Objectivity: A Guiding

Principle of Entrepreneurship
Prepared and written by Elizabeth Thornton,
Babson College and Boston University

part

Copyright Houghton Mifflin Company.

Foreword
Entrepreneurship is defined as a mindset, a way of viewing the world, a way of
thinking, and a way of acting. Interestingly, the more we try to understand this
mindsetthose personal characteristics, mental models, beliefs and tendencies
the more elusive it becomes. Over the last two decades, there have been numerous studies and many theories about what it takes to be a successful entrepreneur.
Some suggest that just like in the movie Top Gun, there are only a handful of exceptionally talented people who can make it as an entrepreneur. Others conclude
that in order to be successful as an entrepreneur, business ownership must run in
the family, that you have to be raised by an entrepreneur. Still other theories postulate that a person must be born with this entrepreneurial mindset. None of
these theories really hold water.
A better place to start is by clearly understanding the nature of the entrepreneurial process and the realities of starting and managing a business. From this understanding, we can begin to identify the personal characteristics and behaviors
that can help a person be effective in an entrepreneurial environment. Fortunately,
there seems to be a consensus among the stakeholders of entrepreneurshipthe
entrepreneurs, investors, venture capitalists, and business advisorsabout the
realities of entrepreneurship. Words like dynamic, chaotic, unpredictable, risky, exciting, fluid, ambiguous, and intuitive are often used to describe the nature of the
entrepreneurial process. These stakeholders also conclude that given these realities, the success of an entrepreneurial venture greatly depends on the skills, attributes and behavior of the founder, the lead entrepreneur, the individual person. It
is the person who decides that he or she wants to be an entrepreneur. It is the person who identifies and evaluates the opportunity. It is the person who puts together

2
a team of people to leverage the opportunity and manages the venture day-to-day.
Therefore, the stakeholders have determined that given the realities of the entrepreneurial process, to be a successful entrepreneur, the person should possess the following
core attributes:

Passion
Perseverance and commitment
Ability to handle uncertainty
Sound judgment and right action

As the entrepreneurial process is centered on the entrepreneur, it is important to

recognize that the entrepreneur is a person, first, dealing with the realities of everyday
living. Underlying these core attributes for handling the reality of entrepreneurship is
an ability or lack thereof to effectively deal with the realities of life. Can a person be
unsuccessful in life yet successful as an entrepreneur? To embark on the dynamic and
unpredictable path of entrepreneurship, the person must be grounded in the guiding
principle for intelligent living, or what one could call the principle of objectivity. The
guiding principle of objectivity provides the foundation for managing the realities of
life as well as the entrepreneurial process. The premise of this module is to introduce
the principle of objectivity as a fundamental requirement for successful entrepreneurs.
We will illustrate how objectivity provides the framework for entrepreneurs to consistently overcome challenges, deal with uncertainty, make good decisions, and ultimately increase their chances for success.
To do this, we will start with a basic definition of objectivity. We will immediately
recognize that as human beings, we rarely relate to the people in our lives or the circumstances of our lives objectively. Rather, our default position is subjectivity. We will
analyze several extreme cases of subjectivity to illustrate how familiar we are with our
tendency to be subjective and how costly it can be. In the next section, we will introduce a framework for increasing objectivity in our lives that can be applied to our relationships, our jobs, and our businesses. We will then apply this framework to one of
the most challenging activities in life, entrepreneurship, and will empower entrepreneurs with the framework, knowledge, and tools they need to be successful.

Copyright Houghton Mifflin Company.

Part 1 Foreword

part

The Principle of Objectivity

The dictionary has three meanings for the word objectivity:

1. The state or quality of being objective;
2. External reality; and
3. A judgment based on observable phenomena and uninfluenced by emotions or
personal prejudices.
Objectivity means recognizing what is without subjectivity. Objectivity is not projecting our own interpretation of a fact, or what is, based on our experiences, background, culture, fears, and the various colors through which we see the world. To be
objective is to recognize what is. Objectivity empowers us to live intelligently. Objectivity allows us to discern what is appropriate, what is right and proper, and to actually do it, every day, every time. Objectivity empowers us to intelligently handle
conflict, stress, and feelings of fear, shame, and guilt. Mastering the power of objectivity allows us to live our lives intelligently and successfully.
The challenge is that as human beings, as people, we are all subjective about the way
we deal with our lives, the way we deal with what is, the way we deal with reality.

Cases of Subjectivity
Copyright Houghton Mifflin Company.

The following situations illustrate how easy it is to be subjective.

Case #1The boss and the nod

Does this simple situation sound at all familiar? Put yourself in Jims shoes:
Jim has been in his new job for six months. He has always been conscientious and
hardworking. He is considered to be on the fast track. Every morning around 7:45
A.M., Scott, Jims boss, passes by Jims desk with a warm and boisterous Good morning, Jim. But one day, Scott walks by Jims desk and just nods. What is Jim to think?
How should he respond?

4
Jim responds like this:
1. Scott is angry with me for something that I did that Im not aware of, and as a
result he will probably cut my bonus in half this year. This means that I wont
be able to buy my little boy the new toy he wants or my wife the new coat she
needs. This is a disaster because theyre already mad at me for spending too
much time at the office. Jim panics, runs into Scotts office, and asks,
Are you mad at me? What did I do wrong?
Or, Jim responds this way:
2. Scott has been told by his boss that he has to reduce headcount. Ive only been
with the company for six months. Im the employee in the department with the
least tenure, so Scott has no choice but to fire me. He didnt say hello because he
feels bad about it. Im about to lose my job, which means not only no toy for
my son and no coat for my wife, but now Ill lose my family because theyll
leave me if I can no longer support them. So now Jim is dangling off the cliff of
subjectivity and runs into Scotts office and asks, Are there going to be layoffs
soon? Am I on the list?
Sound extreme? Maybe. Now step into the shoes of a student at a tough university.
Case #2The student and class participation
Susan is a student at a university. Class participation is 30 percent of her grade. Susan
has been shy ever since grade school, when she froze while reciting the Emancipation
Proclamation. Now she hates speaking up in class and is horrified when the professor
even looks in her direction. One day around mid semester, Professor Simmons raises the
issue of class participation and reports that a few students are not doing well in this area.
What is going through Susans mind at this time? What will she do?
1. Oh no! Ill have to get an A on everything else I do to offset the F Im surely
going to get for class participation. Okay, well, let me get out my calculator and
figure that out. A 4.0 times 70% + 0 times 30% is 2.8, best case. Thats less than
a B and this is a four-credit course. Thats going to bring my grade point average
down and I might not be able to get into grad school. Its so competitive out
there. I wont be able to get a job and Ill end up living with my parents for the
rest of my life. Oh no!
It can get even worse for Susan, she could be thinking:
2. I know I should go and talk to Professor Simmons but if I do, she will make me
participate. Right now, every time Professor Simmons looks at me, I put my
head down to avoid eye contact at all costs. But now she is going to cold call on
me. I wont be prepared. Ill stutter. Ill sound like a total idiot and everyone will
laugh at me. Even if I do speak up, Ill still get an F because what I say will be
worthless. Rumors will fly around school about how stupid I am and Ill end up
having to transfer! Oh no!
Unfortunately, both of these subjective responses are very real in academia today.
Here is an example of how we can be subjective in our relationships. Imagine you are
this person:
Case #3The couple
Patricia and Sam have been dating for 4 months. Things are wonderful; they have so
much in common. A match made in heaven. Every morning around 8:00 A.M., on his
way to work, Sam calls Patricia to wish her a good day and to tell her that he loves her.

