Entrepreneurship. It’s a term that not only helps define the desire to start a business, but also represents the spirit that keeps a business growing. Every practice owner and manager needs to know how to keep their business fresh. And Pam Danziger, a prolific trend watcher and tracker, is here to help. An internationally recognized expert specializing in consumer insights for marketers, she is president of Unity Marketing̶ —a boutique marketing consulting firm, based in Stevens, PA, which she founded in 1992.

In addition to her work as a respected market researcher and sought-after speaker, Danziger is also a prolific author. Her six book titles include “Why People Buy Things They Don’t Need” and “The Corporateneur Plan,” a book she co-authored with Ken Rohl and Greg Rohl.
 
Business researchers and psychologists have tried to discover the personal qualities and attributes that set individuals up for success as entrepreneurs. The findings would help those with innate entrepreneurial talent to hone their skills and steer others away from pursuing a path at which they are likely to fail.
 
The failure rate is already so high for new enterprises: 20% of small businesses fail within the first year and, by year 10, only about 30% of companies are still open for business. That’s a 70% failure rate, a number that includes those not gifted with the spirit for entrepreneurship.

Cognitive Skills and Success

Notably, researchers have found no entrepreneurial personality type. While age has some correlation with success—people 35 to 64 years old with more work experience have an advantage—not all older entrepreneurs succeed. And entrepreneurs are no different than anybody else in their willingness to take risks or avoid them.
 
So, what’s the difference between those who have an entrepreneurial spirit and those who don’t? Cognitive psychologist Saras Sarasvathy, University of Virginia’s Darden Professor of Business Administration, found that high-performing entrepreneurs display cognitive styles and processes that power their success.
 
She describes the two cognitive processes for which people tend to display a preference:

• The causal reasoning process starts with a “predetermined goal and a given set of means…[It] seeks to identify the optimal—fastest, cheapest, most efficient—alternative to achieve the given goals.”
• The effectual reasoning process does not start with a specific goal in mind but “begins with a given set of means and allows goals to emerge contingently over time.” 

“Causal thinkers are like great generals seeking to conquer fertile lands. Effectual thinkers are like explorers setting out on voyages into uncharted waters,” she explains. Businesses need both types, but effectual thinkers are more likely to succeed at getting a new business off the ground.

An Art and a Science

However, an individual’s cognitive style is not an either/or proposition, Professor Sarasvathy further clarifies. High-performing entrepreneurs use both the causal and effectual modes of thinking, but they tend to prefer the effectual process, which is creative and requires imagination, spontaneity, and risk-taking.
 
Causal thinking may also involve creativity, such as reasoning through alternative ways to achieve a specific goal, but it always focuses on the ultimate goal. Causal thinkers are therefore better suited to more structured corporate environments.
 
Different cognitive styles might be needed at different stages of business, which is why predominantly effectual thinkers might not transition well to later stages of a business where more causal reasoning is required. Effectual thinkers “believe in a yet-to-be-made future that can be shaped substantially by human action,” Professor Sarasvathy says, emphasizing the effectual entrepreneur’s inclination toward action using all the means at hand to determine the ends. It’s the “Fail early, fail often, but always fail forward,” leadership principle espoused by author John C. Maxwell, author of “The 21 Irrefutable Laws of Leadership.”
 
Ken Rohl, founder of a niche luxury kitchen and bath plumbing supply company that he sold to a Fortune 500 organization, credits the ultimate success of his business to his ability to switch seamlessly between the causal and effectual cognitive styles as circumstances demand. He calls it the art and science of business. The effectually powered art involves intuition, flexibility, innovation, and the human touch. The science is organization, process, strategy, and discipline that taps causal thinking.
 
Rohl likes to quote President Dwight D. Eisenhower who said, “Plans are nothing. Planning is everything.” His interpretation? “It’s not the process [i.e., the plan], but doing the process that moves a business forward. And the entrepreneur is responsible for defining the process and building systems that can effectuate the process.”
 
Are you that person in your organization? Have you been able to retain an entrepreneurial spirit as you’ve grown your practice? We hope so.

“High-performing entrepreneurs display cognitive styles and processes that power their success.” —Pam Danziger