Harvard Business School Professor Lynda Applegate hears plenty of business pitches that envision a big opportunity but lack the specifics of how to get there. Conversely, some pitches focus on entering the market but don’t have an end goal in mind. The best entrepreneurs, she suggested at a speech at LSU’s E.J. Ourso College of Business today, keep both the big picture and the short term in mind.
“When you’re building a new business, one of the first things is to get other people to commit to come along with you,” Applegate said. “You’ve got to be able to tell a really compelling story, but you’ve got to be able to tell that story in a way that allows people to see that you can back it up and take some of the risk out of it before you get started.”
Entrepreneurs will make some initial assumptions about the product and the market, and Applegate said many of those assumptions will prove to be wrong. Developing a small, limited version of the product is one way to test those assumptions.
“It’s not going to work the first time,” she said.
Amazon founder Jeff Bezos started out with books as his only product, although the company name indicates that he was thinking bigger from the beginning. But books are a simple product that’s easy to ship and easy to store, and almost no one ever returns a book, Applegate said. He didn’t go to investors until he had built a minimum viable product and tested it, she added.
Established companies like Amazon should still continue to innovate, she said, but they should never bet the company on one idea. Instead, she suggested incubating a steady stream of big ideas and focusing resources on the ones that show the most promise.
Entrepreneurship depends a great deal on forecasting the future, or inventing it, which requires a mix of analytical thinking and trusting your gut.
“The best entrepreneurs learn to look out and see what’s changing,” Applegate said.
An entrepreneur needs to understand how to model the future, test the model, and change it when appropriate, Applegate said. With that in mind, she praised LSU for incorporating data analytics into its business curriculum.
Applegate also stressed the importance of entrepreneurs surrounding themselves with people that have different skill sets. The person who is good at “visioning” won’t necessarily be great at execution. Elon Musk, CEO of SpaceX and Tesla Motors, may in fact turn out to be a great visionary leader, but he’s not necessarily the best person to deal directly with customers, she said.
“Teams build companies, not individuals,” Applegate said.
Applegate, the Sarofim-Rock Professor of Business Administration at Harvard Business School, is one of the founding senior faculty and former department heads of the school’s Entrepreneurial Management Unit. She was hosted today by the E.J. Ourso College of Business and the LSU Department of Information Systems & Decision Sciences.
—David Jacobs
