As the economic gloom sits over us, as indifferent to our misery as a rain cloud at a test match, we screw up our eyes in search of rays of light. Stories of plucky start-up businesses and bold entrepreneurship are among those rays.
I found it inspirational yesterday to be a judge for the Shell Livewire Young Entrepreneur of the Year (the winner will be announced this evening). The finalists were the cream of the crop. Although all under 30, most of the entrepreneurs were already bedecked with various other awards as well as carrying scrap books of favourable press coverage. As someone who has come far too late to an understanding of the importance and excitement of entrepreneurship, it was interesting to see a kind of pattern among the competitors.
When it comes to the complex, reflexive nature of human behaviour, classifications tend to be reductionist, but I discerned three types of business proposition, each associated with different motivations and challenges: these three approaches could be called ‘the opportunist’, ‘the solver’ ‘the visionary’.
The opportunist is the most purely focussed on making money. They are not designers or inventors. Their skill lies above all in spotting a gap in the market and then exploiting it to its full until someone else comes along with another marginal improvement. They will tend to be thinking about their exit strategy almost as soon as their business is up and running, knowing that the opening they have seized will close and that they will then need to survey the market for another one. It is not that these entrepreneurs don’t do good - their businesses succeed because they provide a better service, lower costs or both - but they are unembarrassed about being focussed on profit maximisation. For some people they represent the spirit of enterprise in its pure from, while others find their commercialism less inspiring.
The ‘solver’ entrepreneur sees creating a successful business as a means to the end of making the world a better place. A typical example of this breed will study industrial design or some form of engineering at university. It will be there that they have become fascinated by a problem – perhaps a failing in an aspect of public service, or a lack of product sustainability or flexibility - which they think they can solve. When they talk about their business they are eloquent about the need they think they can meet and fiercely proud of the product they have designed. It isn’t that they don’t want to make money or even that they aren’t commercially savvy, but their conviction about their product means they see the question of creating a profitable business as one of ‘how’ not ‘whether’. The idea that having a clever, functional product isn’t the same as having one which will turn a profit is sometimes too hard for them to accept.
The ‘visionary’ isn’t focussed on solving a current problem - they believe they have an idea which meets a desire which the public may not even know they have. I suspect these entrepreneurs – who will often be very creative thinkers - are the most challenging to investors. Because they are trying to create a new desire or surface a latent demand, their proposition is by its nature speculative. We can all think of products which created a desire which we hadn’t known we had, from the Walkman and ipod to the modern coffee shop, but for every one of these there are a thousand ideas that foundered, or limp on in the small ads or innovations catalogues; a supply searching for a demand.
Of course, these three categories are not mutually exclusive. Of the eight competitors interviewed yesterday six fitted pretty neatly into one or another but the other two were difficult to classify.
There are many initiatives trying to turn young people onto the idea of enterprise. If there is a value to my classification it might be to help youngsters see that there can be very different capabilities and motivations which lead somone to set up their own business. The Shell Live Wire winner is expected to be a public champion of entrepreneurship so I asked all the candidates what they would say to inspire a class of sceptical 14 year olds. My favourite answer was the person who said ‘I would tell them that however hard it might be, setting up a business is basically about being able to pursue your own passion; to make a living doing what you want to do’. Perhaps if we explained to young people that being an entrepreneur can be about meeting your ambition to make money and do deals, or to solve a problem and make the world better, or to have a vision and make it real then we could tap into a wider set of aspirations.
But, perhaps not: in my intellectual shallowness I used to think that making up classifications (or as academics tend to call them ‘typologies’) was a clever and useful thing to do, especially if each category could be made to start with the same letter or all the categories could be given initial letters which together made up a word, like SMART for example. The general futility of this activity was already starting to occur to me when, a few years ago, I overheard the coach of under 12 football team berating his players, who were losing 5-0 at halftime:
‘We have got to sort out the three T’s’ he shouted at his team; ‘The defence, The midfield and The attack’.
But perhaps you won’t agree. After all, the world is surely divided up into two kinds of people: those who create false dichotomies and those who don’t.