Act, learn, build: Lessons small business owners should take from serial entrepreneurs


Small business owners should shift from a “plan, optimize, execute” mindset to an “act, learn, build” mindset, according to Schlesinger, Kiefer and Brown. (istock)
May 15, 2012

Small business owners often fall into the trap of applying a basic approach to running their organizations, which essentially follows the pattern: plan, optimize, execute. Known as prediction reasoning, this way of thinking is based on the assumption that the future is going to closely resemble the past, and, to be fair, it can work wonderfully in certain situations.

The problem is that the world in which you are operating today is often extremely unpredictable, and that means you need to radically change your thought process.

Serial entrepreneurs, those individuals who have successfully started multiple companies, have mastered managing the unknown. To follow their lead and take control of the future, small business owners must:

●Begin by taking a small (smart) step forward. It may not be the right direction, but as the owner of a small business, you will never know if you do not try. When starting a new venture, ask potential customers what they think about each idea.

●Evaluate the feedback and see what you have learned. If potential customers have an idea about the business, listen to them. Their response is invaluable and could offer a new outlook.

●Build that learning into what you do next. Take this first-hand feedback and, if necessary, reconstruct your path. Take a step in a different direction to see what happens as you experiment with new ideas.

As we conducted research for our book “Just Start: Take Action, Embrace Uncertainty, Create the Future,” we began referring to this new thought process as act, learn, build. The steps repeat until an outcome is achieved — either the business is up and running or the owners decide they can’t afford or don’t wish to continue.

Admittedly, transitioning to the act, learn, build thought process may not be easy because we’re accustomed to using prediction reasoning all the time, and like anything that’s repeated over and over, that process has for many people become a conditioned habit. For instance, on a road trip, travelers are confident that a GPS and map will guide them to the destination. Prediction reasoning, with its detailed forecasts, works well in those situations, but running a small business — or any business for that matter — is not so easily maneuvered.

Take a look at Facebook, for example. Owners of small businesses and start-ups alike are focused on the literally billions of dollars Mark Zuckerberg will make from the Facebook IPO, making it easy to conclude that getting venture capital funding, as Zuckerberg did, is the way to go. You could go that prediction-based route. You’d plan for what feels like forever. You’d assemble a team, which takes more time. You’d network like crazy to get to a venture capitalist who will see you. If she does, it can take as long as two years to get the money you need — and that’s only if the venture capitalist decides to fund you, which they likely won’t. Venture capitalists fund about 1,200 out of the 600,000 new businesses started every year. Of those 600,000, the Small Business Administration says 66 percent survive two years, and other research shows 44 percent survive eight years.

If you do the math, you’ll find that in that same two-year period, you might start and fail in two ventures and start a third, all by bootstrapping and tapping family and friends. The odds favor one of those ventures working, leaving you with a good chance of owning a successful firm. In contrast, you’d have a 0.2 percent chance of owning of a venture capitalist–funded firm.

Any time you head off into the unknown with a new business plan, product or service, the logic behind prediction reasoning is rendered rather useless. That’s why many small business owners are often their own biggest impediment to success, as using prediction reasoning in situations that are simply not predictable is bound to result in disappointment and frustration.

Act, learn, build will help guide companies through the inevitable hurdles that characterize today’s small business landscape.

The predictability of the world has changed drastically. Shouldn’t our way of thinking keep up?

Leonard A. Schlesinger is the president of Babson College, Charles F. Kiefer is president of Innovation Associates and Paul B. Brown is a long-time contributor to The New York Times. They are the co-authors of “Just Start: Take Action, Embrace Uncertainty, Create the Future.”

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