The entrepreneurial mindset is a way of thinking that enables you to overcome challenges, be decisive, and accept responsibility for your outcomes. It is a constant need to improve your skills, learn from your mistakes, and take continuous action on your ideas. 3
If past generations dreamed of the prestige and perks that come with the executive suite of a major corporation, the dream of the millennial generation (also known as Generation Y) appears quite different. They believe that career success will require them to be more agile, independent, and entrepreneurial than past generations.4
In a recent study only 13 percent of millennials said their career goal involves climbing the corporate ladder to become a CEO or president. By contrast, almost two-thirds (67%) said their goal involves starting their own business.
Let us explore some facts:
- Millions of individuals younger than 35 are actively trying to start businesses.
- One-third of new entrepreneurs are younger than 30.
- A large number of 18- to 30-year-olds study entrepreneurship in business schools.
- Major universities are devoting more resources to entrepreneurship, and the success stories of young entrepreneurs are increasing.5
Every person has the potential and free choice to pursue a career as an entrepreneur, but precisely what motivates people to make this choice is not fully understood.
Although it is not an exact science, examining the entrepreneurial mindset provides interesting insights into the entrepreneurial potential of every individual.
Let us examine the cognition of entrepreneurs as a doorway to understanding the entrepreneurial mindset.4
Cognition: The term comes from the Latin cognoscere, which means "to know,” "to conceptualise," or "to recognise," and refers to the processing of information, applying knowledge, and changing preferences. Cognition is used to refer to the mental functions, mental processes (thoughts), and mental states of intelligent humans. 4
One of the most prolific topics in the research literature is entrepreneurial cognition: entrepreneurs think differently from other people.
In science, cognition refers to mental processes, including paying attention, remembering, producing and understanding language, solving problems and making decisions. It means the ability to process information, apply knowledge and change preferences.
Social cognition theory looks at situation-based mental models (cognitions) that optimise personal effectiveness.
Entrepreneurial cognition:
- It is about understanding how entrepreneurs use mental models
- It is about how they piece together information that helps them invent new products or services and assemble the resources to start and grow businesses
- Offers an understanding of how entrepreneurs think and why they do some of the things they do.6
Consider the entrepreneur challenged to give a sound explanation for a new venture to a venture capitalist. Before evaluating alternative strategies, the entrepreneur must first formulate a strategy to frame how they will 'think' about this task. Many people believe that entrepreneurs' think' differently than other individuals. 6
In the simplest of theoretical terms,
Entrepreneurship = f (entrepreneur)
This formula states that entrepreneurship is a function of the entrepreneur, a real individual with passions, experiences and knowledge living in a particular culture and time period. Looking at the characteristics of these real individuals helps us understand entrepreneurship.
Characteristics of these real individuals helps us understand entrepreneurship.
Does the following describe you or any of your friends?
Would-be entrepreneurs live in a sea of dreams. Their destinations are private islands – places to build, create and transform their particular dreams into reality. Being an entrepreneur entails envisioning your island and even more important, it means getting in the boat and rowing to your island. Some leave the shore and drift aimlessly in the shallow waters close to shore, while others paddle furiously and get nowhere, because they do not know how to paddle or steer. Worst of all are those who remain on the shore of the mainland, afraid to get in the boat. Yet, all those dreamers may one day be entrepreneurs if they can marshal the resources – external and internal – needed to transform their dreams into reality. 6
Entrepreneurs typically have skills like internal control, planning and goal setting, risk-taking, innovation, reality perception, use of feedback, decision making, human relations and independence. They are also not afraid to come back from failure.
Research continues to expand our understanding of the entrepreneurial mind. Here we look at how entrepreneurs perceive, recognise, conceive, judge, sense, reason, remember and imagine. William Gartner examined the literature and found a diversity of reported characteristics.
Psychologists have put together a set of profile dimensions that characterise entrepreneurs.
- Determination and perseverance
- Drive to achieve
- Opportunity orientation
- Persistent problem solving
- Feedback seeking
- Internal locus of control
- Tolerance for ambiguity
- Calculated risk-taking
- Tolerance for failure
- High energy level
- Creativity and innovativeness
- Vision
- Passion
- Team-building skill.
While this is likely an incomplete list of entrepreneurial characteristics, it does provide an essential backdrop for the discussion of the entrepreneurial mind. Importantly, these characteristics cannot always identify who is and who is not an entrepreneur.6
Ethical issues in business are of great importance today, and with good reason. Scandals, fraud, and various forms of executive misconduct in corporations have been watched by and disapproved of by the public.7
What is ethics all about? Here's a quick ethics check:
- If a business contact invites you for dinner in China, is it a gift or a bribe to take a bottle of wine and a box of chocolates?
- Is it ethical to put pictures of young children in underwear in your advertising?
- Is it ethical to pad your expense account, conceal cash receipts from the tax office, pay your employees under the table or copy a protected computer program?
