Entrepreneurship Can Only Be Learned By Doing

I’m a great believer in what is commonly called clinical teaching: learning by being immersed in real problems. Surgeons learn by watching others perform operations and then by actually operating while under supervision. Entrepreneurship should be learned similarly. One way you can learn the skills is to network in your local entrepreneur clubs and try to find mentors. If you are working in a larger corporation, ask to be assigned to new business generation activities where you will interact with internal creative people.

Entrepreneurship is taught entirely using clinical methods at the Smeal College of Management. The introduction to the entrepreneurship course requires each student to find an idea that they would like to champion, using the methods outlined earlier in this chapter. Their output is actually an executive summary describing their opportunity and targeted to generate interest in a specific person or group of people that they’ve identified as their most appropriate stakeholders. If the opportunity best matches a venture capital firm, they have to identify not only the one or two firms that are the best fit, but also the actual partners that specialize in the area addressed by the opportunity.

If the opportunity fits a corporate partner’s route to commercialization, the student must define the actual person in that company who will be most likely to be receptive to the opportunity they’re putting forward. If it’s suitable for a group of angel investors, then they have them call them up and get an audience to listen to their pitch of the opportunity. And so, in the introductory course, the students actually feel comfortable that, in fact, there are a hundred or even a thousand ideas that they can identify with and get excited about sufficiently to create the arguments and the resource and financial plans – in outline, not a detailed business plan – so that they can pitch it to somebody who ought to be receptive. I would recommend a similar exercise for anyone contemplating an entrepreneurial career. Finding an idea and engaging with someone to be a champion is a great way to learn.

Next, we do two things that I think are also very interesting from a learning perspective. The students have to write a business plan, and they can either write it around the idea that they conceived in the previous class, or they can take a bad business plan and convert it into a good business plan. But generally, they have to learn how to write a concise business plan. Every entrepreneur must be able to put their ideas into a convincing, well-argued document. There are several excellent templates that can be accessed on the Internet that can help you through this process. Do not underestimate the importance of a good plan and how difficult it is to put one together. Only when you try to put your ideas on paper in a cohesive way, do you uncover the holes that need to be filled.

In parallel with the idea generation and planning exercises, the students are placed on the other side of the table and act out the role as a potential investor in someone else’s opportunity. Now you’re a venture capitalist and you’re looking at business plans to determine where to invest. This is another important way of learning – by challenging another’s plans you can directly experience the areas where significant risks lie, or there is insufficient information to make a decision whether to invest or not. At the University we actually have a venture fund, which the students manage. We find companies that are looking for investment, and they make a presentation to the class, and then the class does all the due diligence and decides whether to make an investment or not.

So it’s interesting to observe the learning process: on the one hand, the students are trying to create arguments to attract money, and, in parallel, they’re looking at somebody else’s arguments and taking them apart to determine whether this would be a good investment or not. By simultaneously playing the role of both promoter and potential investor, the students learn to be more critical of their own ideas and, therefore, able to build them into more robust opportunities.

Although you may not have money to invest in others’ plans, you can learn to critique plans by either going to presentations made to your local entrepreneurs’ club, for example, or getting yourself onto a review group to examine new opportunities within your existing company. This will help you when the time comes to create your own plans and sell them to stakeholders.

After reviewing several plans, you will begin to see certain patterns of weakness. The main area of concern is usually associated with a lack of customer input. An idea has no value unless someone will eventually pay for it. Getting input from potential customers that indicates that they will buy what you plan to offer at the price, which will make you a profit, is the most important checkpoint for investors. Without customers there is no business opportunity. Entrepreneurs often underestimate the need to complement their own management skills. A major cause of failure for new enterprises is the originator not recognizing the need to bring in additional talent. Owning a large percentage of a failure is no compensation for owning a small part of something large and successful. Honest self-examination, with the input of trusted advisors, should be done regularly. The willingness of founders to forgo the leading position is viewed as a positive attribute by investors.

Because bringing in additional managers with complementary skills adds to the chance of success, we teach a basic knowledge of such skills. These include cash management, team building and motivation, and negotiating partnerships, as well as managing and growing a start-up through its various phases. An understanding of the value of these skills makes the entrepreneur more likely to accept that others can bring value to the management team.

Finally, the students learn to practice their learned entrepreneurial skills using a set of different business scenarios where they play the role of CEO. For example, we take a real case biotech start-up company that has taken several wrong steps along the way. The “acting CEO” must create a new innovative strategy to extract the lost value.

In another scenario, we take a major company that is threatened by an aggressive start-up and must therefore re-examine its business model – perhaps to shift from a product to a service model. The “acting division manager” has to present the rationale and plans for what might be a radical change to the “board” of the company.

In another case, the students are presented with a series of rather disparate press clipping, product literature, market research reports and recently issued patents from around the world. They are issued with the following challenge: “Somewhere in here is an opportunity. Go figure out who’s going to make the move or where the business opportunity is.” For example, one case uses the idea of so-called “intelligent appliances” in the home that are connected to the Internet and what this might do to the detergent market. Will a company such as GE get into the detergent market? Will the consumer lease washing machines with a supply of detergent delivered by UPS to match their pattern of usage? Will the major supermarket chains be shut out of the detergent market – a major part of their revenue? I want to make them look at a very complex situation and figure out where the real opportunities might be and to use their learned skills in making the arguments to various stakeholder groups.