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Corporate Logic vs Entrepreneurial Logic: How the Best Business People Think Differently About the…
Why is that many entrepreneurs can’t level up to become corporate executives and why is it that many executives struggle to get traction…
Why is that many entrepreneurs can’t level up to become corporate executives and why is it that many executives struggle to get traction for their business? I consider both groups very smart yet it seems that the skills aren’t transferable.
I wasn’t satisfied with words like “resourcefulness”, “cunning”, and “savvy”, so I’ve always been very observant of others and open-minded about new perspectives & ideas.
Today, I think I now understand this.
This article is my attempt to explain the difference between corporate logic and entrepreneurial logic as applied in goal-setting and strategic thinking.
How Goal-Setting Works Differently for Corporate Executives & Entrepreneurs
Reflecting on the past two and a half years, I’ve noticed that there are two ways to approach goals: working backwards and working forwards. Both work, but only in very different contexts.
Let’s start with working backwards.
Working Backwards from a Goal
When I quit my job in 2015, I had one goal, which is to start my software company.
I had three tests in mind: 1) a free inventory management tool for sari-sari store owners where I’d sell the sales data to research agencies like Nielsen, 2) a marketing automation tool that makes it easy for advertisers to bid on the lowest CPMs and highest ROAS, and 3) join an existing software company and see how it works out.
I had 2 years before my savings ran out.
To try these 3 things, I worked backwards and determined that I had to do the following:
Enroll in a 3-month coding bootcamp to get the programming skills I needed
Fly back to Philippines, in a high-growth city that was both urban yet had a high density of sari-sari stores
The city should also have emerging tech talent that I can partner with
I decided on Cebu City, a place I’ve never been to, because it’s the 2nd largest region behind the capital and it had a booming Business Process & Knowledge Process Outsourcing industry, which means it had a a lot of ambitious yet likely bored developers wanting to make an impact instead of working over the graveyard shift making boring internal applications for foreign companies.
For #1, I enrolled in bloc.io, which was the only online coding bootcamp at that time, and I immediately shelled out the $5,000 fees to learn how to code.
Now that I run a digital marketing agency, you’ll immediately guess that that none of these things worked out for me.
The problem with working backwards is that you’ll never get to an accurate conclusion on the cost and the time it takes to meet the goal.
So instead of 2 years, my savings in reality only had 1.5 years. And I while I b the inventory management application (you can see the prototype’s code here: Inventory Management App in Github and the marketing automation software (I’ve kept that private since I still want to use it), I realized that products need 2 years on average before it can pay off your living expenses so I had to scrap it.
I only had about a few months left until I changed the way I approached my goals.
Working Forwards to Find the Right Goal
For quite a while, a lot of my friends and my newfound connections in Cebu suggested that I should start my marketing agency.
They remarked how I always “knew my stuff” in that realm and I should start my own.
I dismissed it many times until I had a few months left in my runway.
Eventually, the pressure of having only a few months left in the bank spurred me to take action and try it.
And it worked.
However, I also realized that relying only on a network is not good for fast growth. I was deliberating on creating a website and fill it with content until I bumped into an interesting site when I browsing flippa.com, which is a marketplace for buying/selling websites.
The site was called growthhackerkit.com, and it was a free growth hacking course that had 3,000 subscribers. The source of traffic was high quality as it came from tech and founder centric websites such as producthunt.com and growthhackers.com.
I realized that it would be a good source of leads. So I bought that site for $1,500 and it immediately paid off for me as I got three clients there that I was able to retain for at least 10 months.
The difference between “working backwards” and “working forwards” is that in the former, you build a plan & process to get to your goal with the trade-off of time & capital. Working forwards mean that based on your own skills, your time, and your existing capital, you imagine opoprtunities that you can tap into.
Depending on who you’re talking to, “working forwards” means something that’s very flighty and spontaneous, but that’s the best way to find business ideas that you can reasonably do. The goals emerge from yourself & your environment. It’s not something you can throw in the air and hope to achieve.
While these stories are from my personal experience, there’s a lot of data that backs this up.
Let’s formalize this further.
Deterministic vs Emergent Strategy Development Processes
When I was working in Procter & Gamble, strategy development was straightforward:
Find markets & customer segments that are large or fast-growing
Identify a compelling marketing idea that captures the imagination of the market
Link the idea to a product that is valuable & unique that people want to pay a premium for it
Find distribution & awareness channels that best reaches that market
Through concept & product testing, you reduce the risk of the launch
Once we’ve qualified the plan, we’ll stick to it for months. We would spend hundreds of thousands of dollars in research and testing. Then spend a few million on marketing and distribution.
While the logic is sound, it is still very risky. Even for large, well-financed multinationals, the success rate of such projects is 5–30%. The top quartile of multinationals have a rate higher than that at between 30%-50%.
Despite that success rate, most multinationals understand that there are asymmetric gains among projects: some projects have significantly higher ROI than the rest. So they invest more on the best-qualified projects and the math works out towards sustained profitability.
The CEO job of the biggest multinationals is no different from being a portfolio manager of an asset management firm — projects are just like stocks and your allocate your money on those with the most value & growth.
For entrepreneurs, you don’t have the luxury of managing a portfolio of projects. You need to get at least one of your two or three projects right. Many have the budget for just one project.
So how do they strategize for that?
For entrepreneurs, the strategy development process is different:
Who you are
Who you know could be customers
Who you know could be partners
What you know
What you can build
Large corporations start with the “market & customer”. While entrepreneurs start with the “self”.
Based on an MIT study, the average successful entrepreneur is 45 years old. It’s not some 19 year old hotshot that the media likes to talk about.
Middle age is the best time to become an entrepreneur for simple reasons: unless you come from an entrepreneurial background, you need time and investment to build a reputation (who you are), build a network (who you know), and build skills (what you know & what you can build).
So even when people ask me for advice on when’s the best time to become an entrepreneur, I always say to do it when you’re older and more stable. I was an outlier when I started at 26. And there were many times I had to show & demonstrate that I was wiser and savvier than my age in countless sales meetings. It’s not easy.
As you can see, corporate strategy is deterministic: you set a goal, set a plan, and you reduce the risk of that plan. Entrepreneurial strategy is emergent: starting with yourself & your peers, what possibilities can you imagine?
But while the logical processes are different to succeed in corporations as compared to entrepreneurship, it doesn’t mean you’re stuck with one.
One day, entrepreneurs need to make that shift.
But when does it happen?
Breaking Out of the “Traditional Business Owner” Ceiling
In Southeast Asia, there’s a very defined image of a “traditional business owner”: ROI-focused, pragmatic, operationally involved, and stubborn to old yet proven ways.
But inevitably, this person hits a ceiling and the business stagnates. While it is stagnating with slow growth, the person and the family’s already living a comfortable life. It then leaves them with a choice: stay in comfort or apply more risk to the business?
Many opt to stay in comfort as they understandably had to go through a lot to get to that point. There’s nothing wrong with that at all.
But for those who want to get to the next level, they now have the resources to unlearn everything and start adopting the corporate approach.
And that means they need to buy their way into their goals and bite the bullet: raise debt, raise equity financing, hire external managers, and invest in new-to-their-world services such as research & concept testing.
Few take that big of a risk (remember that the success rate of projects is only 5–30%). But for those who take the plunge and let themselves go through the unlearning process, then they’ve mastered what it really means to become an elite businessperson.
Schedule for More Insights
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