Redefining Entrepreneurship — 4 Common Myths Debunked
In the end, it comes down to what we teach — how to become an entrepreneur or how to develop an entrepreneurial mindset. – Article on Huffington Post
The Dallas Entrepreneur Center (DEC)
New Book: Launching a Biz: The First 100 Days
New Book by Bruce Barringer, Oklahoma State University Entrepreneurship Department Chair. “Launching a Biz: The First 100 Days” Selected Editor’s Pick
Entrepreneur vs. New Venture Creator?
I attended the Austin Technology Council CEO Summit several weeks ago and observed that there were strong feelings about some of the presenters’ positions among the attendees. Statements like ‘we focus too much on lifestyle startups and not enough on worldchanging ideas’, ‘we need exponential growth businesses’ and finally, the one that got the strongest reaction from many in the crowd, ‘there’s not a shortage of capital, there is a shortage of companies worth funding’ really struck a chord with many attendees and there was much discussion both in support and against these positions during the breaks.
Upon further reflection and conversations with other entrepreneurs at the event I realize that the statements appear true from the lens of venture investors and entrepreneurs looking to create exit-focused endeavors. For those people looking to create exit-worthy businesses these statements ARE correct and lifestyle businesses are likely not the correct focus. Understanding the position and reactions requires an understanding of the different perspectives of ‘entrepreneurship’. I frequently hear entrepreneurs lately describe themselves by how many ‘successful exits’ that they have had rather than by the number of successful businesses that they have built. Entrepreneurship and New Venture Creation are used interchangeably as is appropriate. There remains some confusion among the community about what entrepreneurship means.
According to the authors of one of the top academic textbooks on New Venture Creation, Bruce Barringer and Duane Ireland, there are three types of start-up (new venture) businesses:
Salary-substitute Firms – these firms allow the owners to be their own bosses and to develop and grow their businesses at a level commensurate with the personal lifestyle desired. Salary substitute CAN (and often do) develop into large businesses but they typically are not exit-focused. Many service and local product businesses fit into this category. Digital Marketing firms where the innovation creation is low but innovation deployment is high may be one example of a salary-substitute business.
Lifestyle Firms – these firms conform to the specific interests of their owners passions. An example of this would be a music retail business which grows into a multiple location business and is tied to the passion for music of it’s founder. Lifestyle businesses may be large and even multinational, but they are rarely innovative or designed for an exit. These businesses may be innovative in their specific areas but are not usually driving broad innovation. Some digital media ventures are lifestyle businesses (digital filmmakers, gaming, bands, etc).
Entrepreneurial Firms – these firms bring new products and services to the market and deliver innovation in one or more areas. These firms are developed to create value for their investors and customers and strive to drive growth and scale quickly. Because of the nature of their value offerings they are frequently started with an ‘exit’ in mind, whether that exit is an IPO or M&A activity.
The term Entrepreneur is a derivative of the french words Entre (between) and Prende (to take). It originally applied to the person between the investor and inventor/creator who assembled and integrated the resources necessary to transform the idea/product/service/creative into a a viable business (Barringer, Ireland, 2008). Entrepreneurship is about making ideas into businesses, not just about building businesses to exit (although that is one very popular form of entrepreneurship).
Many startup endeavors today are actually lifestyle businesses or salary substitute businesses. There is nothing wrong with those types of businesses, in fact, our economy is made up of a great number of these types of businesses. You could argue that some of the recent IPOs are lifestyle or salary-substitute businesses that have been dressed up for scale rather than true entrepreneurial ventures.
Where we run into challenges is when there is a disconnect between the investor, entrepreneur, and inventor/creator in terms of the true nature of the business being formed. There is a risk that we have had an inordinate amount of focus and emphasis on venture capital and public market approaches while not paying enough attention to the needs and nurturing of salary substitute and lifestyle businesses as valid forms of entrepreneurship. These businesses provide jobs, services, and local economic expansion. A good mix is necessary to have a healthy economy.
There is an opportunity for all three types of ventures. A healthy business environment has ecosystem, investment sources, and infrastructure to support all three of these types.
Those speakers weren’t wrong at the ATC CEO Summit. They were exactly right – for the type of new ventures that they are interested in. I’m hoping that we can start a dialogue about how to nurture and develop the other types of ventures.
