That’s what we’ve been discussing over the last few weeks in my Management Secrets blog as I’ve walked you through a January 2012 article by Eric Jackson at Forbes: “The Seven Habits of Spectacularly Unsuccessful Executives.” The article covered research conducted in 2004 by Sydney Finkelstein, Steve Roth Professor of Management at the Tuck School of Business at Dartmouth College. With this blog installment we’re going to look at the final two habits in the seven habit line up. Review the first five covered earlier in my blog entries immediately preceding this one. Let’s dive in …

Habit #6: They underestimate obstacles –Part of the allure of being a CEO is the opportunity to share a vision. Yet, when CEOs become so enamored with their vision, they often overlook or underestimate the difficulty of actually getting there. And when it turns out the obstacles they casually waved aside are more challenging than they anticipated, these CEO have a habit of plunging full-steam into the abyss. An example of this scenario would be when a company’s business is racking up huge losses, yet they are busy expanding operations at an amazing rate.

Why don’t CEOs in this situation re-evaluate their course of action, or at least hold back for a while until it becomes clearer whether their latest programs will pan out? Some feel an enormous need to be right in every important decision they make, because if they admit to being fallible, their position as CEO might seem tainted or precarious. Once a CEO admits he or she made the wrong call, there will always be people who say the CEO wasn’t up to the job. These unrealistic expectations make it exceedingly hard for a CEO to pull back from any chosen course of action, which not surprisingly causes them to push that much harder. That’s why leaders at Iridium and Motorola (MMI) kept investing billions of dollars to launch satellites even after it had become apparent that land-based cellphones were a better alternative.

Warning Sign of #6: Excessive hype Side note – A manager can become sucked into “believing their own press releases” just as easily as a CEO. A few accolades too many from the corner office or lack of oversight and some managers begin to think they can do no wrong even if they don’t really know what they are doing in the first place. If a new policy or idea has merit excess hype isn’t needed because the idea generates its own validity by virtue of its success.

Habit #7: They stubbornly rely on what worked for them in the past — Many CEOs on their way to becoming spectacularly unsuccessful accelerate their company’s decline by reverting to what they regard as tried-and-true methods. In their desire to make the most of what they regard as their core strengths, they cling to a static business model. Guess what? Doing the same thing every time usually doesn’t work every time! The dynamic and ever-changing nature of products and markets makes this a given. These CEOs may insist on providing a product to a market that no longer exists, or they fail to consider innovations in areas other than those that made the company successful in the past.

Instead of considering a range of options that fit new circumstances, they use their own careers as the only point of reference and do the things that made them previously successful. For example, when Jill Barad was trying to promote educational software at Mattel, she used the promotional techniques that had been effective for her when she was promoting Barbie dolls, despite the fact that software is not distributed or bought the way dolls are.

Often CEOs who fall prey to this habit owe their careers to some “defining moment,” a critical decision or policy choice that resulted in their most notable success. It’s usually the one thing that they’re most known for and the key achievement that gets them all of their subsequent jobs. The problem is that after people have had the experience of that defining moment, if they become the CEO of a large company, they allow their defining moment to define the company as well – no matter how outdated or unrealistic it has become.

Warning Sign of #7: Constantly referring to what worked in the past Side note – particularly for managers, this can be a crushing fault that is exhibited with painful frequency. Consider the individual contributor who is promoted to manager due to their outstanding independent achievements but those achievements don’t translate into outstanding management decisions or contributions. The result is incredibly frustrating for the team who works for the unqualified manager who is a “one hit wonder” with no other ideas in their briefcase.

The bottom line: If you exhibit several of these traits, now is the time to dump them from your repertoire. If your boss or several senior executives at your company exhibit several of these traits, now is the time to start looking for a new job.
I would sum up these seven undesirable habits of highly unsuccessful executives by describing them as: leaders who believe they are better than they really are, have big egos which need to be regularly stroked, don’t stay in touch with reality and don’t engage the skills of their team to make their business continuously successful. Now you know. These are management traits to avoid as well.

