Which Type of Entrepreneur are You?

Which Type of Entrepreneur are You?

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A few months back one of my students visited me. He had recently read the best-selling book, Blue Ocean Strategy. I had strongly recommended the book in one of my classes and, on my recommendation, he had purchased it and invested his time in meticulously working through the concepts. Yet on finishing the book he felt lost, despondent and overwhelmed.

He and his older brother had recently bought a struggling independent coffee store which they wanted to transform into a viable, thriving operation that would enable them to pursue their passion for music with a sustainable income. He complained that concepts in Blue Ocean Strategy seemed foreign and unrealistic and he wondered why I would recommend such a ‘pie in the sky’ book. Just a few days earlier I had met up with a friend from my MBA class. She was involved in launching a new social networking application that has the potential to transform the way we interact online. She explained to me how the same book had helped her create a practical and relevant blueprint for designing and implementing her new innovative product. She described in great detail how it was the “most valuable and insightful book” that she had ever read.

Why does one entrepreneur interpret Blue Ocean Strategy to be ‘pie in the sky’ while another interprets it to be the most valuable and insightful book that they have ever read? The answer lies in this simple statement: Not all entrepreneurs are the same. The term entrepreneur is used to describe any person launching and managing his or her own business, but in reality there are many different types of entrepreneurs. The ingredients for entrepreneurial success are very different depending on what kind of entrepreneur you are. It is hugely valuable for a person launching and managing a business to understand what kind of entrepreneur they are and to align their actions with the principles that govern that kind of entrepreneurship.

So what kind of entrepreneur are you and what does that mean for the way you manage your business? Some of the research that I have done would suggest that there are four broad categories of entrepreneurs: survivalists, lifestyle entrepreneurs, growth entrepreneurs and revolutionaries.

Survivalists are in business merely as a means of economic survival. They operate micro enterprises to feed themselves and their families. They create very little long-term wealth in their operation; they are merely keeping the business afloat while living on the profits from one day to the next. Examples of survivalist entrepreneurs can be found all across South Africa – they are the basket sellers on Durban beachfront, the people selling sunglasses on the corner of William Nicol Highway and Republic Road and the person selling Stormers flags outside Newlands Rugby ground.

Lifestyle entrepreneurs get into business as a means to a particular lifestyle. Being in business for themselves means that they can live in a certain place, have the freedom to pursue another passion (such as music, sailing, writing) and the autonomy to dictate when they do and don’t work. They tend to engage in higher value activities and use more infrastructure compared to survivalists. They therefore usually need to make a larger upfront investment in the business than survivalists but they get better returns. In most cases these people are forgoing the certainty of being an employee in an existing business for the freedom of autonomy and choice that goes with being an entrepreneur. The owner of a thriving guesthouse in Plett, the coffee shop owner who needs time for his music and the local nail parlour owner who wants afternoons off to spend with her kids are all examples of lifestyle entrepreneurs.

Growth entrepreneurs are driven by the competitive nature of business. They get into business for themselves to create something of long-term value and they continually seek to make the business bigger and more competitive. They usually need to make a larger investment in the business than lifestyle entrepreneurs, both in terms of upfront capital investment and the time they invest in managing the business as it grows. They often take on more risk than lifestyle entrepreneurs but that risk comes with financial rewards if the business succeeds. The consultant who keeps hiring more associates to service more clients, the media entrepreneur who is continuously launching new products to sell more advertising space and the estate agent who is franchising her operation to facilitate growth are all examples of growth entrepreneurs.

Revolutionaries create a business as a means to change the world. They are driven to disrupt and reshape markets. They look to make big bets and if these pay off they usually become famous. Globally, Steve Jobs, Richard Branson and Bill Gates have left indelible marks on the industries they entered. In South Africa, Raymond Ackerman reshaped the retail industry, Adrian Gore disrupted the healthcare sector and Gidon Novick turned domestic airline travel on its head. Such entrepreneurs often need to invest substantial amounts of capital in their businesses to facilitate growth; with that comes high expectation. They are notorious for working hard and for demanding much of those who work for them.

