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Most start up and small business people call themselves entrepreneurs. But how many understand the term and the power it unleashes?

In 1803 French economist, J. B. Say, coined the term entrepreneur, “The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.” In 1986 Peter Drucker formulated this theory. First, entrepreneurship sees change as normal and healthy. Second, it does something different than what is already being done. Notice it’s not just about doing something better but doing something different.

By this measure, entrepreneurs make up a minority of new businesses and those who are entrepreneurs understand what is expected of them: To create something different.

Popular culture expects this something to be a visible object, like an iPod, for example. But it can easily be argued the iPod is the direct descendant of Sony’s true innovation the “pocket-able radio.” What was really different about the iPod was iTunes—that’s what completely disrupted the music distribution business. Similarly, forgive us for thinking that Facebook created a breakthrough in the way people engage in relationships. In fact, what they’re doing is turning their users into the product they sell to their real customers: Advertisers.

Entrepreneurs often innovate in unseen ways. They standardize a product, systematize a process, redefine what the customer considers value, change a procedure, recombine things, improve the yield from resources, or change the way resources are used. One of my favorite innovations, cited by Drucker, was the establishment of the entrepreneurial bank by Crédit Mobilier. They were the first to use other people’s money to finance large projects rather than using their own.

So, if you’re starting a new company I hope you do well. If you’re an aspiring entrepreneur, you’d do well to understand what’s expected.


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