Published July 2002

Study: Entrepreneurs do think differently

By John Wolcott
Herald Business Journal Editor

Entrepreneurs have probably suspected it all along. Now, a University of Washington researcher has found evidence that they really do think differently than most other business people.

The difference seems to be in how they approach opportunities, situations and problems, Professor Sara Sarasvathy told a May gathering of the Alliance of Angels Investor Forum at the offices of the Technology Alliance in Seattle.

Sarasvathy, an Assistant Professor of Entrepreneurship, completed a study of 27 entrepreneurs who founded companies worth between $200 million and $6.5 billion, including George Rathmann, founder of Icos and Amgen.

Now she plans to write a book explaining how entrepreneurs seem to base decisions on what they know themselves rather than on market research.

“When I started (studying for a doctorate on this topic), I was told entrepreneurial research is an oxymoron,” she said. “I was told it can’t be done, it’s not worth doing and that throwing darts is the reigning theory of entrepreneurship.”

But she persevered.

“In the ’60s, economists bought the idea that there’s something called innovation, but now we know there’s more to it than that. It’s not just a matter of entrepreneurs throwing something out there and letting the market decide (if it will be successful or not),” she said.

Instead of just interviewing successful entrepreneurs about their methods of thinking — some of them hadn’t even considered that aspect of their work — Sarasvathy presented all of them with a hypothetical business plan and asked each one to solve the 10 business, marketing and growth problems associated with the example.

During the two-hour test, she asked them to talk aloud as they analyzed each problem and proposed their solutions, recording all of their comments to study later.

“It was very clear in my mind that entrepreneurs think differently,” she said. “Anyone who has worked with entrepreneurs ... knows that there is something different about them. I started with that premise. I wanted to see if there were common themes.”

When she analyzed the transcripts, she did, indeed, find similarities. Entrepreneurs don’t concern themselves with market research, instead using feelings, experiences and materials at hand to create opportunities and new markets, she said.

Entrepreneurs use ideas and materials at hand, saying, “What can I do?” or “What do people want?” rather than taking a traditional path to starting and building a business, she said.

But she believes there is a logic to the decision-making process of entrepreneurs, even though they often seem to be “flying by the seat of their pants,” using intuition and determination where others would use market studies and revenue projections.

Entrepreneurs, she said, “know that surprises are not deviations from the path ... instead they are the norm, the flora and fauna of the landscape, from which one learns to forge a path through the jungle.”

Market research, in fact, wastes time and money in the view of entrepreneurs, who often ignore such traditional ways of starting a new business. They prefer to imagine new markets and figure out how to create them.

As for failures, she discovered entrepreneurs view the world as a series of successes and failures and that failure management is an important element in succeeding over time.

“For me, the interesting thing is that entrepreneurship is teachable,” she said, noting that even people who don’t think that way are able to learn the value of thinking differently.

More information is available on the Internet at http://depts.washington.edu /bapub/research/saras.html, or by contacting Sarasvathy at saras@u.washington.edu.

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