If there’s one thing the best entrepreneurs do well, it’s breaking the conventional rules of business. Equipped with the right mindsets, so can you.
WHAT DOES IT TAKE TO SUCCEED as an entrepreneur? I mean really succeed, like Elon Musk, Michael Dell and Phil Knight have. And do these wildly successful founders have attributes that set them apart from other successful business leaders?
I myself am a veteran of three entrepreneurial ventures — with one win, one loss and one draw to my name. I have studied entrepreneurs extensively and have taught and learned from close to 2,000 of them in executive programs at leading business schools and elsewhere. As a result, I’ve observed first-hand the differences between entrepreneurs and other successful businesspeople. It’s their mindsets, I’ve discovered.
A couple of years ago I set out to codify these mindsets to help people everywhere — not just start-up founders — become more entrepreneurial. The six mindsets I have identified break the conventional rules that are widely observed in large organizations, and they fly in the face of much of what we teach in business schools — about finance, target marketing, strategy and more. In this article, I will summarize them.
MINDSET 1: Yes, We Can!
Big companies almost never do this. Broadly speaking, leaders are advised to ‘stick to their knitting’: They are supposed to know what their organization’s core competencies are, nurture them and do what they can to make them more robust. If a customer asks for something outside the box, they say, ‘No, I’m sorry, we don’t offer that.’
Entrepreneurs like Brazil’s Arnold Correia personify the Yes We Can mindset. Back in college, Correia and a buddy started hosting fancy Sunday night parties for their fellow students, complete with light shows, music, dancing and more. When he finished college, his buddies started taking jobs in consulting and banking. But he wasn’t ready to give up on his passion for live events.
It’s easier to solve the problems of a narrowly-defined target market than to make one product that attempts to serve all.
He asked himself, ‘How can I transfer my skills for running events to the business world?’ He placed a small ad in the media, and almost right away, McDonald’s answered it. The company had a big event coming up and asked if he could manage it. All of a sudden, he found himself in the events business. And given his mindset, it grew quickly.
At an event for Walmart, he was told by the organizers that the person who was supposed to record the event had cancelled. Could he record it for them? Correia thought for a nanosecond and said, “Yes, I can!” He had neither shot nor edited a video in his life, but he got on the phone, worked his network and found someone who could handle the task. Overnight, he found himself in the video production business, as well.
As his business grew, Correia continued to wonder how he could offer his customers more. On a trip to the U.S. to see what Walmart was doing there, he discovered that the U.S. operations were producing ‘corporate TV.’ They had placed TVs in all the stores’ training rooms, and corporate executives could broadcast motivational events and sales meetings in real time to excite and motivate employees around the country.
Correia realized immediately that he should do the same in Brazil. So he prepared a plan to propose to Walmart; but first, he mentioned the idea to another one of his clients, a Brazilian company called Magazine Luiza, a chain of appliance stores. It loved the idea, and six months later, Correia’s concept was in all 200 Magazine Luiza stores.
To accomplish this, Correia had to develop an array of new competencies: satellite broadcasting (the Internet was insufficient at the time); the ability to install video gear across a vast country (to date, his team had only done events in São Paulo) and more, all requiring new skills and new talent. Yes, we can, yet again!
Fast forward to the global financial crisis of 2008-09. Correia realized that in tough economic times, companies cut their costs. He was on the cost side of his customers’ P&L, but he wanted to be on the revenue side. What could he do? He returned to the U.S. for inspiration and found that Walmart was doing something called Digital Out of Home Television. The idea was to place TV screens in the sales areas of the stores; customers walking down the detergent aisle would see a screen broadcasting an ad for, say, a Procter & Gamble detergent — paid for by P&G, of course.
Again, he went to his key customers and said, ‘I’d like to do something new for you.’ It wasn’t long before the Digital Out of Home Television: service at Walmart Brazil accounted for 10 percent of its profits in a single year. The point is this: Correia transformed his business, now called Atmo Digital, again and again, without regard for his or his team’s current competencies. If a customer could benefit from something, he would figure out how to deliver it.
MINDSET 2: Problem-First, Not Product-First Logic
Entrepreneurs like Jonathan Thorne, in contrast, start with a customer problem. Thorne, the founder of Silverglide Surgical Technologies, had developed a technology that stopped the surgical instruments used in medical procedures from sticking to human tissue. He asked himself, ‘What are the most common sticky-tissue problems?’ His first idea was plastic surgeons. If they’re doing a face lift for someone and the surgical instrument sticks to the tissue, the final outcome might be marred. That’s not what the patient — nor the plastic surgeon — has in mind!
That’s how Silverglide got started, but soon Thorne realized there were medical practitioners facing much bigger problems with human tissue: neurosurgeons. Working on delicate areas like the brain and spine, this work is very precise. The last thing a neurosurgeon wants is for a surgical instrument to stick to the healthy tissue around a tumor. The business took off, and Thorne sold it some years later, making him and his investors very happy. All because he focused on customer problems.
MINDSET 3: Think Narrowly, Not Broadly, About Your Markets
Everyone is familiar with Nike, but perhaps not with its founding story. Back in the 1960s, Philip Knight and Bill Bowerman became concerned about a problem that elite distance runners like Knight were facing. Bowerman was Knight’s track coach at the time, and the shoes that long-distance runners were wearing were made for sprinters. This was problematic, because distance runners didn’t run around paved tracks. They trained on country roads and dirt paths that were littered with sticks and stones — and, as a result, they were plagued by sprained ankles and shin splints.
