Entrepreneurial strategies

Just as entrepreneurship requires entrepreneurial management, that is, practices and policies within the enterprise, so it requires practices and policies outside, in the marketplace. It requires entrepreneurial strategies. Of late, "strategy in business" has become the "In" word, with any number of books written about it. However, I have not come across any discussion of entrepreneurial strategies. Yet they are important; they are distinct; and they are different. There are four specifically entrepreneurial strategies. 1. "Being fustest with the mostest" 2. "Hitting them where they ain't" 3. Finding and occupying a specialized "ecological niche" 4. Changing the economic characteristics of a product, a market, or an industry These four strategies are not mutually exclusive. One and the same entrepreneur often combines elements of two, sometimes even three, in one strategy. They are also not always sharply differentiated; the same strategy might, for instance, be classified as "hitting them where they ain't" or "finding and occupying a specialized 'ecological niche."' Still, each of these four has its prerequisites. Each fits certain kinds of innovation and does not fit others. Each requires specific behavior on the part of the entrepreneur. Finally, each has its own limitations and carries its own risks. "Being Fustest with the Mostest" "Being fustest with the mostest" was how a Confederate cavalry general in America's Civil War explained consistently winning his battles. In this strategy the entrepreneur alms at leadership, if not at dominance of a new market or a new industry. "Being fustest with the mostest" does not necessarily aim at creating a big business right away, though often this is indeed the aim. But it alms from the start at a permanent leadership position. "Being fustest with the mostest" is the approach that many people consider the entrepreneurial strategy par excellence. Indeed, if one were to go by the popular books on entrepreneurs, one would conclude that "being fustest with

the mostest" is the only entrepreneurial strategy-and a good many entrepreneurs, especially the high-tech ones, seem to be of the same opinion. They are wrong, however. To be sure, a good many entrepreneurs have indeed chosen this strategy. Yet "being fustest with the mostest" is not even the dominant entrepreneurial strategy, let alone the one with the lowest risk or the highest success ratio. On the contrary, of all entrepreneurial strategies it is the greatest gamble. And it is unforgiving, making no allowances for mistakes and permitting no second chance. But if successful, "being fustest with the mostest" is highly rewarding. Here are some examples to show what this strategy consists of and what it requires. Hoffmann-LaRoche of Basel, Switzerland, has for many years been the world's largest and in all probability its most profitable pharmaceutical company. But its origins were quite humble: until the mid-1920s, HoffmannLaRoche was a small and struggling manufacturing chemist, making a few textile dyes. It was totally overshadowed by the huge German dye-stuff makers and two or three much bigger chemical firms in its own country. Then it gambled on the newly discovered vitamins at a time when the scientific world still could not quite accept that such substances existed. It acquired the vitamin patents -- nobody else wanted them. It hired the discoverers away from Zurich University at several times the salaries they could hope to get as professors, salaries even industry had never paid before. And it invested all the money it had and all it could borrow in manufacturing and marketing these new substances. Sixty years later, long after all vitamin patents have expired, HoffmannLaRoche has nearly half the world's vitamin market, now amounting to billions of dollars a year. Du Pont followed the same strategy. When it came up with nylon, the first truly synthetic fiber, after fifteen years of hard, frustrating research, Du Pont at once mounted massive efforts, built huge plants, went into mass advertising -- the company had never before had consumer products to advertise and created the industry we now call plastics. Not every "being fustest with the mostest" strategy needs to aim at creating a big business, though it must always aim at creating a business that dominates its market. The 3M Company in St. Paul, Minnesota, does not-as a matter of deliberate policy, it seems, attempt an innovation that might

result in a big business by itself. Nor does Johnson & Johnson, the healthcare and hygiene producer. Both companies are among the most fertile and most successful innovators. Both look for innovations that will lead to medium-sized rather than to giant enterprises, which are, however, dominant in their markets. Perhaps because "being fustest with the mostest" must aim at creating something truly new, something truly different, nonexperts and outsiders seem to do as well as the experts, in fact, often better. Hoffmann-LaRoche, for instance, did not owe its strategy to chemists, but to a musician who had married the granddaughter of the company's founder and needed more money to support his orchestra than the company then provided through its meager dividends. To this day the company has never been managed by chemists, but always by financial men who have made their career in a major Swiss bank. The strategy of "being fustest with the mostest" has to hit right on target or it misses altogether. Or, to vary the metaphor, "being fustest with the mostest" is very much like a moon shot: a deviation of a fraction of a minute of the arc and the missile disappears into outer space. And once launched, the "being fustest with the mostest" strategy is difficult to adjust or to correct. To use this strategy, in other words, requires thought and careful analysis. The "entrepreneur" who dominates so much of the popular literature or who is portrayed in Hollywood movies, the person who suddenly has a "brilliant idea" and rushes off to put it into effect, is not going to succeed with it. There has to be one clear-cut goal and all efforts have to be focused on it. And when those efforts begin to produce results, the innovator has to be ready to mobilize resources massively. Then, after the innovation has become a successful business, the work really begins. Then the strategy of "being fustest with the mostest," demands substantial and continuing efforts to retain a leadership position; otherwise, all one has done is create a market for a competitor. The innovator has to run even harder now that he has leadership than he ran before and to continue his innovative efforts on a very large scale. The research budget must be higher after the innovation has successfully been accomplished than it was before. New uses have to be found; new customers must be identified, and persuaded to try the new materials. Above all, the entrepreneur who has succeeded in "being fustest with the mostest" has to make his product or his process obsolete before a competitor can do it. Work on the successor to the successful product or process has to start

immediately, with the same concentration of effort and the same investment of resources that led to the initial success. Finally, the entrepreneur who has attained leadership by "being fustest with the mostest" has to be the one who systematically cuts the price of his own product or process. To keep prices high simply holds an umbrella over potential competitors and encourages them. The strategy of "being fastest with the mostest" is indeed so risky that an entire major strategy is based on the assumption that "being fustest with the mostest" will fail far more often than it can possibly succeed. It will fail because the will is lacking. It will fail because efforts are inadequate. It will fail because, despite successful innovation, not enough resources are deployed, are available, or are being put to work to exploit success, and so on. While the strategy is indeed highly rewarding when successful, it is much too risky and much too difficult to be used for anything but major innovations. In most cases alternative strategies are available and preferable not primarily because they carry less risk, but because for most innovations the opportunity is not great enough to justify the cost, the effort, and the investment of resources required for the "being fustest with the mostest" strategy.