The bitter truth about entrepreneurial success
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If you have taken a class in entrepreneurship recently from the top business schools of the world, chances are that many of the lessons taught were not based on sound knowledge. Worse, it is likely that some of the content was nothing but platitudes, good wishes, or simply illusions: mediocre knowledge sold at the price of gold.
Once an obscure elective that attracted few students and generated little academic interest, entrepreneurship research and education has exploded since the internet bubble made start-ups a beacon of light for ambitious youngsters, and, for the first time in the history of Harvard, entrepreneurship became the most popular career choice a few years ago. Today, students see it as a valid alternative to a classic corporate ladder, and schools use it as a differentiation mechanism: get our MBA, we will teach you how to be a successful entrepreneurial leader, not an ordinary manager.
Engaging in entrepreneurship, however, is like finishing Ulysses: had one known how tough it would be, one would probably not have attempted it. Hence the Talmudic dilemma: how do you teach something that will lead the vast majority of your students, statistically speaking, to a painful failure but not before they have spent months, if not years, enduring hard work and little pay?
No one likes being the messenger of bad news, even less so when the recipient is your customer. So we pretend instead: professors pretend that their students can be transformed into an “entrepreneurial leader” in a short MBA quarter shared with three other classes, and business schools pretend that the successful cases they present in their brochures are not only true, but also typical. They may also tell their students that up to a quarter of their graduating class end up starting a venture, without revealing how many of these start-ups survive to see their thousandth day.
There are not enough euphemisms to hide the bitter truth: becoming a successful entrepreneur is immensely difficult, so much so that the oddity is when a start-up survives, not when it fails. At the heart of creative destruction is destruction, often of the limited resources of the entrepreneur and his or her inner circle. Many, if not most, entrepreneurs use their or their family´s assets to guarantee the capital needed to start a business, ensuring that a failure not only kills their livelihood but also their savings and sometimes their future as well.
Risk is not a reason not to try. Yet, as is the case with any risk, ignoring it or underestimating its true level is seldom a good idea. It is reasonable, then, to encourage entrepreneurs everywhere, yet whenever possible avoid predictable errors. A good understanding of why entrepreneurship fails, how the process unfolds, and why it stops unfolding increases the chances of success, as does adequate preparation and a few simple techniques that are both easy to teach and to learn. This is what business schools should teach, instead of the lame encouragements to “follow your passion” and “take the entrepreneurial challenge” that sound like science but feel like marketing.
Wouldn´t you want to be told that successful high-growth technological companies are usually created by middle-aged individuals, possessing the highest level of academic degree, a deep understanding of the customer problem, the market, the industry, and the solution they propose, and a good access to capital that predates their start-up? Wouldn´t you want to know that not having these attributes will bring your chances of success close to zero? Wouldn´t you want to be told that most entrepreneurs grossly overestimate their chances of success, and that their decision to “go for it” is based on a fundamental error that may leave them in debt forever? Wouldn´t you want to know that contrary to the iconic stories of Mssrs Zuckerberg, Jobs and Gates among others, education strongly increases the likelihood of starting a business and also its chances of survival?
Business schools are not serving entrepreneurs. As John Mullins from London Business School argues, business schools are more likely to teach about entrepreneurship than to explain what it really is, how to do it, and what not to do. They assume that learning how to build, tune and decorate a piano will automatically make you a good pianist. Entrepreneurship, however, is no different than management: it is not a science, it is not an art. It is, as Henry Minzberg from McGill University once said, a practice and, as a practice only practice will make you better. That is the role of a business school: to act as a safe place, a sandbox where entrepreneurs can hone their skills and develop new ones, meet other entrepreneurs and investors, but especially, minimise the cost of their mistakes and decide if the exciting life of the entrepreneur is for them and their families.
It is time business schools teach what they are supposed to teach: best managerial practices, based on good research, both academic and professional, with a focus on how things actually work instead of how we wish they worked. It is time schools start telling students what they need to hear instead of what makes them feel good but ultimately will leave them broke. It is time we all embrace evidence-based entrepreneurship.
The author is professor of strategy and entrepreneurial management at EMLyon Business School.