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Business Lessons from The Entrepreneurial Mindset (entrepreneurship column)

Book Review:
Innovation and Entrepreneurship


What No One Ever Tells You About Starting Your Own Business

The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty

The Entrepreneurial Mindset

Strategies for Continuously Creating Opportunity in an Age of Uncertainty

By Rita Gunther McGrath and Ian MacMillan

The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty is one of the best books I've read about entrepreneurship. Yet, nearly all the examples and case studies in The Entrepreneurial Mindset focus upon larger companies. The book is about strategically launching new products without risking the corporate piggy bank and moving your company into new areas where your company doesn't have much experience and knowledge. Managing people's creativity and your company's opportunities is another part of The Entrepreneurial Mindset.

McGrath and MacMillan suggest entrepreneurs view their endeavors as a portfolio of options. Entrepreneurs create "opportunity portfolios." Each option is pursued or abandoned as conditions warrant and resources allow. Habitual entrepreneurs ruthlessly weed out unprofitable endeavors and are willing to move in new directions. They should also map out their projects to be sure they aren't trying to do too much.

McGrath and MacMillan tell us that the goal is to learn as you go and effectively convert assumptions to knowledge at low cost. For example, via Stepping-Stone Options, McGrath and MacMillan write: "You start with small, exploratory forays into less challenging market niches and use the experiences gained there as steppingstones to build competencies in increasingly challenging and attractive market arenas that you discover as you go."

The Entrepreneurial Mindset gives the example of The Kyocera Company, which entered the industrial ceramics business by focusing upon lower-end, niche-based, ceramic products, such as ceramic scissor blades. Using the knowledge of ceramics acquired making scissor blades, the company successfully moved into more profitable ceramic markets, such as semiconductor-chip substrates. This moving-ahead-as-you-learn-and-learn-as-you-move-ahead is a key to becoming a successful entrepreneur.

The authors highly recommend the use of key ratios to benchmark company performance. They give a great example with G.E. Financial Services (an ultra-small start-up J ). Something must happen to improve your ratios. McGrath and MacMillan define this "something" as "entrepreneurial insight." Entrepreneurial insight is the crucial ingredient behind entrepreneurial success. Entrepreneurial insight is seeing something about an industry or a market that others miss or fail to understand and finding a way to convert that knowledge into a powerful market position.

The authors astutely observe that while it is relatively easy to reverse-engineer a product, products bundled with services are much more difficult for competitors to replicate. McGrath and MacMillan strongly emphasize carefully examining the features of your own products and services.

McGrath and MacMillan describe the process of "attribute mapping," which divides a product's features into the customer's perception of the desirability of the feature. Attributes could range from "nonnegotiables" (features expected by the customers) through "differentiators" (features that positively differentiate your product from the competition) and "exciters" (features customers find positively delightful) to "tolerables" (features not really liked, but not hated either) and "enragers" (features customers absolutely hate, fear, or despise).

Enragers must be eliminated, while exciters to drive customer purchasing should be sought. McGrath and MacMillan point out that there is no definite correlation between the expense of creating a feature and the customer's perception of its value. They write, "Exciters are often technically simple, relatively low-cost advances that greatly add to the offering's convenience or ease of use." And, many features that are quite costly often go unappreciated by the customer. I found this section about "attribute mapping" useful.

Learning how consumers contemplate, select, use, and dispose of a company's products is another major focus of "The Entrepreneurial Mindset." Via such "consumption chain analysis," entrepreneurs can find ways to positively differentiate their products from the competition. Great ideas here.

I found some of the lists and worksheets a bit tedious (but useful). And, some of the writing was a bit formal and the book slows down in some places. For example, when discussing "stratification mapping." Yawn. Why stratify? Why not just break your company's revenue and profits down by endeavor or product? I see no value in lumping the different sources of revenue together to create a "strata," i.e. a lumpy mess in my view. Then, McGrath and MacMillan discuss product demand. In that section, the authors formally write that Pfizer's Viagra creates "a highly attractive structure of demand." Say what? Couldn't they just write, "There are a lot of people who might want to buy it." ?

If you want to understand how other strategic product launchers think and how companies achieve market superiority, I highly recommend The Entrepreneurial Mindset. There is a lot to be learned from this excellent book.

The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty
The Entrepreneurial Mindset:
Strategies for Continuously Creating Opportunity in an Age of Uncertainty

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