I hear people ask, what is an entrepreneurial mindset?
Do I have it? Can I be an entrepreneur?
Look, let's look at this rationally. Prior to industrialization.
When we invented these gigantic companies
where everyone had specialized jobs, everyone was an entrepreneur.
You would have a skill.
You would take that skill and find someone to pay you for it,
or you would develop a product and find someone to pay you for it.
So entrepreneurship is something that not
only do we all have the capacity for,
but it used to be the norm.
Everyone did it.
It's only been since we've started to specialize that people are assuming
that being an entrepreneur is also specialized.
Well, some people do it,
and some people don't, and some people like doing it, and some people don't.
But anyone can learn to do it.
There are two major phases to an entrepreneurial enterprise.
In phase one, it's the building phase.
This is the phase where you're
searching for what the business is you're looking for.
Do you have a market that you can reach?
Does that market have a need that you can fulfill?
Do you have a product or service that fulfills that need?
And very importantly, for this to be a business,
does it all fit together in a way where you can deliver that product or service
for less money than people are willing to pay?
Because if not, then you don't have a business.
So phase one of entrepreneurship is finding the model
that works. Finding the marketing model and finding the operation model.
Then phase two of entrepreneurship is scaling.
So in phase one, you found the thing that works.
You found the market,
you found the product, you found the way of producing it.
Then in phase two, you systematize that. You do it over and over and over.
You do it on a grander and grander scale.
Maybe you start off by doing it in one place and in another place.
Then you do it bigger and bigger.
And before you know it,
you have scaled your organization to be much, much larger.
But scaling requires a different set of skills and a different mindset than
the first part, which is finding all the stuff that works in the first place.
Today, we're going to talk about finding the stuff that works in the first place
because there is a particular mindset that goes along with that.
The first part of entrepreneurship is characterized by not knowing. You just
don't know and you can't predict what's going to work
and what isn't. Professor Saras Saravarthy
of the Darden School of Business did a lot of research with serial entrepreneurs
to uncover how successful serial entrepreneurs navigate this period
of complete, unpredictability and unknowability.
There are five major principles that underlie the way to navigate
any situation--in this case a business and entrepreneurial situation--where you
don't know, you don't even know what you don't know.
And there's no real way to find out.
Principle number one is Pilot-in-Plane.
Sure, we could all ride in a plane that has nothing but an autopilot.
But we feel more comfortable if there's a pilot in the plane.
Why? Because if something goes wrong,
the human pilots can exercise the judgment to take corrective action.
This turns out to be critical in entrepreneurship as well.
A lot of people, especially in big corporations.
They look out into the world.
They project trends,
they create pro-formas, and they attempt to predict the future.
But in an entrepreneurial environment where you're doing something that hasn't
been done before, in a place that hasn't been done before, you don't really have
anything on which to base your predictions except making stuff up.
So instead,
you rely on the idea that you're the pilot in the entrepreneurial plane.
And what that means is it's not about you
predicting the future and figuring out how to fit into it.
It's about you making the future happen in the way that you want to.
Mindset number one, Pilot-in-Plane, is that you are in control of Destiny.
You may not be able to get the outcome you want, but you can make corrective action.
You can observe things you can learn
in such a way that instead of asking, Where is everything going? And can I ride
along with it? What you ask is, where is everything going? And can I
direct it? And can I actually create the future that I want instead of relying
on having that future just happen to come to pass?
Principle number two is called Bird-in-Hand.
It turns out that you already have resources at your disposal.
You have skills, you have a network,
you may have money, you may have assets, maybe you own a house.
It's the skills that you have at hand that you're going to have to work
with when you begin your entrepreneurial venture.
Why? Because that's all you have now.
You might want to go out and pursue other ones.
But when you're in this discovery phase,
you need to take a careful stock of what it is that you have and what it is
that you're working with, because that's gonna be the raw material
that you create, whatever success you're gonna create.
Principle number three is Lemonade.
If life gives you lemons, make lemonade.
When you're in this place of not knowing in the first part of the entrepreneurial
journey, you don't know what's going to succeed.
You don't know what isn't.
A lot of times, things that seem like setbacks may, in fact end up giving you
the advantage you need or the insight you need to find the thing that's going to work.
