Nothing turns an entrepreneur’s head faster than a glittering opportunity and the chance to pursue it with laser-like focus. But after the launch, when the novelty wears off and the day-to-day management drudgery sets in, they start to have a wandering eye…and either abandon their business for a thrilling new opportunity or start one or more other businesses on the side.
Few research studies have been able to shed light on why this happens. However, a new one provides evidence that it is tied to thinking style: the degree to which the entrepreneur is an intuitive or analytical problem-solver. Extremely intuitive entrepreneurs, who tend to go with their gut in making decisions, also tend to be better at starting ventures than maintaining them. Analytical types, who are comfortable making a move only when the numbers confirm it’s the right thing to do, tend to stay put because they feel more secure with the management structures and metrics that their maturing business needs.
New businesses need both types for continued success, points out Keith Brigham, the Kent R. Hance Professor in Entrepreneurship at Texas Tech University, who conducted the study with Ritch Sorenson, Opus Chair in Entrepreneurship at the University of St. Thomas, and James Hoffman, dean of the College of Business at New Mexico State University. But the need for diverse thinking styles is often overlooked, both by entrepreneurs who fall in love with a shiny new idea, and the investors who fund it. They assume, mistakenly, that a successful entrepreneur will always have the Midas touch, when often the opposite is true.
“Entrepreneurship is a lot like dating,” Brigham said. “The entrepreneur and the investor love the newness and novelty and often have blinders on. But if you look at startups, about half of them fail – just like nearly half of all marriages. That’s because the need for day-to-day management eventually kicks in and it doesn’t fit with the founder’s intuitive thinking style, which craves novelty rather than systems.”
Brigham and his fellow researchers looked at a total of 280 entrepreneur-run businesses, including 176 Colorado technology firms and 104 family-run businesses. They asked a number of questions to determine the respondents’ cognitive styles – from extremely intuitive, to extremely analytical – or, as most people are, somewhere in between. They then asked questions about the number of businesses the respondent had started, and whether they started one business at a time (called serial entrepreneurship) or managed several businesses at once (portfolio entrepreneurship.)
Most entrepreneurs tend to skew to the intuitive style in their approach to problem solving, but researchers discovered that the most intuitive respondents had started several businesses or, in the most extreme cases, were running two or more businesses at the same time. “Novice” entrepreneurs, who were still managing the first business they founded, tended to be more like the general population.
“The stronger their preference for intuitive problem solving, the more likely respondents were to be serial or portfolio entrepreneurs,” said Brigham. “The extreme intuitives tended to be extreme entrepreneurs.” Another study, entitled "How Job Creators Think," explores entrepreneurial thinking styles further.
Know your own approach to problem solving. Entrepreneurs can use Figure 1 below to determine whether they are intuitive or analytical, or somewhere in between. This ‘metacognition’ is key to helping them understand where they might fall short as their business’s needs evolve. Then pick the right place to play, both in choosing a venture and how you’re involved in it.
Fig. 1: What’s your thinking style?
Analytical types can still be successful entrepreneurs. While entrepreneurs tend to be more intuitive, businesses headed by analytical problem-solvers can still thrive. “After a business is launched, the analytical types are better at managing it, making it more efficient and planning for the future,” said Brigham. “For example, entrepreneurs who run franchises successfully are often analytical because the parent company demands certain management systems and metrics. You need to recognize your style and make sure you are in the right place.”
Hire people who can complement your style. “If you are building a team, strive for cognitive diversity,” said Brigham. “That means if you are an extreme intuitive thinker, you may need more help from accountants and attorneys as your business grows. If your style is more analytical, hire more visionaries. A mix of styles gets the best results.”
Have a “pre-nup.” “Investors might fall in love with an idea or the person behind it, but it’s amazing how many flaws they miss,” said Brigham. “It’s important, for both owners and investors, that a long-term plan explains how the new business will flourish once it needs professional management and traditional structures to keep going. While many find this distasteful, you can’t assume a great idea will always be successful.”