Copyright Houghton Mifflin Company.

Part 2 The Principle of Objectivity

5
Have a good day sweetheart, I love you is the morning sign-off. One morning Sam
doesnt call Patricia on the way to work. It is 9:00 A.M., Patricia is at work and, naturally,
she is quite concerned that she has not heard from Sam. She is worried that something
awful has happened to him, such as a car accident or something even worse. Finally,
around 9:30 A.M., Sam calls Patricia and apologizes for not calling her earlier. He seems
a little distant. He wishes her a good day and says that he will call her later.
If you are Patricia, you really have two ways to think about this situation:
1. Sam did not say I love you so obviously he is seeing someone else. While Im
sitting here wondering whether he is on the side of the road hurt somewhere, he
was got to work late because he was out late with someone new. I do think he
cared for me, but he probably fell in love unexpectedly with this person and is
now afraid of hurting my feelings. He knows how much I care for him so he
wont want to tell me at work because he knows that Ill be too upset. I think Ill
call him back, let him off the hook and tell him that I think we should start
seeing other people.
Here is a more objective response to the situation:
2. There must be something going on with Sam. I trust him, he trusts me, and we
both trust our relationship. I just hope everything is okay. I am sure he will call
me when he is able to talk and I hope that I can help him in some way.
How would you react in this situation?
Case #4The entrepreneur and the international supplier

Copyright Houghton Mifflin Company.

Cathy is an entrepreneur who is very excited about a new opportunity to import an

excellent product from a country that has just restored its trade relationship with the
United States. She knows that as a woman business owner, her biggest risk will be the relationship with the foreign supplier, as it is not accustomed to doing business with
women, in its own country or abroad. The stakes are high. Cathy has committed everything she has to the venture, she is all in. Both governments appear interested in the venture being successful. Cathy has proven the products appeal in the U.S. market, and
investors are interested. One day, at the official launch of the product at the U.S.
Embassy for that country, the ambassador pulls Cathy aside and says, Old habits and
ways of doing business still prevail. Watch out, this is a new era for this country; the supplier may not honor your relationship in spite of your legal distribution agreement.
Clearly understanding the risk of the relationship with the supplier of the product, Cathys thought process is as follows:
Our company is responsible for navigating U.S. Customs and the FDA labeling
process for the supplier to gain access to the U.S. market. We are 75 percent of U.S.
sales so far, poised with commitments from new distribution channels. The supplier
would never hurt their number one distributor. That makes no sense! Cathy continued her effort to expand distribution in the United States in spite of the warning.
Was this a subjective or objective analysis of the facts at that time?
What would you have done?
Case # 5The Corporate CEO
Stephan Connor is the CEO of a large technology company called Personal Technologies, Inc. (PTI), which sells integrated personal technology products. PTI has
been experiencing rapid growth over the last 5 years, with 60% market share and a
75% increase in stock price. The PTI product line is highly differentiated and is supported by strong brand awareness. A new technology has emerged in the marketplace
that makes the technology upon which the PTI product is based obsolete. This new

Objectivity: A Guiding
Principle of Entrepreneurship

6
technology is creating a stronger value proposition for the customer at a slightly
higher price than the PTI product. The CEO has to decide whether to invest in this
new technology or to stay the course. The CEOs response is:
1. No one is going to spend more money on that functionality, and it will be a
hassle for the customers to switch over all their stored data to the new product.
Moreover, it will cost PTI too much money to invest in the new, unproven
technology. Lets wait and see what happens. Our brand is strong. We can afford
to wait.
How many corporate executives in this situation do you think respond this way?
Many of us can relate to these five case scenarios of subjectivity. We have all
watched ourselves take a subjective rollercoaster ride in our minds in response to people, situations, or events. The question is not whether we are going to take the ride.
We most certainly will because that is the nature of the mind. (We will address this
later.) The question is: how can we become more objective so that we can get off the
subjective rollercoaster before it costs us more than we are willing to pay?
Let us assume that given a choice, none of us want to take the ride on the subjectivity rollercoaster if the cost is potentially our job, our grades, our relationship, or our
business. Let us further assume that given a choice, we would prefer to learn ways to increase our objectivity so that we can have freedom in our relationships, both personal
and professional, and make sound business judgments as an entrepreneur or corporate
executive.
To become more objective is possible with knowledge, understanding, and effort.
Increasing our objectivity is not difficult, it simply requires the following:

An understanding of subjectivity and how we relate to the world

An acceptance and appreciation for how the mind works
A framework for increasing objectivity
A minimum knowledge about the reality of living
Tips and tools on how to apply this information

In this next section, we will introduce a simple framework for objectivity that can help
us respond to things as they are. In addition, we will review the minimum knowledge
that we need to be more objective, knowledge that we all intuitively understand but
often forget and rarely apply in our daily lives.

Copyright Houghton Mifflin Company.

Part 2 The Principle of Objectivity

part

A Framework for Objectivity

Understanding How We Relate to the World

Copyright Houghton Mifflin Company.

Are we ever totally objective? The fact is, we are all totally objective every day. It is the
nature of the subject-object relationship. You are the subject (I) and everything else
is the object, (Other or not-I). As the subject, you relate to the object through objective means of knowledge, which are your five senses: sight, hearing, taste, smell,
and touch. For example, you are walking along a path and you come across a beautiful
bed of roses. You see the roses; sight takes place. You have no choice in the matter. If
there is a flower and your eyes are open and working properly, you will see the roses.
At that moment you are totally objective. We are all completely objective when we experience through our senses what is. However, after our initial objective experience
of what is, things tend to get a little murky. After seeing the object, our immediate
response to the object or situation becomes subjective, conditioned by the mind with
its formidable modes of operating. The good news is that with minimum knowledge,
effort, and a bit of courage, the mind can be managed and a more objective life is possible. The key drivers of our subjective response to what is include:
Mental ModelsThese are our deep-rooted ideas and beliefs about the way the
world works and the way things ought to be. We began constructing this view of reality out of all the sensory input from our objective means of knowledge; sight, hearing,
taste, smell, and touch. As children, we see, hear, taste, smell, and touch, and we begin
connecting all of those sensations in our minds to form patterns that define for us our
sense of reality and the way the world works. We view everything in our lives based on
these mental models whether they are right or wrong. Our mental models are further
constructed by things we have been taught as a child, i.e., right from wrong, good and
bad. Other notions we have merely adopted from what we have seen on TV, or they
could just be a part of the fabric of our society, such as our political, economic, and social structures. Interestingly, we rarely question these assumptions and conclusions,
and as an adult, we assume them to be true. All of these notions, beliefs, or mental
models directly influence the way we interpret what is. The most fascinating is that
every new sensory input or experience is not interpreted as new; we try our best to
force it into a pre-existing, known, and comfortable mental model. We find it disorienting when we try building new mental models; to do so requires effort and courage.

