The Entrepreneur's Mentor

Is Our World Real?

As often happens during the summer, I have immersed myself in the exploration of new subjects by reading as much as I can. I have become fascinated by the subject of the "synthetic worlds." Synthetic world are crafted places created by software designers that are designed to accommodate huge numbers of people. They put ordinary people in a strange environment, where they can act as they do in the real world, or in a totally different manner. And interestingly, what they do inside this world can gave effects outside of it.

The author that seems to have the best handle on this subject is Edward Castronova. He has written "Synthetic Worlds" and "Exodus to the Virtual World."  It is fascinating to read how thousands prefer their online world to the real one. For them, the online world is more real.

By analogy, some business leaders live in their own virtual world. They create their own reality  They bend the facts to their own view and perceive things in a way that satisfies them. The essentially create their own customized vision of what is going on. But their connection to the real world, the one unhabited by their companies and their employees, may be tenuous.

In my role as an entrepreneurial mentor, I have seen many company owners go through life thinking all is well. They have constructed their own stories - and they don't let the facts get in the way of their happy story. Is this any different from living in a virtual world where we fight dragons, conquer Black Knights and capture the heart of the damsel in distress?

Some CEOs don't even listen to direct evidencer that contradict their view. In retrospect, everyone can see that Bernie Madoff was running a scam. Why was everyone blind to it, even when evidence was so strong? We believe what we want to believe.

If you believe your employees love you and will be loyal forever, you will not listen to those who tell you they are not engaged or not productive. If you think your customers have a great personal relationship with you that can survive anything, you won't be on the lookout for dissatisfaction. You are living in a very dangerous world.

Business leaders have to test their assumptions and beliefs. They must be in touch with the facts. They must look at what is happening in the world and must question how that impacts them and their businesses. They must learn to accept that their virtual world is a nice aspiration but not the reality of paying the bills, feeding the family, building a nest egg and developing something great.

Rose colored glasses have their place. But that place is not in the day to day of running a business. Business leaders need to choose the real world for their business. They can exist in alternative realities in their time off, be they online or purely of the mind. An owner can not afford to be a guru on a mountaintop spouting visionary epithets unless there are others managing the business in reality and yet others translating the language of the alternate reality into something strategically or tactically based.

They used to say "pick your poison" in the old movies. Now it is "pick your reality." Choose well, because there is a lot at risk.

Innovation Environment

It doesn't stop. The flow of new ideas, leading to new businesses and new products, is not deterred by a weak economy. To the contrary, it may be spurred by our economic distress. We have to be more clever and more inventive to achieve with fewer. resources.

Entrepreneurs have had to re-think all of their processes in order to eliminate as much cost as possible. They have had to seek out new sources of revenue. Even many who have never thought of themselves as innovative have discovered previously unknown competencies, driven to the surface by necessity.

Suppose that President Obama banned the sale of gasoline in our country effective in one year. Don't you think necessity would propel innovators to come up with new solutions quickly?

Innovation is, of course, part creativity and part intelligence. But it is also the application of critical thinking to common problems to come up with uncommon solutions.

There are different ways to be innovative. We can all think out of the box. It is important for entrepreneurs to remember that. Instead of giving up when an obstacle seems too difficult to overcome, look at it as a Rubik's cube. Move some parts around; turn it over and look at it from a different angle; keep thinking and re-thinking and possible solutions become visible. We can innovate with totally new ideas or by taking an old one and adding or subtracting a key element or two.

Necessity can be the mother of invention. This old adage can be the key to your business surviving and thriving.

Six Month Review

For some, the key landmark at this time of year is the summer solstice, which just passed; or the first day of summer. To others, it is the end of the 2nd quarter of the business cycle. Either way, the year is just about one half over. What can we learn from the first half?

What did we do right? What could we do better? And what are the critical success factors for the next six months? We are still in the depths of a bad economy, so we cannot expect external factors to be of assistance. Consumer confidence has not picked up, so we can't count on euphoria.

