Written by Jan Turner Tuesday, May 15 2012
One simple definition of risk-taking is that it consists of plunging ahead armed only with the assumption that the rewards will outweigh the costs. But it’s more complicated than just weighing pros and cons. Risk is largely situational and subjective, and (at least to some degree) it can often be mitigated. The risk of launching a new enterprise, for instance, can be mitigated by things like previous experience, more information, an angel visitation and a good coach. Which means the ability to risk is, and isn’t, gender-based.
It doesn’t help that for every study that “proves” that women are afraid of risk there is another study that proves that women aren’t risk-averse at all. Unfortunately, some of the research that has received the most media play – like the women-with-higher-testosterone-take-more-risks study – has later been criticized as being rooted in faulty research practices that lead to flawed results.
New Ventures and Emerging Networks
Julianna Iarossi is one researcher who says that a propensity for risk-taking isn’t gender-based. An Atlanta resident who travels back-and-forth to Munich, Germany, Iarossi says that she doesn’t buy the notion of women being risk-averse. “I think we need to drill down deeper to get at what is really going on.”
A candidate in the Georgia State University Executive Doctoral Program, Iarossi is doing her dissertation on emerging entrepreneurial firms, networks that unfold around key entrepreneurial activities and how network constituents help shape those activities and the resulting deliverables.
Her initial research involved 13 entrepreneurs – half women – who remained engaged with the companies they founded. All tech firms, the companies had beaten the odds by remaining in business after six years. Because the entrepreneurs and their associates were guaranteed anonymity in the dissemination of the research results, Iarossi has kept further details about them and their ventures confidential.
The first step in her research was to ask the entrepreneurs how they divided their time during the start-up years. The majority of their time, she found, was dedicated to developing their businesses’ value propositions (the basic “why this, why now, who’s gonna buy it” core).
And while the value proposition received the most time and energy, it often changed later. “Once they got a prototype out, they may have found that just a little piece of it solved a problem and found a market,” she says. “It may not have been the shoe but just the shoe lace.”
The entrepreneurs also spent time on capital acquisition, talent acquisition and management, product development, and customer acquisition and management.
What Iarossi saw among the interviewees was not a common set of characteristics – like a propensity for risk – but rather a common set of practices.
“These activities or behaviors are not gender-tied. They are shared by both women and men who have launched successful ventures,” she explains.
The Makings of Success
Iarossi says that by employing these behaviors, her interviewees demonstrated that they could “act courageously and boldly” – an expression that Iarossi greatly prefers to the notion of “risk-propensity” and “risk-aversion” in women and men.
Iarossi says that the entrepreneurs in their start-up years demonstrated:
- The ability to admit what they didn’t know and to ask for help. They knew their strengths and weaknesses and took action to fill in the gaps with other people’s expertise.
- The insight to recognize that not everyone is right for every stage of the firm’s development. Iarossi says that as a company grows - adding people, departments and policies - some of the original insiders can’t adapt. This can also occur if the product is substantially reworked, since the sales force that could sell the original product may lack the expertise and contacts to sell its new iteration.
- The willingness to seek feedback and act on it. “They asked everyone they knew for input, and they asked everyone those people knew for input. And – this is crucial – they actually acted on what they heard. Then, they were willing to scrap, rebuild, change strategies,” explains Iarossi.
- The willingness to experiment. “The entrepreneurs created an environment in which it is okay to try, to test. They believed that if they took their product out there and it failed, it failed.” Iarossi found that the interviewees also shared a common mindset: “They didn’t live in past mistakes.” They learned from their failures and moved on.
- The ability to set proof points that moved the company ahead incrementally. “Start-up companies never have enough people, enough money, enough contacts. That means they can’t afford to squander the resources they do have.” Iarossi explains that, applied early on, proof points allow the company to shift gears quickly without throwing additional (scarce) resources at dead-end strategies and products. “If you focus only on big milestones you might not reach them for a long time.”
The Few, the Proud, the Gutsy
The five practices may sound much like simple common sense. They may even seem a little pedestrian, but when they were actually deployed they create gutsy results all over the place. “These [entrepreneurs] had the ability to fire an entire sales force or to scrap a product or department and start over,” Iarossi explains.
Firing the people you recruited and goosed into action – including, sometimes, friends and family – does take courage. But it didn’t stop there, Iarossi says. The entrepreneurs also fired customers.
“Despite the fact that young companies need to acquire customers quickly in order to start generating dollars, these entrepreneurs didn’t want just any customer,” says Iarossi. Customers who were too expensive to service long-term got sacked. Customers who required a high degree of special tailoring of the product (meaning that each unit essentially became a “one-off”) also got the Pink Slip Party.
But, Iarossi adds, when the entrepreneurs did find the right customer, they “bent over backwards to serve them.”
“We Need New Words”
Originally a materials engineer, Iarossi has had a 20-year career at some of the largest banking and wealth management firms. Coupled with her doctoral research, these experiences have allowed her to examine the dynamics of venture-building close up.
One of her conclusions? “We need new words.” She explains, “We need a new way to talk about entrepreneurship and a new way to think about it.”
She points out that there is a movement afoot to take the field of entrepreneurship out of the business school. “It is becoming clear that entrepreneurship is very different than the typical business school curriculum, which is largely devoted to business management.”
Entrepreneurship, she says, requires a specific skill set. And it doesn’t always involve the launching of a new venture. “Entrepreneurship can be applied to all kinds of organizations, including nonprofits,” Iarossi states. “It can also occur within an organization, at the level of a department or project.”
Entrepreneurs are Fierce…and Fun to be Around
More good news: Entrepreneurs often combine passionate goal-orientation with an attractive personal style. “The women I interviewed were courageous and fierce.” She adds, “And some of the nicest people you would ever want to meet.”
This creates a corporate culture in which camaraderie and optimism run high, Iarossi says. The energy that moves the venture forward seems to be related to mindset. “The new venture is seen in terms of a problem to be solved.” Failure? “Another problem to be solved,” she says.
“These are very uplifting people to be around,” she maintains. “They are operating with a certain degree of uncertainty, but no one is sitting around wringing their hands.”
This, then, seems to be one of the main attractions of entrepreneurship for both women and men: “It lifts you up,” Iarossi says. “There is nothing like the excitement of being around people who are solving problems.”
Here are some women entrepreneurs that made it:
Despite not having a college education, former restaurant server Delia Champion beat the odds and launched two brands of successful eateries.
Sonia Clayton came to the U.S. from Venezuela with $50 to her name. Now she is president of a company she calls the "Wal-Mart of IT."
After her husband passed away, Irma Elder found herself in charge of his car dealership -- an enterprise she has grown to be worth $450 million.
Jan Turner lives and writes in the Blue Ridge Mountains of North Georgia. For more than 20 years her articles have appeared in the Chicago Tribune, Los Angeles Times, New York Post, USA Today Magazine and the Christian Science Monitor as well as on wire services in the United States and abroad. Turner has written on subjects ranging from leadership and business culture to diversity awareness and faith-based organizations, and she has a nonfiction book underway. Turner has an advanced degree in intercultural communication and has traveled solo on many continents, exploring cultures from Ladahk and Sumatra to Malawi and Turkey, seeing first-hand the contributions and resilience of women.