8
FearsFear is everything we are afraid of. Fear is common to us all. The most common fears are fear of failure, fear of success, fear of loss, fear of death, and fear of pain
and suffering. The challenge is that deep-rooted fears color our interpretation of
what is. If we fear something, the sensations received through our objective means
of knowledge (sight, hearing, taste, smell, and touch) will be filtered through these
fears by the mind. Our actions then become a reaction to a fear and not a response to
what is.
Habits and TendenciesThese are our habitual behaviors and actions, which are a
response to our mental models and our fears. For example, some of us who feel threatened stay and fight while others run in the other direction at top speed. Fight or
flight is a habitual tendency in response to fear. Just as our mental models have been
constructed from the sensory input we received as young children, our minds have instantly patterned habitual responses and tendencies to support those mental models.
ThoughtsThere is a constant stream of thoughts going through our minds every
minute of every day. Have you noticed? If you stop and watch this stream of thoughts
you will notice that one of the recurring themes is one of self-judgment. Did you
know that there is a symbiotic relationship between the thoughts that pop up in our
minds and the mental models that we have created? For example, if your mental
model is that women are dishonest in relationships, and then every time you meet
someone new and try to have a relationship, the stream of thoughts in your head will
be something like, she cant be trusted, she just lied to you, she will dump you, so
dump her first. Many good relationships are doomed because of such mental models.
Wouldnt it be wonderful if we could be objective to our mental models and relate to
and appreciate the other person for who he or she actually is? The reality is our mental models drive our thoughts, and our thoughts modify our mental models. What a
cycle it is!
This is what we do:
We experience through our senses a fact whether it is an object, a person, an action, or a
situation. In an instant, we project our own fears, mental models, and background onto
that fact. The result is that we see something other than what it is, a misperception, or
sometimes one object is mistaken for another, or the value of an object or circumstance is
exaggerated, seen for more than what it is. Everyone has this problem.

A Framework for Increasing Objectivity

To be objective requires a focused effort. Because of the complexity of the mind and the
deep-rooted nature of all those drivers of subjectivity, the approach to becoming more
objective is non-additive, nonlinear and iterative, containing the following components:
Discerning what is, without judgment, without projection, without subjectivity
Identifying the mental model that may be dictating our reaction to what is
Responding with right action to what is based on an objective recognition of

the facts
If we go back to our cases of extreme subjectivity, we can apply this objectivity framework and determine an appropriate response to the reality of each situation.

Copyright Houghton Mifflin Company.

Part 3 A Framework for Objectivity

9
Case #1The boss and the nod
Objective Recognition
of the Fact
Mental Model
or Tendency

The boss did not say hello as usual, only nodded.

As a child, many of us thought that we were responsible for
our parents behavior. We thought that their behavior was
directly related to something that we did. Unchallenged,
adults often assume that they are responsible for others
behavior when often it has nothing to do with them.
Fear of not being able to support the family and guilt
over time spent with work.

Fear
Objective Response

Do nothing. It may have nothing to do with you.

Epilogue: Scott was not feeling well and was focused on resting behind his desk,
period. When Jim came into his office, Scott looked at him in disappointment. The
relationship changed from that day on, because Scott now perceived Jim to be insecure and impetuous.
Case #2Student and class participation
Objective Recognition
of the Fact

Class participation counts 30% of the grade and I

know I am not participating because I am afraid.

Mental Model
or Tendency

Many of us tend to avoid difficult situations and try to avoid

confrontation at all costs. The student in this case just
wanted it to go away. Susan assumed the worst possible
scenario and avoided confronting the reality all together.
Fear of failure and being embarrassed.

Fear
Objective Response

Be proactive and meet with Professor Simmons. Susan

should be open and honest about her discomfort with
class participation and express her desire to improve.

Epilogue: In the second case, Susan became overly stressed. She showed signs of fatigue and was more distracted in class. Finally, Susan started skipping class. Fortunately, Professor Simmons was sensitive to these issues and contacted Susan to set up
a meeting. Susan had no choice but to meet with the professor. Professor Simmons
and Susan had an open discussion about the issue, and together they worked out a
process to help Susan feel more comfortable and participate more, without cold calling. Susan ended up with a 2.8 for class participation and a 3.5 for the class.

Copyright Houghton Mifflin Company.

Case #3The couple

Objective Recognition
of the Fact

Sam called late and didnt say I love you.

Mental Model
or Tendency
Fear

Patricia had been hurt before in relationships. She

believes that men cant be monogamous.
Fear of being rejected.

Objective Response

Trust Sam. Give him the benefit of the doubt. There are
many reasons why he may not have responded as usual.
Give him time to communicate. Base your response on his
behavior over the past 4 months, not just one morning.

Epilogue: In the third case, Sam was late to work because of a flat tire and he was disgusted with himself because he knew the tire was bald. He had procrastinated for

Objectivity: A Guiding
Principle of Entrepreneurship

10
months and did not get new tires and was just angry with himself. He called into work
to tell his boss he would be delayed but he didnt want to tell his new girlfriend, with
whom he was so open and honest, about how dumb he was. This is the reason he
waited to call. Even then he was feeling silly and embarrassed, so he didnt stay on the
phone long and he forgot to say, I love you. Later that day, he called Patricia and
told her about his morning.
Case #4The entrepreneur and the international supplier
Objective Recognition
of the Fact

Cathy received a warning from the ambassador,

a credible person with more knowledge and
understanding of the business climate.

Mental Model
or Tendency

Cathy was influenced by her view of business and the

way business should be. She could not accept that the
supplier did not value her performance, since her company
represented 75% of sales in the United States.
Fear of failure and being embarrassed.

Fear
Objective Response

Minimize losses, do not invest in the growth of the

company, and develop an exit strategy.

Epilogue: The international supplier did not want to do business with Cathy. No
matter how hard she worked or how much revenue she generated for the supplier, the
supplier wanted to do business with someone else. The supplier found a way to terminate the relationship with Cathys company, as the ambassador predicted, and the
business failed. Cathy lost one million dollars. Unfortunately, this type of subjective
response is one of the main reasons why global businesses fail. American companies
tend to subjectively assume that the foreign company with which they are doing business operates with the same mental model and beliefs. Often this is not the case.
Many global entrepreneurs have difficulty accepting this reality.
Case #5The corporate executive
Objective Recognition
of the Fact

A competitor comes out with a new technology that

appears to be a stronger value proposition for the
customer at a higher price.

Mental Model
or Tendency

Consumers wont pay more for the new functionality.

Since things are going well, and the board and stockholders
were happy with performance over the last 5 years,
the executive was fearful of reducing earnings in an
investment in an uncertain technology.
Fear of investing in unknown. Fear of losing money.

Fear
Objective Response

Leverage relationships with existing customers and

conduct focus groups to determine the willingness to pay
and the willingness to switch to the new technology and at
what price. Task the PTI technology group to investigate
the actual cost of acquiring or developing the new
technology. Task the CFO to conduct an competitor
analysis to determine the financial strength and operating
resources of the lead competitor.

Epilogue: PTI lost market share and ultimately failed. The consumer did see the value in
the functionality provided by the new technology, and the competitor made it very easy
for them to switch. Stephan, the CEO, had a subjective view about consumer adoption of

Copyright Houghton Mifflin Company.

Part 3 A Framework for Objectivity

11
a new technology but did not conduct an objective analysis of the facts before making his
decision. Unfortunately, this subjective response to objective competitive facts can be
seen in many business failures. For example, Kenneth Olsen, founder of minicomputer
maker DEC, opined in 1977, there is no reason for any individual to have a computer in
their home. Because of that strong belief, Olsen did not commit internal resources to investigate the change in market conditions. Thus, he failed to realize that electronic hobbyists were making their own home-grown personal computers between 1975 and 1981,
and that many start-ups like Apple Computer and mid-sized firms like Radio Shack and
Commodore were manufacturing easy-to-use personal computers. We all know what
happened to DEC as a result of this subjective response to what is.

