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The Backbone Source Material For The 8 Important Attributes Of Entrepreneurship.

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We recently outlined the 8 most important attributes for entrepreneurs. Some of you have asked how the list was derived. There are three broadly-defined sets of source data, and, within these, some specific research studies. The three backbone sources are:

Austrian Economics.

This body of economic thought is focused on the individual (as opposed to classical economics, which focused on macro economics and aggregates like GDP) and how individuals make decisions. It takes a dynamic view of economic activity (as opposed to classical economics which is focused on equilibrium). There are two critical individual roles for economic dynamism: the consumer is boss, because they determine what is produced by deciding what to buy and not to buy. The decision is subjective, emotional, idiosyncratic, inconsistent and unpredictable. The consumer lives in a permanent state of dissatisfaction, believing things could be better and seeking to make decisions that improve their circumstances. The entrepreneur serves the consumer, attempting to identify solutions to this dissatisfaction, and sacrificing time, capital assets and current income to the production of that solution, having made the economic calculation that the net present value of the future revenue streams that will result is greater than the current cost of production. The entrepreneur bears the uncertainty of this process.

Service Science

Service Science is a relatively new field in social sciences that focuses on the demand for and production and delivery of services. Today, service science has a strong technology component, since so many services are delivered by or via machines and software. Like Austrian Economics, it is customer-facing, and defines service as an experience, and explores how to deliver that experience. Service science originated the concept of co-creation – that services are a joint product of the customer or receiver of the service and the provider of the service. The customer reacts to service experiences and provides feedback, which the service provider uses to further refine the service for better acceptance, and so the two parties are co-creators. There’s a good basic reference book about service science under the title of Service Thinking.

Effectuation Theory

Effectuation is a relatively new theory of entrepreneurship. One of the primary authors is Dr. Saras Sarasvathy. See her research here and a more popularized version of it here and a blog summary of it here Effectuation theory holds that the individual does not start the entrepreneurial process with a market assessment of unmet needs to attempt to meet with new solutions, but rather with a self-assessment which includes the questions, “Who Am I? What Do I Know? Who Do I Know? What Are My Resources?” From this basic foundation, the individual starts the entrepreneurial journey.

From these three sources, along with a lot of research and input from consulting services, venture capitalists and mentors of entrepreneurs, we derive the 8 attributes of entrepreneurship.

1) Empathy

Service science identifies empathy as the primary skill for the service innovator and service provider. Since the service customer’s perceived need is subjective, emotional and idiosyncratic, the service designer must “put themselves inside the customer’s head” to try to understand the service need from the customer’s subjective perspective. In the entrepreneurial process of developing new services, the entrepreneur must be able to transfer this empathetic understanding to implementers, such as those designing and writing code for apps. This is sometimes referred to as empathetic engineering.

2) Interconnection

The answers to the questions “Who Do I Know?” and “What Do I Know?” hinge on interconnection. Building a network of collaborators and customers is an act of interconnection, as is connection to knowledge in all its forms. Dr Cristina Mele of the University Of Naples has conducted research that indicates that, in the digital era, interconnection IS entrepreneurship. See a blog about Dr. Mele’s research here.

3) Adaptability

Austrian economics defines the efficiency of the entrepreneurial order as an adaptive efficiency, capable of responding to new knowledge and new market signals to co-ordinate the needs of consumers and suppliers. Service science emphasizes a process of dynamic innovation, whereby the service provider makes an offering to a service customer, who provides feedback, whether positive or negative, to which the provider adapts by changing the offering to match the content of the feedback. To maintain this adaptive process, the entrepreneur must be able to cross disciplines, communicate well with collaborators, and keep up with changing information streams from customers, all of which is summed up in the term “adaptive”. (Agility often means the same thing, but is a less specific term than “adaptive”.)