So when life gives you lemons, make lemonade.
And what's even more powerful about
that is other people may not even be able to figure out how to make the lemonade.
So if you can really find a way that uniquely puts a spin on something
that would seem to be an obstacle that may end up being your actual advantage.
Principle number four is Crazy Quilt.
Crazy Quilt says that in the beginning,
there's just you and then maybe you and a couple of friends.
Crazy Quilt says that the shape of what
you end up creating is not necessarily something you can predict in advance.
It's going to be a patchwork
of the relationships that you build and the interdependencies that you build.
And again, you can't figure it out in advance.
But what the principle is is network, network, network.
Get to know people, find customers, find investors.
If you can find colleagues,
find people who can donate work or do work or swap work, whatever.
But what you want to do is create your business in conjunction with a whole host
of other co-creators—people who are equally committed to the vision.
And there's some subtlety to this about.
You often end up changing your direction based upon who's involved,
what they bring to the table and what they need out of the situation.
But the idea is you're going to be creating a quasi.
You're gonna be creating a Quay Quilt pass.
You're going to be creating a patchwork of relationships and people and resources
which are going to turn into the business that you're creating.
The fifth principle is one called Affordable Loss.
This is actually my favorite principle of all of them, because it's the flip side
of how a lot of people start off companies.
A lot of people start off saying, how much money are we going to need?
Let's raise the money and then let's move forward.
The problem with this is they're raising
the money in the middle of all this uncertainty.
So everything is just a guess with affordable loss, what you say.
And this is the thing that relieves all of the stress of entrepreneurship.
With affordable loss,
you say how much time, money and reputation and opportunity cost.
Am I willing to sacrifice completely with no expectation of any return whatsoever?
But I'm willing to spend that to take whatever my enterprises one more step.
And usually it's a step about learning.
So, for example, you might say, you know what?
I'm willing to put a $1,000 into this idea to see if I can make a sale
and you now have a $1000 budget and you get to make a sale.
Now, there's two powerful things about affordable loss.
Number one, is it limits your risk to only what you're willing to lose.
So there is no stress, but, oh, my gosh,
I'll lose everything, which there might be if you just raised $10 million.
And now you're on the hook for delivering on that.
But with affordable loss, you stay in your comfort at all times.
And two is it forces you to be creative.
If you only have $1,000, you're not going to be buying a Super Bowl commercial.
So it's going to really make you, like, get down and dirty about what are
the different ways that I have of being able to use $1,000.
And again, you don't have to build
the whole business on $1,000, but I'm going to use the $1,000 to get
the next bit of learning that I need to get in order to know whether or not I
should commit maybe $2,000 next time, etc.
So what you're doing is you're doing rapid
learning cycles very much like the lean startup methodology only this is more
at the business level rather than the product development level.
And those learning cycles.
Each one is designed so that you feel good about doing it.
You're not afraid of loss,
and it forces you to be creative and work within constraints which just may turn
into whatever your competitive advantage ends up being.
Those are the five principles of successful serial entrepreneurs.
As supported by research.
Principle number one, Pilot-in-Plane.
You're creating the future.
You're not a victim of the future or the mercy of the future.
Principle number two, Bird-in-Hand.
What you have to work with is your current asset base, your current relationships,
your current money. Know what that is because those are your tools.
Principle number three, lemonade. Life gives you lemons.
Make lemonade. So when things don't work,
stop and use the way they're not working as preferably an advantage.
If you can use it directly and if not as
an advantage, at least it's something to spur learning and spur creativity.
Number four is Crazy Quilt.
You're going to be not just creating your future.
You're going to be co-creating it with all
of the other people involved, and you may even change the direction
of what you're doing on the basis of the partnerships it enables you
to create or the people that enables you to get involved so on and so forth.
And principle number five is Affordable Loss.
You cap the amount that you're willing to spend for your next learning cycle
at the amount that you're willing to lose, it keeps you calm.
It keeps you comfortable.
It keeps you stress free, and it also forces you to be creative so
that you can find ways to run a business that automatically has a functioning
operational model that's going to produce a profit.
Those my friends are the five mindset of an entrepreneur.