November 26, 2020 5 min read
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As a professor at Oklahoma State University’s School of Entrepreneurship, the most common question my students ask me is: How do I succeed as an entrepreneur? You might think that would be difficult to answer — or even that there is no answer. But that would be a mistake.
My answer is that there is an entrepreneurial rationality that greatly increases the chances of success. Unfortunately, many entrepreneurs downplay, overlook or are not even aware of it. But without it, entrepreneurs can only trust their luck. If you don’t like those odds, you should work on developing and strengthening your entrepreneurial rationality and making it your superpower.
Simply put, entrepreneurial rationality boils down to understanding your role as an entrepreneur. Part of it is to recognize who’s boss — and it isn’t you. As experienced entrepreneurs have learned — many of them the hard way — the customer is king. Your job as an entrepreneur is and will always be evaluated by the customer. So unless you understand the customer and can place yourself in their shoes, you’re unlikely to be successful.
Jeff Bezos explains Amazon’s success with being obsessed with the customer. Close enough. The customer is the ultimate arbiter of whether you, as an entrepreneur, have provided them with something of value. Customers can take part in the development process, they can be supportive and cheering you on, but they’re a disloyal bunch. They do not have to buy from you and may change their mind at any time. The result is that there is no demand for what you’re offering.
If you find yourself in this predicament, the answer is not to do more surveys or another round of expensive market research. You’ll only get more of the same result. Instead, you need to step ahead of the customer and aim for where the customer will be — not where they are. You have to be empathic about their situation and place yourself in their shoes. Only then can you understand what they value and why.
To do this, to develop empathy for your customers, you need to know and feel with them. You need to get close to them and understand what drives them, what their lives are like, and what their aims and aspirations are. Where do they want to be? Can you help them get there? If you can figure that out, you’re in good shape. It means you understand what they value.
We tend to talk about entrepreneurship, if not business generally, as value creation. That’s a bit misleading because you are not actually creating value (other than, hopefully, profit for yourself). The actual value of your offering is not expressed in dollars and cents but only exists in the eyes of the customer. It is the indistinct and immeasurable well-being that your offering provides them.
In other words, your job as an entrepreneur is to facilitate value — not create it. You produce how the customer gets value. But it is the experience of getting, having, and using your offering that is the real value. The complete experience. That includes how you sell, when you sell, whether and in what manner you follow up on your sale, the entire scope of the relationship you establish with your customer through your actions, offerings, and interactions.
If you understand that your role is not to create value, and that value cannot be measured but only experienced, then you see more clearly how you can facilitate value. By placing the customer experience first, you are closing in on success. Remember what Henry Ford supposedly said: “If I had asked people what they wanted, they would have said faster horses.” Customers may not know what they value until they see it. Your job is to facilitate that value, known or not.
The entrepreneurial rationality
It is not enough, of course, to have empathy for the customers and understand that you, the entrepreneur, facilitates value for them. But it gets you very close to the finish line. What remains is to recognize that the business you are running needs to be formed around the customer and the value-facilitation mindset first — and run it competitively second. Without the former, you cannot do the latter. To earn profits over time, you need to be obsessed with your customers.
Entrepreneurial rationality is not about pinching pennies or adopting business strategies as much as it is about realizing what is value, and that the decision of what is valuable is ultimately out of your hands. Your role as an entrepreneur and business owner in a market economy is to facilitate value for customers on their terms.
Many entrepreneurs have an intuitive understanding of this — or are fast learners. Unfortunately, many seem to forget it. Most existing businesses seem to have strayed from the empathy that allowed them to facilitate value. Perhaps because they were not aware of it, but just happened to be lucky. But luck only goes so far. Empathy goes the full mile. This, my students understand.