Skills and Behaviors that Make Entrepreneurs
Successful
Research at Harvard Business School by Lynda Applegate, Janet
Kraus, and Timothy Butler takes a unique approach to understanding behaviors
and skills associated with successful entrepreneurs.
Is it the technical brilliance of Bill Gates? The obsessive
focus on user experience of Steve Jobs? The vision, passion, and strong
execution of Care.com’s Sheila Lirio Marcelo? Or maybe it’s about previous
experience, education, or life circumstances that increase confidence in a
person’s entrepreneurial abilities.
Like the conviction of Marla Malcolm Beck and husband Barry Beck
that high-end beauty retail stores and spas, tightly coupled with online
stores, was the business model of the future, while other entrepreneurs—and the
investors who financed them—declared such brick-and-mortar businesses were
dinosaurs on their way to extinction. The success of Bluemercury proved the
critics wrong.
Despite much research into explaining what makes entrepreneurial
leaders tick, the answers are far from clear. In fact, most studies present
conflicting findings. Entrepreneurs, it seems, are still very much a black box
waiting to be opened.
A Harvard Business School research team is hoping that a new
approach will enable better understanding of the entrepreneurial leader. The
program combines self-assessments of their skills and behaviors by
entrepreneurs themselves with evaluations of them by peers, friends, and
employees.
Along the way the data is also allowing scholars to study
attributes of entrepreneurs by gender, as well compare serial entrepreneurs
versus first-time founders.
“We’ve always had a hard time being able to identify the skills
and behaviors of entrepreneurial leaders,” says HBS Professor Lynda Applegate,
who has spent 20 years studying leadership approaches and behaviors of
successful entrepreneurs. “Part of the problem is that people usually focus on
an entrepreneurial ‘personality’ rather than identifying the unique skills and
behaviors of entrepreneurs who launch and grow their own firms.”
Complicating this understanding are the many types of
entrepreneurial ventures that exist, says Applegate. These can include small
“lifestyle” businesses, multi-generational family businesses, high-growth,
venture funded technology businesses, and new ventures designed to
commercialize breakthrough discoveries in life sciences, clean tech, and other
scientific fields.
“These types of ventures seem to both appeal to and require
different types of entrepreneurial leaders and we are hoping that our research
will help us understand those differences—if they exist,” says Applegate, the
Sarofim-Rock Professor of Business Administration at HBS and Chair of the HBS
Executive Education Portfolio for Business Owners & Entrepreneurs.
The answers are already starting to come in, thanks to initial
results from a pilot test of “The Entrepreneurial Leader: Self Assessment”
survey taken by 1,300 HBS alumni. Results allowed the researchers to refine the
self-assessment and to create a second survey, “The Entrepreneurial Leader:
Peer Assessment.” Both are being prepared for launch in summer 2016.
The team included Applegate; Janet Kraus, entrepreneur-in-residence;
and Tim Butler, Senior Fellow and Senior Advisor to Career and Professional
Development at HBS and Chief Scientist and co-founder of Career Leader.
Dimensions of entrepreneurial leadership
A literature review combined with interviews of successful
entrepreneurs helped the team define key factors that formed the foundation for
the self-assessment. These dimensions were further refined based on statistical
analysis of the pilot test responses to create a new survey instrument that
defines 11 factors and associated survey questions that will be used to
understand the level of comfort and self-confidence that founders and
non-founders have with various dimensions of entrepreneurial leadership.
These 11 dimensions are:
1. Identification of
Opportunities. Measures skills and behaviors associated with the ability
to identify and seek out high-potential business opportunities.
2. Vision and
Influence. Measures skills and behaviors associated with the ability to influence
all internal and external stakeholders that must work together to execute a
business vision and strategy.
3. Comfort with
Uncertainty. Measures skills and behaviors associated with being able to
move a business agenda forward in the face of uncertain and ambiguous
circumstances.
