Sharpen Your Skills

Sharpening Your Skills (from HBS Working Knowledge) brings together articles on ways to improve your business skills.

Questions to be answered:
Should I keep control of my company?
How do I turn potential into profit?
How can a resource-challenged start-up grow?
What legal mistakes should I watch out for in starting a new company?
Should I keep control of my company?

Rich or Royal: What Do Founders Want? It's a fundamental tension many entrepreneurs face, the conflict between wanting to become rich and wanting to keep control of their new company. Few can have both. Professor Noam Wasserman discusses his research into the motivations of entrepreneurs and the people who invest in them.

Key concepts include:

Entrepreneurs are often motivated by the potential of money and control, but very few ever achieve both.

A fundamental tension between "rich and regal" starts to develop as entrepreneurs look to attract resources to grow their ventures.

Investors need to understand the motivations of the entrepreneurs they back to make sure their goals are aligned.

How do I turn potential into profit?
Turning High Potential into Real Reward Transforming high-potential ventures into high-performance ventures, says professor Joseph Lassiter, depends on combining what, how, and who you know.

Key concepts include:

Successful entrepreneurs look ahead and say, "Two or three years from now, this is exactly the customer and exactly the product, and this is exactly why they're going to be compelled to buy."

A key issue is who do you do business with initially who lets the venture start moving down the "right" product road map?

Turning high-potential ventures into high-performance ventures is always an elegant combination of know what, know-how, and know who!

How can a resource-challenged start-up grow?
How Can Start-Ups Grow? For new ventures a lack of resources makes growth difficult to come by—just ask those nine out of ten fledgling firms that fail. Professor Mukti Khaire says the key may be in acquiring intangible resources such as legitimacy, status, and reputation.

Key concepts include:

Small companies can grow by developing intangible social resources such as legitimacy, status, and reputation.

In some cases the location of a new venture is a critical facilitator of success because of the symbolic benefits offered by an office address that is legitimate in the minds of stakeholders.

Firms have to work at maintaining their status in the hierarchy, while legitimacy is a critical issue only in the early stages of firms' lives.

For new firms in established industries, there is value to doing some nontechnical, symbolic things in the manner that is widely accepted and to adhering to industry norms and culture.

What legal mistakes should I watch out for in starting a new company?
Top Ten Legal Mistakes Made by Entrepreneurs The life of a startup can be precarious, a wrong turn disastrous. Harvard Business School professor Constance Bagley discusses the most frequent legal flops made by entrepreneurs, everything from hiring the wrong lawyer to puffing up the business plan.

Key concepts include:

Entrepreneurs tend to delegate too much to the lawyers.

Lawyers are risk averse; delegating to them can often compromise business objectives.


St. Francis Hospital Implosion

To make say for the new Pittsburgh Penguins arena, old St. Francis Hospital bit the dust on Saturday. Here is a video of the implosion from StartPoint Media


Overconfidence in Sheep's Clothing

"What else can psychology tell us about running a business?

"One example... [is] 'the illusion of validity.' This is the sense that you have that you understand somebody and you can predict how they will behave. The reason I call this the illusion of validity is that we knew from the statistics that we were actually not able to predict how people would behave...That's a very important illusion--this illusion of validity. In many different forms, it has big implications.

"Such as?

"One of the versions of it is called overconfidence: People assign much higher probability to the truth of their opinions than is warranted. It's one of the reasons people trade so much in the market, generally with bad results. [Another example is people] exaggerate their confidence in their plans--something we call the planning fallacy.... The existence of the plan tends to induce overconfidence.

"But isn't confidence a good thing?

"It's a wonderful thing to be optimistic. It keeps you healthy and it keeps you resilient. But I personally would not want my financial adviser to be optimistic; I'd like him to be as realistic as possible. There are contexts where optimism helps. Generally where it helps is in executing plans. It keeps you on track. It gives you energy to overcome obstacles....

"In many cases, what looks like risk-taking is not courage at all, it's just unrealistic optimism. Courage is willingness to take the risk once you know the odds. Optimistic overconfidence means you are taking the risk because you don't know the odds. It's a big difference."

Read more in this inteview with Nobel Laureate Daniel Kahneman.