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06 JUN 2016 RESEARCH & IDEAS

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Skills and Behaviors that

Make Entrepreneurs
Successful

24 OCT 2016 RESEARCH & IDEAS

BERNIE MADOFF
EXPLAINS HIMSELF
31 OCT 2016 RESEARCH & IDEAS

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Research at Harvard Business School by Lynda Applegate, Janet Kraus, and

Timothy Butler takes a unique approach to understanding behaviors and
skills associated with successful entrepreneurs.

by HBS Working Knowledge

What makes a successful entrepreneurial leader?
Is it the technical brilliance of Bill Gates? The obsessive focus on user
experience of Steve Jobs? The vision, passion, and strong execution of
Care.coms Sheila Lirio Marcelo? Or maybe its about previous experience,
education, or life circumstances that increase confidence in a persons
entrepreneurial abilities.
Like the conviction of Marla Malcolm Beck and husband Barry Beck that
high-end beauty retail stores and spas, tightly coupled with online stores,
was the business model of the future, while other entrepreneursand the
investors who financed themdeclared such brick-and-mortar businesses
were dinosaurs on their way to extinction. The success of Bluemercury
proved the critics wrong.
Weve always had a hard time being able to identify the skills and
behaviors of entrepreneurial leaders
Despite much research into explaining what makes entrepreneurial leaders
tick, the answers are far from clear. In fact, most studies present
conflicting findings. Entrepreneurs, it seems, are still very much a black
box waiting to be opened.
A Harvard Business School research team is hoping that a new approach
will enable better understanding of the entrepreneurial leader. The program
combines self-assessments of their skills and behaviors by entrepreneurs
themselves with evaluations of them by peers, friends, and employees.

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BE DONE

FEATURED FACULTY

LYNDA M. APPLEGATE
Sarofim-Rock Professor of
Business Administration
Chair, OPM
CONTACT

Along the way the data is also allowing scholars to study attributes of
entrepreneurs by gender, as well compare serial entrepreneurs versus firsttime founders.
Weve always had a hard time being able to identify the skills and
behaviors of entrepreneurial leaders, says HBS Professor Lynda Applegate,
who has spent 20 years studying leadership approaches and behaviors of

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successful entrepreneurs. Part of the problem is that people usually focus

on an entrepreneurial personality rather than identifying the unique skills
and behaviors of entrepreneurs who launch and grow their own firms.
Complicating this understanding are the many types of entrepreneurial
ventures that exist, says Applegate. These can include small lifestyle
businesses, multi-generational family businesses, high-growth, venture
funded technology businesses, and new ventures designed to
commercialize breakthrough discoveries in life sciences, clean tech, and
other scientific fields.
These types of ventures seem to both appeal to and require different types
of entrepreneurial leaders and we are hoping that our research will help us
understand those differencesif they exist, says Applegate, the SarofimRock Professor of Business Administration at HBS and Chair of the HBS
Executive Education Portfolio for Business Owners & Entrepreneurs.
The answers are already starting to come in, thanks to initial results from a
pilot test of The Entrepreneurial Leader: Self Assessment survey taken by
1,300 HBS alumni. Results allowed the researchers to refine the selfassessment and to create a second survey, The Entrepreneurial Leader:
Peer Assessment. Both are being prepared for launch in summer 2016.
The team included Applegate; Janet Kraus, entrepreneur-in-residence; and
Tim Butler, Senior Fellow and Senior Advisor to Career and Professional
Development at HBS and Chief Scientist and co-founder of Career Leader.

Dimensions of entrepreneurial leadership

A literature review combined with interviews of successful entrepreneurs
helped the team define key factors that formed the foundation for the selfassessment. These dimensions were further refined based on statistical
analysis of the pilot test responses to create a new survey instrument that
defines 11 factors and associated survey questions that will be used to
understand the level of comfort and self-confidence that founders and nonfounders have with various dimensions of entrepreneurial leadership (Chart
1).

Chart 1: Preliminary Research Method.

These 11 dimensions are:

TIMOTHY BUTLER
Senior Fellow
Director of Career
Development Programs,
MBA Program
Administration
CONTACT