Applying the Framework

The key to becoming more objective is in the second component of the framework.
This is recognizing our mental models, fears, and tendencies, and anything that may
be coloring our response to what is. To be objective requires that each of us recognize and accept our mental constructs and tendencies and be open to the possibility
that we may be wrong about what we believe. For example, if Stephan Connor of PTI
had accepted the possibility that his mental model could be wrong, he would have
tasked internal resources to conduct an in-depth industry analysis to objectively evaluate the companys competitive position. In the case of the international entrepreneur,
Cathy could have accepted the possibility that her mental model about business was
wrong in this case and tested the relationship with her supplier before raising and investing more resources. To be objective also requires us to recognize our tendencies
and habitual responses. It is helpful if we try to understand the basis for the response
and then determine the effectiveness or appropriateness of that tendency or response
in a given situation. A simple example of this is the tendency to postpone or procrastinate. Many of us have this tendency. Some say it is human nature. We like to take care
of things that are easy and pleasant and postpone or even avoid altogether that which
is difficult, painful, or troublesome. Where does this tendency come from? Perhaps it
is because as students, we were told when taking an exam that we should attempt the
easy questions first. As a result, it seems everyone has this trait to some degreethe
tendency to do the easy things first and the tough things last. Being objective means
that when we find in ourselves a tendency or a habitual response we should reverse
that tendency or response. In the case of procrastination, we should deal with the
tough things first. In the case of Cathy, the international entrepreneur, her tendency
was to keep charging full steam ahead without pause in the face of uncertainty. For
her, reversing the tendency would have meant that she pause and get more information before moving forward. If she had done this, her loss would have been minimized.

Copyright Houghton Mifflin Company.

This is what we should try to do to become more objective:

Stop! Give yourself the time and the mental space before you react or respond to a
fact, so that you can recognize a tendency born of a mental model that may be
coloring your response to what is, and then reverse the tendency.

The Minimum Knowledge

The framework is a tool to increase objectivity, but without a basic understanding of the
realities of life, applying the framework will yield less than optimal results. It is like trying to build an airplane without understanding aerodynamics. Or more relevantly, it is
like trying to start a business without understanding the entrepreneurial process. The
key is integrating the framework with a basic understanding about the realities of life.

Objectivity: A Guiding
Principle of Entrepreneurship

12
Armed with this framework, what is the minimum knowledge we need to be more
objective in our jobs, in school, in our businesses, and in our relationships? In this section, we will review this minimum knowledge; realities that we intuitively understand,
realities that can be verified through experience yet are often taken for granted or discounted altogether. We will also provide practical tips on how to begin living intelligently with the guiding principle of objectivity.
Reality #1There will always be situations that are not conducive.
This is really about Murphys Law. We all know that What can go wrong, will go
wrong. The possibility of something going wrong is much greater than the possibility of it going right. If there is such a thing as plane crashes, they will happen; if there
is such a thing as stock market crashes, they will happen. Unfavorable situations will
keep arising and we have to face them and deal with them. Unfortunately, when problems occur, many of us tend to disown the problem or, worse yet, engage in wishful
thinking, that is, wishing the problem will go away or that it will be all right. The reality is that it wont be all right unless we take objective and appropriate action.
Objectivity Tip: To effectively handle the day-to-day problems that arise, the first step
is to accept that there is a problem. Acceptance of the facts of what is is a precondition to right action. Non-acceptance is an ideal condition for an emotional, subjective
reaction, and we have already learned what a subjective reaction can cost. Furthermore, non-acceptance does not alter the fact that there is a problem; it just creates a
chain of further emotional reactions that make the problem worse. If you are objective
in your perception of a situation, you can then respond to it in an appropriate manner.
The key is to accept a problem as it occurs.
Reality #2Every effort is a calculated risk.
We all set goals for ourselves. It is our nature to have desires and aspirations, but we
should also be aware and accept that there are no guarantees that we will succeed. Success is not given; it does not come as a rule. Every time we expect a result of an effort
we base our expectations upon certain data. Unfortunately, dealing in a world of uncertainties, this knowledge often proves to be inadequate. Thus, there is speculation
involved in every expectation. Our tendency is to assume that a certain result is given.
We think that some things will naturally follow a probability curve and, in fact, some
things do. But the reality is that every intelligent effort involves a calculated risk, and
only two possible results can be expected from every effort: success to varying degrees,
and failure to varying degrees.
Objectivity Tip: You should always be prepared for failure in your effort because you accept that success is not guaranteed. Being objective means that you accept that your
knowledge is limited and that there are factors beyond your control. Living with the
guiding principle of objectivity means that you put forth your best effort and accept
the result.
Reality #3Everything is connected, interrelated.
Everything is connected and interrelated. From the food we eat to the car we drive,
there are many interrelated people and processes involved. We all know this but
somehow we go about our daily lives acting as though everything is disconnected. The
truth is that there are universal laws and principles over which we have no control and
that dictate how things interact and connect to each other. We know that when we
drop a ball, it will fall. We know that if we touch fire, we will burn. We also know that
there is an order to things. There is a physical order that governs the way our bodies
function. There is an astronomical order that governs the way the planets revolve.
There is a psychological order, a sociological order, and so on. Every order is connected to and interrelated with all the other orders, and you are a part of that order.

Copyright Houghton Mifflin Company.

Part 3 A Framework for Objectivity

13
In addition to these immutable laws, there are also universal values that we all
seem to know and understand. For example, we know that we dont like to be lied to
or cheated. We know that we dont want to be physically or emotionally harmed. This
is the nature of reality. There is so much about this reality over which we have no control. To be objective is to recognize these facts and to try to live in harmony with this
reality, this interrelated macrocosm of universal laws, principles, and values.
Objectivity Tip: Living your life in harmony with the unchangeable laws of the universe
just makes sense. We know that instead of swimming against the current, it is more intelligent to swim with the current. Therefore, to live a life of reality means living according to universal principles of truth, integrity, and compassion, and with an
understanding and appreciation for your own individual connection to it all.
Reality #4We cannot control the results of our actions.
If there are only two possible results to every effort, what dictates the results and the
varying degrees of success or failure? It can be mind-boggling. Sometimes we have the
knowledge and the power, yet things still dont work out and we fail miserably. A more
favorable twist is when we dont have the knowledge or the power, yet things work out
perfectly with the highest degree of success. So what is this unknown factor? Some call
it luck, some call it karma, and some call it grace. Whatever you call it; this is the reality.
Objectivity Tip: Being objective means understanding and accepting the fact that you
have no control over the results of your action. To be objective is to recognize that
there is something other than your own effort that makes the difference between success and failure. In recognizing a power other than yourself, you recognize your limitations and you are objective. You are objective when you can accept the indisputable
fact that you can control only your choice of actions and the action itself; beyond that
you have no control. You never know what will happen moment to moment. You can
only do your absolute best in the present moment and let go of all your anxiety about
the way things will turn out. All of your anxiety never changes the result anyway!
Try thinking of it this way:

Copyright Houghton Mifflin Company.

It is a lot like driving a car in the night in a rural area with no street lights. The
headlights of the car light up only a few yards and you travel many miles. On the way,
you encounter different situations. You act according to the situation. You deal with
what is in front of you with the understanding that all you can do in the moment is
your best with the resources you have. The result you cannot predict. Objectivity is
understanding that you do not need to see the end result to live your life, to take action,
or to move forward.
Now we understand:
1. How subjective we all are.
2. How a guiding principle of objectivity can help us manage our day-to-day lives.
3. The framework, knowledge, and tools we need to live our lives more objectively.
Specifically, we have seen how our subjectivity can play out in our lives. We have
learned how being guided by the principle of objectivity can improve our relationships, minimize job frustration, and minimize business loss. In the next section, we
will apply this guiding principle of objectivity to the realities of entrepreneurship. We
will focus on the start-up stage of entrepreneurship because this is when the venture is
most vulnerable and when things are most uncertain. With start-up business failure
rates as high as 80%, effectively applying the principle of objectivity in the early stages
of business growth can make the difference between success and failure.