We can only count on ourselves. We have to do the right things. We have to examine what it is that keeps our existing customers or clients coming back and make sure we keep doing those things. If we are not doing enough, we have to do more. It is not just price. Service and quality are critical. Reliability is necessary. Flexibility counts. What else?

We have to remember that our employees are the ones that are responsible for our customer relations. Happy, engaged employees contribute hugely to customer loyalty. Even in the age of layoffs and benefit cutbacks, we can work hard to keep our employees as happy as possible under the circumstances. We can work to inspire them, to earn points for credibility, transparency, honesty and integrity. How we treat our employees is part of our brand- don't forget that.

We can cut cost and lay off employees, but it is rarely enough. We have to keep business coming in the door. We have to pay our suppliers. We have to ask for everyone's contributions- effort, ideas, teamwork and sacrifice.

Entrepreneurs need to ask of themselves what they are asking of their employees. If there is a general wage freeze or cut, the owner should be doing the same to his own wages. If he is asking additional hours from others, he should be putting them in himself.

If something is taken away from employees, they ought to be given an incentive of some sort to get it back. Employees ought to be able to earn back what they gave up if certain benchmarks are hit. This builds teamwork, morale, employee engagement and employee loyalty and gives the employer credibility if he ever has to ask something of the employees again.

Use the midpoint of the year to measure your accomplishments and your opportunities for improvement. Then do something with the information.

More Myths Busted

Scott Shane's book The Illusions of Entrepreneurship provides chapter after chapter of new insights.

As we listen to the talking heads on cable news talk about our financial crisis, they all speak to the entrepreneurial aspect of America and how we are so much different from Europe and other areas.

But Shane has some interesting facts that can be added as fuel to this fire.

• America is not becoming more and more entrepreneurial. In fact, entrepreneurialism is on the decline in the US.

• We are not even one of the most entrepreneurial countries. Turks are four times as likely to start their own business. Peruvians are three and one half times as likely to become entrepreneurs. The US is in the bottom third of countries when measure by the number of young businesses per capita.

• Silicon Valley and high-tech corridors are exceptions rather than the core of entrepreneurialism in the US. People are more apt to start businesses in poorer and more agricultural areas.

• Businesses are more likely to be started in areas of high unemployment than people in places with low unemployment. Unemployed people are more likely to start a business than those with jobs.

• Startups in an area tend to mirror businesses already in the area. That is because most people start businesses in the industries in which they are currently working and in the geographic areas where they live and work.

• Businesses do not start up in greater abundance in areas where there is a lot of capital available. Business does not follow capital. In fact, capital follows business. So capital tends to gravitate to areas where a number of businesses are starting.

The American entrepreneur looks pretty different from Donald Trump, Bill Gates and Steve Jobst. And while some of us would like to achieve what they have, most just want to make a living.

Costly Myths

I have recently come across a rather shocking book, shocking in the sense that it shatters a number of commonly held beliefs about entrepreneurs. The book is The Illusions of Entrepreneurship by Scott Shane. Shane is a professor at the business school of my alma mater, Case Western Reserve University.

Over the next few posts I am going to focus on these myths.

Before even getting into the meat of his book, Shane sets out some fairly startling facts in the Introduction.

• Contrary to common belief, entrepreneurs are not a rare breed. It is a common vocation, with more than 11% of American households owning a business.

• In the US, more people start a business each year than get married or have children.

• The typical entrepreneur is a married white man in his forties who has some college education, but not a degree.

• He lives where he was born, not in high-tech corridors.

• The new business is low-tech and is in an industry where he has much work experience.

• He has no big plans. He just wants to make a living.

• The typical entrepreneur starts a business to avoid working for others.

So, the picture of the wunderkind with a big new, innovative idea that blooms into a large employer and business powerhouse is much more the exception than the rule.  This is only the beginning of what Shane has to offer. And his findings are based on significant research.