The Entrepreneurial Mindset (and my Top 10 list)

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For the past 30 years I’ve pursued the answer to the question: “What distinguishes the best entrepreneurs and innovators from the rest of us?”

I’ve done this as a startup entrepreneur in Silicon Valley (Google owns a startup e-commerce company I led) and as a corporate entrepreneur launching and building new businesses globally for enterprises such as Sony.

And for the past 15 years, I’ve also studied and taught entrepreneurship and innovation at UC Berkeley, working with entrepreneurs, F500 executives and public sector policy-makers around the world.

During this time, the entrepreneurial environment has changed dramatically. Over the past couple of decades in particular, we have reframed the way we conceive, evaluate, launch and grow startup ventures. We have identified particular habits, techniques and tools successful entrepreneurs employ, and defined these resources in ways that aspiring entrepreneurs and innovators can easily adopt to improve their own odds.

These proven approaches provide a definitive answer to the oft-asked question whether or not entrepreneurship can be taught.

While a semester studying entrepreneurship with my UC Berkeley colleagues and me may not suddenly transform you into the next Jeff Bezos, Jack Ma or Elon Musk, your chances of success will definitely improve.

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Innovation versus Entrepreneurship

We often confuse or conflate the concepts of innovation and entrepreneurship. Especially since innovation is almost always involved in entrepreneurship, but sometimes entrepreneurship is not a part of innovation. Here are my basic definitions:

  • Innovation is about developing something new and better, with the potential to drive significant value for customers, partners and your organization. Innovation can address concepts, processes, products and services.
  • Entrepreneurship is all about putting innovation to work. It is taking those insights and making them real by assembling resources, building products and generating revenues.

Though clearly distinct in a number of specific areas, innovation and entrepreneurship go hand in hand. And especially so when driving entrepreneurial projects.

First, we do the work and develop the insights leading to innovative new concepts, then we deploy our entrepreneurial skills to leverage those innovations for maximum impact and value.

The Innovation Conundrum: “Failure is not an option”

As business leaders, we are constantly on the lookout for growth and competitive advantage. Innovation is often one of the critical levers we use to help us get there. Unfortunately, I often hear executives frame the challenge this way: “We need to drive more innovation across our organization. But failure is not an option.”

There is a conflict inherent in that statement. The more innovation these leaders want, the more they also need to understand that failure will likely become a key element of the journey.

In many instances, failures — appropriately managed — actually provide the specific insights needed to attain the sought-after innovations and breakthroughs. One of the most basic innovation equations I share with business leaders trying to better understand this dynamic looks like this:

  • if you want to innovate, you need to try new things;
  • when you try new things, some will work and some won’t;
  • the more innovation you want, the more “new things” or risk you need to incorporate; so…
  • the more innovation you want, the more failure you must also be willing to assume.

Successful entrepreneurs understand this. They know that many of the ventures they launch will fail. In fact, it is generally accepted that more than 80% of startups fail. Venture capitalists understand this as well.

That’s why VCs create portfolios comprised of investments across multiple ventures knowing that, while some of these ventures will fail, those that succeed have the potential to deliver outsize returns that more than make up for other losses.

The Role of Failure — and “Failure-Savvy” Leadership — in Driving Innovation

When my UC Berkeley colleague John Danner and I started conceiving a book to investigate the factors that drive so much innovation and value creation in Silicon Valley, we did not necessarily intend to focus so heavily on failure.

But ultimately that’s where we ended up: seeking to develop a better understanding of the role that failure plays in the innovation and entrepreneurial process. This eventually led to our Amazon bestselling book: “The Other ‘F’ Word: How Smart Leaders, Teams, and Entrepreneurs Put Failure to Work,” (Wiley, 2015).

The overarching message of our book is — whatever the size of your organization — developing a more productive relationship with failure will open up a path to greater innovation and growth, more engaged employees and teams, and greater success in the long run.

If the observation regarding more engaged employees seems counterintuitive, it evolves from work we did with The Great Place to Work Institute. A concentrated distillation of our work in this area goes something like this: if the occasional failure in the workplace — especially while undertaking new initiatives — is not punished by a loss of status or job, then trust is created (thanks for following the double negative there). Trust between boss and employee, and trust between co-workers. This leads to improved team dynamics and more engaged employees. It results in employees who feel empowered to solve problems and innovate within whatever guidance you provide.

This does not mean you need to like failing. None of us enjoy that. But it means you, your team, and your organization benefit when you create a more productive relationship with failure.

Being a failure-savvy leader does not mean you accept failure in every part of your organization. There are clearly places it is unacceptable to fail. These “no fail zones” include areas where Six Sigma should reign, such as the production line of a pharmaceuticals company or the control room of a nuclear power plant.

But when it comes to innovating in your product lines, business models, customer relationships, and marketing strategies, if you’re not failing some of the time then you are probably playing it too safe.

The “3 Sets” of Successful Entrepreneurs

Every year at UC Berkeley and around the world, I meet with dozens of groups who seek to better understand why so much innovation, new company formation, and value creation takes place in Silicon Valley.

Part of the answer is found in the highly evolved entrepreneurial ecosystem that exists in Silicon Valley.

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Six Core Pillars of Effective Entrepreneurial Ecosystems

And of course part of the answer is found with the talented entrepreneurs themselves.

