(Note to readers: This is the continuation of an occasional series of posts about providing intelligence support to entrepreneurs This issue interests me for both academic and personal reasons. Academically, I can think of no one who has touched it and, personally, I have recently started a games company and am about to launch my first game, Widget.)
To understand the intelligence requirements of entrepreneurs, it helps, I think, to have an understanding of what makes a "good' entrepreneur. When you consider that both the guy with 10 million dollars in venture capital and the guy with 50 bucks of used CDs are both technically entrepreneurs, such a task might seem difficult, if not impossible.
Recently, though, some very good research has come out of the Darden School of Business at the University of Virginia. Saras Sarasvathy, (who, it should be noted, got her start at Carnegie Mellon working with Nobel Laureate, Herbert Simon), has done extensive research on how great entrepreneurs think.
Great entrepreneurs, it seems, are "effectual reasoners". They start with broad goals, assess their means - the birds in their hands - and then move as far as their resources will allow. This is in contrast to more typical "causal reasoning" which starts with a specific goal and a clear plan for achieving it. The image below, from the Society for Effectual Action, visualizes the difference:
- Bird in the Hand. Entrepreneurs start by imagining what they can do with what they have rather than setting a goal and then abandoning it if they do not have the means to achieve it. Helping the entrepreneur identify what they "have" in this global economy would seem to be at least one intelligence requirement.
- Affordable Loss. Instead of large all or nothing plans, entrepreneurs seek, like Napoleon, to conduct "a well reasoned and extremely circumspect defensive, followed by a rapid and audacious attack." In other words, they seek to determine what they can afford to lose at each step rather than hyper-focus on expected return. Intelligence should, then, focus on the near-term, external, potential causes of loss.
- Lemonade. Entrepreneurs tend to see surprises as opportunities. Intelligence would be useful in helping the entrepreneur explore, understand and exploit those opportunities.
- Patchwork Quilt. Entrepreneurs worry less about competition and more about building partnerships with people who want to work with them. Intelligence could play a significant role in helping the entrepreneur identify potential partners.
- Pilot in the plane. Entrepreneurs believe that the future is "neither found nor predicted, but rather made." Sarasvathy contrasts this to managerial thinking which accepts that trends will hold and the future is predictable.