Is Passion All You Need?

Passion.  It’s exhilarating.  Energizing.  All consuming.  And necessary for successful entrepreneurship?  Many entrepreneurs seem to think it has contributed to their success.  It’s often cited as a cornerstone of their entrepreneurial journey.  And it leads to the dispensing of such advice to aspiring entrepreneurs as “just follow your passion, and success will follow”. 

But the research isn’t as clear.  Psychologists and entrepreneurial researchers have attempted to discern the role of passion in driving entrepreneurs to create successful ventures.  And while some attribute it as having a role, the research done by Dr. Saras Sarasvathy suggests otherwise. 

Dr. Sarasvathy asked expert entrepreneurs to describe how they would go about starting a venture based on the scenario she provided them.  The answers she received led to her theory of Effectuation.  She found that entrepreneurs don’t innovate from an idea backwards, as traditional strategic planning would direct.   Instead they begin with their means and, by combining assets with committed stakeholders, they are able to create a future that could not have been predicted.  It’s less about the idea and more about the process. 

Reflecting on the results of her research, the behaviors she identifies maps more closely to love than to passion. 

1.      Attraction to Something Deeper.

There has to be something about the venture that captures the interest of the entrepreneur.  It could be the idea itself.  It might be the method of delivering on the idea.  Or it could be the process of building out an infrastructure.  But the attraction needs to have enough depth to sustain the interest. 

It is important to have something that engages the entrepreneur and makes them want to pursue that venture rather than an alternative.  However, focusing on passion can be detrimental.   Passion can be fickle and fleeting.  Burning bright for a short period of time, passions can be transferred to the next item that sparks excitement.

Building a venture requires a long-term mindset and is full of operational minutiae.  While a person with a passion for music might think that launching an online music streaming service will fulfill their passion, they quickly discover that running this type of business might not allow for the enjoyment of listening to music.  So the passion becomes unable to sustain the venture creation process, and the entrepreneur might become bored or dissatisfied and abandon it quickly. 

Richard Branson talks about his “passion” for customer service and delivering positive customer experiences as a key driver for his motivation as an entrepreneur.  But this is more than a short-term passion.  It’s a love.

This love for customer service has transcended many business ideas and industries.  For instance, Branson claims he had no interest in banking or financial services.  Yet he started a financial services business.  There were just too many missed opportunities for good service in that space, he thought. 

This drive to reform customer service processes is a steady love that he has nurtured and expanded as he’s grown his business expertise.   Even though he refers to it as a passion, it goes beyond this.  His spark for serving customers started in the music industry and has allowed him to innovate his way to a business empire.

2.      Rooted in Reality.

When innovating, entrepreneurs encounter many obstacles.  Market feedback may not be as expected for example.  An entrepreneur who is passionate about their ideas may be blind to the faults in their concept.  They might develop an unproductive attachment to their imagined end that diminishes their ability to see and react positively to criticisms and shortcomings.  Passion is associated with a blind devotion to an idealized version of things.  It dismisses away faults rather than acknowledging and dealing with them. 

Love reacts differently to failures and faults.  It sees them for what they are.  It is able to differentiate between the trivial and the fatal.  It evaluates them with a long-term view.  This builds coping skills, communication capabilities, and offers varied tools to initiate an appropriately proportional response. 

3.      Willingness to Give and Receive Commitment. 

Effectuation identifies commitment as the key to venture growth.  As more people opt in to participate as customers, partners, employees, etc., the stronger the venture and the faster its growth.  Passion is notoriously short term. 

Effectuation encourages the connecting of people based on their commitment to seeing the venture to a mutually beneficial state.  It is predicated on the notion that the character of the venture changes with the contributions of those who opt to participate in it.  This necessitates an element of trust between parties.  There is still much research to be done on the role that trust plays in venture creation, but it is evident that expert entrepreneurs manage relationship formation by leveraging affordable loss – that is, risking only what they can afford to lose at each step of the journey. 

And while it is positive to have the energy associated with passion, the slow burn of a more mature love is necessary to sustain the venture through the many iterations required for true innovations to succeed. 

Passion’s Not All You Need – Love Is What Matters

Successful entrepreneurship is not a short-term affair.  It’s a long-term relationship.  Characterizing passion as the foundation is short sighted and neglects the long-term work that goes into building a truly innovative venture.  Passion is associated with the young and the fun.  Love can be perceived as passion’s older, more boring sibling.  However, while an initial spark of passion might be what kicks things off, the behaviors that are more closely associated with love is what will see a venture through to success. 

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Don’t Ask If Your Industry is Ripe for Disruption

“Is your industry ripe for disruption?”  This is a common headline in the innovation space.  What usually follows is a list of industries and some bullet points about what makes them prime targets for competitive interference. 

If you’re letting these analyses drive your innovation activities, you’re missing the point.  Here’s why:

             1.      The Future is Created, not Predicted

What industry is not ripe for disruption?  Companies often think they have a lock on market share based on data, trends, research, etc.  No wonder they’re surprised when confronted with upstarts that overturn traditional ways of thinking about their market. 

The disruptions that occur often defy expectations.  And prediction.   Expert entrepreneurs disrupt industries by following the principles of Effectuation as outlined by Dr. Saras Sarasvathy of UVa’s Darden School of Business. 

The “unifying principle” of Effectuation is that of Pilot in the Plane.  This asserts that innovations are not “found”.  They are created through deliberate actions and responses on behalf of the innovator.  They do not arise based on “vision”, but on action. 

