According to a recent study from Bank of America and Babson College's Center for Women's Entrepreneurial Leadership, too often those who control key resources that women-led startups need-- such as capital and access to networks --are biased against them. The good news is that women entrepreneurs are overcoming the resulting challenges through seven "actionable strategies."
Before getting into the details, let's explore the concept of confirmation bias -- a mental process that embraces information that reinforces what a person believes while dismissing data that challenges those beliefs. Social groups create and reinforce these beliefs by giving positive reinforcement to members who think, talk and act according to those beliefs.
Confirmation bias plays an important role in the study, which is based on in-depth interviews with 30 women business owners of companies with at least $5 million in revenue. The study found that women must overcome three biases in their efforts to keep growing:
- Market misperceptions: People who control capital and access to mentor networks routinely disregard women entrepreneurs' competency and market knowledge;
- Network exclusion: These resource providers limit women entrepreneurs' access to gender-based social and business networks that could provide capital and mentoring; and
- Managing expansion while underfunded: Lack of access to capital makes it more difficult for women entrepreneurs to recruit talent and tap into growth opportunities.
Why did the research not interview more entrepreneurs? According to principal researcher, Lakshmi Balachandra, the 30 women sample met the study's objectives of diversity by geography, demography, and industry to examine "recruitment effort of many parties' networks." Balachandra is planning to do quantitative based survey research with a large sample to expand on these initial findings.
Sadly, she suggested that confirmation bias in the minds of those who control capital and access to mentor networks makes it difficult to change their misperceptions of women entrepreneurs. As Balachandra -- who earned her MBA at MIT's Sloan School -- explained, "[At MIT] we had successful entrepreneurs come speak to our seminar every week; 12 weeks of class, not one woman. The 2019 Forbes Most Innovative list is another example of how this [bias] keeps getting...confirmed: [there was] only one woman on the entire list 'based on research' by two men who published it. So we are still in the same cycle."
While her research does not evaluate the effectiveness of each, she is proud that it highlights seven actionable strategies which include:
- Explore various capital alternatives. Including forms of debt to supplement venture capital;
- Build for the long term. By not taking venture capital, women entrepreneurs "averted [VCs'] expectations for rapid, possibly unrealistic, growth. Notably, this allowed their businesses to grow more organically and, therefore, more sustainably," the study said.
- Develop a sustainable and talented workforce. While straining short-term profitability, many women entrepreneurs invest in people and the company's culture because in the long term it can build a strong workforce that may generate multiple returns.
- Buy from and fund women-owned businesses. Women should consider supporting the vision of other women entrepreneurs with capital, the study suggests.
- Be a mentor, seek a mentor. Mentoring can include informal coffee meetings, taking a woman entrepreneur to your business meeting, and showcasing women entrepreneurs at industry events by offering them keynote speaking opportunities and participation on panels.
- Join or create new networks. Since so many industries are traditionally male-dominated, women entrepreneurs create and join organizations that connect and promote women-owned businesses.
- Capitalize on personal insights and experiences. Women have "significant purchasing power" and women entrepreneurs "have an opportunity to leverage their personal experiences [to] understand the market, communicate their value proposition, and form partnerships with other women-focused ventures to reach their target clients," the study detailed.
I encourage students in my entrepreneurship class to understand two ways of thinking and acting-- predictive and creative logic. Predictive logic is the idea that knowledge of the past can provide the basis for useful predictions about the future on which the leader can take action to achieve business goals. Creative logic should find ways around the obstacles that make it difficult for entrepreneurs to achieve their goals. They could do that by adding new people to their team and/or by choosing new goals and crafting new strategies to achieve them.
These seven actionable strategies demonstrate the particular power of creative logic to help women entrepreneurs overcome the challenges they face due to confirmation bias in the minds of those who control resources they need. Use the ones most likely to help your venture.