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Here's What it Takes to Be a Great Entrepreneur

Entrepreneurship is a game of chance. Or is it? Dr. Bennett McClellan, who earned an MBA from Harvard, spells out a few basic rules so you can play at the top of your game.
BY Dr. Bennett E. McClellan |   23-11-2015


If you ask any high school student whether they want to become millionaires, most will instantly reply, “Of course!”  If you ask the same student whether he or she wants to start his or her own business, they will most likely answer, “It depends.”  On what does it depend?  It depends on whether they can become millionaires!

Successful entrepreneurs can become wealthy.  Some become fabulously rich.  Even if you do not become the next Bhavin Turakhia, it may be worth a try.  However, if you fail, you may end up poor, overworked, and a disgrace to your family.

Therein lies the dilemma for would-be entrepreneurs.  Everybody wants to succeed.  Only a few are willing risk failing big in order to succeed big.

To help you overcome that fear, I am going to give you the basic rules of entrepreneurial success:

Rule 1: Find a problem that a lot of people have.

Rule 2: Solve that problem in a way that others will find difficult to imitate.

Rule 3: Scale your solution as fast as possible.

Rule 4: Adapt your solutions as you learn more about the problems you can solve.

Rule 5: Cash in on your idea while the business is still growing.

I’ll explain each in turn.

  • Rule 1: Find a problem that a lot of people have.
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  • Entrepreneurs get paid for ideas that solve problems for other people.  Sometimes those ideas come from your own experience.  Sometimes those ideas come from people who share their problems with you.  Mark Zukerberg started Facebook not as a social network, but as an electronic directory with photos and contact details.  Harvard University had started a project to do the same thing, but Harvard was taking too much time.  Zuckerberg solved that problem by coding theFacebook.com.  It turned out that a lot of people around the world felt they had a problem connecting with existing and would-be friends. 
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  • Rule 2: Solve that problem in a way others will find difficult to imitate.

  • Entrepreneurs typically see opportunity in problems other people just complain about.  However, once an entrepreneur introduces a solution, they invite imitation.  Jeff Bezos realized that book buyers typically wasted a lot of time looking for books in multiple places.  Bezos imagined a solution that would allow a book-hunter to find any book in a single location.   Bezos designed his solution not as a sales site, but as a logistics system.  Amazon.con built its competency around handling books from procurement to delivery.  Would-be imitators, like Flipkart.com, are still struggling with how to adapt Amazon’s enterprise model in India and other places.   What makes an idea hard to imitate may be embedded in patents, copyrights, software code, proprietary processes, equipment design, or by other means.  
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  • Rule 3: Scale your solution as fast as possible.
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  • Larry Page and Sergey Brin were Ph.D. students at Stanford when they developed an Internet search engine to find academic articles.  Their classmates quickly helped them realize that they had stumbled onto a better way of searching for information than other search engines provided.  An angel investor forced Page and Brin to make a tough decision: finish their Ph.D.s or drop out to scale up Google.com before other search companies imitated their ideas.  Page and Brin chose to grow Google.com as fast as possible.
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  • Rule 4: Adapt your solutions as you learn more about the problems you can solve.
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  • Sanjeev Bikhchandani launched Naukri.com as a platform for job seekers to present resumes to job makers.  However, as he developed a sales force to sell this idea across India, Bikhchandani realized that smaller to medium sized enterprises (SMSEs) also needed a larger range of human resource services.  After discovering these related problems, Naukri began developing a variety of HR-related solutions for SMSEs.  Today, Naukri makes more money from HR services than it does from operating a resume exchange.  Similarly, Facebook.com did not begin to make money until it shifted its focus from providing a meeting place for individuals, to providing a market place for application developers, such as Zynga (FarmVille).
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  • Rule 5: Cash in on your idea while the business is still growing.
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  • The final rule for becoming a successful entrepreneur is to cash out while people still think your idea is hot.  Investors buy unrealized potential.  Once the market knows how much money an enterprise can make, rational financial calculations take over in the valuation process.  You want to cash out once you prove the validity of your solution for some problem, but before its full potential is known. 
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  • Letting go may be the hardest part of becoming a successful entrepreneur.  It will rend your heart to sell your brainchild to others who may treat it with less respect than you treated it.  But don’t let this rule deter you from becoming an entrepreneur.  You can always put your millions in the bank, before you set off to start another enterprise.   Entrepreneurship is addictive.  Once you found your first successful enterprise, it will be hard to just sit around counting your cash.
     

The author is Professor and Vice Dean of the Jindal School of Liberal Arts & Humanities, and founding Executive Director of the 10-Day Filmmaking Academy.  Dr. McClellan earned his MBA from the Harvard Business School.  You can find him on Twitter here -DrBennettMcC

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