2.      Unanticipated Happenings are Not to be Feared, but Embraced

The tone of these articles on disruption is usually fear based.  “Companies need to do x”; or “beware of y”.  It paints the picture of unanticipated acts as threatening.  This is a very plan oriented, causal or “managerial” mindset.  If it hasn’t been identified ahead of time, it must be mitigated against or eliminated.  There is no room for the unexpected in corporate strategic planning. 

Dr. Sarasvathy learned from her research on expert entrepreneurs that their mindset is the inverse.  They not only leave room for the unexpected, they encourage it.  And when they do encounter it, they don’t attempt to quash it.  Instead they ask themselves “how can I use this to my advantage”.  Consistent with the entrepreneurial mindset of viewing everything you have as a potential asset, even the unexpected that entrepreneurs encounter are put in that same category. 

3.      Innovating is Not Equal to Adapting

Industry focused articles often promote the herd mentality.  Once they identify that the industry should innovate, they usually recommend a direction.  Using these analyses to drive your innovation efforts can lead to a “follow the pack” bias that shortchanges the internal innovation process.  Innovation built on this mindset is grounded in benchmarking and best practices.  At best, it will induce the organization to make a slight change in future plans, or prepare better for the known future.  What it won’t do is stimulate truly breakthrough “unknowable” innovations. 

What to Do Instead

1.         Don’t wait for someone to tell you your industry needs to innovate.  Start now. 

2.         Empower your people to shift their mindset from predicting and adapting to Effectuating and creating.   

3.         Leave room in your innovation planning for the unplanned.  And when it does occur, capitalize on it. 

Next time you see a headline asking “Is your Industry Ripe for Disruption?” move on to the next article.  The answer is always “Yes”.  

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Entrepreneurship is About Who You Know

Do you have to know someone to be successful as an entrepreneur?  The answer is Yes.  But who you need to know may surprise you. 

When Dr. Saras Sarasvathy was doing research on entrepreneurship, she had a hunch that successful entrepreneurship didn’t originate from a business plan or market research.  She herself had started new ventures and surrounded herself with other successful entrepreneurs who were able to start or grow new businesses without sophisticated forecasting and modeling tools.

So if they didn’t use planning, what did they use?  For this answer, Dr. Sarasvathy sought out the most successful entrepreneurs she could find and put them through a start up problem solving scenario that she recorded.  She interviewed entrepreneurs who started multiple ventures with successes and failures and they all had at least one IPO.  At the conclusion of the interviews she looked for behaviors common to all of these entrepreneurs. 

What she found was that all of them knew someone who helped them get their venture off the ground.  Yet not all of these entrepreneurs had:

• An Ivy League education;
• A parent who worked in venture capital;
• An MBA;
• A family member in a CEO role; or
• The support of a high ranking political official.

If money, power, or influence wasn’t a commonality among these entrepreneurs, what was?  Who was it that played a significant role in getting their ideas to market?  The commonality is that there was no one person in one specific role who made it all happen.  Rather, it was the process of being open to engaging all types of individuals that made these entrepreneurs successful.  Some of those contacted became co-founders and colleagues.  Some became collaborators and advisors, who opened the door to other opportunities beyond those immediately apparent to the entrepreneur.  Others became customers, partners, or suppliers. 

The transcendent factor in all of these relationships was that each stakeholder opted to participate in the venture with the founding entrepreneur.  And their participation was not just verbal.  The stakeholder committed to bringing some of their assets to the endeavor in an effort to jointly grow it beyond its original state. 

For those who think that entrepreneurship is all about who you know – they’re right.  But it’s not about finding the perfect person to connect with - someone with the most money, power, or influence.  It’s really about building a broader network.  About engaging those you know – whoever they may be.  Rank and role becomes secondary to commitment. 

Entrepreneurs can act on these findings by engaging those in their family, personal and professional networks, and even those with whom they have chance encounters.  Talk to people.  Tell them your ideas.  Share your goals.  And if they express interest, ask for more than feedback – ask for commitments.  It turns out that what you ask for – commitments – is even more important than who you ask.  

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

The Effectual Story of Angostura Bitters

When people think of the Caribbean they often think of beautiful beaches, warm people, and fruity drinks.  Daiquiris, pina coladas, and mai tais are at the top of the list.  But it’s actually bitters that have become a key export for Trinidad and Tobago.  Angostura Bitters, probably the most recognizable brand of bitters in the world, is based there.  Today it’s a prominent part of the nation’s economy.  Its history indicates that it was founded in a very Effectual way. 

Dr. Johann Siegert was a German soldier and surgeon with a taste for adventure.  After medical school, he served as an army surgeon during the fight against Napoleon.  When those battles were over, he set sail for South America to participate in the wars for liberation there.  He established himself in Venezuela in the early 1800s. 

While in Venezuela, in the city of Angostura, Dr. Siegert had troops under his care who suffered from stomach ailments.  Seeking a tonic to ease their discomfort, he experimented with locally available ingredients.  Local AmerIndians supplemented his knowledge and ingredients with some of their practices.  He spent years of trial and error experimenting with versions.  Eventually, he came up with a concoction that seemed to work.  It eased stomach pains and was pleasant for the troops to ingest. 

Word of Dr. Siegert’s tonic spread.  In 1824 he began to sell it outside of his command.  Six years later, he established a distillery to increase production and maintain consistency.

