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Think like an entrepreneur

Saras Sarasvathy, a professor at Darden School (University of West Virginia), undertook some research to see if entrepreneurs thought, acted and decided differently. Her conclusion was that this is the case. At its most basic level, she says that rather than set a goal and work out how to get there, entrepreneurs start with the means at their disposal, collaborate with others and go on a journey to see where they end up. Her work has attracted much attention and is taught in many entrepreneurial courses the world over. The process is portrayed below (you may need to click on the picture for a clear view):

effectuationI have read her research papers and various other materials, but the best explanation of her process I have come across is displayed in this video from the University of Gallen:

The 10 myths of entrepreneurship

 

So, through trial and error, together with discussion with stakeholders and customers, and a clear understanding of the means at your disposal, you develop a new product or business even if your original goals need to shift substantially in the process.

At Genesis we have a view on Saras thinking – although it may go a little against the crowd at the moment. Although I am not certain how academically robust was her research, intuitively there are some great ideas embedded in the theory. Base your business on your own means (including competences), spend more time experimenting and market testing (than in-office analysis), share your ideas and get inputs, … these are all good. They also dovetail nicely with other entrepreneurial thinking such as that of Alex Osterwalder (Business Model Generation) and Steve Blank (The Start-Up Owners Manual). These concepts are particularly useful when dealing with “fuzzy” markets where you have really new products or are developing a new market or market niche.

Where do we think this could be dangerous? Taken to its extreme, we believe the process could lead to laziness and sloppy thinking if it is used totally outside causal thinking. We accept that a new start-up is not the same as a microcosm of a large enterprise, but there are some excellent analytical tools and strategic thinking that can play an important role in the entrepreneurial process. From the humble SWOT through Porters competitive strategy and on to Christensen’s disruptive technology – all could guide the process (depending on the venture) and could also help to reduce risks of ending up in the wrong place and/or with the wrong product.

Furthermore, one of the things that we believe is a characteristic of great entrepreneurs is to persevere and continue far beyond the point when other more “sensible” people have thrown in the towel. That attitude does not sit well alongside the idea that goals can be changed whenever things seem to be going against them.

 

Our conclusion, Saras has begun an interesting “movement” and there are many important principles that should be used in the “0 to 60mph” phase of the start-up. But do not throw the baby out with the bathwater – recognize that causal thinking, modelling and other scientific business principals can enhance the effectuation process.

We are about to launch a new company: Mashauri Limited aimed at helping entrepreneurs through the process from start-up to stable business where we have cobbled together a mixture of the types of thinking discussed above. We have produced a process that we believe will really enhance the entrepreneurial journey and greatly increase the chances of success. If you are an entrepreneur in the early stages of start-up and would be interested in trialling the product, contact me at sgifford@genesis-esp.com to discuss it.

 

 

 

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Billionaires and biology

A number of blogs, ideas and headlines have come together to write this article stimulated by some thoughts around “biomimicry”  (creating solutions designed by nature), a topic that has been around for a while but is now being taken more seriously by business thought-leaders.

The first article came from a blog called The Nature of Business and was titled: “Super organisations – learning from nature’s networks” which applies aspects of complexity theory, particular the analysis of networks, to the state of the economy and business today. That sounds like a tough read, but it is surprisingly easy-going and a fascinating article showing how nature organises itself and how there are lessons for business.

That led me to a second article about risk and resilience from a web-site called “Business Inspired by Nature”. It shows how natures uses 3 strategies for building resilience: decentralisation, redundancy and diversity. This is really important. Genesis, along with one of our partner organisations: Consileo (specialists in building resilience through insight and foresight), are convinced that with the increasingly uncertain environment, resilience must be one of the prime requirements for all organisations. The increased possibility of unexpected exogenous shocks, together with coping strategies that are unlikely to be based on past experiences, demands that organisations must build in resilience and the ability to act at the front-line independently and spontaneously. It is clear that nature can provide us with lessons and metaphors that could help us to survive and thrive in these environments.

You are probably wondering where the “billionaires” (from the title) comes into this thinking. That came from a recent Forbes article in August putting Amancia Ortega ahead of Warren Buffet on the billionaires list and in third place overall. To me, Amancia’a organisation Inditex (owner of Zara and other brands), is a great example of a company that (perhaps deliberately or perhaps intuitively) uses nature-type strategies in their own strategies. A detailed description of the Inditex strategy would lengthen this article too much (and it  is easy to Google it), but they manage their entire business more as an ecosystem than a traditional business with boundaries. Built-in flexibility and speed to react are key survival mechanisms that provide its competitive advantage. Latest results of 12% profit increases and 10% revenue, the third consecutive year of growth in an impossibly-tough economic climate, combined with an increase in head-count demonstrates that their strategy is working.

The quality of decision making within an organisation is key to its success, survival or failure. I believe the three resilience building mechanisms adopted by nature hold lessons for how we make decisions in our business to build our own resilience:

  • Decentralisation (performing a function or responding to a disturbance in many distributed locations throughout an organism or system
    rather than in a single or centralized location).
    For example: encourage decentralised decision-making so decisions are made where they are best-informed and which can result in rapid response
  • Redundancy (performing a function or responding to a disturbance in more than
    one way.
    For example: when forced to decide what to do about a specific challenge (such as shrinking revenues), consider a number of different alternatives and allow those options to be explored and applied differently in different areas (locations, divisions, units).
  • Diversity (constantly seeking new and different ways of performing functions or responding to disturbances.)
    For example: find different ways of reacting to challenges and ensure that your decisions are are not based on “how we did it before” heuristics.

