Disciplined Entrepreneurship

This is an MIT Sloan Management Review article. Although the pursuit of opportunity promises outsized rewards to entrepreneurs and established enterprises, it also entails great uncertainty. The critical task of entrepreneurship lies in effectively managing the uncertainty inherent in trying something new. Some entrepreneurs foolishly try to ignore uncertainty; others go to the opposite extreme of attempting to avoid it altogether by believing naively that every contingency can be anticipated. Instead, entrepreneurs should manage uncertainty by taking a disciplined approach. Over the past five years, the author conducted systematic research into how entrepreneurs manage the inevitable risks while pursuing opportunities. A synthesis of the research revealed that discipline--and its byproduct, the successful management of uncertainty--comes through the adoption of an iterative experimentation model. In this three-step process, an entrepreneur formulates a working hypothesis about an opportunity, assembles the resources to test the hypothesis, and finally designs and runs real-world experiments. Depending on the results of a round of experimentation, the entrepreneur may revise the hypothesis and run another experiment, harvest the value created through a sale, or abandon the hypothesis and pull the plug. The model provides insights into some of the most daunting questions entrepreneurs face--including how to screen an opportunity, how much money to raise, when to make key hires, and how to use limited resources most efficiently.

• Managing uncertainty
• Risk management
• Entrepreneurship
• Innovation
• Technology and analytics
• Corporate strategy