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Chapter 3
Men Are Cheaper Than Guns


Chapter 4
Intellectual Capital And Bootstrapping


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The Art of Entrepreneurship

  Entrepreneurs bring together the resources to make a venture happen regardless of the resources currently controlled by the entrepreneur.

  Today, people are the crucial resource for most ventures. So, entrepreneurs ask, "How do I most effectively bring together the team I need to pursue my venture?" And, "Once I have my team in place, how do I lead them toward success?"

  How do you provide an environment where creativity will flourish, while at the same time effectively monitor the bottom-line and be reasonably sure that the creative endeavors can contribute to it?

  These aren't easy questions. The art of entrepreneurship is the art of modern leadership. There are three primary reasons people have historically followed leaders:

  • One, the leader's official position of authority demands that others follow.

  • Two, the followers respect the leader's knowledge and/or personality. This is charismatic leadership.

  • Three, it is in the best interest of the followers to follow. The followers expect some personal gain (physical or psychological) for themselves.

  Usually, all motivations come into play. Conditions within the entrepreneurial organization allow effective leadership to thrive and encourage unity of purpose.

  Conventional theories of business leadership in the U.S. began with military thinking. Early industrial businesses such as the railroads adopted a chain-of-command oriented leadership. Authority was absolute and dictatorial. Orders flowed from the top down to be executed as given. Further, the force of society was behind the leadership, so few could resist.

  The role of the community, society, and personal ego are significant to command-chain, authoritarian leadership, though their role is often overlooked.

  Why do privates willingly follow the commands of their superior officers even if the command involves charging up a hill under heavy machinegun fire and possible death?

  The soldiers might answer that duty demands it. They might quote the greater good of their country. They might say they trust the commanding officer. While all these explanations put a positive spin on the soldiers' compliance, factors we probably won't hear verbalized include, "I'll be labeled a coward if I don't charge. And, then, Iíll be psychology banished from society." Or, "I'm not a coward. Only cowards wouldn't charge. Don't label me in a way that hurts my self-perception and ego."

  Labeling people based upon their actions is a powerful tool of compliance that begins in childhood. Often unstated motivations are the strongest motivators.

  Of course, especially in ancient times, that the commander could have a soldier executed if he didn't obey led to compliance. Resisters were made into an example of just how bad the consequences of non-compliance were. Even Bill Gates doesn't have the motivational resources or power of Attila the Hun.

  As history evolved and people came to expect more freedom of action and personal choice, powerful forces of ego, self-image, and community expectations were necessary to achieve compliance of the individual in following the orders of those in official positions of authority under demanding conditions.

  On the other hand of the leadership spectrum is a free-for-all, where all decisions are debated among the parties or their representatives and significant compromises are made. Everyone has a say in each decision. Consensus is achieved through negotiation and political maneuvering. Often, the results don't fully satisfy any of the parties, but they agree to a workable compromise. And, each decision involves significant overhead in the form of time spent making the decision and booty paid to each party to get it to agree to the compromise. The workings of representative and democratic government tend in this direction.

  In Sun Tzu's The Art of War, Chang Yu says: "Benevolence and righteousness may be used to govern a state but cannot be used to administer an army. Expediency and flexibility are used in administrating an army, but cannot be used in governing a state."

  But, what about leading the modern, entrepreneurial venture? Itís not an army, and it's not a State. It's just a little company. It's trapped somewhere in the middle of the leadership extremes.

  Early industrial companies adopted the army leadership model, and it worked, more or less, for two reasons. First, the early industrial employees didn't see other viable career options. Secondly, the physical output of each employee could easily be quantified and monitored. People were rapidly interchangeable cogs.

  Today, neither of those conditions hold true. You can order somebody to pound a nail, you can't order a person to think. Authoritarianism doesn't fly in most modern companies. And, while there might be a strong sense of community within your company, each employee is also strongly tied to wider communities. Job-hopping is a way of life for the most valuable employees today.

  Imagine trying to conduct a military campaign where each individual soldier could toss up a white flag, run over to the other side, and see what rations, bedding, boots, and leadership were being offered. Then, he could choose the best deal for himself and pick a side. And, if things got rough, he might just change sides during the battle.

  Obviously, because numbers do matter, the commanding generals would start offering the best deal they could to get the potential conscript. Comfort and part of any future booty secured might be offered. The employee stock option was born. To acquire the crucial resource of human talent, entrepreneurs often offer a portion of any future benefit created by the endeavor.

  As the future looks bright, the option-fed army snowballs in size. The downside to offering future to-be-created wealth as a form of compensation is that when conditions change for the worse and it appears no loot will be secured after all, some conscripts quickly change allegiance.

  What was a battalion becomes a firing squad, angry at the leader, who has failed to deliver the promised victory. Tax wounded, option-exercised conscripts lie bleeding on the battlefield to highlight the leader's failure.

  Victory brings its own leadership challenges. Sun Tzu, in The Art of War, writes: "Tu HsiangÖ entered Nan Hai, destroyed three of their camps, and captured much treasure. However, P'an Hung and his followers were still strong and numerous, while Tu Hsiang's troops, now rich and arrogant, no longer had the slightest desire to fight."

  The same can happen to a successful business team whose motivation was primarily money. Success can destroy unity and separate egos.

  While it is ultimately true that you must make the key decisions for your business, leading a modern business is not akin to leading ancient armies. Conditions motivating "the troops" are significantly different. Woe, especially, to the home-based business owner, whose sole employee is the spouse, and who reads The Art of War and The Campaigns of Napoleon, looking for management advice.