- Is it ethical to put your business' rubbish into a personal rubbish bin before you put it out on the street for collection if personal collection is free and business collection is taxed? 6
Ethics origin
Ethics have figured prominently in philosophical thought since Socrates, Plato and Aristotle. Derived from the Greek word ethos, meaning custom or mode of conduct, ethics have challenged philosophers for centuries to determine what exactly represents right or wrong conduct.
About 560 BCE, the Greek thinker Chilon believed that a merchant does better to taking an honest loss than make a dishonest profit. He reasoned that a loss might be painful for a while, but dishonesty hurts forever – and that advice is just as relevant today.
Many entrepreneurs, especially social entrepreneurs, are highly ethical people, but some entrepreneurs are not. Why is that? Is it because they have a strong 'action bias' that prevents them from considering ethical issues? Is it because they are more focused on personal financial gain, even at the expense of others? Are teenagers who love rule-breaking and who are non-conformists more likely to become entrepreneurs? Can the lack of resources (or short-term availability) make an entrepreneur rely on corruption and bribery? Could an entrepreneur introduce a morally questionable innovation that could lead to 'destructive innovation'? 6
Yes! Look at the case of 'Dodgy Dave', a criminal entrepreneur who provides a collection service for debts irrecoverable by conventional means. 8
His 'service' was very effective, using only the threat of violence. Even social entrepreneurs must come under scrutiny because, at their core they too look for the most effective methods of achieving their missions, which might require shady dealings. 8
Baumol helps us understand ethics by discussing the differences between productive, unproductive, and destructive forms of entrepreneurship. We could add 'annihilative entrepreneurship' in the present era of biosphere entrepreneurship. 9
| Productive entrepreneurship | Unproductive entrepreneurship | Destructive entrepreneurship | Annihilative entrepreneurship | |
|---|---|---|---|---|
| Stereotype | Value-creating hero | Robber of value | Exploiter of value | Plunderer of value |
| Definition | Ethical in that they capture rents to the benefit of further growth | (Think fraudsters): unethically appropriate rents without adding to collective value | (Think criminals): unethically destroy rents, but recovery from this calamity is still possible | (Think ivory hunters) unethically destroy rents, and the damage is catastrophic and irrecoverable |
| Value creation | Positive | Unaffected; redistributed | Negative, value lowered | Toxic; negative value creation |
| Example: Tree harvesting | Cut and replant forestry | Contract forestry | Clear-cut harvesting | Burning of the rainforest to plant cash crops |
There were some famous scandals in the 80s and 90s with entrepreneurs who were consumed by plunder and greed, contributing to today's economic and climatic crises. This desire for wealth at any cost is shown by Gordon Gekko (played by Michael Douglas) in the 1987 film Wall Street (copyright 1987, 20th Century Fox): 9
The point is, ladies and gentlemen, that greed is good for lack of a better word. Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. Greed, in all of its forms – greed for life, money, love, and knowledge – has marked the upward surge of mankind. And greed – you mark my words – will not only save Teldar Paper, but that other malfunctioning corporation called the USA. 10Wall Street 1987
Sometimes entrepreneurs have a clouded vision. They see what works as what is right. As a result, they do not always follow conventional morality. Ethics provide the rules for how society conducts any activity in an 'acceptable' manner. Ethics prescribe a behavioural code about what is good and right or what is bad and wrong at any given time. Morals are values held by an individual (or a moral community) and define what constitutes a good life. The planet operates in an ever more dynamic and changing environment, so a moral consensus does not exist. 9
Values and societal norms all constantly fluctuate. A definition of ethics in such a rapidly changing environment must be based more on a process than on a static code. 9
Deciding what is good or right or bad and wrong in such a dynamic environment is necessarily "situational". Therefore, instead of relying on a set of fixed ethical principles, we must now develop an ethical process.
The following graphic displays the age-old dilemma between law and ethics. Moving from the ideal ethical and legal position (quadrant 2) to an unethical and illegal position (quadrant 3), one can see the continuum of activities within an ethical process. Legality provides societal standards but not definitive answers to ethical questions.
Criminals aside, we are also concerned with real-life business entrepreneurs who sometimes face ethical dilemmas. How far down the road toward illegality would you be willing to establish a new venture? Survival of the business is the strongest motivation for entrepreneurs. Laws provide the boundaries of legality, but they do not supply answers for ethical dilemmas. 9
Entrepreneural profile
- Write down any of the following characteristics that you think describe yourself:
- Determination and perseverance
- Drive to achieve
- Opportunity orientation
- Persistent problem solving
- Feedback seeking
- Internal locus of control
- Tolerance for ambiguity
- Calculated risk-taking
- Tolerance for failure
- High energy level
- Creativity and innovativeness
- Vision
- Passion
- Team-building skill.
- By no means do entrepreneurs need all of these qualities but having at least some of them will be helpful as you start up your own business.
- For each of the characteristics you identify with, try to think of an example of when you displayed those characteristics and write it down. Share your notes in the forum with your peers.
