Authr: Amar Bhide
Backstory:
For The Origin and Evolution of New Businesses, Amar Bhidé, a professor at Columbia University’s Graduate School of Business, spent more than 10 years researching hundreds of successful entrepreneurial ventures from the pre-dotcom era. Bhidé had earned an M.B.A. from Harvard but failed twice as an entrepreneur himself. After a five-year stint working for McKinsey, he joined the Harvard Business School faculty in 1988 to teach a course in entrepreneurship. It was there that he discovered an apparent lack of available research on small businesses, which prompted him to compile a textbook-quality study of the field. It will take a scholar’s aptitude and patience to digest the fruits of his labor—summer beach reading this is not.
Total reading time: 1,800 to 2,400 minutes
First published: 2000
Key passages:
“Over the past half-century, business schools have devoted considerable resources to studying the entrepreneurial activities of large companies—how 
Merck develops new drugs and Intel new microprocessors, how Disney produces and markets The Little Mermaid and McDonald’s introduces Big Macs in China. Little effort has been devoted to systematic research about starting and growing new businesses.”
“Entrepreneurs who start and build new businesses are more celebrated than studied.”
“Most entrepreneurs start their businesses by copying or slightly modifying someone else’s idea. They also usually don’t have deep managerial or industry experience.”
“Overall, the reality of bootstrapped businesses does not bear out the popular image of an entrepreneur as an irrational, overconfident risk-seeker. Quite the contrary. Entrepreneurs can pursue ‘heads I won, tails I don’t lose much’ opportunities because they are less prone than average to irrational ambiguity aversion and they have a talent for exploiting the cognitive biases and defects of other individuals. They require exceptional self-control; they may have to tolerate difficult customers with unreasonable demands and focus on winning orders rather than arguments.”
“By coincidence, our interviewees, the founders of Attronica Computers and Bohdan Associates, had both started their businesses in 1983 about 10 miles away from each other. Both evolved into companies that distributed computers to corporate customers. Attronica’s founders, who had worked together in a large telecommunications company, had decided after extensive market research and planning to purchase a franchise from a computer retail chain for $150,000. After that and other attempts to serve the retail market failed, Attronica developed, through trial and error, into a company serving corporate and government accounts. In 1988 the company had revenues of about $8.1 million. Bohdan’s founder, in contrast, started selling computers out of his home by accident -- he placed an ad to sell his used computer and was surprised by the demand. Simply by ‘reacting’ to his customers, Bohdan grew to a $48 million revenue business by 1988.”
Synopsis:
At least one thing is clear after reading Amar Bhidé’s exhaustively researched book, The Origin and Evolution of New Businesses: Everything you thought about entrepreneurship is probably wrong. Spurred on by what he saw as a lack of understanding of what makes startups successful, Bhidé spent 10 years researching and interviewing the founders of some of the fastest-growing private companies in the country, using the firms named to the Inc. 500 list in 1989 as his base. The results are surprising. Ironically, Bhidé’s book, published in the throes of the dotcom era, blasts many of the notions made popular by the so-called internet millionaires, such as the Silicon Valley stereotype that risk-loving dynamos armed with business plans and backed by a fleet of deep-pocketed venture capitalists create the most successful startups. Bhidé disagrees. He argues that the most successful entrepreneurs usually just copy someone else’s idea—often something the company they work for is already doing—risking little capital in the process. One example: John Katzman, founder of the Princeton Review, started his company after teaching S.A.T. preparation classes at Hunter College in New York City. Over time he differentiated his service by reducing the size of his classes and offering more computer support. “Successful startups usually do not involve a blockbuster innovation,” Bhidé writes. “The entrepreneur’s ability to recognize the promise of someone else’s idea, and to show resourcefulness and ingenuity in solving the problems of its implementation, provide sufficient bases for success.” And unlike a select few examples, such as Bill Gates, most entrepreneurs don’t set out to build multibillion-dollar companies, nor do they “need to have exceptional charm, magnetism, or a capacity to inspire devotion.”
Microsoft, Hewlett-Packard, and Wal-Mart and become tomorrow’s large corporations. “Few new ventures attain significant longevity and size, because only a very small number of individuals have the willingness and the capacity to both start and build a business.” To build a business for the ages, in other words, you need to be one in a million.