What’s the opposite of this? The successful executive or manager who has people who are excited to be working for them and knows how to inspire and keep talented employees. Sounds like a much better formula to which we can all aspire as we continue to pursue improving our own management skills. How are you doing this now? Write to me and let me know! That wraps this blog series …. I’ll be back in a couple of weeks with a new Management Secrets series topic. See you then.

Last time around we covered bad habits one and two – leaders who think they dominate their environment, and leaders who cannot delineate boundaries between personal and corporate interests. Read the details in my blog entry immediately below this one. With this blog installment we’ll look at a few more.

Habit #3: They think they have all the answers Here’s the image of executive competence that we’ve seen admired throughout history: a dynamic leader making dozens of quick decisions, dealing with multiple crises, and taking only seconds to size up the situation and provide a solution. Big problem with this picture – it’s a total fake. Crisp and decisive leaders tend to move so quickly they don’t grasp the ramifications of fast decisions. Worse, these leaders often have huge egos which won’t let them learn new answers. These leaders who know it all shut down other points of view and often make a series of bad decisions that take the company down the tubes.

Warning Sign for #3: A leader without followers — the executive or manager who has no team members who are allowed to follow him is hogging the glory and all the decision making – bad formula. Side note – at the management level the person with this habit often refuses to recognize his team’s accomplishments in front of upper management – they hog all the glory and keep their team from having any visibility with leadership. This charade can only last so long before their true lack of skill comes out –or worse – they’re being protected by someone higher up and they hang on for years.

Habit #4: They ruthlessly eliminate anyone who isn’t completely behind themCEOs who think their job is to instill belief in their vision also think it’s their job to get everyone to buy into it. If you don’t rally to the cause you’re considered to be against it. Hesitant managers have a choice: Get with the plan or get out. This approach is unnecessary and destructive. CEOs don’t need to have everyone unanimously endorse their vision, in fact, eliminating contrasting points of view cuts them off from seeing problems and correcting them. Eventually those executives being stifled decide to leave and no one is left to warn the CEO when disaster is in hovering in the wings.

Warning Sign for #4: Executive departures Side note – at the management level, departures can take the form of leaving the company or moving to other departments to get away from destructive leaders — from another perspective, employees who seek other jobs to get away from bad managers are sending the same message. If you’re a manager with this kind of negative track record, stop and think about what you’re doing to your team.

Habit #5: They are consummate spokespersons, obsessed with the company imageYou know these CEOs: high-profile executives, constantly in the public eye. The problem is that amid all the media frenzy these leaders’ management efforts become shallow and ineffective. Instead of actually accomplishing things, they often settle for the appearance of accomplishing things. When CEOs are obsessed with their image, they have little time for operational details. As a final negative twist, when CEOs make the company’s image their top priority, they run the risk of using financial-reporting practices to promote that image. In their eyes, everything that the company does is public relations.

Warning Sign of #5: Blatant attention-seeking Side note – for a manager, the same dangers are apparent; managers constantly seeking attention are simply doing a lousy job being a manager and may be faking results, eventually it bites them in the back end.

When have you worked in an environment where leaders or managers exhibited habits 3, 4, or 5? How did you deal with it? As a manager, have you ever fallen into these negative behavior habits? Or better yet, risen above them? Drop me a line and let me know your experiences, good and bad, with these challenging, potentially stress-packed issues. I’ll see you in a couple of weeks with the final two habits in this blog series. Till then, take care.

Not long after hosting that dinner I came across a January 2012 article by Eric Jackson at Forbes: “The Seven Habits of Spectacularly Unsuccessful Executives.” The article covered research conducted in 2004 by Sydney Finkelstein, Steve Roth Professor of Management at the Tuck School of Business at Dartmouth College. In a number of ways, the professor’s study resonated nicely with the job stress conversation mentioned above which, in turn, made me want to share Finkelstein’s research in this latest Management Secrets blog series. Finkelstein examined what was done by over 50 former high-flying companies – like Enron, Tyco, WorldCom, Rubbermaid, and Schwinn – to become complete failures. As you read this list, consider how these seven nasty habits look at the executive C-level and how they look at the next management level down as well.

