- Email: [email protected]
Pioneering strategies for entrepreneurial success
Business Horizons (2008) 51, 21–27
Available online at www.sciencedirect.com
www.elsevier.com/locate/bushor
Pioneering strategies for entrepreneurial success Candida G. Brush Arthur M. Blank Center for Entrepreneurship, Babson College, Wellesley, MA 02457, USA
KEYWORDS Entrepreneurs; Entrepreneurial success; Pioneering; Visioning; Bootstrapping
Abstract Entrepreneurs are, by definition, pioneers in that they innovate new products/ services, create new processes, open new markets, or organize new industries. Dramatic changes in the global environment suggest that successful entrepreneurs must master three key strategies: (1) develop a clear vision; (2) manage cash creatively, or learn to “bootstrap”; and (3) be able to persuade others to commit to the venture using social skills. This article discusses pioneering strategies and offers guidance on how to implement these. © 2007 Kelley School of Business, Indiana University. All rights reserved.
1. O pioneers! Dramatic changes in global economies, technology, and emerging markets create challenging dilemmas for growing ventures. Entrepreneurs who succeed in this new environment have mastered the art of “pioneering,” which is a key strategy for entrepreneurial success. When we think of pioneering, we think of those who settle new territory, take the initiative to explore new horizons, and try new things that have not been tried before. Throughout history, entrepreneurs have created new markets, products, and industries, pioneering innovation and change in the economy. In doing so, these entrepreneurs utilized three key strategies: (1) they developed a clear vision, (2) they managed cash creatively, or “bootstrapped,” and (3) they learned to persuade others to commit to their venture using social skills. In the next decade, these same pioneering strategies will be essential for entrepreneurial success. E-mail address: [email protected]
Consider the story of Donna Dubinsky and Jeff Hawkins. In the early 1990s, nearly a billion dollars was spent by experts in Silicon Valley in attempt to develop a handheld computer. Unfortunately, the result of this massive investment was the Apple Newton, which proved to be a market dud. In 1992, Dubinsky, an International Vice President at Apple, was introduced to Hawkins through a mutual contact. Hawkins, a biophysicist from Berkeley, had developed a handheld electronic organizer he built in his garage from mahogany and cardboard. Upon discussion, Dubinsky and Hawkins decided to form a new company, called Palm Computing. While Hawkins engineered Palm's new device, Dubinsky crafted a strategy, raised cash, and helped bring the product to market (Dodson & Hart, 1997). Initial sales of the product rivaled that of cell phones and Walkmans. Palm Computing turned the wooden experiment into one of the most successful consumer electronics product launches in history, selling 400,000 units during its debut. In 1995, Palm was sold to US Robotics for $44 million; two years later, US Robotics was acquired by 3Com Corporation.
0007-6813/$ - see front matter © 2007 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2007.09.001
22
C.G. Brush
Dubinsky and Hawkins then left Palm to start a new company, Handspring, Inc. Their product, the Visor, undercut Palm’s prices by 30% and gained market share quickly, representing after just a year in business one out of every four personal digital assistants sold (They Made America, 2007). Said Dubinsky (2006, p. 2):
efforts shaped the auto industry. In this way, William Durant settled new territory and explored new horizons (Classic Car, 2007).
“The breakthrough of the Palm Pilot was to decide that the handheld device should be an accessory to a desktop computer, rather than a little computer. It should synchronize with the desktop, and let the desktop do the ‘heavy lifting’, such as printing, leaving the handheld part smaller, faster, cheaper. In one sense, the handheld – although a powerful computer itself – was really a mobile window into the desktop computer. This simple notion created a multi-billion dollar industry.”
By definition, entrepreneurs are pioneers. Schumpeter (1934) characterized economic development as a function of spontaneous and discontinuous change that causes disequilibrium in the environment; innovations take place in response to needs and wants, and these appear as “new combinations” (p. 66). These new combinations are defined as the:
Dubinsky and Hawkins were on the forefront of technology, trying things that hadn't been done before and exploring new territory. Pioneering entrepreneurs have a long history in the US and in other countries. Take the story of William Durant. Born in Boston, Durant spent several years alternately employed piling lumber, working in a drug store, and collecting overdue bills. In 1886, he joined forces with Dallas Dort and created a business that manufactured 2-wheeled carts, which cost $12.50 to assemble and which sold for $25.00. The first year, the venture sold 4000 carts. By 1890, the Durant–Dort Carriage Company was the leading manufacturer of horse-drawn carriages in the US, producing 50,000 a year. But Durant had a vision that the “horseless carriage was the wave of the future.” During the same period, David Buick had developed a valve head engine that could be used for cars; however, Buick was not interested in running an auto company. Gladly accepting the opportunity himself, Durant became general manager of the fledgling Buick Auto Company and, a few years later, assumed the presidency, overseeing the production of automobile manufacturing. By 1908, there existed four auto producers: Buick, REO (headed by Ransom E. Olds), Maxwell–Briscoe (led by Benjamin and Frank Briscoe), and Ford. After several months of negotiations, Durant launched General Motors with a capital investment of $2000 and subsequently issued stock that generated more than $12,000,000 in cash. With these proceeds, he purchased the Buick Auto Company with stock and, six weeks later, acquired the Olds Auto Corporation. He next completed a deal with the Oakland Company, later named Pontiac, and finally acquired the Cadillac Motor Car Company. Within 18 months, Durant purchased, acquired, or incurred substantial interest in 30 automakers. Not only did he create one of the largest companies in the United States, but his
2. Entrepreneurship and pioneering strategies
• Introduction of a new good; • Introduction of a new method of production; • Opening of a new market; • New source of supply; and • New organization of industry. In other academic research, pioneering is associated with market entry whereby companies introduce new technologies, products, or process improvements (Lieberman & Montgomery, 1988; Robinson & Chiang, 2002). While the marketing literature examines market entry, in the entrepreneurial domain, pioneering can be considered more broadly as any entry undertaken by an enterprising individual, firm, or small business unit (Lumpkin & Dess, 1996). For entrepreneurs, successful pioneering generally means overcoming obstacles. For example, if we consider when the steam engine and the automobile were created, it is notable that there was effectively no industry. The environment was uncertain and there existed a lack of resources. John Fitch, creator of the steam engine, had no money and little credit for developing the first steam-powered boat. In fact, Fitch was a silversmith, but inspired by a horse-drawn carriage, he worked to develop a carriage mobilized by steam power. He made sketches, and built a prototype propelled by flat wooden paddles and driven by a chain on a sprocket. He lobbied his friends, Congress, and anyone who would listen. While he was awarded a patent in 1791, he never received adequate funding to move beyond the prototype stage. As such, it was Robert Fulton who ultimately became known as the father of steam navigation. Nonetheless, John Fitch started the ball rolling by going against convention and attempting to do
Pioneering strategies for entrepreneurial success what others felt was not possible (John Fitch, 2007). In addition, think about Michael Dell, who launched his company in 1983 while a student at the University of Texas. He started by formatting hard disks and adding memory, disk drives, and modems to IBM clones, and selling the revamped computers for as much as 40% less than IBM's machines. As articulated by Dell: “I was too late to challenge the technical standard and the dealer network had been done already. Compaq was already very strong in retail. A new marketing and distribution strategy was something new, however” (Rivkin & Porter, 1999, p. 6). Late to the game, most predicted that Dell would fail. Other entrepreneurs had no social support or role models. In the early 1900s, Madam C. J. Walker was selling cosmetics door to door. In 1910, she built a factory in Indianapolis to manufacture her own line of cosmetics and a hair treatment system, designed to heal scalp disease through more frequent shampooing and the application of an ointment made of petrolatum and medicinal sulfur. Through strong business management skills and a remarkable ability to sell, Madam Walker became a millionaire before her death in 1919 (Madam C.J. Walker, 2007). As an African American woman entrepreneur, she had to work even harder to convince customers, suppliers, and venture partners to support her business. Likewise, Dubinsky and Hawkins had to persuade venture capitalists to invest in a very competitive field, one in which many were working on creating a similar product (Dodson & Hart, 1997). The ability of these entrepreneurs to settle new territory, explore new horizons, and develop new things was rooted in a set of skills that allowed them to succeed. These three capabilities, explored next in detail, are: (1) visioning, (2) bootstrapping, and (3) social skills.
