“Entrepreneurial Thinking” is a phrase we hear everywhere from the entrepreneurship conferences we attend, to developments in children’s education. Entrepreneurial thinking is the new creative thinking. But what does it mean?
Over the past decade there has been a great influx of emerging research on what constitutes entrepreneurial thinking and what entrepreneurs have in common when it comes to the way they operate and make decisions.
Among the literature on entrepreneurial thinking, many things remain consistent. In this post, we will review a few popular insights on entrepreneurial thought and draw parameters around what they have in common. We will consider research from: Amy Wilkinson, author of The Creator’s Code: 6 Essential Skills of Extraordinary Entrepreneurs; Saras Sarasvathy, a professor at the University of Virginia focused on the field of entrepreneurial thinking; Jason DeMers, a contributor for Inc. Magazine. Observing the similarities in all of their work helps us understand a clearer consensus in defining “entrepreneurial thinking.”
1. Ask Questions.
When Amy Wilkinson visited the Kauffman Foundation last month she mused that 5 year olds ask an average of 100 questions every day, and wondered how entrepreneurs might compare. Wilkinson writes that entrepreneurs need to remain curious to “find the gap” – the area in the market where they have an opportunity to enter as a business.
Sarasvathy writes that entrepreneurs operate in such a way that they allow discovery of their goals over time, rather than beginning with the perfect end in mind. As she puts it, thinking entrepreneurially leads to “the ability to turn the unexpected into the profitable.” Curiosity is the channel for this type of creative, entrepreneurial thinking.
Photo courtesy walknboston via Flikr http://goo.gl/N0VqAe
Entrepreneurs are excellent at improvisation. Whether it is coming up with an original innovative idea, navigating the start-up period, or orienting to emerging competition, entrepreneurs have a sense for rolling with the punches. Saras Sarasvathy compares entrepreneurs to Iron Chefs—they have the ingredients (their skills), but no menu (business). As entrepreneurs put their ingredients together, they create something new and different than others in the same industry.
“Effectual Reasoning” is the main theory Sarvasvathy touts. Where causal reasoning has a clear road map of what can cause the imagined end, effectual reasoning begins with means and allows clarity, even goals, to arise over time through imagination and spontaneity.
3. Be Open to Risk.
Amy Wilkinson writes that entrepreneurs fly the “OODA Loop,” meaning, “Observe, Orient, Decide, Act.” Entrepreneurs are in constant motion, pushing forward despite the environment surrounding them. In an ongoing hectic environment, risk is part of the day-to-day, and thinking in such a way that expects risk helps entrepreneurs respond better to risk.
Sarasvathy references an entrepreneur who goes by the motto “Ready-Fire-Aim.” Entrepreneurs must have a high tolerance for risk; they even need to be willing to act before the goal which they are acting toward is clear. While economists think in terms of cost-benefit analysis, or opportunity costs, entrepreneurs accept that they will often be on the losing side of those models, and push forward anyway to create something new.
4. Be Ready to Fail.
All of these researchers note that not only do entrepreneurs accept failure, they expect failure, plan for failure, and learn from failure. DeMers writes that perfection is the enemy of entrepreneurs because there is simply no time for perfection, and entrepreneurs view challenges as opportunities to reorient and adapt: “Making mistakes is healthy and normal, […] Acknowledge your mistakes, figure out what you can do to make up for them, and move on.”
Wilkinson writes that entrepreneurs incorporate a “failure ratio” into their thinking. She finds that many successful entrepreneurs set a ratio ahead of time for how much failure is acceptable before beginning their next venture. This changes according to each entrepreneur, and she writes that “For venture capitalists who fund creators of new companies, failure ratios can surpass 70 percent.”
5. Don’t Go It Alone.
Entrepreneurs are not an island. They do not work alone. Whether it’s business partners, investors, networking, or competition, successful entrepreneurs are never alone. DeMers writes about the importance of looking for new, outside perspectives and remaining open to opportunities that can challenge the way entrepreneurs think and work.
Sarasvathy notes that strategic partnerships are key. Rather than avoiding the competition, entrepreneurs look for partnerships within their industry early on, as “obtaining pre-commitments from key stakeholders helps reduce uncertainty in the early stages of creating an enterprise.”
Wilkinson’s book notes that successful groups are especially adept at leveraging cognitive diversity. A variety of perspectives leads to innovative thinking in entrepreneurially decision-making.
6. Be Self-Driven.
Successful entrepreneurs seek a lifestyle which allows them to be their own boss, set their own schedule, and be accountable to themselves. They also share in common a sense of self-driven discipline, ready to work and put in the hours each day. DeMers writes that "[Discipline] is a prerequisite into all aspects of their lives."
Wilkinson compares entrepreneurship to racing a car—always looking forward, always gripping the controls, following the momentum. Despite challenges and pitfalls that come in the way of an entrepreneur, they must continue moving forward, reliant on themselves.
It is easy to see how “Entrepreneurial Thinking” would be attractive to build into our daily lives, whether or not we are entrepreneurs. In future post I will explore whether these traits are born or learned. Whether innate or developed, perhaps learning more about the way entrepreneurs think, we can all learn to think in a way that is more creative, open-minded, and collaborative.
Alternative Theories for Rising College Tuition: Baumol’s Cost Disease and Bowen’s Rule
3 Emerging Trends in the Accelerator Model
Get our best content, straight to your email inbox.