What can entrepreneurs and professional managers learn from each other?

Posted by on Mar 19, 2012

More importantly, when and where should these lessons be applied? 

A lot has been written about the differences between entrepreneurs and managers, often with the underlying message that professional managers should try to be more like entrepreneurs.

The praise showered on entrepreneurs includes that they:

  • see opportunities where others don’t
  • have the knack of making something out of nothing
  • are “fearless”, “independent minded” and “adaptable”
  • are constantly scanning for new opportunities
  • are avid information-gatherers and opportunistic learners
  • see and pursue opportunities without the need for reams of market research
  • are doers who prefer action over analysis

The same sources tend to describe professional managers in far less glowing terms. When compared to entrepreneurs, managers are often described as being (relatively) unimaginative, skeptical, narrowly focused, inflexible and cautious.  We’re also told they prefer analysis and planning over action.

With such a list of kudos for entrepreneurs, it would be surprising if some managers didn’t start to develop a slight inferiority complex!

While there’s a dose of hyperbole in this, the research seems to bear out some of these generalities.

What does the data tell us?

The research tells us that entrepreneurs aren’t deterred by a lack of market research.  They prefer to get to market quickly, to “do the do-able”, then push it to see where else it can lead.  For example, 60% of Inc. Magazine’s top 500 entrepreneurial companies were started without a business plan, and only 12% had market research at start up.

The data also tells us that entrepreneurs spend significantly more time than managers searching for information in their off hours and through nonverbal scanning.  They employed different sources than managers and paid special attention to risk cues about new opportunities.

Are the differences personal or situational?

One of the important findings of research into the behaviour of entrepreneurs is that with success and experience, the gap between entrepreneurs and managers shrinks.  As entrepreneurs leave the start-up phase and move into successful operation, they tend to behave more like managers!  This shows that many of the differences may be more situational than personal.

Personality differences may also be a factor. Those attracted to entrepreneurial ventures and repulsed by the predictable consistency of operations tend to be independent-minded risk-takers who thrive on excitement and change.

However, we believe that many of the differences between these two groups are due to the nature of their different challenges.  Breaking new trails and creating something new requires a very different focus and modus operandi than managing a going concern.  We think these differences provide us with the framework for a contingency approach for selecting the best meta-strategy for tackling opportunities.

When should managers be more like entrepreneurs, and vice-versa?

There are times when the situation calls for the dogged persistence of the stereotypical manager, mining market data to find an edge over competitors in a well-defined market.  There are other times when an entrepreneurial approach is better – keeping goals loose and learning from implementation, and always searching for ideas about how the opportunity can be expanded. We’ve seen some of our clients use both approaches successfully in different situations.

Next week, we’ll distill what we’ve observed into a simple set of guidelines to help managers know when and how to be more entrepreneurial. We’ll also present guidelines to help entrepreneurs recognize when and how they should emulate professional managers.

The contingency approach we’ll suggest includes two important situational variables for deciding when to be more entrepreneurial and when to be more like professional managers.  See if you can guess what they are, then check back next week to find out if you were right.

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