2.1. Visioning Visioning is about the long view, where you see your venture in the future. Successful entrepreneurs develop a vision of where they want their business to be and are guided by this. Vision is also personal: about your career, your timing in life, your personal circumstances, and a variety of other things. Numerous experts on leadership and career development have emphasized the vital importance of individuals crafting a personal life vision. For example, Warren Bennis (1989), Stephen Covey (2004), Peter Senge (1990), and others maintain that a powerful vision can help people succeed far beyond what they might achieve otherwise, and that an individual's vision can propel and inspire those around him or her to reach their own dreams. Psychologists would say that if you don't identify your vision, others will plan and direct your
23 life for you. Senge (1990, p. 211) defines vision as “what you want to create of yourself and the world around you.” Management scholars define organizational vision as a transcendent ideal representing shared values that are ideological in nature, and having moral overtones (House, 1977; House & Shamir, 1993). Organizational vision is used to inspire others to perform well (Bass, 1985; Bennis & Nanus, 1985; Conger & Kanungo, 1987). It is an ideal to which the organization should aspire, or a mental image of the products, services, and organization that the business leader wants to achieve (Bennis & Nanus, 1985). At the organizational level: “Vision has a clear and compelling imagery that offers an innovative way to improve. It recognizes and draws on traditions and connects to actions that people can take to realize change. It taps people's emotion and energy; properly articulated, it creates enthusiasm.” (Nutt & Backoff, 1997, p. 312) As related by McMullan and Long (1990, p. 134), entrepreneurial vision is a mental prequel, a “previsualization” of a desired outcome. The articulated business concept or idea is the operationalization of “vision”: “A writer may at first crudely visualize a plot for a new novel or a painter may envisage the broad contours of an image to be painted on blank canvas. The entrepreneur may pre-visualize the basic character of a product or service to be provided to a potential target market against a background of relevant economic activity.” (p. 135) An early investigation of entrepreneurial vision found that entrepreneurs imagined pictures, movies, and physical arrangements of their future ventures; they performed mental rehearsals of presentations, imagined plant lay-outs and even types of employees, sometimes using scenarios (Rockey, 1986). Hanks and McCarey (1993) describe the process as more sequential: the way that the entrepreneur identifies a need in the marketplace and develops a concept that leads to establishment of a new organization. Generally, there is agreement that a vision is a pattern for a future; having elements of time and scope, it is values driven, has a purpose, and often evokes a mental image or picture that can be communicated (Bird & Brush, 2003). The process of visioning is often used in business, sports, psychology, and a variety of other contexts. NFL quarterbacks, politicians, and actors often use visioning to enact a situation in their “mind's eye,” as practice for handling the real life event. As regards entrepreneurial ventures, vision can have a profound impact on the early success of the endeavor. A clear vision can create a
24 shared purpose for the founding team; can set the initial culture, practices, and policies of the organization; can motivate employees, suppliers, customers, and investors; and can influence strategy and, ultimately, growth (Bird & Brush, 2003). For example, Larry Page expressed his vision for Google, Inc. as such (Corporate Information, 2007): “The perfect search engine would understand exactly what you mean and give back exactly what you want. Given the state of search technology today, that's a far-reaching vision requiring research, development, and innovation to realize. Google is committed to blazing that trail. Though acknowledged as the world's leading search technology company, Google's goal is to provide a much higher level of service to all those who seek information, whether they're at a desk in Boston, driving through Bonn, or strolling in Bangkok.” Having a concise vision that is easily communicated is essential for pioneering entrepreneurs.
2.2. Bootstrapping Bootstrapping is the means of conserving financial resources and managing cash in a resourceful manner to start and grow a venture. At start-up and during early growth, having cash to develop or sell products/services, collecting receivables, and paying creditors and employees while, at the same time, trying to expand a business can be challenging (Carter, Brush, Greene, Hart, & Gatewood, 2006). Most small and new firms face greater obstacles in obtaining capital than their older and larger counterparts because of information asymmetries, lack of market access, and idiosyncratic forces such as the influence of the entrepreneur on financing and capital structure choices (Cassar, 2001). In order to overcome these challenges, entrepreneurs must manage cash creatively to prove their concepts and gain market acceptance. During the early business development phase, entrepreneurs generally use personal or internally generated funds, aggressively control costs, and manage capital expenditures to achieve benchmarks. This collective set of managerial behaviors/ practices is commonly referred to as “bootstrapping.” Bootstrapping is a strategy for financing a small firm through the creative acquisition and use of resources, without raising equity or borrowing money (Van Osnabrugge & Robinson, 2000; Freear, Sohl, & Wetzel, 1995; Bhide, 2000). Bootstrapping generally takes two forms: (1) to minimize the need for financing by securing resources at little or no cost, and (2) to creatively acquire resources without
C.G. Brush using bank financing or equity (Harrison, Mason, & Girling, 2004; Freear et al., 1995; Bhide, 2000; Landstrom & Winborg, 1995). The process enables the entrepreneur to use cash and manage the business in a resourceful and creative manner (Bhide, 2000). Founders who learn to bootstrap their businesses effectively gain legitimacy in the eyes of stakeholders (Freear, Sohl, & Wetzel, 1991). Further, bootstrapping is an easy way to obtain capital often without collateral (e.g., using credit cards), which can be detrimental if used to excess or inappropriately (Van Auken, 2005). But more often, bootstrapping assists in the development of knowledge, and human and technical resources, and these activities may help the entrepreneur to develop a “lean” mindset (Harrison et al., 2004). This process should increase their likelihood of acquiring growth capital in the next stage to fuel growth, and has the added benefit of retaining a higher percentage of founder ownership. Research shows that those companies that bootstrap and get good at it have more financial savvy and are more likely to obtain angel investment and equity financing (Carter et al., 2006). There are generally four different ways to bootstrap (Van Osnabrugge & Robinson, 2000; Carter et al., 2006): (1) Product development: Using customers and suppliers to finance R&D and operations (e.g., borrowing computers of customers to develop software); (2) Business development: Using personal cash resources to get operational quickly (e.g., credit cards, own money); (3) Conserving cash: Reducing inventory, paying employees in stock, doing without, deals with service providers (e.g., using students or interns); and (4) Meeting cash needs: Personal loans, family and friends loans, delayed compensation for employees, using trade credit. A good example of bootstrapping involves the way in which Mark Roberge, a Massachusetts Institute of Technology graduate, launched PawSpot.com, a social-networking site for pet owners looking to swap pet-sitting duties, arrange play dates, and share information on local pet-services vendors. Roberge launched the business with $500,000 from outside investors to help fund his start-up needs. But, he didn't want to spend any more money than necessary to get the business started. Instead of buying or leasing office space, Mr. Roberge worked from home for several months and
Pioneering strategies for entrepreneurial success held meetings in cafés. He also signed up for affiliatemarketing programs and Google's AdSense program, which helped provide cash when visitors clicked on ads or purchased goods from the advertisers. In addition, the founder employed graduate students for 10 hours a week, at a cost of $1000 per month, to perform freelance marketing and technology analysis. And, he used several open-source software programs (i.e., free or low-cost software available online to the general public) to test out potential site features before investing money to create them internally. These practices helped PawSpot to conserve and create cash, and develop the business and product at the same time (Spors, 2007). Bootstrapping, as a practice in venture development and during the early growth phases, is a means for pioneering entrepreneurs to survive and overcome the challenges innovative businesses face.
