The Single Greatest Factor in Entrepreneurial Success
On a flight to New York this month I found myself seated beside a veteran entrepreneur. Now retired and headed to Europe for a vacation, he was the founder of two highly successful chains of restaurants. I knew his restaurants well, because they happen to be on my short list of favorites.
Even before the plane was in the air we had begun talking about his business-building career. In the course of our two-hour conversation, I asked him what trait he considered most vital for today's entrepreneurs.
His answer was immediate, without even a split second of reflection. "The most essential quality for entrepreneurial success," he said, " is the ability to manage effectively in the face of constant ambiguity." And it was evident from the speed and precision of his response that this was hardly the first time that he had thought about this question.
Coping with Uncertainty
He then went on to explain that today's business climate is so fast-changing that it's nigh unto impossible to forecast the future in terms of economic trends, markets, customer preferences, or regulatory constraints. As a business owner, therefore, you are always contending with uncertainty. The best laid plans today may need wholesale revision tomorrow.
"Some people are cut out to thrive in uncertainty," he observed. "Others are not." And as he talked about his career, there was no mistaking which group he belongs to. Bold moves in the face of uncertainty were the hallmark of his business life.
Ambiguity and Decision-Making
His comments resonated with me, because they parallel a point that I've made repeatedly to corporate leaders and senior executives. To be specific, as you move higher and higher on the corporate ladder, your decisions impact longer and longer time-horizons. And as the time-horizon for your decisions increases, so does the amount of ambiguity in the data on which those decisions are based.
That is to say, early in a management career your decision-making responsibility usually deals with things that will happen in the next few weeks or months. You usually have extensive data to sort through the variables which shape your decision. You can therefore defend your decision by citing the data which supports it.
At upper tiers of management, however, you are charged with decisions which will shape the organization for years to come. Because you are dealing with such an extended time frame, the data is more vague, less detailed. Your assumptions are broader, your projected trend lines more open to question. People who succeed in upper management, therefore, must have the self-assurance to make decisions without extensive data to substantiate their conclusion.
I've seen many capable, competent middle managers who failed once promoted to upper management because they could not cope with the ambiguity that was thrust upon them. Which then brings us back to my conversation on the plane.
Many encore entrepreneurs built their first career in lower or middle management. In all likelihood, they were self-confident and effective in those posts. Because of the nature of these postions, however, there's a high probability that they did not have to deal extensively with ambiguity in decision-making. Policies, goals, milestones, and performance expectations were laid out for them explicitly and concretely by the organization above them.
When they become business owners, they are like middle managers promoting into top management — they must contend with ambiguity on every turn. Some make this transition well, others do not. Several factors have a bearing on whether encore entrepreneurs will be able to manage the ambiguity of entrepreneurship.
- Prior Career Experience. We've already touched on this factor when looking at the management career path in the corporate world. Encore entrepreneurs whose experience is entirely at middle management or below did not have an opportunity in the course of that career to fine tune their skills at dealing with ambiguity when making decisions.
- Life Experience and Risk Aversion. Many people have a risk-averse approach to life. They are uncomfortable unless things are under control. Decision-making in the face of ambiguity thus brings too much risk for them to feel assured and at ease.
- Personality Factors. Personality profiles like the Myers-Briggs Type Indicator (MBTI) evaluate whether a person is more given to concrete, detailed thinking or to conceptual, theoretical thinking. These profiles also measure whether a person prefers to work in a setting that is very structured or in one where there is a great deal of flexibility and open-endedness. People who are concrete, detailed thinkers and who prefer structure have the greatest difficulty, as a rule, thriving in a setting of ambiguity. People who are more conceptual and open-ended in their approach tend to handle ambiguity more effectively.
In starting a business, then, here are some guidelines to follow:
- Assess your own tolerance for ambiguity and determine whether your tolerance is appropriate for success as a business owner.
- Evaluate your spouse's tolerance for ambiguity. Startups are a family enterprise, even when only one partner in the marriage is actually working in the business. The more your spouse is comfortable with ambiguity, the more supportive he or she can be when the circumstances surrounding the business are somewhat uncertain.
- Make it a habit from the very outset to gather and record lot's of data about the performance of your business. I'm referring to such things as what percentage of your promotional emails are opened? How does that percentage move up or down when you change the style of the subject line? When you mail at a different time of the day? When you send your emails on a different day of the week? With data like this you eliminate needless ambiguity when making decisions about email campaigns.
The email example I've cited is only one of dozens of business activities on which you might want to capture data. Data is a great antidote to ambiguity. Spending the time to gather this information may seem like tedium, especially with the many alligators continually snapping at you as a business owner. But in the future the effort pays off handsomely by giving you the wherewithal to make more informed, less ambiguous decisions.