Previously, we looked at how the startup landscape has changed and that you might not need a formal business plan to successfully launch your business. In this post, we will look into why we keep getting the same old business advice. What has emerged, as the funding and risk gap has widened, is a greater awareness that there are different entrepreneurial reasoning skills required depending on the industry sector, growth stage, and scalability of the startup.
Based on research performed by Saras D. Sarasvathy of the University of Virginia’s Darden School of Business, there are specific characteristics, habits, and behaviors of successful startup entrepreneurs. The thought and problem-solving processes of successful entrepreneurs, as identified by this research, uncover a set of principles and logic that are quite contrary to the advice entrepreneurs are frequently urged to follow.
Most of the standard entrepreneurial advice from books, courses, and consultants is provided by corporate leaders from legacy businesses, professors at academic institutions, and business service consultants such as CPAs or lawyers. These advisers, based on their locus of personal experience, have more management-dominated reasoning skills. However, most startup entrepreneurs (outside innovation and manufacturing industries) look at the problem of starting a new business with a different set of reasoning skills that are often better suited to launch less costly and lower-risk ventures.
These advisers often focus on business administration and high levels of pre-planning. According to Saravathy, this advice is out of sync with the advice needed for the vast majority of startup entrepreneurs. According to Sarasvathy’s research, what makes the startup entrepreneur’s mind different is that they employ effectual reasoning. However, most business advisers come from, and therefore, focus on causal reasoning.
Are most of your small business advice coming from sources whose experience comes from management-dominated reasoning skills?
The follow series of post make up what I call the “New Small Business Manifesto”
- Why Being Told You Need a Business Plan May Be Bad Advice
- Why The Business Planning Advice You Have Received Is Probably Stale
- Why The Business Advice You Are Getting Is One-Sided
- How Your Reasoning Skills Can Affect Your Business Success
- Affordable Loss Principle – Reaching Markets with Minimum Resources
- Strategic Partnership Principle – The Truth about Competitive Analysis
- Leverage Contingency Principle – Planning for the Unexpected
- Exploit the Future by Shaping It – Don’t Try to Predict It
For additional information on what makes the entrepreneurial brain different, check out “The Entrepreneurial Brain.”
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