Unsuccessful Executive Habit # 1: They see themselves and their companies as dominating their environmentThis first habit appears to be the most insidious, since it seems to be highly desirable. Shouldn’t a company dominate its business environment in order to shape the future of its markets? Yes, but there’s a big catch. Unlike successful leaders, failed leaders who never question their dominance fail to recognize they are at the mercy of changing circumstances. They greatly overestimate the extent to which they control events and greatly underestimate the role of chance in their success.

To coin a phrase – they start believing their own press releases. Or put another way, their ego starts writing checks their body can’t cash. These CEOs suffer from an illusion of personal grandeur: Like certain movie directors, they see themselves as God-like creators of their companies. As far as they’re concerned, everyone else in the company is there to execute their personal vision for the organization. Samsung’s CEO Kun-Hee Lee was so successful with electronics he believed he could repeat his success with cars. He invested $5 billion in a saturated market with no business case. Why? He loved cars, had dreamed of being in the auto business and just assumed that’s all he needed. Wrong assumption.

Warning Sign for #1: A lack of respect – Side Note – at the management level, these managers may see themselves as dominating and having sovereign control of their team, humility is in short supply, ego is often profuse, as is lack of respect for the skills their employees bring to the table.

Habit #2: They identify so completely with the company that there is no clear boundary between their personal interests and their corporation’s interestsLike the first habit, this one seems innocent enough, perhaps even beneficial. But “don’t worry” said the spider to the fly. We want business leaders to be completely committed to their companies, with their interests aligned with those of the company. Turns out after digging deeper it was found that failed executives weren’t identifying too little with the company, but rather too much. Instead of treating companies as enterprises that they needed to nurture, failed leaders treated them as their personal offspring — extensions of themselves. With that, a “private empire” mentality was locked in.

CEOs with this outlook often use their companies to carry out personal ambitions. The most slippery slope of all for these leaders is to use corporate funds for personal reasons. CEOs with an impressive track record may come to feel they’ve made so much money for the company that the expenditures they make on themselves, even if extravagant, are trivial by comparison. This twisted reasoning was one of the factors that shaped the behavior of Dennis Kozlowski of Tyco and was exhibited in both his pride in his company and his personal extravagance. This is why he could sound so sincere making speeches about ethics while unethically using corporate funds for personal purposes. Being the CEO of a sizable corporation is the closest thing to being king of your own country, and that’s a dangerous title to assume.

Warning Sign for #2: A question of character – Side Note – at the management level, is it all about how things benefit the manager with no concern for the team? The manager who isn’t regularly concerned with his team’s welfare and will throw them under the bus if needed, falls closely in line with Habit Number 2, “character missing.”

Can you take the first two unsuccessful traits above and recall finding these traits in a manager you have worked for in the past — or worse – a manager YOU may have been? Think it over … drop me a line and let me know what answers you come up with. I’ll see you in a couple weeks with another Management Secrets blog installment and a few more bad habits to chew on.

Today we’re moving on to the second stress response: freak. This is a good stress reaction when you’re running away from a tornado or burning building. Smart move. Freaking out – similar to the stress reaction of “flight” — is not the recommended stress response however when managing your business or group. If you’re a freaked out manager you may be a victim of a natural disaster, you’ve been disconnected too long, had too much caffeine or you’re in over your head. If there is a good side to freaking out it is recognizing the need to make decisions which could save your business. Freaking out usually catapults you into reactionary decision making — good or bad –such as drastic changes in your product and service mix, downsizing employees and space, or even bankruptcy. Whether freaking out is a good stress reaction is all about timing. How long had negative conditions been brewing before you reached a key managerial conclusion? You already know why freaking out is a bad stress reaction when it comes to management tactics. If you had been consistently managing your flanks you likely wouldn’t be freaked out in the first place.

