Katarzyna Zachariasz-Podolak: You claim everyone can learn to be an entrepreneur. Business psychologists might disagree with you. To run a company you need qualities such as, hard work, ability to take risk, perseverance.
Bill Aulet: Why can’t people learn those things? Entrepreneurship isn’t about taking risk; any fool can take a risk. What entrepreneurship is about is managing risk and taking intelligent risk, anyone can learn how to do that.
Maybe some people are born entrepreneurs?
It’s not true, there is no data to support this idea. My parents weren’t entrepreneurs, none of my siblings are particularly entrepreneurial, nor was I. I graduated from college in 1980 and I had no idea what “entrepreneurship” was. At that time the only career options you had, were as academics, doctors, or lawyers, and maybe a businessman, however, nobody wanted to be a businessman.
Business people seemed to be boring – wearing suits, carrying briefcases and going to work, then all of a sudden the personal computer revolution came along and everything changed. In the late 1980s you saw people like Steve Jobs, Bill Gates, Mitch Kapor. It was cool to be entrepreneur – you could be your own boss, do what you wanted and have fun. Entrepreneurship became a more acceptable career path. Other people didn’t quite accept it at once. I grew up outside NY City, in a small town, where everyone knew each other. When I got a job at IBM everyone was, “Wow, working for IBM! It’s so great! It’s a job for life!”
Then in 1994, after 12 years I left IBM and started my own company. People came up to my mother and asked “what happen to Bill? He was such a nice boy. Is everything OK with him?” For them entrepreneur was someone who exploited others.
Why; when we have so many business schools, training courses, trainers and being an entrepreneur is supposedly so easy, is it that so many companies go bankrupt?
We must ask the question is entrepreneurship being well taught today?
Well what is the answer?
I do not believe it is, teaching entrepreneurship is as easy as some might think.
First of all a lot of educational institutions are set up to lecture and teach in the classroom, it is nearly all theoretical. They use a tried and tested formula, in the same way as they might teach mathematics in many countries around the world, as in Poland.
However, entrepreneurship, needs to be tailor made, to the individual business you may be working in, whether it is a media or energy company. In the real world, everything is evolving and changing so fast, therefore a lot of the teaching is ineffective.
Wait a minute. Every business must have the same basic components, products; clients etc.
You mention fundamental principles, however different types of industries have varied kinds of dynamics. Let’s say I want to open a social media company, I have to figure out who the customer is, what they want.
Like in every other business
Yes, but in social media I have to get someone to write a programme, to try it and think how to reach a client. If I make a business in the financial services area, there is no need to worry about that. Instead, I need to understand the regulatory considerations and that is what the big companies do, because I work through them to reach the final customer.
There is one more problem with teaching entrepreneurship. We don’t have a long rack record and there is not a large body of knowledge, unlike in other disciplines. We don’t even have a common language, everything is a fad, we reinvent terms again and again.
But at MIT you managed to overcome all these shortfalls. In recent years your alumni founded over 300 thousand companies. One in four MIT graduates becomes an entrepreneur. How do you do this?
What we do in our classes is lots of practical learning. We have our students to come up with ideas and attempt to build a business in class. They have to get out, and actually do it – do market research, meet with potential clients, develop a product. You need to think about entrepreneurship as being a skill set that’s needs to be learnt. It’s not magic
What if students have poor ideas?
The biggest mistake in business is that people think the idea is the most important thing, in fact it is the most overrated thing in entrepreneurship. Of course you need an idea to get started, but when you look at successful companies the original idea is just the starting point.
The second common mistake is underestimating the team. Usually people say, “There is my product”. What about your team? Your team tends to be the biggest factor to achieving success or not. You have to have a strong team that has a common vision, shared values, and colleges that trust each other, and have complementary skills. The last part is the biggest challenge because people tend to hire people, who are similar to them. In short people like to hire the same sort of people; tall people like to hire tall people. Engineers like to have more engineers; sales people want more sales people. It is essential to have a heterogeneous team where you have got good business people, good technical people, good designers, and good sales people.
Do you have a recipe for a successful company?
We have 24 steps to become an entrepreneur – how you take an idea and bring it to the product, because a company needs to have a strong product to be successful. Steps are divided into 6 themes. The first one is “who is your customer”. That is the foundation that everything is built around, that is where the magic starts.
People often worry about how and what they are going to do, but you have to focus on question “why”. What is the problem you are going to solve? Why, in the world, should someone buy our product? But to figure out “why” you have to go back to “who?” Who is my customer?” Once we know who our customer is, we can figure out what they need. So the second theme is “What can I do for my customer?” This leads to the valuable proposition – what can I do uniquely.
The third theme is an analysis how the customer acquires a product. Once we know that, we can think about how we make money from the product – how much they will pay for it, how much profit we will get and how much it will cost to acquire it. The next theme is “how do we build the product in the most efficient and effective way”. The last theme is about scalability – how do we make a company scalable, so its products attract more and more customers.
What is necessary to become an entrepreneur?
We talk about four “H’s”. First you have to have “Heart” to be different. You need spirit to be an entrepreneur. You have to be willing to be different, often to swim against the current. It is not just enough to know what you want; you need to learn how to put it into practice. Now is “Head”. We need to give people the knowledge, but knowledge doesn’t mean action. We need “Hands”, that’s the third; to put everything into action. The fourth “H” is “Home”, we need to provide a supporting community. I didn’t understand for some time; that being an entrepreneur is being very different; it is not easy there is a tremendous amount of instability.
So the community should give emotional support?
Entrepreneurs should talk and meet with many people, you need to support and learn from each other. There is a saying in “The Jungle Book” by R Kipling “the strength of the pack is in the wolf and the strength of the wolf is in the pack. The second part of that quotation is especially true for entrepreneurs, a strong entrepreneur, must be built around a community.
In Central Europe we have been trying build an entrepreneurial ecosystem for a couple of years, at this moment it is not working properly.
To have entrepreneurial ecosystem you need a number of things: demand, that’s a market place which is willing to buy things; new ideas; R&D and creativity; infrastructure – access to the Internet, roads, airports and finally funding, because innovation driven entrepreneurship requires a level of funding, some risk capital, which ordinary banks will not provide as they lend against assets. These are things people mention all the time, however these are not the most important things, there are three more.
What are they?
You also need a supportive government that does not hinder entrepreneurship, which they often do, they need to have regulations and legislation that are entrepreneurship friendly or at least not harmful. These are things like bankruptcy law, so if somebody fails, they are not punished for it and they can move on and try once more.
What are the last two things?
The most importantly, you need to have a culture that celebrates and appreciates entrepreneurs. We must understand that entrepreneurs don’t exploit other people. They create vibrancy, they create jobs; often solve the world’s problems. A society that values entrepreneurship gives young people, and not only the young, a sense of, “Yes, I can”. Once they say this, we are halfway there. Now, we have to provide a place where entrepreneurs tend to be creative, where they build a skill set, and a network. That’s where you create lots of good entrepreneurs.
The single necessary condition for business is a paying customer; the single crucial condition for entrepreneurial ecosystem is not government policy, not VCs, not infrastructure, but entrepreneurs themselves.
Bill Aulet is the managing director of the Martin Trust Centre for MIT Entrepreneurship at MIT and Professor of the Practice at the MIT Sloan School of Management. Prior to joining MIT, Bill had a 25 year track record of success in business himself.