Entrepreneurial Mindset

Part of the challenge of being an entrepreneur, if you’re going for a really huge opportunity, is trying to find problems that aren’t quite on the radar yet and try to solve those.- Sean Parker Co-founder of Napster and First President of Facebook.

Why is the entrepreneur at the heart of entrepreneurship?

     While I will introduce the role of market opportunities, technology changes, and other factors in entrepreneurship, it is important to recognize that the person, the entrepreneur, is at the heart of the matter. Without the entrepreneur, there is no entrepreneurship. This is why an understanding of the mindset of entrepreneurs is critical to understanding how to develop and launch successful ventures.

     By exploring the components of the entrepreneurial mindset, you can understand exactly who are entrepreneurs. Entrepreneurs can be independent individuals, intensely committed to persevering in starting and growing a venture. They may be confident optimists who strive for success and desire to create a for-profit, non-profit, or social venture. They often burn with the competitive desire to excel, and use failure as a learning tool.

     While every entrepreneur is unique, there are select commonalities in their mindset. This chapter focuses on the entrepreneurial mindset, with attention to achievement, individualism, control, focus, and optimism.

The Opportunity Analysis Canvas - Edition 2.0

Do you have a high need for achievement?

     Need for achievement is a preference for challenge, an acceptance of personal responsibility for outcomes. A personal drive for accomplishment evidences one's need for achievement. We may call it drive. We may call it hunger. We may call it beign a self-starter, or beign self-motivated. All of those would be accurate as we think about need for achievement in this context.

    What we see is that entrepreneurs typically have a higher need for achievement than managers. What we call a manager in this context is a corporate or government employee.

     Need for achievement plays a key role in creating the entrepreneur. For individuals who score high in need for achievement, the likelihood of them becoming an entrepreneur is high.

    A high need for achievement makes for better entrepreneurs. Naturally, if you have a greater motivation, a greater drive and a greater level of commitment, you're going to have higher involvement in your job and in your career. You're going to have a higher organizational commitment and commitment to colleagues, suppliers, partners, customers, and investors. Need for achievement is therefore an enabler of becoming a successsful entrepreneur.

How do you know if you have a high need for achievement?

     Take a step back and think about the entrepreneur. Think about yourself. We want to know what it means to have this need for achievement.

     We first want to think about goal setting.

• Do you have personal goals?
• Are they written?
• Are they specific and challenging and relevant?
• Do you mentally rehearse or forecast or think about future events?
• Do you anticipate obstacles?
• Do you develop alternative solutions?
• And are you not only driven to success, but are you planning your own success?

     Self-monitoring is something to keep in mind as well. Are you tracking progress towards your goals? I'm a believer in tracking what we care about, and measuring our progress towards our ambitions. Self-monitoring and milestone measuring are practices of individuals with a high need for achievement. 

     Self-reinforcement is important. Do you reward yourself for your achievement? Either with incremental rewards, or long-term rewards?

     Are you self-motivated? or do you need others to encourage you in order to feel motivated?

     Do you need others to congratulate you? Or do you find satisfaction in your own success? Are you fulfilled without receiving the recognition of others?

     In summary, need for achievement is a key component of the entrepreneurial mindset. It's one of the five key components that we're going to analyze. It's motivating for individuals to pursue their new venture's success and contributory to their success as entrepreneurs.

     Analyzing your own need for achievement is valuable to diagnosing and enhancing your level. We're all at different levels. And it's not to say that you are where you are and that's all there is to it. What we hope to do within each of these elements is identify and assess where we are, and work towards improving ourselves in each element. 

How does individualism influence your decision making?

      Individualism is a key element of the entrepreneurial mindset. Individualism means that you need less support or approval from others. You may place a very high value on independence, freedom and control. There may be a willingness, even a prefernce, to go against the norm. High individualism is associated with an emphasis on individual initiative and a high need for achievement.

     Collectivism is the alternative to invidualism. As individuals, we focus on "I." If you're a collectivist, you focus on the "we". Individuals have their own goals, while collectivists have group goals. Individualists emphasize themselves, while collectivists have a group emphasis.

     With individualism, the element of reciprocity or sharing is not required, and may not even be preferred. With collectivism, reciprocity is expected.

   Individualist manage individuals.

     Collectivists manage the group.

