What Entrepreneurs Do: Why It’s Not What You Think …

What entrepreneurs do can seem mysterious and complicated. But the truth is a matter of strategy, not tactics.

Different entrepreneurs do different things, but what unites them is a mindset. Do you have what it takes to be an entrepreneur?

What Entrepreneurs Do: The Equal Odds Rule and Entrepreneurship

My success is built entirely on my ability to fail quickly and then learn and adapt from the results of that failure.

Chris Brogan, The Freaks Shall Inherit the Earth

Have you heard of Aviary.com?

Aviary makes photo editing software. Like many startups of its kind, Aviary started by targeting the millions of people taking digital photos every day. Aviary’s basic photo-editing tool was free to use. Aviary made money by charging for premium features and showing ads.

But they weren’t growing fast enough and the industry was becoming crowded. So Aviary pivoted. They began to target companies like Walgreens that were developing and digitizing photos for users. By going directly to companies with their photo-editing software, they changed their unique value proposition and differentiated themselves from the mass of apps marketing themselves to individual photo-takers.

Today, Aviary boasts 10 billion photos edited, 70 million active users, and employees 30 people. They partner with a thousand different companies, including the aforementioned Walgreens, Twitter, and Yahoo!

The founders of Aviary did what entrepreneurs do: They adapted. They improved. They iterated.

Iteration starts with the belief that anything and everything can improve. There are four simple steps: (1) experiment; (2) measurement; (3) analysis; and (4) reaction and modification. Repeat. The best businesses never stop iterating. They may change direction, abandon a product line that isn’t working or meeting expectations, or decide that an entire venture should be shut down. But they make these decisions rationally and quickly based on the facts. Above all, they learn to fail fast.

Hat-tip: Inc.

If there’s anything I believe about the state of the marketplace today, it’s that people like you and me need to embrace the mindset of entrepreneurs in order to advance in our careers.

It doesn’t matter if you’re a wage slave, a cubicle jockey, a contract worker, or a successful entrepreneur. The only sane strategy is to experiment and learn. Inspect and adapt. Iterate and pivot.

That means diving into what entrepreneurs do, how they do it, and the mindset they use to achieve their ends.

What Is Entrepreneurship?

Harvard Business School professor Howard Stevenson put it best: Entrepreneurship is the pursuit of opportunity beyond resources controlled.

What that means in practice is that entrepreneurs are creators. What entrepreneurs do isn’t all that different from what an artist does. An artist takes a blank canvas or blank page and marshals their resources to create something valuable.

It doesn’t matter how many resources an entrepreneur starts with. Not really. As Stevenson says, “They’re used to making do without resources.”

Entrepreneurship is about the pursuit, the reaching and grasping for something that doesn’t quite yet exist. It’s about the process of becoming.

Entrepreneurs are people who start things. And when people who start things don’t have a map, they draw one.

What Do Entrepreneurs Do?

There are no qualifications for becoming an entrepreneur. There’s no degree to get, no credential to attain.

An idea isn’t enough. A plan isn’t enough.

To be successful, an entrepreneur must ultimately be comfortable with taking action when the potential for reward isn’t clear.

Entrepreneurs:

  • Identify untapped opportunities
  • Attack problems in original ways
  • Work incredibly hard within pre-existing limits
  • Are open to new experiences, data, and feedback
  • Reap the direct benefits of their work
  • Like their independence and autonomy

To think like an entrepreneur, you have to prefer acting to planning, doing to thinking. That doesn’t mean entrepreneurs act recklessly or in a haphazard way. Deliberate action is the hallmark of entrepreneurs who succeed.

But you have to know the difference between planning and paralysis. And that distinction is not an easy one to make.

Entrepreneurs Know Action Is Not Prophecy

There’s nothing magical about taking action. All it takes is a willingness to be wrong initially, and the resilience to keep experimenting.

In his management book, The Tom Peters Seminar: Crazy Times Call for Crazy Organizations, Tom Peters marvels at the capacity of certain action-oriented leaders to persevere:

Yet I keep stumbling across bosses who seem oblivious to hurdles, who assume (for themselves and their associates) that people can do damn near anything they have the will to do so long as they don’t wait for one more analysis before starting.

Peters is quick to note that action isn’t prophecy:

Mind you, action-obsessed chiefs are not prophets, and what they and their hustling underlings accomplish may bear little resemblance to what they first imagined. The action faction nonetheless believes — and I concur — that if you can just get going, you’ll learn quickly, and dramatically increase the odds of doing something worthwhile in short order.

Rapid learning and adaptation is the secret to entrepreneurial action in today’s world.

Here are 3 crucial lessons to learn if you want to understand what entrepreneurs do:

1. Entrepreneurs Don’t Gamble

As Simon Sinek says in Start With Why, “There is a big difference between jumping out of a plane with a parachute on and jumping without one. Both produce extraordinary experiences, but only one increases the likelihood of being able to try again another time.”

This is the principle of Affordable Loss restated. You can take risks without betting everything you have. You can jump out of the plane and still keep your parachute. Anyone who tells you different is being overly dramatic or simply defending the status quo.