Have you previously managed your way through difficult market conditions by freaking out? Don’t get sucked into this often detrimental reaction to stress. Stay on top of your management responsibilities by communicating with your team and regularly taking the pulse of where you are — successes, failures, revenue, costs, trends, projections, strategies for staying ahead of the curve and more. Looking the other way now and freaking out later isn’t going to make your market stress magically disappear but you’d be surprised how many managers think it will.

It you don’t freeze or freak when confronted with stress in the market place, how do you manage your way through it? More than likely you “fight” – our third stress response option. We’ll dive into the “fight” alternative in my next installment. Until then – feeling stressed? Make a note as to how you are managing your stressful situation or drop me a line with your story. It’s great to hear from you. See you in a couple of weeks.*

*excerpted in part and reprinted from Mary Elston management column with permission from Soundings Publications, LLC.

How are you guiding your business or team with this stressful wave-like market motion in mind? Is the economy improving or isn’t it?! Are you frozen in your current management approach to the teeter totter market; not taking any action at all? Are you freaking out or running in the other direction (the “flight” response to stress)? Or are you fighting back with strategies and actions that keep you moving on a future-focused track? You may be surprised to hear each of these reactions can be good or bad depending on timing and circumstances. Good stress, bad stress; what’s the difference, the best way to deal with it, and better manage your group and business world? For the next several weeks we’ll be looking at options for managing market stress to your advantage.

Freeze. This is a good stress reaction when you don’t have enough information or small changes in the economy haven’t been consistent enough to warrant business adjustments. It may be okay to freeze for a while as you continue to monitor the situation, gather data and maintain market vigilance — being careful not to wait too long. Freezing is a bad reaction to stress when economic swings and diminishing revenues establish a negative pattern. You may be frozen because you don’t know what to do, you’re stuck in your comfort zone (complacent or scared to tackle change), or inappropriately waiting till things get better. Stop! Managing market stress by freezing in your tracks often prompts comments such as: Hello? Is anyone home? Wake up! Doing nothing for the long term can place you in the loser category — don’t let it! Break free from the freezer, thaw out and get moving.

Since freezing usually isn’t your best option, start managing assertive moves to make your business and team visible and vibrant. Revisit familiar and previously successful tactics. It’s time to send out a fresh email to your customer list; make it fun and relevant, providing value-oriented information. Include product and service tips (e.g. best ways to use certain product features), website links for finding related information, the newest hot topics in your industry, along with humorous or “ah hah” moments which helped customers maximize their value. Change up the look of your email too. Have your web master add a new banner, eye-grabbing photos and colors. Integrate your brand with everything touching your customers from email to voice mail, signage to reminder service calls, Websites to what’s coming soon. Manage your efforts with revenue in mind while making your brand and business memorable.

That covers how to manage our first stress reaction – Freeze. Do you freeze when management or market stress hits or do you react in a way that avoids getting stuck on the wrong side of moving forward? Let me know how you’ve previously pushed past the “freezer zone” — send me your input and comments. Join me in a couple of weeks for the next segment in this series and we’ll explore another avenue for managing good and bad responses to market stress … see you then. *

*excerpted in part and reprinted from Mary Elston management column with permission from Soundings Publications, LLC.

Because of this, many surviving companies and independent entrepreneurs have a refined business model that’s different coming out of the recession than the model they had going in. They’ve likewise taken advantage of a bright spot these same market forces have produced; expansion in the service sector or other value-driven areas. Those who lasted through the lull also navigated the economic storm by judiciously managing costs, dynamically driving responsiveness to changing consumer needs, and proactively protecting customer relationships. They have a good handle on maintaining their profitability as they move ahead because they are actively taking the new customer mindset into account while aggressively pursuing competitive market positioning and pricing.