     When we examine individualism and collectivism, we are interested in their relevance to entrepreneurship and decision making. We'll deconstruct and think about this at the abstract and the concrete levels.

     Individualism is tightly correlated with decision making based on achievement and risk taking. There's more assertiveness. There's more speed to action.

     Inversely, when we look at collectivism, there's more sensitivity for the group. There's more consideration of developing the buy-in  and the consensus of others. There's also a measure of security that's involved in making a safer decision. What that can mean is that collectivist mindset decisions are slower to come by. They're more complex with more viewpoints, more individuals and perhaps other groups or organizations that play a role in the decision. You mau even avoid decisions or simply agree to disagree on areas. You may potentially come up with te sub-optimum decision because you're trying to satisfy many different groups that may or may not have common interest.

     Individualism and collectivism were historically viewed as exclusive categories, and people were believed to be one or the other. What we have realized as of late is that most people have a combination of both. While they may have a "we" identity and they are concerned about their group, they may preface their individual goals to those of others. They may have an individual emphasis in their decision making, but they still believe that reciprocity and sharing with the group is valuable.

What causes happiness?

     Our national and ethnic cultures play a substantial role in our personal balance of individualism and collectivism. In collaboration with Gallup, a research-based, global performance-management consulting company, Columbia University recently did a study where they looked at the 40 happiest countries on earth. Denmark, Finland, Norway, the Netherlands, and Canada were the top five. Switzerland, Sweeden, New Zealand, Australia, and Ireland rounded out the top ten.

     What causes national happiness? Perhaps it's wealth, but if we correlate per capita gross domestic product (GDP), the financial wealth of a nation, with happiness, there is no relationship.

     Perhaps it's life expectancy. With health and long life, there's happiness. Right? There's no correlation here, either. The higher life expectancy countries-Japan, Singapore, Hong Kong-are not among top 10 happiest countries. 

     Perhaps it's safety, but it's not. Only a few of the safest countries earn a place among the happiest countries.

     What is the cause for this happiness? Research suggests that the happiest places tend to be collectivist countries instead of those with an individualist nature.

     In summary, individualism and collectivism are relevant to your entrepreneurial success. Entrepreneurs tend to have a higher level of individualism, but too much may be detrimental. We do not benefit from entirely lacking this collectivism aspect. Once you understand your preferences between individualism and collectivism, you can strive towards developing a balance.

Do you believe that you have control of your own destiny?

     In considering the question of your belief that you have control of your own destiny, we'll deconstruct the term into two pieces: autonomy and locus of control.

How does autonomy influence control of your own destiny?

     With autonomy, we're considering your freedom from the influence of others in decisions that you make. For the significant decisions that you make, you may solicit advice and counsel, and consider others' inputs. But when it comes down to it, are you the number one influencer and the number one decision maker? And can you act on your decision, and what you think is right, with relative independence and freedom from the influence of others?

     One way to think about autonomy in action is to consider your perspectives on a job. Is a job primarily for your economic security? Is it comfortable? Is it a source of satisfaction? Or, does it prohibit you from reaching your ultimate goals? Is it constraining? And is entrepreneurship a way to tackle that, and a way to free yourself from a job?

     In my experience, the idea that entrepreneurship provides you with total autonomy and total freedom is a fallacy. Your old bosses are not removed, but replaced. If you start your own company, you may not have a boss in a traditional sense, but you have customers, partners, and investors, all of whom have a certain level of expectation, demand, or influence. Your 9-to-5 working hours are now 24 hours a day. An your new work week? Well, it may have been Monday through Friday in the past. As an entrepreneur, particularly in the early days of the venture, it may be 7 days per week. There are long days, there are short days. There are pieces of days that are segmented over that 24 period, that if you don't do the work, it doesn't get done. You do control how you do your work. You have relatively unbounded influence and flexibility. You can decide the level of freedom for yourself that still allows you to deliver value to your customers, partners, and investors.

