Optimism and chance are the two key factors in entrepreneurial success, according to leading enterprise academic Prof. David Storey. Full details of Storey’s new research will be published in a journal next year, but I was able to get a preview at last week’s Enterprise and Small Business academics’ annual gathering: the ISBE conference.
Storey finds no impact from training in enterprise skills or from prior experience or forecasting. Americans’ often quoted ability to learn from failure was also rejected by his analysis: previous failure makes no difference to your chance of succeeding, but the cultural optimism of Americans does.
According to Storey, business owners don’t just need psychological resilience, they also need the wealth to withstand economic turbulence, until their business gets that lucky break. In an ensuing discussion, Ron Botham suggested that Storey’s conclusions could be a case for ‘enterprise for all’. Botham’s own powerful new report (summarised in EFAN discussion) suggests that the majority of new jobs are created by very small businesses. But despite his findings that only 3/20, of the tiny proportion, of firms selected for support by Venture Capitalists actually succeed, Storey still prefers a ‘picking winners’ approach focused on well capitalised ‘high quality’ businesses. There was an inevitable exchange fairly dismissive of the growth potential of trades like hairdressers: “ah yes, but there are some highly innovative hairdressers too” retorted Botham. Nicky Clarke, Vidal Sassoon, Toni & Guy anyone? All self-made I think, like the majority of entrepreneurs and millionaires.
While Storey argues that wealth is an essential underpinning for his optimism and chance thesis, economic resilience can also be achieved by the kind of relentless bootstrapping many of our best known entrepreneurs are renowned for: pushing down personal and business costs, growing through low-cost promotion and customer supported cashflow. Bill Gates is the most famous example, when he started Microsoft he secured his first major customer, IBM, before he’d completed the product he had sold them. Capital driven start-up as advocated by Storey is fine for some, but I’ve certainly seen too many seduced by easy money and big business dreams in the last decade: losing their shirts/ blouses in the process. Slow and steady is a better route for most: risk aware, not risk blind. It’s also an approach that ultimately results in significantly more jobs for the UK economy and fosters an environment which enables those high growth opportunities.
The two fundamental core points of Storey’s thesis – optimism and chance – do chime with my own experience of supporting people to start and grow businesses. However I wouldn’t discount enterprise education. More segmented research shows that it makes a significant difference to women who start businesses (GEM UK 2005). This is where self-efficacy comes in – optimism about your own ability and capacity to accomplish a task. Women are notoriously less confident in their abilities than men, for example the average man will take a punt on applying for a job when he meets something like 50% of the criteria; most women by contrast need to meet over 80% before they will apply. Training helps women’s confidence and optimism to grow; for that reason it’s important for anyone whose confidence is low or has taken a knock: including those made redundant, the over 50s who feel left behind. Self-efficacy is also massively helped by good quality mentoring and business coaching. It’s a case for transformational, bespoke, relational business support; and if you believe, as I do, that confidence and optimism can be built; then it’s also a case for enterprise for all.