These four kinds of entrepreneurs can be represented in a simple diagram (see figure 1) which depicts the investment required and the revenue generated by the different categories of entrepreneurs. As can be seen in the diagram, survivalists invest very little in their business but they barely operate above the ‘breadline’. Lifestyle entrepreneurs make an investment in their business – usually their own money or money from family and friends. They use that money to create a business that initially grows but after a period of time it reaches a steady state and they are able to live on the income. Growth entrepreneurs typically need to make larger investments in their business and often rely on capital from external sources to facilitate growth. They push hard to grow the business and keep pushing for growth, even after it is making more money than they need for their chosen lifestyle.

Revolutionaries usually need to make very significant investments in their businesses to disrupt a market – Fred Smith of Fedex raised US$100 million in 1971 to create the infrastructure for his overnight delivery service. Adrian Gore ended up owning only 5% of the company he created because he needed to access significant amounts of external capital to get Discovery off the ground. Revolutionaries invest this capital in ventures that have significant potential. If the business takes off it will generate substantial growth and will probably keep growing for a number of years.

The questions every entrepreneur must answer:

My research indicates that there are two key factors that determine whether an entrepreneur is likely to achieve success with their chosen entrepreneurial trajectory.

  • First, does their chosen trajectory – lifestyle, growth or revolutionary – align with their personal values and subconscious entrepreneurial desires?
  • Second, do they have the skills to deliver within their chosen trajectory?

People subconsciously have a desire to be a certain kind of entrepreneur. This desire is driven by their underlying values – the things that they hold most dear.

Those who recognise how their personal values are driving their subconscious entrepreneurial desires, understand what kind of entrepreneur they want to be and act in accordance with that choice, are more likely to be successful.

Those who fail to recognise how their personal values are driving their entrepreneurial desires risk getting on the wrong trajectory which can have catastrophic consequences. Such people find it hard to align their individual actions with the actions demanded by the business. Being a successful entrepreneur takes hard work, effort and energy, no matter which trajectory you are on. To sustain that hard work, effort and energy, the entrepreneurial journey needs to fit in with the entrepreneur’s life. If your entrepreneurial journey fits in well with your desired life, you will have the energy to sustain what you are doing. If your entrepreneurial journey is out of sync with how you would like to live you are likely to run out of energy.

If your values and desires align with your chosen trajectory, you need to have the skills and knowledge to deliver within that trajectory. If you have the desire but not the skills and knowledge, you may work hard and do everything in your power to try to succeed, but you will continually come up against barriers. Such a person would do well to first develop the right business and entrepreneurial skills before pushing too hard down their desired entrepreneurial trajectory.

So what does all this mean for you?

If you wish to be satisfied, fulfilled and successful on your entrepreneurial journey, follow these three steps:

  1. Recognise which entrepreneurial path you subconsciously wish to be on – lifestyle, growth or revolutionary.
  2. Assess if you have the skills and knowledge to be effective on that path.
  3. Assess if the path you are currently on aligns with where you really need to be and make the necessary adjustments.

1. Assessing your desired entrepreneurial path

Assessing your desired entrepreneurial path involves being brutally honest with yourself. Many people automatically assume that they wish to be revolutionary entrepreneurs – “Wouldn’t it be nice to transform a market and become incredibly rich and famous?” they think to themselves. But when pushed to think about what they really desire, they don’t want the risk, the stress and the endless hard work that goes with building a revolutionary business. You need to go beyond your surface level desires to understand what kind of business will meet your long-term desires and align with your personal values.

10 by 10

One way to do this is to engage in what I call the ‘10 by 10’ exercise. This requires you to get a blank sheet of paper and write down ten sentences describing the kind of life you would like to be leading ten years from today:

  1. What work do you want to be doing?
  2. Do you want to be living in a specific location?
  3. How do you want to spend your days?
  4. How do you want to spend your weekends?
  5. How wealthy would you like to be?
  6. What other aspects of your life do you wish to nurture?
  7. What would you like to have achieved in the past ten years?
  8. What assets would you like to own?
  9. How do you want to divide your time?
  10. What role will family play in your life?

