Sunday, April 13, 2014

Moving a prospective entrepreneur from analysis to action

Working with prospective entrepreneurs that lack management training or experience has its joys, one of which is helping them develop a mindset that can lead them and their businesses to success.
Mindset includes, to my way of thinking, learning to think like a business owner, keeping a rough P&L and Balance Sheet running in the mind, learning to think about their business as do their customers and prospective customers, learning to evaluate opportunity, how to capture it and use it to build their business without wasting time over analyzing the situation.

Mindset involves attitude as well as skills, so in the workshops I lead, students spend time learning simple but useful attitude management practices based on the latest science.

According to researchers PhD student John-Erik Mathisen and Associate Professor Jan Ketil Arnulf at BI Norwegian Business School, increased formal competence (business education) affects the mindset of people who are interested in becoming an entrepreneur, retarding new-business formation.

Entrepreneur mindsets
The researchers take a slightly narrower definition of mindset than I use.  In their research, a mindset may be described as automated recognition of patterns in one's surroundings, with associated actions.  For example, a chess player's ability to quickly see and solve chess problems which other people would take a long time to consider, is a good example of a mindset.

In other words, the better the education and the more the experience, the more quickly an entrepreneur can see opportunity, analyze it and act. Researchers distinguished between two main types of mindsets in entrepreneurs:
  • Elaborative (explorative) mindsets: Mindsets that concentrate on assessing a situation and obtaining information. When people are influenced by elaborative mindsets, they are open to new information and become thoughtful. Elements of doubt will also increase. 
    • When you are taking in new information, a consequence is that you are unable to draw conclusions. (analysis paralysis)
  • Implemental (implementation-oriented) mindsets: A state where everything is interpreted using known patterns, and where the outcome is always some kind of action. (To quote Nike, thinking about how to "Just Do It.")
Anyone who works with people thinking starting a business has worked with someone who is trapped in "analysis paralysis."  They research, think, study and analyze an opportunity until all they are doing is dithering and thinking in circles.

As Mathisen and Arnulf point out, "Teaching can of course provide useful information for people who are interested in entrepreneurship. But it is also possible that the teaching situation in itself leads to a prevalence of elaborative mindsets, with doubt and too many different ideas."

In simple terms, we need to be aware that how the education we provide man trap some students in a never-ending cycle of research and planning.

The study
The researchers studied mindsets among 242 bachelor students at BI Norwegian Business School and finance students at the Norwegian University of Life Sciences (NMBU) in ├ůs near Oslo.

Their work shows that students who participated in the survey had different degrees of the two mindsets. The researchers looked for any connection between the students' mindsets and the number of new companies they set up (entrepreneurship in practice).  In other words, how many got on with it and started the business as opposed to dithering.
Mathisen and Arnulf found that students with implemental mindsets were behind most new companies, while there was no corresponding connection between new companies and students with elaborative mindsets.
Too much education may lead to doubt
"We find that formal knowledge may get in the way of action, because it makes room for more doubt," says Mathisen and Arnulf.

The researchers argue that doubt should be considered a cost in entrepreneurship. "Only students who had implemental mindsets to a very high degree, seemed able to also benefit from elaborative thinking."

Suggested readingClick on image
So how does anyone working with nascent entrepreneurs help our students get off the "elaborative" analysis-paralysis merry go round?  No answers were offered by authors other than to be aware of the tendency in some students.  It may be the simplest way to help is to continually ask them, "how would you do that?", "how would you implement that?", "what can you do to make that idea or concept a reality?"
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Story Source: Materials provided by BI Norwegian Business School. John-Erik Mathisen, Jan Ketil Arnulf. Competing mindsets in entrepreneurship: The cost of doubt. The International Journal of Management Education, 2013

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