4. Assembling and
Motivating a Business Team. Measures skills and behaviors required to
select the right members of a team and motivate that team to accomplish
business goals.
5. Efficient Decision
Making. Measures skills and behaviors associated with the ability to make
effective and efficient business decisions, even in the face of insufficient
information.
6. Building
Networks. Measures skills and behaviors associated with the ability to
assemble necessary resources and to create the professional and business
networks necessary for establishing and growing a business venture.
7. Collaboration and
Team Orientation. Measures skills and behaviors associated with being a
strong team player who is able to subordinate a personal agenda to ensure the
success of the business.
8. Management of
Operations. Measures skills and behaviors associated with the ability to
successfully manage the ongoing operations of a business.
9. Finance and
Financial Management. Measures skills and behaviors associated with the
successful management of all financial aspects of a business venture.
10. Sales. Measures
skills and behaviors needed to build an effective sales organization and sales
channel that can successfully acquire, retain, and serve customers, while
promoting strong customer relationships and engagement.
11. Preference for
Established Structure. Measures preference for operating in more
established and structured business environments rather than a preference for
building new ventures where the structure must adapt to an uncertain and
rapidly changing business context and strategy.
While the 11 factors provided some level of discrimination
between founders and non-founders, five factors showed statistically
significant differences. For example, founders scored significantly higher than
non-founders on “comfort with uncertainty,” “identification of opportunities,”
“vision and influence,” “building networks,” and “finance and financial
management.” Founders also had significantly lower ratings on their “preference
for established structure” dimension.
Although some of the factors—like comfort with uncertainty and
the ability to identify opportunities—seemed like obvious markers for
entrepreneurial success, the study built a statistically reliable and valid
tool that can be used to deepen understanding, not only of founders versus
non-founders, but also of differences and similarities among founders who start
and grow different types of businesses, between male and female founders,
serial founders and first-time founders and founders from different countries.
In addition, a deeper examination of the individual questions
that make up each factor provides richer descriptions of specific behaviors and
skills that account for the differences in the profile of entrepreneurs who are
launching different types of ventures and from many different backgrounds.
Take vision and influence, for example. Although it is a
long-standing belief that great leaders have vision and influence, the
researchers found that entrepreneurial leaders have more confidence of their
abilities than the average leader on this dimension—and that leaders working
within established firms actually rated themselves much lower.
Financial management and governance turned out to be another
non-obvious differentiator.
“Financial management is a skill that all of our HBS alumni
should feel confident in applying,” Kraus says. “Yet among the alumni surveyed
in the pilot, those who had chosen to be founders rated themselves as much more
confident in their financial management skills—especially those related to
managing cash flow, raising capital, and board governance—than did non-founder
alumni.”
Self-confidence in financial management and raising capital was
especially strong for male entrepreneurs, she says. “Our future research will
broaden our sample beyond HBS alumni to enable us to differentiate between
those who graduated with and without an MBA, and to assess confidence in
raising capital and financial management and a wide variety of other skills by
different types of founders and non-founders.”
Efficient management of operations was another crucial, yet less
obvious, factor. “While we often think that employees within established
organizations would be more confident in their ability to efficiently manage
operations, we were surprised to see that it is a distinguishing and
differentiating attribute of entrepreneurs,” says Kraus. “All entrepreneurs
know that they must do more with less—which means that they must work faster
and with fewer resources.”
Differentiating
male and female entrepreneurs
The pilot study allowed researchers to examine gender
differences. While men and women rated themselves similarly on many dimensions,
women were more confident in their ability to “efficiently manage operations”
and in their “vision and influence,” while men expressed greater confidence in
their “comfort with uncertainty” and “finance and financial management”.
These differences rang true for Kraus, herself a serial
entrepreneur who founded and grew three successful entrepreneurial ventures.
“Successful women entrepreneurs that I know have lots of great
ideas, and are super skilled at creating a compelling vision that moves people
to action,” she says. “They are also extremely capable of getting lots done
with very little resources so are great at efficient management of operations.