     Based on a recent Inc. 500 survey, the typical entrepreneur starts their day at 6:30 am. They may work, at the beginning of the day, for an hour or so. They may then have a commute to an office or co-working space. During the drive, train ride, subway transit, or whatever their form of transportation, half of them are doing work during their commute. There is meeting time throughout the day, which may be meeting with your team, if you're already at the time of having a team. Or it may be meeting with customers or prospective partners or investors. This may take an hour or two a day. Then there's a mix of activity of communicating with other partners and colleagues. Emailing alone consumes approximately one-third of entrepreneurs. Others work as they can, and eat as they can on the go. There's an afternoon break at 5:00 pm when traditionally individuals may be accustomed to stopping work for the day. We need time for exercise and/or family time. We see a return to work after dinner, and perhaps relaxation time later as well. The average bedtime is 10:30 pm based on that waking time of 6:30 am.

     What this illustrates is that as an entrepreneur it's a busy day and it can be a long day, but there can still be time for family and friends. While the element of working 24 hours a day is not necessarily there, entrepreneurs rarely work 9-to-5 schedule, particularly in the early years of the startup.

    The element of complete autonomy and complete freedom for entrepreneurs , while a fallacy, does deliver the opportunity to be flexible and dynamic, and to do things on times that suit you, how you want them done, and increasingly, where you want them done.

How does locus of control influence control of your own destiny?

   The second element that we'll examine is the locus of control, which is a different side of control that looks at the individual's belief that they can influence others, or that they can influence the environment.

     When good things happen, do you attribute that to what you did, or to what happened externally? Inversely, when bad things happen, do you think accountability for that? Do you take control of that situation, or do you attribute that to others?

     Locus of control is either internally or externally oriented. Locus of control that's internally oriented means that you believe, as an individual, that you are in control and able to influence your environment and its outcomes. Inversely, externally oriented means that you're feeling subject to people and events, that you have minimal influence. You attribute fate or luck or other external factors to what caused certain things to happen.

    Individuals who have higher levels of internal locus of control drive entrepreneurial opportunity discovery and action at a higher rate than those with an external locus of control. When you believe you have a measure of influence and you can make something happen, even if the economy, or the government, or competitors are not necessarily in your favor, you have a greater likelihood of bringing about entrepreneurial change than those who believe they are subject to an external locus of control. The element of creating your own destiny is in large part based on your belief of having this internal locus of control.

     For illustration, imagine that you are interested in starting a new payment processing company. You believe that you can compete with American Express, Visa and MasterCard for online payment processing. You think that you can change the way that customers buy products online. You start PayPal.

Next, you set your sights on competing against the world's largest automotive manufacturers. You beieve that you have a new way to build, sell, and service cars. You desire to fundamentally change the technology as well as the dealership model for sales and service. You eventually accomplish this, while elevating the driving experience and customer satisfaction, while reducing the harmful emissions of gasoline-based automobiles. You started Tesla.

     As a founder of PayPal and Tesla, Elon Musk epitomizes the entrepreneur's internal locus of control.

     In summary, beliefs about the value of entrepreneurial opportunities are driven by the individual, and their willingness to take action on their ideas. The ability to make an idea a reality is in large part based on how you operate in the sense of how independently you operate.

     Do you believe that you have the ability to successfully pursue that opportunity? That's where autonomy and locus of control play a role in your ability to execute on these beliefs. This depends on the degree to which you believe that you can influence others, the environment, and the circumstances that exist.

Are you able to effectively focus your time and resources?

      With competing interests and dynamic priorities, focus is a central challenge for entrepreneurs. Developing an ability to focus our time and energy is an important step to enhancing our entrepreneurial mindset.

     Our definition of focus in this context is concentration on a specific issue or task. To really focus, you need self-discipline and motivation. Do you have the commitment and attention span to see a task through to completion with high quality and relative speed?

     Successful entrepreneurs can focus on a task and see it through to completion, or see it through to its next milestone. We can be more efficient, and do things better, by giving it our full attention, by processing information efficiently and thoroughly. This enables us to be decisive and thoughtful in our decisions.

     As an experiment, detach yourself form email, at least in part, for a day. Check it three times: once in the morning, near noon, and late in the day. During those times, reply to your emails as desired, and send emails as needed. If something urgent happens in the interim, you will likely receive a phone call. At the end of the day, consider if you were more productive with this abbreviated email schedule versus your normal day of regular email monitoring.

     As a second experiment, reduce your use of the phone. Allow your voicemail to answer all non-critical calls. Set aside one time during the day to return calls, perhaps near the end of the day.

     By reducing interrumptions of our work, our focus and productivity skyrockets.

