Entrepreneurship lessons from strategy leader Rita Gunther McGrath
Nine timeless entrepreneurship pearls of wisdom from the world’s leading strategy expert, Rita Gunther McGrath
- Many entrepreneurs fail because they don’t have a compelling offer to the customer
- Take risks on things that are uncertain, but be sure to think about what would happen if things go wrong
- Be very parsimonious about resources, but also know when the time is right time to scale up
Photography by: Aniruddha Chowdhury
If Sun Tzu was right, and “every battle is won before it is fought”, then strategy is the key to pre-empt victory in business.
When it comes to strategy advice, whether it’s the Yale CEO Summit, the Innosight CEO Summit or the World Economic Forum in Davos, Rita Gunther McGrath is always the headline pick for such insight.
Acuity sat down with the strategic management scholar at the Columbia Business School at the 2016 World Business Forum in Sydney, where she warmed up the crowd for Richard Branson. In conversation with Acuity, McGrath dished the dirt on the strategy lessons that entrepreneurs and business decision-makers must heed if they are to succeed.
Gamble on the “smart risks”
“When it comes to successful entrepreneurs and business people, they have to be willing to take a risk on something that’s uncertain. However, it’s about the ‘smart risks’ – the risks that you’ve thought about what would happen if things go wrong and you’ve got at least a Plan B to mitigate it.
“A lot of risks can be dealt with at very low cost. And if that’s the case, then you’re often wasting opportunities by trying to mitigate those kinds of risks.”
It’s about a team, not just an individual
“A considerable myth about entrepreneurship is the notion of Bill Gates rising from the desert and waving his wand and Microsoft is born. There’s a team, and commonly there are four key roles.
“There’s the idea person that came up with the idea, who is the public face of the company. There’s the operational person who really makes sure that the nuts and bolts get attended to. There’s often a product person or a technical person who is really pushing the front edges of what the product needs. Finally, there’s a customer person thinking hard about what customer development is really all about.”
Sell before you buy
“Who would really benefit from this idea being implemented? If you have an attractive enough idea and the problem is big enough, you’ll find stakeholders to fund it. This gets you the resources and gives you customer buy-in.
“The real watchword in serial entrepreneurship is ‘sell before you buy’. Be very parsimonious with your resources and look for evidence of real customer need and commitment before you go off and develop this thing.”
Entrepreneurs fail for these four reasons
“The first reason entrepreneurs fail is because they do not really have a compelling offer to the customer. Secondly, they run out of cash, as they just haven’t really thought through how much cash they want to burn.
“Thirdly, the team implodes. They lose a key member of the team and then that causes low value proposition to be undermined. Fourthly, they can simply lose interest.”
Personality traits matters
“Successful business people tend to be absolutely relentless. They’re the guys that show up after everybody else has left. They’re very perseverant. They don’t take ‘no’ for an answer and can be very aggressive. They can be very charming. They’re often quite demanding, both of themselves and other people. They are also single-minded – it’s not fun to be married to an entrepreneur!”
Learn what you can and can’t learn
“I can’t teach you passion, I can’t teach you commitment, I can’t teach you perseverance. What I can do teach you to do is avoid the most crucial mistakes and help shape what happens when things go wrong. I can teach you to create a structure that’s scalable and sensible.”
An MBA? Useful, not essential
“An MBA gives you two things that are really valuable: one is a network, and the other is some better tools in your toolkit. However, I don’t think it’s essential. A lot of entrepreneurs can learn by doing and they learn by mentoring and they learn by observing from others.”
You might fly very close to failure
“Most small businesses stay small and most small
businesses do not scale the way a Microsoft or Google did.
“However, Google was nearly a failure. People don’t understand this today, but when it first started Google was just basically an algorithm and it looked for a business model for a while. Then eventually it found a company called AdWords and they solved a problem that had always bedevilled searches.”
Scale with care
“You want to be sequencing your sets of activities, so don’t leap whole scale into hiring staff and getting office space before you have really tested out you value proposition. So, be very parsimonious about resources. However, also know when is the right time to scale up.”