Entrepreneurs and Start-ups
What is an Entrepreneur?
When you think about an entrepreneur, you are probably imagining a single person running a makeshift company from the back of a small garage with (or without) their mother making frequent tea runs. With a little bit of success, this entrepreneur will almost certainly pack their bags and head for sunny San Francisco where they will share ideas and grow alongside other successful entrepreneurs.
I can tell you now that this is a mythical scenario and far removed from the many aspiring and successful entrepreneurs across the world. Believe it or not, you might already be an entrepreneur and not realise it. So, what exactly is an entrepreneur and where can you find them?
Entrepreneurs are Visionaries
Entrepreneurs seek out new and innovative solutions to tackle problems within their industry. They have the ability to see the future direction of their industry and are often prepared to take bold risks to realise their vision. Entrepreneurs are everywhere. They exist both within and outside of established organisations. This means you might already be an entrepreneur while working within the NHS. You don’t have to be relegated to your garage!
What is a Start-up?
A start-up is an institution which operates under the conditions of extreme uncertainty. It is a human enterprise with the goal of achieving the entrepreneur’s vision to provide solutions (a product or service) to a pre-existing problem. The size of the company is irrelevant. This means a start-up can be both a small company run from your living room or an experimental team working within a larger organisation. The start-up structure leaves the enterprise well suited to confront and work within the environment of extreme uncertainty. This is an advantage that larger established organisational structures struggle to achieve.
The Benefits of Being an Entrepreneur
Sounds interesting right? But why would anyone become an entrepreneur when they already have a predictable work routine and/or a steady income from their salaried job? There are two short answers: freedom and value.
They are free to make their own decisions and choose their own path through the early days of uncertainty (and beyond). They hold all the responsibility for their decisions and will seek to earn an income (for themselves or their employer) through their ability to make or sell something of value.
Value is created when someone makes something useful to another person and shares it with the world. The goal of a start-up is to build something that other people will value enough to pay for it.
Different Entrepreneur Settings
The Microbusiness Revolution
If you chose to go solo and start your own business, you are part of the microbusiness revolution. As with all new businesses, yours will be operating within uncertain conditions (i.e. you have unanswered questions: who are your customers, will there be demand for your product, how much will you earn). Thus, your business is a start-up! Once a start-up achieves a steady supply of income, the entrepreneur is then free to utilise that income in any way they see fit. This includes growing their company in a direction that suits their needs and interests or working less to spend more time with those important to them. In other words, your income is no longer tied into working for someone else and you are free to tailor your working life to suit your own personal requirements. Success in this scenario could therefore be defined as a way to earn a good living while crafting a life of independence and purpose.
Entrepreneur Within an Organisation
If you already work within an organisation but have been given a freehand to experiment and explore with new products, you are an entrepreneur too! In this scenario it is likely you are working within an innovation team. Here you will have a steady income, but you and your team will work outside the normal functioning of the main organisation.
Innovation teams which operate within an “Innovation Sandbox” are separated from the wider organisation. This enables them to operate freely while exploring the impact their ideas and assumptions have. Initially the sandbox will be small with a limited number of webpages, customer segments or shops affected. As the team builds, markets and deploys new products, the sandbox will grow to provide more value for customers.
These innovation teams are structured differently to their parent organisation in order to succeed. While senior management is often supportive, they must remain distant from the team itself. There are three necessary attributes for such a team: First, they must have scarce but secure resources which are free from the threat of budget cuts. However, the budget should not be so large that they can carelessly spend money. Second, they must be independent from senior management and have complete autonomy to develop and market new products within the scope of their role. Waiting for approvals to experiment with new ideas serves only to slow down the learning cycle and reduce innovation. Finally, employees within the innovation team must have a personal stake. This could be financial, or it could be a sense of ownership or recognition.
Innovation teams consist of employees from each department in the parent company. They work together on the same project for the duration of the sandbox’s life. This leads to quick learning through rapid iteration and continued experimentation. As the innovation team demonstrates success, they will reach a point where their product is successful, and the sandbox becomes integrated with the overall company. This occurs once a new and sustainable source of growth has been found and they no longer need to operate within an environment of extreme uncertainty.
Harness your Passions
The eventual aim of an entrepreneur is to get paid to do what they love by connecting other people with want they need. Consider the skills you have and how they could be helpful to other people. You don’t even have to use your skill in the exact same way, but it could be transferred onto another use, or you might even develop a related skill set. Without too much effort your various skills could combine to achieve something greater than their sum and provide value to your prospective customer. Therefore, it should be no surprise that you already have the skills you need to become an entrepreneur!
“A feeling of strong or extravagant fondness, enthusiasm or desire for anything”.
Passions are often supported by a skill. For example, you might be passionate about playing the piano. While you might not be able to be paid for simply playing the piano, you might be able to earn an income from helping other people learn to play the piano. This leads to the most important rule for harnessing your passion: convergence.
Convergence is the intersection between something you like to do/are good at (preferably both) and what other people are interested in. Not everything you are passionate about or skilled in is marketable or of interest to the rest of the world. Use convergence as a guiding light and you will be bound by the need to continually focus on how your project can help other people and why they will care about what you are offering in the first place.
In simple terms, you get paid for helping people, either by directly pursuing the hobby or by indirectly pursing something related to it. You need to identify and utilise your skills in order to provide a solution to a problem. Once you have found the right product or service, then you need to match it with the right group of people. Only when passion merges with a skill that other people value can you truly earn an income.
A few caveats: not every passion makes a good business, and many people will want to keep their businesses and hobbies distinct to achieve a level of work-life balance. It is easier to do what you love and get paid for it. You just have to find the right passion, the right audience and the right business model.
Why do Entrepreneurs Fail?
In the movies and on the news, you will hear countless stories of successful start-ups. It is easy to believe this is the norm. The reality is somewhat different. In fact, most start-ups will fail. Selection bias leads us only to see the successes and to forget the failures. Why am I telling you this? Because it is important to realise that hard work and perseverance don’t lead to success. Many start-ups fail because they don’t know what their product is, or they don’t know who their customers are. The usual planning and forecasting tools used by established businesses will not work within the uncertain start-up environment.
Fortunately, success can be engineered. Learn more about how you can provide your start-up with the best chance to succeed. Read our other articles and learn how to apply a scientific approach to your decision making, how to focus on what your customers want and the importance of fast learning cycle.
- The Lean Startup; Eric Ries
- The $100 Startup; Chris Guillebeau