2.3. Social skills Social skills are a composite of learnable behaviors individuals use in interactions with others. Entrepreneurs depend on social skills to persuade others to join and commit to their business or venture idea. Suppliers, customers, investors, and employees all need to be convinced to come along into the uncharted landscape of a new venture, especially when the idea is innovative and there are no existing businesses in the marketplace. Enhanced social skills are a form of “social competence,” which is comprised of persuasion, social adaptability, impression management, and social perception (Baron & Markman, 2003). This summary term captures the combined effects of various social skills, such as the ability to perceive others accurately, make a good first impression, and persuade others to change their views or behavior (Wayne & Kacmar, 1991). An entrepreneur's presentation to different stakeholders includes information about a new opportunity that effectively provides a signal to investors about his/her ability to successfully develop and manage a new venture. Creating a negative impression can result in failure to sell the business opportunity to investors, and limit investment potential (Mason & Harrison, 2000). Key dimensions of social skills include the following (Baron & Markman, 2003; Hoehn, Brush, & Baron, 2004): (1) Social perception: This is the ability to perceive and understand what the audience is expecting, how ready they are to listen and receive a presentation; (2) Impression management: This is the ability to create a good impression, by what you say, how you look, and how you act;
25 (3) Persuasion and social influence: This is the ability to persuade and convince people to join the business, to buy the product/service, invest, or form an alliance with the venture; and (4) Social adaptability: The ability to think on your feet, meet the needs of the situation, and adjust to people and circumstances. Here, the story of Andy Wilson and Boston Duck Tours is relevant. In 1993 on a trip to Branson, Missouri, Andy Wilson saw amphibious vehicle tours being given and conceived the idea that tourists might, too, enjoy viewing Boston from both land and sea (The Money, 2007). While a straightforward idea, the process of launching Boston Duck Tours took nearly two years, due largely to the 30 permits required and financing necessary to purchase and rehab the vehicles. Andy began by pitching his idea all over Boston, sporting a happy face t-shirt and carrying his business plan with a smiling duck on the cover. His early elevator speech for the venture painted a picture of “amphibious war vehicles that would traverse the cobblestone streets of Boston, so [patrons] could see the sights from the street and the water” (McIndoe, 2003). Not only did the founder have the wrong introductory speech, but his appearance and the cover of his plan were not appropriate for the investment community or government regulators. While pleasant enough, the happy face and smiling duck left the impression that Andy wasn't serious about the business, and that the business wasn't a serious investment. After receiving coaching to polish up his social skills, Wilson managed to obtain the necessary permits from various regulatory agencies. This in itself was a feat; the permits were extremely difficult to obtain, in part because of bureaucratic red tape, the fact that most people had never heard of “duck tours,” and that the thought of a land/water tour of Boston seemed crazy (McIndoe, 2003). At one point, Wilson was even told that it would be easier to build a skyscraper in the center of the Boston Public Garden than launch his venture! Undaunted, the visionary persevered and what began as a four-Duck, 15-employee business on October 4, 1994 has grown into a 23-Duck, 100employee powerhouse firm in the Boston tourism market (Boston Duck Tours, 2006). As Andy's story suggests, social skills are very important in persuading funders, regulators, employees, and others to join a new venture. Research indicates that outsiders make observations and judgments about entrepreneurs' presentations within two minutes. At the same time, entrepreneurs believe they are more persuasive than outside evaluators would agree (Hoehn et al., 2004). The
26 ability of entrepreneurs to attain funding is directly related to social adaptability, self-efficacy, and emotional expressiveness. Hence, for pioneering entrepreneurs who are exploring new areas, development of social skills is very important to success.
3. Pioneering into the future In the next decade, socio-demographic changes (e.g., aging and shifting populations, likely shortages of natural resources, rising environmental pollution, health and welfare concerns) and political economic changes will give rise to new opportunities for pioneering entrepreneurs. This is uncharted territory. How can you be more successful? Following are tips for achieving this goal.
3.1. Crafting your vision Creating a vision involves taking stock of your personal situation, your company, and the environment. Start by identifying your strengths and capabilities; your networks and support systems, as well as a reasonable timetable, are essential. Then, think about what you are most passionate about. The next step is to develop a vision of your venture into the future. What will it be? What values will drive the company? And what will your role be in this organization? The vision of your venture should be a short statement that can be easily communicated, or presented in an image. It should be motivational, be guided by values, and be memorable. For example, Geomagic, a producer of advanced optical measurement systems and 3D-data processing software that digitally captures physical objects and automatically creates accurate 3D models, states (Geomagic, 2007): “Geomagic's corporate vision is to advance and apply 3D technology for the benefit of humanity. By maximizing value for customers, Geomagic is becoming the digital shape sampling and processing (DSSP) leader, growing by more than 50 percent annualized revenue year after year.”
3.2. Bootstrapping This is not only a philosophy, but also a skill. Bootstrapping represents managing for cash and being rigorous in this approach. Almost every decision involves cash, whether it is product-, customer-, supplier-, or market-related. In the words of one entrepreneur, “I try to buy low, sell high, collect early, and pay late.” This approach will help maintain cash flow into the business. Most investors, loan officers, and business consultants can provide advice on ways to do this in your business, but other resources are available at SmartBiz.com (Burke, 2007) website and
C.G. Brush the Angel Capital Education Association (Angel Capital Education Foundation, 2007).
3.3. Polishing your social skills Social skills are learnable. In every interaction, you need to consider the impression you will make and how others will perceive you and your business. For additional resources, see work by Baron and Markman (2003), and articles on the Stanford University website (www.stanford.edu). Here are some tips to think about in your interactions:
• Be
a story teller; use analogies that evoke pictures and images.
• In formal presentations, know your audience. Try to anticipate their expectations and adapt your presentation, if needed.
• Non-verbal
communications are very important. Work on eliminating mannerisms that might detract from your interactions (e.g., flipping your hair, chewing on your pen, unnecessary hand movements).
• Believe
in the business, and try to exude confidence and passion for your business.
• First impressions are vital in every setting; your
dress, body language, eye contact, and speed and clarity of presentation delivery impact whether or not someone wants to spend more time learning about the business and your vision.
• Practice and polish your elevator speech, your delivery, and your presentation.
If you are exploring new horizons and settling new territory, follow the successful pioneering strategies of Madam C. J. Walker, Michael Dell, and Donna Dubinsky. Have a vision, learn to bootstrap, and develop your social skills.
