The Entrepreneur and the Academic

The Entrepreneur and the AcademicWalking around Melbourne city one afternoon I decided to have some chips for lunch and ended up in a trendy chippery in Elizabeth Street, munching away on some deep fried potatoes and mayo. The man serving me was the owner, an entrepreneur experienced in the fast food business. Brad, spoke openly and explained how he tries to make a buck in the hyper-competitive world of fast food.

Brad celebrated big successes in this market in the past but emphasised that he had only completed high school and had no formal business qualifications whatsoever.

Some time ago, Brad attended a post graduate management lecture at a local university. First Brad thought that the lecturer was talking gobbledygook, but after a while recognised that the theories presented in this lecture match what he does intuitively to run his business.

The entrepreneur is the hero of contemporary capitalism

I told Brad that I occasionally teach marketing at La Trobe University. What management scientist do, I continued, is to study entrepreneurs like Brad to figure out how they do business and present this back to students in theories, formulas and diagrams. One of the aims of business studies is to unlock the intuitive knowledge of entrepreneurs such as Brad so that other, less gifted and more risk averse budding entrepreneurs, can replicate their success.

The Entrepreneur in Society

The entrepreneur is the hero of contemporary capitalism and has been idealised and studied in great detail by scholars around the world, each looking for the holy grail of entrepreneurship. Researchers study entrepreneurs like etymologists study insects. They dissect them, analyse them, observe their behaviour to extract the essence of what it is that makes them successful.

Entrepreneurial biographies are, however, always incomplete and sanitised versions of reality. The essence of entrepreneurship is a mythical concept in business studies that can only be known through experiencing what it is to be in business, not by studying it

Further reading:

The Risk of Risk Management: A New Approach to the Risk Matrix

Risk management is like throwing diceManagement is about managing risk. If there were no risk, there would be no need to manage anything because positive outcomes would be guaranteed.

If Einstein were a management guru, he would have said that managers don’t play dice, but how wrong he was!

Around the world, businesses are using simple matrices to manage risk. People gather around a table and have arguments over whether a risk is low, medium or high. In most cases without proper consideration of the actual statistical issues.

Risk matrices are a poor proxy for real risk management and suck up a lot of resources to ‘manage’ trivial risk.1 Risk matrices provide false confidence in the actual risk profile and, more often than not, produce outcomes that do not add any information to the situation other than the ability to provide colourful overviews.

At the Lucid Manager, we have created an alternative risk matrix that you can use to inform your management decisions. We bring risk management to life. No boring and meaningless numbers, but practical advice. Download this picture, assess the likelihood and consequence of your risk and act by this schedule. Success is guaranteed!

Lucid Manager Ris Matrix


  1. Cox, L.A. (2008), What’s Wrong with Risk Matrices?, Risk Analysis, (28)2: 497-512. 

Welcome to the Matrix: Methodology to Assess Business Theories

Business researchers are seeking to find the ultimate elegant theoryThe science of business, just like any other academic field of endeavour, seeks to understand the nature of reality. Scientists judge a theory not only on its ability to predict the future but also on whether it can be considered elegant. In the physical sciences, for example, Stephen Hawking admits that he longs for the day when nerds can wear t-shirts with one simple formula that explains everything in the universe.1

The Science of Business

Business theorists are also drawn towards the aesthetics of their thoughts.2 The textbooks slaved over by MBA students all over the world are littered with two-dimensional matrices that purportedly explain everything from what business strategy to use or whether the divest whole business units. Famous examples are the BCG Matrix, Igor Ansoff’s strategy matrix, the ubiquitous SWOT analysis, Porter’s Generic Strategies and so on. Some more adventurous thinkers take it a step further and postulate slightly more complicated diagrams, such as the GE-McKinsey Matrix or Porter’s Five Forces and of course his Diamond of national competitive advantage. It is a comforting thought that the unpredictable nature of business reality can be expressed in simple two-dimensional diagrams that even the least intelligent manager can reproduce to impress his peers and superiors with.3

Since I started my journey into business theory several years ago, it surprised me how much academic literature on business is separated from the popular books that managers read and apply in their daily work. A great moat surrounds the ivory tower of academic business schools. Even though most managers spend considerable time chewing the fat with academics when they attend university to earn their coveted degrees, as soon as they leave there is often little further interaction. The word academic is mostly used in a negative sense as an indication of something being of no practical use.

The Lucid Manager would not be a real business blog if we did not introduce our meta-matrix or ‘über-matrix’ of the business sciences. So, let’s take the blue pill and enter the world of the Management Theory Matrix, henceforth known as the LM (Lucid Manager) Matrix.

The first dimension of the LM Matrix is the extent to which theory is corroborated in reality. In other words, how much empirical evidence is available to support the theory. The second dimension to consider in the LM Matrix is the popularity of the theory. Popularity can be easily tested by reviewing the best-sellers lists of internet bookshops and reviews in popular management magazines. To visualise the matrix and provide some metaphors, a zoological approach is used in the LM Matrix. This method is inspired by the ubiquitous BCG Matrix and DiSC personality profiling. In the bestiary of business theories, we can distinguish four animal kingdoms, dodos, owls, rabbits and unicorns, each with their unique characteristics.

Management Theory Matrix (HTC Matrix)

Management Theory Matrix (HTC Matrix)

Dodos

When a management theory has little empirical foundation and is neither very popular, it can be called a dodo. Just like the now extinct ugly flightless bird from the island nation of Mauritius was hunted to extinction by Dutch sailors in the seventeenth century, these theories are not able to withstand the evolutionary forces of social selection by managers and scholars. Although the father of what we now call management science, Freddy Taylor, who himself was killing the dodos of his time, proclaimed to base his work on rigorous measurements of reality. More recent research of his private notes shows that this is more myth than reality.4 Taylorism and Scientific Management is thus an example of a dodo. Although it has spawned many modern theories, Taylor’s original thought has fortunately perished.