Knight and Bowerman realized that distance runners needed a better shoe — more lateral stability, more cushioning and lighter in weight, for faster race times, too. They started a company called Blue Ribbon Sports and began selling shoes out of the back of Knight’s station wagon. It took five years before Knight could quit his day job and devote himself full-time to the business. But once the world’s best distance runners started wearing his shoes to win Olympic medals, guess what happened? Other runners wanted to wear the shoes, too.
Along the way, Knight and Bowerman learned how to design athletic shoes; how to do sourcing in Asia; how to tap elite athletes to advise what they needed in a shoe — and, equally importantly, to endorse it. Before long they had John McEnroe on board for tennis shoes and Michael Jordan for basketball shoes.
The point is that you can start out with a very narrow target market. Knight and Bowerman’s initial target market — elite distance runners — were few and far between. If there was ever a prize for the smallest target market, they might win it; but we’ve all seen the astronomical growth that followed for Nike. The takeaway: Build a solid foundation in a narrowly defined target market, then grow from there.
MINDSET 4: Ask For the Cash and Ride the Float
What do world-class entrepreneurs do? When Michael Dell started his computer company, his customers had to pay for their computers before they were even built. Dell used that up-front cash to assemble the computers and do all the other things required to run the business. I call this ‘riding the float,’ and Dell isn’t the only company to put it into practice.
In the beginning, Elon Musk and his Tesla co-founders had a plan: They would build a fancy sports car, then use the proceeds to build market awareness and a slightly cheaper car; and then they would do this again, over and over. In 2006 Musk and the team set out on a road show in California. Within three weeks, they had sold 100 Roadsters at $100,000 each, paid for up front, to people who were environmentally conscious, wealthy and thought it would be cool to have a Tesla Roadster parked in their driveway.
Let’s do the math: 100 Roadsters at $100,000 each provided Musk and team a cool $10 million, with which they set out to start building more cars. This principle of getting a deposit up front was, to the surprise of many, a key source of Tesla’s funding along its entire journey. Yes, Tesla raised venture capital, although much of it came from Musk himself; but the key thing they did was get deposits up front.
When Tesla introduced the Model 3, its lowest priced car yet, in 2016, nearly half a million people put down $1,000 deposits to get their hands on one. Let’s do that math: Half a million deposits at $1,000 is half a billion dollars paid up front, before the first Model 3 had even gone into production. That money went a long way towards funding the engineering, building the tooling, fitting out the factory and much more.
The lesson: Best-of-breed entrepreneurs find a way to get the customer to pay up front and, riding the float, they then use that cash to do all the things they need to do to grow the business.
MINDSET 5: Beg or Borrow (But Please Don’t Steal) the Assets You Need
By the time it had to deal with regulators, Uber already had a slew of customers onboard who wanted their service to survive.
But why invest in assets if you can ‘borrow’ them — at least until you can prove your concept will work? Entrepreneurs Tristram and Rebecca Mayhew of Go Ape did just that. While on vacation in Europe, they came across an interesting tree-top adventure business located smack dab in the middle of a forest in France. Wouldn’t it be cool to bring something similar to the UK, they thought?
Once home and eager to move forward, they discovered that the most important landowner in the UK was the UK Forestry Commission, which had sites all over the UK, each equipped with a visitor centre, huge parking lot and washrooms. Tristram went to the Forestry Commission and said, ‘Look, we know you’re trying to grow visitor traffic to the forests. We’ve got an idea that might help you do that.’ They described how they’d like to build Go Ape ‘treetop adventure sites’ in the forests.
The foresters loved the idea and struck a deal; if Go Ape could build six sites within five years, the Commission would give them an exclusive for the rest of their sites that would last for 25 years. That would certainly be long enough to keep any competition at bay.
Go Ape ‘borrowed’ numerous resources: the trees (so they didn’t need to use telephone poles (like most zipline operators did), the parking lots, the visitor centres and the loos, paying rent in arrears. Sure, they still required some investment: They had to build the Tarzan swings, ziplines and other attractions within each forest. But it turned out that within two years, given the modest investment, a typical park would be able to pay back that investment in full. Today, Go Ape operates more than 30 locations throughout the UK — and has a growing portfolio in the U.S., too. The lesson? If you think you need to invest in your next project, think again — and find a way to borrow what you need, instead.
MINDSET 6: Don’t Ask for Permission (Beg Forgiveness Later).
Entrepreneurs like Uber’s Travis Kalanick and Garrett Camp, don’t ask permission. They just get started. The Uber team knew that existing regulations applied to taxi companies. But they were not going to be a taxi company. Instead, they would be a marketplace. They would bring together people with cars with people who needed to get somewhere. Existing regulations didn’t apply to that, in their view. While I surely don’t applaud some of the ways in which Uber built its business — some of them unethical and perhaps illegal — the principle of acting boldly when the regulatory frameworks are ambiguous has given birth to the rapidly growing ‘gig economy,’ whether we like it or not.
Of course, we know what happened with Uber and Grab and all the others who took such bold action: By the time they had to deal with regulators, they already had a slew of customers on board who wanted their service to survive. They had become too big to shut down, and too valuable to consumers.
In Closing
John Mullins is an Associate Professor of Management Practice in Marketing and Entrepreneurship at London Business School. He is the author of Break the Rules! The Six Counter Conventional Mindsets That Can Help Anyone Change the World (Wiley, 2023).
This article was published for the Rotman Management Magazine.
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