Be thoughtful and deep in answering these questions. Don’t sell yourself short – write at least ten sentences to create a full picture of what you desire.

Once you have ten sentences outlining your life ten years from today, consider the kind of entrepreneurial trajectory necessary to get you there and whether you are willing to embark on it. Living out each entrepreneurial trajectory has very different implications for your life and you need to figure out if your desired life and your desired entrepreneurial trajectory are compatible. Are you are willing to tolerate the stress and risk that go with being a revolutionary? Are you prepared to put in long hours and hard work that go with being a growth entrepreneur? Are you happy to forgo business growth for control if choosing the lifestyle trajectory? Table 1 provides insight into important elements of each entrepreneurial trajectory. This table can be used to assess if your chosen trajectory is likely to align with your desired life path.

2. Assessing your skills and abilities

The second order of business is to assess if you have the knowledge and skills to execute within your desired trajectory. The knowledge and skills needed to run a lifestyle business are very different from those required to build and grow a revolutionary or growth business. Lifestyle entrepreneurs need basic business management skills accompanied by the specialist skills of the business they are building. Growth entrepreneurs need skills and knowledge related to strategy, marketing, operations and human resource management to be able to find and create new markets, and hire people to manage their business in those markets. Revolutionaries need to innovate and disrupt. They must have the charisma and vision to sell a crazy idea; then, they need to surround themselves with experts who can help make that vision a reality.

3. Assessing your current trajectory and jumping trajectories

The third order of business is to assess if the path you are currently on aligns with where you want to be and to make the necessary adjustments. By carefully interpreting the outcomes of the 10 by 10 exercise and assessing your knowledge and skills, you can ensure that there is alignment between your skill levels, your desired career outcomes and the entrepreneurial trajectory you are currently on.

If there is alignment, you need to strive to be as effective as you can within your chosen trajectory. If there is no alignment, you should identify what you need to change. Do you need to shift your trajectory or develop your knowledge and skills to create alignment? Developing knowledge and skills may require work experience in an industry, attending a business course or doing some deep reading and research. Changing your trajectory involves realigning expectations and taking on the risks and work practices that are associated with a new trajectory. If you want to move from lifestyle to growth or revolutionary, you may need to bring on new partners, spend time crafting a strategic plan to set goals for the business or invest in the skills of the people in the business to create a platform for growth. If you decide to scale down and transition to a lifestyle business, you may need to simplify things, scale back on the risk within the business and realign expectations and work habits.

Understand your needs

Two years ago I shared this framework with a friend of mine. At the time he was trying to create a high growth organisation in the medical supplies industry. He had hired a number of sales and operations people, he was endlessly looking for new markets, new channels and new suppliers, yet he constantly came up against roadblocks. Early one morning as we were driving out to a triathlon together, we chatted about some of these challenges. I asked him what he really wanted from the business he was creating. After some thought he said that he was trying to create an organisation in which he would be in control and through which he would be able to make a good living and provide for his family.

Through this discussion, he realised that he had not properly thought about what kind of organisation he was trying to create and whether that would align with the life he desired. It dawned on him that the only reason that he was pushing so hard to grow his business was because “that is what is expected if you get an MBA.” Over the past two years he has scaled back his operation, reduced the amount of debt in the business, cut the payroll and changed his expectations. He is now taking home more money than before, he is less stressed and he gets to swim, bike or run much more than when he was pushing so hard for growth.

Aligning your deep personal desires with your entrepreneurial trajectory is one of the most valuable things that you can do to enable entrepreneurial success. Start now.

Greg Fisher
Greg Fisher, PhD, is an Assistant Professor in the Management & Entrepreneurship Department at the Kelley School of Business, Indiana University. He teaches courses on Strategy, Entrepreneurship, and Turnaround Management. He has a PhD in Strategy and Entrepreneurship from the Foster School of Business at the University of Washington in Seattle and an MBA from the Gordon Institute of Business Science (GIBS). He is also a visiting lecturer at GIBS.
  • HUBERT WERE

    Great work Mr. Greg. i found your article very interesting and i hope to implement what you have advised me. I have a business that is not doing very well. I now have an answer with me. Thank you