Management Perspectives

Most people in big companies are not natural risk-takers. If they were, they would probably be working somewhere else. Entrepreneurs do not like risk, either, as it turns out. They are more likely to be risk managers and mitigators than risk-takers. When Jeff Bezos decided in 2004 that Amazon’s physical distribution business for books and music CDs was at risk of being digitally disrupted by the likes of Apple, he did two things:

• Pulled Steve Kessel, the then VP in charge of Amazon’s core books, music, and video business, out of his role and tasked him with developing a solution that eventually became the Kindle e-reader.
• Determined that the effort would be run by an entirely autonomous organisation, separate from the existing business, notwithstanding the fact that the digital media suppliers to the new organisation would be mostly the publishers on which the current books, music, and video business relied.
  Bezos’ rationale? Bill Carr, Kessel’s number two on the business side of the new venture, opines “Jeff felt that if we tried to manage digital media as a part of the physical media business, it would never be a priority. The bigger business carried the company after all, and it would always get the most attention.” Bezos was adamant. “If you are running both businesses, you will never go after the digital opportunity with tenacity.”

Bezos, Mittal, Musk, and more

Building upon 20 years of research-based insights into what makes entrepreneurs ‘entrepreneurial’, and how they differ from other successful businesspeople, I have learned that many successful entrepreneurs exhibit one or more of six ‘counter-conventional, breakthe-rules’ mindsets. These mindsets connect what entrepreneurs observe and encounter with the actions they take. They help them grab opportunities, challenge assumptions, overcome obstacles, mitigate risk, and sometimes, change the world.

Further, the six mindsets run counter to the conventional wisdom that is typically found in large and well-established companies. They fly in the face of what is taught in most business schools about strategy, core competencies, target marketing, financing, and more. Here they are:

• “Yes, we can!” When asked by a prospective customer whether they can do something that is entirely new and unfamiliar and falls outside their current competencies, entrepreneurs say, “Yes, we can!” Then they figure out how! The long-established rule that successful companies are those that ‘stick to their knitting’ is there to be broken! Bezos knew that his company lacked the capabilities that building a hardware product would require. He charged Kessel with two key tasks: figuring out what was to be done, and who—including a few key hires from outside Amazon—should do it. Kindle’s success almost single-handedly made e-books relevant and made Amazon the dominant retail player in digital media of all kinds.

• ‘Problem-first’, not ‘product-first’, logic:Entrepreneurs know that if they solve genuine customer problems their businesses will thrive. As prominent venture capital investor Vinod Khosla famously remarked, “It’s very simple. Nobody will pay you to solve a nonproblem.” The product then follows. Philip Knight’s and Bill Bowerman’s invention of the now legendary waffle sole solved two key problems for Nike’s initial distance runner target market: more lateral stability to reduce the number of sprained ankles incurred while training on rough country paths; and more cushioning to prevent the all-too-common shin splints that resulted from their rigorous training regimens. And lighter weight shoes, for faster race times, too!

• Think narrow, not broad: Big companies want to serve big markets: “It won’t move the needle,” they say when markets are small. But once success is established in a tiny market, entrepreneurs know, a foundation is in place to enable their businesses to grow from there. Nike’s initial target market, elite distance runners who could run nearly a four-minute mile, might be the narrowest target market ever for a start-up! Tennis and basketball shoes were not on their radar.

• Ask for the cash, ride the float: By getting customers to pay in advance, and by paying their suppliers afterwards, entrepreneurs generate cash for growing their businesses. Elon Musk and his Tesla co-founders sold 100 Tesla Roadsters, their first model, for $100,000 each, payment up front, please. That’s a cool $10 million with which they could then set about building the cars.

• Beg, borrow, but don’t steal:Borrowing the resources you need to start something new beats investing in those resources, especially when the outcomes of anything new are highly uncertain. When in 2003 Sunil Bharti Mittal recognised that the next phase in Bharti AirTel’s growth would have to come from India’s rural customers, he and his team convinced IBM, Ericsson, and other key suppliers to take over the equipment, systems, and support Bharti needed. Why invest, when you can convince others to do it for you? By 2008, Bharti became India’s largest mobile operator.

• Instead of asking permission, beg forgiveness later: Getting new things done in established companies typically requires permission, sometimes from higher-ups in the organisation, sometimes from regulators or others. When the legal or regulatory landscape is ambiguous or uncertain, however, entrepreneurs simply plow ahead and deal with any necessary regulatory issues later, begging forgiveness, if necessary. When Manish Sabharwal and Ashok Reddy decided to start TeamLease in 2002, despite Sabharwal’s realisation that “In order to comply with 100 per cent of the labour regulations, you have to break 20 per cent of them,” their mantra was ‘Putting India to work’. Now, twenty years on, TeamLease has become a vocal leader for labour market reform and provided jobs to more than 3 million Indians. Putting India to work, indeed!
  These six mindsets offer a set of tools for identifying and grabbing opportunities and mitigating the inherent risk in doing so. Even better, they and the examples that underpin them provide a healthy dose of inspiration that ordinary mortals in any kind of organisational setting can learn and adopt any or all of them, and apply and master them, too. You can, too!

Why break the conventional rules?
Much of the progress that our societies make is driven by entrepreneurs like Manish Sabharwal and Ashok Reddy in addressing India’s employment needs, Elon Musk’s efforts toward climate change, and the connectivity and other benefits that Sunil Bharti Mittal and other telecom pioneers have brought to rural India and elsewhere. We don’t want to lose that progress! And progress doesn’t have to occur only within start-ups. Who would have thought the small team that created Nespresso within the world’s largest instant coffee maker, Nestlé, would build what is today one of Nestlé’s hottest growth engines?