Posts Tagged long-term

Small Business Risk Taking: History Repeats Itself


“History repeats itself” is a saying I hear on occasion and often wonder about. Today, for example, some businessmen say they cannot work because of uncertain conditions, yet Adam Smith designed capitalism as the “epitome of risk taking” (Bernstein, 1996, p. 19). According to Bernstein, up to the time of the reformation, the stable Protestant tradition stressed abstinence to avoid risk. Protestants considered the danger inherent in risk-taking as akin to gambling. Adam Smith (1904) introduced capitalism believing the danger attached to risk also came with opportunity. Instead of looking at risk as a zero-sum game where someone wins and someone loses, Smith believed trade resulted in a mutually worthwhile pursuit. Smith believed both parties to trade and risk taking could become wealthier contrary to practice before the reformation that relied on exploitation to gain wealth (Bernstein, 1996).

Recent conversations have talked about how unacceptable the transfer of wealth is from the elite to its underlings. Some business people espouse the pre-reformation idea that wealth transfer should only come from exploitation of underlings, while others see wealth transfer more like Adam Smith did. Smith believed business is risky, but full of opportunity and new wealth came to those adventuresome people willing to innovate (Bernstein, 1996). Today with the coming of supply-side economics, some want to return to the days of exploitation and stymie adventuresome entrepreneurs willing to innovate and create new trade. Does history repeat itself? Has the pendulum swung too far in the wrong direction?

I believe an efficient economic system has to balance opportunities with risk taking. If business people do not take risk, I do not see where innovation comes from under such conditions. Stable well-established businesses do not like to remove themselves from their comfort zone and their products and services eventually become stale and do not satisfy consumer needs. Meanwhile, society needs to provide more incentives to entrepreneurs to innovate and create new trade.

What do you think? Is our economic system returning to the stable pre-reformation days bereft of any risk taking relying solely on exploitation? Are you willing to take a risk in today’s economic setting? What incentives do you believe would help entrepreneurs to resume their efforts to innovate new trade? Please leave your thoughts here. Do you want to know more about incentives to small business entrepreneurship to its rightful role? Click here.

References

Bernstein, P. L. (1996). Against the gods: The remarkable story of risk. Hoboken, NJ: John Wiley & Sons, Inc.

Smith, A. (1904). The wealth of nations (5th ed.). London: UK: Methuen & Co., Ltd.

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Reflections on the DNA of an Entrepreneur: Discovery vs. Routine


One of the characteristics I enjoy most about entrepreneurship is that an entrepreneur does have to keep doing the same tasks repeatedly. In fact, my experience is just the opposite. An entrepreneur is constantly trying to perfect new tasks. The entrepreneur is in constant contact with people and those who need a product or service. Because entrepreneurs want to perfect a product or service, they must continually take the pulse of the people they serve.

I have to confess my undergraduate and part of my graduate education trained me to perfect procedures in which the steps are repetitive. My background and experience as a certified public accountant highlights the repetitiveness of what a good accountant does. I found working as an accountant interesting at first, but quickly became boring because I wanted to move on to learn new things. I have heard people say that accountants and lawyers often make the worst entrepreneurs because of the repetitive nature of their work.

In retrospect, I can see how professionals like lawyers and accountants make terrible entrepreneurs because most of the time they involve themselves in fixed routines in which they have extensive training. Corporate planners in specific vocations are much the same way, but entrepreneurs enjoy constant relations and communication with the people and the consumers he they aim to serve. Few engagements involve using the identical procedures and the entrepreneur is more like a detective always trying to seek the truth to perfect a product or service. Steve Jobs highlighted this role as an entrepreneur in developing his products.

I believe I have always had the curiosity to enjoy learning new tasks because I learned from my father who worked as a private investigator. I believe, because I helped him on many occasions, it put the thirst for entrepreneurship in my blood. I enjoyed discovering new things about people and this role stayed with me to this day.

A good entrepreneur in my experience likes to work with people from diverse backgrounds. The corporate planner, the accountant, and lawyer attune themselves to a more convergent group of people with similar skills. Entrepreneurs like to learn from others about talents and skills they may not already have. Entrepreneurs like to stay in touch with people with diverse talents because it allows them to improve products and services to satisfy an emerging need.

Corporate planners immerse themselves in routine and become detached from people. These people become more bureaucratic and enjoy placing layers between themselves and the people they ultimately serve. Bureaucracy in my view is a dirty word because it adds costs and, although in the beginning is more efficient, it eventually reduces efficiency in the long haul. Corporate planners already have a model producing enough cash flows, but entrepreneurs have to craft a model to make it efficient enough to produce enough cash flows. Corporate planners manage existing models and repetition makes their models tired, but entrepreneurs create new efficient models through their communications with people and consumers to discover what they want now.

I believe an entrepreneur is more an adventurer and enjoys dealing with the unknown. Professional planners concern themselves more with avoiding the unknown and dealing with issues with which they already have skills. Both professional planners and entrepreneurs work to minimize risk, but risk is routine and a person can avoid risk through insurance or risk transfer. The unknown is much more adventurous because no one knows what it may bring.

What do you enjoy? Do you enjoy learning and discovering new tasks or do you enjoy the routine of a professional planner? What is in your DNA? I would love to hear your answer.

If you have the DNA of an entrepreneur and want help to use your talent as an entrepreneur please visit us to learn more about how we can help.

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Creating a Setting Right for Innovation


Scholars widely acknowledge entrepreneurs as the engine driving innovation and creativity. In this article I want to examine what facets contribute to a successful setting for driving innovation and creativity.

A vision has to propel the entrepreneur to pursue a cause or solve a problem. The vision often comes from a gap between what consumers want and what is currently available. The entrepreneur must persevere to fill the gap. Overcoming setbacks, frustration, and ambiguity is a critical part of the entrepreneur’s mindset (Quinn, 1985).

An entrepreneur has a long-term mindset to overcome obstacles and keep costs low. This mindset takes risks and obsesses to achieve the end goal. The innovator has to have autonomy to let imagination take over and find workable solutions. Experimenting with new ideas allows the entrepreneur to see what works and what does not (Quinn, 1985).

Breaking accepted rules, challenging authority, confronting risks, and causing conflict are part of the behavior of innovators (Baucus, Norton, Baucus, & Human, 2008). These ingredients are all part of the entrepreneur’s toolbox. A founder values people who can thrive in chaotic environment (Quinn, 1985).

A setting conducive to these attributes avoids excessive rationalism, bureaucracy, and intolerance. Employee incentives should avoid control motivations. A flat organizational structure helps avoid control motivations (Quinn, 1985).

Does your work setting have these characteristics? How can your firm support a setting to foster innovation and creativity? Want to know more? Click here.

References

Baucus, M. S., Norton, W. I., Jr., Baucus, D. A., & Human, S. E. (2008). Fostering creativity and innovation without encouraging unethical behavior. Journal of Business Ethics, 81(1), 97-115.

Quinn, J. B. (1985). Managing innovation: Controlled chaos. Harvard Business Review, 63(3), 73-84. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=8500002474&site=ehost-live

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