As Dr. Siegert grew older, his sons (Alfredo and Luis) became more actively involved in the venture.  Venezuela was politically unstable in the latter half of the 1800s, so they looked to move their operations.  Trinidad and Tobago lie just off the coast of Venezuela, and were part of the UK.  They chose to relocate there. 

As a territory of the UK, Trinidad offered a lot of connections to people from overseas.  The brothers began marketing the “Angostura bitters” to royal visitors from Europe.  They also kept in contact with their military networks and sold it to troops from the UK.  The bitters were particularly tasty when mixed with their Navy gin rations.  It tasted good and had a medicinal effect.  Liking it, they brought it back to the UK with them.  There, the bitters were incorporated into various cocktails and other drinks and spread beyond the original military audience.   

Angostura bitters began to develop a broad following for its tastes.  At the same time, it gained recognition for its look.  The label is big – out of proportion to the size of the bottle.  The story is that the two brothers shared responsibilities for production – with one making the bottle and the other making the label.  Unfortunately (or so it seemed initially), they didn’t communicate well and when the two parts came together, they didn’t fit.  But they had deadlines to meet, so the oversized label was pasted on the diminutive bottle.  This could have been a disaster, but the brothers turned it into a positive by using the distinctiveness of this mismatch as a cornerstone of their brand identity. 

Looking back at this narrative, we can see several elements of Dr. Saras Sarasvathy’s entrepreneurial theory of Effectuation.

1.      Pilot in the Plane Principle:  The future is what you create, not what you predict. 

The rise of Angostura Bitters could not have been predicted.  It was shaped at every step by Dr. Siegert and his sons.  Dr. Siegert did not begin testing bitters to create the next great global bitters brand.  He started small, used the resources and networks that were accessible to him, and grew from there. 

Business planning, market research, and forecasting became important tools for its growth as a company, but only after the brothers had created a market and knew that they had a product and customers. 

2.      Bird in Hand Principle:  Start with who you are, what you know and who you know. 

Dr. Siegert had responsibilities as a combat surgeon.  He began his venture by looking for solutions to problems that were within his trained profession.  He used ingredients from Venezuela because that’s where he was located.  And he learned from the native population because he had access to them and their deep knowledge of local herbs and their medicinal properties. 

Had Dr. Siegert stayed in Germany and never ventured to South America, Angostura Bitters would likely not have been created.  It was not inevitable. 

3.      Affordable Loss Principle:  Only invest what you can afford to lose. 

Dr. Siegert made these bitters in quantities needed to satisfy his troops’ medicinal needs at first.  As they liked it and requested it outside of illness, he began to make more.  When he realized that there was a market for it, he began to sell it.  As people bought it, he set up a distillery to increase production. 

He did not jump the gun and build before he had a market. 

4.      Crazy Quilt Principle:  Obtain stakeholder commitments to grow.

When the Siegert brothers moved their operations to Trinidad from Venezuela, they were able to leverage a broad network of stakeholders with ties to the UK and Europe.  This included both troops who would introduce it to their peers back home as well as the aristocracy, who could introduce it to their social strata. 

Also, it is said that the recipe is only known by a handful of people in the company.  Even the Trinidadian customs officials traditionally did not inspect the contents of the shipments coming to the company.  This required a partnership with government officials.  Had the company not been able to gain this stakeholder commitment to secrecy, it might not have been able to protect its recipe and thus maintain its lock on the bitters market. 

5.      Lemonade Principle:  Turn disadvantages into advantages. 

The Angostura label creation and bottle design is a prime example of this.  They took what could have been a one-time production error and have kept it as a key part of their brand identity for a century. 

Angostura Bitters is known the world over.  It has a distinct look and a distinct taste that has made it a bar essential.  But it’s path to creation was not distinct – it followed the same trajectory exhibited by successful entrepreneurs worldwide – Effectuation.  

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Surprises in Shipping

There’s 9 shopping days until Christmas.  That countdown used to be prominently placed on the front page of local newspapers, encouraging shoppers to scurry to their local retailers. 

Today, people are also paying attention to a different number – the last holiday shipping date.  With more and more purchases being done online, customers are very aware of the limited time remaining to mail, ship, or post their purchases.  No one wants to find the perfect Christmas gift only to have it arrive at the recipient’s doorstep on the 26th. 

Online retailing giant Amazon knows the importance of getting those Christmas gifts there on time.  In December 2013, the perfect storm of a last minute consumer shopping rush collided with a snowstorm that had UPS playing Santa days after December 25th came and went.  Negative customer backlash to both UPS and Amazon did not go unheard. 

Since then, Amazon has aggressively pursued improvements to its delivery infrastructure.  One of their recent initiatives is a great example of how Amazon uses Effectual thinking to develop transformative innovations. 

The Problem:  The Last Mile is the Costliest

The shipping industry has a massive global infrastructure that has seen tremendous innovations in management and technology.  As Amazon’s online sales and merchants have developed a global footprint, Amazon has developed partnerships with the major customer shipping outlets, including FedEx, UPS, the US Postal Service, DHL, etc.  Able to take advantage of global scale opportunities, they have built warehouses in strategic locations worldwide to drive down costs while shortening their merchandise delivery times. 