References Angel Capital Education Foundation. (2007). For entrepreneurs. AngelCapitalEducation.Org. Retrieved from http://www. angelcapitaleducation.org/dir_resources/for_entrepreneurs. aspx Baron, R., & Markman, G. D. (2003). Beyond social capital: The role of entrepreneur's social competence in their financial success. Journal of Business Venturing, 18(1), 41−60. Bass, B. M. (1985). Leadership and performance beyond expectations. New York: Free Press. Bennis, W. (1989). On becoming a leader. New York: Addison-Wesley. Bennis, W., & Nanus, B. (1985). Leaders: The strategies for taking charge. New York: Harper & Row. Bhide, A. (2000). The origin and evolution of new businesses. New York: Oxford Press. Bird, B. J., & Brush, C. G. (2003). Exploring leadership vision: New perspectives on women entrepreneurs and executives. In
Pioneering strategies for entrepreneurial success J. Butler (Ed.), Research in entrepreneurship and management: Special issue on women entrepreneurs (pp. 51−69). Charlotte, NC: Information Age Publishing. Boston Duck Tours. (2006). Company history. Retrieved from http://www.bostonducktours.com/company_history_main. html Burke, D. (2007). Bootstrapping 2.0: Smart, marketable ideas trump outside capital. SmartBiz.com. Retrieved from http:// www.smartbiz.com/article/articleview/1777/2/5/ Carter, N., Brush, C. G., Greene, P., Hart, M., & Gatewood, E. J. (2006). The use of bootstrapping by women entrepreneurs in positioning for growth. Venture Capital Journal, 8(2), 1−19. Cassar, G. (2001). The financing and capital structure of business start-ups: The importance of asset structure. In W. Bygrave, E. Autio, C. Brush, P. Davidsson, P. Greene, P. Reynolds, & H. Sapienza (Eds.), Frontiers of entrepreneurship research: The proceedings of the Babson Kauffman Conference on entrepreneurship research. Wellesley, MA: Babson College. Classic Car. (2007). William C. Durant. ClassicCar.com. http:// www.classiccar.com/articles/william_durant.asp Conger, J., & Kanungo, R. (1987). Toward a behavioural theory of charismatic leadership in organizational settings. Academy of Management Review, 12(4), 637−647. Corporate Information. (2007). Our philosophy. Google.com. http://www.google.com/corporate/tenthings.html Covey, S. R. (2004). The 7 habits of highly effective people. New York: Free Press. Dodson, S., & Hart, M. (1997). Palm Computing, Inc. — 1995 (HBS 9-898-090). Cambridge, MA: Harvard Business School Publishing. Dubinsky, D. (2006, May 20). Commencement speech to MBA candidates, F. W. Olin Graduate School of Business at Babson College (p. 2). Retrieved from http://www3.babson.edu/ Newsroom/blog/upload/Babson%20College%20Dubinsky% 20Address.doc Freear, J., Sohl, J., & Wetzel, W. E., Jr. (1991). Raising venture capital to finance growth. In N. C. Churchill, S. Birley, W. D. Bygrave, D. F. Muzyka, C. Wahlbin, & W. E. Wetzel Jr. (Eds.), Frontiers of entrepreneurship research. Wellesley, MA: Babson College. Freear, J., Sohl, J., & Wetzel, W. E., Jr. (1995). Who bankrolls the software entrepreneurs? In W. D. Bygrave, B. J. Bird, S. Birley, N. C. Churchill, M. Hay, R. Keeley, & W. E. WetzelJr. (Eds.), Frontiers of entrepreneurship research (pp. 394−406). Wellesley, MA: Babson College. Geomagic. (2007). About us. Geomagic.com. Retrieved from http://www.geomagic.com/en/about_us/ Hanks, S., & McCarey, L. (1993). Beyond survival: Reshaping entrepreneurial vision in successful growing ventures. Journal of Small Business Strategy, 4(1), 1−12. Harrison, R., Mason, C., & Girling, P. (2004). Financial bootstrapping and venture development in the software industry. Entrepreneurship and Regional Development, 16(3), 307−333. Hoehn, M., Brush, C. G., & Baron, R. (2004). Putting your best foot forward? Assessments of entrepreneurial social competence from two perspectives. Journal of Private Equity, 7(4), 17−26. House, R. (1977). A 1976 theory of charismatic leadership. In G. Hunt & L. Lawson (Eds.), Leadership on the cutting edge. Carbondale, IL: University of Illinois Press. House, R., & Shamir, B. (1993). Toward the integration of transformational, charismatic, and visionary theories of leadership. In M. Chemers & R. Ayman (Eds.), Leadership theory and research: Perspectives and directions (pp. 81−107). San Francisco: Academic Press.
27 John Fitch. (2007). John Fitch and steamboats. About.com. Retrieved from http://www.classiccar.com/articles/william_durant.asp Landstrom, H., & Winborg, J. (1995). Small business managers' attitudes to use of financial sources. In W. Bygrave, B. Bird, S. Birley, N. Churchill, F. Hoy, R. Keeley, & W. Wetzel (Eds.), Frontiers of entrepreneurship research (pp. 172−186). Wellesley, MA: Babson College. Lieberman, M. B., & Montgomery, D. B. (1988). First-mover advantages. Strategic Management Journal, 9(5), 41−58. Lumpkin, T., & Dess, G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135−172. Madam C.J. Walker. (2007). Biography. MadamCJWalker. com. Retrieved from http://www.madamecjwalker.com/ bio_madam_cj_walker.html Mason, C., & Harrison, R. (2000). Auditioning for money: What do investors look for at the initial screening stage? In R. D. Hisrich, & E. Hacker (Eds.), Proceedings of the entrepreneurial finance workshop (pp. 155−176). Jonkoping, Sweden: Jonkoping International Business School. McIndoe, C. (2003, April). Presentation skills in new ventures. Presentation to the Boston University Executive MBA Program, Boston, MA. McMullan, W. E., & Long, W. (1990). Developing new ventures: The entrepreneurial option. San Diego: Harcourt Brace Jovanovich. Nutt, P., & Backoff, R. W. (1997). Crafting vision. Journal of Management Inquiry, 6(4), 308−328. Rivkin, J., & Porter, M. (1999). Matching Dell, Vol. HBS 9-799158. Cambridge, MA: Harvard Business School Publishing. Robinson, W. T., & Chiang, J. (2002). Product development strategies for established market pioneers, early followers, and late entrants. Strategic Management Journal, 23(9), 855−866. Rockey, H. (1986). Envisioning new business: How entrepreneurs perceive the benefits of visualization. In R. Ronstadt, J. Hornaday, R. Peterson, & K. Vesper (Eds.), Frontiers of entrepreneurship research (pp. 344−360). Wellesley, MA: Babson College. Schumpeter, J. (1934). Theory of economic development. Boston: Harvard University Press. Senge, P. (1990). The fifth discipline: The art and practice of the learning organization. New York: Doubleday Currency Publishing. Spors, K. (2007, July 10). The benefits of using your own bootstraps. Wall Street Journal. Retrieved from http://www. startupjournal.com/financing/credit/20070612-spors.html? sjcontent=mail The money is out there. (2007). Small Business School. Retrieved from http://smallbusinessschool.org/webapp/sbs/sbs/index. jsp%3Fpage%3Dhttp%3A%2F%2Fsmallbusinessschool.org%2Fwebapp%2Fsbs%2F1500%2F1501%2Fprofile.jsp They Made America. (2007). Donna Dubinsky: Personal Digital Assistants. PBS.org. Retrieved fromhttp://www.pbs.org/ wgbh/theymadeamerica/whomade/dubinsky_hi.html Van Auken, H. (2005). Differences in the usage of bootstrap financing among technology-based versus nontechnology-based firms. Journal of Small Business Management, 43(1), 93−103. Van Osnabrugge, M., & Robinson, R. J. (2000). Angel investing. San Francisco: Jossey Bass. Wayne, W. J., & Kacmar, K. (1991). The effects of impression management on the performance appraisal process. Organizational Behavior and Human Decision Processes, 48(1), 70−88.
