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Innovating in a post-crash world: A blueprint

Brian O'Connell

It’s not always easy measuring the impact of the great economic crash of 2008-2011 on entrepreneurism.

At first glance, you’d think that the ranks of the startup owner profession took a big league hit over the past three years, thanks to a lousy economic climate. But that’s not actually true.

Economist Scott Shane, writing in a Federal Reserve Bank of Cleveland Research Report dated March 24, 2011, says that one measure at least – self-employment (the number of U.S. small business owners) has swelled.

Shane cites The Kauffman Index of Entrepreneurial Activity, which shows 2010 had the highest rates of activity in 15 years.

But as Shane writes, measuring self-employment as a barometer of entrepreneurial activity is only part of the story:

Another view of entrepreneurial activity can be obtained by comparing numbers on incorporated and unincorporated self-employment. That comparison lets us tease out how the recession affected two different kinds of people who work for themselves—those who run corporations and are likely to employ others and those who don’t, mostly sole proprietors less likely to have employees. Both types of self-employment fell during the recession, but the decline was much more severe for those running corporations. BLS numbers show that (non-seasonally adjusted) incorporated self-employment dropped by 519,000 people between November 2007 and June 2009, a reduction of 8.9 percent, while (non-seasonally adjusted) unincorporated self-employment fell by 48,000 people, a decline of 0.5 percent.

So whether you buy into the notion that entrepreneurship has either risen or fallen (and Shane makes both cases eloquently), business startup owners, both in the healthcare field and outside of it, must embrace, adapt to, and successfully leverage the new economic landscape if they expect to survive what cynics are increasingly calling the “new abnormal.”

Now, in a new book, The New Entrepreneurial Leader: Developing Leaders Who Shape Social and Economic Opportunity, published by  — count’em — 23 Babson College professors, the authors say that startup owners must adopt a “radically new approach” to management in a “post-crash” world.

“Our economic crisis has shown that we need a fundamentally new kind of business leader—able to make ethical decisions in the face of strategic unknowns, serve the environment and society while also serving the needs of investors and shareholders, and understand how their personality and the social context in which they operate impacts their leadership,” say the book’s authors.

Their research calls for entrepreneurs to apply several key principles that embrace the new world economic viewpoint for both existing businesses and new startups.

Here’s an inside look:

Cognitively Ambidextrous Leaders

Leaders today must be "cognitively ambidextrous," meaning they must have the ability to shift between analytic- and action-oriented approaches—and know when to take action even when all the variables aren’t known. They must look beyond the traditional balance sheet, creating social, environmental and economic value. And they need a deep awareness of how their decisions are impacted by who they are—their values, biases, background and capabilities—as well as the social and cultural context in which they operate.

Prediction Logic & Creation Logic

Rapid change and increasing uncertainty require leaders to be able to shift between traditional “prediction logic” (choosing actions based on analysis of known trends) and “creation logic” (taking action despite considerable unknowns). Guiding this different way of thinking is a different worldview of business and society, where simultaneous creation of social, environmental, and economic value is the order of the day. Entrepreneurial leaders also leverage their understanding of themselves and their social context to guide effective action.

The book pretty much tackles those two big concepts, and mixes in some chapter themes that augment those points, as well. Chapter titles include “Cognitive Ambidexterity: The Underlying Mental Model of the Entrepreneurial Leader,” “Creation Logic in Innovation: From Action Learning to Expertise” and “Who Am I? Learning from and Leveraging Self-Awareness.”

There are also two chapters on leveraging social networking to manage your business: “What Is the Context? Fostering Entrepreneurial Leaders’ Social Awareness” and “Whom Do I Know? Building and Engaging Social Networks Using Social Media Technology.”

If you’re a healthcare startup owner grappling with the new abnormal, this book might be worth a few late nights of reading. The economy threatens to swallow up whole companies that don’t recognize and adapt to the new business management terrain.

The Babson book may just be your blueprint to navigating that dangerous new terrain.

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