Objectivity: A Guiding
Principle of Entrepreneurship

part

Objectivity and Entrepreneurship

Entrepreneurs have a difficult time being objective about their business. Driven by
their unyielding passion, many entrepreneurs have a great deal at stake when they
start a business. Many entrepreneurs start businesses because they dont want to work
for anyone else; they want to row their own boat. They want to work hard for themselves and create something of value from nothing. When they get started, they like
wearing all the hats. They are the visionary with the vision; they are the salesperson
who makes all the sales. They are the bookkeeper and the accountant. They are customer service. They are the person responsible for delivering the product or service to
the customer and also collecting the money from the customer. They are faced with
the reality that there is no more paycheck coming in, and now they are, in many cases,
singularly responsible for their ability to eat. And we all know we all have to eat! If
they have a family there is an added level of personal investment; their familys livelihood depends on how well they do as an entrepreneur.

The Entrepreneurial Process

Grounded in the Guiding Principle of Objectivity
The Customer

The Team

Profit

Employees, Partners, Advisors

Return

The Industry

Weaknesses

Tendencies
Thoughts

The
Entrepreneur

Fears

Objectivity
Strengths
Skills

Minimum Knowledge

Objectivity

Value to stakeholders:

Passion

Vision

Purpose

Resources
Financial, Human, Material
2007 Elizabeth R. Thornton

14

Customers, Employees.
Investors, Community

Copyright Houghton Mifflin Company.

Objectivity
Mental Models

Objectivity

The
Opportunity

15
With all this going on, is it really possible for an entrepreneur to be objective? Given
the high failure rate of small businesses and the dynamic and uncertain nature of entrepreneurship, can an entrepreneur afford not to approach the venture with some level of
objectivity? Along with passion, perseverance, and commitment, an entrepreneur will increase his or her chances of success by mastering the guiding principle of objectivity.
In this next section, we will apply our principle of objectivity to starting the venture based on a new model for the entrepreneurial process grounded in the guiding
principle of objectivity.

(1) The Entrepreneur

As stated earlier, the entrepreneurial process is initially centered on the entrepreneur
and how well that entrepreneur can manage the dynamic, uncertain, risky, and chaotic
nature of entrepreneurship. Based on what we have learned about dealing with what
is, it is clear that a venture has a greater probability of success if its founder, the entrepreneur, has mastered some degree of objectivity. It is critical that the entrepreneur
learn to be objective about him- or herself, the opportunity, and his or her ability as a
leader to manage the growth of the venture. By applying our objectivity framework to
the entrepreneurial process, we can identify some tactical steps an entrepreneur can
take to help increase the probability of success by being more objective.
Recognizing Our Mental Models, Fears, and Tendencies
In addition to the belief systems, fears, and mental constructs that drive our subjective
response to what is, entrepreneurs have an added layer of subjective notions to sift
through. We call them entrepreneurial myths, and there are many of them. Entrepreneurs must evaluate these myths, or sets of false beliefs, and make sure their day-today decisions are not clouded by these subjective notions. Following are a few myths
about entrepreneurship that can easily derail an entrepreneur along with an objective
way of looking at each of these myths.
Myth #1If an entrepreneur is talented, success will happen in a year or two.
Objective Reality: In most cases, it can take over five years for a business to be successful. Instead of planning to work hard for a year or two, an entrepreneur should plan
for a sustained commitment over five years, with the understanding that it could take
longer and that there is always the possibility that the venture will fail.

Copyright Houghton Mifflin Company.

Myth #2Entrepreneurs want the whole show to themselves.

Objective Reality: Nothing happens in a vacuum. Even as a sole proprietor, an entrepreneur depends on many people to support the venture, such as the host of the website,
customers, or the mail carrier that delivers the customers payment. Everything is interrelated and no one does anything alone. Research also indicates that entrepreneurs have
a greater probability of creating wealth if, instead of acting alone, they build a team with
all the requisite skills and experience to successfully leverage the opportunity.
Myth #3Entrepreneurs are motivated solely by the quest for money.
Objective Reality: Most entrepreneurs are successful because they love what they do.
They have a passion for their business. Entrepreneurship is too hard and too risky for
anyone to sustain the required level of effort unless he or she loves the work. In addition, the love and passion of the entrepreneur is contagiousit can help attract customers, investors, and employees!
The Minimum Knowledge Applied to Entrepreneurship
Now that we have applied the key component of the objectivity framework, that is,
recognizing some of the drivers of subjectivity in the entrepreneurial process, it is

Objectivity: A Guiding
Principle of Entrepreneurship

16
and Entrepreneurship

important that we review the minimum knowledge, the realities of life, in the context
of managing the realities of the entrepreneurial process.
Reality #1There will always be situations that are not conducive.
This is all about dealing with uncertainty for an entrepreneur. When the entrepreneur
starts the venture, he or she has no idea how the target customer will respond or how
competitors will respond. The entrepreneur has to assume that if something can go
wrong it will go wrong. So if there is rivalry within the industry based on price, there
may be price wars. If the industry is characterized by constant technological advances
that leapfrog old products within six months, the entrepreneurs product may
become obsolete. Accepting the reality of Murphys Law helps the entrepreneur to
develop strong problem-solving skills. Empowered with this knowledge, the entrepreneur is not surprised or shaken when a problem occurs. The entrepreneur anticipates
a potential problem because that is the nature of entrepreneurship. Being able to
quickly and objectively identify a problem, accept that the problem exists, understand
its impact on the business, and then execute the best possible solution to that problem,
given existing resources, is critical. This is what we mean by sound judgment and right
action.
Reality #2Every effort is a calculated risk.
Given that all of our efforts are calculated risks, a successful entrepreneur should be
able to handle any result and keep moving forward. Success to varying degrees and
failure to varying degrees are the two possible outcomes for every effort. A successful
entrepreneur must start the venture with a readiness to accept this fact in order to
prepare for the uncertainty of entrepreneurship. Many times an entrepreneur will become depressed when something doesnt go as planned. To be objective, the entrepreneur must ask, Was the failure totally unexpected? The entrepreneur should have
expected it if he or she accepts the reality that every effort is a calculated risk. The entrepreneur should take it in stride, get over it, and move on! This is what perseverance
and determination is all about. An entrepreneur cannot afford to become sad or depressed and lose whatever effectiveness, efficiency, and courage he or she may have
because of something that is outside of his or her control. Knowing that every effort is
a calculated risk allows the entrepreneur to take himself personally out of the equation. Guided by this principle of objectivity, an entrepreneur must believe that it is
okay to fail and that a failed effort or even a failed business does not mean that the
entrepreneur, the individual, is a failure. Perseverance and commitment in the face of
uncertainty and potential failure is a key characteristic of a successful entrepreneur.
Reality #3Everything is connected, interrelated.
For an entrepreneur to be successful, he or she must be aligned with the reality of universal values and principles. An entrepreneur should treat customers well, not only because it will bring in more business but because it is the way the entrepreneur wants to
be treated as a customer. Entrepreneurs should be kind and supportive to their employees because it is the right thing to do, in addition to being the smart thing to do.
Being objective, being in harmony with universal laws and principles, means creating
a vision for yourself and your company that is grounded in a passion or purpose, a belief that the business will positively influence peoples lives. Billionaire entrepreneurs
such as Bill Gates of Microsoft and Michael Dell continue working even after they
have achieved financial success because they strongly believe that their product or
service makes a difference in people lives. Passion is often described as the number
one characteristic of successful entrepreneurs, and it has its basis in the reality that
everything is connected. Starting, managing, and harvesting a venture grounded in
this understanding of universal values and principles will increase the probability of
success.