Available online at www.sciencedirect.com
www.elsevier.com/locate/bushor
Pioneering strategies for entrepreneurial success Candida G. Brush Arthur M. Blank Center for Entrepreneurship, Babson College, Wellesley, MA 02457, USA
KEYWORDS Entrepreneurs; Entrepreneurial success; Pioneering; Visioning; Bootstrapping
Abstract Entrepreneurs are, by definition, pioneers in that they innovate new products/ services, create new processes, open new markets, or organize new industries. Dramatic changes in the global environment suggest that successful entrepreneurs must master three key strategies: (1) develop a clear vision; (2) manage cash creatively, or learn to “bootstrap”; and (3) be able to persuade others to commit to the venture using social skills. This article discusses pioneering strategies and offers guidance on how to implement these. © 2007 Kelley School of Business, Indiana University. All rights reserved.
1. O pioneers! Dramatic changes in global economies, technology, and emerging markets create challenging dilemmas for growing ventures. Entrepreneurs who succeed in this new environment have mastered the art of “pioneering,” which is a key strategy for entrepreneurial success. When we think of pioneering, we think of those who settle new territory, take the initiative to explore new horizons, and try new things that have not been tried before. Throughout history, entrepreneurs have created new markets, products, and industries, pioneering innovation and change in the economy. In doing so, these entrepreneurs utilized three key strategies: (1) they developed a clear vision, (2) they managed cash creatively, or “bootstrapped,” and (3) they learned to persuade others to commit to their venture using social skills. In the next decade, these same pioneering strategies will be essential for entrepreneurial success. E-mail address: [email protected]
Consider the story of Donna Dubinsky and Jeff Hawkins. In the early 1990s, nearly a billion dollars was spent by experts in Silicon Valley in attempt to develop a handheld computer. Unfortunately, the result of this massive investment was the Apple Newton, which proved to be a market dud. In 1992, Dubinsky, an International Vice President at Apple, was introduced to Hawkins through a mutual contact. Hawkins, a biophysicist from Berkeley, had developed a handheld electronic organizer he built in his garage from mahogany and cardboard. Upon discussion, Dubinsky and Hawkins decided to form a new company, called Palm Computing. While Hawkins engineered Palm's new device, Dubinsky crafted a strategy, raised cash, and helped bring the product to market (Dodson & Hart, 1997). Initial sales of the product rivaled that of cell phones and Walkmans. Palm Computing turned the wooden experiment into one of the most successful consumer electronics product launches in history, selling 400,000 units during its debut. In 1995, Palm was sold to US Robotics for $44 million; two years later, US Robotics was acquired by 3Com Corporation.
0007-6813/$ - see front matter © 2007 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2007.09.001
22
C.G. Brush
Dubinsky and Hawkins then left Palm to start a new company, Handspring, Inc. Their product, the Visor, undercut Palm’s prices by 30% and gained market share quickly, representing after just a year in business one out of every four personal digital assistants sold (They Made America, 2007). Said Dubinsky (2006, p. 2):
efforts shaped the auto industry. In this way, William Durant settled new territory and explored new horizons (Classic Car, 2007).
“The breakthrough of the Palm Pilot was to decide that the handheld device should be an accessory to a desktop computer, rather than a little computer. It should synchronize with the desktop, and let the desktop do the ‘heavy lifting’, such as printing, leaving the handheld part smaller, faster, cheaper. In one sense, the handheld – although a powerful computer itself – was really a mobile window into the desktop computer. This simple notion created a multi-billion dollar industry.”
By definition, entrepreneurs are pioneers. Schumpeter (1934) characterized economic development as a function of spontaneous and discontinuous change that causes disequilibrium in the environment; innovations take place in response to needs and wants, and these appear as “new combinations” (p. 66). These new combinations are defined as the:
Dubinsky and Hawkins were on the forefront of technology, trying things that hadn't been done before and exploring new territory. Pioneering entrepreneurs have a long history in the US and in other countries. Take the story of William Durant. Born in Boston, Durant spent several years alternately employed piling lumber, working in a drug store, and collecting overdue bills. In 1886, he joined forces with Dallas Dort and created a business that manufactured 2-wheeled carts, which cost $12.50 to assemble and which sold for $25.00. The first year, the venture sold 4000 carts. By 1890, the Durant–Dort Carriage Company was the leading manufacturer of horse-drawn carriages in the US, producing 50,000 a year. But Durant had a vision that the “horseless carriage was the wave of the future.” During the same period, David Buick had developed a valve head engine that could be used for cars; however, Buick was not interested in running an auto company. Gladly accepting the opportunity himself, Durant became general manager of the fledgling Buick Auto Company and, a few years later, assumed the presidency, overseeing the production of automobile manufacturing. By 1908, there existed four auto producers: Buick, REO (headed by Ransom E. Olds), Maxwell–Briscoe (led by Benjamin and Frank Briscoe), and Ford. After several months of negotiations, Durant launched General Motors with a capital investment of $2000 and subsequently issued stock that generated more than $12,000,000 in cash. With these proceeds, he purchased the Buick Auto Company with stock and, six weeks later, acquired the Olds Auto Corporation. He next completed a deal with the Oakland Company, later named Pontiac, and finally acquired the Cadillac Motor Car Company. Within 18 months, Durant purchased, acquired, or incurred substantial interest in 30 automakers. Not only did he create one of the largest companies in the United States, but his
2. Entrepreneurship and pioneering strategies
• Introduction of a new good; • Introduction of a new method of production; • Opening of a new market; • New source of supply; and • New organization of industry. In other academic research, pioneering is associated with market entry whereby companies introduce new technologies, products, or process improvements (Lieberman & Montgomery, 1988; Robinson & Chiang, 2002). While the marketing literature examines market entry, in the entrepreneurial domain, pioneering can be considered more broadly as any entry undertaken by an enterprising individual, firm, or small business unit (Lumpkin & Dess, 1996). For entrepreneurs, successful pioneering generally means overcoming obstacles. For example, if we consider when the steam engine and the automobile were created, it is notable that there was effectively no industry. The environment was uncertain and there existed a lack of resources. John Fitch, creator of the steam engine, had no money and little credit for developing the first steam-powered boat. In fact, Fitch was a silversmith, but inspired by a horse-drawn carriage, he worked to develop a carriage mobilized by steam power. He made sketches, and built a prototype propelled by flat wooden paddles and driven by a chain on a sprocket. He lobbied his friends, Congress, and anyone who would listen. While he was awarded a patent in 1791, he never received adequate funding to move beyond the prototype stage. As such, it was Robert Fulton who ultimately became known as the father of steam navigation. Nonetheless, John Fitch started the ball rolling by going against convention and attempting to do
Pioneering strategies for entrepreneurial success what others felt was not possible (John Fitch, 2007). In addition, think about Michael Dell, who launched his company in 1983 while a student at the University of Texas. He started by formatting hard disks and adding memory, disk drives, and modems to IBM clones, and selling the revamped computers for as much as 40% less than IBM's machines. As articulated by Dell: “I was too late to challenge the technical standard and the dealer network had been done already. Compaq was already very strong in retail. A new marketing and distribution strategy was something new, however” (Rivkin & Porter, 1999, p. 6). Late to the game, most predicted that Dell would fail. Other entrepreneurs had no social support or role models. In the early 1900s, Madam C. J. Walker was selling cosmetics door to door. In 1910, she built a factory in Indianapolis to manufacture her own line of cosmetics and a hair treatment system, designed to heal scalp disease through more frequent shampooing and the application of an ointment made of petrolatum and medicinal sulfur. Through strong business management skills and a remarkable ability to sell, Madam Walker became a millionaire before her death in 1919 (Madam C.J. Walker, 2007). As an African American woman entrepreneur, she had to work even harder to convince customers, suppliers, and venture partners to support her business. Likewise, Dubinsky and Hawkins had to persuade venture capitalists to invest in a very competitive field, one in which many were working on creating a similar product (Dodson & Hart, 1997). The ability of these entrepreneurs to settle new territory, explore new horizons, and develop new things was rooted in a set of skills that allowed them to succeed. These three capabilities, explored next in detail, are: (1) visioning, (2) bootstrapping, and (3) social skills.
