I just saw research on how to successfully start a new
venture that made me think about the Wimbledon tennis tournament. Here’s why:
some of the things that are obvious sources of strength in tennis are widely
thought to be weaknesses in business – but if current research is any guide,
they are strengths. Concentration, vision, and practice through endless
repetition are how champions are built in tennis, a sport where the average
serve speed is 180 km/h for men and 155 km/h for women. But how is that related
to new ventures?
Research recently published in Administrative Science Quarterly by Susan Cohen, Christopher Bingham, and Benjamin Hallen looks at how
new ventures perform in accelerators, which are training and development
programs for new ventures. They looked at many accelerators to find out exactly
what activities accelerate and improve a venture more, because some accelerators
have been successful in helping launch new ventures but others have not. Before
they started, we knew very little. Their findings were clear – and completely
the opposite of some common beliefs about forming and improving new ventures.
Belief 1: New ventures should start with a solid business
plan and be given information and introductions to potential mentors gradually
over time to develop their ventures. This is not true. Ventures should be given
concentrated consultation and advice early in the founding, because that is
when the value of new information is highest. The venture may be most flexible
and uncommitted at this stage, but even if it isn’t, Cohen, Bingham, and Hallen
found that the concentration of feedback was key: it helped venture founders
overcome their own biases and assumptions, connect with potential customers, rethink
what would be best for the business, and act on the new information.
Belief 2: Entrepreneurs should avoid divulging information
about their activities to other entrepreneurs, who might steal their ideas.
This is not true. Yes, we’ve all learned since childhood that secrets are
valuable, but in business, quality trumps secrecy. New ventures in accelerators
were able to understand their own business much better and improve faster when
they had a clear vision of what other ventures were doing. That was only
possible when they also shared information about their activities.
Belief 3: New ventures should have development plans
customized to their needs. This is not true. The problems faced by new ventures
are very similar, so using a standard process that lets ventures practice how
to overcome these problems is best. New venture founders don’t know what they
don’t know, so by customizing – seeking input and knowledge from only the
people they assume will be most useful to them – they create blind spots.
How can we be so wrong about the factors that create
successful new ventures? All venture founders, advisors, financiers, and
researchers have incomplete information and bounded rationality. Ventures are
typically not visible until they have reached a certain size and become full
organizations, so there is not enough knowledge about the crucial founding phase.
And we humans learn from what we see in very limited ways, strongly shaped by
prior beliefs and selective use of examples. The secrecy belief is a good
example, because it is such an old myth that people rarely challenge it.
The best accelerators go against these three beliefs and
foster concentration, vision, and practice. Their ventures are much more
successful than those of accelerators that follow the conventional beliefs. Entrepreneurs
should take note, even if they are not part of an accelerator. I think Serena
Williams would approve.
