Inc. editor-in-chief George Gendron and Amar BhidÉ, author of The Origin and Evolution of New Businesses, discuss BhidÉ's surprising conclusions about risk taking, bootstrapping, and successful start-ups.
Face to Face
Finally, an answer to the question, What's the secret of start-up success?
I can't even begin to calculate how often people who are thinking about starting new businesses have asked me to name the one book that illuminates, more than any other, what it's essential to understand in order to create a successful start-up. For close to 20 years now, I've had to answer that there is no such animal. Don't get me wrong -- there are lots of perfectly acceptable books about almost every imaginable aspect of starting and running a new venture, from writing a business plan to raising capital. The limitation of such books is that, important though those tasks may be, you can get them right and still fall flat on your entrepreneurial face.
This is no 60-Second Entrepreneur. The book is a demanding read and is based on research BhidÉ conducted over a 10-year period at the Harvard Business School, research that sheds light on the mother of all entrepreneurial questions: What differentiates a successful start-up from the masses of new businesses that are created every year? During a series of interviews, BhidÉ and I talked about that subject and discussed topics as diverse as his contention that risk taking is irrelevant to early-stage company building, and the implications of young Internet companies' skipping a crucial stage of entrepreneurial development. --George Gendron
Inc.: So many of your findings challenge conventional wisdom about entrepreneurial success. I'm curious: What has surprised you the most?
BhidÉ: I grew up with an entrepreneur. My father started a series of businesses and eventually built a fairly significant glass-related business. He was adventuresome, to use that old-fashioned word. The way he started his companies was ad hoc and improvised and not planned and not systematic. I had attributed his behavior to his own eccentricity. So I was very surprised at the extent to which the way he built his businesses was the same as was true of the founders of Inc. 500 companies. I was even more surprised that the improvisation was the natural, logical outcome of the sorts of opportunities that those individuals pursued, of the capital constraints that they faced, and of their relative lack of human capital. And that it all made sense.
Inc.: So much of your research focuses on the difference between ordinary start-ups and those gazelles, or "promising companies," that go on to achieve significant levels of success. Could you give us an overview of how successful companies get started?
BhidÉ: Here it is in summary: Most successful entrepreneurs start without a proprietary idea, without exceptional training and qualifications, and without significant amounts of capital. And they start their businesses in uncertain market niches.
Inc.: What you're saying is, it's not the exceptional start-up that has those characteristics but most growth companies, right?
Inc.: Well, then, let's start with the notion of no proprietary idea, no novel product or service to offer, which will come as a surprise to many people. How do these promising businesses get started?
BhidÉ: Most are started by someone who is working for another business, who sees a small niche opportunity -- one in which the company he or she is working for is already taking advantage of, or one in which a supplier or customer is involved. And the person jumps in with very little preparation and analysis but with direct firsthand knowledge of the profitability of that opportunity -- and pretty much does what somebody else is already doing, but does it better and faster. These entrepreneurs don't have anything that differentiates their business from other businesses in terms of technology or in terms of a concept. They just work harder, hustle for customers, and know that the opportunity may not last for more than six or eight months. But they expect to make a reasonable return on those six to eight months. And along the way they'll figure out something else that will keep the business going.
Inc.: The idea that you build a company around novelty -- around a unique proprietary idea -- is very ingrained in our culture.