Many people thinking of starting their own business are faced with the question; is the entrepreneur or the idea more important?
In a recent series of papers in academic journals, this is referred to as the horse (idea) and jockey (entrepreneur) debate. The analogy is an interesting one, as it emphasizes that both are critical to win a race, while noting that a good jockey can ride other horses, and vice versa, but it is the combination of the two that leads to long-term success.
As with all analogies, such a comparison has its limitations, as it ignores the evolutionary nature of the entrepreneurial process. The relative importance of both idea and entrepreneur requires an overview of the venture creation process, which leads to different relationships between the entrepreneur and the venture over time.
The first stage in the venture creation process is ideation, where the entrepreneur identifies a new opportunity. This is a fundamental requirement for most entrepreneurs as an entrepreneur is defined as someone who identifies opportunities – usually where others do not. At this stage, the key is the entrepreneur who must generate the idea. At the next stage of the venture creation process, the entrepreneur has to assemble the resources for success. It is at this stage that the idea becomes more important. This is because, to attract the resources necessary for success, the requirements of the business must be clear, and something potential partners can relate to. In addition, the nature of the business is critical, as potential partners need to see the financial benefit of engaging with that venture, either as customers, employees, suppliers or investors.
At the next stage, the entrepreneur becomes more important, due to the challenges of turning the business plan, and managing the earliest stage of the business. Unfortunately, many of the entrepreneurs who have developed a great idea, do not have the ability or the experience to be successful at this subsequent stage of venture development. As the venture grows, the successful entrepreneur will look to attract external financing, and while their own experience may provide a level of confidence in the investment decision, the potential investor will likely first consider the business, and whether it is likely to succeed and provide a reasonable rate of return. Once the investor has determined this, they will then look at the entrepreneur, and see if they have both the cognitive abilities and character traits, both to lead the business and form a partnership.
Finally, there is usually a point in time when the entrepreneur outgrows the venture or the venture outgrows the entrepreneur. Entrepreneurs outgrow the venture when the need for their creative skills and informal relationship is no longer essential, and where the challenges are no longer there. In most cases, these serial entrepreneurs will leave to create other ventures. Equally, ventures often outgrow their founding entrepreneurs, as they require knowledge, experience and more formal management processes, which the entrepreneur is not equipped to provide. At this point, the board or outside investors will often identify the need for a new CEO.
The lessons for entrepreneurs are important; know and understand your strengths and limitations and manage ventures through the phases in their development, where you can be successful. Failure to realize your own limitations can lead to poor venture performance and frustrated entrepreneurs.
Andy is currently working at the Canadian Innovation Centre and pursuing a Ph.D. in the area of new venture creation at the University of Waterloo. In his spare time, he enjoys teaching technology entrepreneurship at UTM and the University of Waterloo.