What is Entrepreneurship — Learn why managers and inventors (scientists) aren’t entrepreneurs (innovators) and what makes an entrepreneur great!
Have you ever asked yourself —
What is Entrepreneurship?
What makes an entrepreneur entrepreneurial?
The Entrepreneurship phenomenon is based on four key insights most laymen are not aware of. Learn now why —
- Managers are not entrepreneurs, but entrepreneurs can be managers.
- Inventors (scientists) are not innovators (entrepreneurs).
- Entrepreneurial skills can be learned
- There are five entrepreneurial principles — at least that’s what science thinks so far, till otherwise proven wrong…
When learning about startups, you will quickly note the close association with the term “Entrepreneurship”.
Startup founders enjoy calling themselves “entrepreneurs” and they often use the term Entrepreneurship to refer to the things they’re doing all day. Therefore, it makes sense for you to develop an understanding of this term and ask: What is Entrepreneurship?
Let’s take a brief look at the etymology of the word first!
The first part of ‘entrepreneur’ originates from the thirteenth-century French verb ‘entreprendre’ which means ‘to undertake’ or ‘to do something’. The subsequent suffix ‘–ship’ relates to ‘creating something of value’ and is derived from the ancient Gothic verb ‘schappen’ (Curveball 2013).
In brief, the word originally meant something like the ‘process of discovering new ways of combining resources’ (Sobel, 2008).
In the academic world, Entrepreneurship has been an object of research for decades and examined by various disciplines like anthropology, economics, social and management sciences.
Managers are not entrepreneurs
As you might imagine, lots of different working definitions have been used for this term.
Some argue, for example, that ‘entrepreneurship merely reflects the creation of a new organization and that any individual who starts a new business venture is an entrepreneur’ (Peter Drucker 1985).
However, many refer to ‘Entrepreneurship’ in a more empathic sense and think that it must be disassociated from the concept of ‘business administration’.
This differentiation was created by one of the most famous entrepreneurship researchers, Joseph Schumpeter. According to him, a “business administrator” or “manager” keeps preserving existing structures, while a true entrepreneur creates new and fundamentally better structures.
Steve Jobs can be considered a true entrepreneur because his company, Apple, revolutionized mobile communications and much more when they created the iPhone.
Moreover, Schumpeter coined the term ‘Creative Destruction’ — a process in which old structures are destroyed by new ones. For example, no one uses the old phones anymore that were cool before the iPhone came out. Companies that did not manage to produce something competitive are not doing so well. Think about Nokia.
Inventors (scientists) are not innovators (entrepreneurs)
Invention is different from innovation.
Simply speaking, scientists are great at inventing stuff. Entrepreneurs are great at bringing inventions to market. Only the adoption of something new by customers is called innovation.
Beyond that, a new stream of entrepreneurship research stresses that entrepreneurship is highly associated with risk and uncertainty. Also, an entrepreneur always breaks new grounds, and it can hardly be estimated how his venture will turn out.
Researchers like Fueglistaller (et al. 2008) stress that entrepreneurship cannot be understood properly if we just consider what entrepreneurs are doing. Their actions are embedded in a multifaceted social background which has a notable impact on the opportunities and challenges an entrepreneur faces.
Business ideas are thus rarely spontaneous. Activities outside your professional work environment lead to 50% of ideas but are heavily based on your prior work experience (Fueglistaller et al., 2008).
Entrepreneurship is a social phenomenon
Therefore, keep in mind that entrepreneurship is a social phenomenon which is dependent on factors like cultural beliefs, the access to employment and the availability of funding in an area!
Specifically, cultural beliefs and personal self-limiting beliefs cause most people to avoid starting a business and starting a startup (read about the difference here). However, social welfare plays a significant role, too!
The Global Entrepreneurship Monitor (GEM) measures entrepreneurial activities in different countries and so different cultural, religious and economic environments. Countries with the most entrepreneurial intention are Malawi, Botswana, Libya, Uganda, Ghana, and Zambia. The reason is that less developed countries don’t offer social safety nets. The only option for people to ‘survive’ is to start a business.
Not surprisingly, countries with stark social safety nets, like Germany and Japan, are last in the ranking.
What makes entrepreneurs entrepreneurial?
#Innovation and #Entrepreneurship always take place under high uncertainty. It is not predictable. Watch Guy Kawasaki’s TED talk about the ‘Art of Innovation’ to better understand what is Entrepreneurship.
For a very long time, entrepreneurship science debated around ‘nature or nurture’ — whether entrepreneurs are born or made.
However, a new stream of belief has emerged that thinks that entrepreneurial principles can be taught. They are not only born or nurtured; they can be learned!
