Turn to any entrepreneurial support organization (including Pioneer Entrepreneurs), and someone will point you toward a roster of advisors, consultants, resources, and other experts, all of whom are purportedly able to help you develop an organization that is robust in the face of rapid growth and constant change.  A skeptic might wonder why successful growth companies are so rare when such expertise is advertised as being so abundant?

As a rule, entrepreneurs are pretty good at judging when and where to spend scarce dollars.  Consequently, it is unlikely that an entire generation of entrepreneurs has been systematically duped by a consulting conspiracy.  Entrepreneurs must, in fact, perceive that they are getting some value from consultants and other outside advisors.  So under what circumstances might it actually make sense for a growing company to turn to advisors?  To put a finer point on it, how and when can advisors add strategic value?

Entrepreneurial Learning and the Role of Advisors

I have plenty of theories, but I'm not exactly unbiased.  After all, I'm in the advice business.  So, I sought out Andrew Field, the founder and president of PrintingForLess.com (PFL) in order to gather some real world data against which to test my ideas [1].

PFL's credentials as a growth company are well-documented.  So far, it's been named to the Inc. 500 twice (#285 in 2002 and #155 in 2003).  Inc. also named the company one of the "Best of the Web."  Andrew's entrepreneurial story is featured in Forbes publisher Rich Karlgaard's upcoming book, Life 2.0.

I've had the good fortune to watch PFL grow as a member of the company's advisory board.  I've observed how the initial success of PFL was largely a function of Andrew and the founding team's capacity to learn.  Now that the company is approaching 100 employees, growth is increasingly a function of how the entire organization learns and adapts.  Per Andrew:

I'm always hoping to learn from other peoples' mistakes.  I'm always hoping to not have to pay the price of the school of hard knocks and learn it the hard way.  I'm happy if I can learn from somebody else's bruises.

John Seely Brown and Paul Duguid, in The Social Life of Information, observe, "People learn in response to need.  When people cannot see the need for what's being taught, they ignore it, reject it, or fail to assimilate it in any meaningful way."  As students of the sales process understand, a customer's buy decision is a function of a perceived gap between a current and desired state and a perceived payoff from closing that gap.  It follows, then, that entrepreneurs will seek out expertise to the extent that they perceive and value a gap in their knowledge.  Furthermore, I believe that demand for expertise over time is a function of the interplay among three feedback loops:

• The more you learn, the more aware you become of gaps in your knowledge.
• As you learn, the gap between what you need to know and what you do know narrows.
• Applied learning leads to entrepreneurial success, which increases the need for new knowledge as well as the payoffs for acquiring such knowledge.

Here's a graphical representation of my model of the relationship between entrepreneurial learning and the value of expertise (click image for larger version):

Andrew's unprompted elaboration on his experience is consistent with the preceding generalizations:

I think I've sought out people who I felt had knowledge or experience in an area that filled a gap for me. I get kind of nervous when I go into an area where I really don't know what I don't know...So when - when there's a gap...between where I think I want to go or what I think I want to be the truth...and I don't clearly see the way to get to that path and can't, within the company, find the resources to figure it out, I think that's a very good sign of when to seek some outside help.

Early on, PFL reactively sought outside expertise in some specific, high-gain areas:

• Raising outside capital
• Developing good hiring and training practices
• Process re-engineering
• Establishing an incentive stock option program

As Andrew described his expertise search process, "Really it's usually whatever the latest, greatest pain point or choke point or bottleneck in the business is."

However, I perceive that as the pace of PFL's success accelerated, Andrew's view toward seeking outside expertise has become more strategic and proactive.  At one point in our conversation, Andrew said, "I wish we had a process for identifying gaps."  I infer that Andrew wants to be able to anticipate change in order to help his growing company maintain a competitive rate of learning and adaptation:

[O]utside advisors have an enormous value. The main value, one of the big values, I think, is opening up my mind, opening up my eyes to other possibilities and other ways of looking at things. I think that we all have a tendency to be problem solvers and just want to get to the solution of the problem rapidly. I at least sometimes feel that the faster I'm moving down a given path, the closer I am to a solution. And sometimes the biggest value is for somebody to say, back up a second, and let's ask a couple of questions about what you're really trying to do, and where you're trying to go, and kind of - kind of avoid that group think, rabbit trail, foreclose other options too rapidly kind of mindset. And because [outside advisors] haven't necessarily been there with you going down that mindset...they can question assumptions. That might be one of the biggest [sources of value] is if you can just question basic assumptions.

In other words, outside advisors can help a company see its world in a different way, which can lead to an evolution of decision-making policies and, as a consequence, more productive actions.

All Advisors Are Not Created Equal

Although Andrew acknowledges the potential value of outside advisors, not all potential advisors are equal in his eyes:

I look for people who aren't just trying to get something out of our company, but who are actually genuinely interested in our success.

And I'd say that, if I've identified problems, it's usually been the case where somebody sort of [is a] Johnny one-note consultant...they have one answer to every question.  And it's the same answer, and it's their product offering...If, you know, they come in with an answer before they've really taken the time to ask enough questions to get a good grip on your problem or your issue or your opportunity, that's a big red flag.

One other thing that I've learned is the quality is going to vary.  There are a lot of people out there who are happy to give advice to a company and be part of something that's successful.  And I think that it takes a little bit of a wait-and-see attitude.  You know, you give it a try and...see over time what has been the value of their advice.

So how does Andrew identify prospective advisors?  Maybe not surprisingly, he doesn't trust to databases of service providers or other unvalidated lists:

I talk to other entrepreneurs and business owners and that sort of thing.  And I've talked to people who were referred by other people.  I met you through our process re-engineering consultant.  And he...said...I think that you'd benefit from some of the experience that Dave has, based upon where you're going.  And that actually turned out to be a very good step for us.

In the end, however, Andrew trusts primarily in his own counsel and in the wisdom and expertise of his PFL co-workers:

I'll frequently first look within the company, and then look outside to some of our advisors that we've lined up to work with regularly, and then beyond that, if need be...[But] don't believe everything they say.  I think it's very important for me to use my own judgment...

For my part, I've concluded that rosters of experts offer modest value, by themselves.  Strategy is personal, and advisory relationships must consequently be personalized.  Although many consultants continue to seek economies of scale by "productizing" their offerings, the make-and-sale ("Johnny one-note") strategy is deeply flawed.  I suspect that economies of scope and pay-for-performance will prove to be the foundations of a more robust strategy.

[1] Click here for a transcript of my conversation with Andrew Field (PDF).