The Atlanta Fed recently hosted a Public Affairs Forum on "Advancing Entrepreneurship in America: Building Blocks for Success." The October event featured Wilson Center public policy scholar Amy Wilkinson who is also a senior fellow at Harvard's Kennedy School Center for Business and Government.
Wilkinson shared key insights from her research on high-impact entrepreneurs—founders of fast-growing businesses or social enterprises. She highlighted several aptitudes shared by successful entrepreneurs, including the ability to identify untapped opportunities. Wilkinson also discussed policy changes to foster entrepreneurship and identified several demographic groups that are rich with potential entrepreneurs.
Learn more about Wilkinson's research findings on entrepreneurs.
Public Affairs Forum
October 17, 2012
An interview with Amy Wilkinson, senior fellow, Harvard University, and public policy scholar, Woodrow Wilson International Center for Scholars
Ed English: Welcome to PA Forum. I'm Ed English and today we'll be talking with Amy Wilkinson, a senior fellow at Harvard University and a policy scholar at the Woodrow Wilson Center.
Everyone agrees that entrepreneurship is a good thing for the American economy. Amy has done an extensive amount of research on this subject and she's going to be sharing some of her insights with us today. Amy, welcome, and thank you for joining us from Washington, D.C.
Amy Wilkinson: Thank you very much. I appreciate being with you.
English: Amy, your studies have identified several key characteristics that are common to successful entrepreneurs. What can you tell us about those?
Wilkinson: I've done a multiyear research project on high-impact entrepreneurs. And the definition there is founders of businesses or social enterprises, businesses that have scaled to $100 million in revenue in less than five years, or social enterprises that have scaled to reach 100,000 people in less than five years. And across 250 founders, I can tell you that I believe there are six kind of key aptitudes and they are: one, spotting opportunities that others don't see, that's really finding a gap.
Two, managing speed and complexity in the fast-changing world, and that's driving for daylight as NASCAR drivers do. I know in Atlanta you have Road Atlanta there and plenty of people that can manage speed and complexity.
The third thing I can see is about fast-cycle iteration. So these entrepreneurial founders that really do a good job at scaling continue to observe, orient, decide, and act. That is the OODA loop—observe, orient, decide, and act—but it really is this fast-cycle iteration characteristic on moving forward.
The fourth thing that I see is about failing, and failing wisely, which has been in the past talked about as failing forward, continuing to improvise. I actually think it's slightly different coming out of the recession. I think it's a characteristic where really successful entrepreneurs don't fear failure. They in fact want an imperfect record so they want to set a failure ratio and then really learn to be resilient. That's the fourth characteristic.
The fifth is about networking minds. It's about bringing together people in new and innovative ways. A lot of that is through the Internet but it is also in innovation clusters or hubs in physical locations. It's really bringing brain power and cognitive diversity together.
The last thing that I believe that these high-impact founders do is they gift small goods, which is unleashing generosity in the networked economy. It's a pay-it-forward kind of concept, but they all are helping each other through the exchange of small favors. Those are the six characteristics that I've identified in the research that I've done.
English: Very interesting. What do you see as the biggest barriers to entrepreneurship in America? Is there a silver bullet that could be used to combat them?
Wilkinson: I wish there was a silver bullet. I think if there was a silver bullet we might have already found it. It's a really complex issue and certainly it's an important one. We see in the economy that the data basically show that entrepreneurs, first-time founders, are the job creators. So how does that work? I am always going around saying that we don't need the Small Business Administration, we need the New Business Administration. I'll give two examples of things that can really be addressed to try to help foster entrepreneurship in the United States.
One is to support foreign-born founders, and this gets talked about quite a lot with immigration policy. It's the H-1B visa (high-skilled immigration visa) that many across the entrepreneurship spectrum would like to see increased. And some of the data there, really half of the Fortune 500 companies in the United States have been founded by an immigrant or a child of an immigrant. In Silicon Valley between 1995 and 2005, half of the Silicon Valley companies had a foreign-born founder. Those are companies we know, companies like Google, eBay, Yahoo, and PayPal in that recent period of time. Now, here's the bad news: since 2005 we've actually seen a drop-off, not as many immigrant founders in the United States, not as many immigrants staying in Silicon Valley. We don't want them to be educated by our university system and then be kicked out because they can't extend their visa or to just simply go home to wherever they came from and start companies abroad.
A second thing is really commercializing technologies out of universities. I know Georgia Tech has got a really big office that's doing that. Many of the big research universities do across the country. But we need to commercialize technologies a lot faster. Right now there is legislation that holds up patenting of faculty inventions. Nanotechnology is a sector, for example, that has many, many faculty founders of companies and if they can't commercialize technologies out of universities, we slow down and that process actually hampers the innovation cycle. So, that's one thing.
Another thing related to universities is teaching entrepreneurship across disciplines. And this is starting to happen more and more. But it's experiential learning—the Venture Mentor program out of MIT is a fabulous example to do all of these things that are really important to starting and scaling companies. We really want founders who will go and grow their businesses. It's great to have one- or two-person companies, but in the United States, if we want to create jobs we have to find and foster these high-growth founders. So those are two things that we can do.
English: Your research has identified some things that universities can do to help entrepreneurship. What are some other things that can be done? What's the low-hanging fruit?
Wilkinson: I love to point to the demographic of baby boomers. People don't actually realize that the demographic of people age 55 to 64 is the fastest-growth demographic for first-time entrepreneurs right now in America. So we can help people who are retiring stay in the workforce, we can help them found companies. They, in many cases, have absolutely tremendous skills and experience and are able to do that. There are 76 million baby boomers who are potentially reaching retirement age but could be first-time founders and high-growth founders. So that's one thing.
The Gen Y demographic is the number-two growth demographic and this goes back toward university education and also goes to K through 12 education where we could teach students at even earlier ages to work together in project-based teams. Project-based learning is a big thing that we can foster across the education system.
The statistics there basically show that 40 percent of Gen Y would like to be an entrepreneur. Sixty percent of entrepreneurs in that younger demographic that have started one thing actually will tell you that they believe their career will be to be a serial entrepreneur.
I would say the third is supporting women. Women are half of our workforce certainly, half of the graduates out of graduate school programs, 70 percent of the valedictorians. I always like to say that. Women really have the capabilities to start companies but we aren't seeing it. We can look for ways to help women access capital. We can also look for ways for women to access networks of other people that will help them build products. There is research showing that women have self-perceptions that they're not ready for entrepreneurship, they may just need encouragement. They can work 15 years in an industry and not feel ready to go out and start their own company.
The other thing that I really believe could be helpful, and certainly you see it in a city like Atlanta, is big companies partnering with small companies, big companies partnering with start-ups. There's nothing as a small start-up company like having a big company to partner with because you know they will stay in business, you know they will pay on time. You know that if you can get a contract or you can structure a partnership with a really established company, it helps in your credibility and it helps you scale and grow.
English: Well, Amy, hopefully your research can help promote entrepreneurship in America. Thanks for your time today.
Wilkinson: Thank you very much. I'm very pleased to come to Atlanta and to participate with the Atlanta Federal Reserve Bank. Thanks for the opportunity.
English: Thank you for joining us on PA Forum. You can see this video and other videos on our website at www.frbatlanta.org.