Five Myths of Entrepreneurship (morning commencement address)

• Date: 08/15/2009
• Author: Dr. Luis M. Proenza (President, The University of Akron)
• Location: E. J. Thomas Performing Arts Hall

• So, you are now poised to go out there, into the "real world," as they say; you are ready to go forth, to "commence." That is what this ceremony is all about, and I am sure that you are wondering about what your future will be as you begin your professional careers.

  Now you'll notice that I said careers - plural - because during your lifetime, it will be common for those of your generation to change professions five or more times, as our economy evolves and new skills are required.

  The simple fact is that the business world is in a constant state of flux, as companies merge, acquire, downsize, expand, move, outsource and spin off their various assets.  And as we have witnessed vividly during this recession, no company, indeed no industry, is too big to fail.

  The world economy is experiencing the natural progression that former Harvard economist Joseph Schumpeter called "creative destruction," which occurs when innovation makes old ideas and technologies obsolete. ¹ 

  We simply must accept the fact that the world is changing and that jobs change with it. The current jobs in our economy will undoubtedly be destroyed at some point in the future, because that is the natural course and evolution in any economy.  It would do us well to remember the expression: the "stone age did not end because we ran out of stones." ²

  That era ended because humanity found new and better ways of doing things.  In other well-worn words, necessity was the mother of invention.  Faced with challenges and subsequent opportunities, humans responded creatively, entrepreneurially.

  Now, with globalization raising the competitive stakes for everyone, the world's largest foundation devoted to entrepreneurship, the Kauffman Foundation, reports that "...the United States might be on the cusp of an entrepreneurship boom." ³

  Entrepreneurs already launch hundreds of thousands of new firms annually, and those new firms account for 50 percent of all new jobs in America.

  In its recent study, the Foundation points out that "The primary determinant of which path our country will take (in recovering from the current, deep recession) is our level of entrepreneurial activity.  In terms of job creation, innovation and productivity, entrepreneurs drive growth." ⁴  

  Yet sometimes, even the best and brightest prospects require a push to get them started.

  I am reminded of a conversation between two friends, one of whom recently started his own business.  It went something like this:

  "So, what made you decide to become an entrepreneur?" said his friend.

  "It was something my last boss said."

  "Really, what did he say?"

  "He said: 'You're fired.'"

  The word entrepreneur, which I believe was coined around 1800 by French economist Jean-Baptiste Say, is most commonly applied to someone creating value by carving out a niche in the market that may not currently exist. 

  Further, as business guru Peter Drucker pointed out, entrepreneurs often are indentified as those willing to risk their careers, financial security and an uncertain future in the name of an idea.

  And, while those two definitions are on point, there are many misconceptions about entrepreneurs.  Five misconceptions are particularly persistent, according to a special report in The Economist magazine.  Let me share that with you now. 

  The first myth is that entrepreneurs are "orphans or outcasts."  The fact is: "...like all businesses, entrepreneurship is a social activity.  Entrepreneurs may be more independent than the usual suits who merely follow the rules, but they almost always need business partners and social networks (in order) to succeed." ⁵ 

  "The second myth is that most entrepreneurs are just out of short trousers."  Certainly some were astonishingly young.  "Bill Gates, Steve Jobs and Michael Dell all dropped out of college to start their businesses, and the founders of Google and Facebook were still students when they launched theirs...But not all successful entrepreneurs are kids.  Harland Sanders started franchising Kentucky Fried Chicken when he was 65.  Gary Burrell was 52 when he left Allied Signal to help start (the GPS giant) Garmin, (and) Herb Kelleher was 40 when he founded Southwest Airlines." ⁶

  The Kauffman Foundation examined more than 650 technology companies organized between 1995 and 2005 and found that "...the average boss was 39 (years old) when he or she started (and) the number of founders over 50 was twice as large as that under 25." ⁷

  "The third myth is that entrepreneurship is driven mainly by venture capital.  This certainly matters in capital-intensive industries...(and) it can also help start-ups to grow rapidly...But most venture capital goes into just a narrow sliver of business...(and) venture capitalists fund only a small fraction of start-ups.  The money for the vast majority comes from personal debt or from the 'three Fs': friends, fools and families." ⁸

