The most fabulous part of my work life over the last decade has been to observe at close quarters the craziness, the inspirations, the quirks, and the discipline of entrepreneurs and serial entrepreneurs. The main thing that separates a first-time entrepreneur from a serial entrepreneur is that the latter shows a more profound and pragmatic understanding of risk and leverage.

But I wrote that in the last post already. This post is about something else. About how serial entrepreneurs continue to create new businesses, well, serially. Here are some of the things I have observed (for confidentiality reasons, I have to write about my clients in abstract terms but those are stories that I am excited to be part of, so share them I must!)

I am sure you have stories to tell too. Please do share them in the comments.

Core strength über alles

Serial entrepreneurs, especially the successful ones, know their core strengths and rarely stray far from them. This sounds simple enough but the difficulty of such focus is only revealed when one stops to count the dead bodies that litter the field called entrepreneurship.

Core strength enhanced opens new markets

Serial entrepreneurs are lucky. And their luck is not by chance, but made by their attitude, behaviour and choices.

Core strength + new knowledge –> new market

One of my serial entrepreneurs clients is an animal health specialist. That is the area in which he founded his first venture 25 years ago. That is the area in which his current venture’s main revenue streams lie. But as he got familiar with a different kind of animal from the kind he knew well before – moving from vertebrate quadripeds to invertebrate arthropods – he learnt about a certain manufacturing process and new materials.

This new knowledge set him on the path to invent a product for human health. It has opened a new market for his venture. One could call it serendipity, one could call it luck. I think it is the fruit of positive curiosity, the desire to understand things well and the ability to think laterally about possibilities.

Core strength + removal of a constraint –> new market

Another of my serial entrepreneurs clients emerged from his last exit, in pharmaceutical manufacturing, with his hands tied by a tight non-compete. He spent the next few years making new contacts and expanding his horizons. And plotting his next venture. Now his non-compete has expired and he has in the interim developed a business line in biologics. Contract biologics manufacturing is in demand but also faces a shortage in certified facilities. His new venture is already serving large orders and he is looking to expand them further.

The constraints of the non-compete gave him time to absorb new developments and be creative with his core strength in a way that was relevant to emerging market trends.

Core strength + emergent opportunity –> new market

Dharmesh Shah‘s new venture, Hubspot, illustrates this point beautifully. A profound understanding of what technology is and does is Dharmesh’s core strength. More importantly, as a good engineer, he knows that the user only cares about the ease of use of the front-end and must not be exposed to the complexity of the algorithm or the back-end. His venture before Hubspot, Pyramid Digital Solutions, was founded on these core strengths.

Fast forward to 2006, as social media were gathering pace, and Hubspot was born to help small businesses harness the power of the internet to grow. If you run a small business and are not already familiar with Hubspot tools, do try them out. You will see for yourself.

Core strength is fortified by complementary skills/ how to pick, motivate, reward and retain good teams

Successful entrepreneurs are aware that they owe their success in part to strong teams which are strong in skills they lack. All the serial entrepreneurs I have met, observed and worked with show an amazing knack for picking the right teams. While they have king-size egos otherwise, they are brutally honest to themselves about the skills they lack. Once they pick their trustworthy lieutenants, they treat them well thus motivating and retaining them and their loyalty.

I am aware that while the post is focused on serial entrepreneurs, these could equally be characteristics of a strong strategist and a good leader in a business. How do you see these lessons applying to your business or your clients’ for that matter?

”Let us try.
To-morrow, how you shall be glad for this!”

- Robert Browning

Businesses want to scale. It is especially true for ambitious entrepreneurs. It should be easy, should it not? After all, the smart view is that it is ambition that scales, ‘stuff’ does not. But the reality is not linear, not bi-modal, but nuanced. The road to hell is paved with a surfeit of ambition and a shortage of what it takes.

So what does it take to scale successfully?

Here is what.

Cardinal check: The core issues

Is the core of the business profitable? If it is not, then there may be a problem to solve already. There could be many reasons for unprofitability from bad strategy to poor execution. But one big outcome is that the business has little money to spend on dreams.