In what other ways have managers adjusted their business model? They are likely paying greater attention to what customers really want – not what they want to sell them. This is huge. Listening to buyer’s preferences is central to their market maneuvers. There’s a strong awareness of filling customer needs and, more than ever, using value-oriented techniques to bring consumers in the door, expand wallet spend by each customer and retain customers they already have. Sloppy or lackluster customer loyalty programs need not apply. Little things like a 10% off coupon, a complimentary introductory service and much more are essential in today’s business climate. You won’t find market survivors expecting the economy to return to previous levels of lucrative spending — they know it won’t.

What does this mean to you, the manager?
With the market bottom projected to continue through part of 2012 and a new value mindset for many buyers solidly in play; a fresh business model is mandatory. The future involves a smaller world with slow growth and less volume for higher priced discretionary items. As a manager in today’s economy, your navigation challenge will be to recognize and work with changing economic forces, realize your need to adjust for this latest consumer class and amend your business approach accordingly.

Remember the navigation anecdote I shared at the beginning of this blog series? It’s different with business models. If you make a wrong turn along the way there will be no automated navigation lady telling you to: “Make a U-turn at the next intersection.” You’ll have to figure it out yourself — and I know you will — because you have already plotted a course for continued business success; an extension of the course you plotted for surviving the downturn in the first place. Well done. For those managers who haven’t updated their business model yet, get going! There’s revenue waiting for you at your destination as long as your journey includes savvy, realistic market navigation.

Drop me a line and let me know how you’ve managed your way through business model shifts in the past … good and bad. I’ll see you again in a couple of weeks with another fresh Management Secrets blog series.*

*excerpted in part and reprinted from Mary Elston management column with permission from Soundings Publications, LLC.

How is the consuming customer doing when it comes to personal savings? Previous trends in personal savings rates chime financial foolishness with a clobbering clang. The U.S. Department of Commerce, bureau of Economic Analysis advised in late November 2010, personal savings rates ranged between 7-11% from 1959 through the 1970’s, hitting a high of 12.2% in August of 1981. After that, U.S. consumers steadily saved less and less for over 20 years, sinking to an all time low savings rate of an emaciated 0.8% in April, 2005. Yuck. Talk about living on the edge and betting on the come. Since November, 2008, savings rates have improved to the 5-6% range, with personal savings running at 5.7% as of October 2010. Better — and part of the reason for a new consumer class, customer mindset and business model reality.

With housing and employment meltdowns, many consumers finally realized living on the economic edge is incredibly uncomfortable, especially when losing your job throws you into a nasty fiscal tail spin. Those with savings fared better. Others continued being money smart and even more conservative. Now we’re getting to the meat of the matter –the result is a new customer class of value minded, money conscious, careful spenders. The former “aspirational buyer” who wanted to emulate the rich by buying luxury items on impulse is a thing of the past. Consumers have a new mindset and everyone is more sensitive to the money they spend. This means large, high priced discretionary items loaded with frills (cars, boats, jewelry, electronics and more) don’t have nearly the following they had before.

Middle class Americans need affordable options or they’ll make do with what they have — or worse – remain priced out of the market entirely. Manufacturers, marketers and managers who are embracing this message are cranking up the volume on value-driven lines to attract buyers who put big spending on hold. As an example, value priced cars have essential features but are lean on amenities and additional accessories. Selected dealers have now rolled smaller, less expensive models onto the showroom floor and are offering value-oriented options when available. The result is an appealing alternative for the value-minded buyer. While tough loan options for the foreseeable future may limit buying to those who have ready money, other buyers with stable jobs will likely qualify for loans when the lending market loosens down the road.

With this new consumer class, how should you manage your business model; what changes should you make? Smart managers and business owners know you have to change to survive in today’s market reality — it you don’t, you won’t last. We’ll talk about what smart business model changes astute managers have made in my next blog release. In the meantime, what changes have you made as a manager given the new value-based customer mindset? Has it impacted what you do? Send me your comments …. it’s great to hear how the real world is affecting the way you manage. I’ll be back with the conclusion to this series in a couple of weeks.*

*excerpted in part and reprinted from Mary Elston management column with permission from Soundings Publications, LLC.

