The Management Team

Skills and background are critically important in a management team; forget the personalities for the moment. Are the management’s skills appropriate for the problems the firm is currently facing? Very often that’s simply not the case. They don’t have a clue about how to compete in the markets that the firm is currently in. They may know quite a bit about competing in other types of markets, but that’s irrelevant. So matching the skills of management to competitive challenges is crucial.

Risk preferences are also important. In some situations, management needs to be more risk-seeking. It needs to be more willing to bet on the future of the market. It can demonstrate that by investing in capacity in order to generate a learning curve and then actually lose money while the firm is growing in order to generate volume, so that it can make a lot of money subsequently when its costs are much lower. If management doesn’t have that risk-seeking orientation and isn’t betting on the future of the market, it will lose to companies that do. However, sometimes management needs to be risk-averse and be much more careful about expanding capacity – as we know from the amount of dark fiber that’s sitting in the ground all over the world right now since there’s no demand to fill it with light. There are many telecom companies out there sitting on assets that are basically worthless until demand comes back.

Are the members of the management team lemmings rushing toward the cliff? Are they herd animals, or are they able to separate themselves from the herd? There are many companies in the late 90s and early part of this century who invested simply because it seemed to be a good idea at the time and everyone else was doing it. That turned out to be a bad idea. Those who sat on the sidelines were viewed as nuts. But now they’re looking pretty smart. So do the executives go with the crowd, or are they more their own people, so to speak? If they are their own people, going against the crowd, how well can they manage the expectations of investors? How much control do they have over the capital market in order to maintain the position of the company, even if they take a contrary view?

The Entrepreneurial Aspect of Technology Commercialization

The concept of entrepreneurship is extremely broad. I try to separate several dimensions, or categorize it into three basic groups. The groups are small business, family business, and technology commercialization. Small business management is about a person starting or operating a business that is not intended to experience very rapid growth, but rather to provide products or services on a small scale. These are frequently also referred to as mom-and-pop operations. Certainly managing a mom-and-pop business involves entrepreneurship – there’s no doubt about that; it’s an entrepreneurial act. However, the kinds of problems that mom-and-pops face are very different from those of family businesses, where the organization is trying to employ family members and balance out (usually) a very large number of social and emotional issues. And both of those (small businesses and family businesses) are quite a bit different from a situation in which an entrepreneur is trying to take a raw technology and make a commercially viable new product or service that nobody’s ever seen before. So I try to separate entrepreneurship into those three broad categories and talk about them separately, because the issues involved are quite different.

My personal teaching and research emphasis is on technology commercialization. What I mean by that is taking fundamental, basic research done at research universities and converting it into viable products and services. So what I talk about to entrepreneurs is the process of taking what I think of as potential solutions to problems (that being the research that’s done in universities), and the actual problems themselves (problems that people face in their day-to-day lives, or problems that need resolution in one form or another), and bringing those two together. Very often problems exist, and solutions exist for those problems, but the people who have the problems don’t know any of the people who have the solutions. I look at this in a broad way as a knowledge management concern – bringing together people with problems and people with solutions and trying to find matches between those two. To me, that’s the key to the technology commercialization process, and it often leads to business start-ups. In my teaching, I talk about other things as well, such as the entrepreneurial drive, motivation, and so on, but because my primary emphasis is on technology commercialization, that’s my starting point and that’s the approach I take.

From there, I would usually discuss ways of sharing problems and solutions, and then about the fundamental business planning that goes behind a technology commercialization. Once you have a match between a problem and a solution, you would move more into the business planning arena. The business planning process poses questions about what costs are involved, and what resources are needed, and also considers the competition and markets and those things external to the start-up.