2.1. Visioning Visioning is about the long view, where you see your venture in the future. Successful entrepreneurs develop a vision of where they want their business to be and are guided by this. Vision is also personal: about your career, your timing in life, your personal circumstances, and a variety of other things. Numerous experts on leadership and career development have emphasized the vital importance of individuals crafting a personal life vision. For example, Warren Bennis (1989), Stephen Covey (2004), Peter Senge (1990), and others maintain that a powerful vision can help people succeed far beyond what they might achieve otherwise, and that an individual's vision can propel and inspire those around him or her to reach their own dreams. Psychologists would say that if you don't identify your vision, others will plan and direct your
23 life for you. Senge (1990, p. 211) defines vision as “what you want to create of yourself and the world around you.” Management scholars define organizational vision as a transcendent ideal representing shared values that are ideological in nature, and having moral overtones (House, 1977; House & Shamir, 1993). Organizational vision is used to inspire others to perform well (Bass, 1985; Bennis & Nanus, 1985; Conger & Kanungo, 1987). It is an ideal to which the organization should aspire, or a mental image of the products, services, and organization that the business leader wants to achieve (Bennis & Nanus, 1985). At the organizational level: “Vision has a clear and compelling imagery that offers an innovative way to improve. It recognizes and draws on traditions and connects to actions that people can take to realize change. It taps people's emotion and energy; properly articulated, it creates enthusiasm.” (Nutt & Backoff, 1997, p. 312) As related by McMullan and Long (1990, p. 134), entrepreneurial vision is a mental prequel, a “previsualization” of a desired outcome. The articulated business concept or idea is the operationalization of “vision”: “A writer may at first crudely visualize a plot for a new novel or a painter may envisage the broad contours of an image to be painted on blank canvas. The entrepreneur may pre-visualize the basic character of a product or service to be provided to a potential target market against a background of relevant economic activity.” (p. 135) An early investigation of entrepreneurial vision found that entrepreneurs imagined pictures, movies, and physical arrangements of their future ventures; they performed mental rehearsals of presentations, imagined plant lay-outs and even types of employees, sometimes using scenarios (Rockey, 1986). Hanks and McCarey (1993) describe the process as more sequential: the way that the entrepreneur identifies a need in the marketplace and develops a concept that leads to establishment of a new organization. Generally, there is agreement that a vision is a pattern for a future; having elements of time and scope, it is values driven, has a purpose, and often evokes a mental image or picture that can be communicated (Bird & Brush, 2003). The process of visioning is often used in business, sports, psychology, and a variety of other contexts. NFL quarterbacks, politicians, and actors often use visioning to enact a situation in their “mind's eye,” as practice for handling the real life event. As regards entrepreneurial ventures, vision can have a profound impact on the early success of the endeavor. A clear vision can create a
24 shared purpose for the founding team; can set the initial culture, practices, and policies of the organization; can motivate employees, suppliers, customers, and investors; and can influence strategy and, ultimately, growth (Bird & Brush, 2003). For example, Larry Page expressed his vision for Google, Inc. as such (Corporate Information, 2007): “The perfect search engine would understand exactly what you mean and give back exactly what you want. Given the state of search technology today, that's a far-reaching vision requiring research, development, and innovation to realize. Google is committed to blazing that trail. Though acknowledged as the world's leading search technology company, Google's goal is to provide a much higher level of service to all those who seek information, whether they're at a desk in Boston, driving through Bonn, or strolling in Bangkok.” Having a concise vision that is easily communicated is essential for pioneering entrepreneurs.
2.2. Bootstrapping Bootstrapping is the means of conserving financial resources and managing cash in a resourceful manner to start and grow a venture. At start-up and during early growth, having cash to develop or sell products/services, collecting receivables, and paying creditors and employees while, at the same time, trying to expand a business can be challenging (Carter, Brush, Greene, Hart, & Gatewood, 2006). Most small and new firms face greater obstacles in obtaining capital than their older and larger counterparts because of information asymmetries, lack of market access, and idiosyncratic forces such as the influence of the entrepreneur on financing and capital structure choices (Cassar, 2001). In order to overcome these challenges, entrepreneurs must manage cash creatively to prove their concepts and gain market acceptance. During the early business development phase, entrepreneurs generally use personal or internally generated funds, aggressively control costs, and manage capital expenditures to achieve benchmarks. This collective set of managerial behaviors/ practices is commonly referred to as “bootstrapping.” Bootstrapping is a strategy for financing a small firm through the creative acquisition and use of resources, without raising equity or borrowing money (Van Osnabrugge & Robinson, 2000; Freear, Sohl, & Wetzel, 1995; Bhide, 2000). Bootstrapping generally takes two forms: (1) to minimize the need for financing by securing resources at little or no cost, and (2) to creatively acquire resources without
C.G. Brush using bank financing or equity (Harrison, Mason, & Girling, 2004; Freear et al., 1995; Bhide, 2000; Landstrom & Winborg, 1995). The process enables the entrepreneur to use cash and manage the business in a resourceful and creative manner (Bhide, 2000). Founders who learn to bootstrap their businesses effectively gain legitimacy in the eyes of stakeholders (Freear, Sohl, & Wetzel, 1991). Further, bootstrapping is an easy way to obtain capital often without collateral (e.g., using credit cards), which can be detrimental if used to excess or inappropriately (Van Auken, 2005). But more often, bootstrapping assists in the development of knowledge, and human and technical resources, and these activities may help the entrepreneur to develop a “lean” mindset (Harrison et al., 2004). This process should increase their likelihood of acquiring growth capital in the next stage to fuel growth, and has the added benefit of retaining a higher percentage of founder ownership. Research shows that those companies that bootstrap and get good at it have more financial savvy and are more likely to obtain angel investment and equity financing (Carter et al., 2006). There are generally four different ways to bootstrap (Van Osnabrugge & Robinson, 2000; Carter et al., 2006): (1) Product development: Using customers and suppliers to finance R&D and operations (e.g., borrowing computers of customers to develop software); (2) Business development: Using personal cash resources to get operational quickly (e.g., credit cards, own money); (3) Conserving cash: Reducing inventory, paying employees in stock, doing without, deals with service providers (e.g., using students or interns); and (4) Meeting cash needs: Personal loans, family and friends loans, delayed compensation for employees, using trade credit. A good example of bootstrapping involves the way in which Mark Roberge, a Massachusetts Institute of Technology graduate, launched PawSpot.com, a social-networking site for pet owners looking to swap pet-sitting duties, arrange play dates, and share information on local pet-services vendors. Roberge launched the business with $500,000 from outside investors to help fund his start-up needs. But, he didn't want to spend any more money than necessary to get the business started. Instead of buying or leasing office space, Mr. Roberge worked from home for several months and
Pioneering strategies for entrepreneurial success held meetings in cafés. He also signed up for affiliatemarketing programs and Google's AdSense program, which helped provide cash when visitors clicked on ads or purchased goods from the advertisers. In addition, the founder employed graduate students for 10 hours a week, at a cost of $1000 per month, to perform freelance marketing and technology analysis. And, he used several open-source software programs (i.e., free or low-cost software available online to the general public) to test out potential site features before investing money to create them internally. These practices helped PawSpot to conserve and create cash, and develop the business and product at the same time (Spors, 2007). Bootstrapping, as a practice in venture development and during the early growth phases, is a means for pioneering entrepreneurs to survive and overcome the challenges innovative businesses face.