Is she annoyed or what? Who’s right, me or the navigation lady? Who cares! I only want to get where I’m going with minimal time and aggravation. Sometimes the random route I select achieves this goal; other times not. In this new blog series I’m starting today, we’ll explore the importance of navigating and managing business model changes in today’s challenging economy.

How are you managing your business in the current market? Are you reaching your revenue destination on a random or regular basis? Have you made course corrections to your business model or is your navigation stuck in “wait ‘till it gets better” mode? Here’s the scary thing — a few managers actually believe the market will return to the frivolous spending ways we saw a few years back. You know, when everyone was burning through money and buying bigger, glitzier cars, electronics and other toys like Daddy Gotbucks. Stop the music!

The reality is it’s not going to happen. I’ll repeat it like the navigation lady does: “It’s-not- going-to-happen.” Why not? Because consumers have been hard hit across two crucial elements of their economic existence: employment and housing. Join me as we walk through the numbers and look at what this means to you, the business manager, and what the new customer class and market reality will be in the future.

Let’s start by looking backward for a moment. Unemployment at the end of 2010 bobbled near 9.8%. At this rate, per Money Magazine, December 2010, employment won’t return to pre-recession levels until October 2013 or even longer. Unemployment in 2011 hasn’t fared much better. Housing foreclosures and short sales likewise continue to suck the life out of money markets and the general economy. Per Money Magazine again, in certain areas like southern California, average home values have fallen over 30% with foreclosures and short sales expected to bleed on for years as people float in and out of jobs and financial solvency. In other geographies such as parts of Florida, home values have dropped 50% or more. In short, jobs and housing finances are looking poorly for many.

These numbers give you an initial taste as to why it’s important to manage your business model with a changing customer mindset in mind. We’ll go into a few more interesting statistics in my next blog entry. Until then, think about how the current economy has caused you to change as a consumer and how this has impacted the way you spend your money … which in turn … has impacted the way the businesses you frequent are now being managed. You’re invited to send me your comments on this thought … see you next time.*

*excerpted in part and reprinted from Mary Elston management column with permission from Soundings Publications, LLC.

In my most previous installment I mentioned Saras Sarasvathy, a professor at the University of Virginia’s Darden School of Business.  Sarasvathy wanted to find out how smart entrepreneurs think and share her findings with other rising business wannabes.  She looked at several small business successes and failures whose founders had at least 15 years of entrepreneurial experience, had started multiple companies and taken at least one public.  A wide range of subjects and companies were involved in her study which covered organizations with annual revenue from $200 million to $6.5 billion. How did they manage to bring all the pieces together and get their business started?

As you may recall from last time, Sarasvathy determined expert entrepreneurs thrive on what she referred to as effectual reasoning.  This means these entrepreneurs are incredible improvisers who don’t start out with a concrete goal, but instead use their personal skills, resources and creativity to develop goals on the fly.  On the opposite side of the scale, successful corporate executives use causal reasoning – they set goals and find a way to reach them.

Now for more good stuff.  Here are the four major characteristics of the effectual thinkers … the entrepreneurs:

1)    Do the doable, then push it.  Take a great idea, do as little market research and planning as possible and push the idea into reality … then push it further.  Impatience to get to market, perfection avoidance and embracing an inability to predict the future are part of the plan. This was summarized as “Ready, fire, aim.”  Yeah – sounds right.

2)    Woo partners first.  Pick partners and package yourself early before you have to spend a lot of money, keeping in mind your most influential partners are first customers.  Entrepreneurs used customers to help with product design, sales, finding suppliers and often as their best investors!   They lived the customer experience to make the product better.  Primal yet powerful.

