Thursday, May 28, 2009

Why Do Most Entrepreneurs Fail to Scale?

6:55 PM Monday April 13, 2009

Anthony Tjan

One of my recent blogs discussed the DNA of great entrepreneurs as a mix of three simple things: smarts, guts, and luck. But what about the characteristics of entrepreneurs that can hinder success and prevent their companies from getting to the next level? …

Consider the strengths and weaknesses of the following entrepreneurial traits:

Persistence and stubbornness. … Perseverance is an admirable quality of great entrepreneurs. However, when perseverance is confused with unhealthy stubbornness the outcome is not likely to be great. … So how can you tell the difference? It's tricky, but here's a tip: Be persistent in your vision when you are sure you are right and have some proof to back that up, but also acknowledge when you need help or redirection.

Controlling interest. During the early stages of a company, the entrepreneurial vision is critical and is typically embodied by the founder. It can therefore make sense early on for the entrepreneur to [have as much] control of the operations as possible. … But as a company grows, entrepreneurs need to demonstrate not only that they can do the task (i.e. no task is too small or beneath them), but also that they can appropriately delegate. Fast growing businesses quickly move beyond the ability of one person to manage without proper delegation, founders can unknowingly limit the start-up's growth potential.

Team loyalty. … What has to be recognized is that the loyalty and relentless commitment that helped get a company to a certain stage might cloud judgment in determining the capabilities and skill gaps required as a business scales. To be clear, loyalty should be recognized and is culturally important, but it cannot be confused with the performance and future needs of the organization. As a start-up becomes a full-fledged business, an entrepreneurial leader has to be prepared to deal with difficult and inevitable personnel situations where business decisions need to be made for the interest of the company and not personal or historical reasons.

Some of these and other factors that hold a business back from realizing full potential are described well in the 2002 HBR article by John Hamm "Why Entrepreneurs Don't Scale." I also touched on similar themes in a lecture on entrepreneurship I delivered for the School of Management at Boston University.

Thanks again for all the comments on the prior blogs that helped shaped my thinking on this entry.

Now, what growth challenges do you face and why do you think many entrepreneurs fail to scale?

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