1. A Great Question.
The other day I was talking to a friend who is Chair of a TEC group. He told me about the owner of a successful business he’d met recently. The guy insisted that there was no value to be had in paying anyone to help with strategy or business planning.
Knowing what we do, my friend asked me how we dealt with this attitude. A couple of days later I saw a great article in the current edition of Inc. magazine called “How Great Entrepreneurs Think”. Had I seen it before talking to him it would have helped me do a better job of answering his question than I was able to do.
2. How Successful Business Owners Think.
The article is about a very credible piece of research carried out with a group of entrepreneurs who had:
• At least 15 years’ experience.
• Started multiple companies.
• Successful businesses and failures.
• Taken at least one company public.
It was the brain child of Saras Sarasvathy and was supervised by Herbert Simon who won a Nobel Prize for his research on decision making. Participants were asked to imagine that they were the founders of a start-up that had developed a computer game.
When experienced entrepreneurs start a company they use effectual reasoning. This means that instead of setting out with concrete goals, they use their personal strengths and the resources at hand to develop goals as they go along.
Brilliant improvisers, entrepreneurs are impatient with extensive planning. They just want to get started. Instead of traditional market research they believe they’ll learn what the obstacles are, which questions have to be answered and which prices are acceptable by going out and trying to make some sales.
And it’s not only market research they reject. At start-up, these entrepreneurs don’t believe in prediction of any kind because they don’t believe the future is predictable – and if it is they don’t want to be in that space.
3. How Successful Executives Think.
Sarasvathy wanted something to compare the entrepreneurs’ approach to. So the same experiment was repeated with a group of highly successful corporate executives.
Executives use causal thinking which is typified by setting a goal and then diligently looking for the best ways to achieve it. This means, for example, that they will want to carry out structured research before launching.
4. The Important Point.
But the important point is that the study determined that successful entrepreneurs did adopt more formal planning practices as time went on. In fact, their ability to do so – to become causal as well as effectual thinkers – helped them grow with their companies.
And that’s the answer to my friend’s question. Some business owners adapt as their companies grow, others don’t. Hopefully the ones who do never substitute one way of thinking for the other but rather use them to complement each other.
Those who adapt also know what they don’t know. And, provided there’s clearly perceived value and a proven solution, those entrepreneurs will hire people with the knowledge, skills and experience that they don’t have.
And that’s how people like strategy consultants make a living.