3)    Sweat competitors later.  While corporate, causal thinkers research and map out the competitive landscape, expert small business founders analyze what can succeed before worrying about the competition.  They see themselves not in the thick of the market but on the verge of creating a new market –“like farmers planting a seed and nurturing it.” They care about the patch they’re creating and growing; competition is secondary.

4)    Don’t limit yourself.   In brief; think big.  Entrepreneurs express confidence in their ability to recognize and respond to developing opportunities.  They may be cocky but they don’t let limited thinking restrict their potential success versus their corporate counterparts who may use more constrained projections due to answering to a higher power.  This also helps us understand why entrepreneurs are seen as eternal optimists.

Now think about today’s world of budding small business owners.  Do you know any fresh, independent shop keepers bringing products and services to market?  I’ll bet you do– in fact – I’ll wager you have at least one friend or friend of a friend who took the leap.  Despite the choppy waters of small business financial risk, employee drama and market challenge, all these entrepreneurs and effectual thinkers jumped in. 

When you drive by your local pizza place or nearby car repair shop, consider the independent owners and risk takers running them who may have turned a previous job loss into a new option for customers like you and me.  Also think about their management approach – how do they continue to be successful?  What management techniques are they using?  The best way to find out is to give them a try!  This is the spirit behind entrepreneurial energy that’s generating fresh market power — which is in itself — a powerful force contributing to the market recovery.

That wraps this blog series.  You’re invited to share your thoughts on the entrepreneurial manager and the energy they bring to their business.  Are you an effectual thinker getting ready to launch your own business?  Let me know, it’s always great to hear from you!  See you again in a couple of weeks.*

*excerpted in part and reprinted from Mary Elston management column with permission from Soundings Publications, LLC.

Independent business establishments are hanging out their shingles to provide products and services across the spectrum. Where does their risk taking energy come from? How do they think and where do they drum up their ideas? In someone’s basement? Garage? Or the corner coffee shop? On February 1, 2011 Inc. Magazine explored question of risk taking energy in an intriguing article by Leigh Buchanan called “How Great Entrepreneurs Think.” That got my attention; let’s unwrap the how and why right now.

Here’s the dirt — Saras Sarasvathy, a professor at the University of Virginia’s Darden School of Business wanted to find out how smart entrepreneurs think and share her findings with other rising business wannabes. She looked at several small business successes and failures whose founders had at least 15 years of entrepreneurial experience, had started multiple companies and taken at least one public. Out of the 45 subjects she interviewed, her conclusions included comments from 27 of them. The companies, all run by their founders, covered industries reaching from toys to railroads and represented annual revenue from $200 million to $6.5 billion. What did Sarasvathy’s study uncover? Buckle up business buddies, we’re about to ride through a range of fascinating findings.

Sarasvathy determined expert entrepreneurs thrive on what she referred to as effectual reasoning. This means these entrepreneurs are incredible improvisers who don’t start out with a concrete goal, but instead use their personal skills, resources and creativity to develop goals on the fly. On the opposite side of the scale, successful corporate executives use causal reasoning. Causal reasoning involves setting a goal and meticulously finding the best way to accomplish it. Here’s another interesting twist – rookie company founders appear to be all over the effectual –to–causal board. Those who grew up around family businesses are more likely to be effectual thinkers and those with MBA’s lean more toward causal reasoning. Makes sense, doesn’t it? If you grow up around entrepreneurial, effectual thinking it could easily become second nature to think this way yourself.

How did effectual reasoning manifest itself with the expert entrepreneurs? Sarasvathy’s study found four major characteristics were on their route to market. In a couple of weeks I’ll walk through each of these and ask you to consider small businesses you’ve seen execute these characteristics. In the meantime, think about what makes you loyal to the small businesses you frequent. What are they doing right? What could they be doing better? And even more important — how do they manage to survive? Go ahead and have some fun pondering these points. Drop me a line and let me know what you come up with -– see you next time. *

*excerpted in part and reprinted from Mary Elston management column with permission from Soundings Publications, LLC.