An age old question, this is.
We have all read the stories where the son of the Scion goes on to trump the father in business achievement. Think of Kerry Packer and the achievements of the “idiot son” in surpassing father Frank in business dimensions. Born or created?
Think of Rupert Murdoch and how he built a global news empire on the back of inheriting a provincial newspaper based in Adelaide, left to him at a young age after the premature death of his father. Born or created?
Think of penniless immigrant Richard Pratt coming to Australia. Over 50 years he built a packaging empire on the back of hard work and sacrifice. Born or created?
Or is there an aura of circumstance involved? Luck even?
Beneath the headlines, romantic fantasy and urban myths are often trotted out to explain such results. Populist authors and pundits reach for convenient explanations.
Attributional bias
They say “winners write the history books”. Thus, the bias exists that every success story will hold an indelible truth. Yet the academic and anecdotal research suggests multiple underlying causes for entrepreneurial success.
Consider this: entrepreneurship born of necessity, as distinct from opportunity seeking. The conventional wisdom is that business success stories emanate from opportunity seeking entirely. The Global Entrepreneurship Monitor, a global study covering 42 countries including Australia, reports that businesses founded to pursue opportunity are seven times more frequent in number than those founded out of necessity. There also appears to be a strong correlation with age, with opportunity seeking business formation reducing with age.
Yet the fact remains: out of every one hundred new businesses founded today, in ten years time only three will still be open for business.
Skill versus Passion
Much has been written of the sources for entrepreneurial advantage, be they personality characteristics, family connections or learnt skills.
At the Centre for Innovation & Entrepreneurship, our initial premise begins with a view that passion often drives opportunity seeking, yet skills form a foundation to maintain operational integrity and minimise risk. And it is such skills to quickly re-assess business situations with new information that distinguish serial entrepreneurs from others.
It is precisely this risk profile that is frequently misunderstood by observers. The popular mythology has it that entrepreneurs are risk-seeking. Yet observational research suggests that successful entrepreneurs are in fact risk-averse agents of opportunity. They intensely manage risk to maintain exposures to levels that can be tolerated and to kill off poorly performing ideas earlier than others. Decisiveness is the key.
Hence skills development is an important contributor to routine management capability, while aptitude appears to drive decision making, commitment and team building at those inflexion points. In other words, passion leads to decisive strategic action, while skills can keep the train on the rails.
‘Timely’ matters more than ‘perfect’
Yet humans are still creatures of the animal kingdom, and emotion plays a considerable part at critical decision points. Research has repeatedly shown that timely decisions based on less information frequently generate equal or better results than delayed but more fully analysed decision making. This probably reflects our instinctive learning capability and our adaptive skills to transpose one set of circumstances (known) over another situation (unknown), and, in effect, make good “educated guesses”.
Another fascinating fact: humans frequently over-estimate the pain of a possible mistake — and then under-estimate the ability and time needed to correct that same mistake. This leads to dwelling on failures and hesitancy in commitments. Not a great entrepreneurial strategy!
No doubt emotional intelligence — or the lack thereof — has been a contributor to otherwise good businesses coming unglued. Think One-Tel and its expansion into building a multi-billion dollar telecoms network on the back of initial success as a re-selling operation. Hubris can have a poisonous affect on the entrepreneur’s ability to process contradictory information running against the grain of their accepted wisdom.
Mentoring and modelling of behaviours have been shown to strongly influence on coping skills for leaders. The CIE devotes considerable effort to provide quality time to network and learn informally from practitioners.
As a pilot trains heavily in a simulated environment, so might we train entrepreneurs through experiential learning and deep interaction with serial entrepreneurs.
Consider this, and decide to decide on at least one pending item in your inbox — today.
Having spent his early career at big corporations such as AT&T, Telstra and Motorola, Chicago-bred Christopher Witt is now doing his bit to help bridge the commercialisation gap as Director of the Centre for Innovation & Entrepreneurship at the Australian School of Business. He also puts his wisdom to good use at his investment practice, The Kalori Group.
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