4 Characteristics of Successful Entrepreneurial Ventures
Last week we discussed the key differences between starting a new business and entrepreneurship. After receiving an overwhelming amount of questions and calls for further discussion. I have decided to dedicate the entire month of November to Entrepreneurship. While a month is hardly enough time and there exist innumerable articles and resources on the topic, I hope you find these thoughts useful and refreshing.
4 characteristics of successful entrepreneurial ventures
To recap, we are using the working definition of entrepreneurship as used by Harvard Business School; Entrepreneurship is the pursuit of opportunity beyond resources controlled. Entrepreneurship requires the skills and decisiveness necessary to obtain resources that the entrepreneur does not yet posses. Peter Drucker, the organizer of modern management, reminds us that entrepreneurship is not an art or a science but rather a practice. A practice that can be learned and mastered.
In my practice and survey research of over 50 successful entrepreneurial ventures, I have found a vast number of managerial structures, product & operation models, founder leadership styles, and many more unrelated variables but all have these 4 foundational characteristics. Successful entrepreneurial ventures are: focused, simple or easy to explain; add value to the customer/ end user, and designed with scale and diversification in mind.
Successful entrepreneurial ventures are focused. This is often times the most difficult task for an entrepreneur. Myself included. There are so many bright ideas and even more ways to execute those ideas but without focus; a venture is almost certainly doomed to fail. It's even more difficult when you think of how diverse large organizations like Amazon are. Amazon does everything from sell clothes, to healthy foods, and even has your own personal electronic assistant. A careful study of Amazon's history will reveal that while Jeff Bezos had some great ideas when he founded Amazon, he focused on one area. Selling books. That's it. Selling books. Now Amazon does everything. Focusing on one area allows the entrepreneur to do everything else more effective. Including marketing, product and service design, sales models etc. After the venture has gained significant recognition and market share it is easier and less risky to diversify in other areas.
Successful entrepreneurial ventures are simple or easy to explain. Yes a product or service can be very complex but to be successful it must be simple or easy to explain to the customer or user. I must confess I don't know the inner workings of technology in my microwave. I just know that when I put my plate in the microwave for 3 minutes I expect to eat hot food soon. The microwave is a device that warms my food up. Simple, easy to explain. Think of all the successful companies you know. Simple, easy to explain. I know Facebook connects me to people I have lost contact with and friends from college. I know LinkedIn connects me with professionals. A new venture should be so easy to explain that other people can explain it for you without ever knowing you mission statement after using it for the first few times. It should be so easy to explain that people say, “yeah I thought about doing that before”. The success of your business depends on it.
Successful entrepreneurial ventures add value to the user or customer. Can you imagine life without Google, Facebook, LinkedIn, Apple, and Samsung? Okay perhaps but what about life without whirlpool, Maytag, Kenmore, and GE. Those names ring a bell because they add value. The latter are washing machine brands that make it easier and timelier to wash clothes while the former connects us to resources, produce, and each other. I am using names that we all know to illustrate a reality that applies to new ventures of any size. You are creating value, redefining value, repackaging value or you will find your company has no value soon. There is no middle ground.
Lastly, Successful entrepreneurial ventures are designed with scale and diversification in mind. This may seem like it contradicts the first point of being focus but having a focused service or product does not mean you do not have a long term strategy. Failure to have scale and diversification in mind won't prevent early growth but will most definitely cost you in the near future especially with a dynamic economy and ever advancing technology. Think of Netflix. The founder of Netflix began renting DVDs by mail and would grow exponentially with their new subscription model. Founder Reed Hastings tells Fortune in an interview "We named the company Netflix (NFLX), not DVDs by Mail because we knew that eventually we would deliver movies directly over the Internet. DVDs will be around a long time, but we're building for the day when they're not." Perhaps diversification for your company does not mean venturing into new areas of business but rather taking advantage of new technologies and exploring new markets. Either way starting a successful venture requires beginning with the future in mind.
Remember entrepreneurship is a practice. Some people go the trial and error route having no experience. Some people go the expert in a larger company starting his or her own similar business route. Some people study trends rigorously, see an opportunity and go for it. However you do it make sure you answer these 4 questions.
1. Is my new venture focused enough?
2. Is my new venture simple enough or easy enough to explain?
3. Does it add value or am I recycling a concept or product that is already in market?
4. How do I plan to scale and or diversify?