4) Time Preference

The entrepreneurial process takes time. Once an opportunity to serve customers in new ways is identified, resources must be assembled and/or rearranged to develop the new service or product. During this time, the entrepreneur typically uses savings, and sacrifices current income, in the anticipation of future profits. The entrepreneur is said to have a low time preference, which indicates a willingness to forego satisfactions and benefits today, in order to experience improved benefits in the future. The opposite attitude, high time preference, can be summarized in the phrase “I want it now” – i.e. an unwillingness to sacrifice current satisfactions. The entrepreneur lives in the future more than the present. Low time preference is associated with a long term perspective rather than a short term one, and is also associated with ethics and morality in decision making.

5) Lifelong learning

Lifelong learning is an expression of individual commitment to the economic model of entrepreneurial dynamic efficiency, and it is a social concept and educational concept that has garnered more attention as the static institutional model of educating youth for an extended career based on the learning they receive in school has shifted to the dynamic one of accumulating skills and new knowledge throughout adult life. There is an element of boundary crossing in lifelong learning, since a lifelong learner might accumulate skills in mechanical sciences (like coding) as well as social sciences (like economics), as well as crossing cultures in order to operate globally, and crossing physical/ digital barriers to deliver services digitally and physically.

6) Co-creation

Co-creation is a concept specific to Service Science, with highly developed process maps and a series of stages. (See a simplified example below.) To summarize a long literature, the process begins with the entrepreneur listening to market signals from the customer. Those signals are in the form of needs or dissatisfactions (“Things could be better if….”) which are not necessarily well-articulated but are sincerely felt. The entrepreneur invests in listening, processes the signals into a value proposition, which is offered to the customer. The response back from the customer (“Love it”, “Hate it”, “It would be even better if….”) becomes the co-creation component that the entrepreneur combines with the original idea in a new, co-evolved offering that eventually becomes the in-market service.

7) Grit

Grit is a term to denote the personality trait required to deal with continuous learning from market feedback, which often comes in the form of negative feedback, sometimes referred to as “failure”, and to keep going by processing that feedback and eventually achieving success. There was a popular book of this title, defining it as passion plus perseverance.

8) Individualism

Entrepreneurs should seek unique knowledge, make a unique benefit promise to customers, identify a niche that no-one else has identified, and generally be comfortable with being the only occupier of a commercial space. Initially they might be viewed as crazy or taking excessive risk or out on a limb. Individualism makes them comfortable with that situation. Individualism doesn’t mean they are not collaborative; in fact quite the opposite. They will assemble a team, hire vendors and co-create with customers. Individualism embraces the self-confidence to originate and create differentiation.

Center For Individualism is developing a self-assessment tool for entrepreneurs to compare their personality traits to these attributes. Stay tuned.

Are You Entrepreneurial? Self-Assess These 8 Attributes.

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The future quality of our work and our world is going to be governed more and more by our entrepreneurial capabilities. The emergent technologies of A.I., cloud computing, and global talent and commerce platforms will augment everyone’s capacity, and will place increased demands on each of us to define our specialist value, specialist skills and specialist contribution in the interconnected global economy.

In addition, organizational norms are going to evolve and change, mostly in the direction of less structure and greater flexibility. In the future, we are more likely to work for ourselves, or as part of a flexible team arrangement in which our individual contribution is measured carefully and rewarded commensurately.

The requirement for each of us, as a consequence, is to develop and reinforce our entrepreneurial skills, so that we can plan, learn and adapt on our pathway through a fast-changing world of work, technology and organization. It is valuable to conduct a self-assessment of our entrepreneurial aptitude. Here are the attributes to examine.

Empathy

Empathy is the primary entrepreneurial skill: the ability to understand and respond to how others feel and how they think and why they behave as they do. Those others are co-workers, team members, customers, partners, networking connections, information providers, service providers, and innumerable people with whom we interconnect on global platforms. We all are naturally empathetic, but our circle of empathy can be quite narrow. Adam Smith famously pointed out that a person living in Europe might feel some distress in the event of a massive earthquake in China that caused millions of deaths, but it would be nothing compared to the distress caused by some private, local misfortune. But this narrow circle of empathy will not suffice in the modern world. Our empathetic engagement needs to extend worldwide, across demographics, and over multiple contexts. If we want to sell our talent or our services worldwide, our empathetic reach must complement our ambition.