The planning process is very important, and tends to get a lot of coverage in teaching. However, at first blush, especially in technology commercialization projects, I try to get people not to worry too much about how big the market is and how much things cost, and all that. Those are problems to be resolved in the planning process, and you may well find out when you put the meat on your plan that there really isn’t very much there, and the idea isn’t really worth pursuing. But in this sort of open-ended problem and solution/resolution discussion, you don’t want to think about that yet. Too many good ideas are never developed because people don’t give them a chance, and don’t try hard enough to find solutions to the problems that commercialization presents.

WHAT YOU NEED TO KNOW AS AN ENTREPRENEUR

ACCESSING RISK

The risk orientation of entrepreneurs varies. People often think that entrepreneurs have a predilection for exposing themselves to great dangers and hazards. That is not the case. Very often, they don’t think they’re really taking any unreasonable risks at all. They just have a certain clarity of thinking, and they see things that others don’t. So the kinds of risks they are taking are calculated.

As an entrepreneur, you should always be asking, “Is there a way of doing this more safely?” It is important to recognize that no matter how much you work on your business plan, there will always be unexpected twists and turns. Part of determining what is a reasonable risk involves asking the “what if” questions. You work through what could go wrong and then ask, “What can I do if these things happen? At what point should I decide to reassess or change course?” Then you look at the kinds of things that you can do to prepare for different scenarios. You may feel that there are certain bets you must make in order to succeed. But understanding the critical assumptions that you are making about your environment and your capabilities and how potential hazards can be avoided or controlled – that thought process is a calculating process. It doesn’t mean you have all the answers, but you do have a very well thought-out vision.

BUILDING LEARNING AND ADAPTATION SKILLS

In a world that’s constantly changing, the ultimate competitive advantage comes from superior learning and adaptation skills, which are the foundations of an entrepreneurial mindset. If your business can’t learn quickly and adapt to change effectively, then ultimately the successes it has achieved will plant the seeds for hubris and rigidity, which will sooner or later lead to its demise.

For large, established corporations, generally, it is harder to be flexible and to change. Over time, the system of routines and reinforcing processes that have played an important role in making the company successful often lead to organizational calcification and inertia. The core competencies and skills that provide the company with a unique competitive advantage can also lead managers to ignore important opportunities for innovation and renewal. Smaller companies in earlier stages of the life cycle generally find it easier to be entrepreneurial, but must be particularly careful in managing the process of growing into larger, more mature enterprises.

We live in a world that is increasingly more dynamic and turbulent, where technology is becoming more and more sophisticated and where the magnitude and pace of innovation and change have increased exponentially over the last few decades. There is good reason to believe that the future will be no different in this regard. Having an entrepreneurial mind-set will enable the senior management team to be more open to innovation and change, thereby enabling their business to be successful in a business world that will be dominated by the most flexible, creative, and nimble organizations.

Building the Team

To build and grow the business, you need someone at the helm who has good managerial and leadership skills. Before investing significant amounts of money in your business, venture capitalists and angels will look very carefully at whether or not the company will be run by somebody who has had operational experience managing a profit center. The closer the experience is to the business or the industry your company is in, the better. You need to have someone who heads the strategic marketing effort. You also need someone who understands the nitty-gritty of the operations, because you cannot execute properly if you do not understand the day-to-day details involved in running the business. The team has to have credibility not just in terms of what the individual members have done and what their individual credentials are, but also in terms of their ability to work well together as an effective team. There has to be a high level of shared commitment to a common vision and shared set of goals and a strong sense of fit, comfort, and enjoyment in working together. Having a team of senior managers that have faced adversity together and have even failed together can forge a high level of trust, inspiration, mindfulness, and ingenuity - traits that superior entrepreneurial teams possess.

The people you want on your team should be individuals who are willing to put some skin in the game, who are looking to build something, and who are willing to take necessary risks. You can attract the right people by exciting them. Someone who is only looking for financial compensation is probably not the right person to work in a start-up. Your team needs to feel as passionately as you do about the company’s products and prospects. Successful management teams are excited at the prospect of building something and of being part of an entrepreneurial effort. Commitment is very important. In return, you need to incite your employees so that they will share equitably in the results of success