Fall Registration is here and as you plan your schedule for next year, you might be trying to decide if a NUvention startup course or class on technical entrepreneurship is right for you. Professor Verinder Syal is here to help by clearing up five common misconceptions about entrepreneurship below. Be sure to also read Professor Werwath’s proposal for the natural fit between entrepreneurship and engineering and learn about a former NUvention group that found success in a national competition.
1. Entrepreneurship is a win-all, lose-all gamble on a completely new product.
The standard perception of an entrepreneur is a person who has an epiphany, starts a business, hocks all his savings (and perhaps those of his family and friends), rolls the dice, and hits a grand slam or strikes out.
In reality, nothing could be further from the truth.
Entrepreneurship is a process. It can be learned. And practice makes perfect. In his classic book Innovation and Entrepreneurship, Peter Drucker defines entrepreneurship as follows: “It is the act that endows resources with a new capacity to create wealth.” In other words, entrepreneurship is NOT a science or an art but uses innovations as the key means to create value.
Drucker adds that entrepreneurs are a small minority of businessmen because most businesses do not add any new value. Think about it: Hamburgers had been sold for a few millennia (give or take) but it was Ray Kroch, the entrepreneur, who brought new value to McDonald’s by standardizing the product, production, and service. He endowed the same resources—meat, potatoes, and bread—with considerable wealth-generating capacity.
Walmart revolutionized retail by developing what we now call “supply chain.” Amazon destroyed bookshops; Apple is making the music industry obsolete (and perhaps the movie industry distribution business as well). Skype has demolished long distance telephone monopolies, while Grameen brought microfinance and economic growth to the poor in Bangladesh. Each company took an already well-established market and simply made it better. Which leads to our next point.
2. Ideas must come from a sudden spark of inspiration.
No, you don’t have to howl at the moon or wait for a bolt of lightning to strike you with a grand idea. You do not have to be kissed by the muse or mutated by the right genetic code. But if the muse down not speak to us, where do the ideas come from?
Peter Drucker developed seven sources.
- The Unexpected
- Process Need
- Industry/Market Structure
- New Knowledge
The number one source is “the unexpected” which can mean both unexpected successes and failures. Drucker provides many example in his book. A more recent one: could anyone have imagined that an idea developed to rate girls by a fellow who had a hard time getting a date would result in Facebook? Demographics come in at number five and new knowledge comes in last at number seven, mainly because it takes so long to convert new ideas into feasible businesses. The most prolific creative force known to mankind has been Leonardo da Vinci and several of his ideas took centuries to come to fruition.
When evaluating your new idea, turn to Rachel Bridge’s suggestions In her book My Big Idea. She suggests that a good idea should:
- solve a problem
- be practical and easily scalable
- have a market/customer of a big enough size
- have a reasonable price and offer a competitive opportunity cost
- create an immediate relationship with the customer
Entrepreneurs may not need to be struck by sudden inspiration but they do need to observe the world around them: solve problems, create new value, and have the courage of strong convictions. Entrepreneurs combine passion with common sense. They look outward and serve the customer. They use a business model based on common sense to solve problems and work with people who share the same values. Look around you. Problems exist everywhere. The next time you see a problem, don’t get upset; rather, think of a solution. Now you are on your way to becoming an entrepreneur.
3. Most successful entrepreneurs open tech companies in Silicon Valley.
A common misconception is that entrepreneurship is limited to technology companies like those based in Silicon Valley, but this is a mistake. Silicon Valley has glamour and can appear to be the land of dreams, but the odds of making it there are similar to winning the lottery.In other words, miniscule. It makes for good theater, but is more akin to tulip manias than sustainable value creation. A recent article from Trends magazine states that “. . . the number of startups (today) valued at $1 billion exceeds the number during the height of the dot-com bubble in the late 1990s . . . . Of the private U.S. companies that were valued at $1 billion or more back in 1999 and 2000, only a few are still in existence. Most have lost much of their value while many have disappeared.”
Taking a step back from the buzz and excitement around Silicon Valley allows one to see just how many other entrepreneurial opportunities exist in the world. To help my students understand the breadth of possibilities, I have them read Rachel Bridges’ My Big Idea, which highlights 30 small entrepreneurial ventures across almost every industry in the UK. To dispel the Silicon Valley myth, my friend and entrepreneur Robert Jordan researched over 45 entrepreneurs from technology and no-technology companies in the Midwest who had created $41 billion of value. Based on their stories he wrote How They Did It, a book I highly recommend.
I don’t want to minimize the great benefits created by Silicon Valley companies—they have generated enormous value and in many cases changed the way we live—but I do want to emphasize the fact that there are many ways to create value in virtually every industry and in every country. By all means, create a technology company if that is your passion, but using technology as a driver may open up even more opportunities.
4. Entrepreneurs and innovative companies destroy existing companies while only creating a few new jobs.
In a recent Wall Street Journal article, Andy Kessler passionately explains how entrepreneurs, following Schumpeter’s dictum of creative destruction and create many new jobs even as they destroy existing businesses. “Apple employs just 47,000 people, and Google under 25,000. Like Staples, they have destroyed many old jobs . . . But by lowering the cost of doing business they’ve enabled innumerable entrepreneurs to start new businesses and employ hundreds of thousands, even millions, of workers world-wide—all while capital gets redeployed more effectively.”
5. Entrepreneurs must be able to do everything themselves.
In just about every venture you pursue, you will have a team. You do not need to do and learn everything yourself. Instead, consider a strengths-based leadership approach and develop the skills more necessary to your position. Here are five tips that will help you:
- Passion. You will need a lot of it to overcome your fears, doubts, neigh Sayers, and the inevitable setbacks.
- Perseverance. You have to get through it, adapt, go around concrete structures, all while lifting those around you.
- Emotional Quotient (EQ). Dealing with people is the key to success, be it working and motivating your team, connecting with potential customers, or raising capital. Most people approach others with a transactional attitude (What’s in it for me?); focus on developing relationships instead (How can I help you?). Good karma will come along for the ride.
- Seeing and Seizing Opportunity. This is a mindset wherein problems are converted to opportunities, setbacks to new possibilities, and dreams to realities.
- Discipline. You will need to be very disciplined personally and you will need to run the organization in a disciplined manner. You must have goals and execution, which is what leads to success. Lofty pronouncements will not get you very far.
When I ask my students about the skills necessary to become an entrepreneur, they come up with some very thoughtful answers: passion, networking, humility, self-awareness, leadership, team player, confidence, selling skills, optimism. In the end, integrity is the cornerstone of a successful business and a successful life; there is no compromising your integrity. Make sure you choose partners who believe the same.
Verinder Syal is an entrepreneur having started Filterfresh of Chicago and Syal Consult. He also teaches highly regarded classes on Entrepreneurship, and Leadership at Northwestern and guest lectures at Loyola Universities in the Chicagoland area. He has run both large companies and small ones at Quaker Oats, Stella Foods, Rymer Seafood.