A recent academic paper by Sarasvathy and Venkataraman in Entrepreneurship Theory and Practise (January 2011) paints a wonderful picture of seeing entrepreneurship as a method in the same way that society understands the “scientific method” as a way of deconstructing difficult questions and therefore understanding how nature works.
They go back to the fundamental work of philosopher Francis Bacon – whose thinking promoted the idea that scientific inquiry was not the preserve of a few people who were gifted with an ability to discover general laws and principles, but if people were taught the method they too could begin their own journeys of discovery. This was a major breakthrough and created vast numbers of scientists, to the extent that now we also have debates on how to commercialise their work, how they compete for scarce research funding, develop talent, career tracks and so forth. Imagine if we believed that only a handful of people had the “gift” of scientific inquiry – would we have had the progress in human affairs that we have had in the past 200-300 years?
So, based on this analogy, the authors promote the idea that there may also be an “entrepreneurial method” and if we were to pursue such a view we may change the education of future entrepreneurs, find new ways of developing opportunities and even of how we see investments in new companies.
Applying the “scientific method” gives us a step by step process of how we think businesses are created and developed. We insist on business plans, market research, logic flows, and business models and, in effect, the creation of a hypothesis that we can believe in, fund and build. But as ventures grow they divert away from the theoretical model and become successful or “failed ventures”. So – what should we do instead?
According to Saravathy and Venkataraman, we should study what entrepreneurs do rather than impose on them what we think they “should do”! A blindingly simple statement, but stated with a great deal of substance.
The curiosity of this view then is if the investors insist on applying the “scientific” method to review business plans and proposals, while privately acknowledging that life is “just not like that” – we persist with a disconnect between what we need to do and what actually gets done. And the one area in which this fallacy persists is with novel technologies and ideas.
For example, if an entrepreneur or inventor comes up with a new idea – he or she is told – “there is no need for what you have come up with” – otherwise someone else would have already done that! There have been many such blunders; not least the report that suggested there would be no market size beyond about 80,000 for mobile phones, no need for more than a handful of computers, that the mouse was not needed (GUIs), that no one would need a touchpad function on phones and so on. All these decisions were made on a fairly static basis, not allowing for evolutionary co-creation of ideas and opportunities.
But – if the stubborn entrepreneur persists with the vision and actually gets into the market place – then the “hindsight” merchants come into play and say: “well, of course, they tapped into a major unmet market need”! Can they really have it both ways?
Therefore we need to think more about the “entrepreneurial method” which is more about co-creating opportunities in incremental ways, based on scarce resources, iterative market feedback, step by step development of the idea, the team, the deepening understanding of markets and customers and gradually allowing the business and the market to shape itself? All this takes time and the investment community, the banks and others may simply not have the patience to allow for this kind of process, but it is really how it works. Which is why the Mullins and Komisar book Getting to Plan B has been such a hit.
I am very taken by the paper by Sarasvathy and Venkataraman and am pleased to be able to air some of the thoughts via this column and hope that investors, entrepreneurs and policy-makers consider the implications of seeing entrepreneurship as a method rather than as a destiny or as magic! It would strengthen incubation processes and result in strong social networks being developed to better assist nascent entrepreneurship.
Dr Shailendra Vyakarnam is Director of the Centre for Entrepreneurial Learning, part of Judge Business School at the University of Cambridge. He currently holds the Otto Monsted Guest Professorship at Aarhus School of Business in Entrepreneurship, Denmark. Shai is also Senior Member at both Darwin College and Wolfson College at the University of Cambridge. He has published five books and several papers on entrepreneurship and has combined academic and business interests having co-founded several businesses.