Interconnection

We used to call it networking. Today, the updated term is interconnecting. It is possible to interconnect with virtually any individual, any firm, any vendor or service company, any knowledge and any learning provider. On global platforms, we can offer our talents and evaluate and purchase the talent of others. On social media, we can give and get appraisals and ratings of the products and services and experiences that we buy or we sell. We can potentially analyze the customer reaction of millions, or we can be the one to offer such a reaction.

Interconnection is a practice, a constant activity that expands and reinforces our entrepreneurial capacity. By working hard at interconnecting, we can improve our performance every day. It takes effort and a certain amount of desire.

Adaptability

The first principle of entrepreneurial economics is that the future is uncertain and unpredictable, and no amount of planning or forecasting or predictive analytics will make future uncertainty any more tractable. Successful entrepreneurs embrace uncertainty, betting that they can navigate its changing currents. The attribute required for confident navigation is adaptability, being able to adjust to new and emerging conditions. Adaptability can be innovative and even transformative. If you can change course, change beliefs, change behaviors, change priorities, or change alliances to adapt to new signals from the marketplace, your entrepreneurial prospects will always be bright.

Time Preference

Consumption is an act of high time preference, the expression of desire for immediate gratification – I want it now, rather than later. Entrepreneurship requires a highly developed practice of low time preference – the willingness to save, invest and take the time required to develop a product or service offering that will yield future returns while accepting sacrifice during the development phase. Entrepreneurs live in the future rather than the present. They make bets on what consumers will buy in the future, and they spend their effort in the present to create the appropriate offering. Entrepreneurs sacrifice in the present. They may take low or no salaries, they prioritize research and development funds, they test and experiment to polish quality rather than rush to market. Check your time preference to ascertain your appetite for the entrepreneurial life.

Lifelong learning

The traditional view of education and learning is that we concentrate it in our younger years so that we can devote our mature years to pursuing a career or developing a business based on the learning foundation we have established. Today, that approach simply doesn’t work. Change, both in people and technology, is so rapid, and the enormous flow of data available for analysis from every interaction and transaction is so transformative, that the old concept of education is totally outdated. The new concept is lifelong learning. In practice, that means that we commit ourselves to learning as a practice – that we will be open to data, analytics, information, and experience, and actively use these inputs to learn, to improve, to change and to get better at whatever we do. Nothing is fixed, no knowledge is permanent. Our attitude must be that of the lifelong learner, nurturing the capability to take in new knowledge, process it, and make whatever changes are required to act upon it, without clinging to any fixed precepts.

Co-creation

One of the outcomes of interconnection and lifelong learning is co-creation: innovation as a shared, social practice. Dr. Cristina Mele of University Of Naples calls entrepreneurs “inno-mediaries“. Inno-mediaries encourage new innovators (consumers, communities, and experts) to enter into the co-creation of innovation. Each individual one of us represents a critical component. The more we work at learning and the more we work at being interconnected, the more we contribute. We all should seek to be more knowledgeable, and better equipped for the collaborative economy. Co-creation is a practice we can each actively cultivate.

Grit

Working in the future, sacrificing the present, and learning through experimentation (which inevitably results in a lot of failed experiments) all require what Angela Duckworth calls Grit – the power of perseverance. There is no overnight success, and most entrepreneurial journeys require many years, often decades, of sustained effort. The earliest years may be the most trying, when the entrepreneur is at the lowest point on the learning curve, perhaps stretched for resources, with few successful data points to cultivate. There is no substitute for stick-to-it-iveness.

Individualism

Inherent in every attribute on our list is the embrace of individualism. You probably have ideas that are different from those of others, and may be mocked for that very reason. You may pursue a path that others don’t. You may read signals from the marketplace differently. You may be an innovator, the very definition of which is challenging the status quo. The ethos of individualism is that we all are free to try as hard as we can to contribute to society in a way that is different and better. Everyone else is free to provide feedback, both positive and negative, and the entrepreneur laps up that feedback in the form of learning, taking no offense at the negative feedback, and no excessive pride in the positive feedback. Individualism is the system that generates economic growth, improved life experiences and greater social order. The entrepreneur embraces individualism in the service of all.

 

 

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