Entrepreneurs and business builders do not need to be geniuses. As long as they have a baseline level of IQ, what matters is a good mix of the four different types of Business Smarts: Book Smarts, Street Smarts, People Smarts, and Creative Smarts. Each plays a role in pattern recognition, the key to early perception of trends and other forms of contextual intelligence. The most effective leaders know how to balance and when to deploy the four types.

Most people equate being “smart” with having a high degree of Book Smarts — fundamental brainpower and analytical ability. This quality is critical in solving many basic business problems, and can help in gaining access to top schools and professional networks. But Book Smarts can actually get in the way of business launches by encouraging over-analysis when what counts is the big picture. The importance of Book Smarts is that it spawns the ability to organize, simplify, and prioritize. Book Smart leaders are good at disciplined processes.

Individuals with high levels of Street Smarts have strong intuition and practical wisdom. They rely on experience, observation, and common sense to solve problems. The authors refer to Street Smart entrepreneurs as “business anthropologists,” with a deep ability to evaluate and understand the needs of the customer and the context within which a product or service is used. Among their most significant contributions is the “three minute rule:” finding out what a customer does three minutes before and after using a product can lead to key insights and selling opportunities.

People Smart leaders benefit from a strong ability to intuit how people will react in particular situations, prioritize and manage relationships, and develop talent. While Street Smarts are linked to customer understanding, People Smarts facilitate knowledge of the individuals who can help drive entrepreneurial success.

Book Smarts, Street Smarts, and People Smarts can be practiced and learned, but Creative Smarts tend to be inborn. Individuals who are strong on this dimension have both game-changing ideas and the ability to express them realistically and in terms of customer experience. They can frame or reframe a business definition in a way that motivates those around them and resonates with ordinary people.

Every type of Business Smarts can make a meaningful contribution to success. Most critical to entrepreneurs and business builders, however, is the ability to mix, match, moderate, and modify the four types. This means being able to interpret data patterns, observe macro and micro trends, manage and nurture relationships, and formulate strategy as needed — sometimes all at once.

Leaders can improve their Business Smarts in simple ways. For example, they can observe people’s actions, study books, art, and psychology, and read about others’ business decisions. Most effective, however, is learning by doing: sizing up the options, taking the plunge, and being willing to make mistakes.


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