Owls

Academic journals of management theory are brimming with valuable research, carefully undertaken and analysed using deep thought and sophisticated mathematical models. Prestigious journals rigorously select papers that can demonstrate a high level of empirical validation and predictive power. The complexity of academic thinking is, however, not popular with managers. Most people in business are not comfortable with convoluted mathematics and abstract structures proposed by scholars. The ancient Greek goddess of wisdom Athena is often depicted with an owl perched on her head. These theories are as such called owls because of their great wisdom. Alas, owls are shy creatures that prefer the darkness of the night and are rarely seen in boardrooms and management workshops.

Bunnies

Most theories that win the popularity contest in the business ideas market dramatically lack in empirical validation. Managers blindly accept Maslow’s Hierarchy of Needs as a psychological truth and try to emulate the 7 Habits of Highly Effective people. They are called bunnies because they are cute and cuddly on the outside, but breed uncontrollably and can cause irreparable damage to the environment; burrowing holes and undermining the foundations of organisations. Some authors, such as Jim Collins and his immensely popular book Good to Great, hide behind a veil of pseudoscience and undertake shallow research without the statistical rigour required in science. But his work is littered with tautologies and is lacking in critical analysis.

Unicorns

What would be expected the Cash Cow of management theory are those ideas that are corroborated with actual business practice and are indeed practised widely, are unfortunately as elusive as the mythical unicorn. But the unicorn stands for a hope of better times ahead. Maybe one day a new age in business will e heralded, as was originally proclaimed by Taylor, and millions of workers around the world can sigh of relief when they are liberated from the dodos and owls, instead of riding unicorns towards the rainbow.

Epilogue

But what does this all mean you might ask yourself. The simple message that the LM Matrix proclaims is, in the words of Immanuel Kant: “Sapere Aude!”, or in common language, dare to think.

A business theory is, in essence, social theory, and no aspect of reality is so difficult to capture in theory as the behaviour of human beings. Good business science is complicated and often requires deep thought and self-knowledge to be able to understand business. As a social science, a business can not be explained away in simple theories and matrices. Understanding comes with wisdom and insight that can just not be drawn in two-dimensional diagrams.


  1. Stephen Hawking (1988) A Brief History of Time

  2. W.G. Astley, W. G. (1985) Administrative science as socially constructed truth. Administrative Science Quarterly, 30: 497–513. 

  3. Matthew Stewart (2010). The Management Myth: Debunking Modern business philosophy. New York & London: W. W. Norton. 

  4. See Matthew Stewart’s excellent book The Management Myth, which provided the inspiration to write this post. 

Enter the Dragon—Six Simple Lessons on Entrepreneurship

Some lessons on entrepreneurship from underneath an imperial dragon.Wearing bright pink pants, white T-shirt and green sash, I stood looking through the barbed wire and plague locusts at the trees filled, for the first time in Bendigo’s history, with a smelly and squawking colony of fruit bats. The sound of Mancini’s Pink Panther theme was a stark counterpoint to the apocalyptic feel of the marshalling area and was an odd but pleasing reminder that, out there, where the festivities of the 140th Bendigo Easter Festival. My strange outfit matched that of the other sixty men, whose job it was to spread out over the length of Sun Loong—the forty-year-old, one hundred meters long imperial dragon—and carry him through the crowd; the grand finale of the Festival’s Easter Monday street parade. When I hoisted the bamboo and silk dragon’s midsection above my head, the one thing I least expected to receive was a motivating insight into entrepreneurship.

After being swept the 500 metres toward the parade starting area, each of the dragon-bearers had an hour to wait. This was when I met Ewan.

Lessons on entrepreneurship

Ewan was a fifty-something with close-cropped hair and a no-nonsense attitude. We talked about our kids, and he mentioned how he enjoyed the time he could spend with his children because he works from home—something he has done for a great many years. Ewan explained he could do this because he has a passion for starting up businesses and growing them. He also mentioned the many and varied industries in which he’d worked: pay-TV, repossessions, logistics, telecommunications; to name a few. Though I have no idea what level of success he’d achieved in any of the businesses in financial terms, it was clear that he had thoroughly enjoyed starting each business, each industry (except telecommunications) and he loved the lifestyle his choices afforded him.

Throughout our discussion he generously offered a lot of advice about how to avoid working for someone else … there’s only one way to do something: your way. Some of Ewan’s views on entrepreneurship were:

  • Start small and build up—that way you avoid getting trapped if the idea doesn’t work
  • Seek out a niche—something that no-one has thought of or bothered with
  • Avoid employing people—where possible use subcontractors
  • You don’t need training to be an entrepreneur
  • Treat others the way you expect to be treated: with honesty and integrity
  • Avoid the telecommunications industry—no one is making money in telecoms.

The shout went up that it was time for the dragon to march its way through the streets lined with families from all over Victoria. As I watched Ewan’s feet shuffle ahead of mine, I thought about what it is that makes him or any other entrepreneur successful. It’s an indefinable mix of self-confidence, energy, cleverness and determination that predisposes them to succeed.

After 4,237 steps over 2.1 kilometres, I helped Sun Loong rest in his Museum home to reluctantly sleep for another year. I returned to my regular clothing, none of which is pink, and walked out into the sunlight and away from the barbed wire enclosure, the bats and the locusts.

I don’t believe in signs, omens, or ‘messages from the universe’ and having walked through an apparent apocalypse, I left with a much better sense of entrepreneurship and what it is to have a real love of business—something I never expected when I entered the dragon.