  "The fourth myth is that to succeed, entrepreneurs must produce some world-changing new product.  Sir Ronald Cohen, the founder of one of Europe's most successful venture-capital companies, points out that some of the most successful entrepreneurs concentrate on processes rather than products.  (Sir) Richard Branson (for example) made flying less tedious by providing his customers with entertainment (on Virgin Atlantic Airways).  Fred Smith built a billion-dollar business by improving the delivery of packages (through FedEx).  Oprah Winfrey has become America's richest self-made woman through successful brand management." ⁹

  "The fifth (and final) myth is that entrepreneurship cannot flourish in big companies."  Simply not true.  "Many big companies work hard to keep their people on their entrepreneurial toes.  Johnson & Johnson operates like a holding company that provides financial muscle and marketing skills to internal entrepreneurs...Just as importantly, big firms often provide start-ups with their bread and butter.  In many industries, the giants contract out innovation to smaller companies." ¹⁰

  After all, "The defining characteristic of entrepreneurship...is not the size of the company (nor the age and income of the individual) but (rather) the act of innovation..." offering new products or processes that add value to our lives. ¹¹ 

  One highly successful entrepreneur and innovator is University of Akron alumnus Gary Taylor.  Under Gary's leadership, InfoCision Management Corporation, which he started nearly three decades ago in the foyer of his house, has become one of the fastest-growing private companies in America.  It employs more than 3,000 people throughout Ohio, Pennsylvania and West Virginia.

  Gary found his niche, providing teleservices for Fortune 1000 companies and major nonprofit organizations.  Today, InfoCision raises more money via telemarketing for non-profits than any other company, period.

  And like many grateful alumni, Gary and Karen Taylor give back to their university, and some of you might have been beneficiaries of their generosity.  The Taylor Institute for Direct Marketing, the first undergraduate institute of its kind, has become the most advanced direct marketing school in the country, and we are fortunate to have it located on our campus.   And, of course, InfoCision's name soon will be displayed proudly on the new University of Akron football stadium, which we will be inaugurating on September 12^th. 

  So, while entrepreneurship does present an element of risk, the payoff can be extraordinary.  That is true not only for individual entrepreneurs, but for their associates, their communities and, ultimately, their regions and nations.

  Remember the Kaufman Foundation report's statement that, "The primary determinant of which path our country will take is our level of entrepreneurial activity.  In terms of job creation, innovation and productivity, entrepreneurs drive growth." ¹²

  Hopefully during your time here at The University of Akron, you, too, have learned the importance of entrepreneurship and its role in advancing America's economic competitiveness.  And, I hope you have become more of an entrepreneurial, innovative, disciplined and well-rounded thinker.

  Now you need only the willingness to take chances and make choices that create new knowledge and new technologies and quickly translate those discoveries into marketable products and services.

  Who knows?  Someday you may form your own company, or you may end up working for a successful entrepreneur like Gary Taylor, helping drive the economic prosperity of our nation. 

  Wherever life leads you, know that as you continue to expand your knowledge and creativity, so also will you expand your worth and that of your community. 

  My charge to you as graduates is to re-create yourselves constantly, because the only economic stimulus you truly can count on in life is that which you create yourself.

  * * *

  References

  1. Reamer, Andrew, Larry Icerman, Jan Youtie, "Technology Transfer and Commercialization: Their Role in Economic Development," Georgia Institute of Technology, August 2003, p. vii (and) MSN Encarta, Joseph Schumpeter, July 8, 2009
     
     
  2. Yamani, Sheik Ahmed Zaki, Saudi Oil Minister, quoted by op-ed columnist Thomas Friedman, "The Energy Harvest," The New York Times, September 15, 2006
     
     
  3. Stangler, Dane, "The Coming Entrepreneurship Boom," Ewing Marion Kauffman Foundation, June 2009
     
     
  4. Stangler, Ibid
     
     
  5. Special Report-Global Heroes, A special report on entrepreneurship, The Economist, March 14, 2009
     
     
  6. Special Report-Global Heroes, Ibid
     
     
  7. Special Report-Global Heroes, Ibid
     
     
  8. Special Report-Global Heroes, Ibid
     
     
  9. Special Report-Global Heroes, Ibid
     
     
  10. Special Report-Global Heroes, Ibid
      
      
  11. Special Report-Global Heroes, Ibid
      
      
  12. Stangler, Ibid

   

   

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