In fact, this is the fundamental difference between an entrepreneur and a gambler. A gambler’s winnings only come at the expense of the house or another bettor. An entrepreneur’s gains come from creating something of value that didn’t exist before.

Frans Johansson in The Click Moment nails the distinction between placing a bet in a casino and placing a bet on yourself:

[T]here is no “house” when placing bets in the real world. Humans are, in other words, generally better off trying to start a new company or investing in the economy than gambling at the casino because the payout ratio is not systematically limited.

As Johansson observes, even in the middle of financial crashes, crises, and recessions, we can still find new ways to add value to the world.

In a casino, we play until we cash out or (more likely) lose all our money.

In the real world, we’re asked to repeatedly make bets that have a risk of failure attached to them. That’s true for the Googles, the Apples, and the Microsofts of the world.

And it’s true for you. Even inaction carries great risk.

The key question to ask yourself is, Can you survive?

2. Entrepreneurs Take Advantage of the Equal-Odds Rule

UC-Davis psychology professor Dean Keith Simonton has studied success among his colleagues, the academic professors of research universities like his own institution.

The career of an academic rises or falls based on one metric: research paper citations.

(You didn’t think I was going to saying teaching, did you?)

Simonton wanted to study which factors led to groundbreaking, citeworthy papers. Was it experience? Or intelligence? Prestige of the institution?

The answer is none of the above.

The answer is quantity.

Johansson summarizes the impact of the finding by invoking the Equal-Odds Rule:

[T]he equal-odds rule implies that scientists who publish the most high-quality papers should also publish the most low-quality papers. They do. It also implies that there should be no real trend in when they write groundbreaking papers during their career. If experience mattered, for instance, we should expect research papers to get better over time. They don’t. Instead, scientists have the best chance of writing groundbreaking papers when they publish a lot, no matter when that happens in their career.

Simonton has found evidence that this effect extends to other fields, like music.

The implications are startling. For you, for me, for anybody in a field that requires creative output in any way, shape, or form.

The key to uncommon success is just to create more stuff.

That means checking less email, surfing less social media sites, and saying no to more drudge work.

It means getting your butt in your seat and producing.

There’s a study out that says that most famous artists don’t create their most best works until their forties. That means decades of producing stuff until they get to their Lifetime Achievement-level work.

It’s a lesson any serial entrepreneur already knows. It’s all about getting the current business to take off—or surviving to get to the next project.

Your average chump looks at the odds of a new business succeeding (5% or thereabouts) and immediately dismisses the whole idea of starting his own business.

But the Equal-Odds Rule says something pretty interesting. If you start 5 different businesses over your lifetime, your odds of one of them succeeding increases to 23%. If you can start 10 different businesses, the odds of one succeeding jumps to 40%.

At 14, you’re actually more likely to succeed than fail.

And that’s assuming the 5% statistic is actually accurate. How many of those “failed” businesses were simply dabblers or hobbyists who didn’t take entrepreneurship all that seriously? Or delusional folks with a pipe dream and too much time on their hands?

If you wipe out all the noisy data, the true success rate might be closer to 10% or 15%. The odds start looking pretty good.

What if it were 25%?

The name of the game then becomes survival. How much can you afford to lose on each bet? You need skin in the game for sure, but you don’t need to fork over your life savings either.

Because maybe it’s not this project that changes your life forever. But it might be the next one.

3. Entrepreneurs Expect the Unexpected

Can you prepare for the truly unexpected?

In Get Big Fast and Do More Good, co-author and co-founder of Yes To Carrots, Lance Kalish, uses a rubric he dubs The Kalish Rule of Three (yes, another Rule of 3) to confront the harsh realities of starting a new business:

At some point in any new business you’re going to have to take your projections, crumple them up into a ball, and throw them out the window.

Why? Because the majority of new projects will cost three times more than you project, take three times as long to get to market, and generate a third less revenue than you anticipated. To put it more formally:

1. Your costs will be three times more than anticipated.
2. It will take you three times longer to go to market than originally planned.
3. You will generate two-thirds of the revenue you originally projected.

If The Kalish Rule of Three sounds bleak, that’s not the intention. Again, it’s all about survivability:

… The Kalish Rule of Three helps you stay as conservative as possible in the beginning stages of your business. If you take your initial forecast plan for the business, apply the Kalish Rule of Three, and find that the business can still survive, you know you have a strong enough business model to see you through all the inevitable bumps along the way.

Jumping out of a plane without a parachute doesn’t promote survivability. Nor does trying to market to millions of people who take photos when it’s clearly not working and the thousands of businesses who also need your services make for a better target.

The Kalish Rule of Three tempers lofty expectations. It translates hot emotions into cool logic. It focuses an entrepreneurially-minded person on implementation, not just ideas.

Because what entrepreneurs do, ultimately, is translate dreams into reality. And you always lose something in translation. But people who start things have to believe that an imperfect solution is superior to a perfect fantasy.

♦♦♦

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