That’s a tremendous shift in thinking about entrepreneurship. Let’s explore what principles you must learn to be an entrepreneur – scientifically speaking.
Harvard Professor Saras Sarasvathy asked herself ‘What makes entrepreneurs entrepreneurial?’.
She discovered five distinct trade’s that she summarized as the effectual logic (or effectuation).
Effectuation is used in situations of uncertainty. In opposite, most managers of large corporations make use of causal reasoning (or causation).
The five distinct trades are:
#1: The Bird in Hand Principle
Entrepreneurs start with what they have. They will look at who they are, what they know and who they know. Their education, tastes, and experiences are examples of factors which are important in this stage.
Besides these examples, this is also the stage where entrepreneurs look at their 3F’s, better known as Friends, Family, and Fools. From this point, they will look at their abilities. So an entrepreneur does not start with a given goal, but with the tools he or she has.
#2: The Affordable Loss Principle
An entrepreneur does not focus on possible profits, but on the possible losses and how they can minimize those losses.
#3: The Crazy Quilt Principle
Entrepreneurs cooperate with parties they can trust. These parties can limit the affordable loss by giving pre-commitment.
#4: The Lemonade Principle
Entrepreneurs will look at how to avoid contingencies. Surprises are not necessarily seen as something bad but as opportunities to find new markets.
#5: The Pilot-in-the-Plane
In this stage, all the previous principles are put together. The future cannot be predicted, but entrepreneurs can control some of the factors which determine the future.
What does this mean for YOU?
Is it luck to become a successful football player, a respected scientist, a well-known musician or a successful startup founder?
Yes and no!
Most successful startup founders attribute their success to luck.
I think they are just expressing their humbleness that mostly sets in when reaching success — financially, physically and emotionally.
Successful entrepreneurs don’t appreciate praising their success for themselves. Who does anyway?
However, they know that they went through a tough period of ups and downs — an emotional rollercoaster — mastering their emotions, leading their team, gaining incredible leadership skills and executing well on their vision. A future nobody else saw!
The important question when it comes to starting a business — especially a startup — is not whether you will be lucky! Instead, it matters if you are able to identify an opportunity and have the skills readily available to start searching for a repeatable, scalable business model.
Ultimately, you are turning your idea into a startup — potentially going from a side project to a massively growing business — as AirBnB, Dropbox, Twitter, WhatsApp, Slack and many more did.
I want to find a but, and I am sure their any many, however, I can’t find a convincing one. Please feel herewith invited to share your BUT’s in the comment section.
YOUR talent is unlimited. YOUR learning is endless.
I believe you can prepare, study and learn basic lessons about startups, leadership, customers (a.k.a. humans) and products to increase your odds of success.
Not theoretically. Not intellectually.
By applying. By doing.
Did you know that we remember 75% of the stuff we apply? We only remember 10% of the stuff we hear and 20% of the stuff we read.
I am sure YOU already have the talent and drive to act. Otherwise, you wouldn’t be reading until this point. Right?
You might, however, not be confident or something else is holding you back. That’s fine at this point. As long as you learn — either actively by doing or passively by reading — you are moving forward.
BUT you must start at some point and leave the ‘knowledge collecting to become more self-confident’ stage.
IF you just try and start — really anything — you will be astonished how quickly you can learn and grow beyond your purest imagination.
Eliminate your self-limiting beliefs about yourself. Show yourself what you are capable of.
Be sure …
YOUR LEARNING is endless.
Ultimately you will be changing. You will be turning into a better version of yourself. By becoming part of our entrepreneurial society — a worldwide movement — you will unlock your true potential. Unleash the power within.
Let’s be proactive! Let’s start, do, learn and personally grow and become successful entrepreneurs.
So, what can you do? Two things. Actually three things.
Firstly, start learning about startups.
Secondly, find out what you want in life.
Thirdly, start a side project.
By starting a side project, you will discover what you want in life. You will apply entrepreneurial principles. Because they are neither DNA-related (hint: born) nor parenthood-related (hint: nurtured), you can master them step by step.
That’s the purpose of StartupGeist – to help you successfully apply startup best practices and success principles to start anything.
- The Global Entrepreneurship Monitor (GEM)
- Joseph Schumpeter’s ‘Act of Creative Destruction
- Guy Kawasaki’s TED talk: ‘The Art of Innovation’
- Saras Sarasvathy: ‘What makes entrepreneurs entrepreneurial?’
- Entrepreneurship research: Are entrepreneurs born or made?
- Entrepreneurship research: Effectuation (Entrepreneur) vs. Causation (Manager)
Next on StartupGeist
- The Startup Path: Measurable & Repeatable.
- Startup Fundraising: The Crazy Startup Madness.
- Startup Failure: Why 75% of all Startups fail.