Entrepreneurs face many strategic dilemmas and challenges when they want to turn their idea into a business. For instance, should entrepreneurs storm the castle and just take action or should they first sit down and consciously plan their first strategic moves?
Richard Branson – a well-known entrepreneur – is a true believer of taking action: “If you’re looking to become an entrepreneur then don’t waste your time. Just get on and do it.” The world famous Belgian biker Tom Boonen once said just before his race: “Sometimes you don’t need a plan, you just need big balls.”
“If you’re looking to become an entrepreneur then don’t waste your time.
Just get on and do it.”
Other experienced entrepreneurs are believers in a more planful approach. For decades, many entrepreneurs have been using, for example, Porter’s five forces framework to understand the attractiveness of entering a particular industry. Jack Dorsey, the founder of Twitter, often talks about the benefits of writing down your business ideas and strategies as it could help you to start reflecting on it.
To be honest, I do think that both strategic approaches have serious pitfalls and might even be real recipes for disaster in some cases. Luckily, I am not alone. MIT researchers have argued that both approaches fail for many reasons. Briefly stated: an action-oriented approach only makes sense when there is one clear optimization path, while a planning approach only makes sense when a cost-benefit analysis can be conducted prior to making a decision.
“Sometimes you don’t need a plan, you just need big balls.”
This has been seen as the paradox of entrepreneurship: choosing between alternative strategic commitments requires knowledge that can only be gained through experimentation and learning, yet the process of learning and experimentation inevitably results in (at least some level of) commitment that forecloses strategic options (Gans and Stern, 2017).
In the course Entrepreneurial strategy (Master in Innovation & Entrepreneurship), I build on very recent insights from MIT professors (Gans and Stern, 2017) to explain how entrepreneurs can build great entrepreneurial strategies and can deal with this entrepreneurial paradox.
Starting from 3 basic strategic rules, we dive deep to understand how entrepreneurs can develop successful strategies. This academic year we also used very recent real-life cases, discussed many practical examples and invited many entrepreneurs and investors to class to tell their own stories.
Thanks to Maarten VandenBroucke (Founder of Gatewing, Realo, Ticto), Joris De Bruyne (Founder of Eyesee), Nathalie De Ceulaer (Fortino Capital), Moos Tits (former MIE student and founder of Poppy and Flavr) and Yannick Van der Gucht (former MIE student and founder of Sealjobs) for paying it forward and sharing valuable insights with our MIE students!
So what are those three basic rules?
1. Choice matters
Even when you are following a very lean approach and experiment a lot, it will require at least some level of commitment. The choice of what to explore not only provides information but also forecloses alternative strategic paths.
Many entrepreneurs are often not aware of the choices they can make. Furthermore, they do not always think about the strategic implications of some of their actions in the beginning of their venture. These actions could have strong imprinting effects on the future development of a venture. Instead of getting in a situation where you need to react on and fight against forces that you cannot control, we teach our MIE students to take matters into their own hands by following a proactive choice-centered approach, instrumental for developing a superior entrepreneurial strategy.
“Geography is one of those factors that is a business advantage you can choose to control."
Let me give an example. Ask any starting entrepreneur why they set up their business in their home country. Many entrepreneurs will struggle to give a clear answer. One of the most inspiring Belgian entrepreneurs in Silicon Valley, Sébastien De Halleux, once told me during an interview: “Geography is one of those factors that is a business advantage you can choose to control. Most people funnily enough don’t see that and don’t control their geography. And they just accept a set of constraints and then spend most of their time dealing with that.”
As an entrepreneur you need to question everything and be aware of the choices that you can make proactively early on in your venture’s lifetime. So choice matters!
2. These choices matter
But what are those key choices that entrepreneurs should proactively take during the start-up phase? In our MIE program, each class focuses on a few particular choices and deep dive to better understand how to make the following choices that make or break your venture in the start-up phase:
- Choosing your market: What are the criteria to choose the right market? How to develop an agile market strategy? How do you account for customer sequencing?
- Choosing your technology: What are the criteria to choose the right technology? Should you adopt or innovate a technology?
- Choosing your identity: How do you shape your venture’s entrepreneurial identity (aligning and accounting for founder’s purpose, external positioning, ecosystem and corporate culture)?
- Choosing your competitors: What is our competitive environment? Should you collaborate or compete with existing players on the market? Should you focus on speedy execution or on keeping control on the basis of bargaining power and strong IP protection?
- Choosing your team: How are you going to build your entrepreneurial team? What kind of experiences do you need to hire based on the opportunity that you start from and the type of challenges you face?
- Choosing your investor: What kind of external finance are we going to use and how does this affect our future investment possibilities?
3. These choices matter together
Finally, entrepreneurs should ask themselves how these choices matter together. In the final class of entrepreneurial strategy, we develop our entrepreneurial strategy (1) by providing coherence among the different strategic choices, (2) by clearly disentangling goals from strategies, (3) by building a story on how these choices lead to value creation and value capture and (4) by solving the paradox of entrepreneurship.
An entrepreneur can tackle the paradox of entrepreneurship by iteratively eliminating different possible entrepreneurial strategies using commitment-free analyses until they reach the point where they are faced with at least two equally viable and attractive alternatives that cannot be ranked without making some level of commitment to one. Next, the entrepreneur should carefully develop two fleshed-out strategies before choosing one of these to commit to (test two, choose one principle).
If you want to know more about the master’s in innovation and entrepreneurship, check out our website and learn about the 10 reasons to take the MIE. Also check our next info sessions at AMS and meet me there!