Entrepreneurs today have a powerful hold on the collective imagination. Look around and notice the many inspiring examples of entrepreneurs in action.
But much of what we think we know about entrepreneurship is wrong.
What is the essence of entrepreneurship? It turns out that the word “entrepreneurship” has a fascinating history that is actually useful to understanding its essence. Let’s take a quick tour of that history, but starting in the present and working backward.
Elaine Rideout of North Carolina State University defines entrepreneurs as those who “creatively initiate, evaluate, and organize to exploit wealth creating business opportunities under conditions of uncertainty.” Her definition packs a lot of punch and includes many of the things we typically think of when reflecting on entrepreneurs.
Richard P. Rumelt of UCLA in 1987 noted that entrepreneurs “create new businesses with some element of novelty.” Yes, newness and novelty are important aspects of entrepreneurship.
Years before, the legendary consultant and author Peter Drucker noted that “the entrepreneur always searches for change, responds to it, and exploits it as an opportunity,” observing that entrepreneurs are “change agents who catalyze innovation and as a result endow existing resources with new wealth producing capacity.” Here we note the importance of change, opportunity, and innovation to entrepreneurship. Drucker also commented, “Whenever you see a successful business, someone once made a courageous decision.”
A surprising definition comes from Howard Stevenson of Harvard University in 1975: “the pursuit of opportunity without regard to resources currently controlled.” For a powerful unpacking of that definition, see here.
British economist Israel Kirzner observed in 1973 that an entrepreneur is a “decision maker who is alert to unnoticed opportunities.” He also famously noted the phenomenon of “entrepreneurial alertness”: “an attitude of receptiveness to available, but hitherto overlooked, opportunities.” In the early 1900s, Alice Foote MacDougall, a restaurant and coffee entrepreneur, was previewing this notion when she noted, “Much of the success of life depends upon keeping one’s mind open to opportunity and seizing it when it comes.”
In 1949, economic historian Arthur H. Cole described entrepreneurship as “purposeful activity to initiate, maintain, and aggrandize a profit oriented business.” Again, this captures succinctly what many people think of when they reflect on the idea, but in many ways it misses the magic.
Let’s turn to Joseph Schumpeter, the famous Austrian political economist, who noted that entrepreneurs “employed means of production differently, more advantageously. They have carried out new combinations! They are the entrepreneurs….” He said they are “individuals who exploit market opportunity through technical and/or organizational innovation,” and “The essence of the entrepreneur’s function lies in the identification and implementation of new opportunities…. production and implementation of new products… development of new markets.” In these textbook lines, Schumpeter brings together the key elements of newness, alertness, opportunity, and innovation.
Many stop there, but we can go back further to 1803, when French economist Jean Baptiste Say wrote that an entrepreneur …“shifts economic resources out of an area of lower into higher productivity and yield.” This speaks to the economic transformation that can accompany the phenomenon.
Even earlier, in 1755, Richard Cantillon, an Irish-French economist, businessman, and financier, wrote about an entrepreneur as a non-fixed income earner who bears the risk of buying at certain prices and selling at uncertain prices. He observed that entrepreneurs deal in speculation and risk, and they “…pay a fixed price for them at the place where they are purchased, to resell wholesale or retail at an uncertain price… These entrepreneurs never know how great the demand will be in their city.“ Yes, risk and uncertainty are foundational to the concept.
But let’s go back to the very beginning. Decades before Cantillon wrote about it, the word “entrepreneur” appeared in a French dictionary, Savary’s Dictionnaire Universel de Commerce, with a simple but illuminating definition that can be translated as: “one who undertakes.” (Scholars believe that the term “entrepreneur” has been used in the French language since the 12th century.) In a nutshell, the word itself, as initially used, refers to one who is the acting person, one who takes action on a project or initiative.
While entrepreneurship is a big word and complex phenomenon that encompasses many important ideas, from innovation, opportunity, and resourcefulness to courage, alertness, and risk, fundamentally its essence is about taking action in the world—and creating value in the process.
That leads me to some of my favorite sayings about entrepreneurship:
“Do not wait till the iron is hot; but make it hot by striking.”
-William B. Sprague
“Those who say it cannot be done should not interrupt the people doing it.”
And here we arrive at a common inhibitor of entrepreneurship: “analysis by paralysis,” or people with ideas who somehow never get to the stage of trying them out in the marketplace. There are many legitimate reasons why. Taking action despite all the risks is wickedly difficult and fraught with peril. But in the end, the challenge is clarifying. Ar you willing to step into that great unknown and take action despite the risks?
Yoshikazu Tanaka, founder of GREE, a Tokyo-based Web company, says, “I think the number one advice I can give is: you just have to start it. Just get your feet in the water and do it. I learned a lot from just trying it out.”
Of course, there is a risk of oversimplifying here too. We have learned a great deal in recent years from lean startup innovation methods (drawing on customer development, design thinking, and agile software development) how to lower the risks by designing smart business experiments and learning iteratively about what the market wants (as opposed to coming up with an idea, writing a business plan that supports the idea, most probably laden with cognitive biases and untested assumptions, and then launching the idea, mostly likely resulting in failure). Even with lean methods, a willingness to act is what gets the feedback loop spinning in the first place, albeit in a mindset of testing and learning and not assuming that your initial assumptions were correct.
So for those of you who are intrigued by this fascinating and important phenomenon of entrepreneurship, with great potential to remake economies and deliver social impact as well as financial profits and growth, author Pamela Slim has a question for you:
“When deciding whether entrepreneurship is right for you, all that matters is, have you tried it and did you like it?”
Gregg Vanourek is an award-winning author who trains, teaches, and speaks on leadership and personal development. He runs Gregg Vanourek LLC, a training venture focused on helping you lead yourself, lead others, and lead change. Gregg is co-author of three books, including Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations (a winner of the International Book Awards) and LIFE Entrepreneurs (a manifesto for integrating our life and work with purpose and passion). To get Gregg’s manifesto on Leadership Derailers (and how to avoid them) and free book chapters from Gregg’s books, including Triple Crown Leadership, check out his Free Guide.