Yet as they’ve wrung efficiencies out of the origination of their shipping points, the most expensive and inefficient leg of the shipping process is the last mile.  Getting the package to the customer doorstep is the costliest step.  Why?  To get the packages to houses, drivers must often criss-cross towns and suburbs.  Sometimes they have to park far away from the home or search for the right house number or appropriate parking.  If the package requires a signature they have to wait for a customer to sign or put it back on the truck for redelivery. 

Rather than solve this problem on their own, Amazon collaborated with others to develop an innovative approach to reducing these last mile costs. 

The Solution:  Mobile Mailboxes

One solution that Amazon has enacted is the use of centrally located drop-off boxes in urban areas.  When a driver delivers a group of packages to one location, it minimizes time spent driving.  And standard box locations allow for optimized routing. 

Amazon saw there were a lot of benefits to this, but they felt that there was room for further innovation.  They identified a company who shared this last mile pain with them.  The company they selected was DHL in Germany.  As conversations evolved, they identified a secure dropbox that many of their customers already owned but that was going unused – a car trunk. 

The conversation expanded to include car manufacturer Audi.  Now all three companies were engaged together in solving this problem.  The solution they developed is currently being piloted in cities in Germany.  It works as follows:

• Audi developed a lock for trunks that is distinct from the overall car lock. 

• Owners of Audis can download an app that “enables” their smart cars to participate in this pilot and signals their consent to have their packages delivered to their car trunk. 

• Amazon packages ready for shipment are picked up by DHL.

• DHL drivers use the app to identify where the package recipient has parked their car for the day.

• DHL drivers are given a one-time use code that enables them to unlock the trunk of the car.  They place the package in the trunk and close it.

• The driver gets a notification on their phone that the package has been delivered and their car is locked. 

Both Amazon and DHL are betting that the majority of the users are commuting into the city and parking their cars in lots and garages.  Rather than traversing the suburbs for delivery, it concentrates the drivers in the urban ring.

The Method:  Effectual Co-Creation

When Dr. Saras Sarasvathy of the University of Virginia’s Darden School of Business identified the principles of Effectuation, the process of innovation used by expert entrepreneurs, she highlighted five key principles.  They are all evident in this example. 

1.      The Pilot in the Plane Principle – the future is created, not predicted. 

While a partnership between Amazon and DHL is not unusual, the addition of Audi and the reimagination of how even parked cars can be used as part of the delivery process show that Amazon believes that they can create new markets and transform industries. 

2.      The Bird in Hand Principle – start with what you already have access to. 

As these three companies joined forces, they each contributed their existing resources to the innovation process.  Amazon added their logistical optimization capabilities.  DHL added their trucks and manpower.  And Audi recognized that they had a “slack” resource to contribute – the Audis their customers were driving and parking. 

3.      Affordable Loss – invest only what you can afford to lose. 

Despite the fact that they are global in scope, these three companies decided on a limited pilot to test this concept.  Beginning with Munich, the companies will gauge efficiencies and customer response before committing to rolling out the service further.  Each organization was willing to invest in small changes, such as creating apps, training drivers, educating customers in a limited market, etc.  They recognize that just because they are large successful organizations, doing truly innovative projects means successes and failures and limiting the scope initially can be a valuable learning experience. 

4.      Crazy Quilt – co-create with additional committed stakeholders.

This principle is at the core of this project.  Rather than viewing each other as competitors, DHL and Amazon are working collaboratively to solve this last mile challenge.  And in order for Audi to participate in this project with them, Audi had to commit to making changes to their vehicles that enabled the trunk locking mechanism to be distinct from the overall car lock and compatible with smart phone technology.  Ensuring that each party has skin in the game increases the involvement and commitment to success of every stakeholder. 

5.      Lemonade Principle – turn obstacles into advantages. 

Just by participating in this collaboration, these three companies are acknowledging that they have a major obstacle – the high cost and inefficiencies of last mile deliveries.  By working together to solve this, they could possibly convert this drawback into a competitive advantage. 

Mastering the Last Mile

Corporate collaborations aren’t easy.  But they are essential for true game changing innovation.  The partnership between Amazon, DHL, and Audi to pilot this car trunk delivery solution likely took a lot of discussion, negotiations, and some strong corporate advocates in each organization. 

But if all works as they anticipate, Amazon will get packages to customers more quickly, DHL will reduce its delivery costs, and Audi will deepen its value and relationship with its customers.  All of which would make for a Happy Holiday season for these companies and their customers combined. 

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Assets to Action v Lean Startup

Having too many options can be paralyzing.  Consider the cereal aisle.  Spend enough time reviewing each product’s ingredients, benefits, and cost and it will make you consider skipping your morning meal in favor of a cup of coffee – if the Starbucks menu wasn’t overwhelming itself. 

The discipline of entrepreneurship is no different.  As management science took off in the mid-twentieth century, the business plan was the cornerstone of new venture creation.  Then, as many innovations began to occur outside of the planning process, a new process was developed as a systematic approach to problem solving – design thinking. 

Enter the hyper-growth era of tech startups and soon it became evident that many innovations could not be attributed to design thinking.  Where were they coming from? 

After observing successes and failures in the tech and venture capital industries, Eric Ries produced his version of how innovations come to be – the Lean Startup method.  Similar to other entrepreneurs, he offered his view on what it takes to be successful.   

Around the same time, Dr. Saras Sarasvathy of the University of Virginia’s Darden School of Business saw that in academia and many startup related eco-systems, the business plan still reigned supreme.  Yet these other approaches were gaining ground.  She knew as an entrepreneur herself and based on her interactions with other entrepreneurs that businesses were growing all around the world without even the start of a business plan.  And in some cases, these ventures would go on to become IPOs. 