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FIND RELATED ARTICLES

ENTREPRENEURSHIP

1. Identification of Opportunities. Measures skills and behaviors associated

with the ability to identify and seek out high-potential business
opportunities.
2. Vision and Influence. Measures skills and behaviors associated with the
ability to influence all internal and external stakeholders that must work
together to execute a business vision and strategy.
3. Comfort with Uncertainty. Measures skills and behaviors associated with
being able to move a business agenda forward in the face of uncertain
and ambiguous circumstances.
4. Assembling and Motivating a Business Team. Measures skills and
behaviors required to select the right members of a team and motivate
that team to accomplish business goals.
5. Efficient Decision Making. Measures skills and behaviors associated with
the ability to make effective and efficient business decisions, even in the
face of insufficient information.
6. Building Networks. Measures skills and behaviors associated with the
ability to assemble necessary resources and to create the professional
and business networks necessary for establishing and growing a business
venture.
7. Collaboration and Team Orientation. Measures skills and behaviors
associated with being a strong team player who is able to subordinate a
personal agenda to ensure the success of the business.
8. Management of Operations. Measures skills and behaviors associated
with the ability to successfully manage the ongoing operations of a
business.
9. Finance and Financial Management. Measures skills and behaviors
associated with the successful management of all financial aspects of a
business venture.
10. Sales. Measures skills and behaviors needed to build an effective sales
organization and sales channel that can successfully acquire, retain, and
serve customers, while promoting strong customer relationships and
engagement.
11. Preference for Established Structure. Measures preference for operating
in more established and structured business environments rather than a
preference for building new ventures where the structure must adapt to
an uncertain and rapidly changing business context and strategy.
While the 11 factors provided some level of discrimination between
founders and non-founders, five factors showed statistically significant
differences. For example, founders scored significantly higher than nonfounders on comfort with uncertainty, identification of opportunities,
vision and influence, building networks, and finance and financial
management. Founders also had significantly lower ratings on their
preference for established structure dimension (Chart 2).

Chart 2: Entrepreneurial Leadership Differentiates Between Founder and Non-Founder Business

Leaders

Although some of the factorslike comfort with uncertainty and the ability
to identify opportunitiesseemed like obvious markers for entrepreneurial
success, the study built a statistically reliable and valid tool that can be
used to deepen understanding, not only of founders versus non-founders,
but also of differences and similarities among founders who start and grow
different types of businesses, between male and female founders, serial
founders and first-time founders and founders from different countries.
In addition, a deeper examination of the individual questions that make up
each factor provides richer descriptions of specific behaviors and skills that
account for the differences in the profile of entrepreneurs who are
launching different types of ventures and from many different backgrounds.
Take vision and influence, for example. Although it is a long-standing belief
that great leaders have vision and influence, the researchers found that
entrepreneurial leaders have more confidence of their abilities than the
average leader on this dimensionand that leaders working within
established firms actually rated themselves much lower.
Financial management and governance turned out to be another nonobvious differentiator.
Financial management is a skill that all of our HBS alumni should feel
confident in applying, Kraus says. Yet among the alumni surveyed in the
pilot, those who had chosen to be founders rated themselves as much more
confident in their financial management skillsespecially those related to
managing cash flow, raising capital, and board governancethan did nonfounder alumni.
Self-confidence in financial management and raising capital was especially
strong for male entrepreneurs, she says. Our future research will broaden
our sample beyond HBS alumni to enable us to differentiate between those
who graduated with and without an MBA, and to assess confidence in
raising capital and financial management and a wide variety of other skills
by different types of founders and non-founders.
Efficient management of operations was another crucial, yet less obvious,
factor. While we often think that employees within established
organizations would be more confident in their ability to efficiently manage

operations, we were surprised to see that it is a distinguishing and

differentiating attribute of entrepreneurs, says Kraus. All entrepreneurs
know that they must do more with lesswhich means that they must work
faster and with fewer resources.

Differentiating male and female entrepreneurs

The pilot study allowed researchers to examine gender differences. While
men and women rated themselves similarly on many dimensions, women
were more confident in their ability to efficiently manage operations and
in their vision and influence, while men expressed greater confidence in
their comfort with uncertainty and finance and financial management
(Chart 3).

Chart 3: Entrepreneurial Leadership Differentiates Between Male and Female Founders

These differences rang true for Kraus, herself a serial entrepreneur who
founded and grew three successful entrepreneurial ventures.
Successful women entrepreneurs that I know have lots of great ideas, and
are super skilled at creating a compelling vision that moves people to
action, she says. They are also extremely capable of getting lots done
with very little resources so are great at efficient management of operations.
That said, these same women are often more conservative when forecasting
financial goals and with raising significant rounds of capital. And, even if
they have a big vision, they are less confident in declaring at the outset that
their goal is to become a billion-dollar business.
Indeed, research confirms observations that women start more companies
than men, but rarely grow them as large.
Based on his earlier research, these results also resonated with Tim Butler:
When it comes to self-rating on finance skills, women are more likely than
men to rate themselves lower than ratings given them by objective
observers. There are definitely implications for educators when lower selfconfidence in skills associated with entrepreneurial careers becomes a
significant obstacle for talented would-be entrepreneurs.

The researchers hope to deepen their understanding of male and female

entrepreneurial leaders as they collect more data.

