Friday, May 22, 2009

Entrepreneurs & Success -- Past Performance DOES Matter ... A Lot

A new detailed study by the Harvard Business School concludes that, for entrepreneurs, past performance IS the best predictor of future success.  In other words, "success breeds success in startups."  Click here for the report's abstract.  And, click here for the full report.

In the words of the report:

"We show that entrepreneurs with a track record of success are much more likely to succeed than first-time entrepreneurs and those who have previously failed. In particular, they exhibit persistence in selecting the right industry and time to start new ventures." 

The study found that entrepreneurs who had experienced success at earlier startups had a 30% chance of succeeding in subsequent endeavors, whereas first-time entrepreneurs had only an 18% success rate.  And, the study further debunked what it calls the "popular Silicon Valley myth" that entrepreneurs who had previously failed were more likely to succeed in future ventures because they learned from past mistakes.  According to the report, the success rate for those entrepreneurs with startup failures in the past were just about as likely to fail again as first-time entrepreneurs (the chances of failure being around 80%).

Bottom line conclusions: "previous performance is the best predictor of an entrepreneur's success or failure in future ventures."  In other words, experience with success matters ... a lot.  

And, for the entrepreneur, what are the critical ingredients of initial success in the first place (in order to beget future success)?  

No question about it -- market timing is one critical piece -- having a right idea at the right time (notice how I say "A" right idea, rather than "THE" right idea, because there can be several "right" ideas at the same time).  In the words of the report:

"Entrepreneurs with demonstrated market timing skill are also more likely to outperform industry peers in their subsequent ventures. This is consistent with the view that if suppliers and customers perceive the entrepreneur to have market timing skill, and is therefore more likely to succeed, they will be more willing to commit resources to the firm."

But, is timing really everything?  Of course not.  It is a necessary ingredient, but not sufficient.  The entrepreneur must be skilled and creative, of course.  That goes without saying.  But, good old-fashioned hard work and tenacity (what the report calls "persistence") also are critical elements, not only for the entrepreneur himself or herself, but also for the team with which he or she surrounds himself or herself.

An amazing book that discusses all these elements as predictors of success -- including the good fortune of timing, hard work and tenacity -- is "Outliers" by Malcolm Gladwell (the author who also wrote "The Tipping Point" and "Blink").  "Outliers" will change the way you look at success.  Not only about success in business.  But also about success in just about everything in our lives.

Run, don't walk, to get it and read it.