     To assist with your focus, I suggest using timelines for your tasks and goals. Create a plan for what you want to achieve by what time or day. With your timeline, particularly your daily timelines and to-do lists, be sure to schedule breaks and vary your tasks as possible. As the human attention span typically declines after two hours, taking short periodics breaks can be more productive than being heads down and staring at a computer all day.

     I suggest that you maintain a to-do list that you actually schedule on your calendar. You should know how much time you're going to spend each days on various tasks. That allows you to structure your day and to have time allotments, and forces you adopt a principal of "done is better than perfect". That way you're bringing things to a close and you're able to make progress on the next task.

     I also encourage you to be goal-oriented, and think about the outcome of what you're doing, and how you measure that outcome. Writing down your goals is valuable in clarifying and quantifying what you're trying to achieve. Putting a timeline to your goals improves your likelihood of actually getting there. And you need to reward yourself as you have success, as you reach these goals and milestones. Take time, go to dinner, go on a vacation, buy an item, give a gift-these are things that entrepreneurs are certainly allowed to do and that I would encourage you to do. That way you see some of that material success, and you reap satisfaction as you go.

 Communicating with fellow aspiring and active entrepreneurs is valuable of focusing your time and energy. Talking with those of similar ambitions with similar struggles reduces the sense of isolation and hopelessness that we may experince as entrepreneurs. It's also inspirational to see the successes of others.

   Meditation, prayer, and other methods of embracing calm and peace further assist in developing your focus. Turn things off and sit quietly for a time to reflect on your goals and interests.

     As you begin to grow your venture and engage with others, you will become a better leader. A primary task of leadership is directing your attention towards the goal, and being able to focus the attention of your team. Think about how things, what you can do to motivate them to happen, and how to focus on the big picture.

     Leaders need to cultivate awareness. That includes inward focus, a focus on others, and outward focus. Inward focus and the focus on others are related to emotional intelligence. Daniel Goleman's book, Emotional Intelligence, is valuable to understanding these principles. Outward focus enables you to improve your ability to devise strategies, innovative, and manage the organization.

     "A wealth of information creates a poverty of attention," said economist Herbert Simon in 1971. This is a prophetic statement, given that it was written over forty years ago. What we see today, particularly as entrepreneurs, is an inmense flood of information and data. How do we act on this? What do we focus on? What do we give our attention to? Developing the ability to effectively focus your time and resources is an asset for entrepreneurs.

Do friends characterize you as an optimist?

     In our consideration of optimism, I framed this question differently to change the point of reference. While most of the traits that we're exploring can be self-assessed effectively, your optimism is better measured by how other people see you.

     A textbook definition for being optimistic is to anticipate the best possible result. The optimum result. We'll modify this definiition to include a "favorable" outcome that may not be the optimum result. While the optimum result may not occur, if you're an optimist, you do expect that the outcome will be at least favorable.

Does optimism truly improve performance?

     Yes, and it's evidenced in multiple studies.

     Metropolitan Life Insurance Company was the subject of a study where the sales agents who were more optimistic sold dramatically more than those who were pessimistic. The more optimistic half of sales agents in the study sold 37%  more than the pessimistic half. The most optimistic 10% of sales agents sold 88% more than the most pessimistic 10% of sales agents.

    The United States Military Academy at West Point studied optimism  as an indicator of graduation. They found that optimism ws a greater influencer of a cadet's likelihood of graduating from the university than SAT scores or high school grades.

     In the U.S. professional baseball (MLB) and basketball (NBA) associations, athletes who scored higher in optimism evaluations experienced more success in their athletic careers.

     In professional, academic, and athletic settings, we see that optimism matters, and those who are optimistic perform at a higher level.

     There are benefits to optimism. It encourages entrepreneurs to try new things. It enables entrepreneurs to attempt the difficult, and attempt things that they may feel they don't have the right education or experience for, but they're willing to try anyway. We think that we can have a favorable outcome, and we'll make a go of it as entrepreneurs if we have an optimistic outlook.

     Optimism can also be contagious. If we're optimistic, it tends to influence our team to be optimistic, as well as our partners and our investors to share in our enthusiasm and excitement.