Instead of relying on heuristics, she set out to research what successful entrepreneurs really do to start and grow new ventures.  This resulted in a method validated by social science research - Effectuation.  Effectuation is the process that successful entrepreneurs use to create new ventures. 

Today, one of the primary methods of applying Effectuation to a new venture is the Assets to Action Model.  So how is the Assets to Action Model aligned with or opposed to the Lean Startup method? 

Lean Startup v Assets to Action

• Ideas v Assets Focus

Lean Startup begins with the idea.  The entry point is a solution to a problem or a future vision. 

The Assets to Action model begins with a person’s assets – who they are, what they know, whom they know, what they have, etc.  This is the “Inside” step in the model.  The idea is of secondary importance to the process.  This allows for innovations that range from ingenious inventions like Apple Computers to simple successes like the Pet Rock craze. 

• Build a Product v Build a Team

Lean Startup’s initial step is to build a product based on your starting idea.  The emphasis is on creating a minimum viable product (MVP) as quickly as possible.  The goal is to get the product in front of possible customers and begin collecting real time data with immediacy so that adjustments can be made to improve the marketability of the product. 

The Assets to Action model also encourages getting to market as quickly as possible, but the process differs.  In Effectuation, building a team comes first.  Priority is given to partnering with others who commit to mutually co-creating the venture.  This team is ideally comprised of co-founder(s), suppliers, customers – anyone who can play a role in the success of the venture. 

Ultimately, getting stakeholders to participate increases the likelihood of venture success.  That’s why the Assets to Action model encourages expanding your stakeholder network by considering “Outside” opportunities.  And the Commitments Core of the model drives the concept that feedback isn’t sufficient for building new ventures.  It’s commitments that propel venture success. 

This can best be illustrated by an example.  Say you want to build an app that broadcasts the restaurant specials that each restaurant in town is offering for the night.

If you’re an app developer, Lean Startup’s approach of just build it might work for you, because app development is a skill set you have.  If you have the time, building the product might be straightforward and simple for you to execute on, and might not cost you any money.  And if it didn’t work out the way you thought, perhaps you could make your own changes to the app, and continue tweaking it until something stuck with possible buyers.    

But what if you’re not an app developer?  What if you have this idea for a restaurant related app, but don’t have the skills to build a MVP? 

In that case, the Assets to Action Model would have you first identify your Inside -- what skills and connections you might have that could contribute to getting this product to market.  Do you work in a restaurant?  This might give you insight into how specials are determined for the week and when most in the industry come up with their planned specials.  And it also possibly gives you connections to potential restaurant customers. 

Next you would set your Downside (your Affordable Loss).  Perhaps you only want to invest $100 into seeing if this might be a viable business.  Rather than hire an app developer, you’re going to have to tap into your network to connect with someone who might have that skillset.  This requires tapping into your “Outside” (your Crazy Quilt).  When reaching out to others you’re going to have to rely on your ability to co-create to see if you can get them to commit to partnering with you on getting a minimum viable product into the marketplace. 

If after approaching a developer you’re unable to get anyone to participate, you might consider adjusting your idea to one that more closely aligns with your existing assets, changing the terms of how you co-create, or opting into a different approach for testing that is more consistent with your “Inside” assets (for example, developing a manual process that tests the fundamentals of the idea). 

• Testing a Vision v Creating a Market

Lean Startup is grounded in a test-and-learn philosophy, but the objective of this approach is to uncover the “answer” for a successful business model.  At the core, it is a predictive based methodology that assumes that new ventures are to be “found” or “discovered”.  Products are built with features that are “predicted” to be of value to assumed customer segments. 

Effectuation asserts that the future is not out there to be discovered.  It is not predetermined.  Instead, the future can be created.  Instead of theorizing what a customer group might want, the “Outside” of the Assets to Action Model encourages entrepreneurs to talk to customers before even building the product.  This is based on commitments from others, with the view that customers are stakeholders in co-creating a future vision and not just transactional participants.  The “Upside” component of the model drives entrepreneurs to action, learning, and iteration with the mindset at each turn that the future is open to being made.

Which to Choose

There is a lot of value in the Lean Startup process, especially its emphasis on action and in-market learnings.  Where it falls short is its tech-centric approach.  It has an overreliance on product and an under-reliance on people, collaboration, and creating new markets.  

Our recommendation is to start with the Assets to Action Model.  Use it to build a team of stakeholders committed to creating a market together.  Start with the “Inside” – Identifying your Assets.  Set your “Downside” by determining your Affordable Loss.  Move to the “Outside” by pulling in others to co-create with you.  Then push the “Upside” by getting your idea into market and collecting real-time feedback with the mindset that it is within your control to create the future.    

As you acquire experience and real time data in market, and develop more certainty in what you’re moving forward with, transition to the Lean Startup approach if desired.  Or you might consider bouncing between the two, relying on the Assets to Action Model as you iterate or encounter more uncertainty.

Still having trouble deciding which to use?  With the Assets to Action Model you set your “Downside” (Affordable Loss) up front, so you only invest what you can afford to lose.  Viewing it through this lens, it’s not such a difficult decision after all. 