That said, these same women are often more conservative when forecasting
financial goals and with raising significant rounds of capital. And, even if
they have a big vision, they are less confident in declaring at the outset that
their goal is to become a billion-dollar business.”
Indeed, research confirms observations that women start more companies than men, but rarely
grow them as large.
Based on his earlier research, these results also resonated with
Tim Butler: “When it comes to self-rating on finance skills, women are more
likely than men to rate themselves lower than ratings given them by objective
observers. There are definitely implications for educators when lower
self-confidence in skills associated with entrepreneurial careers becomes a
significant obstacle for talented would-be entrepreneurs.”
The researchers hope to deepen their understanding of male and
female entrepreneurial leaders as they collect more data.
Differentiating
serial founders and first-time founders
Not all founders are cut from the same cloth, the study
underscores. Analysis of the pilot data also revealed important differences
between first-time founders and serial founders—those who launch and grow a
number of new ventures, such as Elon Musk (PayPal, Tesla Motors, SpaceX) and
research team member Kraus (Circles, Spire; peach).
One key difference the research team discovered: serial founders
appear more comfortable with managing uncertainty and risk. That doesn’t mean
they enjoy taking risks, Kraus says, “but they appear to be confident that they
are adept and capable of knowing how to ‘de-risk’ their venture and manage
uncertainty from the very beginning”.
While the data are not yet robust enough to say so with
certainty, Kraus believes that serial entrepreneurs often enjoy launching
businesses where the risk is highest because of confidence in their ability to
manage uncertainty, and perhaps because they enjoy the process of creating
clarity from uncertainty.
Other factors that set serial entrepreneurs apart from
one-timers include confidence in their skills at building networks, securing
financing and financial management, and generating creative ways to identify
and meet market opportunities.
FUTURE OPPORTUNITIES
As more people take the assessment and HBS develops a richer
data set, scholars, educators, entrepreneurs and those who support them will be
able to develop insights that will have a number of payoffs.
“The entrepreneurial leaders we know are constantly searching
for tools that can help them become more self-aware so they can be more effective,”
Kraus explains. “This tool is going to be uniquely useful in that it was
specifically developed to help entrepreneurs gain a deeper understanding of the
skills and behaviors that they need to be successful.”
In addition, researchers will be able to examine the data by
age, gender, country, industry, size of company, pace of growth, and type of
venture “to understand the full range of entrepreneurial leadership skills and
behaviors, and how different types of entrepreneurs are similar and different,”
Applegate says. “These insights will enable us to do a better job of educating
entrepreneurs, designing apprenticeships and providing the mentorship needed.”
The data will also be useful in identifying skills and behaviors
needed to jumpstart entrepreneurial leadership in established firms, and in
understanding how an entrepreneurial leader continues to lead innovation
throughout the lifecycle of a business—from startup through scale-up.
“Today, I often see that the creativity and innovation that was so
prevalent in the early days of an entrepreneurial venture gets squeezed out as
the company grows and starts to scale,” says Applegate. “But, rather than
replace entrepreneurs with professional managers, we need to ensure that we
have entrepreneurial leadership and creativity in all organizations and at
levels in organizations. We hope that our research will help clarify the
behavior and skills needed and, over time, will help us track the
entrepreneurial leadership behaviors and skills of companies of all size, in
all industries, and around the world.”
Given the critical importance of entrepreneurial leaders in
driving the economy and improving society, shockingly little is understood
about them. The data and analysis emerging from HBS will provide important
insights that can help answer the questions, “What makes a successful
entrepreneurial leader and how can I become a successful entrepreneurial
leader?”
http://hbswk.hbs.edu/item/skills-and-behaviors-that-make-entrepreneurs-successful?cid=spmailing-13055035-WK%20Newsletter%206-8-2016%20(1)-June%2008,%202016
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