The Luck of the Entrepreneur

July 2010 by Leon Gettler www.smartcompany.com.au

Can you create luck?

Oil billionaire J. Paul Getty had three rules for business success: get up early, work hard, find oil. He had a good point. Luck accounts for the difference between success and failure in business and economics more often than we think.

But while many business owners are nervous about the idea of luck and can become suspicious when lucky opportunities present themselves, there is a growing brand of entrepreneurs, academics and thinkers dedicated to the idea that business owners can actually create and manage luck.

It s not only about taking chances, but about getting out and meeting more people, sharing ideas and not being frightened of wandering off the beaten track.

Michelle Mathews, who runs the successful Deck of Secrets guides for shopping, cafes and other cultural interests, has had lots of luck. But much of that, she says, has come from bad luck.

A former flight attendant with Ansett, she was dabbling in publishing in 1998 in the years leading up to the airline folding. Her lucky break came when she was made redundant.

If that hadn t happened, my publishing company would have limped along and I would have been increasingly frustrated staying at Ansett, she says.

To have the rug pulled out from underneath you at some stage is usually a good thing. Some of the best opportunities I have had have been born out of misfortune.

Along the way, there have been some lucky breaks. Deck of Secrets, for example, has been turned into an iPhone app after she was approached by a developer. A chance meeting turned into a great business opportunity. But then, she was approached because she had been dabbling in mobile technology. And whereas others might have walked away, Matthews seized the opportunity.

Creating good luck, she says, is about noticing and taking opportunities.

As an entrepreneur, you always have your mind switched to looking for things and observing opportunities. Just by being visible, you get approached by people who have ideas who want to work with you.

That often means taking risks, and some opportunities don t work out. Matthews says it all comes back to attitude. She says she is careful with commitments and that her business is flexible enough to ensure risk mitigation.

I outsource everything so that if something goes wrong and is unpalatable, I will steer the business in a slightly different direction. I am not wedded to a fixed infrastructure or employment structure. Most other companies would deal with long lead times and inflexible structures so that it is difficult for them, even if they spot an opportunity, to act on it.

She says that lucky chances come from getting out and meeting more people. The more different they are, the better it is as this can provide unexpected opportunities. It s a skill, she says, that hones the mind and preparedness to take chances.

If you do lots of maths problems and language problems, you will expand the neurons in your brain, it s that kind of thing. It s pretty easy to stick to the same routine but nothing is going to come of that. The more you get out, the more you see things.

A lucky attitude

David Austin, who runs the entrepreneurship and creation of new business course at Melbourne Business School says luck is a misunderstood concept. It s about attitude.

A lot of what looks like good luck is that capacity for noticing opportunity, Austin says. It tends to involve divergent thinking.

Pretty frequently, for example, you will hear repeated stories of people who started a business and they were weeks or even hours away from having to close the business. Then something happened and they continued. But when you take a closer look, you will see that as disaster loomed closer and closer, it in fact encouraged them to change their behaviour in a significant way and it was their changed behaviour that made the difference.

It s not about creating luck, he says. What you are really doing is having the capacity to notice it and to notice its early seeds. It looks like you created it, but you haven t really, he says.

Entrepreneur Ziggy Pyka has had extraordinary luck. Fifteen years after arriving in Tasmania and setting up a ginseng business, his company 41 South has gone from nowhere to success after success. It targets Asian markets and its ginseng is now infused in vodka and gin, chocolate, nougat, honey as well as a herb and spice mix for cooking. The company, tucked away in Deloraine, has been featured on national TV.

Pyka says luck is only part of the story. Luck doesn t come about by itself, you have to make it, Pyka says. You actually have to make decisions. I don t believe in Lotto.

He says the key is to stay positive and to take calculated risks. Setbacks are inevitable but they offer valuable lessons. Bad luck is just setbacks. You look at it, you think about why it happened and you solve it.

Some entrepreneurs are nervous about pursuing luck but Pyka says that always boils down to the business model. In the business world if you start a business and in the first year, you don t have a good return, then it s seen as not a good business. I see it differently. If you want to do something, even if it doesn t bring you much return at the beginning but you can still make a living out of that, you have to pursue it.

Business consultant Jason Bresnahan specialises in luck. Apart from running a regular blog, The Pursuit of Luck, he takes clients through luck pursuit sessions where they identify opportunities.

How luck happens

He says companies get lucky when several elements align. First, there has to be a random collision of interactions that create opportunities. Secondly, the entrepreneur needs to be prepared to take opportunities that present themselves. And finally, the business needs to have systems and techniques that can exploit opportunities while mitigating risk.

Bresnahan says entrepreneurs need to get out more and interact, forcing more interactive collisions. It means they have to break routines, get off the beaten track and challenge conventional wisdom. By sharing ideas, they can bounce them off others and pick up even more brain waves.

