What it takes to become an entrepreneur

What is an entrepreneur? There’s no definite answer, but there is one thing we know—it’s more than just running a business. So we’ve turned to the experts, who say innovation is a requirement in becoming an entrepreneur and growing your business.

When the title ‘entrepreneur’ is thrown around it can cover anyone from the business owner to giants such as Bill Gates or Sir Richard Branson. The Macquarie Dictionary defines an entrepreneur as “one who organises and manages any enterprise, especially one involving considerable risk”.

But according to Kevin Hindle, professor of entrepreneurial research at Swinburne University of Technology, this is the broadest and least useful definition. “Entrepreneurship has to be a lot more than mere business ownership,” he says. “You’ve got to have a high level of innovation and growth, in my view, to qualify as an entrepreneur.”

Instead he defines entrepreneurship as “the process by which new knowledge is converted to sustainable value, and that usually involves the creation of a business to do it”. And he warns against gifting all small business owners with entrepreneurship. “Because if entrepreneurship is about anything, it’s about not being small for long.”

Nevertheless, Bill Delves, partner and national leader of entrepreneurial growth markets at Ernst and Young, argues that many entrepreneurs do run small businesses but they grow fast and aren’t afraid to take on the big end of town. “They’re not scared of the David and Goliath theory. They have enormous confidence in their ability to beat someone just because they’re big. So that confidence and belief in what they’re doing catapults them past someone who has a big business but isn’t sure what to do with it next.”

But what makes an entrepreneur? Querying Hindle about whether entrepreneurs are ‘born’ or ‘made’ elicits a fiery response. “That question just drives me absolutely wild, it’s such a stupid question!” he exclaims. “You can be tall, short, ugly, black, domineering, whatever—it’s not who you are, it’s what you do!” All entrepreneurs are made, not born, Hindle believes, and while he recognises entrepreneurship isn’t for everyone, “most people have the potential to be an entrepreneur at some stage in their career if they wish to be”.

Ernst and Young’s Entrepreneur of the Year awards recognise successful entrepreneurs in 40 countries around the world each year. The awards have been running for six years in Australia, and Delves says in that time feedback from participants on what it takes to be an entrepreneur has revealed no clear answer. “We’ve asked all the entrepreneurs every year, what does it take? Can you be born an entrepreneur, can you learn how to be one, are you just struck by a bolt of lightning—what is it that gets you to be an entrepreneur? The most exciting thing is, it can be all or none or a mixture of those things.

Entrepreneurs define themselves by their diversity. They are so different. You put 40 of them in a room, they all understand each other but you couldn’t put two the same, side-by-side.”

Calculated Business Risks

Hindle will concede, however, that certain cognitive processes feature strongly in entrepreneurs. “Entrepreneurs tend to be more overly optimistic or they may tend to overrate their own ability,” he explains. “They’re able to make decisions fairly quickly and they’re able to short-circuit information rightly or wrongly. They have a cognitive ability to perceive and implement new combinations, and that’s really important because a lot of people can’t do that.

“It all adds up to having the ability to think in ways that don’t impede action. Entrepreneurs are not synonymous with gamblers. They’re attracted to challenge, not risk, but they are not afraid to take a risk if it seems a reasonable one.”

“Entrepreneurs tend to be curious, creative, innovative, and they’re willing to take the biggest risks. The difference is, they manage those risks,” Delves agrees. “They’re not people who do things flippantly, they’re not people who take wild punts or guesses. These people understand their market, their people, and the risk that’s in front of them. The key is, they move very quickly and they know which risks to take.”

Hindle explains that, historically, only around 4.5 to 5.5 percent of the small business sector are going to be gazelles. “That is, those businesses that do grow enormously are tremendously innovative and dynamic, and will create the jobs of the future.”

“Entrepreneurs are about what [Austrian economist] Schumpeter called creative destruction—they actually destroy old ways of doing things and old industries, old mindsets, old everything. They’re the ones who create the jobs, wealth, and the high value-added of tomorrow.”

Australian Entrepreneurs

While Australia has produced many successful entrepreneurs—one only has to read this magazine to digest their stories—we’re not an ‘entrepreneurial nation’, according to the 2005 GEM (Global Entrepreneur Monitor) Australia findings, and analysis of the results by Hindle, who heads the Australian research team.

The most significant indicator of this is Australian business owners’ lack of innovation. “Nearly every survey that has ever been done on innovation with the general Australian population, comes up with the fact that the majority of people think innovation is just the newness—doing something new,” Hindle explains. “But we’ve got to get some understanding and respect that innovation involves the implementation of invention, not just the invention.”

This means, Hindle adds, that most Australian business owners are managers, not entrepreneurs. “Their businesses aren’t innovative and they’re not growth-oriented,” he says.

That’s not to say being a good manager is without merit, it just isn’t being entrepreneurial. “All I would say is, we could do with a bit more entrepreneurship,” Hindle says.

So, how do we foster more entrepreneurship in Australia? “We’ve got to get better at commercialisation,” says Hindle. “In our national policies and everywhere, we do all kinds of research that’s capable of creating newness (new knowledge) but we do very little research on understanding the commercialisation, the entrepreneurship process.

“Then, we have to introduce into schools a cultural acceptance that it’s an exciting, responsible and wonderful thing to start your own business, particularly if it’s an innovative one. We train our young people to become employees, not to create new ventures. We need to get entrepreneurship into the high school curriculum and that will affect the cultural change.”

Delves agrees. “Imagine, if when children left school many more of them thought about becoming an entrepreneur rather than just getting a job, what type of country would we have in 10 years time?”  

 

Entrepreneurial Activity

For a complete outline and analysis of entrepreneurial activity in Australia and the Global Entrepreneur Monitor Australia findings—past and present—check out the GEM Australia website, www.gemaustralia.com.au

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