How might you go about putting this thinking into practice? It really will require some time and courage. Time to move out of fire-fighting operational mode and give yourself and your team some time to consider your current position and levels of resilience. Courage to move from tried and tested responses and explore some more innovative actions that may help you move from survival-thinking to a thriving-mentality.

Genesis Management Consulting would be delighted to facilitate a workshop with you and your selected team (not necessarily your Executive Committee!) to investigate these options.

For further reading:
Superorganisations – learning from natures networks.
Risk and resilience: how can I protect my organisation from future risk

And a new book that I have not yet started, but comes highly recommended by my colleagues:

Resilience: Why Things Bounce Back

 

 

 

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Surviving and thriving in the global economic crisis

Leadership and strategic decision-making in the global economic crisis

The global economic crisis is impacting on almost every organisation in one form or other. From a decision making perspective, there are two broad ways in which we are impacted

  • We are being forced to make certain decisions because of the crisis. For instance:
    • Do we investigate new markets to make up for our falls in revenue from traditional sources; or increase our focus on our existing markets?
    • Should we be retrenching staff or considering other ways to reduce costs?
    • How can we discover, and capitalise on, the opportunities that are hidden within this environment?
  • Our normal decision making process is also impacted through the need for more frequent strategic decisions and greater uncertainty when making them. For instance:
    • The decision to make a capital investment in new capacity is made more complex through the difficulty in forecasting future demand.

In the latter half of 2011, a small global group of experts formed part of a digital workshopglobal crisis to consider these types of challenges that individuals and organisations face when taking strategic decisions in the economic crisis that the world is facing. The objective is to provide some actionable advice for people who are looking for ways to lead their organisation through the challenge and to grasp the new opportunities that always abound in such environments.

The full article can be found here:

[si-contact-form form=’6′]

We are also building a knowledge repository of useful information concerning leadership through the crisis on our web-site; and have started with some workshop ideas. Go to the page by clicking here:
Decision making in the crisis

 

 

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Flexible strategy in action – adapting the business model

Agile strategy
Adapting the business model to create flexibility 

Pop-up stores.

There has been much talk for the last decade about having an agile strategy or being a flexible company. This is seen to be even more important in crisis situations – such as much of the world is currently facing. However, although there is a great deal of information about the “why”, there is less about the HOW and far less about real case studies of such.. So when we came across this article about pop-up shops (Inc. mahgazine) we thought we should publicise it as an example of how this can work in practice.

The article discusses how a New York City beauty chain store launches pop-up shops (temporary shops) to capitalise on the Halloween season – with significant success. This may sound like a tactical or short-term move – but in reality it is part of their overall strategy and is carefully planned.

For us, there are 2 points of particular interest:

  • They use a model that seems to be more similar to a prototyping model than more traditional strategic models. They try, learn and refine based on their new knowledge.
  • It is built into their overall strategy. For instance, if a particular pop-up store is successful in attracting young females they may convert the temporary store into a permanent one as the location obviously works for their target market.

 

We recommend you read the short article (click on the link) and while doing so, consider whether or not there may be analagous things you might be doing to to generate new revenue streams – especially if you are suffering in the current crisis. Are there parts of your business model that may not be as “fixed” as you believe? (eg Do retail stores have to be permanent fixtures? Must you own manufacturing facilities or warehouses?)

 

Look out for the latest in our series The 7 Habits of Highly Effective Decision Makers: Habit 3 Using Visualisation. In this document, you will find ideas about using visualisation to stimulate creativity and innovation – which could be useful in thinking about your agile strategy (Habit 3 to be published tomorrow 11 October 2011)

 

If you would like to discuss how you might go about deciding whether you should make your strategy more agile or how you should go about it, drop Simon a line at sgifford@genesis-esp.com.

 

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HBR classic readings on strategy – supporting your strategic decisions

Key strategy readings – strategic decisions, business models, 5 forces, ….

Maybe you are a CIO trying to get to grips with strategy and how you should be influencing your own organisation’s strategic thinking. Perhaps you are a young, ambitious engineer with their first general management role. Possibly you are a CEO facing challenging times who needs to take time out to seriously reflect about the direction of their business. Or you could even be a seasoned strategy consultant who wants to recall the basics (and that is not a bad idea in this age of fast change and complexity).

Whatever category you fit into, skim through these Harvard Business Review Classics and stimulate your thinking about your business. Each article has a summary of the concept, the article itself and some suggested further reading. Below the image of the contents is a click-able link that takes you to a pdf with the set of articles. (Note clicking on the contents themselves only gives you a larger picture of the image).

The HBR Strategy Classics

 

At the moment, we at Genesis are finding ourselves in a number of conversations about business models – are they still valid? do we need to tweak our model? are we becoming outdated? can we use new tools and technologies to reinvent ourselves?

We would be delighted to have a conversation with you about your organisation and help you to DECIDE if, and how, you should be reviewing your business model – by using our own set of tools together with our expert Associates from a range of industries and disciplines.

Drop me a line at sgifford@genesis-esp.com and lets start a dialogue.