information technology to let people do things never done before.
"A filing cabinet is just a box of papers," says Ben Narasin, CEO of Boston Preparatory, a clothing designer and manufacturer. "The same information set up on a computer network can give you a dynamic sense of your customers. You can pull up their history--the way they pay their bills, what they're talking about--and get a feeling for them. You get $10 worth of value for every $1 of information. When technology breaks down, you realize how effective it is when it's working."
Intuition > > > > Education
Intuition: Trip Hawkins's first company, founded when he was 19 years old, flopped. "I loved being an entrepreneur," he says, "but before I'd do it again, I'd figure out how to do it right."
Education: Hawkins studied for an M.B.A. at Stanford University and worked at Apple Computer before making his next entrepreneurial moves: launching Electronic Arts in 1982 and 3DO in 1991.
Research backwater > > > > Research mainstream
Research backwater: In the early '80s, when Congress wanted information on entrepreneurs and entrepreneurship, it didn't exist. Entrepreneurship research? Never heard of it.
Research mainstream: David Birch, Zoltan Acs, Bruce Kirchhoff, Bruce Phillips, Paul Reynolds, John Jackson, Donald Sexton, Howard Aldrich, Howard Stevenson, Jeffry Timmons, Bill Wetzel, Karl Vesper, and so on
Dozens--maybe scores--of academicians now specialize in entrepreneurial study, scrutinizing and analyzing processes and behaviors in organizations of all sizes and in all stages of development. Look for a lot more academic research on what makes entrepreneurial companies work.
Price takers > > > > Value makers
Price takers: Me-too competitors--Wendy's, for instance--could set prices at any point--as long as they were lower than the McMarket leader's.
Value makers: New competitors--Nike, for instance--create new categories and new price points.
Personal financial plan is the business > > > > Business is part of personal financial plan
Art > > > > Science
Art: What entrepreneurship was presumed to be
Science: "'Professionalized' means having a set of disciplines and routines that can be taught and applied. Professionalism doesn't eliminate the art in entrepreneurship, it strengthens it."
--Amar Bhidé, associate professor of entrepreneurship, Harvard Business School
Equity = control > > > > Performance = control
Equity = control: Vincent Yost, founder of Intelligent Devices, was reluctant to raise additional capital. To do so would have meant reducing his ownership of the company to less than 51%. By his logic, that would result in losing his control. "He'll discover," says Harvard Business School Professor Bill Sahlman, "that by not raising much capital, he'll have given up real control of his destiny anyway."
Performance = control: "Control comes from performance, even for CEOs. If you do the job well, you have all the control you need. If you don't, it doesn't matter how much stock you have. You won't be in control of your company."
--Mitchell Kertzman, Powersoft founder
Company > > > > Career
Company: Henry Ford, David Packard, Ken Olsen, Lillian Vernon, and countless others: the companies they founded were their careers.
Career: Career transcends company. Consider the résumé of Eric Kriss:
- CEO, MediQual Systems, 1993present
- Functional chief financial officer, Commonwealth of Massachusetts, 19911993
- Founder, MediVision, 1984; grew company to $50 million, then sold it, 1989
- Consultant, Bain & Co., 19791984; launched Bain Capital, 19841990
- Produced jazz and blues albums, 1970s
"It's more painful to sell a business," Kriss says, "than to start one."
Also read Creators of the New Economy, Part One by Tom Richman. "A new group of people is emerging out of the swelling entrepreneurial mainstream: genuinely professional entrepreneurs..."