How Entrepreneurs Think and Behave

“Entrepreneurial thinking is about imagining the end and creating the means.”

That’s the mantra of Neil Tarallo, a senior lecturer at The Hotel School at Cornell University and the director of Cornell’s Entrepreneurship Bootcamp for Veterans with Disabilities. Tarallo, who learned about entrepreneurship at the knees of his father and grandfather, says that the term ‘entrepreneurship’ has become too closely tied with startups when in reality entrepreneurship is not solely about starting a business. It is a way of looking at the world.

As part of eCornell’s Entrepreneurship webinar series, Tarallo spoke with Chris Wofford about the behavior traits of successful entrepreneurs and the foundation for entrepreneurial thinking. What follows is an abridged version of their conversation.

Wofford: Nice to see you again, Neil. The last time you were here we covered the business model canvas, (((link to previous transcript))) a great tool for entrepreneurs and managers. Today we’re going to be talking about how entrepreneurs think and behave. Why is this something we should look at? What can we hope to learn from today’s talk?

Tarallo: For me, having been an entrepreneur and then moving into an academic environment and teaching the subject, one of the things that became apparent is that entrepreneurship is less about starting businesses and more about how the people who start these businesses think and behave.

Over the past four or five years, there’s been some really great research into how entrepreneurs behave and documentation of the behaviors of expert entrepreneurs. For me as an academic, if we can teach those behaviors and help our students understand those processes, we can put them on a path to be much more successful in their endeavors.

Wofford: The obvious question here: What are those behaviors?

Tarallo: I think more than anything else, the behavior can be summed up as a level of comfort in moving forward without really understanding what the final goal will be or even which path you will take.

One of our Hotel School alum put it really well: “Most of the world needs to know every turn and every nuance in the path that they’re taking wherever they go. Entrepreneurs just need to get to the first turn. When they get there, they’ll look around and evaluate their environment and then they’ll make a decision on which way to go based on that information.”

To start a business or to create something new is very dynamic and it requires that we have a lot of information coming from the environment around us and that we can use that information to find the right direction to go.

Whenever I talk about this subject, I always like to define entrepreneurship because it’s really interesting to me that as I talk to people about what entrepreneurship is, there are a lot of different impressions.

While I wouldn’t say that anybody’s really wrong about how they define entrepreneurship, I like to make sure we’re on the same page. So I always start out by asking, “What is entrepreneurship and what does it mean?” Many of the definitions of entrepreneurship that you see involve some reference to starting businesses and honestly I’ve moved very far away from that. For me, entrepreneurship includes starting businesses but it’s not solely about starting businesses. I like to define entrepreneurship as the process of creating value by bringing together a unique package of resources to exploit an opportunity.

If you use this definition, you’ll see that entrepreneurship and entrepreneurial behavior can occur in many different contexts. As we remove the idea of a startup being the focal point of our definite measure of entrepreneurship, we find that it applies to corporate environments, social enterprises and nonprofits.

Wofford: So you’re saying that maybe people have actually exhibited entrepreneurial behavior but they might not think of it that way because the idea of being an entrepreneur is so closely related to having started a business?

Tarallo: That’s right, it’s really not just about starting businesses. The behavior aspect of it really winds up being an alternative way of thinking, and it’s a way that I approach my entire life and especially my work.

I think about entrepreneurship as being a capacity to perceive and act upon opportunities based on the environment around you and the ability to create and build something from practically nothing. That’s what really great entrepreneurs are able to do, and it involves putting things together in a way that other people haven’t thought of yet.

Wofford: We’ve got some questions coming through in the chat box here and I’m just going to throw one out at you and then let you respond: Do you think entrepreneurs are born or can we teach people to be entrepreneurs?

Tarallo: Well, I sure hope so because Cornell pays me to teach people about entrepreneurship! There is some research out there about how some people are born thinking effectually, meaning they think entrepreneurially. If you watch children playing together, you can see this really clearly. When you see little boys sitting down playing and they have a whole bunch of dump trucks but they need a firetruck, they don’t just say, “Oh geez, we don’t have a firetruck so therefore we can’t have a fire.” No way. What they say is, “Okay, you see this dump truck right here? From now on, that’s our firetruck.” And from then on out, any time one of them touches that firetruck, they’re making the siren noises and all that. That’s a form of effectual thinking.

What we’ve learned is that as people move through the education system in the United States, and I would argue in most other countries, they become less and less effectual in their thinking and they become more focused on how to get someplace and what is needed to accomplish something along that defined path. We work on changing that and it is something that I definitely think we can teach.

Wofford: How do you teach people to maintain or reclaim that effectual thinking?

Tarallo: When I came to the Hotel School at Cornell, my responsibility was to help hotels move their entrepreneurship programs forward. One of the first things we did was to separate the skills and tools that we can teach in the classroom – marketing, finance, those kinds of things – from the behavioral component of entrepreneurship.

The only real way to teach the behavioral part of entrepreneurship is to really immerse the students in the behaviors because that’s where you learn. I learned to be an entrepreneur at the knees of my father and my grandfather because they immersed me in that behavior. Teaching practical skills in a classroom is a very simple thing to do, but the behavioral part is a little bit more challenging.