Copyright Houghton Mifflin Company.

Part 4 Objectivity

17
Reality #4We cannot control the results of our actions.
The objective entrepreneur understands and accepts that he or she has control over
two things: (1) the choice of action and (2) the chosen action. The entrepreneur has
little control over what will happen after that. The entrepreneur works for success,
knowing that there is a possibility of something going wrong. The entrepreneur must
approach the venture with the drive and commitments to do his or her best, not knowing what the results will be. The only way to effectively deal with this uncertainty is
the acceptance and resolve that since results cannot be controlled, the entrepreneur
should singularly focus attention and effort on sound judgment and right action in the
moment. With limited knowledge, the entrepreneur must trust his or her instincts
and be prepared to execute. Meg Whitman, the savvy entrepreneur who leads eBay,
makes her best decisions in the moment, knowing that the price of inaction is greater
than the price of making a mistake. With this mindset, an entrepreneur can approach
each stage of the business planning process with objectivity.

(2) The Vision

The most successful entrepreneurs start the entrepreneurial process with a clear vision.
That vision is often based in a passion to do something good for other people. To be objective and to maximize success, the entrepreneur must clearly define his or her vision for
the company and how the company will create a positive impact for all of the stakeholders: customers, employees, investors, and the community. To construct a vision for a new
business venture, the entrepreneur may start with what he or she is passionate about.
Sometimes the vision comes from feelings of frustration, sadness, or even anger about an
unmet need in society. Based on the objective understanding of universal laws and principles, a business founded on the principle of helping others has a higher probability of success than one founded on greed and ego. Entrepreneurs must spend some time on this.
They will quickly see that getting clarity around this will help them to attract the right
people with the right resources to successfully launch the venture.
Being grounded in objectivity and having a clear vision of what is to be accomplished, the entrepreneur must now turn his or her attention to the business opportunity. In the next section, we will focus on opportunity identification and evaluation
and will provide an objective approach to identifying and evaluating business ideas.

Copyright Houghton Mifflin Company.

(3) Opportunity Identification and Evaluation

Many people have good ideas for a business. Ideas can be exciting, and the entrepreneur can get carried away. The challenge is that not all ideas are viable business opportunities. Most start-up business counselors will say that many businesses fail
because there was never a real opportunity to begin with. The business fails because
the entrepreneur did not engage in an objective, unemotional, fact-based analysis to
determine the feasibility of the opportunity. Applying the principle of objectivity to
the opportunity evaluation process will help entrepreneurs focus on ideas that have
potential.
The CustomerBusinesses win in the marketplace because of customer focus.
Clearly, the first place to start when evaluating an opportunity is with the customer. It
is critical to identify the primary customer for your product or service. The customer
or market demand is a critical factor in determining the viability of an opportunity.
The main questions entrepreneurs must answer when analyzing market demand are:
Does the product or service satisfy a significant unmet need in the marketplace?
Is the primary target audience identifiable?

Objectivity: A Guiding
Principle of Entrepreneurship

18
and Entrepreneurship

Is the customer reachable?

Is the customer willing to pay a premium price for the product or service you are

offering?
An objective approach: Entrepreneurs must look beyond their own experience and the experience of people they know. Just because friends and family say they like the product
or service doesnt mean it is a good idea. Many entrepreneurs start a venture with only a
vague idea of the market appeal for their product or service. Even when entrepreneurs
spend hours in the library conducting an in-depth industry and market analysis, they
must validate these assumptions in the marketplace with potential customers, not just
with friends and family. Entrepreneurs must invest in qualitative and quantitative research methodology to prove that there is a sizable market segment, a primary target audience, in which the pain point or need for the product is significant. There are many
free online survey tools available such as Survey Monkey. The entrepreneur must validate that the target audience is willing to pay a premium for the product or service because it is unlike all other available solutions to that need or pain point.
The IndustryFor many, understanding the industry, marketplace, and the competitive landscape is daunting. Entrepreneurs often say, I have no competition, there is
nothing out there like my product or service. This is never the case. Some venture
capitalists will throw an entrepreneur out of the office if they hear those words. To be
objective, not influenced by passion and wishful thinking, an entrepreneur must understand that there is always some form of competition. It could be rivalry from a direct competitor or just inertia, people doing it one way and being resistant to change.
The entrepreneur must conduct an in-depth industry analysis to understand how the
industry is operating so that he or she can determine how to effectively compete for
market share. Below is a list of some but not all of the questions the entrepreneur must
be able to answer:

How large is the market and what is the potential for capturing market share?
Is it an emerging industry or is the industry declining?
What is the year-over-year growth rate in the industry?
What trends are influencing the industry and what do they portend?
Is the industry concentrated with a few players holding a large percentage of
market share, or is the industry fragmented with a lot of companies each holding
a small percentage of market share?
What are the substitute products?
What is the nature of the competition between the existing players in the industry?
Is there significant variability in profitability within the industry?
On what basis do the competitors compete?
What are the competitive strategies of the leading firms in the industry?
Are there proprietary barriers to entry in the industry?

An objective approach: It is a little easier to be objective about analyzing the economic

and strategic characteristics of an industry. The facts are more clearly laid out. It is the
subjective interpretation of these facts where entrepreneurs can get into trouble. For
example, if the industry is growing by 10 percent year over year, an entrepreneur cannot assume that it will continue to grow at that rate. Moreover, if the 10 percent
growth is the industry average, the entrepreneur must determine if there are companies within the industry that are growing above or below that industry average and
what may account for the variability. The entrepreneur must continually dig deeper to
understand what trends are driving the growth rate. The entrepreneur must make an
objective assessment as to whether the trends may continue or what could cause a shift
in that trend. While making this assessment, the entrepreneur realizes that he or she
has limited knowledge and that the assessment could be wrong. Interpreting data and
forecasting trends in an effort to reduce uncertainty is an entrepreneurial activity that
requires the most objectivity. Typically, when faced with making this type of assess-

Copyright Houghton Mifflin Company.

Part 4 Objectivity

19
ment, the entrepreneur goes one of two ways. Some entrepreneurs, because of their
background and life experience, will be pessimistic and see the glass as half empty. The
pessimist thinks the absolute worst and plans accordingly. On the other hand, an optimist, who always sees the class as half full, will plan for the best-case scenario. Which
of these entrepreneurs is correct? Is either one being objective?
Objectivity means looking at the glass without the judgment of full or empty. Objectivity means looking at the glass in terms of its function to contain a volume of liquid only. Rather than the optimistic or pessimistic views, to be objective means
looking at the market conditions as neither good nor bad, but just as they are. By looking at the market conditions and their potential impact without labeling them as good
or bad, the entrepreneurs can approach the marketplace more effectively. An entrepreneur can use the chart in Table 1, based on Michael Porters Five Forces model, to
assess the market without placing value judgments on what is. Knowing that there is
imperfect information, the objective entrepreneur analyzes the potential variables and
develops a risk assessment for each, thereby formulating a viable plan based in reality.
Profit PotentialOnce we assess the fit between customer need and product/service
and determine the attractiveness of the industry, the entrepreneur must evaluate the
profit potential of the opportunity. The entrepreneur must focus now on the economics of the business in order to determine the overall viability of the venture. This is another area where objectivity is tough but essential. It means the difference between
starting a venture that is doomed to fail and starting a venture that has a chance of succeeding. It really is that critical. Entrepreneurs must sit down in front of a spreadsheet
and start mapping out the business model. The entrepreneur must determine how

Copyright Houghton Mifflin Company.

