5K views Entrepreneurship is seen by many as startups and brands that made it big with their products, disrupting the world in the process. Others view it as being flexible with time and work capacity, and being your own boss.
However, the picture is not all rosy. Failory 2021 report 1 shows a piece of information that is not new, but still surprising: 90% of startups fail, 10% of which failing in their first year. So if you are considering becoming an entrepreneur, statistics say that you have 9 chances out of ten to fail. But all that doesn't seem to stop all the new startup support programs and entrepreneurship hackathons taking place everywhere around the world with increasing popularity, so why is that?
Origin of the name and concept of 'Entrepreneurship'
The term 'Entrepreneurship' originates from French in 1800s where it was used to refer to someone who shifts economic resources from being limited in productivity and impact towards becoming more productive and profitable 2, which views 'entrepreneurship' in a capitalist perspective of wanting to gain more. However, if we go back in time we find that the concept of entrepreneurship itself is embedded in cultures and societies since the beginning of time. 'Riyada', the Arabic translation of entrepreneurship that is over a thousand years old does not necessarily refer to economic profitability, but rather leadership.
Entrepreneurship is mostly linked to risk taking and value creation for customers3. This means that without one of the two, we cannot have an real entrepreneur.
Let's focus on what the characteristics of an entrepreneur are.
Entrepreneurship is driven by a risk-reward mindset
Understanding the risk/reward perspective is the first step towards understanding what distinguishes an entrepreneur. Risks in this sense include threats, uncertainties and fears. These risks make people fearful and reluctant, and this makes room for entrepreneur to jump in and engage this risk with a product or service that could facilitate customer fear.
This helps in addressing the issue of 90% failure rate mentioned above, which means great risks associated with entrepreneurship. In this manner, risk best defines entrepreneurship having the odds against the entrepreneur who is risking time, capital, and resources with the goal of achieving a certain 'reward'. The higher the risk, the less people willing to tackle it, and therefore the larger the reward. This is unlike other concepts like ,for instance, freelancing where the risk is relatively low, and therefore risk is a determinant for an entrepreneur.
Entrepreneurship is driven by value creation
Value creation is the corner stone of any successful business. This value can come in many forms and shapes, and goes beyond the mere products or services sold to include all aspects linked to the value proposition- which includes branding, servicing, delivery, followup on sales, support, and other forms of value that are associated with the Value Proposition. (Check out the Value Proposition here) .
The first step towards creating value for customers is identifying a real problem or pain. The business problem is any world issue that is causing difficulty or pain for a group of people.
Check out our guide on identifying the right startup business idea for solving a real-world problem.
Innovation and entrepreneurship
Innovation is often linked to entrepreneurship although it is not necessarily the same thing. Innovation is rare to come by and therefore is difficult to achieve. We prefer a term called "Minnovation" that is focused on small innovations.
Innovators (or Minnovators) can become great entrepreneurs as they introduce something new and unpredictable. We can differentiate innovative entrepreneurs vs. normal entrepreneurs with two characteristics:
- Changing the status quo
Some entrepreneurs manage to come up with solutions that change the status quo of what is expected in a given industry . These not only undertake risk and provide value, but also change the status quo in the process. Take for example car-pool apps such as Uber and Careem- they have changed the nature of the industry on what is considered the norm.
- Working with scalability in mind
If you build a new street shop to sell the latest electronics and manage to generate income then you are considered an entrepreneur, but that model is not scalable. I.e. It is not easy to scale what you do to maximize impact and find new audiences.
Taking things into perspective we find that the advent of internet has empowered communities to connect better and easier than ever before. For businesses this meant the ability to expand their channels and operations to reach more audiences. Thus, it only makes sense for entrepreneurs today to take use of this opportunity and create something that could be scaled and expanded in the future.
Pros of entrepreneurship
Entrepreneurship has many positives and points of attraction making a lot of people aspiring to become entrepreneurs. These include:
- Freedom and flexibility in life and business. Entrepreneurs get to select what to work on, what to do, and where to do it.
