Why Do Entrepreneurs Innovate Better Than Managers?

netbuzz writes "New research from MIT suggests that entrepreneurs innovate better than managers not because they try more often but rather because when they do try they apply more of their available brainpower to the task. 'We found, somewhat surprisingly, that managers and entrepreneurs did not differ in the probability with which they would undertake explorative (potentially innovative) courses of action. But when entrepreneurs did select explorative tasks, they used both the left and right sides of the frontal cortex of their brain whereas managers only used their left parts of the frontal cortex,' says the lead researcher, MIT Sloan School of Management Visiting Prof. Maurizio Zollo. This is an important difference, he notes, 'because the right side of the frontal cortex is associated with creative thinking, involving to a larger extent emotional processes, whereas the left side is associated with rational decision-making and logic.'"

Re:Obvious

[GodBlessTexas]

I would also state that in the vast majority of companies, managers are trained not to take risks. I work for a multibillion dollar company where the most common management decision at the mid-management level is simply to do nothing. By not making a decision, they believe they minimize the risk of making the wrong decision, never mind that doing nothing is rarely the right decision. It also means that most management decisions then come from the very top down, which means there's no innovation from the bottom, nor is there any real quality feedback loop since suggestions for improvement never make it up the chain of command. Of course, we're a health insurance company that wastes our members money on high administrative costs, but as long as we don't lose a substantial amount of members (and won't because the individual members don't decide who their company uses for insurance) we have no reason to change. We simply keep raising our rates. It's a very dirty business, and horribly run.

not surprising

[Anonymous Coward]

In my experience (30 years of R&D/start-ups), it is frequently the case that the entrepreneur is a
technical designer, engineer, sw developer, researcher, etc., while the manager is not. It is not
surprising that the former more frequently innovates than the latter.

In a surprising number of cases, the manager is where s/he is because they were a poor innovator
and rose up into management, while the successful innovator stuck to what they were good at.
I have known some fantastic managers who were also awesome innovators, but they were infrequent
enough that I enjoy working with them when they did occur.

Re:Obvious

[obarel]

It's easier to answer "why didn't you do <the right thing>?" than "why did you do <the wrong thing>?". In most cases, "we didn't have enough information at the time" is good enough for the former, whereas it takes a lot more effort to explain the latter.

An entrepreneur only has to answer "where's my money?" (if s/he's playing with someone else's money), but doesn't have to justify each and every decision.

Re:coz they get more excited?

[Anonymous Coward]

As a former senior manager in a Fortune 50 company, and now a co-founder with my own Series A funded startup, I might share a unique vantage:

When I was a manager in corporate America, I spent a lot of time weighing the paramaters that came with the job. Often times, I wasn't actually trying to make the 'best decision' in the sense of perfection, but the right decision that fit my company, culture and current political situation as a manager. How might my boss respond to this? How will it be perceived more broadly? What will it do for my personal and team credibility? Do ideas like this one seem to survice in this culture? I probably put as much thought into puzzling through these things as I did trying to 'innovate'. (Oddly, one team I managed was called Innovation Development. But thats another story).

As a entrepreneur the team is really small. And the parameters are only a few. Really I only have to answer to my co-founder and our investors. And the overall set of paramaters personalities I'm managing against are substantially fewer (and probably of my own choosing) and more 'real' than in corporate america. What people think, or what my boss / team might think, are really non issues now.

As an entrepreneur, I spend a lot more time thinking bout how to realize the right idea than defending it.

Re:Wait, what?

[Xugumad]

I think it dates back to when intellectual work was a lot rarer, and managers tended to be either the only skilled worker, or amongst the most skilled, and things have not really caught up with the fact that now managers are frequently managing workers who are at least as skilled, but in very different ways.

I am an innovative manager.

[kmitchner]

I consider myself to be an innovative manager. I have great ideas and those ideas have a lot of times in the past made the companies I've worked for a ton of money. This happens all the time and I don't think you understand the real problem. The problem isn't that managers aren't innovative, it's that managers don't get anything for their innovations. As an innovative manager I run into a lot of obstacles in my career. First and foremost I have never received even close to 1% of the profits from any invention I have ever came up with for an employer. At my last job all I did was come up with new ideas to make the company money. I have made companies millions of dollars in profits with my ideas. I have implemented ideas that have saved hundreds of thousands per month in running costs. Afterwards I did not get a single raise, bonus or sometimes even acknowledgement of that extra income. It was my job, they were already paying me for it. As a sub 6 figure "senior" employee I feel a huge push to not mention my ideas to my employers. If the idea costs money to implement, it usually gets shut down before they even think about it, because most people aren't willing to put their own money on the line for a risky idea they didn't come up with. When it only costs a little money, or even a free of cost change in procedures that could cut costs by dramatic amounts, employees are usually thanked and forgotten, if they are even thanked. Decades ago if an employee came up with a method to save a company $300,000 a month that employee would be pushed to the top of a company and probably even made a junior partner and queried for new ideas, not today. So what do innovative managers do now? We look carefully at our non-compete agreements and we focus our innovative brains in a direction that does not conflict with it. We do our job as well as we can, but the second we leave the building our brains are thinking about our own inventions, our own companies and how we can get them funded. And once we get the cash to start something, we leave, we become entrepreneurs and we break the logic of this topic. The only difference between an "Entrepreneur" and a "Manager" is that the entrepreneur quit his day job as a manager to focus on his own idea. So what do I do now? Well

