Entrepreneurial learning, what you didn’t know.
Entrepreneurial learning seems to be about acquiring the knowledge to run a company on your own. Although experiences are needed too, what you probably don’t know is that entrepreneurial learning involves other essential aspects also to make the learning process possible. However, some people even claim you cannot learn entrepreneurship. Entrepreneurs are born and not made. Are they?
Table of contents
- Are entrepreneurs born or made?
- What is entrepreneurial learning?
- Three obstacles that prevent business owners from learning
- Results of entrepreneurial learning
Are entrepreneurs born or made?
Successful entrepreneurs like Steven Jobs contradict the science of learning to do business and claim that you can not learn to do business. Unfortunately, Steve Jobs is wrong. Scientific research has now also shown. He says: “You cannot learn to do business. Instead, the most important thing is your mentality.” In other words: it is all or nothing.
It would be best if you went for it wholeheartedly; otherwise, it is better to quit, because it will never work. For example, a famous Dutch entrepreneur, Hennie van der Most, who employs about 2,000 people, is sure too: “You cannot learn entrepreneurship, 100% you cannot. It’s in your blood or not. Yes, you can learn more, but you do it while doing business.” So, it possible to learn, then? Or can you only learn it if you were born an entrepreneur?
Scientific research: entrepreneurs are made, not born
Everyone who registers their new-born company at the proper authorities can proudly call themselves a business owner. Yet, it remains to be seen if they qualify for someone with the mindset of an entrepreneur. Is an entrepreneur born or bred? Scientists, like many others, were marveled by this frequently asked question. In their article “Why do Entrepreneurial Parents have entrepreneurial children?” they finally report the definite answer. The upbringing in an entrepreneurial family gives you double the chance of starting a business of your own, then when your biological parents run their firm.
Even the most talented entrepreneurs learn (everyday)
When businessman Van der Most was asked: “What would you have done differently if you could start all over again,” he replied that he would start his first business at an even earlier age. “You shouldn’t study too much, but begin your business on time,” he added. Looking back, he now sees what he didn’t do at the time: start early! At least that is what he learned.
With entrepreneurship, it is just like football. Anyone can kick a ball, but not everyone becomes a professional footballer. And, even a professional football player has to practice a lot. The sooner you start training, the more time there is to learn.
What is entrepreneurial learning?
Entrepreneurial learning is acquiring the necessary entrepreneurial knowledge to improve business performance continuously. It is the ongoing process of turning experiences into relevant information to improving set up and manage a small or medium-sized company. In the Entrepreneur Competence Model, the fourth element of entrepreneurial knowledge and experience refers to the following areas:
- Marketing & Sales
- Organization & leadership
- People (human resource)
- Finance and pricing strategies
- Market demand and supply
Many people, including teachers and mentors, assume that entrepreneurial learning is solely about learning how to run a business. So, if we put students at an early stage through entrepreneurship education, they learn automatically all there is to know about the essential elements of running a business of your own. However, it takes an entrepreneurial mindset to spot opportunities (for learning) and process and transform the experiences into entrepreneurial learning outcomes.
Derived from the experiential theory (Politis 2005) and entrepreneurial learning research, the transformation process in entrepreneurial learning can follow the paths of exploration and exploitation. The desired way an entrepreneur chooses also leans on their predominant thinking styles.
The first path of exploration involves spotting new opportunities and creating innovation. However, boredom is around the corner. Something new can be more appealing to pursue than following through on an ‘old’ idea.
The second path of exploitation relies more on exploiting opportunities and endure until a substantial and sustainable value is created despite obstacles and setbacks. With the disadvantage of holding on to something, that should have abandoned long before.
According to Kolb, experiential learning follows four stages to acquire awareness on how to deal with situations or problems you never had before. In an entrepreneurial context, both paths of transforming experiences are required in finding out how to start and run your own business successfully. Yet, its success depends on someone’s entrepreneurial personality profile. Therefore, a great emphasis is also needed on learning essential entrepreneurial skills, competence, and attitude.
Hence, even if experiences are conceived as a vital source of entrepreneurial learning, it is useless without an additional program for entrepreneurship development. Entrepreneurship programs offer a perfect platform for entrepreneurial learning. However, they lack in giving sufficient attention to the development of the entrepreneurial capability of the person.
Three obstacles that prevent business owners from learning
About half of the companies in the USA and the EU closed their doors within five years since they first opened them. The majority quit their business, and the rest went bankrupt. Maybe they were not naturally talented entrepreneurs. Yet, they weren’t able to learn quickly enough how to turn their business idea into a viable entrepreneurial activity.
The five entrepreneurial capabilities that entrepreneurs lack most of the time are:.
- Marketing as a skill
- Market orientation
- Financial management
- Independence / decisiveness
- Planning and organizing
Maybe if they had followed entrepreneurship courses, they would have survived just on time. Yet, three significant obstacles prevent business owners from learning business-specific ‘how-to-do’s’ and entrepreneurial management tactics.
