Sunday, 6 November 2011

Can entrepreneurship be taught?

“Entrepreneurship can only be self-taught. There are many ways to do it right and even more wrong, but it cannot be processed, bottled, packaged, and delivered from a lectern”, one of my readers – Michael Marotta – commented on an earlier post.

I am not sure I agree with the suggestion of that statement, namely that "entrepreneurship can only be self-taught". Of course we hear it more often - "you cannot teach entrepreneurship" - but I have yet to see any evidence of it. Granted, this is a weak statement, since the evidence that business education helps with anything is rather scarce (although there is some)!

However, the fact that the majority of entrepreneurs did not have formal business education does not tell me anything. Suppose out of 1000 attempted entrepreneurs indeed only 100 had formal business education. It might still be very possible that out of the 100, 50 of them became successful, where out of the 900 others only 300 became successful. This means that out of the 350 successful entrepreneurs, a mere 50 had formal business education. However, 50% of business educated entrepreneurs became successful, while only 1/3 of entrepreneurs without business education did.

My feeling about the potentially influence of business education on the odds of becoming a successful entrepreneur are quite the opposite of Marotta’s. I see quite a few attempted entrepreneurs with good business ideas and energy, however, they make some basic mistakes when attempting to build it into a business. The sheer logic of how to set up a viable business - once you have had a good idea - is something that is open to being "processed, bottled, packaged, and delivered from a lectern" (although that is hardly what we do in B-school).

Having a great idea and ample vision and energy perhaps is a necessary condition for becoming a successful entrepreneur, but it is not sufficient; this requires many other skills, and for some of them, education helps. Out of the 10 different skills needed to become a successful entrepreneur, perhaps only 5 can be taught or enhanced through business education, but those 5 will clearly improve your odds of making it.

Perhaps the majority of successful entrepreneurs do not have formal business education, but I have yet to meet a successful enterpreneur who did go to business school who proclaims his/her education was not a great help in becoming a success. Invariably, those people claim their education helped them a lot. In fact, many of such business school alumni donate generously to their alma mater. For example, one of London Business School's successful alumni entrepreneurs, Tony Wheeler (founder of Lonely Planet travel guides) regularly donates very substantial amounts of money to the School, because he believes his education there helped him greatly in making his business a success, and he wants others to have the same experience and opportunity.

In the absence of any formal evidence on whether business school education helps or hinders becoming a successful entrepreneur, I am inclined to rely on their judgement: business school education helps, if you want to become a successful entrepreneur.

1 comment:

AG said...

Even though I am a little bit disappointed with the lack of originality of this topic (it has been studied to death and the results are always inconclusive), I find it interesting enough to comment on it.

There are entrepreneurs... and then there are entrepreneurs. To me there is a big difference between a guy who opens a restaurant, and a guy who, say, comes up with a revolutionary business idea (the Zuckerbergs of the world and so on).

Both are to be admired. Anyway who is brave (or crazy) enough to risk his capital, time and reputation deserves my utmost respect. But one of them is bringing something new to the table that actually changes people's lives.

I think this distinction is important because for the restaurant guy, a business education can be very helpful. A little bit of accounting and marketing goes a long away, specially considering how important is to manage cash flow in any business, but specially small businesses.

For the second one, the innovators group, business education is not really that relevant because the core component of that business, innovation, cannot be taught anywhere. As an MBA (2010), I have the feeling that many of my classmates became less likely to start a business after completing their MBAs.

The reason is very simple. After completing an MBA you have a pretty good picture of what it takes to start a business. And you realize that building a successful business is a LOT of work. As humans, we pay more attention to what we can lose rather than to what we can win. Hence, many of us, once we see the whole picture, we take a step back and think twice before jumping in the world of entrepreneurship.

Obviously Mr Vermeulen's point of view should come as no surprise for anyone. After all he is a business professor (one of the best if I say so in my humble opinion and based only on what he writes and says on videos that end up on YouTube) and has a vested interest in defending business education.

However, a formal business education in a top school does offer something that I think is critical for entrepreneurs and that many times it goes unnoticed.

That intangible thing is CONFIDENCE. After you have (successfully) completed an MBA in a fancy school, you probably have been forced to make relatively complex presentations in formal environments and in front of smart people.

Once you've done that many times, you develop the confidence needed to succeed in many arenas, including entrepreneurship.

That is the added value of business school (and the network of course). Knowledge is secondary, it is everywhere and cheap.

An entrepreneur without confidence is like a lion without teeth.

Needless to say, you can get the confidence you need in many places other than business school. But B-School is a good option for those who can afford it, and don't mind learning a few things along the way.