by Jamie Garrett
According to SuccessHarbor.com, 50% of businesses fail within the first year. Of those that make it past the one-year mark, only 66% will make it past the second year. From that group, only 50% survive to their fifth year (http://www.successharbor.com/percentage-businesses-fail-09092015). There are a lot of different stats on entrepreneurial success, but the common theme is that, while most startups fail, some do succeed.
So, why do some succeed while so many others fail? Do these failed businesses actually represent critical learning experiences needed to develop successful entrepreneurial skills?
According to Albert Bandura, the originator of social learning theory, learning is a cognititve process and not a purely behavioral one. The most effective learning takes place as part of a social phenomenon – which includes observing others (https://en.wikipedia.org/wiki/Social_learning_theory) – rather than as a solely individual pursuit.
In this model of learning, there are no passive learners, only active participants who constantly seek improvement. Bandura states that this cumulative process is comprised of several steps:
- observing the behavior of others
- imitating behaviors that produce a positive result
- internalizing what one has learned and making it into habits or patterns of behavior
Social Learning Theory and Entrepreneurs
Dr. Joseph Johnson, an entrepreneur, investor, and startup expert, says that social learning theory (SLT) applies directly to entrepreneurship. In his 2016 Ph.D. dissertation, Examining Learning Antecedents to Entrepreneurial Success, Johnson says that this theory takes into account the activity of both internal forces (an individual’s desire and drive, along with their natural entrepreneurial abilities) and external forces (the learning environment, business experiences, and context).
This theory best explains the process of entrepreneurial learning. Dr. Johnson lists four key phases of entrepreneurial learning experiences in relation to social learning theory:
Entrepreneurial instructional learning – Higher education can provide a low-risk setting for aspiring entrepreneurs to observe and learn. It gives more knowledge about specific disciplines needed in entrepreneurship, whether it’s accounting, leadership theories, or how to write a business plan.
However, instructional learning at whatever level is really incomplete without the other forms of social learning theory. In fact, in Dr. Johnson’s 2016 research, he found that levels of formal education achieved did not have a significant correlation with entrepreneurial success because they represent only one part of the larger equation at work.
Entrepreneurial mentorship learning – Being in a mentoring relationship with a more experienced and knowledgeable entrepreneur allows one to learn from and imitate a mentor with a proven track record. A mentor relationship with a more experienced entrepreneur enables an individual to obtain guidance and learn new skills.
In fact, Johnson’s 2016 research found a correlation between entrepreneurial mentorship and entrepreneurial success as defined by 5-year startup survival, as well as improvement in both income and net worth. Although new entrepreneurs should seek mentors with a good track record, some of the best entrepreneurial mentors are those individuals who have experienced major failures prior to experiencing success, as their mentees receive the benefit of their more nuanced experiences.
Entrepreneurial experiential learning – Once an entrepreneur has received formal training and has begun learning from a mentor, another critical step is to apply those newly learned behaviors through the old-fashioned school of hard knocks. This is where learning meets risk taking. Nothing helps one to remember entrepreneurial lessons so much as practical experience.
With a startup, an entrepreneur begins to repeat the behaviors they have learned and observed. Those behaviors will themselves provide valuable experiences on which an individual can build.
At age 21, Dr. Johnson had his first business failure, going bankrupt in the process. However, rather than give up, he formulated a new model by changing some variables. The new venture became so successful that he was able to sell the business for a profit and pay off his earlier creditors. A good entrepreneur will learn what works and what doesn’t and will adapt his future behavior accordingly, especially following a failure.
Self-efficacy of entrepreneurial knowledge – After all the training, learning, and mentoring, eventually the entrepreneur reaches a point of confidence in their own entrepreneurial knowledge. This confidence (i.e. self-efficacy) is the cumulative result of all the preceding entrepreneurial learning.
In Dr. Johnson’s research, self-efficacy of entrepreneurial knowledge – however it’s obtained – was found to have a significant correlation to entrepreneurial success. Whatever the combination or intensity of methods, in the final analysis, the knowledge must be retained – and the entrepreneur must have confidence in it – in order to succeed.
Merriam-Webster defines success as, “the correct or desired result of an attempt.” If a business venture does not achieve the projected results, it may be properly labeled a failure. However, just because you experience a startup failure, doesn’t mean that you are a failure. As Winston Churchill famously said, “success consists of going from failure to failure without loss of enthusiasm.”
In the life of an entrepreneur, this could not be more true. In the meantime, keep learning:
- Learn from more formal instructional methods, whether it’s taking a class, reading books, going to a seminar, or anything else that adds to your knowledge and experience.
- Learn from experienced mentors, but make sure that they have real entrepreneurial experience blended from both failure and success.
- Finally, never forget to reflect upon and learn from your own experiences, both good and bad.
If you can do that without the loss of enthusiasm, your confidence in your skills and knowledge will grow, and so will your chances of success.
For more information on Dr. Johnson’s published Ph.D. dissertation titled: Examining Learning Antecedents to Entrepreneurial Success go to http://www.proquest.com/products-services/pqdtglobal.html.