Business Journal

Why Entrepreneurs Matter More Than Innovators

by Jim Clifton
Excerpted from The Coming Jobs War

Most leaders don't know this: Great businesspeople are more important than great ideas

In his book The Coming Jobs War, Gallup Chairman Jim Clifton makes the bold claim that political and business leaders pay far too much attention to innovation and far too little to cultivating talented entrepreneurs. They've got it backward, Clifton says. To create jobs, leaders must understand that great, thriving businesspeople matter far more than great ideas, which are a dime a dozen.

Because of his extreme optimism, his unstoppable determination, and his incredible energy, Wayne Huizenga is able to build hugely successful enterprises.

One of my favorite entrepreneurs is Wayne Huizenga. He has had, in my opinion, three humble business ideas in his career.

When he was a garbage collection manager, he decided to build his own trash collecting business. That was a bad idea because the world didn't need another trash collection company. Trash gets picked up pretty well. But nevertheless, he built his own trash collection business. And he turned it into a great multibillion-dollar worldwide organization, a Fortune 500 company, and a leader in environmental sustainability that was profitable and valuable to its customers, a great place to work, and an international powerhouse. You have heard of it: Waste Management, Inc.

The question is: Was it the idea or Wayne that made Waste Management such a successful American enterprise for tens of thousands of highly engaged employees and that created good jobs of all kinds? Most global thought leaders would believe it was Wayne's good idea more than his entrepreneurship.

Wayne's next idea was arguably worse. The big idea was to rent movie videos through branded outlets, malls, and small free-standing buildings. It didn't sound very good to me -- and I did much of the research on it for him. That became his second multibillion-dollar Fortune 500 company -- Blockbuster, Inc. And Blockbuster, too, was a great American organization that created millions of customers and a hundred thousand new jobs.

And with that, Wayne did what no one had ever done before: He created two Fortune 500 companies in one lifetime. Was it the ideas that made them Fortune 500 companies and great places for thousands of people to work -- or was it Wayne?

The Coming Jobs War

Then he had one more bad idea: a national chain of used car outlets. He called it AutoNation, Inc., and it became his third multibillion-dollar Fortune 500 company.

So what explains these staggering successes: the innovation or Wayne? This is a really important question because whatever idea Wayne chooses seems to become a good idea. The predicting variable of success in Wayne's case is "Whatever idea Wayne chooses is a good idea because he makes its business model work." It is not "Wayne is good at picking innovative ideas."

But most thought leaders still believe it's the second answer.

My hunch is that if you took away everything Wayne has -- all his financial resources, management team, money, keys to his car -- and put him in a one-bedroom apartment in downtown Miami, a multibillion-dollar Fortune 500 company would likely burst out of that room. Because of his extreme optimism, his unstoppable determination, and his incredible energy, Wayne is able to build hugely successful enterprises, and he doesn't need a breakthrough innovation to do it.

It is wiser to study the person than the idea.

24-hour news? Really?

Another favorite American enterpriser of mine is Ted Turner. A 24-hour news channel didn't seem to be that good of an idea to me. I did initial market research on 24-hour news as well. No one wanted more news, and the news Ted was going to show was just a reel of reports played over and over again. Trust me, so I don't have to go into a long review of the research, 24-hour news is a mediocre idea. It was far from the invention of the airplane or the transistor or the discovery of the Van Allen radiation belt. It is right there with the "breakthrough" idea that banks should extend business hours past midafternoon so that people who work during the day could actually use them.

Ted Turner, of course, built CNN, a famous, high-mission, highly profitable, multibillion-dollar worldwide TV enterprise out of a small business in Atlanta from a very humble, hardworking idea.

But Ted Turner has optimism and determination bursting out of his whole body, so whatever idea he picks becomes that next "great idea" in broadcasting. His energy just needed a host. It found 24-hour news, old movies, and sailing.

Lots of people have good ideas, but most new businesses fail.

His newest innovation is buffalo ranching. Honestly, buffalo ranching and a chain of restaurants that serve buffalo meat. That is a really bad idea. There can't be a person in the world who would say, "Oh my gosh, I wish I had come up with that one." This is a horrible idea that Ted will most likely make work because whatever idea he chooses becomes the lucky host for his unstoppable optimism and determination. And along with his success come thousands of great new jobs for highly engaged workers.

Let me review one more really dumb innovation: an Internet site where people can sell junk to one another -- a sort of 24/7 worldwide garage sale. In my opinion, this is the worst of the worst. This innovation gets my vote for "An idea that will never ever, ever work."

Nonetheless, Meg Whitman chose to lead that innovation. It's called eBay.

Not only is eBay one of the great new highly profitable technology companies of the last 25 years, it has also created thousands of great new jobs and income for millions of customers who trade on eBay's system. It is a free-enterprise colossus. Although eBay may be a humble idea, Meg made it great because whatever idea she chooses has a high probability of being a success of world-beating importance because she makes it work.

Meg's rare optimism and determination will always create a lucky host. And thousands of even luckier workers found great jobs at eBay because of her.

Is it innovation or entrepreneurship? It is both. But the key insight here is that innovation by itself has no value until it is chosen by talented entrepreneurs.

Entrepreneurs are rare, however. While America will not win without inventing a third of everything, the country should focus first and disproportionately on world-class entrepreneurship because that's what creates jobs. Lots of people have good ideas, but most new businesses fail. It's not for lack of passion, but lack of customers. There are millions of new businesses launched every year, each creating a handful of jobs, but only a few of them take off because most didn't have the unstoppable determination and optimism required to win.

Entrepreneurial talent

This is what to look for in an entrepreneur: somebody with an idea that totally consumes him -- an idea that becomes the way he thinks, a way of life, and an obsession. That obsession fuels unstoppable optimism and determination. All businesses have terrible problems, but highly talented entrepreneurs enjoy the problems, even welcome them. Untalented entrepreneurs are destroyed by these problems. That's why just wanting to be an entrepreneur isn't enough. Encouraging people to be entrepreneurs the usual way -- just take a class, get a loan, and then you're ready -- is setting them up to fail.

America needs to understand the talent makeup of people who start companies. Right now, Gallup is looking into it. The implications are huge for institutional investors. In the new economic climate, investors will have to ask which they're investing in: the individual or the idea.

With uncanny accuracy, educational psychologists can rank an auditorium full of students on their innate ability to learn. SAT or IQ tests signal high-potential learners in science, math, language, technology, engineering, and medicine. But if you asked these same educational psychologists to rank these same students by innate capacity for entrepreneurship, they'll probably have no idea how.

Some leaders even believe that anyone can be trained to be an entrepreneur. This is a mistaken assumption. Entrepreneurs have a rare gift. My estimate is that for every 1,000 people, there are only about three with the potential to develop an organization with $50 million or more in annual revenue.

Yet while the educational system has nailed the process of developing the best learners, America is still in the dark about cultivating gifted enterprisers. This could explain why there is such an oversupply of innovation and an undersupply of entrepreneurship. America has overdeveloped the more controllable trait and left the more mysterious trait's development to chance.

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