The 7 Principles Of Successful

Entrepreneurship
Its fair to observe that many big, established organizations tend not to think or act in a very
entrepreneurial way. Of course, those of you who manage large organizations (or hold their stock
in your portfolio) are probably thinking, Yes, and its a good thing that executives dont behave
like crazy entrepreneurs. After all, managers of established enterprises are accountable to their
shareholders, customers and employees first and foremost to successfully maintain and operate
the going concern and only secondarily to grow it and improve on it.
Indeed, Hippocrates famous dictum to physicians seems to apply equally well to big-company
executives: First, do no harm.

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But, fully accepting the corporations first priority of protecting and maintaining that which it
already has, some useful wisdom is demonstrated by the behavior of entrepreneurs wisdom that
can be successfully applied to large organizations. Not only can such entrepreneurial thinking
help executives run their mainstream lines of business, but also help to instill greater creativity
when planning and launching new businesses or market initiatives from under the corporate
umbrella.
This post provides some thoughts as to how executives can work smarter and more effectively by
emulating entrepreneurs. I call these The Seven Principles of Entrepreneurship:
Ski with your knees bent.
Refine the skill of falling down.
Get comfortable with close enough.
Be happy with a conditional yes.
Remember that business model innovation is often as important as tech innovation.
Think small.
Strive to understand and mitigate risk.
Lets examine these principles in detail:
Ski with your knees bent

Those of you who enjoy downhill skiing know that one of the first principles of survival is to
keep your knees bent and flexible and your center of gravity low. This style enables you to adjust
to change on the slope, in surface conditions or with obstacles or other skiers and still
achieve your goal of gracefully traversing the hill. Conversely, skiing with locked knees, a rigid
posture and a fixed gaze is a formula for disaster.
Its too easy, when working in an established organization, to develop a certain rigidity in how
one approaches decision-making and day-to-day operations. Most times, you can get away with
it, standing upright, knees locked, eyes trained straight ahead. Why? Because established
businesses necessarily develop standard operating procedures, and oftentimes little changes dayto-day. The rigidity can creep up on you. Sameness and predictability are comforting, and its
human nature to embrace and standardize behavior that succeeded in the past.
By contrast, entrepreneurship is, metaphorically, a bit like skiing moguls (big, scary,
unpredictable bumps) ... blindfolded. If youre an entrepreneur, you have to keep your knees
bent. You have to stay loose. You know full well that things will change, probably dramatically,
and that youll experience dramatic shocks; you just dont know exactly what those shocks will
be, where theyll come from or when theyll occur.
Keeping loose and with a low center of gravity helps business managers absorb change and keep
the business on its feet. Entrepreneurs have always operated this way as a matter of course. And
this sort of flexibility and adjustability can be a crucial advantage for corporate executives as
well, whether in accommodating change in existing markets or tackling new business initiatives.
Refine the skill of falling down.
To continue the skiing metaphor, one of the first things a ski instructor teaches novices is how to
fall. Why? Because its an inevitable part of the sport, and its the primary way of getting hurt,
but good skiers fall gracefully and bounce back quickly.
Similarly, successful entrepreneurship requires getting comfortable with the idea of falling down
repeatedly and springing back up each time. Startup business is all about expecting, gracefully
accommodating and learning from failure. After all, even with the best-thought-through venture,
its reasonable to expect that 50 percent of the original business plan will prove to be wrong.
Worse yet, you wont know which 50 percent until you get into it until you point your skis
down the hill and go.
Understanding this phenomenon is why venture investors often prefer to invest in entrepreneurs
whove experienced failure. Its also why many startups prefer to hire, as key managers,
individuals who have experienced the good and the bad of a previous startup or two. A previous
fall or two is not considered a scarlet letter of failure on a persons career, but rather an
indication of maturity and a willingness to take calculated risks.
For established organizations to successfully grow through innovation, they must delve into less
certain and more ambiguous environments. Therefore, they need to take more calculated risks
without being paralyzed by fear of failure. They need to refine the skill of falling down.
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Get comfortable with close enough.

