Children are Not Small Adults: Lesson for Start ups

Many entrepreneurs and would be entrepreneurs start their venture with the grave assumption or strategy of running their start up like miniature version of large and well established firms. This can be compared to a parent who treats their small toddler or child like a mini-adult, you can rest assured the parent will be frustrated. Just like a toddler start ups need to be treated as such and given time to grow.

In this article we shall explore what makes entrepreneurship fundamentally different from corporate management;

Risk Management versus Risk Minimization

 Corporate management deals in risk minimization while entrepreneurship deals in risk management. Corporate management tends to be risk-averse.

Its goal is to reduce risk to a minimum while being as productive and as profitable as possible, for example its heavily budget oriented.

Entrepreneurship is not necessarily risk seeking, but it is risk assuming. It realizes that startup or high-growth ventures, by nature, entail amount of risk.

Risk, in many cases, cannot be reduced significantly in entrepreneurial situations but it can be subjectively measured, and actions can be taken to offset risks

Opportunity Driven versus Resource Driven

Corporate management tends to be resource driven while entrepreneurship tends to be opportunity driven. Corporate management is resource-driven investment.

It determines the amount available to invest first and then determines where that investment should be made. Even if a number of opportunities have crossed management’s desk, the issues are often put on hold until available resources are determined.

Entrepreneurship on the other hand studies opportunities from the viewpoint of what the eventual payoff might be. If the payoff is great enough, capital can be found to underwrite it. If the payoff is not great, then the entrepreneur must decide whether the venture should be funded at some lower level, spun off to a subsidiary venture, or scrapped completely

Action versus Analysis

 Corporate management moves methodologically, studying each move carefully while entrepreneurship involves a sense of urgency, realizing that many opportunities have a short window. Management in large corporations is characterized by committees, which take time, even though they may produce well-studied, well-written decisions. Entrepreneurs realize that action often must be taken quickly, sometimes without full knowledge and without a definite answer.

Lean Management Team versus Personnel Heavy

Corporate management tends to become personnel heavy over time, while entrepreneurship tends to stay lean with overworked team members.

Corporations tend to grow over time due, generally, to increases in volume. Entrepreneurial firms, on the other hand, have lean management teams and few layers of management, most of which are directly related to providing the product or service.

These teams are willing to work long hours, often at low pay, in order to reap the payoff at a later time.

Start ups are unique by their very nature and therefore require unique strategies in order to guide them in the turbulent waters of entrepreneurship.