The Funnel and Social Media
I’ve been in several presentations and meetings lately where there has been an inordinate amount of discussion and focus on Conversion and the role of social media and social networking. I’ve heard phrases such as ‘it’s not about content for content’s sake, it’s about content that leads to conversion’ or ‘your goal should be conversion or the attainment of some action from the user that can be interpreted as a conversion’.
Both of these statements, while true to a large extent, oversimplify and marginalize the opportunity with social media for marketers. There are three major components to the funnel (some marketing literature highlights four or five but for simplicity I’ll focus on the major three funnel sections). These are Awareness, Consideration, and Conversion.
Social Media and Social Networking can play a major role in the Awareness part of the funnel. This section is about creating content that is appealing, worth sharing (viral), and has value for the readers/viewers/consumers, whether the value is for laugh and entertainment value, such as the DollarShaveClub.com video or an Infographic on Security from a security vendor. These are general content that are worth sharing and help bring potential customers into the top of the funnel. Measuring this may be as simple as measuring views, clicks, or tracking as a campaign component through Google Analytics.
Consideration is also an important component of the funnel. Creating content specifically for users that have already ‘opted in’ through Facebook Pages, Twitter connections, or other methods allows the marketer to tune the message to a much more focused ‘sales’ message with the intent of deeper interest. This content may be things like offering webinars, whitepapers, or Hangout events on Google. The goal of these would be to move customers into the true conversion phase. Connecting with the users individually at the end of this process is critical to really driving conversion. Tracking things such as the collection of contact information, a request for more information, or a user opt-in for additional contact are all ways of measuring whether the consideration methods are working optimally.
The final phase is the conversion phase and this is the ‘rubber meets the road’ phase. This is the conversion of a prospect to a sale, the conversion of a casual reader to a committed follower, the conversion of a passive user to an active user, etc.
When people talk about focusing on conversion the risk is missing the optimization and opportunity offered by providing content and interacting with the community to drive awareness and encourage consideration.
I have a simple test that I occasionally use to figure out if an executive is a reasonable leader. It’s one that is useful sometimes (organizational situations may make this a difficult test to pass). That test is; do any former employees follow the executive to his/her new company. Now this test is really a single attribute test – it highlights whether employees will follow someone to a different company (hence the ‘leader’ title). It DOESN’T test for the reasons behind the employee moves, quality of the leadership, or the direction of the migration (did the employee follow the leader or did the leader pay the employee to follow).
Regardless, employees following executives to new opportunities is an indicator of leadership and team commitment. I’ve thought about this from time to time as I’ve experienced different executives and have really paid attention to the ones that have teams around them that are willing to move to new roles with the leadership. Why is it that some executives join a firm and people from the old firm send in resumes right away and other executives join a firm and there is no trace of their former employee base anywhere around? I also wonder about companies that hire executives with a track record of bringing people with them to manage existing teams. Sometimes this works well and sometimes it can be an organizational disaster.
My view is that this comes down to two different attributes; leader with broad group interest vs. self-focused leader and team building need vs. existing team leadership need. These are important attributes to understand because they will help illuminate what opportunities and risks new executives may bring to your emerging organization.
In some cases, organizations have teams in place that needs executive management and there is a desire NOT to bring on an executive that has a ‘ready-to-go’ team ready to follow. Bringing on an exec with strong former team loyalties and structures may be inviting massive churn into your organization as the executive brings on ‘their team’ and moves out existing employees.
In other cases, an executive may be needed to build a new capability or organization and an executive that has a rolodex of experienced people willing to follow him/her would speed up the team development and reduce organization ramp time.
Sometimes a team exists with solid performers but there is not the experience, strategic planning/vision capability, industry relationships, or management capacity and a strong executive is needed. In that case, an executive that has a good track record of management but not a ‘ready team’ may be preferred.
Many times executives are hired based on their personal accomplishments rather than the organizational leadership and development skills that they have. It’s important when hiring executives for startups and emerging businesses that consideration is given to the type of leader being hired. It’s important for both the health of the business and for the likely outcome of the executive hire.
Dedoose – providing context to qualitative research
One of the challenges that I have found over the years in my career has been getting technical (read engineering) people to accept and appreciate the value of qualitative research.
