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Professor Stuart Read unveils research study findings on the way entrepreneurs make decisions

September 2008

What have expert entrepreneurs learned about making decisions in the uncertain setting of new venture creation? IMD Professor Stuart Read has come up with an answer to this question based on a six-year research project which involved interviewing hundreds of participants and working with faculty around the world.

“We have concluded that expert entrepreneurs have learned something unique – something that other business people have not,” stated Professor Read, who is also the Dean of Research, Development and Publishing at IMD. “So much so, that compared with the approaches common to novice business people, or expert corporate managers, expert entrepreneurs completely invert many aspects of both the uncertain problem and the solution to the problem.”

Professor Read’s conclusion is based on an experiment which involved presenting a fictional company to three groups of participants: expert entrepreneurs, novices and corporate managers.

The participants were asked to answer a set of questions pertaining to the development of an initial market for this product and were asked to think aloud continuously during the task. Their protocols were collected on tape and transcribed for coding and analysis.

Professor Read also found that expert entrepreneurs:

  • Start taking action based on what they know, whom they know and the resources they have available.
  • Evaluate opportunities based on whether the downside risk is acceptable, rather than on the attractiveness of the predicted upside.
  • Seek out partnerships with people and firms willing to make a commitment to jointly creating the product, service, firm or market with them.
  • Embrace surprises that arise from uncertain situations, remaining flexible rather than committed to existing goals.
  • With these principles, focus on activities where they know their actions will result in an outcome they find attractive. It may not be the highest potential option, but it must be one they can control.

In general, expert entrepreneurs successfully effect the transformation of uncertain situations into new products, services, firms and markets and the differences are evident both in how they make core decisions, and also in their approach to specific elements of the business such as price and place. The central implication of Professor Read’s study for managers in start-ups, established companies and multinational firms is clear: In uncertain situations, opportunities cannot be found through search, analysis and selection, but instead are co-created in collaboration with partners, customers and stakeholders.

Learn more about Professor Read's findings:

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