The #1 Thing Entrepreneurs Need to Succeed: Power Steering

Many entrepreneurs will tell you that the most important personal characteristic to founding a successful start-up is perseverance, never giving up. There are so many hurdles to overcome -- cash shortages, clashes with partners, a deteriorating personal life -- that only the most driven people committed to being successful need apply.

But now I'm beginning to think such bulldoggedness may actually be a deterrent. My view, in fact, is that entrepreneurs need something almost the opposite of perseverance: they need to know when to give up.

Not give up as in go home. Give up as in stop what they are doing and head in a new direction. Business management scholars call this the pivot, and its increasingly becoming part of the histories written by many a fledgling business.

For 15 years, Harvard Business School has encouraged students to enter an annual business plan contest, which is judged by faculty, visiting venture capitalists and others. Recently the School's alumni magazine interviewed a bunch of past winners to ask them how their businesses had fared once leaving the ivy-walled HBS campus. And what comes through in their stories is the importance of recognizing when it's time to hit the brakes and apply the power steering.

To wit:

1. EyeView, winner of the 2008 contest, wanted to help businesses create and post online video content. Then market conditions suggested a change: EyeView shifted focus to create customized sales videos tied to sales cycles. And then last year, even though the company was profitable, EyeView decided to go bigger. After a significant staff layoff, the company reformed as a provider of video ads tailored to the viewer by location, demographics and even weather.
2. Potentia Pharmaceuticals, a contest winner in 2001, made a bet on using force microscopy to speed drug research. But it soon became apparent to CEO Alec Machiels that the technology was unreliable, not suitable for industrial use. As the article relates, Machiels "turned down the money, bought out his partner, and relaunched the company with new people, eventually moving over to an advisory role as chairman of the board." The new mission: develop treatments for age-related macular degeneration.
3. Finale, a quarterfinalist in 1997, was a scheme to open a nationwide chain of upscale dessert eateries. After four restaurants opened, however, the recession hit, and frills such as culinary treats came off the budgets of many families. The company has since scaled back its ambitions and been acquired by its lead investors.

"Most startups fail not because they can't build the product they set out to build, but because they build the wrong product, take too long to do that, waste a lot of money doing that, and waste a lot of money on sales and marketing trying to sell that wrong product," Eisenmann says. "It takes a lot of time, time equals money, the money runs out, and the start-up fails painfully."

Failure was not an outcome for EyeView, Potentia Pharmaceuticals, or Finale, but all three are significantly different companies than what was envisioned on their original charter documents. That's why start-up CEOs need to know when forget perseverance and head in a new direction.

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