The Ambition Inequality: Does the 1-9-90 Rule apply to Entrepreneurs?

Mostly in reference to online communities and social networks, there is a rule called the 1-9-90 [pronounced One Nine Ninety]rule that describes a phenomenon called the Participation Inequality. It says 1% of all users are  creators, 9% curators and 90% are lurkers.

As my colleagues and I travel through Middle India and meet entrepreneurs almost every week, we are noticing a similar phenomenon with regard to their ambition. This gives us a new framework to segment entrepreneurs and understand their behaviour.

For the sake of simplicity, let’s just call it the 1-9-90 Framework of Entrepreneurial Ambition.

From what we have seen so far, we can refer to the 1% as High Hunger, 9% as High Potential and 90% as High Patience.

Compared to the starting-context based segmentation I had written on in the last post, based on which we spoke of entrepreneurs as ‘by compulsion’, ‘by volition’ and ‘by presumption’, the 1-9-90 framework is more of a behavioural segmentation framework - it is based on behavioural traits entrepreneurs actually show, regardless of the context they might have started against.

To probe this further, let’s go back to the basics.

Since entrepreneurship usually involves uncertainty, risk taking, innovativeness and value creation, the assumption we usually make about entrepreneurs is they must be risk friendly, aggressive, innovative and ambitious. This stereotype of the entrepreneur is always welcome, since it is useful to our general need to encourage entrepreneurship. We don’t always question whether these characteristics are true for all entrepreneurs, as we use the word ‘entrepreneur’ in a broad way. Some generalisations are comforting, and this just happens to be one.

The reality, however, can be quite sobering. Much like context, the ambition profile of an entrepreneur seems to influence his approach towards the four pillars of business – money, people, customers and technology. It affects his decision making style, risk taking ability, focus and business philosophy.

1% - High Hunger: The 1% segment is populated with the the quintessential hard driving entrepreneur with almost all the characteristics we spoke about before. He loves dealing with uncertainty, is very fond of taking risks, very innovative and scores really high on ambitiousness. He usually has a sharp vision of why he is in business and where he wants to take it. He loves being independent, but hardly ever misuses it. He is obsessive about business and can drive himself crazy working day and night.

More often than not, his aggressive behaviour is misread by many as abrasiveness. He drives change, invests ahead of visible returns, and likes other aggressive people. You will find him adopt technology really fast; and hire smart people even when he does not ‘need’ them. If his company has done well, his office would be architected impressively, but he is choosy who he shows it off to. His ambition level is very high, and he often has role models such as Dhirubhai Ambani, Sunil Mittal or Kishore Biyani. Once he can afford, he travels well, both within and outside the country, and invariably mixes business with what might have been a pure pleasure trip.

As can be imagined, the high hunger entrepreneur is generally impatient. He looks at himself as an action leader and is very decisive, knowing fully well that not all his decisions will turn out to be right. This is why he may often appear impulsive in decision making. He is highly focused on one line of business at a time, prioritizes revenue over profitability and wants to become a dominant player in a sector, even within a restricted geography. Others may call it an ‘all eggs in one basket’ approach; but the high hunger entrepreneur does not much listen to critics.

He is not dismissive or disrespectful of people and he certainly understands their utility to business, but financial success is a much more tangible measure for him than just employee or customer satisfaction.

9% - High Potential: The high potential entrepreneur has many characteristics similar to that of the previous profile, but the differences become visible over multiple interactions. His ambition levels may be lower, but he is no less opportunistic. His preference for work-life balance gets him to want to spend more time with family, relatives and community, but in general he is focused more on work than family.

In contrast with the high hunger entrepreneur, he has a strong emphasis on people and values.  He believes that he is not autocratic and likes to take his senior team along in his decision making. This makes his decision making a bit slower and his decisions appear ‘thought through’.

In general the high potential entrepreneur prioritises profitability over revenue and does not aspire to a size leadership position. He believes in building a sustainable business and would give up customers if he believes he cannot satisfy them. He prefers debt as a way to finance his business over equity. He is quite knowledge hungry and attends conferences, seminars and other industry events regularly in order to keep up to date. He also meets people at every opportunity thanks to his belief that rarely does a business interaction goes waste.

90% - High Patience: Is the high patience entrepreneur essentially a lazy person? Or may be a struggler?

May be; may be not.

But his motivations and priorities in business are certainly different. His boundaries are tighter and he believes he knows ‘where to draw the line’. Many of this profile are strongly fatalistic and would not want to ‘defy destiny’.

You would often hear the high patience entrepreneur say ‘people are not just numbers’. This statement is the essence of the high patience entrepreneur’s ambition profile. He likes people, and in turn his people love him back. He wont compromise the love of people for financial success. He finds it very difficult to terminate anyone’s services and tries to improve the under- performers in his team for an irrationally long time.

His decision makaing is so democratic and slow, that many decisions he takes can be meaningless because the time to act on them is gone by the times the decisions are taken.

Because his financial ambition is limited, he is quite happy running a small or mid-sized business, making a few customers happy, providing for his family and his employees and ‘taking care of them’, for a long time. This is the classical low-risk business builder who builds a sustainable business, does not take too much, if any, debt. In fact, he flaunts his ‘debt free’ badge quite liberally. His task orientation is low, as is his risk appetite. His innovativeness in business is of a tactical nature and is geared to overcome smaller, day-to-day challenges. In fact some people believe they are not very innovative in the first place. He has strong sense of right and wrong and is very emotionally attached to his business, which he often sees as his ‘baby’.

The high patience entrepreneur is likely to be more involved in local business issues, be an active part of associations than the other two profiles. More often than not, he is also likely to develop ‘other interests’ and diversify into other businesses quite early.

So is one ambition profile better than any other from the view point of socioeconomic utility? Perhaps not. If we look at this as a pyramid, the 90% forms the base, employs the bulk of the people in our society, and provides the stability that allows more risky entrepreneurship to thrive and the cushion that absorbs occasional shock. The 1% and 9%, on the other hand, provide the inspiration for breakout entrepreneurs as bright examples of entrepreneurial possibility. The 1% may be the self starters and the 9% may need some stimulation, but each plays his role.

The moot point is does a given individual stay in one segment throughout his life? Our current experience is telling us otherwise. Context seems to keep an individual in a segment and when context changes, the individual moves into another segment. I see a lot of people moving from high potential to high hunger because of peer influence, enabling elements such as availability of people, money and changing customer needs and sometimes a change in the entrepreneur’s family such as a marriage or return of an educated or experienced son or brother. Some times, I also see a high potential entrepreneur moving into high patience profile for a variety of reasons.

This may be the beauty of understanding the patterns, to recognise that nothing, not even simple sounding profiles and segments are static. They are fluid, as is business.

What has been your observations and experience? Tell me.

The thoughts and opinions shared here are of the author.