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Luck of the Entrepreneur

Tom was having a bad day.  He was preparing for a presentation when he ran out of printer ink.  His presentation was the next morning.  He had to have those copies ready.  He jumped in his car and headed out in search of ink.  Driving around, he was unable to find a place open that had the ink he needed. 

Tom was stressed out.  He was between jobs.  This was his opportunity to sell himself to a new team.  If he didn’t have this presentation in hand in hours, he would be out of luck. 

Or would he?

The Tom in this story is Tom Stemberg.  It was Fourth of July weekend, 1985.  He had been an executive at a supermarket chain and had an idea for a new type of food retailer.  He had his business plan sketched out and was typing it up in preparation for a meeting with potential investors the following day.  But he ran out of typewriter ribbon.  He went in search of replacements, but all of the small office supply retailers he visited were closed for the holiday weekend. 

Tom was frustrated by the experience, but it got him thinking.  Instead of following through on his pitch for funding a new grocery, he started talking about creating an office supply superstore.  The result was Staples. 

Was Tom’s experience of not finding what he needed a case of bad luck?  Good luck?  Or was Staples destined to happen all along?

Luck v. Serendipity

The field of entrepreneurship used to place a lot of emphasis on luck and intuition.  Come up with a new idea?  You were in the right place at the right time.  Make new markets happen?  It was in your genes.  Achieve entrepreneurial success?  The stars aligned and you were destined for greatness. 

But the research of Dr. Saras Sarasvathy of UVA Darden’s School of Business upended this traditional view.  Effectuation shows that there is a process that successful entrepreneurs use to create new ventures.  They don’t have a superior knowledge of the future.  It’s not just a matter of fate.  Instead, they work with what they have and what they experience in the present to create the future. 

Luck is something that is brought about by chance, not by action.  Serendipity is finding value in something unexpected.  While similar, they differ in action.  Luck removes the agent from acting.  Instead, they are acted upon.  With a serendipitous event, the impetus is on the agent to convert the unexpected experience they are having into something valuable.

Serendipity aligns with the Effectual Lemonade Principle.  This says that expert entrepreneurs are open to the unexpected.  They do not fear it, avoid it, or seek to eliminate it.  Instead, they embrace it and beyond this, can be seen to create opportunities for the unexpected to thrive. 

Embracing Serendipity

Nicholas Dew, Associate Professor at the Naval Postgraduate School, has written on the difference between luck and serendipity.  He has identified three conditions that improve the likelihood that an entrepreneur will be able to take advantage of an unexpected event.

1 .  Prior Knowledge.  It pays to have a deep understanding of something.  The specific field can be anything – as long as the individual develops competence. What’s important is the knowledge and confidence that emerges from this expertise. 

2.  Contingency.  This is defined as an awareness of things that are occurring around the entrepreneur; happenings in the broader environment.  In contrast to the previous point, this requires a broad view rather than a narrow but deep understanding.  This perspective allows the entrepreneur to identify opportunities to translate their prior knowledge into creating new and innovative markets. 

3.  Searching.  An openness to experimenting and trying new ideas and new combinations, this requires that the entrepreneur be on the lookout for things that appear to be unusual, unique, or innovative.  This does not imply that the entrepreneur will “discover” or “find” a new market.  But that they are open to trying new things in new ways as they work to create a new market.   

Serendipity and Staples

How does our original Staples example show signs of serendipity rather than just luck? 

1.      Prior knowledge.  Stemberg had a deep knowledge of how to run a major grocery store.  He was a Harvard MBA with a strong business skill set and an understanding of how to build and market a retail store. 

2.      Contingency.  Although Stemberg had a very specific need and was focused on finishing his business plan for groceries, he didn’t have such tunnel vision that he overlooked the opportunity before him.  He was open to applying his prior knowledge in one area to a different field.  He was able to identify the commonalities and differences from his experiences in food retail and translate that to an opportunity in office supplies.

3.      Searching.  When he couldn’t find the office supplies he needed in a pinch, he didn’t stop with defining this as just bad luck.  He saw that it didn’t have to be this way - that there might be a solution that could solve more than just his situation.  And that he could be the one to create this solution.   

Being a successful entrepreneur isn’t a personality trait.  And it’s not just good luck.  It comes from following an Effectual process rooted in the notion that the future is not predetermined, but instead created by the collective actions of individuals.  

With these three factors - prior knowledge, contingency, and searching - serving as inputs to understanding, entrepreneurs can be well positioned to change their luck into serendipity and their future into, well, whatever it is they want to create.

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Sources:  What Effectuation is Not:  Further Development of an Alternative to Rational Choice, Wiltbank & Sarasvathy (2010); and Serendipity in Entrepreneurship, Dew (2009). 

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Something Sweet from Something Bitter

When successful entrepreneurs look back at how they began, they can gloss over the difficulties of starting up.  Often, the stories they tell about how they grew their ventures neglect the early stage of what it really took to validate the initial idea in market. 

Dr. Sarasvathy of the University of Virginia’s Darden School of Business noticed this.  It’s what led her to conduct research with some of the most successful entrepreneurs in the United States.  And this resulted in her discovery of Effectuation.  Effectuation is the process used by successful entrepreneurs to start ventures. 

This week, I came across this story of a local entrepreneur in Charlottesville, VA.  Kip McCharen has launched a business making alcohol bitters (http://tinyurl.com/zfgohje).  And all of the principles of Effectuation are evident in his story. 

• Bird in Hand Principle:  Start with who you are, what you know, and whom you know. 