1. Poor preparation
Only about 40% of the business owners have a business plan. Even fewer use it as an instrument to plan and organize their business accordingly. It forces them to ad-hoc management, which keeps entrepreneurs running behind.
2. Business owners lack accurate self-awareness
Entrepreneurial learning research shows that 72% of business owners lack accurate self-awareness. Their self-image is different from what others think of it. Every owner-manager has an image of him or herself. However, in most cases, their self-image doesn’t closely match reality. Even if they are open to learning something new, they probably take it the wrong way due to a ‘false’ self-image.
3. Owner-managers tend to overestimate themselves
Entrepreneurs tend to underestimate their risk the more they get used to making decisions in trying times (Cooper, 1988). Of course, an established business leader can rely on his accumulated experience throughout the years in business. However, new situations can look like earlier situations, and then entrepreneurs misjudge easily. Or worse, the business owner is so convinced of his entrepreneurial experience that he is blind for pitfalls, conflicting information, and dangers. You could call it arrogance, which is dangerous for every successful entrepreneur.
Results of entrepreneurial learning
There are recent scientific publications that demonstrate the positive effects of entrepreneurial coaching. It is evidence of entrepreneurial learning.
Entrepreneur coaching is directed to the person behind the company. Still, it does that always in regards to the business and its future. The main aim is of entrepreneurial coaching is growth, both personally and professionally. One major and immediate benefit is that it gives the CEO more self-confidence. That, in turn, affects their entrepreneurial capability. In the end, it impacts business growth (Crompton, 2012).
Entrepreneurial learning will, for sure, positively influence the understanding of how to improve business performance. But will small business coaching also change entrepreneurial traits and capabilities?
A project with startup founders
In a Dutch government initiated small business entrepreneurship program, about 3000 startup founders, who volunteered, selected their coach from a trained pool of entrepreneurial coaches. Besides, attending entrepreneurship courses, they also completed a pre- and post measurement of their entrepreneurial mentality.
The post-measurement clearly shows significant improvement (OECD, 2014). The main results in the table below demonstrate this. For example, networking, as an essential skill of the entrepreneurial personality, has increased by almost 100%.
- Networking +96%
- Self-confidence +76%
- Marketing and sales +68%
- Finance and cash-flow control +48%
- Growth and strategic thinking +37%
Furthermore, about 66% of the participants increased their:
- Understanding of entrepreneurial marketing
- Belief in their own entrepreneurial potential
- Better understanding of their businesses’ finance
Of all budding entrepreneurs who participated in the entrepreneurial coaching program, 35% started their company within nine months. For comparison: In the Netherlands, an average of 20% start their business within twelve months.
Growth of net profit was achieved in half of the companies that were running their own business at the start of this entrepreneurship program. Besides, not every company had an increase in their profits as a coaching goal.
A follow-up study, five years after this group of participants received entrepreneurial coaching, shows a significant increase in their survival rate up to 89%. The average survival rates in the EU after five years are 49%. So, for this group, only 11% had to stop their business within five years.
A project with self-employed and entrepreneurs
In another project aimed at developing the regional economy, about 1,000 business owners were given the opportunity to get entrepreneurial coaching. For coaching purposes, attendees were asked to do an entrepreneurial assessment test before the program started, and at the end. By measuring the difference between the first and last test, the entrepreneurial index grew by 17 points. It is a growth of 40.4%.
A reintegration program of incapacitated business owners
Business owners who are unable to work, due to burn-out or an accident, for example, can claim their health insurance company. The unfortunate business owners also face losing their company. Besides an experienced labor official called in to make sure the business owner recovers quickly, a business coach is added to the recovery team to ensure their firm isn’t lost when they want to return.
- Reintegration program for incapacitated entrepreneurs: success rate 74% (60% fully reintegrated).
- More than 80% realize the goals set in the coaching sessions due to accurate insight into personal entrepreneurial competencies and related action points.
- Reinforcement; 78% of the entrepreneurs take action after discussing the results of their entrepreneurial personality profiles with the coach.
An entrepreneurial education program for students
Entrepreneurship education offers a fictive student company program to learn more about entrepreneurship during (secondary) vocational education. With the right help and coaching of teachers, pupils grow an entrepreneurial mentality. The traits grew with about 27,4% and qualities – that are easier to develop – grew with 31,7% on average.
However, there is one critical condition: the quality of the teacher. Due to a lack of commitment and understanding of how to coach students on their entrepreneurial thinking, a big part (49%) showed no growth at all. Students have no clue about their learning experiences. So, the coaching quality of the teacher is paramount.
The ‘true’ entrepreneur doesn’t have to know anything, but knows he can learn to make his dream happen.
Keep reading: Read more about the entrepreneurial personality.