The Entrepreneurial Mindset: Strategies for Continuously Creating Opportunity in an Age of Uncertainty (Hardcover)

For one thing, it is not about entrepreneurs. In fact, the cast of characters is dominated by managers in relatively large organizations. Nor is it about the kinds of coalition-building activities that Gifford Pinchot described in Intrapreneuring (although the topic of political obstacles is addressed). What it is about is strategic innovation. It is a detailed description of an elaborate and exhaustive process for rationally generating (and choosing among) strategic alternatives in the face of uncertainty. This is not a process that the authors have observed while studying entrepreneurs. It is, rather, a description of the tools the authors have developed to work with management teams in established firms to discern original responses to business challenges. Said another way, the book has to do with the process of discovering new things to do - things for which there are no precedents and about which there is very limited data/information - in established businesses.

In some respects, this book constitutes a synthesis (and an impressive one) of themes that have been at work in the strategy literature in recent years. The majority of these themes reflect concerns about how to respond to a business environment in which products rapidly become commodities and (therefore) in which new options are much more strategic hypotheses to be investigated than they are plans to be formalized and funded. Much of the authors' attention is devoted to unearthing new hypotheses from the available data and sorting through them to settle on future courses of action.

The Entrepreneurial Mindset, while easy to read, is not a light narrative by any means. It is, at base, a technical book about a specific approach to strategy development and implementation. It views strategy first as a creative activity and then as a resource allocation problem that terminates in resource allocation decisions first to classes of opportunities and then to specific projects. The search for options ("opportunities" in their terms) occurs at the product/market segment level, not at the business level. Areas considered in search of novel approaches include product features, delivering more value at specific stages of the so-called Consumption Chain, market resegmentation, and radical redesign of the value chain.

There are a few cases in which the authors' actual practice around a task or topic does not become clear until 20 pages or so after their initial presentation of it. Thus, it is hard to derive full value from this material without taking detailed notes and without giving it a second read. (The authors themselves seem to anticipate the need for a twice-through reading, advising us on several occasions that it is OK to skip the next section if this is the first time you've read the book.)

There are none of the traditional "soft" tools of strategy to be found here - no mission statements, value disciplines, driving forces, or what have you. While the book does deal with "Building Breakthrough Competences" in Chapter 8, the approach presented revolves around identifying how to excel on one or more core performance metrics rather than with respect to specific sorts of skills and activity groupings that Hamel & Prahalad adherents have grown used to. Therefore, people whose primary interest is in enunciating over-all themes and affecting corporate culture will not find wisdom on their principal needs here.

As mentioned above, the book incorporates the insights of other researchers - carefully documented in an extensive (and useful) bibliography. Happily, some of the most intriguing of MacMillan's own published ideas have found a place in the process. Other "connections" include:

Pascal, Managing on the Edge - Honda's Five Why's; Wheelwright & Clark, Revolutionizing Product Development - "Types" of development plans; Slywotsky, Profit Patterns - Business model redesign as a strategic response; Porter, "What is Strategy?" in On Competition - Model redesign and unique activities; Brown and Eisenhardt, Competing on the Edge - The idea of "probes."

The list could go on.

Finally, the strategy professional will be pleased with the checklists and questions (called "quizzes") that the authors provide. Some of the very best of these, in my opinion, are:

Sample Questions on Buyer Behavior (pp. 51-52); Is There Potential For Radical Reconfiguration of the Current Business Model? (p. 96); Assessing Market Uncertainty (p. 174); Assessing Technical Uncertainty (p.175); Sources of Competitive Insulation (p.190-191).

In addition, there are many templates to for "mapping" strategies that are quite useful. The notion of "leading indicators" of project progress is a marvelous idea - reminiscent of the principles that Norton and Kaplan have enunciated in their various writings on leading and lagging performance metrics and the Balanced Scorecard.

As a strategy professional, I must admit to one basic reservation about the process described in this book. I cannot imagine how to get a group of busy managers to take the time to do all of these steps in this quantity of detail. There is no doubt in my mind that The Entrepreneurial Mindset presents an ideal way of going about strategy development and selection at the business level. In fairness, the authors point out many cases in which one should modify the process to reflect local custom. Even then - in the absence of some extreme strategic crisis - maintaining interest in and motivation around so exhaustive and elaborate a process rates to be a huge challenge.

