Entrepreneurs Can’t Fix What They Don’t Understand
Reblogged from PandoDaily
Francisco Dao is one of my favorite bloggers. Francisco focuses like a laser beam on the tough issues of entrepreneurship with unfailing logic, sometimes tough for some to hear. In a previous post, Francisco spoke openly about the frothy enthusiasm and euphoria surrounding entrepreneurship, suggesting that there were too many entrepreneurs producing too many mediocre ideas. In this post, Francisco explores the current shift in entrepreneurial profiles, bemoaning their ignorance of how businesses work, and the embarrassing consequences. He makes the very interesting point that in the past entrepreneurs would gain experience working in an industry before striking out on their own. That was my experience. Today, too many entrepreneurs are dropouts, recent graduates, or have only startup experience. As he points out, this has become the Achilles Heel of entrepreneurship.
When you look at Walmart, what do you see? A store? Dying brick and mortar commerce? Badly dressed poor people? If you’re an entrepreneur looking for massive opportunities, what you should see is a business empire with almost $500 billion in sales, 2.2 million employees, 8,500 stores, 25 percent of all grocery sales in the United States, and most importantly, a mastery of supply chain logistics that its competitors have been unable to match.
How about UPS, a company much of the Valley is dependent on for its physical deliveries? Do you look at UPS and think of blue collar guys driving brown trucks and showing up late? Or do you see an unimaginably complicated coordination of moving parts that delivers 15 million packages per day?
When you think of General Electric, do you picture an appliance and light bulb company or a conglomerate that makes everything from medical imaging equipment to railroad locomotives along with a financial arm that alone has nearly $600 billion in assets?
One of the main reasons few Silicon Valley entrepreneurs tackle big challenges is that most of them don’t really understand how things work. It used to be entrepreneurs would spend several years in industry before starting something on their own. During their time working, they got to see how companies operate, including how they approach large scale opportunities and deal with looming threats. They also likely worked on projects with real or potential profits of hundreds of millions, or even billions, of dollars. Obviously a few years on the job doesn’t teach someone everything that a massive company like Walmart or GE does, but at least they received some real world experience and saw some things first hand that could be improved.
These days many entrepreneurs are either college dropouts, recent graduates, or only have startup work experience. Having never spent time in a big company solving big problems or seeing complex business processes, they don’t have any experience or knowledge of how any of these things are handled. As programmers, they have the tools to build solutions but they don’t have the knowledge of what should be built or what solutions are even needed. It’s like giving someone a construction crew without any training in architecture or telling them what type of buildings the city needs. They’ll probably be able to piece together a house, and once they’ve done that they can copy it “like this for that,” but they don’t have the experience or architectural knowledge to build anything complex or useful.
Even more damaging is the increasingly popular, and arrogant, belief that inexperienced entrepreneurs can solve everything. It’s one thing to be ignorant of how a complex business works, it’s another thing to assume everything is simple and the people running established companies are stupid. Just because Walmart and UPS are old school brick and mortar companies doesn’t mean their CEOs don’t know what they’re doing. Having the potential power of the Internet at your disposal doesn’t make you omniscient or all powerful. It certainly doesn’t reduce all complex problems down to a simple web solution.
Perhaps it’s time for a new type of business school, one that teaches would be entrepreneurs about the large scale challenges in big business. I’m not suggesting everyone get an MBA or spend 10 years working a corporate job before becoming an entrepreneur. But a little exposure to how real companies doing big things actually operate would go a long way toward helping entrepreneurs address some legitimate needs. Instead of simply trying to crank out copycat startups as fast as possible, incubators could even take on this role of teaching entrepreneurs case studies of complex problems.
What could Silicon Valley solve if entrepreneurs actually understood how Walmart’s supply chain worked, or UPS’s delivery logistics, or even why it’s so hard to provide a nutritious school lunch? What could we streamline if we had knowledge of the challenges and problems that currently plague these and other complex systems? The bottom line is that you can’t fix what you don’t understand, and with so little first hand experience working on big, real world problems, most young entrepreneurs don’t understand all that much.