Sergey Brin and Larry Page are multimillionaire icons of the modern age. Just as The Beatles were turned down by EMI, so they were turned down many times by potential investors who thought Google was an odd name for a funny sort of product. But like all entrepreneurs, they had complete self-belief and single-minded persistence.
It takes a special kind of mindset to start a business. More to the point, it is not the same as a classic managerial mindset – perhaps one of the reasons why so many new business ventures fail.
The entrepreneurial mindset is one of simplicity and clarity of vision. Entrepreneurs are prepared to dispense with received wisdom to pursue their vision. And they have great determination and courage, or cojones as the Spanish put it.
These are highly desirable characteristics for starting a business. But they are not enough to take a business forward long-term unless they are allied with professional management skills. Neither is the common entrepreneurial drive for independence. Individuals who wish to avoid the control of others tend to dominate the company they create. This can often lead to poor organisational development and a succession management problem. A dominant entrepreneur’s business decisions tend to set a lasting style. This can be seen in entrepreneurially-driven corporations such as Virgin and Amstrad, just as easily as in smaller owner-managed enterprises.
The difficulty is that entrepreneurs, while driven and tenacious, all too often won’t seek help when it’s needed. And it often turns out to be a tragedy.
Gut instinct, passion and hard work only go so far. Businesses succeed long-term with a structure, a plan, robust systems and a rational approach to risk management. Entrepreneurs are driven by achievement, which is often associated with risk taking – preferring a higher risk with a higher return to a lower risk with little challenge. It makes for an exciting ride, but it can also be prematurely short.
Successful entrepreneurs are those who build an understanding of business issues and the skills needed to prosper. They must accept that as the business grows there will be a call for business management skills that they may lack, but the company needs if it is to realise its full potential.
In its first phase of growth, a company needs two critical skill sets: the ability to create, retain, and develop motivated teams; and better financial and management information systems. At this stage, obsessive entrepreneurs need to step back and recognise their own needs. Some do go on to greatness as they empower others. The entrepreneur who is a command and control freak, obsessive about every detail of ‘his company’, will always stay small. He is too blinkered.
As the company grows, the entrepreneur becomes leader as much as entrepreneur. But the needs of a growing organisation require a new type of leader. The management needs of the company take centre stage. People management issues emerge on many fronts: more sophisticated recruitment techniques and the development of personal performance planning, for example. How to empower people, how to manage conflicts, how to establish financial reward and motivation schemes, how to install induction and other ongoing training programmes – become key issues.
This is management, not entrepreneurship. As is the increasing sophistication needed in financial management and systems. What do you outsource and what do you keep in-house? How do you development IT systems; institute better cost control systems (more crucial in our industry than in many); increase the sophistication of credit control and debt collection; improve job costing and profitability by client analysis and reporting; institute treasury management procedures? Once we get into health and safety, maternity pay and similar legal matters, we enter the realms of pure professional management.
Yet many entrepreneurs have the ability to maintain their vision, while allowing a professional manager to take up the reins of the business. James Dyson is a particularly single-minded entrepreneur, yet he has a professionally managed, international company of which he is still the identified driver and manager. Other entrepreneurial obsessives, like Trevor Bayliss are happy to move aside and just keep inventing while others run the business.
The crucial trick for entrepreneurs is to expand their mindset so that they become not just entrepreneurial leaders but managerial leaders – ensuring the company moves towards an agreed goal while implementing the steps needed to get there. Yet they must give individuals enough space for creativity, by providing the environment and parameters within which to operate – particularly in the decision-making area. The entrepreneur must lead the implementation process by taking a genuine interest and rewarding progress toward the goal.
Hard skills are needed to address business-critical issues; soft skills to facilitate changes and coaching. Not all entrepreneurs can progress from start-up visionary to visionary leader/manager. But for those who can the rewards are great.
Jim Surguy is managing director of Results Business Consulting