The Four Stages of Entrepreneurship from Jim Collins

 Jim Collins is interviewed in the April 2009 issue of Inc. magazine and uncovers many ideas about how to thrive in the present marketplace. He contends that we have entered an era where entrepreneurs will move even farther to the forefront because they are the people most capable of handling risk and ambiguity. Collins also suggests that entrepreneurship has progressed through three stages over the past 30 years, and is about to move into a fourth stage that may change the way we think about doing business.

Stage I – Have a Great Idea

In the 1970s, entrepreneurs were fringe people with unique ideas and approaches that few others understood. They were the tinkerers and radicals who thought about the world in a different way than the rest of us. Entrepreneurs profited from building the better mousetrap and the rest of us bought their products and ideas.

Stage II – Build a Business

The better mousetraps led to successful businesses. Entrepreneurs used their product creation capability to build businesses that supplied and supported those products. The ability to create new products and organize around those successes made entrepreneurial businesses grow and thrive during Stage II.

Stage III – Build a Great Company

Somewhere in the 1990s, entrepreneurs shifted again, into Stage III, and began building great companies. They shifted away from building a better mousetrap into developing better processes around a strong brand. Great companies understand that there are plenty of better mousetraps out there and that it is the way those mousetraps are brought to market and used that creates value. In Stage II, entrepreneurs created a successful business. In Stage III, great companies create multiple successful businesses.

Stage IV – Start a Great Movement

Stage IV is just beginning to emerge. Entrepreneurs are starting to build things that are bigger than great companies. Customers become part of the business and the business aims at a goal that will transform people, which in turn will transform the company. Collins sites Wendy Koop and her Teach for America initiative as a prime example. She had a great idea, that turned into a business, that built a great company, and now her ideas and momentum have engaged people in ways that are likely to transform education. Koop started a movement that excites and engages people.

Thirty years ago, CEOs had power. They could use that power to drive large organizations forward. Web 2.0 and other social networks have eroded that power and diffused it among many people. Now, CEOs power has been exchanged for influence. Using that influence is the only way to reach people with the power to help companies reach their objectives. Mobilizing those people requires an engaging movement and the use of influence usually only seen in social organizations.

If this is the case and serves as the model for future successful businesses, what does that mean for our current models and current leadership? It means we will need to aim higher to create goals worthy of a movement, communicate those goals consistently and tirelessly, and accept the need to allow our customers impact the day-to-day operation of our organizations.

Are we ready for this? Are you ready for this?


1 Response to “The Four Stages of Entrepreneurship from Jim Collins”

  1. 1 mrsedison
    April 24, 2009 at 4:46 pm

    This is great, Buckley…thanks for this insightful summary.

    Thinking about the last paragraph of your blog entry…”What does this mean for our current models and current leadership?”…I believe it means that we need to be fostering entrepreneurialism and creativity (ie creative approaches to problem-solving) at a much earlier age than we do now. One place to begin might be to create Arts and Sciences curricula in middle school that bring students through what it takes to pioneer something new…what it takes for an artist to come up with a new style of painting (Picasso, Monet)…or for an author to develop a new genre of literature (Jules Verne, Emily Bronte)…or for a musician to pioneer a new kind of music (John Cage, Aaron Copeland).

    In high school, this builds out into larger initiatives that look at the great American inventors and entrepreneurs of our country (Franklin, Jefferson, Edison, Land, Carnegie, Geoffrey Moore, Jobs, Bill Hewlett and David Packard) etc. Social innovators like Mohammed Yunus would be leaders of the Level 4 pack. It’s critical to train young entrepreneurs to use their “right brain” and not just their “left brain.” This type of approach would help America deliver inspirational, entrepreneurial leaders who understand what vision means, and are not just driven by an obsession with short term profits and the bottom line.

    That’s my story, and I’m sticking to it. 🙂 -Mrs. Edison

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