2.3. Social skills Social skills are a composite of learnable behaviors individuals use in interactions with others. Entrepreneurs depend on social skills to persuade others to join and commit to their business or venture idea. Suppliers, customers, investors, and employees all need to be convinced to come along into the uncharted landscape of a new venture, especially when the idea is innovative and there are no existing businesses in the marketplace. Enhanced social skills are a form of “social competence,” which is comprised of persuasion, social adaptability, impression management, and social perception (Baron & Markman, 2003). This summary term captures the combined effects of various social skills, such as the ability to perceive others accurately, make a good first impression, and persuade others to change their views or behavior (Wayne & Kacmar, 1991). An entrepreneur's presentation to different stakeholders includes information about a new opportunity that effectively provides a signal to investors about his/her ability to successfully develop and manage a new venture. Creating a negative impression can result in failure to sell the business opportunity to investors, and limit investment potential (Mason & Harrison, 2000). Key dimensions of social skills include the following (Baron & Markman, 2003; Hoehn, Brush, & Baron, 2004): (1) Social perception: This is the ability to perceive and understand what the audience is expecting, how ready they are to listen and receive a presentation; (2) Impression management: This is the ability to create a good impression, by what you say, how you look, and how you act;
25 (3) Persuasion and social influence: This is the ability to persuade and convince people to join the business, to buy the product/service, invest, or form an alliance with the venture; and (4) Social adaptability: The ability to think on your feet, meet the needs of the situation, and adjust to people and circumstances. Here, the story of Andy Wilson and Boston Duck Tours is relevant. In 1993 on a trip to Branson, Missouri, Andy Wilson saw amphibious vehicle tours being given and conceived the idea that tourists might, too, enjoy viewing Boston from both land and sea (The Money, 2007). While a straightforward idea, the process of launching Boston Duck Tours took nearly two years, due largely to the 30 permits required and financing necessary to purchase and rehab the vehicles. Andy began by pitching his idea all over Boston, sporting a happy face t-shirt and carrying his business plan with a smiling duck on the cover. His early elevator speech for the venture painted a picture of “amphibious war vehicles that would traverse the cobblestone streets of Boston, so [patrons] could see the sights from the street and the water” (McIndoe, 2003). Not only did the founder have the wrong introductory speech, but his appearance and the cover of his plan were not appropriate for the investment community or government regulators. While pleasant enough, the happy face and smiling duck left the impression that Andy wasn't serious about the business, and that the business wasn't a serious investment. After receiving coaching to polish up his social skills, Wilson managed to obtain the necessary permits from various regulatory agencies. This in itself was a feat; the permits were extremely difficult to obtain, in part because of bureaucratic red tape, the fact that most people had never heard of “duck tours,” and that the thought of a land/water tour of Boston seemed crazy (McIndoe, 2003). At one point, Wilson was even told that it would be easier to build a skyscraper in the center of the Boston Public Garden than launch his venture! Undaunted, the visionary persevered and what began as a four-Duck, 15-employee business on October 4, 1994 has grown into a 23-Duck, 100employee powerhouse firm in the Boston tourism market (Boston Duck Tours, 2006). As Andy's story suggests, social skills are very important in persuading funders, regulators, employees, and others to join a new venture. Research indicates that outsiders make observations and judgments about entrepreneurs' presentations within two minutes. At the same time, entrepreneurs believe they are more persuasive than outside evaluators would agree (Hoehn et al., 2004). The
26 ability of entrepreneurs to attain funding is directly related to social adaptability, self-efficacy, and emotional expressiveness. Hence, for pioneering entrepreneurs who are exploring new areas, development of social skills is very important to success.
3. Pioneering into the future In the next decade, socio-demographic changes (e.g., aging and shifting populations, likely shortages of natural resources, rising environmental pollution, health and welfare concerns) and political economic changes will give rise to new opportunities for pioneering entrepreneurs. This is uncharted territory. How can you be more successful? Following are tips for achieving this goal.
3.1. Crafting your vision Creating a vision involves taking stock of your personal situation, your company, and the environment. Start by identifying your strengths and capabilities; your networks and support systems, as well as a reasonable timetable, are essential. Then, think about what you are most passionate about. The next step is to develop a vision of your venture into the future. What will it be? What values will drive the company? And what will your role be in this organization? The vision of your venture should be a short statement that can be easily communicated, or presented in an image. It should be motivational, be guided by values, and be memorable. For example, Geomagic, a producer of advanced optical measurement systems and 3D-data processing software that digitally captures physical objects and automatically creates accurate 3D models, states (Geomagic, 2007): “Geomagic's corporate vision is to advance and apply 3D technology for the benefit of humanity. By maximizing value for customers, Geomagic is becoming the digital shape sampling and processing (DSSP) leader, growing by more than 50 percent annualized revenue year after year.”
3.2. Bootstrapping This is not only a philosophy, but also a skill. Bootstrapping represents managing for cash and being rigorous in this approach. Almost every decision involves cash, whether it is product-, customer-, supplier-, or market-related. In the words of one entrepreneur, “I try to buy low, sell high, collect early, and pay late.” This approach will help maintain cash flow into the business. Most investors, loan officers, and business consultants can provide advice on ways to do this in your business, but other resources are available at SmartBiz.com (Burke, 2007) website and
C.G. Brush the Angel Capital Education Association (Angel Capital Education Foundation, 2007).
3.3. Polishing your social skills Social skills are learnable. In every interaction, you need to consider the impression you will make and how others will perceive you and your business. For additional resources, see work by Baron and Markman (2003), and articles on the Stanford University website (www.stanford.edu). Here are some tips to think about in your interactions:
• Be
a story teller; use analogies that evoke pictures and images.
• In formal presentations, know your audience. Try to anticipate their expectations and adapt your presentation, if needed.
• Non-verbal
communications are very important. Work on eliminating mannerisms that might detract from your interactions (e.g., flipping your hair, chewing on your pen, unnecessary hand movements).
• Believe
in the business, and try to exude confidence and passion for your business.
• First impressions are vital in every setting; your
dress, body language, eye contact, and speed and clarity of presentation delivery impact whether or not someone wants to spend more time learning about the business and your vision.
• Practice and polish your elevator speech, your delivery, and your presentation.
If you are exploring new horizons and settling new territory, follow the successful pioneering strategies of Madam C. J. Walker, Michael Dell, and Donna Dubinsky. Have a vision, learn to bootstrap, and develop your social skills.