Differentiating serial founders and first-time founders

Not all founders are cut from the same cloth, the study underscores.
Analysis of the pilot data also revealed important differences between firsttime founders and serial foundersthose who launch and grow a number of
new ventures, such as Elon Musk (PayPal, Tesla Motors, SpaceX) and
research team member Kraus (Circles, Spire; peach).
One key difference the research team discovered: serial founders appear
more comfortable with managing uncertainty and risk. That doesnt mean
they enjoy taking risks, Kraus says, but they appear to be confident that
they are adept and capable of knowing how to de-risk their venture and
manage uncertainty from the very beginning (Chart 4).

Chart 4: Entrepreneurial Leadership Differentiates Between Serial Founder and Non-Serial

Founders.

While the data are not yet robust enough to say so with certainty, Kraus
believes that serial entrepreneurs often enjoy launching businesses where
the risk is highest because of confidence in their ability to manage
uncertainty, and perhaps because they enjoy the process of creating clarity
from uncertainty.
Other factors that set serial entrepreneurs apart from one-timers include
confidence in their skills at building networks, securing financing and
financial management, and generating creative ways to identify and meet
market opportunities.

FUTURE OPPORTUNITIES
As more people take the assessment and HBS develops a richer data set,
scholars, educators, entrepreneurs and those who support them will be able
to develop insights that will have a number of payoffs.
The entrepreneurial leaders we know are constantly searching for tools that
can help them become more self-aware so they can be more effective,
Kraus explains. This tool is going to be uniquely useful in that it was

specifically developed to help entrepreneurs gain a deeper understanding of

the skills and behaviors that they need to be successful.
In addition, researchers will be able to examine the data by age, gender,
country, industry, size of company, pace of growth, and type of venture to
understand the full range of entrepreneurial leadership skills and behaviors,
and how different types of entrepreneurs are similar and different,
Applegate says. These insights will enable us to do a better job of
educating entrepreneurs, designing apprenticeships and providing the
mentorship needed.
The data will also be useful in identifying skills and behaviors needed to
jumpstart entrepreneurial leadership in established firms, and in
understanding how an entrepreneurial leader continues to lead innovation
throughout the lifecycle of a businessfrom startup through scale-up.
Today, I often see that the creativity and innovation that was so prevalent
in the early days of an entrepreneurial venture gets squeezed out as the
company grows and starts to scale, says Applegate. But, rather than
replace entrepreneurs with professional managers, we need to ensure that
we have entrepreneurial leadership and creativity in all organizations and at
levels in organizations. We hope that our research will help clarify the
behavior and skills needed and, over time, will help us track the
entrepreneurial leadership behaviors and skills of companies of all size, in
all industries, and around the world.
Given the critical importance of entrepreneurial leaders in driving the
economy and improving society, shockingly little is understood about them.
The data and analysis emerging from HBS will provide important insights
that can help answer the questions, What makes a successful
entrepreneurial leader and how can I become a successful entrepreneurial
leader?

Related Reading:
Social Networks, Ethnicity, and Entrepreneurship
Governments Positive Role in Kick-Starting Entrepreneurship
Dont Just SurviveThrive: Leading Innovation in Good Times and Bad

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COMMENTS
Samuel Babatunji Adedeji

55daysago

Very much educated by the outcome of this effort, however, I would want to see a situation
whereby this can be replicated in less developed nations where subjects involved are not of
the high class as we have it here. Anyway, this was a good attempt at appraising
entrepreneurial skills and behaviour.
Like Reply

Lawrence

144daysago

Interesting article though. But I doubt its universal applicability given that entrepreneurs
are largely shaped by their environments.
Like Reply

amandakrantz

146daysago

I second the comment by Bluelgnacio...it would be interesting to compare entrepreneurs

who dropped out of college, never went to college, or went to college but not grad school.
Only looking at HBS entrepreneurs makes me wonder if the results would be any different
with a broader set of entrepreneurs.
Like Reply

BlueIgnacio

147daysago

I suggest that future research also focus on non educatedentrepreneurs. Itd be great to
see how compares a post graduatedentrepreneur with a school drop out entrepreneur.
Maybe, they are identical, different flavor though...
Nice job guys!
Like Reply

Prasad Kaipa

147daysago

Great article. I did a TEDx talk a couple of years ago on characteristics of successful
entrepreneurs and I wish I had this information. Thank you!
Like Reply

Phillip Garza

148daysago

This is a great article.

Like Reply

SanjivKarani

149daysago

The essence of any leadership is to inspire action. With that notion, there is a strong
overlap in what it takes to be a great entrepreneurial leader or a great leader in general.
The following postsums up the essence of great leadership from McKinsey, Center for
Creative Leadership, Pew Research Center and Dr. Sunnie Giles.
https://www.linkedin.com/pulse/essence-great-leadership-inspire-action-sanjiv-karani
Like Reply

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