It s something many companies struggle with, he says.

People and companies get into routines and systems which they haven t questioned for a long time, Bresnahan says.

They pursue the same market and they love the status quo, even though they give lip service to innovation. They are on those train tracks and headed in one direction.

The way that people, small businesses and large corporates pursue luck is to get off those train tracks, get off the beaten track and go and try different things that are against the grain and conventional wisdom of the day. It s about how you create more of those random collisions. Random opportunities will present themselves to you.

There are some sectors that thrive on lucky deals. Venture capital, the film industry, drug development companies, sports agents, talent agents and book publishers can all take off with one lucky break.

Bresnahan says their business model is built around a portfolio. You win some, you lose some, but you are sufficiently diversified to manage the risk. With that portfolio, companies can take risks.

When the record producers backed Lady Gaga, they had absolutely no idea she was going to be an international sensation, Bresnahan says.

Certainly when they backed her, they were pursuing luck because it was a very odd personality and it was odd music at the time. They went off the beaten track. They weren t backing American Idol winners, they were not backing mainstream country people or mainstream rhythm and blues, they were backing someone who did not fit any role.

But you don t have to be a record label to get a lucky break.

All businesses, no matter how boring they might see themselves, have the opportunity to pursue pursuit of luck strategies, he says.

As an example, he cites a company in Utah, US, K-Tec, which manufactures blenders. Someone at the company started blending everything from iPhones and iPads to snow skis. The results were put on YouTube which, according to some reports, generated 300 million hits.

If that s not fantastic marketing and publicity creation, I don t know what is, Bresnahan says. They got off the beaten track, did something odd that no other blending manufacturer in the world did. I would buy a $US435 blender that blends a snow ski, it s a good product.

Bresnahan says being in the right place at the right time, a common line about luck, does not happen by accident.

If you think that through logically, there is a way to increase being at the right place at the right time and that is being in more places at more times, he says.

If you locked yourself in your living room and turned on the television and ordered pizza and didn t go anywhere, would you get lucky? No. Someone who can be in 18 different places with 18 different sets of people every day is forcing more random collisions. They are going to be lucky. But in accelerating your interactions, there s no point accelerating the same old, same old. You have to accelerate in different directions with different people and more opportunities will present themselves.

The fear of luck

He says many entrepreneurs are frightened to seize lucky opportunities. It s about fear of embarrassment, losing self-esteem, losing money and a discomfort about moving out of a comfortable routine.

And many small businesses fail to get lucky because they refuse to share ideas. Companies can, for example, put an idea up on their website and then work off the ideas and feedback that comes in.

Not sharing an idea will see that idea rot away in the top drawer. That will get a small business nowhere, Bresnahan says.

Branding expert Michel Hogan says all companies now pursue risk mitigation but none of them seem to have the other side of the coin, luck enhancement strategies.

What do we do if something terrific comes out of the blue? Hogan says. As organisations, we are programmed to dwell on the potential negatives and we don t allow opportunities to dwell on good things that happen.

But Sven Feldmann, an associate professor of economics at Melbourne Business School, says some companies have such strategies in place. One example is Google, which allows its staff to devote 20% of their time on projects of their own choosing, that may or may not do anything for the search engine giant. Put simply, it allows for more random collisions that generate lucky opportunities.

They have created an environment where many new ideas are possible and then of course, you need some means to aggregate those that are truly promising, Feldmann says.

Feldmann say luck is important but entrepreneurs should not count too much on it. To an economist, luck doesn t even exist. Rather, it s just one side of the coin that we call chance, randomness or risk, he says.

When you look at successful entrepreneurs, many of them will have had a lot of luck but for every one of those, there is one or maybe more who have been less lucky.

As an entrepreneurial strategy, you can t count on luck because that s the part you can t influence. It s like saying luck is important for getting rich at the casino. At the same time, we wouldn t recommend going to the casino as a wealth creation strategy.

Making your own luck, he says, is very much about risk mitigation. You need to make a lot of sparks fly and some of those sparks will hit tinder and light a fire and that will be your lucky event. You have to create many opportunities for luck to strike, Feldmann says.

But from an economist s point of view, those are things you can t influence. With economic analysis, if you create a lot of situations that are prone to randomness, and if the downside is not very big, then you should create many of these risky opportunities because if the downside is not very big and the upside is, then you want to be exposed to that kind of risk.

10 ways to get lucky

  1. Get out and meet different people.
  2. Get off the beaten track.
  3. Share ideas.
  4. Learn from bad luck.
  5. Turn bad luck into an opportunity.
  6. Take opportunities when they present themselves.
  7. Set up systems and techniques that exploit opportunities and mitigate risk.
  8. Establish a luck enhancement strategy or unit.
  9. Stay flexible enough to act on opportunities and move on when things don t work out.
  10. Be inquisitive and curious enough to detect opportunities.

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