The vast majority of corporate innovations never see the light of day because theyre killed in
committee. Why do so many die that way? Because innovative ventures and business initiatives
almost always have too many unknowns for many peoples comfort, and the powers that be in
established companies often groups or committees possess the power to say No based on
that uncertainty. Just as, in the old days, IT executives knew theyd never get fired by buying
IBM, with corporate innovation its nearly always a safer bet to say No to something new.
Meanwhile, successful entrepreneurship or corporate venturing and new-business-development
requires operating in a highly uncertain, ambiguous environment. Its a bit like trying to solve
an algebraic equation with seven variables and six unknowns. Technically, it cant be done, so
the correct answer is, We cant do it. The equation cant be solved without taking intelligent
guesses and trying out different combinations based on inadequate information, approximations
and instinct.
But the perfect is often the enemy of the good. Remember, in entrepreneurship: The best
decision is the perfect decision (which youll never have sufficient information or time to
divine). The next best decision is close enough and get moving you can always adjust course
as you go (i.e., ski with your knees bent). And the worst decision of all is to continue to study, or
form a committee (which so often translates to the safe no, and therefore doing nothing).
The entrepreneurial approach accepts close enough: Roll up your sleeves and work with
customers from the start. Get something in customers hands, even if its not finished.
Experiment, and dont be afraid to adjust, occasionally fall down and get back up. Do it, try it,
fix it ... and repeat.
Be happy with a conditional yes.
The tendency in big organizations is to seek budget approval for an entire multiyear project
upfront. After all, nobody wants to launch into building, say, a $275-million plant when they
only have corporate funding approved for the first $30 million for planning and site prep.
The problem is when we see corporate new-business-development folks trying to apply this
upfront approval formula to venturing.
In the entrepreneurial world, nobody expects to receive 100 percent funding upfront; it just
doesnt work that way. With independent ventures, investors believe in milestone investing,
progressively meting out capital sufficient to fund the next 9 to 18 months of activity and the
achievement of the next crucial value-building milestones. For instance, its not uncommon for a
venture requiring a total of $15 million in investment capital in order to reach self-sustaining
profitability to seek seed funding of only a million dollars or less to build a prototype and do
some preliminary testing. A subsequent A round may be for just a few million dollars to
enable the venture to build a team, productize the technology and sign up the first few customers.
And so on. Typically, early-stage investors are keenly interested in continuing to participate in
subsequent rounds; they just like to see incremental progress along the way.
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Internal corporate ventures and here were referring to risky ones entailing new technologies,
new business models and/or new markets, not capacity-expansion projects and the like should
approach funding with the same venture-funding mentality. Remember the principle we
mentioned in our last issue: that 50 percent of a new ventures business plan will inevitably
prove to be wrong, you just dont know which 50. If that holds true, it only makes sense for the
parent company (playing the role of venture capitalist) and the internal startup team to agree on
funding increments and associated milestones rather than the all-in approach. Less capital is
committed, inevitable mistakes or discoveries are less costly and more easily accommodated, and
the new business remains nimble.
Remember that business model innovation is often as important as tech innovation.
Weve never seen any statistics or studies in this regard, but it sure seems that the majority of
shareholder value created over the last half century had a lot more to do with companies
innovating around their business model than around technology. Think of eBay with online
auctions. Store brands and generic drugs. Amazon cutting out the retail middleman.
Manufacturers asking suppliers to co-locate. Dell building PCs to order. Social networking
typified by sites such as MySpace and Facebook. The way HMOs and PPOs fused insurance and
healthcare delivery. Sure, in many cases, technology was involved, but technology was not the
strategic driver that created shareholder value. Instead, it was creativity applied to the business
model (product/service mix, value proposition, channels, pricing) that made the difference. This
kind of thinking needs to be applied not only by entrepreneurs but by corporate new-business
professionals as well.
Think small.
An executive in a tech startup, recently hired away from a Fortune 500 company, unfortunately
brought his big-company thinking with him. Inheriting management responsibility for a
professional services operation of about 50 people growing at over 50 percent annually, he saw a
crying need for more coherent project management. His solution? Call in the vendor whod
provided similar software and services to his last employer, and get a quote. The result? A halfmillion-dollar expense where cloud- or PC-based project management software and rigorous
management communication would have sufficed nicely; worse yet, the expensive solution
never worked. The manager was fired and the system scrapped for a simpler approach.
Too often, we see established organizations trying to innovate and getting caught in this bigcompany, go-big-or-go-home mentality. I observed one internal corporate venture of a
multinational tech company spend millions on PR because Thats how we do things at XYZ
Corp. before theyd even fully defined their product, value proposition, positioning and go-tomarket strategy. Bizarre. Entrepreneurship, even if its taking place under the corporate umbrella,
calls for small, inexpensive, rapid-turnaround experiments and trials. Thinking small doesnt
mean that you dont have big aspirations for your new venture. (Indeed, I tend not to think of
startup ventures as small businesses; we think of them as global enterprises that happen to be
young.) But by iteratively discovering what works and what doesnt, youd be surprised how far
you can get on how little capital.

Strive to understand and mitigate risk.

Contrary to popular belief, entrepreneurs and venture investors are not risk-seeking nuts, the
business equivalent of helmet-free bungee jumpers. In fact, the best ones are remarkably riskaverse, skilled at identifying and mitigating venture risk. Whether they do it intuitively or
explicitly, A-list venture folks are constantly working to wring risk whether its product risk or
risk of a market, financial or management nature out of their startups. Theres a method to their
madness that corporate startups need to apply.
The Seven Principles of Entrepreneurship are enumerated here to stimulate and challenge the
thinking of corporate managers. In many cases, entrepreneurial behaviors that may, on the
surface, seem to be inappropriately risky turn out, on closer examination, to be worth emulating
if done in a thoughtful manner. And emulating certain entrepreneurial behavior can help
corporate executives excel, particularly when it comes to launching new initiatives or product
lines, trying out new business models or entering new markets.
This note was prepared by James D. Price, Adjunct Lecturer of Entrepreneurial Studies at the
Zell Lurie Institute at The University of Michigan Ross School of Business. 2012, James D.
Price.

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