Making bitters is something Kip enjoys.  He was experimenting with some when he ran into a challenge.  He could only buy certain ingredients in bulk.  Rather than let them go to waste, he made a large batch, kept what he wanted for himself, and gave the rest to friends. 

His friends enjoyed the bitters – and asked for more.  From this, the idea of crafting bitters for sale was born. 

• Affordable Loss Principle:  Only risk what you can afford to lose.

While Kip saw an opportunity to make and sell his bitters, he wasn’t ready to give up his existing job yet.  So he decided to test the waters by selling at the local farmer’s market on Saturday mornings.  He called and asked them if they would let him have a presence there some weekend and was surprised that there was an immediate opportunity.  He took it. 

• Crazy Quilt Principle:  Grow through partnerships with committed stakeholders.

Wanting to expand awareness for his product and put it in front of more potential customers, Kip brokered arrangements with local restaurants to feature his bitters.  The restaurants were willing to do so as it gave them something new to offer their patrons.  This has helped Kip to grow beyond customers that he alone can reach. 

• Lemonade Principle:  Turn challenges into opportunities.

This is most evident in Kip’s initial approach to having to order large quantities of ingredients for his own batch.  He didn’t throw away the excess.  He made a large batch and gifted the product to friends and family. 

• Pilot in the Plane Principle:  The future is created, not predicted. 

The market for bitters is relatively untapped.  Even the regulators aren’t quite sure how to address it yet.  Rules around composition and distribution are evolving.  This isn’t stopping Kip from pursuing his venture.  He is working with things he can control and maintaining the ability to adapt and be flexible to meet the needs of this changing environment. 

Kip doesn't know where this venture will end up yet.  The regulations around it are still being formed.  There aren’t many competitors.  Craft bitters are a relatively new concept.  But that’s not stopping Kip.  Instead, he’s viewing this as an opportunity. 

No one can say what this venture might look like in a few years, but for now, Kip is applying Effectuation to grow it.  And we wish him sweet success for his bitter business. 

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Wheels that Took Flight

The idea is simple.  Instead of carrying something heavy, put wheels on it and pull it.  It’s not genius or revolutionary.  It’s obvious. 

Or so it seems.  But prior to the 1970s, people were carrying heavy suitcases when they traveled.  Dashing through the airport to catch a flight meant huffing and puffing with a heavy suitcase cradled in your arms. 

In 1970, Bernard Sadow had a revelation.  While traveling, he saw someone pulling heavy baggage on a wheeled cart.  It looked much easier than what he was doing.  So he came up with the idea for putting wheels directly on a suitcase.  He attached four wheels to the bottom of a standard rectangle shaped hard suitcase and attached a strap by which the luggage could be pulled.  Then he applied for a patent.  The result was a little wobbly and unstable but it was easier than the alternative. 

Patent in hand, he approached several large department stores to see if they would sell his wheeled suitcases.  They all declined.  It was viewed as less than manly at the time for travelers to be pulling luggage that could be carried instead.  Eventually, Macy’s department store bucked social convention and picked up the line, but sales were unremarkable.  Sadow focused more on the patent and less on the marketing and adoption of the innovation. 

Thus, it took over 15 years and a new inventor for this idea to really take flight. 

Who knows more about travel and luggage than a pilot?  Bill Plath flew airplanes for Northwest Airlines.  Like Sadow, he had observed luggage strapped to metal carts and thought there must be an easier way to transport these bulky objects.  And there was. 

In addition to being a pilot, Plath was a tinkerer.  He enjoyed experimenting with design at his workbench in his garage.  That’s where he developed his prototype for the first Rollaboard.  Instead of the 4 wheeled versions of the past, this suitcase had 2 wheels, was positioned vertically instead of horizontally, and had a long vertical handle that formed a skeleton of sorts for the bag. 

Simple in design and use, Plath began using it himself when traveling.  It wasn’t long before his colleagues, other pilots and flight attendants, began asking him if he could make some of these easy to pull suitcases for them as well.  And he did.

As more and more of his friends asked to use this design, he began to think that maybe he was on to something.  He made additional prototypes.  Then he began offering his co-workers a $5 cash incentive when they secured an order from another pilot or flight attendant. 

Plath was in the perfect environment for his idea to spread.  Passengers began noticing that those who were travel experts (mainly pilots and flight attendants), were using this Rollaboard luggage.  Envious of the ease with which the airline crew got around the airport, passengers began inquiring as to where they could purchase something similar.  It was at this point that Plath moved his operations from his garage to a true warehouse.  This was after about a two year journey of experimentation and marketing to friends and colleagues. 

Once passengers started purchasing this luggage, the true transformative impact of this innovation was apparent.  Planes were reconfigured to enable easy rolling down the aisle and storage in overhead compartments.  Airport waiting areas, stores, security checkpoints, and restaurants were designed for customers rolling rather than carrying their bags.  And the once vibrant skycap porter services saw their business roll right by them. 

Lessons Learned

What started with a simple suitcase became a venture – Travelpro.  Plath’s innovation started by grounding itself in some core effectual principles, as outlined by Dr. Saras Sarasvathy of the University of Virginia’s Darden School of Business: 

1.      Start with what you know.  (Bird in Hand Principle)

Plath knew travel.  While he didn’t know luggage design or manufacturing, he was a hobbyist maker and a frequent traveler and he wasn’t afraid to experiment.   He observed what was happening in his surroundings and listened to how people felt about what was working and not working in their day-to-day environment. 