Table 1. Objective Assessment of Industry Economic Characteristics

Economic Characteristics

Strategic Implications

Size of Market

Large market means that it may be possible to achieve

significant sales by capturing a small percentage of
share, 5% or less, without threatening competitors. To
achieve sales of $1 million in a $100 million market
requires only 1% of the market.

Market Growth Rate

Fast growth, for example, an annual growth rate of

30% to 59%, attracts new entrants into the market.
Slow growth causes increased rivalry among
competitors and forces weak competitors out.

Supply and Demand

If supply exceeds demand, surpluses push prices and

profit margins down. If demand exceeds supply,
shortages pull prices and profit up.

Industry Profitability

High-profit industries attract new entrants, i.e., more

competitors. Low-profit industry conditions encourage
exit and potentially increases rivalry.

Barriers to Entry

If barriers are high, threat of entry is low, thereby

protecting positions and profits of existing firms. Low
barriers make existing firms vulnerable.

Changes in Technology/Innovation Rapid changes in technology can increase investment

risk in obsolescing equipment. Rapid innovation
shortens product lifecycle, having a leapfrog effect.
Product Characteristics

Big-ticket items cause buyers to shop around for price.

Low-priced standardized items give buyers many
substitution options.

Capital Requirements

The larger the requirement, the higher the risk, in terms

of investment decisions and timing. The higher the
requirement, the higher the barriers to entry/exit.

Objectivity: A Guiding
Principle of Entrepreneurship

20
and Entrepreneurship

much money is needed to get started, how and when the business will generate revenues, and how much money is needed to sustain operations through breakeven.
Many entrepreneurs think that they can start a business and within one or two months
begin generating revenue. This is rarely the case. Evaluating an opportunity and completing a business plan alone can take months! And once the entrepreneur decides to
start the business, establishes the legal structure, prints business cards, and launches a
reasonably professional website, it is already month two. Money has gone out, but no
money has come in. By month three, perhaps the entrepreneur has spoken to a few
potential customers and has attended many early morning networking events. More
money has gone out. By month four, only a few prospects have returned the entrepreneurs calls and still no money is coming in. Is the entrepreneur eating? This can go on
for many months. When evaluating the opportunity, the entrepreneur must answer
the following questions:

Does the venture require high capital investment?

How much money do I need to get started?
Can I achieve breakeven within two years?
Is my gross margin revenuecost of goods sold > 40%?
Is this a profitable business?

An objective approach: Most entrepreneurs assume the best when developing their pro
forma financial statements. Even their so-called worse case scenarios are often overinflated. Many venture capitalists, in fact, discount revenue projections by 50 percent and
increase cost by 50 percent when evaluating a business model because they know that entrepreneurs have difficulty being objective. The following are tools to help entrepreneurs
become more objective when thinking about the economics of the business.
1. PricingEntrepreneurs must be objective when it comes to pricing their
product or service. It is not enough to compare the prices of competitors. It is
not enough to use a mathematical model to determine what is needed to break
even. The entrepreneur must determine how much the primary target audience
is willing to pay for the product or service based on its unique value proposition.
How can the entrepreneur determine customers willingness to pay for the
product other than asking friends and family? What about a customer survey?
Sometimes even surveys may not be objective enough because there is always a
gap between what people say they will pay for a product and what they will
actually pay for a product at the point of purchase. This can be frustrating. In
some cases, the only way to really test the pricing of the product is to do a minimarket test. The entrepreneur can begin marketing the product or service to a
small segment of the target population and see how they respond.
2. Start-up costsDetail everything! Many entrepreneurs assume that it will cost
only a few thousand dollars to launch a simple business. Entrepreneurs tend to
underestimate what it will actually cost. So instead of estimating, entrepreneurs
should be objective by getting quotes from vendors for all the services and
products that are required to start the venture. As the consumer of business
services, the entrepreneur must also evaluate the price-performance tradeoff for
every start-up expense. For example, an entrepreneur can pay $5,000 for a
website or the entrepreneur can find a friend of a friend and get a good enough
website for only $1,000. An entrepreneur must be frugal and discerning about
start-up costs. The reality is that the average business start-up costs are $10,000.
3. Working capitalThis is critical. The entrepreneur must understand how
much money is needed to sustain the business through breakeven. As we have
learned, objectivity means dealing with what is. When estimating working
capital needs, the entrepreneur does not know how long it will take to generate
revenue. It is difficult to get objective data about the average length of time to
breakeven for start-up companies. There are so many factors that can drive

Copyright Houghton Mifflin Company.

Part 4 Objectivity

21
profitability in the early stages of a venture, such as the strength of relationships
with potential customers, the sales cycle, the strength of the value proposition,
etc. Sometimes, the best an entrepreneur can do is to assume that on average, he
or she may need cash to cover all operating expenses for 9 to 12 months or more
before the business can sustain itself.
4. Cash flowMany entrepreneurs tend to think that booking the revenue and
collecting the revenue happens in the same month, whereas it rarely does.
Entrepreneurs must assume that if they sell a product on day one, by the time
the order is processed, shipped, invoiced, and paid by the customer, it may be 60
days later, best case! In a service business, when you sign a contract to deliver a
service, by the time you begin performing the work on the contract, bill the
client for the first months work, and receive payment from the client, you are
also looking at 60 days minimum. To be objective means understanding and
managing this sales cycle.
The Entrepreneurial Team
The entrepreneurial team is another critical component of the entrepreneurial
process. The first thing the entrepreneur must do to understand what type of team is
needed for the venture is to conduct an objective personal assessment. The entrepreneur must be clear about his or her skills, knowledge, and personal strengths and
weaknesses. This is hard for a lot of entrepreneurs. Not only do they often overestimate their skills and over-inflate their strengths, they often think that no one can do it
better than they can. Because of these subjective notions, entrepreneurs often fail to
develop the team that can help the venture succeed. The entrepreneur quickly becomes overwhelmed and crumbles under the pressure of wearing all the hats. The objective entrepreneur resists these beliefs and tendencies and asks the following initial
set of questions:

Copyright Houghton Mifflin Company.

Do I have the requisite knowledge and experience to start this business?

What contacts do I have in the industry?
What is my reputation in the industryam I known, am I respected?
Do I know people who will support this venture and perhaps become its first
clients?