References Angel Capital Education Foundation. (2007). For entrepreneurs. AngelCapitalEducation.Org. Retrieved from http://www. angelcapitaleducation.org/dir_resources/for_entrepreneurs. aspx Baron, R., & Markman, G. D. (2003). Beyond social capital: The role of entrepreneur's social competence in their financial success. Journal of Business Venturing, 18(1), 41−60. Bass, B. M. (1985). Leadership and performance beyond expectations. New York: Free Press. Bennis, W. (1989). On becoming a leader. New York: Addison-Wesley. Bennis, W., & Nanus, B. (1985). Leaders: The strategies for taking charge. New York: Harper & Row. Bhide, A. (2000). The origin and evolution of new businesses. New York: Oxford Press. Bird, B. J., & Brush, C. G. (2003). Exploring leadership vision: New perspectives on women entrepreneurs and executives. In
Pioneering strategies for entrepreneurial success J. Butler (Ed.), Research in entrepreneurship and management: Special issue on women entrepreneurs (pp. 51−69). Charlotte, NC: Information Age Publishing. Boston Duck Tours. (2006). Company history. Retrieved from http://www.bostonducktours.com/company_history_main. html Burke, D. (2007). Bootstrapping 2.0: Smart, marketable ideas trump outside capital. SmartBiz.com. Retrieved from http:// www.smartbiz.com/article/articleview/1777/2/5/ Carter, N., Brush, C. G., Greene, P., Hart, M., & Gatewood, E. J. (2006). The use of bootstrapping by women entrepreneurs in positioning for growth. Venture Capital Journal, 8(2), 1−19. Cassar, G. (2001). The financing and capital structure of business start-ups: The importance of asset structure. In W. Bygrave, E. Autio, C. Brush, P. Davidsson, P. Greene, P. Reynolds, & H. Sapienza (Eds.), Frontiers of entrepreneurship research: The proceedings of the Babson Kauffman Conference on entrepreneurship research. Wellesley, MA: Babson College. Classic Car. (2007). William C. Durant. ClassicCar.com. http:// www.classiccar.com/articles/william_durant.asp Conger, J., & Kanungo, R. (1987). Toward a behavioural theory of charismatic leadership in organizational settings. Academy of Management Review, 12(4), 637−647. Corporate Information. (2007). Our philosophy. Google.com. http://www.google.com/corporate/tenthings.html Covey, S. R. (2004). The 7 habits of highly effective people. New York: Free Press. Dodson, S., & Hart, M. (1997). Palm Computing, Inc. — 1995 (HBS 9-898-090). Cambridge, MA: Harvard Business School Publishing. Dubinsky, D. (2006, May 20). Commencement speech to MBA candidates, F. W. Olin Graduate School of Business at Babson College (p. 2). Retrieved from http://www3.babson.edu/ Newsroom/blog/upload/Babson%20College%20Dubinsky% 20Address.doc Freear, J., Sohl, J., & Wetzel, W. E., Jr. (1991). Raising venture capital to finance growth. In N. C. Churchill, S. Birley, W. D. Bygrave, D. F. Muzyka, C. Wahlbin, & W. E. Wetzel Jr. (Eds.), Frontiers of entrepreneurship research. Wellesley, MA: Babson College. Freear, J., Sohl, J., & Wetzel, W. E., Jr. (1995). Who bankrolls the software entrepreneurs? In W. D. Bygrave, B. J. Bird, S. Birley, N. C. Churchill, M. Hay, R. Keeley, & W. E. WetzelJr. (Eds.), Frontiers of entrepreneurship research (pp. 394−406). Wellesley, MA: Babson College. Geomagic. (2007). About us. Geomagic.com. Retrieved from http://www.geomagic.com/en/about_us/ Hanks, S., & McCarey, L. (1993). Beyond survival: Reshaping entrepreneurial vision in successful growing ventures. Journal of Small Business Strategy, 4(1), 1−12. Harrison, R., Mason, C., & Girling, P. (2004). Financial bootstrapping and venture development in the software industry. Entrepreneurship and Regional Development, 16(3), 307−333. Hoehn, M., Brush, C. G., & Baron, R. (2004). Putting your best foot forward? Assessments of entrepreneurial social competence from two perspectives. Journal of Private Equity, 7(4), 17−26. House, R. (1977). A 1976 theory of charismatic leadership. In G. Hunt & L. Lawson (Eds.), Leadership on the cutting edge. Carbondale, IL: University of Illinois Press. House, R., & Shamir, B. (1993). Toward the integration of transformational, charismatic, and visionary theories of leadership. In M. Chemers & R. Ayman (Eds.), Leadership theory and research: Perspectives and directions (pp. 81−107). San Francisco: Academic Press.
27 John Fitch. (2007). John Fitch and steamboats. About.com. Retrieved from http://www.classiccar.com/articles/william_durant.asp Landstrom, H., & Winborg, J. (1995). Small business managers' attitudes to use of financial sources. In W. Bygrave, B. Bird, S. Birley, N. Churchill, F. Hoy, R. Keeley, & W. Wetzel (Eds.), Frontiers of entrepreneurship research (pp. 172−186). Wellesley, MA: Babson College. Lieberman, M. B., & Montgomery, D. B. (1988). First-mover advantages. Strategic Management Journal, 9(5), 41−58. Lumpkin, T., & Dess, G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135−172. Madam C.J. Walker. (2007). Biography. MadamCJWalker. com. Retrieved from http://www.madamecjwalker.com/ bio_madam_cj_walker.html Mason, C., & Harrison, R. (2000). Auditioning for money: What do investors look for at the initial screening stage? In R. D. Hisrich, & E. Hacker (Eds.), Proceedings of the entrepreneurial finance workshop (pp. 155−176). Jonkoping, Sweden: Jonkoping International Business School. McIndoe, C. (2003, April). Presentation skills in new ventures. Presentation to the Boston University Executive MBA Program, Boston, MA. McMullan, W. E., & Long, W. (1990). Developing new ventures: The entrepreneurial option. San Diego: Harcourt Brace Jovanovich. Nutt, P., & Backoff, R. W. (1997). Crafting vision. Journal of Management Inquiry, 6(4), 308−328. Rivkin, J., & Porter, M. (1999). Matching Dell, Vol. HBS 9-799158. Cambridge, MA: Harvard Business School Publishing. Robinson, W. T., & Chiang, J. (2002). Product development strategies for established market pioneers, early followers, and late entrants. Strategic Management Journal, 23(9), 855−866. Rockey, H. (1986). Envisioning new business: How entrepreneurs perceive the benefits of visualization. In R. Ronstadt, J. Hornaday, R. Peterson, & K. Vesper (Eds.), Frontiers of entrepreneurship research (pp. 344−360). Wellesley, MA: Babson College. Schumpeter, J. (1934). Theory of economic development. Boston: Harvard University Press. Senge, P. (1990). The fifth discipline: The art and practice of the learning organization. New York: Doubleday Currency Publishing. Spors, K. (2007, July 10). The benefits of using your own bootstraps. Wall Street Journal. Retrieved from http://www. startupjournal.com/financing/credit/20070612-spors.html? sjcontent=mail The money is out there. (2007). Small Business School. Retrieved from http://smallbusinessschool.org/webapp/sbs/sbs/index. jsp%3Fpage%3Dhttp%3A%2F%2Fsmallbusinessschool.org%2Fwebapp%2Fsbs%2F1500%2F1501%2Fprofile.jsp They Made America. (2007). Donna Dubinsky: Personal Digital Assistants. PBS.org. Retrieved fromhttp://www.pbs.org/ wgbh/theymadeamerica/whomade/dubinsky_hi.html Van Auken, H. (2005). Differences in the usage of bootstrap financing among technology-based versus nontechnology-based firms. Journal of Small Business Management, 43(1), 93−103. Van Osnabrugge, M., & Robinson, R. J. (2000). Angel investing. San Francisco: Jossey Bass. Wayne, W. J., & Kacmar, K. (1991). The effects of impression management on the performance appraisal process. Organizational Behavior and Human Decision Processes, 48(1), 70−88.