Re:coz they get more excited?

[gtall]

Try this game, presume lightning has struck and now you are a manager. You try to do the right thing, manage your people properly. Some smart aleck that you manage comes up to you one day and proceeds to tell you that you are stupid because you did A and he thought you should do B. You had good reasons for doing A, but no, now you are stupid. Others you manage do not tell you that you are stupid. Do you (1) take to heart this odd man's opinion, or (2) tell him to STFU knowing trying to explain your reasons will fall on deaf ears because he already considers you stupid?

Managers can indeed be stupid, but no one will change their actions because they are told they are stupid. They simply circle the wagons and repeat to themselves all the reasons why they do what they do thereby reinforcing their current behavior. You want to change something, explain a better way.

Re:Some Of Us Have Known This For Years

[fermion]

Yes, some of use have known for years that selective sampling will lead to incorrect conclusions. For instance, we tend to hear about the entrepreneurs who are successful, and the top managers who fail.

Think about what is new. Not when a dog bytes a person, but when a person bytes a dog. A manager has been vetted, so this person has a bunch of failures and succeses behind, presumably with more succeses, so the failures are news. However, an entrepreneur likely has no track record, or failures, so success is news. For instance we have a local retailer who has a successful business. Prior to this, however, he had a string of failure. Even late in his career he took chances which failed.

The point here is that in any pursuit, failing is not problem if you know how to fail, and your are resilient enough not give up and try again. The damage occurs when one believes that failure is not necessary in the process, or that certain people are more prone to failure than others. This is what leads to people just giving up. Which is what to a lot of entrepreneurs, while managers will persevere. And build up failures. Which is ok.

Re:A hypocritical requirement

[timeOday]

Do investors want to select for delusional entrepreneurs without a sense of the realities of the world?

The lottery mentality runs very deep in American culture. This is not just my opinion: More than half of those aged 18 to 29 (54 percent), believe they will get rich. [bankrate.com] And yet, only 2% of the population identifies themselves as actually rich. That is a BIG disconnect. Put another way, there's a sucker born every minute.

Obvious answers.

[Anonymous Coward]

1: Superior Motivation. Entrepreneurs either have their reputation at stake, or their livelihoods. Managers have neither.

2: Training. Managers are trained to avoid risk by laying down and following processes and procedures. Entrepreneurs aren't as good at quantifying the risks associated with any given move, however, most managers, for reason #3, attempt to avoid uncomfortable changes to the status quo once established. That's a fatal flaw, as the lack of maneuverability and aggressiveness can result in your competition exploiting it.

3: Superior Pay. If you're lucky as a manager, you get a bonus and a raise at years end. If you aren't, you work 60hrs per week to get what you were paid last year. Why should you care?

4: Lack of conventional knowledge. "Naw, that's stupid, it'd never work", true about 95% of things, wrong about 4%, and horribly wrong about 1%. That 1% will kill you.

5: Better money management. In most organizations, if you ask for a $20 tool, you get told it's a waste of money. In a new company, 1 individual is empowered to do the work of 10 with the right selection of equipment. If you're going to buy something expensive, you are going to make really, REALLY Sure you've got the right tool, and a thorough plan to use it. See #3 for the reason why large, enterprise systems are often designed poorly, bought, then fail.

Re:coz they get more excited?

[dywolf]

Dont need a scientific reason. It's very simple:

Managers are hired to maintain the status quo and keep the shop running. They not supposed to take big risks as their boss doesnt want them to risk sinking the company. Slow and steady wins the race type thinking.

Entrepenaur on the other hand is frequently his own boss, and by it very nature engaged in a high risk situation. He either succeeds and makes money or doesnt and goes broke. Since there is no middle ground, no status quo to maintain, he is actually freeer...free-er...whatever...he's more free to take those bigger risks because he's got nothing (status quo) to lose.