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Entrepreneurship and the Red Queen Effect

  •  Daniel Strauss
  • AUG 23 2018
  • Tags Alumni, Entrepreneurship

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Article written by Daniel Strauss, MBA alumnus and lecturer at USB

If you look at the growth forecasts of the five largest competitors in any market, it is certain that all of them would be planning to increase their market share in the short or medium term by being better than they are today. However, it is impossible for all players in a relatively finite market to gain market share simultaneously and these top executives should know that, right?

It would seem that all of them are under the impression that they have the skills to stay ahead or at least keep up with the Red Queen Effect (if you do not move you fall behind). So, what separates the ones that try to get ahead from the ones that actually do?

After doing a Full-time MBA in 2007 at the University of Stellenbosch Business School (USB), I went into the job market at the height of the financial crisis and soon realised that entrepreneurship is risky, but not nearly as risky as being employed by someone else. So, armed with my MBA and an Industrial Engineering degree, I was confronted with the challenge of learning how to “get ahead” by being an entrepreneur, rather than an employee.

“I went into the job market at the height of the financial crisis and soon realised that entrepreneurship is risky, but not nearly as risky as being employed by someone else.”
– Daniel Strauss, USB alumnus and director of Stocks and Strauss (Pty) Ltd

I am extremely grateful to have met wonderful mentors who showed me the bigger picture of building a business and raising funds as an entrepreneur. We started our private equity and venture capital firm in August 2013 with a very small pool of our own capital and today we are providing permanent employment to more than 130 people including CAs, lawyers, engineers, creatives, programmers and factory workers in our portfolio companies.

We have also grown the capital base of our investment company with more than 4200% since inception by applying an established set of methods and concepts on a daily basis. Even though we started very small due to an initial lack of capital, the guidance from various mentors enabled us to achieve significant growth in a relatively short period of time, enabling us to surpass the value that we would have been able to create as employees.

It is therefore a great privilege to be able to provide MBA students at the USB with a glimpse of these methods and concepts as a guest lecturer. Teaching current students about certain aspects of entrepreneurship that I wish I had learnt during my MBA in 2007.

They say that maximum growth occurs at the border of support and challenge. Entrepreneurs and executives leaning too far towards the “challenge” side of the spectrum may run the risk of significant financial and emotional strain or even burn-out, while those hiding on the “support” side of the spectrum run the risk of stagnation and falling so far behind that it becomes almost impossible to keep up with our fast-changing society. In my experience the executives and entrepreneurs who experience the most rapid and sustainable growth are those who aim for accelerated growth under the guiding hand of a mentor or mentors, pushing the boundaries while knowing they will be guided and reinforced by a strong support system before overextending themselves.

For anything to succeed it requires a strong foundation, only once the foundation is rock solid will the creative side be able to complement the foundation and thereby lead to the emergence of true value. So, while some may focus on hyping up their companies with clever structures, mergers and acquisitions they are bound to fail at some stage due to a deficient foundation. While others may be too risk-averse to take the leap and thereby overlooking the fact that avoiding new opportunities are sometimes even more risky than taking a well-considered risk on that new technology or development in your industry.

My challenge to you is to find that sweet spot where you are pushing your own boundaries while making sure that your support system will be able to guide you before pushing yourself too far. Face the brutal truth of your current situation while reaching for the stars and you may just pass that Red Queen sooner than you ever thought possible.

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