Decoding entrepreneurship

EVERY entrepreneur has a unique story of how an audacious dream became real: how the seed of an idea got planted, was transformed into a business and grew from a fledgling venture into, sometimes, a global empire. Hundreds of books have been written on entrepreneurship. Professors and management gurus have compiled theses. Psychologists have speculated on the entrepreneur's DNA.

Amy Wilkinson has produced something different. She conducted interviews with 200 entrepreneurs who had built and scaled companies to at least US$100 million in revenue within ten years. Many of these companies are household names. They include Starbucks and LinkedIn, Tesla Motors, Ebay and Dropbox, Chipotle, Airbnb, JetBlue and Yelp.

The interviews, which took five years to complete, yielded 10,000 pages of transcripts. After doing additional research, scanning the academic literature, government reports, media articles and other biographical material, she distilled them into a 200-page book, The Creator's Code.

Six traits

As the title suggests, Ms Wilkinson believes there is a secret sauce to successful entrepreneurship, a "code", and that she has cracked it. Looking for patterns in the stories of her interview subjects and their accomplishments - in totally different fields - she identified six traits that all of them had in common.

Entrepreneurs find an unfulfilled need, an unaddressed problem that needs solving. Travis Kalanick, the founder of Uber did this by creating a new transportation service out of existing resources, solving the problem of unavailable taxis. Or, they take something that works in one place and transplant it to another place. Howard Schultz modelled his coffee chain Starbucks on informal coffee houses in Italy. Or they integrate things so that the combination is something unique - like the Mexican restaurant chain Chipotle's freshly-cooked fast food.

Entrepreneurs always look forward, not in the rear-view mirror; they focus on what remains to be done, not on what's already been achieved.

They observe, orient, decide and act ('ooda'). They observe what their competitors, or incumbents, are doing, then try to get ahead of them by changing the dynamics of the competition in such a way that that the competitor ends up responding to a situation that has already passed.

They recognise that not everything they try will succeed. But they set a quantum of loss they are willing to accept.

They tap into different minds. Rather than seeking validation of their own views, they encourage differences of opinion to arrive at new solutions to problems. With the rise of complexity and the speed of change, the era of the dictatorial leader is passe. No one person can be the fount of knowledge. Great entrepreneurs recognise that.

They do favours for the people around them and show kindness - even in small ways. This makes others want to work with them, or share ideas and information, which helps them on their journey.

A sociology major with an MBA, Stanford-educated Ms Wilkinson has worked at McKinsey & Co, JP Morgan, the White House and Harvard University. She has also been an entrepreneur herself and now teaches entrepreneurial leadership at Stanford Business School.

She believes entrepreneurship can indeed be taught. "In the nature-nurture debate, I'm on the nurture side," she says. "We can teach people how to find a gap. We can say, look for something you'd really love to pick up and re-apply somewhere else. Look for something and transport it - like a bird would cross-fertilise. Or look for an unaddressed problem. A lot of people say, such and such thing is a pain, I'm irritated by this bottleneck. You can teach people that when you see a problem like that, jump on it - it may be a huge opportunity. You can also teach people that when you integrate things in new ways, novelty is created."

Conventional education systems don't do this, she points out. "Right now, most education systems worldwide aren't teaching us to spot possibilities for new creations. We're taught mathematics and language and history."

But there are people who don't need to be taught. One of them is the serial entrepreneur, South African-born Elon Musk, who features at length in Ms Wilkinson's book.

Mr Musk's entrepreneurial journey has been breathtaking in its range and ambition. His first venture was a videogaming company in the early 1990s, which he set up with his brother. In 1995, the Musk brothers created the first version of the online yellow pages - a novelty at the time.

Musk went on to create a company called X dot com, which became Paypal, the online payment engine. Then came Tesla Motors, the iconic all-electric car, then a solar energy company called Solar City. "An example like that, now that's real nature," says Ms Wilkinson. "He's an extreme case, he's wired like that."

It's not about the money

What did her research reveal about what motivates entrepreneurs? "In all cases, making money wasn't the goal," she says. "Overwhelmingly, people were saying to me, I want to do something that matters. And there are different reasons why it matters; because they love it, like the Chipotle founder Steve Ells - he loves cooking, he's trained as a chef, he loves ingredients. When I interviewed him, he was talking about smells and flavours. He was so into it. And he believes you can make fast food healthier, you can use better quality ingredients.

"Or take Elon's vision. He believes, with Space X, that he's creating the next major leap in evolution. That's really extraordinary. He said if we have a global pandemic, if we run out of water, if we have a nuclear war, we need to be able, as human beings, go somewhere else, so space exploration is vital to the next leap of evolution. That's thinking on a whole new level.

"Nobody I talked to said 'I wanted to get rich'. Bankers may be motivated by making money as an end goal. But entrepreneurs want to make things, build things, they want to create. That's why I called my book The Creator's Code. And many of them become financially successful."

But Ms Wilkinson stresses that good ideas, while essential, are not enough. Ideas are "very available"; execution is critical. She notes that Google and Facebook, for example, were not the first movers in their respective fields, but they executed better and had superior technology.

Nor are barriers to entry always essential, except perhaps in big capital-intensive industries like making cars or rockets. Many of the companies in her book are in low-entry-barrier businesses like sportswear, food and beverage and social media. "The biggest barrier to entry now is time," she says. "Because I think most people can get across your barrier now. So the question is, for how much time do you have an advantage and can you execute fast enough? So it's more about fast and effective execution than protection now."

Many of the skills Ms Wilkinson writes about amount to what she calls "entrepreneurial leadership". This is leadership that works for the future - and not only for start-up companies.