But we do know that we can teach people to be entrepreneurial. Research shows that if you have had even one formal entrepreneurship course, your likelihood of succeeding as an entrepreneur increases exponentially. That’s because you start to become aware and you start to become conscious of these things as you go along.

Saras Sarasvathy, who has done some really great research at the University of Virginia into how entrepreneurs behave, has identified the two primary ways that people think as causal and effectual. Let’s break those down a little bit. Causal thinking is what we’re all accustomed to and what most of us do throughout the course of our day. In business schools, this might be characterized as a managerial way of thinking. Basically this is thinking about how to achieve a predetermined goal. This is when you say, “Okay, here is the challenge I have in front of me and this is what I am going to do to overcome it.”

The next level of thinking is called strategic thinking. In business schools, we sometimes equate this with creative thinking. This is about generating new means to achieve a predetermined goal.

When it comes to effectual thinking, and this is what Sarasvathy identifies as the way entrepreneurs think, it’s more about moving forward by understanding the means that are around you. Instead of saying, “This is the goal that I have”, what you’re saying as an entrepreneur is, “Here’s the problem I need to solve.” The goal is the solution to that problem but in effectual thinking you are not specific about what that solution might be.

Wofford: To oversimplify it, it’s sort of going with the flow, right? Reacting to what comes along?

Tarallo: Yeah, in a way. Sarasvathy also talks about not thinking about either the means or the end but just understanding the problem that needs to be solved and then kind of letting everything take you in that direction.

Entrepreneurs understand that we can’t control the future, nor do we want to. Because if we let the future unfold on its own, generally speaking it will be driven by our customers and therefore the solution that we create will be the solution that our customers desire. That’s why expert entrepreneurs tend to be more successful than others.

Wofford: Something I’ve heard a lot in the startup world is this idea of the agile methodology. I mean, in the end you’re trying to solve a problem and your solution might look very different than what you initially anticipated.

Tarallo: That’s absolutely true. You know, when anybody comes to me with a business idea and asks me what I think of it, I always tell them that it doesn’t really matter what I think. In fact, it doesn’t really matter what they think about it either. You can only present a product or a service; in the end it is only the customer’s opinion about it that matters.

As I evaluate whether or not someone has the potential to really be a successful entrepreneur, one of the things that I think about is how willing they are to be flexible with the solution that they’re creating. The problem we see with new and inexperienced entrepreneurs is they have this vision of what their company is going to look like and they follow that vision to the exception of all the information that’s around them. That leads to failure.

Wofford: Is this in part because they’ve put too much emotional stake into it?

Tarallo: Exactly. They get very personally attached. You have to be willing to let go. What’s interesting about some of the research into the behavior of expert entrepreneurs is that the only thing that matters to them is solving the problem. The thing that’s really compelling for them is that there’s a problem out there or a gap in the marketplace that needs to be filled. They don’t care they do it, they just care that it gets done.

I’ve created this little mantra: “Entrepreneurial thinking is about imagining the end and creating the means.”

To go back to Sarasvathy, she has something called “the lemonade principle”. This is about the old saying that if the world give you lemons, make lemonade. Entrepreneurs understand that when we have something happen to us, there are usually opportunities to be found. How do we take this worst case scenario and turn it into something that is a true opportunity? How do we move forward with it?

I have another little saying: “The world doesn’t happen to me but the world happens for me.” In other words, when bad things happen there’s generally an opportunity there for me to do something different and new. It’s the old silver lining in the cloud kind of thing.

Another one of Sarasvathy’s principles of entrepreneurial expertise is what’s called “the patchwork quilt”. This is about the fact that entrepreneurship is really messy. It never goes according to plan and things happen that force you to change what you do. So instead of looking at things like a puzzle, where we have very specific pieces that fit into very specific spaces, which is what most causal thinkers would do, for entrepreneurs it’s more like a patchwork quilt. It’s more about finding a piece of fabric and sticking it in, then finding another one and realizing you can fit it in over there if you squeeze it or stretch it out a little bit. No matter how I do it, at the end of the day it’s going to create a big quilt that will keep me warm. But I have no idea what that quilt will look like before I start down that path.

I’ve only touched on a few of Sarasvathy’s principles of entrepreneurial expertise, but I encourage everyone to look them up because they are all very interesting.

Wofford: Great. I can see that we are quickly running out of time. Do you want to leave us with some parting words?

Tarallo: I want to stress that entrepreneurship is not something you do, it’s a behavior. I’m really working hard personally to scrub entrepreneurship as a word that I use to describe a career, because it really is a behavior for me. It’s the way that I act, the way that I think.

Wofford: Neil, thank you once again for joining us. I know you are going to be coming back soon for a webinar that looks at innovation. I’m already looking forward to it.

Tarallo: Thanks, Chris. This was fun. See you next time.

Want to hear more? This interview is based on Neil Tarallo’s live eCornell WebSeries event, How Entrepreneurs Think and BehaveSubscribe now gain access to a recording of this event and other Entrepreneurship topics.