A truly successful entrepreneur is guided not by intuition but by a simple, understandable, and elegant theory of the foundations of their business.

The theoretical foundations of business consist of three parts. The first part involves assumptions about the external environment of the organization: society structure, market, consumers, and technologies. These assumptions determine the value of the organization. The second part includes possible formulations of the organization's mission. Assumptions about the mission reflect the significant results for the organization and its vision of its role in the economy and society. The third part consists of assumptions about the key competencies necessary for the organization to fulfill its mission. Key competencies determine the areas in which the organization must continuously improve to maintain leadership.

All entrepreneurs—from the Medici and the founders of the Bank of England to Thomas Watson of IBM—relied on clearly expressed ideas and well-defined theoretical justifications for their businesses. A truly successful entrepreneur, who can establish a company and ensure its success over many years, relies not on intuition but on a clear understanding of the foundations of their business.

TIP OF THE DAY.

A company that was the most successful just yesterday finds itself stagnating and sliding into an uncontrollable crisis. Does the company rely on clear theoretical foundations of business?