Is the business amenable to scaling? Not all businesses are. Some personality driven businesses and hourly chargeable careers may not always scale. The entrepreneur needs to take a dispassionate look – or ask someone else more dispassionate than she is to take a look – at the possibilities in and limitations of his business. That will also help think about strategic pathways to scaling. For instance, Nicky Clarke, who is a well-known hairdresser, can give only so many haircuts himself. Can he scale? Yes, possibly by personally training other stylists, or by launching haircare related products. But only he can decide if it is acceptable to him to scale that way.

Does the business have the capabilities required? A firm may be looking to open a new market. But it will be difficult to service a demand it actively creates if, for example, its manufacturing capabilities do not scale, or do not scale easily. For one of my clients in biologics manufacturing, we are doing our sums and readjusting our timetables because  the manufacturing plants must obtain regulatory approval. In other cases, a firm may not have the capabilities but may be willing and able to source help from outside.

Above all, will the added scale enhance the value of the business? If the answer to that is ‘no’, the project may not be worth the hassle.

Capital: do your sums!

Does the business have the money it will take? Nearly all scaling activities require money. Lots of it. There are both monetary and opportunity costs associated with raising money. One could approach one’s bank, assuming it is willing to lend. One could go to investors who have expertise in one’s industry or bring other non-financial value-add. However with both these sources, tough questions regarding the profitability of the core business must be answered.

If one’s ambition really does scale and if there is confidence in other organisational capabilities, then one could bootstrap, as one of my clients – a serial biotechnology entrepreneur – is doing! He understands the risks and that if he must use leverage or raise money, timing is all important.

Regardless of how one raises capital, the balance sheet will change. So will the nature and scope of control as we see next.

Control: See, letting go of.

Can you let go? For ambitious entrepreneurs, one of the hardest things to do is letting go of absolute and full control: control of the company ownership and sometimes, of strategic pathways to propel the ambition forward. It is however a necessary risk, since the entrepreneur himself cannot scale.

Scaling also requires organisational and process redesign. And empowerment of people who buy into the vision of the business and have the capability to make the right decisions. If a robust core business and a basic but clear structure exist, letting go of control enables emergent structures that suit emergent needs.

The global scaling experience of Indian IT firms, such as HCL Technologies, is informative in that respect.

In some cases, it has been my experience that it is easier to work on scale challenges with a serial entrepreneur of any age or background than with a first-time entrepreneur. Those who have been there, done that have a better understanding of leverage and using it to create enhanced value. The latter often needs to be asked: Would you rather than 10% of something that is worth £ 10Billion or 100% of squat? Brutal but a good readiness check.

Complexity: Dealing with it

I know “simplify or die” was one of the messages in my last post. But in reality, things do get more complex. What changes when complexity grows? I suggest a quick look at this link where Rui Das quotes James Kay:

“Under conditions of complexity, our framing of the situation changes from one (correct) perspective to multiple perspectives and scales. Our explanations shift from linear cause-effect models to narratives about self-organization, attractors, cannons, and propensities. Investigators into complexity do not seek prediction, control, right answers, or efficiency. (…) Rather, the investigators seek understanding, adaptability, and resilience.”

Although written in the context of science, the above description is equally applicable to business.

When seeking scale, assumptions about culture, people, time-scales all come up for scrutiny. There are gaps in data and knowledge. There are trade-offs to be made. All this makes decisions less easy.

In such a situation, a business with a clear vision, empowered employees and the ability to deal with ambiguity succeeds. All that and a lot of preparation.

Most recently, I am working with a British client keen on alliances with healthcare providers in India. Our main challenges are not just regulation, but deceptively simpler things like culture, use of language and imperfect information from potential partners. What helps? Above all, not being fazed by unpredictable developments. Also being able to join dots we have been watching which may not be directly relevant but have an impact on decision-making time lines.

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And yet, helping them tackle these challenges is not the only reason why I work with entrepreneurs. I work with them because with their ambitious and unusual choices every day, they embody something else Robert Browning wrote:

“Ah, but a man’s reach should exceed his grasp,
Or what’s a heaven for?”