In the early years of entrepreneurial education, business schools mainly sponsored business plan competitions. However, these matches had drawbacks. Business plans are long and take time to read, analyze and review – at the end of which no one can accurately predict a company’s success. It’s never clear whether the prize should go to the plan with the “best” lyrics, the most optimistic financial projections, or real proof of potential.
Business schools then turned to pitching competitions. The pitches are short and all the judges have to do is listen to the pitch and choose award winners – deserved or not, even if no one can predict the success of a pitch.
And then we got Shark Tank – the TV show that seems to have mesmerized many into thinking all a successful entrepreneur needs to do is:
“Innovate” an idea based on the assumption that ideas and innovation are the foundation of great enterprises
Develop a pitch that sounds great – don’t know the criteria for great pitches
Deliver it with enthusiasm to show sales skills
· Win prizes because sponsors want to “promote” entrepreneurship as publicity for themselves. How many of the winners and losers actually start the business they’re launching, and how many succeed, is somewhat opaque.
Mark Cuban is a smart guy. He built his company at the dawn of the Internet age and sold it to Yahoo for billions. With this capital, he bought a basketball team and with his charm and cleverness he landed a place in Shark Tank – perhaps the most successful of the investors.
Thankfully, he’s now spilling the beans by admitting that he’s invested about $20 million in 85 ventures in Shark Tank – and is under water.
Why is this authorization important? Because it points out that the Emperor is naked – that no one can predict the potential of a pitch.
Hopefully, this admission can prompt business schools to add to entrepreneurial education by shifting their focus from the idea to the entrepreneur. This is why?
#1. Idea (or “innovation”) is not the key. Strategy and skills are:. Business schools emphasize innovation as a cornerstone of entrepreneurship. Cuban confession clearly suggests that the idea is not the key. Of the more than 120 unicorn entrepreneurs, only 1% trusted the innovation. Most succeeded thanks to the entrepreneur’s skills and strategy:
· Many launched big-box stores. Sam Walton imitated the idea and dominated because of his strategy to focus on small towns
· Many got into PCs. Bill Gates bought the operating system and managed to make it the standard thanks to his alliance with IBM
· Many started connecting people online. Mark Zuckerberg imitated the idea, beating Rupert Murdoch for his strategic focus on college students, starting with Harvard and Stanford.
It is difficult to predict the strategy that can dominate emerging trends because it requires the right combination of product, customer segment and competitive advantage. That’s why many unicorn entrepreneurs, like Travis Kalanick (Uber), are switching from limos to cars. And why it is important to teach entrepreneurs the process to remain flexible and pivotal.
#2. Pitch matches cannot predict success. Shark Tank is built on the field – if you believe the size and the hype. But Cuba’s confession shows that even one of the smartest people in the world cannot predict accurately. Should Business Schools Stop Promoting Pitch Competitions?
#3. Business schools can do more to promote entrepreneurial success by teaching skills and smart strategies and by promoting skills competitions. Instead of a “fast” pitch competition, business schools should promote a “slow” skill competition. Learn skills and smart strategies to succeed, then evaluate real performance – without guessing. Offer resources to those who prove their skills.
#4. Venture capital does not buy success. VC, and the Idea-Pitch-Incubator/ Accelerator-Angels-VC VC method, works for about 20 out of 100,000 (see The truth about VC) and especially in Silicon Valley. And most of these entrepreneurs are severely watered down because they often get VC early and lose control of their businesses. Business schools can teach the Skills-Strategies-Reverse VC method to take off without VC and grow with control, as was done by about 94% of unicorn entrepreneurs.
It would be great to see business schools focus on teaching what they are designed for: skills. And avoid theater in entrepreneurial education.
MY TAKE: How much proof do business schools need to switch from pitch competitions to skill competitions? Maybe Cuban should talk to them directly.