At its most basic, I refer to these capabilities as “The 3 Sets of Successful Entrepreneurs: Skillset, Toolset, and Mindset.” In my entrepreneurship curriculum at UC Berkeley, we put these three “sets” to work, adding new tools and skills every week as my student teams launch new ventures in real time.

The Toolset represents the “what.” Frameworks and models that entrepreneurs and teams utilize to frame and execute their activities and steps. Tools include frameworks such as personas to better understand customers, interview guides and tracking tools for customer discovery and development, competitive positioning grids, definitions of the customer lifecycle, and different structures for business models.

The Skillset represents the “how.” Processes, methodologies, and techniques, in many cases putting the tools to work. How to look at markets and customers. Rapid prototyping and testing. Market segmentation. Launching into tightly defined beachhead markets. Growth hacking. Creating a great customer experience. And storytelling and pitching your venture.

And then there is the Mindset of the entrepreneur…

Mindset: The Top 10 Traits of Successful Entrepreneurs

For more than a decade I have maintained an updated my own Top 10 List on the mindset of successful entrepreneurs. How they think. How they are wired. Where they set priorities. How they act. Here it is:

1. Bias to action — every strategy and plan is merely a set of hypotheses until put into action, and that’s what good entrepreneurs do. Markets change quickly, customer preferences evolve, technology and products have accelerated lifecycles, and competitors are nimble and fast.

2. Experiment — the best way to test assumptions is to run lots of experiments. Prototype and receive feedback on different versions of your product and pricing. Compare channels and partners. Test ads and offers. Track metrics for all of these.

3. Welcome and create change — entrepreneurs thrive on change. Change creates opportunities. Changes in technology, platforms and infrastructure, trends, demographics, laws and regulations. Incumbents who don’t respond effectively to change quickly find themselves flanked by fast-moving competitors.

4. Optimistic — entrepreneurs expect positive outcomes, even though we know 80% of startups fail. We expect our startup will beat the odds and succeed, one way or another. Plus, we are leaders and team builders, and who wants to follow a pessimist?

5. Make decisions with incomplete information — entrepreneurs rarely if ever have perfect information upon which to base crucial decisions every day. And if they wait until they can gather that perfect information, they are probably moving too slowly. Speed matters. Successful entrepreneurs understand that a good decision today is often better than a great decision in two weeks.

6. Intensely curious — in addition to running experiments all the time, entrepreneurs consume huge amounts of information and look for patterns in their sector and elsewhere. We read voraciously, our inboxes are filled with newsfeeds, and we attend many events and ask lots of questions.

7. Understand and manage risk — one of the attributes typically associated with entrepreneurs is we are risk takers. While that is true on some levels, the best entrepreneurs are really experts at managing risk, figuring out how to de-risk ventures at every phase. We run experiments to see what works and what doesn’t. We raise capital in stages, risking less capital in early rounds. We are disciplined in how we go to market, succeeding in small beachhead markets before expanding our efforts.

8. Failure-savvy — successful entrepreneurs try to fail in ways that provide insights into markets, problems, products and customers, and that don’t kill the company. We know that “today’s failure is a lesson for tomorrow.”

9. Know our customer — we talk to customers every day, and know them intimately. We understand our customers’ experiences and the customer lifecycle. When someone says “I don’t talk to customers, I have people for that,” they are clearly not an entrepreneur.

10. Ask for forgiveness, not permission — we constantly try new things and aren’t afraid to break a few rules. We enter markets in unconventional ways (see Uber). We drive changes in industries, channels, customer habits, regulations and laws. Surprisingly, this approach can also be effective inside large enterprises by corporate entrepreneurs who know how to manage risk and manage their stakeholders.

Putting it all Together

Do you see yourself in these traits? Channel those qualities and capabilities to accelerate the pace with which you operate, the experiments you run, the questions you ask and the opportunities you investigate and create.

Or pick a trait to which you aspire, and see how you can put that trait to work in your professional life today, this week, this month. We change our own trajectory, our personal energy, our relationships with our friends and colleagues, and also the related outcomes, by changing our habits, so give yourself a reminder every morning.

Be persistent.

And don’t be afraid don’t be afraid to fail from time to time.

We all do, especially when we strive to drive positive change.

mc

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MARK COOPERSMITH is a best-selling author, entrepreneur, Fortune 500 executive, and educator. A Senior Fellow at UC Berkeley’s Haas School of Business, he teaches entrepreneurship, innovation and leadership to current and future leaders at UC Berkeley, and to executives globally.

He has launched and built Silicon Valley startups (his ecommerce startup is now owned by Google), built and led global businesses for Sony and Newell Rubbermaid, and is a frequent keynote speaker. His book “The Other ‘F’ Word” helps leaders turn failure from a regret into a resource to drive innovation and growth.

Mark’s entrepreneurship students have launched more than 100 ventures.

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A longer version of this article originally appeared as the cover story for the Q1 2019 edition of Strive Magazine. For more on the seven stage Failure Value Cycle from my book “The Other ‘F’ Word” with John Danner (John Wiley and Sons), and The 6 Pillars of Effective Entrepreneurial Ecosystems, see the full article here: https://magazine.thestriveproject.com/issue/jan-mar-2019/the-entrepreneurial-mindset/

Entrepreneur, author, speaker, teacher of innovation & entrepreneurship at UC Berkeley & globally. Drive innovation & growth with my book The Other F Word.

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