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What Is an Entrepreneurial Mindset and How to Develop It: Informative Essay
“Entrepreneurial mindset refers to a specific state of mind which orientates human conduct towards entrepreneurial activities and outcomes. Individuals with entrepreneurial mindsets are often drawn to opportunities, innovation, and new value creation” (Dr. Alain Fayolle). Davis et al. (2015) have further elaborated that an entrepreneurial mindset is a mixture of motives, skills, and thought processes that differentiate entrepreneurs from non-entrepreneurs. It is a state of mind in a complex environment that is intent on pursuing opportunities with scarce resources. The end goal is to deliver user-defined value at numerous multiples of the existing competitive offering through reliance on innovation. Thus, to further our understanding, the features of an entrepreneurial mindset will be illustrated along with ways in which it can be developed.
The first feature of an entrepreneurial mindset is to seek new opportunities, but with discipline. As explained by Shane and Venkataraman (2000), it is a mindset of discovery, evaluation, and exploitation of opportunities to bring into existence future goods and services. There are two competing yet complementary schools of thought, while one believes opportunities emerge because entrepreneurs detect a gap in the existing market which he or she can fill, and the other perceives opportunities are created because entrepreneurs are able to initiate a new gap in the existing market based on their ability to offer higher value-added product or service. McGrath and MacMillan (2000) defined an entrepreneurial mindset as the ability to rapidly sense, act, and mobilize, even under highly uncertain conditions. As stated by them, entrepreneurs are open to new opportunities but do not pursue all of them at the same time. Instead, they are conscious of their scarce resources and prioritize their energy on those avenues that are in line with their strategy and ensure the highest return. For the implementation of projects, it is expected of entrepreneurs to be adaptive to the evolving reality to ensure the best exploitation of opportunities. To ensure this, they leverage their existing internal and external social networks.
The second feature is a constructive attitude towards uncertainty. Ireland et al. (2001) describe an entrepreneurial mindset as a ‘way of thinking’ that creates a competitive advantage out of the positive aspects of uncertainty. In times of uncertainty, entrepreneurs rely on effectuation rather than causal reasoning. Rather than trying to anticipate an uncertain future to meet a set of predetermined goals, entrepreneurs will focus on elements they can control. Considering the means at their disposal, they will rely on their skills to analyze the market, make certain assumptions, identify risks in advance, strategically take calculated ones, and devise ways to manage any other risks beyond their control. Complexity and uncertainty are the norm in today’s business world, but having an entrepreneurial mindset equips them to address the challenges of coping with and adapting to such environments. Thus having an overall positive impact on their survival.
The third feature is to focus on execution, specifically adaptive execution. An outcome of entrepreneurs’ meta-cognitive awareness is their ability to adapt their thinking process to the changing context and task demands (Haynie and Shepherd, 2007). Though they are optimistic and inspired, they focus on their means and rely on trial and error to arrive at probable solutions. They do not make huge investments rather they choose to follow the affordable loss principle. That is, they evaluate opportunities based on if the downside is acceptable rather than the predicted upside. Take the example of the promotion of Dropbox by Drew Houston by posting a video to Hacker-News: the downside was the time spent on putting together the video, but the large upside was the interest generated and signing of the product along with a spot in Y Combinator.
The fourth feature of an entrepreneurial mindset is to focus on building partnerships. Through cooperative trustful relationships with stakeholders and experience, creating social capital is an investment as it requires energy, time, and financial means. Especially in complex and uncertain circumstances, it is a differentiating factor for entrepreneurs (Venkataraman, 1997). Also as discussed by Baron (2006), to gain an advantage entrepreneurs can use social interactions as a mode to access diverse information, make connections, and identify emerging patterns. Thus, by leveraging these networks, entrepreneurs can utilize resources involved in unique and hard-to-imitate ways (Alvarez & Busenitz, 2001).
