3 Keys for Identifying Entrepreneurs

I recently watched a Warren Buffett YouTube video (LINK), where he shared the list of the 20 largest companies in the world by stock market value as of March 31, 2022.  Apple topped the list with a $2 trillion valuation and LVMH MOET of France was twentieth at $330 billion.  He asked the audience to predict how many companies they thought would still be on the list in 30 years.  What is your guess?  Then he showed a list of the 20 largest companies in 1989.  The Industrial Bank of Japan was number one with a $104 billion valuation and Merck & Co. was number 20 at $30 billion.  Mr. Buffett wanted everyone to take away two key points:

  1. Not a single company on the 1989 list remained on the list just 33 years later and
  2. If you were 20th on the list in 1989 and wanted to remain on the list in 33 years your company needed to be 11 times bigger!

To significantly grow your company and sustain competitive advantage over a long period of time requires a culture that is mission driven and adaptable.  The organization must be customer centric, focused on organizational learning, and excellent at navigating change.  That is what you can control.  In addition, you need to identify and adapt the right technological innovations, be lucking, and play in the right industries.  To have a chance to succeed over the long haul, you need a group of entrepreneurs.

Identifying entrepreneurial talent is as much art as it is science (just like P&L talent discussed in a previous blog).  I share three components for identifying entrepreneurial talent.  Each component has a business side and personal side.

A Natural Ability to See Opportunity

Entrepreneurs are often a combination of visionary and customer-focused leaders.  A vision-centered leader sees more than others see, sees farther than others see, and sees before others do.  They use this ability to develop creative solutions to business problems.  A customer-centered leader becomes an expert at understanding their customers’ business.  They use this deep customer knowledge to create products and services that meet their current, future, and unrecognized needs.

On the business side, look for the ability to see holes in the market.  Do they like playing with ideas and concepts?  Are they future oriented?  Do they recognize market trends and customer needs before others?  Most importantly, your entrepreneurs will empathize with your customers on a deep level, and understand their strategy, business model and organizational structure.

On the personal side, look for employees that get easily frustrated or annoyed.  Sounds counterintuitive, doesn’t it?  Innovation is often rooted in frustration with poor product and service experiences, and inefficient processes.  Look for people that use that frustration to fuel change.

Fast and Iterative Learner

A good friend of mine, Gregg Lichtenstein, and author of the book Investing in Entrepreneurs: A Strategic Approach for Strengthening Your Regional and Community Economy, told me a great entrepreneur can hold multiple unknows or variables in their head at one time.  Most leaders need a lot of information to make decisions and vary one or two inputs at a time – the price of a product for example.  Entrepreneurs can make decisions without perfect information by developing and testing assumptions.

On the business side, look for the ability to construct strategic experiments that test ideas quickly using as few resources as possible.  They hone their business model and revise their assumptions quickly.  They can decipher success correlations, patterns, and causes better than others.

On the personal side, look for greenfield or blank page thinkers.  They don’t need a strategic plan or business plan to get started.  They hate waiting for perfect information, a consultant’s report, or senior leader permission to get started.

Effectively Balance Stubbornness with Openness

“First they think you’re crazy, then they fight you, then you change the world.”  This and similar quotes are used to describe the innovation and change process.  It takes a special person to shepherd change through a large organization.

On the business side, look for the ability to have faith in self, ideas, and products.  They don’t quit too soon and have GRIT as defined by Professor Angela Duckworth.  In her book, Grit: The Power of Passion and Perseverance, she defines grit as passion and perseverance for long-term goals. They possess an intuition to artfully balance tenacity with change.

On the personal side, look for resilience and openness to change.  Mentally they are open to new input and prone to using thought experiments.  They are not quick to dismiss ideas or approaches but are willing to invest time to learn more.  They believe it is time well spent to experience something firsthand versus relying on research or public opinion.

Bottom Line

Executive teams need entrepreneurs in their leadership pipeline to create and maintain long-term competitive advantage.  Successful organizations create environments where innovation, learning, adaptability, and change rooted in purpose thrive.

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