My favorite definition—and why it matters to every CEO.
If you had to explain to someone who was learning English what an entrepreneur is, what would you say?
Maybe it seems like a simple question, but the meaning of the word can get slippery. Howard Stevenson, a longtime professor at Harvard Business School, recounts the story of a senior faculty member describing the field of entrepreneurship to a young person: “You peel it back layer by layer,” the faculty member said, “and when you get to the center, there is nothing there, but you are crying.”
Stevenson is an expert on the topic of entrepreneurship, and perhaps it’s that frustration that drove him to craft what is in my opinion the best definition of entrepreneurship, one that has been used as a standard by Harvard Business School since the 1980s.
I’d heard it before, but when I came across it again recently, it instantly grabbed hold of my imagination. Here’s Stevenson’s definition:
Entrepreneurship is the pursuit of opportunity beyond resources controlled.
It takes a few readings to sink in. At first glance, it seems to be missing certain things—namely, the starting of companies and the inherent risk.
Merriam-Webster gives a definition that’s closer to what most of us would probably offer the English learner: an entrepreneur is “a person who starts a business and is willing to risk loss in order to make money.”
Pretty basic. The Oxford English Dictionary’s definition is similar, though it doesn’t mention the starting of the business: an entrepreneur is “a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.” The Macmillan English Dictionary offers the most general of them all—“Someone who uses money to start businesses and make business deals”—yet manages to be the least satisfying as well.
Fortunately, Stevenson offers us a definition that’s clearly the result of expertise in the essence of entrepreneurship. “The pursuit of opportunity beyond resources controlled”—some rigorous thought went into the crafting of that phrase.
But what does it mean, exactly?
An article on HBR.org gives a helpful blow-by-blow here, if you’re interested. Perhaps the best way to understand this definition is to look at a contrast Stevenson set up in a 2000 paper, between the strategic orientation of the entrepreneur and the administrator:
In other words, the entrepreneur is anyone who spots an opportunity and decides to pursue it regardless of the resources currently at their disposal. They see what could be and find a way to make it happen, even if they don’t have everything on hand to do so right now. It’s a leap—a risk—but someone has to take such leaps if we want to develop innovative new products, build better organizations, and keep our companies and the larger economy strong and healthy.
Why This Definition Matters
The real beauty of Stevenson’s definition is how it opens up entrepreneurship to anyone, including people we don’t usually think of as entrepreneurs. Entrepreneurship becomes a mindset rather than the caricature we’re used to, of the driven, risk-addicted, type-A serial business-starter.
It's the role of the CEO to make sure that there are plenty of Stevenson-style entrepreneurs in your company. This doesn’t mean you should encourage people to chase wild geese without any thought of the resources it will take. Processes and administration have their place, but they must be balanced by a drive to pursue opportunity creatively.
If one of your managers has a breakthrough idea for a product feature but she tosses it in the wastebasket because there’s no budget, how much is your company potentially missing out on? If a junior employee sees that a certain weekly meeting is needlessly eating up time and frustrating attendees and has an idea for how to eliminate it, do you want him to not pursue his idea just because he’s running low on the resource of authority?
Of course not. When you make the Stevenson brand of entrepreneurship part of the organizational culture, you ensure that people are empowered to take creative initiative when they spot an opportunity. It makes employees’ working days more exhilarating and rewarding, keeps them engaged, and makes your company stronger. This might not have been as necessary back in the days of foreman supervising ditch-diggers, but given the nebulousness of today’s knowledge work, an entrepreneurial bias for opportunity is almost a prerequisite for success.
When we’re using Stevenson’s definition, we can throw out the gimmicky term intrapreneur and call any pursuit of opportunity beyond resources controlled what it is: entrepreneurship.
Khorus supports the development of entrepreneurs within companies—employees who take initiative and pursue opportunity within the bounds of the larger company strategy. To learn more, schedule a demo today!