Nurturing Entrepreneurial Traits

Return to main page


Digital Library > Building and Inspiring an Organization > Management development"Nurturing Entrepreneurial Traits"

Using effectual thinking and intelligent failure to better see opportunities.

"Entrepreneurs love the world of ambiguity," says Tom O'Malia, director of the University of Southern California's Greif Center for Entrepreneurship. "Their attitude is: I don't know the answer now, but I know I'll have one when I get there."

Speaking at a TEI Presidents' Forum, O'Malia outlined three different ways of thinking:

1. Causal thinking, which is typically practiced by managers and engineers, involves a set of absolute means, having a goal and applying available resources to reach the goal.

2. Strategic thinking searches for new ways to reach predetermined goals. Although most people think that strategic thinking is innovative, strategy is about looking for precise answers, so it can be limiting, O'Malia points out.

3. Effectual thinking doesn't revolve around predisposed goals. Instead, the thinker is trying to reach imagined needs and explore what needs to be changed.

Effectual thinking is what entrepreneurship is all about — and it's important because wealth doesn't necessarily come from optimization, squeezing the last dime out of cost-of-goods or being faster at distribution. O'Malia cites Kevin Kelly, who observed in a 1997 Wired magazine article that "wealth is not gained by perfecting the known, but by imperfectly seizing the unknown."

To practice effectual thinking, one must examine a situation from a number of perspectives. "The magic phrase is: Imagine the end, and then create the means," O'Malia says.

The Wright brothers are a classic example of such thinking. "How else could two brothers in Dayton, Ohio, who owned a bicycle shop, beat hundreds of people who were studying what it would take to make a delta curve work?" O'Malia asks. "Yet those researchers were trying to prove a delta curve as opposed to what the Wrights were doing: imagining needs and constantly changing their means until they got it right."

Intelligent failure. Indeed, learning from setbacks is another critical aspect of innovation. On average, the successful entrepreneur will fail at least two out of three times before building a venture of significant size, O'Malia says. He points to Paul Orfalea, founder of Kinkos, who failed 18 times before scoring a home run with his quick-copy business.

To perpetuate the entrepreneurial spirit within organizations, managers must create environments that nurture creativity and intelligent failure. This means celebrating effort instead of demanding instant perfection.

During brainstorming sessions, anyone who interjects something like, "The problem with that is…" should be fined $1, O'Malia says. And he recommends higher penalties for criticisms that contain personal digs, such as "Where do you get these ideas?" or "We tried that three years ago, and I think it was you that messed it up." Objections like these are deadly because they shut down conversations and stifle innovation.

Recognizing opportunity. Successful entrepreneurs typically have three to five years of industry experience. This knowledge helps them identify existing or future opportunities — and find the means to a solution. Rather than following in someone else's footsteps, they're looking for an opening, for the pattern to change.

Tip: Think guerilla tactics. O'Malia tells of a graduate student who was trying to develop new surgical equipment and wanted to get feedback from experts — no easy undertaking for a startup situation. Yet the student identified 10 top urologists across the country who would be attending the same conference. Then he sent each of them a Montblanc pen case, empty except for a note that read: "I'd like an hour of your time for which I'll be happy to fill this case with its original contents." The results: Nine out of the 10 doctors showed up.

Having a hard time identifying opportunities? Look for pain, O'Malia says. He refers to Scott Cook, Intuit's co-founder, who assigned senior managers and engineers to work the customer service line one day a month so they would be on top of any problems.

"I believe that CEOs must work on their businesses, not in their business," says O'Malia, "but sometimes you've got to get back to where the action is."

Related Articles

Sharing the Risks and Rewards: Evaluating Joint Ventures

Designing Success With a Chain Concept

Better Decision Making

Watch For Expansion Opportunities

Life Values Drive Controlled Growth



Building and Inspiring an Organization

Articles in our Entrepreneur’s Resource Center appeared in print and online newsletters published previously by the foundation. More than 1,000 articles can be found in the categories below, addressing timeless challenges faced by entrepreneurs of all types.