"One of the surprising things that's happening to me," she says, "is that a number of CEOs of large Fortune 500 companies are calling me and asking me to come and talk to their employees. This is a dataset about founders of companies, but I think it also applies to leaders in general, whether you're in a large corporation, or a non-profit organisation. I've given a talk to the Pentagon about this book. I've also talked to the next generation of civil service leaders in DC."

Tomorrow's leaders

As the world has changed, so have the requirements of leadership. "Thirty or 40 years ago, the idea of business was: take risk out of the system and scale something you already know that works. But that's not what the world looks like now. Now, nobody knows where the next idea's going to come from. Something that starts in one place can get accelerated in a different place. Instead of just trying to take risk out of the system and scaling what you know, you have to be innovative and fail wisely on figuring stuff out that you don't know. That's true if I'm starting my own company. That's also true if I'm working for Coca Cola."

One of the important things that needs to change in big companies, says Ms Wilkinson, is the tolerance for conflict - encapsulated in the trait she calls "network minds".

"You have to bring in cognitive diversity - people who think differently from you. You have to invite their perspective. You have to say to them: 'you have an obligation to dissent. Please tell me what you see is not right. Please challenge me on this new business unit or new product that we're launching.' Creators of companies do that pretty well. People in large corporations don't.

Generational divide

In today's world of big business, there's also what Ms Wilkinson calls "a profound generational divide".

"People who are under 40, say, have grown up with technology. They've grown up with Microsoft Excel, they've always used email, text messaging, social media of all varieties. But in many big corporations the C-Suite execs are in their 50s and 60s, or they're board members who are 65 plus. They came up through their careers at a different time.

"So I think there's this decision-making gap where people who are leading companies don't even talk the same language as some of the other people in the company. It's like the young people are speaking Russian and the C-Suite people only speak English. So how can the C-Suite people make decisions unless they reach out to the young people and say 'come over here and talk to me, help me understand what you're talking about and then we'll all make better decisions together.'

She believes this generational gap may have played a role in the US banking crisis of 2008. "I think a lot of C-Suite people inside these big banks grew up at a different time - pre-Excel, pre-algorithm models. And you have a 35-year-old MIT PhD in statistics and math on your swaps derivatives desk, allocating different types of risk in your financial institution. People who are in their 30s understand and use these technology-based financial tools, but people in their 60s don't.

"So you had a bunch of 35-year-old PhDs and others allocating risk, and people at the top of the banks were blindsided because they didn't even understand. They didn't see the risks across the silos of the banks - asset management, investment banking, private banking. They didn't know what was embedded in the risk and they didn't ask questions - they didn't go up to the 35-year-old PhD and say, 'can you please explain what this bundled risk is'. And all of a sudden, when things start tanking, they tank across all the silos. And the people at the top don't know and then it's too late."

But it isn't about age

Ms Wilkinson believes that in business at least, hierarchy and seniority-based systems are out of date. But that doesn't mean skills are necessarily about age.

"When I started my research, I thought it would be a next-generation skill-set - I thought I'd be looking at the next generation of leaders, at under-40s. But I took the age off. Because I don't think it's age-specific. I've met some 60-year-olds who were starting companies and who were amazing. There are also a lot of people in their early 40s who don't have enough of the skills and confidence to actually go to scale. So I don't think it's a demographic, it's a psychographic. But people who did not grow up with technology, they shouldn't think that hierarchy or seniority or 'been there done that' actually gives them an edge."

Don't just disrupt, create

In today's world of business, much is made of so-called "disruptive technologies" - technologies that disrupt established businesses or companies - as digital photography disrupted Kodak or the rise of Amazon dotcom disrupted brick-and-mortar booksellers like Borders. Successful disruptors often turn out to be entrepreneurial successes.

But it isn't enough, according to Ms Wilkinson. "I think disruption is what everybody talks about, but creation matters more. Disruption may be the first thing you do. Ok, I can disrupt something, but does it matter unless I create something? I don't really think so. Until you have created something with scale, that changes the way people live, I don't care what you've disrupted."

Ms Wilkinson, who visited Singapore earlier this year on an Eisenhower Fellowship (awarded to a select group of prominent mid-career professionals) is now researching entrepreneurs in Asia. While in Singapore, she did interviews with Olivia Lum of Hyflux, Douglas Foo of Sakae Sushi and Forrest Li of the gaming company Garena, among others. Before coming here, she visited China and will be in India this month.

Is the creator's code different in Asia, where, unlike the United States and other developed countries, legal systems can be dysfunctional, policies can be business-unfriendly and supportive institutions under-developed?

She acknowledges that the US has huge institutional advantages that others may not have - the rule of law, an immigration system that, despite its flaws, still manages to attract some of the brightest people from around the world, a vast and efficient angel investor, venture capital and private equity ecosystem and deep and liquid capital markets.

Nevertheless, when it comes to what makes entrepreneurs succeed, she stands by her code.

"I think the code is universal," she says. "Because the code is at the individual leader level. These are the skills you need to have to start and scale an idea. The six things are innately human. When you apply them in different cultures, contexts and legal environments, you probably need to amplify these skills in different ways. But the code doesn't change."

AMY WILKINSON

Author of "The Creators Code: The Six Essential Skills of Extraordinary Entrepreneurs" (Simon & Schuster, 2015)

Born Hong Kong, 1972

education

BA (Political Science), MA (Sociology) Stanford University

MBA, Stanford Graduate School of Business

career highlights

1997-2000 Associate, mergers and acquisitions (Latin America), JP Morgan

2002-04 Management consultant, McKinsey & Co

2004-05 White House Fellow

2004-2007 Senior Trade Advisor, Office of the United States Trade Representative, The White House

2009-14 Senior Fellow, Harvard Kennedy School

2014-present Lecturer, Stanford Graduate School of Business