In marketing, customer feedback is a critical part of understanding what customers need and value. Whether the feedback is around product features, advertising, customer satisfaction, messaging, or other important customer engagement areas, qualitative research plays a key role.
Technical people by nature tend to gravitate towards quantifiable data. This is why surveys with Likert scales (e.g. 1-5 ratings) or numbers driven research (the volume of units or click data) is frequently favored by more quantitative minded people. Part of this is because qualitative data is, by the very nature of the data, open to interpretation and easy to manipulate. Regardless, while quantitative data provides the measure, qualitative data provides the flavor – it provides the deeper understanding behind the quantitative data.
Because of the challenge of presenting qualitative data to broader audiences, I’ve learned over the years to use several tricks to make this data more palatable. Things like boiling down the data to the ‘Top 10 most common statements” or “This message was consistent among X number of focus group participants”. This works in some cases but it still leaves a lot to be desired.
Enter a fantastic new tool called Dedoose. Dedoose is an online research tool that can be used individual or in teams of researchers. It allows for the management of qualitative data or mixed methods input (both qualitative and quantitative data).
Dedoose provides a structured way to code transcripts from customer interviews, focus group research, email or online responses (think customer service emails as research input!). Based on the coding, the data can be manipulated and presented in ways that make it understandable and broadly usable. Because of the workgroup capabilities, people outside the research team can be given access to the data for their own review and manipulation (dangerous, I know – but at least possible!).
One of the (many) nice things about Dedoose is that it’s easy and fun to use. Our research group had several folks that were not computer or data oriented and they were able to immediately begin using Dedoose and contribute to our project.
Why is this such a powerful approach? It allows marketing teams to conduct research using different methods and use the Dedoose platform to integrate them into usable, actionable data fast and accurately. Spending time defending qualitative findings is non-productive time for marketing folks. Tools that provide better integration, analysis, and presentation of qualitative data are invaluable in getting to the answer more quickly and getting organizational understanding more quickly.
I have no direct relationship with Dedoose other than as a subscriber. I’m using it in some of my academic research and it’s one of the new tools that I’ve come across that I believe provide real value for marketeers.
Tableau Software – a great tool for Data Visualization and Analytics for Startups
There is a great deal of discussion about the value of analytics and big data management in the technology industry today. Deloitte’s Center for the Edge has research called ‘The Big Shift’ that has looked at the changing world of global business. Among the research findings are points that suggest that with increasing globalization, lower barriers to entry, and the speed of communications, companies that can collect information, assess it, and act on it quicker than the competition may have some fundamental advantages in the marketplace.
On the other hand, some believe that information analysis is an important way to optimize a business but not as important in the early stage invention mode (I don’t agree with this at all). In his blog posting on KillerStartups, Bo Fishback, the CEO of Zaarly and previously the vice president of entrepreneurship for the Ewing Marion Kauffman Foundation, states that user testing and input trumps data at the early stage of the business.
My view is that information and data is only useful if it can help provide insights. Insights into both what customers/prospects want (for finding gaps and opportunities), what customers/prospects do (for optimizing), and what patterns are not obvious from raw data (for both finding gaps AND optimizing) are very important and can be the difference between leading and losing.
One of the challenges that I’ve run into is that analytics conjures up visions of statistics and complex mathematical equations. Both math and statistics are important to analytics but, with a well developed tool, those should be behind the scenes running the tool, not a required input into using the tool. A good data analytics tool should allow anyone on a startup team to be able to use it, it shouldn’t require a math major to be able to use it.
In my area of interest and research I come across a number of sites, services, and tools that may be interesting for startups. One of them is Tableau Software. Tableau is a Data Visualization tool that allows users to easily connect to datasets. From very simple flat data files (.csv, .xls, .txt) to very complex SQL data structures (Hadoop, SQL Server, Oracle, etc). Tableau can analyze data while the data stays in the repository or the data can be imported into Tableau for offline processing.
The main user interface for the user and the data is through a graphical management panel. Based on the data labels selected, different visual representations are automatically presented to the user to select. These visual representations are active graphs that allow for deeper understanding of the underlying data for the different objects. Things like mapping data to geographic map representations are quick and easy.