In addition to assessing current knowledge and skills, the entrepreneur must also evaluate other behavioral characteristics that are known to contribute to the success of
an entrepreneur. There are quite a few self-assessment scales out there such as:
Entrepreneurial Mindset, Tolerance for Ambiguity, Locus of Control, and Kirton AdaptationInnovation Inventory.
Once the entrepreneur completes an objective personal assessment, it is important to begin the process of building a team. A critical component of entrepreneurial
success is attracting a top-notch team of partners, advisors, and employees. Venture
capitalist always say that an A team is more valuable than an A idea. Venture capitalists
would rather fund an A team with a B idea than an A idea with a B team. Based on our
framework for objectivity, how can an entrepreneur objectively approach this crucial
task of attracting the best team?
Functional Requirements
The entrepreneur must first understand what the business requires. During the start-up
stage of the business, the focus is on acquiring resources and setting up initial operations. The goal of the entrepreneur is to establish an infrastructure that will allow the
company to identify, reach, and satisfy the unmet needs of a targeted customer base with
a differentiated product or service. The entrepreneur should focus on defining the value
chain, the specific activities that are required to make the customer willing to pay for the
companys product or service. An entrepreneur can initially focus on primary activities,

Objectivity: A Guiding
Principle of Entrepreneurship

22
and Entrepreneurship

those that directly generate a product or service, and those that support the sales and
support of a product and services. The entrepreneur may use a simple grid to help objectively determine the ideal entrepreneurial team. In Step 1, the entrepreneur will identify the critical functional areas required during the start-up stage of the business. In
Step 2, the entrepreneur will identify the skills and experiences required to perform
these functions. In Steps 3 and 4, the entrepreneur must review the personal assessment
and determine if he or she has the skills required or if there is a gap that needs to be
filled. For example, if the business is on the cutting edge of commercializing an emerging technology, a preliminary screen may include the following:
Step 1
Functional Area

Step 2
Skills Needed

Step 3
Entrepreneurs Skills
Do I have
these skills?

Step 4
Gap

In what areas do
I focus?

What skills do
I need?

Acquire this skill?

Research and
Development

15+ years experience

in industry

Some

Yes

Sales and Marketing Proven track record in

business development,
entering new markets

Some

Yes

Legal

Intellectual property,
patent protection

None

Yes

Financing

Raising capital

None

Yes

In addition to the entrepreneurial team assessment grid, the entrepreneur must also
consider building a team that has complementary entrepreneurial characteristics. Passion, perseverance and determination, and the ability to deal with uncertainty are all
characteristics that the founder should look for in the entrepreneurial team. Clearly,
the members of the team must also be grounded in the principle of objectivity.
Leadership
As an integral part of the entrepreneurial team, the founder must be an effective
leader. In order to attract a top-notch team, the founder must demonstrate leadership
capability, passion, and commitment to the business. An entrepreneurial leader is one
who has a clear vision of what is to be accomplished and a viable plan for how to accomplish it. The founder must also have the capacity to make decisions objectively
and demonstrate good judgment. To have this type of focus and clarity, a person must
be secure and confident. The founding entrepreneur must be a person who has an excellent self-image grounded in objectivity. The entrepreneur must know his or her
limitations, strengths, and unique capabilities. The entrepreneur must demonstrate
honesty and integrity, and must earn the trust and respect of those in the organization.
How well an entrepreneur can lead and how closely his employees will follow is directly related to this trust and respect. Whatever the leader accepts as a means, whatever he upholds as authority, and whatever he considers valuable, people around him
will also follow that value. This is the essence of leadership.
The founder of the business must also know how to manage people. For many,
this is the most difficult aspect of starting and running a business. To be objective in
managing people, the entrepreneur must first understand that people work for the
company not so much out of love for the founder but for themselves. People will work
for a company as long as they do not have a better prospect. When an opportunity
comes along, each employee has the freedom to pursue it. Thus, the entrepreneur
must find ways to attract and retain their employees. The entrepreneur must understand that each person has to be won over, so to speak, and to do that requires skill.

Copyright Houghton Mifflin Company.

Part 4 Objectivity

23
An objective approach: What is it that wins over the person who is working for you?
What is it that is needed over and above the salary, benefits, and equity you may offer
the person? What is it that makes the person work for you with passion, commitment, and a certain sense of service? The answer is care. Caring for employees is
making sure your employees feel understood. Caring means relating to your employees, equally. You interact with them, understanding that they are no different than
you, that there is no separation between you and them, other than the roles you
play in the company. Entrepreneurs need a winning team, a team that works well together, whose members trust and respect each other, a team that can get the job
done!

Objectivity: A Guiding
Principle of Entrepreneurship

How does an entrepreneur create a winning team? You create a winning team only
when there is no sense of inferiority or superiority. A winning team is a team made up
of equal people with precisely defined roles and responsibilities, all committed to the
same vision, who are fairly compensated and rewarded. Can you operate in such a
manner that the person working for you doesnt develop the anxiety associated with a
normal bosssubordinate relationship? Can you talk to that person without creating in
him or her the self-consciousness that Oh no, I am talking to the boss? If you can do
that, then you are a great leader, the people who work with you will give their best,
and your venture has a greater chance of succeeding.

(4) Resources
Bootstrapping is the buzzword for starting a venture. An entrepreneur must be
grounded in objectivity if he or she is to start a new venture with the least amount of
cash. Many entrepreneurs will run out and lease office space even though working out
of their home office would suffice. Others may try to manufacture their product when
outsourcing makes better sense. The key to making these resource decisions is prioritizing the goals for the organization during the start-up stage of the venture, and determining with every resource decision whether the acquisition of that resource will
help achieve that goal. For example, as we stated before, the goal in the start-up stage
of the venture is to acquire resources and establish an operational structure to effectively identify, reach, and satisfy a target customer with a differentiated product or
service. To be objective about resources, the entrepreneur can develop a checklist of
all the potential resource decisions and explore all the ways of acquiring each resource.
In order to do this, the entrepreneur must be objective and give up all notions of how
a business should look, how much money the business should have, and all wishful
thinking that more money will come. See Table 2.

Copyright Houghton Mifflin Company.

Resource
Website

Customer
Impact

Buy

Lease

yes

Share/Barter/
Outsource
barter

Office

yes

Legal support

yes

yes

yes

Computers

yes

yes

Supply

yes

Distribution

yes

Licensing and Patent

yes

Telecommunications

yes

outsource
outsource
yes
yes

Table 2

24
and Entrepreneurship

Conclusion
This module has covered a lot of ground. We have defined a guiding principle of objectivity that, if applied in our daily lives, will bring us freedom in relationships, success at work or at school, and increased profitability and sustainability in business. It
really is that compelling. Here is a brief recap of the key components that will help us
apply this guiding principle.
The Definitions of Objectivity
Objectivity is recognizing what is without subjectivity. Objectivity empowers us to
make sound judgments and good decisions. Guided by the principle of objectivity, one
can live an intelligent and successful life.
The Framework for Objectivity
Recognizing and understanding the drivers of our subjective response to what is is
the first step toward living an objective life. These drivers of subjectivity are centered
in the mind. They are our mental models, fears, habit, tendencies, and thoughts that
all work together to color the way we see the world and cause us to respond subjectively to people, situations, and events. In addition to understanding how the mind
works, to be objective requires an understanding of the immutable realities of life.

There will always be situations that are not conducive

Every effort is a calculated risk
Everything is connected and interrelated
We cannot control the results of our actions

Once we recognize these drivers of subjectivity, then with practice, and with a strong
foundation in the realities of life, one can begin to realize the benefits of relating to
the world objectively. It doesnt matter who we are or what we do, the guiding principle of objectivity can increase success and happiness in everyones life.
For the entrepreneur embarking upon a journey fraught with obstacles, the application of the principle is critical. As we have seen, mastering the principle of objectivity can make the difference between sound business judgments that increase market
share and subjective reactions that result in failure. Integrating the principle of objectivity with the entrepreneurial mindset creates a powerful model for the entrepreneur
to increase productivity, profitability, and sustainability.
One final note: An interesting paradox is that while mastering the principle of
objectivity, one must be objective and accept that it will undoubtedly take some time,
but with focused effort it can be mastered, and success in business and in life will be the
reward. In the meantime, if you are confronted with a situation in which you know
that you cannot be objective, ask someone you trust to help you see the situation clearly
and help you to discern the appropriate action. That is, being objective, living
intelligently!

Copyright Houghton Mifflin Company.

Part 4 Objectivity