     It's important to note that there are cons to being overly optimistic. We may overlook critical elements because we want to dive right in. We may discount uncertainties. Were we to do more research and analysis, we would be better prepared. If we are overly optimistic, we'll accept undue levels of risk. This can contribute to excessive business losses or complete failure of the venture. While I champion being optimistic, I do not discourage your being research-driven and strategy-minded.

     There is also a bias to be aware of. Most of usunderstimate our chances of divorce or losing a job or having disease. We overstimate the likelihood of our children being academically gifted, of what level of wealth we will achieve, and how long we will live. To learn more, I encourage you to view the TED talk titled The optimism Bias.

      We should seek balanced optimism. With that balance, we want to think about the relative costs of pessimism versus the benefits of optimism. We want to recognize the importance of balance in understanding the relative levels of powers and influence. And we want to think about, how do you do that? How do you get on this balanced path?

Can optimism be learned?

    Optimism can certainly be learned, according to Martin Seligman, the author of Learned Optimism. Let's highlight the principles and takeaways that he suggests for learning to be more optimistic.

1. The first step is to learn to identify situations and events that we routinely face. To document them and to think about the challenges that we encounter.
2. Then write your beliefs and assumptions. What comes to mind? What do we expect? Can we separate the facts from our feelings, and have a more objective view and objective account of what it is that we're facing.
3. The third step is to think about consequences and the levels of emotions and energy, and what's happening and what we did.
4. Then think about the elements that you may dispute. There may be a devil's advocate way of thinking about what else may have happened, what may we have missed, what else could have influenced this? We look at evidence. We think about alternatives and consider other implications. Again, documenting these elements.
5. Lastly, we think about the level of influence of energy and beliefs over time. We think about how these elements of emotions and feelings, be they of a pessimistic or of an optimistic nature, have influenced the decisions that we've made. Have we encountered an initial hurdle, but because we felt that it was difficult, we stopped? Or have we performed at somewhat of a lackluster level? Or conversely, if we thought that it was difficult, but we gave it our full energy anyway, what was the outcome then?

     This five-step approach is a way of establishing and developing optimism. We can also better understand the root causes of our pessimism.

      A number of the characteristics and behaviors that we've discussed are influenced by our experiences. We have the capacity to learn things as individuals, to unlearn, and to relearn. And that's true of emotional behaviors and phychological patterns. In that sense, we begin to understand who we are and what we are, it gives us the opportunity to enhance and redevelop ourselves.

     In summary, the optimistic approach combined with high reality testing is the ideal balance. We avoid being overly optimistic. We don't want to fool ourselves into thinking we should do things that we haven't analyzed. We do not want to focus on positive options and become an "optionist" in the context of thinking about how to move forward and how to be optimistic as entrepreneurs. Also within this element, we want to emphasize our capacity to learn, to unlearn, and to relearn. And that's true of optimism and the other factors that we've been discussing.

Entrepreneur Spotlight on Anthony Casalena, Founder and CEO of Squarespace

     As with Dell, Facebook, Google, Yahoo, and countless technology startups, Squarespace was hatched in a college apartment. Anthony Casalena developed the vision for this leading web development platform when he was a junior at the University of Maryland in 2003.

    A project to make a personal website was the result of his dissatisfaction with existing services. Anthony recalls, "At the time, you had seek out and cobble together a mix of blogging software, statistics software, and web hosting. Instead of going that route, I decided to create  an elegant solution that offered all the necesary elements to build a professional website. Further, none of the hosting or publishing services available really had a focus on design. I wasn't comfortable using them for my online identity."

     His solution was to build his own tool for creating professional, feature-rich, esthetically attractive websites. In solving his own problem, he realized that others shared his plight. Customers joined for $8 per month, and a first place win in the University of Maryland's Business Plan Competition followed.

    By focusing his time and resources on building the best solution possible, and by believing that he could build not only a great product but a great company, Squarespace became a leader in its industry. With $17 million in sales, the company is listed among Forbes' "America's Most Promising Companies," Time's "50 Best Websites," and Inc. 500's list of "America's Fastest Growing Companies" for three consecutive years.

Ideas in Action: The Entrepreneurial Mindset

• What role does need for achievement play in your decisions?
• What level of influence do friends and family have in your decision making?
• Do you have an internal or external locus of control?
• What techniques do you see to focus your time and resources?
• How can you improve your level of optimism?