What makes entrepreneurs different?

A new study suggests entrepreneurs think about business problems in a different way to corporate execs...

Last Updated: 31 Aug 2010

Professor Stuart Read, an academic at Swiss business school IMD, has spent the last six years comparing the business approach of serial entrepreneurs with that of seasoned corporate types and MBA-level novices. And he’s found some interesting differences: entrepreneurs take a longer term approach, are quicker to embrace uncertainty, keep a better handle on costs – but often won’t hang around to turn their enterprise into a big business. And they’re probably not so good at working photocopiers.

It clearly makes sense for entrepreneurs and corporate types to understand each other better. Most small companies are desperate to become big companies (or at least be bought by one), while big companies tend to be obsessed with rediscovering the entrepreneurial zeal they had when they were small companies. Read’s argument is that if each can get a better understanding of how the other makes decisions, it will be easier for them to meet half-way – and for organisations to get the best of both worlds.

Read’s research project asked the three groups to create an imaginary business, and compared their approach. His conclusion was that entrepreneurs are not psychologically or demographically different to the rest of us; instead, their experience has taught them to approach problems in a different way, and this can be seen in their decision-making.

The first thing he noticed was that the entrepreneurs took a much longer term view. It wasn’t necessarily that they knew exactly where they wanted to end up and planned accordingly; it was more that they set an ambitious target for growth, regardless of how it was eventually achieved. By contrast, the corporate lot worked on a monthly or quarterly time horizon, while the feckless MBA types were even shorter term.

Attitudes to market research also differed markedly. The corporates and MBAs were very keen on it, and used it to justify their business plans; but the entrepreneurs largely ignored it altogether, working on the basis that sales would tell them everything they needed to know: if it sold, the product was right; if not, it was time to think again. ‘Suck it and see’ rather than ‘analysis paralysis’, they’d presumably argue.

Entrepreneurs were also much more cost-conscious, nor surprisingly, whereas their corporate counterparts were much more willing to throw budget at things with uncertain outcomes (which might be a profitable approach in some cases, of course). And the groups also took a very different approach to other companies in the sector: corporates were primarily worried about competition, while entrepreneurs were much more interested in potential partnerships. Very collaborative.

Whether this will help corporates attract and retain enterprising types is debatable. The entrepreneurs admitted themselves that their instinct was to leave once the company became too big (‘head for the door when ID badges show up’, as one neatly put it), while there doesn’t seem to be much useful advice in here if they want to know more about running a big business.  But at least this kind of study might promote a bit more peace, love and harmony between the two groups...

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