Harvard Business Review on Succeeding as an Entrepreneur

This is one of the volumes in a series of anthologies of articles that first appeared in Harvard Business Review. Having read all of them when they were published individually, I can personally attest to the high quality of their authors' (or co-authors') insights as well as the eloquence with which they are expressed. This collection has two substantial value-added benefits that should also be noted: If all of the articles were purchased separately as reprints, the total cost would be at least $60-75; also, they are now conveniently bound in a single volume for a fraction of that cost.

Those who need best practices and ideas for launching new ventures will find the material in this HBR book invaluable. It is one of the volumes in a series of anthologies of articles that first appeared in Harvard Business Review. Authors of the nine articles focus on one or more components of a process by which to zero in on the most promising prospects, set a clear direction for a start-up, test and revise assumptions along the way, tackle risks that could sabotage efforts, carve out opportunities in emerging markets, launch a start-up within an existent organization, and hand over the reins once the enterprise is established.

In several of the articles, the power and value of asking the right questions is stressed, occasionally demonstrated. I now provide two brief excerpts that are representative of the high quality of all nine articles. In both, asking the right questions is demonstrated:

In "Finding Competitive Advantage in Adversity," Bhaskar Chakravorti Suggests that these five questions be asked when the objective is to "unearth the competitive advantage that adversity can offer":

1. What under lying needs in your market are being curtailed by adversity?Read more ›

I most liked the article titled 'Beating the Odds When You Launch A New Venture.' The article emphasizes analyzing risks early into any new venture, and provide useful examples. In one, a planned use of satellite broadcasting technology to bring mass media to markets lacking infrastructure failed because the simple, low-cost receivers required could not be built. Instead of identifying this problem at the start, those involved focused on obtaining broadcasting licenses and wastefully invested hundreds of millions. In another example, a planned medical tourism firm started with lengthy and expensive interviews with benefit managers around the U.S. After six months they then sampled reactions from prospective patients (tepic, and limited to a narrow band of procedures), and hospitals to get their possible reactions. Turned out that not only was consumer reaction tepic, but the hospitals were also willing to lower prices to near international levels if paid cash upfront.

Another common error - allocating money for a new venture all at once, hoping for fast payback. Venture capitalists, however, provide capital in multiple rounds, using early capital to reduce the greatest risks.

Initial entrepreneurial strategies are probably part-right and part-wrong. A study of entrepreneurs found the most successful redircted strategy at least five times before solid growth. The authors also suggest going with limited length and expansiveness experiments, taking one thing at a time, and being willing to cut one's losses. (Ron Johnson at Penney's certainly could have used that advice!)

'The Founder's Dilemma' reports that analysis of 212 U.S. startups in the late 1990s/early 2000s showed most founders surrendered management control before the firm went public; 80% are forced to step down at some point.

A 2000 paper in the Journal of Political Economy and another similar one two years later in the American Economic Review showed that entrepreneurs on average make only as much s they could have as employees, less if you include the risk and capital involved.

Initial success (eg. shipping the first products) makes it harder for founders to realize their firm now faces a different set of challenges and greater complexity. Investors wield the most influence over entrepreneurs just before investing. The author found that 37% of founder-cEOs left when a professional CEO came in, 23% took a lower position, and 40% became chairmen. Founders motivated more by wealth than control are likely to bring in a new CEO themselves, and accept outside financing.

'Why Entrepreneurs Don't Scale' lists four tendencies that work for leaders of small business units/companies but become Achilles' heels with larger organizations. The first is loyalty to comrades, the second and third involve strong tak orientation - critical for eg. product launch, but such detailed, low-level thinking can cause a large organization to lose its way. The fourth tendency is to work in isolation - great for development but disastrous when a firm needs to please customers, analysts, investors, etc.