Why is Tableau interesting? Four main reasons; 1) it has a graphical interface that is ridiculously simple to use (easier than Excel for graph generation!), 2) it comes with a long library of data connectors and linking multiple databases is handled by Tableau – no complex SQL code to write, 3) it is fast and intuitive, this tool is appropriate for use across the organization, from a fresh marketing staffer to an experienced data analytics expert. and finally, 4) the price – it’s not expensive! (don’t tell them).
I was introduced to this tool during a Ph.D. course at Oklahoma State University where we are using it for some data mining. I’ve now used it extensively for other business analysis work and I’ve found that it has both saved time and provided useful insights by visually representing and allowing the manipulation of the visualization.
Tableau has a download of the tool available for trial.
Organizational Justice and the Application for Managers
Last term in the Ph.D. program at Oklahoma State University we spent an amazing day with Dr. Deborah Rupp, the William C. Byham Chair of Industrial/Organizational Psychology at Purdue University. Dr. Rupp is a researcher and expert in the area of Organizational Justice. If you look at her Curriculum Vitae online it is amazing the body of work that she has already produced.
When we read some of the academic papers around her area of expertise the title of ‘Organizational Justice’ really threw me. Slightly switching the words to ‘Organizational Fairness’ helps clarify a little but still not obvious. What Organizational Justice research addresses is the area around fairness in the workplace, organizational ethics, and high performance work systems.
What was most interesting about the readings and her area of research is that it provides a framework that any manager could (should?) use in processing and communicating decisions that may have an impact on organizational emotions, morale, and/or commitment levels. Internally these are decisions such as organization changes, promotions, raises, project assignments, etc. Externally these are decisions such as partnership choices or business interactions.
Using the framework may provide two benefits; 1) it allows the manager to ensure that the decision is appropriate and fair before the decision is communicated, and 2) it clarifies for all parties affected the critical contributors to the decision. In short, it’s a way to ensure that tough, potentially challenging decisions are fairly made and communicated.
So, what is the framework? It’s made up of three specific components. For the sake of translating this to business application I have generalized the descriptions – more detail and the empirical data that supports these three are available for anyone that wants to churn through the academic articles:
1) Distributive Justice – is the decision appropriate and fair regarding the decisions’ outcomes and distribution of resources? The outcomes or resources may be tangible (e.g., promotions, pay) as well as intangible (e.g., social recognition, praise). A manager needs to step back and ask, “will the organization view this as a fair decision”.
2) Procedural Justice – Was the process used to make the decision fair? In order for decisions to be accepted as fairly arrived at it is critical to ensure that the decision followed a process that the organization (internal or external) perceive as ‘fair’. In many cases this may mean taking additional steps that the manager may think are unnecessary but may be critical to ensuring a fair process. For example, soliciting additional feedback on a potential promotion may be seen as unnecessary but may provide further evidence of the appropriateness (or inappropriateness) of the decision.
3) Interactional Justice – Was the decision communicated fairly and with respect for all parties? This component is made up of two key areas which are related; interpersonal fairness and informational fairness. To be precise, Interactional Justice states that decisions must take into account the interpersonal response and must be communicated in a way that is fair and clear. For example, communicating a potential promotion to part of a team would NOT be seen as fair – from both an interpersonal standpoint (those not in consideration will be upset) and an informational standpoint (those not in ‘the know’ will be upset). Ensuring that decisions are communicated with an intent to be fair and sensitive to the personal impacts to individuals may positively impact the organizational perception of fairness.
This framework provides an excellent tool for thinking through decisions that may impact the perception of fairness of a decision. It may also provide a checklist to ensure that decisions that have difficult potential outcomes are well thought out.
Dr. Rupp’s work is incredibly important for managers and executives. Many managers are able to make good decisions but may not be good at communicating and implementing them. How many times are ‘correct’ decisions negatively impacted by poor implementation or communication of the decisions? Her work provides useful, implementable concepts that should improve decision implementation in organizations.
Rupp, D.E., Baldwin, A., & Bashshur, M (2006). Using developmental assessment centers to foster workplace fairness. The Psychologist Manager Journal, 9(2), 145-170
Rupp, D.E. (2010). An employee-centered model of organizational justice and social responsibility. Organizational Psychology Review, 1(1) 72-94