Lots of conversations I have got into recently have been about what ‘type’ of person is best equipped to win at business in today’s environment. The discussion boils down to a key question, “Who are the business leaders of the future – MBAs or street-fighting entrepreneurs?”
Put a street-fighter into battle with an MBA and this is what might happen.
Professor Saras Sarasvathy, teaches entrepreneurship at Darden School of Business, University of Virginia has studied the differences between entrepreneurs and the rest of the world for most of her career and argues there is a significant difference between “causal” (MBA) reasoning and “effectual” (entrepreneurial) reasoning.
“Causal reasoning, she explains, “begins with a pre-determined goal and a given set of means, and seeks to identify the optimal — fastest, cheapest, most efficient, etc. — alternative to achieve that goal.” This is the world of exhaustive business plans, microscopic ROI calculations, and portfolio diversification.
“Effectual reasoning, on the other hand, “does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with.” This is the world of bootstrapping, rapid prototyping, and guerilla marketing.
“That’s why MBAs and big companies spend so much time on focus groups, market research, and statistical models. “Effectual reasoning, however, is based on the logic, To the extent that we can control the future, we do not need to predict it.” How do you control the future? By inventing it yourself — marshalling scarce resources, understanding that surprises are to be expected rather than avoided, reacting to them fast.
“Ultimately, she says, entrepreneurs begin with three simple sets of resources: “Who they are” — their values, skills, and tastes; “What they know” — their education, expertise, and experience; and “Whom they know” — their friends, allies, and networks. “Using these means, the entrepreneurs begin to imagine and implement possible effects that can be created with them…Plans are made and unmade and revised and recast through action and interactions with others on a daily basis.” Harvard Business Publishing
Put another way, the street-fighting entrepreneur starts from limited resource and focuses relentlessly on the objective of getting more. The MBA mindset works back from a final objective and works out the steps needed to reach that goal. Sometimes you just need to get going.
Just in case you want to accuse me of simplistic stereotyping, I have made no comment about which character is represented by the two fighters above so any projection comes from you. I would be curious to know which person you associated with which approach to business?
Of course these are stereotypes. We all know plenty of entrepreneurial MBAs and conversely non-MBAs who are highly analytical in their approach to business but most people I have spoken to instinctively understand the character types.
Perhaps it is more important to think about what we can do to develop aspects of each character in the other.
- How can we help MBAs hone their street-fighting skills?
- How can we help equip street-fighters with the more practical and valuable tools in an MBA toolkit?
Which approach will have the biggest impact on wealth creation?