The bottom line - It's a relatively technical book aimed at those responsible for strategy development at any level. It does a wonderful job of laying out the details of an exciting process through project implementation. It's a "must read" book because it integrates many current ideas and techniques so well. It's a two-read book. (Actually, I'm on my third time through at the moment.) But it's well worth it.

Bob Nickels 01/15/01

McGrath and MacMillan suggest entrepreneurs view their endeavors as a portfolio of options. Entrepreneurs create "opportunity portfolios." Each option is pursued or abandoned as conditions warrant and resources allow. Habitual entrepreneurs ruthlessly weed out unprofitable endeavors and are willing to move in new directions. They should also map out their projects to be sure they aren't trying to do too much.

McGrath and MacMillan tell us that the goal is to learn as you go and effectively convert assumptions to knowledge at low cost. For example, via Stepping-Stone Options, McGrath and MacMillan write: "You start with small, exploratory forays into less challenging market niches and use the experiences gained there as steppingstones to build competencies in increasingly challenging and attractive market arenas that you discover as you go."

"The Entrepreneurial Mindset" gives the example of The Kyocera Company, which entered the industrial ceramics business by focusing upon lower-end, niche-based, ceramic products, such as ceramic scissor blades. Using the knowledge of ceramics acquired making scissor blades, the company successfully moved into more profitable ceramic markets, such as semiconductor-chip substrates. This moving-ahead-as-you-learn-and-learn-as-you-move-ahead is a key to becoming a successful entrepreneur.

The authors highly recommend the use of key ratios to benchmark company performance. They give a great example with G.E. Financial Services (another ultra-small start-up :)). Something must happen to improve your ratios. McGrath and MacMillan define this "something" as "entrepreneurial insight." Entrepreneurial insight is the crucial ingredient behind entrepreneurial success. Entrepreneurial insight is seeing something about an industry or a market that others miss or fail to understand and finding a way to convert that knowledge into a powerful market position.

The authors astutely observe that while it is relatively easy to reverse-engineer a product, products bundled with services are much more difficult for competitors to replicate. McGrath and MacMillan strongly emphasize carefully examining the features of your own products and services.

McGrath and MacMillan describe the process of "attribute mapping," which divides a product's features into the customer's perception of the desirability of the feature. Attributes could range from "nonnegotiables" (features expected by the customers) through "differentiators" (features that positively differentiate your product from the competition) and "exciters" (features customers find positively delightful) to "tolerables" (features not really liked, but not hated either) and "enragers" (features customers absolutely hate, fear, or despise).

Enragers must be eliminated, while exciters to drive customer purchasing should be sought. McGrath and MacMillan point out that there is no definite correlation between the expense of creating a feature and the customer's perception of its value. They write, "Exciters are often technically simple, relatively low-cost advances that greatly add to the offering's convenience or ease of use." And, many features that are quite costly often go unappreciated by the customer. I found this section about "attribute mapping" useful.

Learning how consumers contemplate, select, use, and dispose of a company's products is another major focus of "The Entrepreneurial Mindset." Via such "consumption chain analysis," entrepreneurs can find ways to positively differentiate their products from the competition. Great ideas here.

I found some of the lists and worksheets a bit tedious (but useful). And, some of the writing was a bit formal and the book slows down in some places. For example, when discussing "stratification mapping." Yawn. Why stratify? Why not just break your company's revenue and profits down by endeavor or product? I see no value in lumping the different sources of revenue together to create a "strata," i.e. a lumpy mess in my view. In that section, the authors formally write that Pfizer's Viagra creates "a highly attractive structure of demand." Say what? Couldn't they just write, "There are a lot of people who might want to buy it." ?

If you want to understand how other entrepreneurs think and how companies achieve market superiority, you will definitely want to read "The Entrepreneurial Mindset." There is a lot to be learned from this excellent book.

Peter Hupalo, Author of "Thinking Like An Entrepreneur."