The fifth feature is tenacity and the ability to learn from mistakes. Failure represents the most difficult, complex, and yet valuable learning experience that can give entrepreneurs revitalized awareness of their abilities and a broader, more sophisticated knowledge base to anticipate and overcome likely barriers (Cope, 2011). Failure is a likely outcome in the uncertain environment, entrepreneurs thus need to inculcate a mindset to make calculated investments limiting their downside and use the learning from previous failures in the next iteration of the opportunity. Colonel Sanders exhibited such a mindset, he failed 1000 times prior to starting KFC, and he used each experience to better his product.
Research into an entrepreneurial mindset yielded two approaches. One approach explained the mindset as a result of the personal traits of the entrepreneur, however further study led to unconvincing and weak results (Busenitz & Barney, 1997; Gartner, 1989; Mitchell, 2007; Shaver & Scott, 1991). The second approach based the mindset on cognition and stipulated it to be a way of thinking (Gartner, 1989; Palich & Bagby, 1995; Shaver & Scott, 1991). Thus, the mindset is not a result of specific traits from birth but rather developed from an individual’s interaction with the environment (Mathisen & Arnulf, 2013). However, some scholars were also combining the two approaches, they expressed that entrepreneurial intention is coming from personality which encompasses their traits, but individuals are good entrepreneurs because of their skills which can be improved through training.
The development of an entrepreneurial mindset has been linked to entrepreneurial education. Analyzing the relationship between entrepreneurial education and factors that shape an entrepreneurial mindset, Ngek (2012) assessed that factors like creativity, motivation, and risk propensity, when properly nurtured by education, could shape an entrepreneurial mindset. Benefiting from the education entrepreneurs will develop the following elements: the capacity to think creatively, strategically, analytically, and reflectively, confidence in one’s abilities, the ability to collaborate, well-developed communication skills, and expertise and understanding through alertness and flexibility. These elements will go on to become integral constituents of such a mindset. Apart from the traditional teacher-centered approach, various innovative learning methods such as computer-simulated business games, role-play, personal and group projects, workshops, group discussions, and case studies can be used to foster an environment for the development of an entrepreneurial mindset. Additionally, individuals can build an entrepreneurial tribe, consisting of folk who possess an entrepreneurial mindset. The members act as a support group with whom the entrepreneur can bounce ideas off, learn from their practical experiences, as well as choose role models who can mentor and guide them. To summarize, developing an entrepreneurial mindset through effective entrepreneurial education transforms an individual’s mindset into a growth mindset, enhancing their adaptability in a fast-changing world and strengthening it, reducing their high failure risk and ensuring survival.
To gain a different perspective on the development of an entrepreneurial mindset, six ways as demonstrated by Arash Asli can be analyzed. To begin with, it is important to revisit one’s vision. While it is important to be committed to a vision, being in a challenging and evolving environment necessitates a re-evaluation of the vision to make necessary amends to the steps required to achieve the vision. Next is to put oneself in challenging situations. By embracing challenging situations more frequently, entrepreneurs can gain the skills and confidence from experience, thus being able to eliminate mistakes and the fear of failure. Subsequently, an entrepreneurial mindset requires reading on a daily basis. To be able to excel and gain a competitive advantage, it is important to constantly update one’s knowledge and skillset. Additionally, entrepreneurs need to approach problems from all sides. One size doesn’t fit all, they need to cultivate a mindset that approaches issues from all aspects, as there can never be a universal solution. The ability to think outside the box will help in survival and growth. Lastly, analysis of the vision is not sufficient, they need to be putting it into motion. By following a flexible approach, they strive to meet the end goal of delivering value. This is possible only when each obstacle is viewed as an opportunity to adapt and better oneself (Asli, 2018).
To conclude, an entrepreneurial mindset is about being motivated to improve. Successful entrepreneurs are never content with the status quo, instead strive to better themselves. It is about accepting the means at hand and utilizing resources efficiently to profit from chosen opportunities. It also focuses on excelling in the present to ensure a better future by learning from past mistakes rather than obsessing over them. It is equally important to build and value a network of peers that support and motivate an entrepreneurial mindset. Finally, by incorporating all of the above, an entrepreneurial mindset can be strengthened and an entrepreneur is equipped with the necessary tools to cement a positive future.
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