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Entrepreneurial Thinking and Opportunity

There is a function of management that is far too often neglected, if not ignored entirely — due to flawed assumptions surrounding when it is needed, who should do it, and because of how daunting the necessary “blank-sheet-of-paper” thinking can be.

This is the Entrepreneurial Function. It is the thinking that seeks to identify and define opportunity. This thinking should precede everything else, it should be revisited regularly — and not only by the “boss.”

Unfortunately, entrepreneurial thinking is surrounded by misconception. When great ideas lead to business opportunities — whether the ideas come from famous inventors (the Wright Brothers, Alexander Graham Bell, Thomas Edison) or company visionaries (Apple’s Steve Jobs, amazon.com’s Jeff Bezos, Google founders Larry Page and Sergey Brin) people often think of entrepreneurism. In fact, people often claim that great “entrepreneurs” succeed because of some bright idea or epiphany that was the necessary underpinning of their success.

In truth, however, many brilliant inventors and “idea people” have never profited from their ideas, because business success requires more than just great ideas. Success requires performing the entrepreneurial function — the thinking that narrows the scope for defining and seizing opportunity.

Thomas Edison is credited with inventing the light bulb, but he was actually one of many who came up with a workable electric light bulb — and Edison’s bulb was technologically inferior to some of the others. The success of the Edison Electric Light Company derived from how it mastered the entrepreneurial function. The company really started an industry that included the generation and distribution of electricity, which led to the success of the light bulb. It was the “HOW” part of the domain that created competitive advantage.

Contrary to common belief, entrepreneurial thinking is not just necessary for start-ups; it is also necessary for existing and established firms to survive into the future — because opportunities come and go, and very often change.

One of the surest ways to fail in business is by trying to be “all things to all people.” Having a scope, or domain that is too broad virtually guarantees a lack of focus and direction. You can’t be everything to everyone...but you’d better be something specific, in some specific way, to someone specific! So the entrepreneurial function requires the difficult thinking of narrowing the domain in clear, concrete ways.

This requires defining three things VERY specifically and clearly:

  • What will we do?
  • How will we do it?
  • For whom will we do it? (Where does the need exist?)
This enables the people who do the work to understand not only where the focus will be but also all the things that the endeavor will not attempt. The idea is to eliminate about 99.9% of everything, so that the focus will be clear and precise.

Do NOT be vague — people often love to be vague because they believe it is “safe.” It isn’t! But also, don’t be tactical by prematurely solving problems or planning implementation. Tactics and implementation will be important, but they are not part of this thinking. Addressing them here can lead down a path involving too many dangerous assumptions.

The entrepreneurial function can begin by thinking from any of the three facets of the domain, but many believe the thinking should begin with identifying unmet or underserved needs — the “For Whom” of the domain. It is important to realize that you are not looking for existing customer groups or markets — this means that data and analytics cannot be very helpful. This is a conceptual thinking exercise, not an analytical one. The idea is to identify new opportunity, so there is very little data that can help with this thinking.

This is what Ray Kroc did when he looked at the well-established hamburger stand created by the McDonald brothers, and identified an opportunity based on the underserved need for a predictable, fast, clean and friendly restaurant experience. In essence, Kroc seized an opportunity by proving that a much larger market could exist for a more narrowly defined set of needs, if an efficient and effective delivery system could be planned. If established companies want to endure, they must also be entrepreneurial. Here is the domain that launched McDonalds’ leap forward:

We will provide quality, service and cleanliness (WHAT) by standardizing methods and using volume purchasing (HOW) for those who seek simple, nutritious food with quick, friendly service, and value for their money (FOR WHOM).

Successful entrepreneurial thinking brings clarity to the opportunity by specifying the domain in clear, unambiguous language. So Kroc had to ensure that everyone understood the language in the same way. For example: “cleanliness” means that there is no trash in the parking lots, the tables and counters are always clear of clutter, the floors and windows shine, and the bathrooms are spotless and fresh smelling. Ideas, even good ones, are common, but disciplined entrepreneurial thinking gives ideas definition so they can be acted upon.

In a similar vein, Henry Ford did not invent the automobile, but his company successfully seized a business opportunity for cars. The domain was well conceived and simple:
  • Where is the need (FOR WHOM)? People (including working class) who want personal control over their means of transportation
  • WHAT will serve that need? The Model T automobile
  • HOW will we do it? Through a large-scale, plant assembly-line production system
It is just as important in existing companies to think entrepreneurially as it is for someone who decides to “put up a shingle” and start a new company. Peter Drucker claimed that an existing company has the best capability for entrepreneurial management:1 “It has the necessary resources, especially the human resources. It has already acquired managerial competence and built a management team. It has both the opportunity and the responsibility for effective entrepreneurial management.”2

There are many functions of management, but it is important not to neglect the entrepreneurial function, even in an existing business or company. Imagine the fate of a firm where multiple people are managing resources and making decisions without a common understanding of what should be done, how it should be done, and whose needs should be served.

While daunting and difficult, the blank-sheet thinking necessary to define opportunity and clarify domain is integral to success. This must come first, and everything else depends on it. In fact, this same thinking should be employed in determining opportunities for divisions, departments and significant projects as well.

1This is a term coined by Drucker and refers to this as a discipline that must guide the modern firm, because we live in an entrepreneurial economy that is demand focused (looking for needs and cultivating those markets) rather than supply focused on simply producing and delivering products and services.

2Innovation and Entrepreneurship, page 144, 1985, by Peter Drucker

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