A Worthless, Impossible, & Stupid Recipe for Policy Success

Can an inspirational story catalyze a business or kick-start a career? Yes, argues Babson Executive Education professor and author Daniel Isenberg. With Worthless, Impossible, and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value, Isenberg has broken the traditional business book mold. Instead of case studies and statistics, he highlights the personal stories of 26 entrepreneurs.

“If someone tells you that there really is a needle in a haystack, then you will be much more willing to search for it there and you will be less likely to give up until you find it,” says Isenberg, explaining why storytelling is effective inspiration for would-be entrepreneurs. “The mere experience of seeing these ordinary entrepreneurs accomplish extraordinary things has stimulated dozens of my students to make the entrepreneurial choice … and I hope that [the book] will have a similar impact.”

Isenberg’s expertise is in building environments where entrepreneurial value capture and creation thrive. Read on for an excerpt from his book that explains why successful ecosystems embrace entrepreneurs of all kinds.

Encompass all varieties of entrepreneurship, not just start-ups

Most policies serve to emphasize start-ups to the exclusion of other forms of extraordinary value creation. The policy emphasis should be on removing the barriers to extraordinary value creation, period—not just for small or large ventures, or young or old ventures. One reason that policy makers conflate start-ups and entrepreneurship is because of a misconception that entrepreneurship is ownership, innovation, or youth employment. However, there is nothing in the perception, creation, and capture of extraordinary value that says that start-ups are intrinsically better at it than existing enterprises, or that the redeployment of existing, undervalued assets may not sometimes be a better way to create extraordinary value.

Robert Wessman took a failing Icelandic company with ninety-some employees and a small revenue stream and turned it into a world leader. Bert Twaalfhoven acquired existing technological assets in the jet engine supply chain and redeployed them commercially. His first successful venture copied a commercial business model from the United States and brought it to Europe. Carl Bistany took a third-generation family company with five schools and oversaw its growth to seventy-four. Whereas ownership is essential, the founding of a company—the common image of the entrepreneur—is not.

The test is the creation and capture of value, not necessarily the creation of value from scratch. And conflating entrepreneurship with starting up new ventures leaves a lot of potential value untapped; remember, entrepreneurship is creating value from assets that are undervalued, whether they are new or not. Family businesses in emerging markets are often breeding grounds of extraordinary value creation. Purchasing existing and underperforming brands, real estate, manufacturing capacity, or distribution channels and infusing them with new growth can generate tremendous amounts of value. Rescuing distressed assets from banks or venture capital funds is a potential source of value creation. The start-up movement that is sweeping the world, as evidenced by Start-Up America and numerous other national start-up campaigns (the bubble may burst or the pendulum may have swung back by the time this book comes out), somehow suggests that creating an asset from nothing is better than re-purposing an existing one. As a result, there is a rich opportunity for policy to specifically target high value creation from existing assets. Scale-up is at least as important as start-up.

Not surprisingly, because they sniff out opportunity where others smell nothing, entrepreneurs understand that extraordinary value creation is not just about starting a new venture. MBA courses in acquisitions and turnarounds are among the most sought-after courses in business schools. The increase in popularity of “search funds” often founded by newly minted MBAs is further evidence*. Prospective entrepreneurs “get” this intuitively, and it is counterproductive for policy makers to detract from this understanding by overemphasizing start-ups to the exclusion of other forms of value creation.

Nor is small necessarily beautiful. The research on employment creation, often cited by policy makers as evidence that small companies create jobs, is much more nuanced. According to the most commonly cited Kauffman Foundation study, net job creation seems to be the most prevalent among a small portion of rapidly growing medium-sized firms, as well as smaller portions of large, established firms and start-ups. Other more extensive research has shown that young firms, not small firms, create jobs. There are huge numbers of small and old firms that don’t create jobs. They don’t create value, either. Extraordinary value creation creates jobs.

*A “search fund” is typically a few hundred thousand dollars provided by several private individuals to two or three search fund managers, who use the cash to support their usually prolonged search for a company that the group would then acquire control of with additional funds, and the managers would manage, grow, and sell.

Daniel Isenberg is a professor of management practice at Babson Executive Education and the Founding Executive Director of the Babson Entrepreneurship Ecosystem Project. Reprinted by permission of Harvard Business Review Press. Excerpted from Worthless, Impossible, and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value. Copyright 2013 Daniel Isenberg. All rights reserved.

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