Guidelines for managing with an entrepreneurial mindset

Citation

Gunther McGrath, R. and MacMillan, I. (2001), "Guidelines for managing with an entrepreneurial mindset", Strategy & Leadership, Vol. 29 No. 1. https://doi.org/10.1108/sl.2001.26129aab.002

Guidelines for managing with an entrepreneurial mindset

Guidelines for managing with an entrepreneurial mindset

Rita Gunther McGrath and Ian MacMillan

Rita McGrath is an associate professor in the management division of the Columbia University School of Business. Ian MacMillan is the academic director of the Sol C. Snider Entrepreneurial Research Center at the Wharton School, University of Pennsylvania. This article was adapted from a new book, The Entrepreneurial Mindset; Strategies for Continually Creating Opportunity in an Age of Uncertainty (Harvard Business School Press, 2000).

The rapid changes in technology and the nature of competition have created an increased entrepreneurial spirit within corporate America. Yet, while some companies have been able to strive and succeed in a shaky business environment, the conventional, business-as-usual organizations are left scrambling to survive as new entrepreneurial companies emerge. If traditional managers are to succeed today, they must adopt the thought process that is second nature to entrepreneurs – a mindset that uses uncertainty as an ally instead of an enemy. Here are nine guidelines for managing under uncertain conditions.

1. 1.

   Develop insight into customers' behavioral context. It's fashionable to talk about looking outside the box. It's harder to find anyone who can show employees how this translates into opportunities to redesign, re-segment, reconfigure, or re-differentiate. After all, the boxes that people try to look beyond are there because they made business sense at the time. Successful entrepreneurs have a revolutionary insight into the context within which their customers live and an idea on how they might solve an important problem for customers within that context.

2. 2.

   In an entrepreneurial mindset, everyone plays. Each employee must believe that any, and all, new ideas are welcome, but also understand that all ideas are not economically feasible even if they are good. Everyone must feel strongly that execution, not analysis, is what will make a real difference to the company.

3. 3.

   Experiment intelligently. Companies experiment and execute their strategies using real options reasoning by continually starting, selecting, pursuing, and dropping projects and businesses before launching aggressively those projects whose value is finally revealed. In an uncertain world, real options give companies flexibility, the potential to learn, and a way of hedging bets. One of the key managerial tasks in the coming years will be to manage a company's portfolio of options, just as a key role for future strategists will be maximizing the learning from real options investments.

4. 4.

   Exercise discipline. Entrepreneurial leaders manage the experimental process with the firm discipline of successful, habitual entrepreneurs. They cannot rely on surplus resources to buffer them from big, expensive mistakes. Ways to achieve this discipline include opportunity registers, options portfolios, and discovery-driven plans, all of which impose discipline and constructive control on new business creation.

5. 5.

   Spend imagination instead of money. As companies continue to build their entrepreneurial arsenal, they must look for ways in which people can be encouraged to utilize their own creativity before asking for material and costly resources. The right group of colleagues will welcome the challenge.

6. 6.

   Framing is crucial to the entrepreneurial leader. Without a frame to work with, employees freeze in the headlights of oncoming uncertainty. Leaders in an entrepreneurial role have a responsibility to provide the frame within which people can meet the challenges of the future.

7. 7.

   Be ruthless with respect to priorities. Overextending staff is equivalent of doing nothing. Dropping projects that don't merit attention is every bit as important as starting ones that may lead to a brighter future. Managers need to clearly specify what is not going to be done, or will no longer be done, and act on it.

8. 8.

   Using fuzzy measures early on is better than using precise ones too late. Measures serve as a guide for employees. The better access workers have to measures that link their jobs to something that drives execution of strategy, the better they can control their own actions to help forge an attractive future.

9. 9.

   Pay attention to the cost – not the rate – of failure. Becoming comfortable with real or potential failure is one of the most difficult challenges for a manager trained in the old school of infallible, numbers-oriented leadership. In conditions of significant uncertainty, failure is often the key to new opportunities. By validating assumptions prior to investment, operating with parsimony, redirecting, and keeping priorities straight, entrepreneurial leaders have significant control over the cost of failure and can use it to their benefit.