- Making a difference and creating value. Some people find fulfillment in creating value and making a difference in the world, which makes entrepreneurship attractive for this type of people. This means that working as an entrepreneur will be more motivative and engaging.
- Entrepreneurship is like an adventure- you never know what's coming, and there is always room to discover and learn more.
- Being own boss, which means the authority and responsibility to take decisions and follow on activities that directly contribute to the income generated for the entrepreneur. This also means managing resources and employees.
- Entrepreneurship presents the opportunity to create more money than other forms of practices.
- Following one's passion and working in an area that they love.
- Some just love the title of 'founder' or 'entrepreneur', so they are in for the prestige that comes with it.
Cons of entrepreneurship
Entrepreneurship has also many challenges and negatives. These include:
- Entrepreurship entails a costly journey with no guarantees of success. This means a lot of financial and time resources are going to spent with no assurance of the outcome.
- As a leader entrepreneur you will need to manage and work with teams that do not necessarily have the same drive or passion. This can lead to miscommunication, lost opportunities, and un-realized potential.
- Ownership of successes and failures. When things go wrong, there is no one else to blame.
- Need to satisfy customers that can be resource and morale consuming.
- Need to satisfy investors and partners that can challenge the vision of the business or the beliefs of the entrepreneur.
- Often leads to longer working hours with less separation between life and business, leading to a burn-out.
Types of entrepreneurship
Entrepreneurs come in many shapes and forms, from different backgrounds and with different approaches- but they all share the same characteristics of risk taking and wanting to create value.
In our piece entitled '12 Types of Entrepreneurs', we focused on classifying entrepreneurs based on their attitude, focus on making profits, and their personality. Check it out here.
Disambiguation for similar terms
Modern science has considered entrepreneurship as an essential part of a healthy economy, and thus it has resulted in numerous derivatives for the concept of entrepreneurship. Most notably, Intrapreneurship that benefits from entrepreneurship attitudes in existing businesses. Entrepreneurship became a buzz word that has caused some ambiguation and mixing between it and other relevant terms. Most notably:
| Term | Similarity to entrepreneurship | Difference from entrepreneurship | Who is this right for |
| Freelancers | Also sometime referred to as digital nomads. Freelancers share similar traits of flexibility and being own boss with entrepreneurship as they work on what they choose, and can balance their work & life as they find fit. They can work online or offline, depending on the nature of their work and the services they provide. | Risks are much less when you are a freelancer, but so is the reward. Usually, freelancers make money based on their service- unlike entrepreneurs who have a product or service that is creating money regardless of them being present or not. | This approach is good for individuals with certain technical skills who want to provide services for others. These don't want the hassle of running a business, but rather require a clear stream of income with less risk than entrepreneurship. |
| Innovators | Inventors and innovators come up with new concepts and ideas to solve problems or make life easier. As discussed earlier, they are closely linked with entrepreneurship. | Mostly these innovators are focused on scientific value on coming up with new novel approaches. Often than not, inventions and innovations are only a proof-of-concept that is not ready for commercialization until it is developed into a sellable product or service. | This approach is good for scientists and researchers who want to come up with novel solutions to world problems without the hassle of commercializing their concepts. |
| Businessman/ Businesswoman | Businessmen and women are business oriented. They often have a good scientific and practical background in managing and running value chains, marketing, sales, and inventory management. They share the risk part with entrepreneurs as all businesses are risky. They also share the value creation element as they want to create value for their customers. | It could be argued that all entrepreneurs are businessmen and women, but not vice versa. Businessmen and women may have been employed to perform their duties, or may have inherited the business from family. | This approach is good for highly skilled business people with an existing business at hand. |
| Founder4 | Founders are entrepreneurs who have created startups and businesses to impact the world. |
Founders are more focused on changing the status quo and scalability (think innovative entrepreneurs). Founders are more directed to build highly scalable businesses to impact the world. Every founder is an entrepreneur, but not vice versa. |
Tech startups and fast moving businesses usually have founders. |
Final thoughts
So you can see that entrepreneurship is not for all. However, everyone should have an entrepreneurial mindset and adopt the practices of entrepreneurship in their business and life.