2.      Start with what you can control.  (Pilot in Plane Principle)

Plath didn’t set out to revolutionize travel.  He set out to make his life easier.  That was a goal he could achieve.  By doing that, he opened the eyes of those around him, his co-workers, to the possibilities of change.  It was an incremental process and not one of overnight large-scale transformational change.

3.    Start with whom you know.  (Bird in Hand & Crazy Quilt Principle)

Plath’s first customers were his partners, fellow pilots.  His next customers were flight attendants with whom he worked.  Then it was pilots and flight attendants he didn’t know, but who were introduced to the idea through his immediate network.  When they bought in, their use of the Rollaboard made passengers aware that there was an alternative to how they were dealing with luggage.   As each successive group adopted the innovation, the idea spread.  

An Innovation with Impact

There are a lot of inconveniences with traveling today.  Long lines, delays, and crowds are just a few of the battles frequent travelers fight.  But thanks to Plath’s Rollaboard, sore muscles and backaches from carrying heavy suitcases through the airport aren’t one of them. 

Inc magazine has referred to Rollaboard as one of the top innovations in modern history.  As Americans gear up for Thanksgiving Holiday travel, we can add it to the list of one more thing to be thankful for. 

--Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC

Entrepreneurship Doesn’t Have to be so Scary

A classic Halloween horror scenario is a person hearing a knock on a door, opening it, and being met with terror and doom.  That’s how many feel about trying entrepreneurship.  They fear that by opening the door to an entrepreneurial opportunity, they risk inviting terror into their lives. 

The list of fears around entrepreneurship can be long.  People fear the pitfalls they’ve heard about, such as product fails, financial struggles, and unending work.  And they fear the weaknesses they know in themselves or their business models, such as whether they can evolve into a salesperson, whether they have the ability to persevere through the hard times, or whether others will notice that their technology chops aren’t as strong as they’d like them to be.

But often, the bigger fear is what’s waiting around the corner.  It’s the fear of the unknown.  Those pitfalls no one mentioned, or the weaknesses that went unnoticed.  The fear of what may be is often what prevents people from creating their own future, preferring instead to take the known that’s handed to them. 

A Fear with Many Faces

Fear of an uncertain future can take on many forms.  It’s ability to change shape and rear its head at unpredictable moments is a powerful deterrent to many who dream of being entrepreneurs.  By recognizing some of its forms and effects, aspiring innovators can develop techniques to lessen its impact. 

·         Fear of failure

Google “fail” and “entrepreneur” and myriad stats pop up citing the likelihood that an innovative venture is doomed to failure.  It’s no secret that launching a new product or service into the market place is a difficult task.  But instead of abandoning the idea, there’s a better way to manage this risk, and that’s using Effectuation. 

Effectuation, the mindset of successful entrepreneurs discovered and defined by Dr. Saras Sarasvathy at the University of Virginia’s Darden School of Business, provides a framework for creating new ventures that manages risk while simultaneously pushing growth.  Through such actions as setting your Affordable Loss at the outset and growing through the creation of a Crazy Quilt, an entrepreneur lowers their own risk while gaining access to far more resources through strategic collaborations with others. 

Beyond a framework, the research on Effectuation shows that the mindset of successful entrepreneurs can be taught and can be learned.  Anything done for the first time can be scary or intimidating.  Effectual research has shown us that practice and repetition of these entrepreneurial behaviors is an effective way to reduce the fear of failure that many novice entrepreneurs feel.  It boosts confidence and optimism, reducing this fear to one of caution rather than deterrence. 

·         Fear of success

For some, the fear of succeeding can be as paralyzing as the fear of failure.  Imagine hearing a knock on the door and opening it to find a stampede of customers.  For experienced entrepreneurs that might be a dream come true, as they’ve developed the skills to handle this level of demand.  For a novice, it can be overwhelming. 

Experience is a strong tool for battling this fear.  Research shows that this fear is greatest at the beginning of the entrepreneurial journey.  Once innovators launch their ventures, they learn quickly that amassing a horde of customers isn’t easy and that product sell-outs can be few and far between.  What’s more likely to happen is that demand is lower than anticipated, leading one to get creative about drumming up business instead. 

Another strategy to address this is to parse the launch into smaller steps.  Stage manageable pilots and controlled marketing to build confidence and test your products, processes, technologies, and teams.  The overnight success stories you read in the magazines are almost always years in the making, full of small steps and pivots rather than single moment launches.

·         Fear of losing control

Businesses start with a single idea.  However, growth requires interactions, and interactions inevitably lead to change.  When thinking up a business idea many think in terms of segments.  Yet when an idea is in the world people relate to it one on one.  As such, each individual reaction will vary.  In order for an idea to become greater than just a passing thought, it has to be embraced, lived, bought, and believed by others.  This requires some amount of ownership on their behalf.  Other stakeholders have to feel that they have skin in the game and an opportunity to shape the future of the innovation. 

For some, this is the scariest fear of all.  They fear that by the time the product becomes “successful” it will have morphed into something unrecognizable.  That it will have so many handprints on it they no longer feel attached to it. 

Understanding the intrinsic motivation for starting the venture can prevent this.  Ask the following: 

o   Why am I doing this?

o   What do I hope to get out of this?

o   What do I hope that those who participate in this venture gain?

o   What are my non-negotiables? 

Setting these parameters upfront will give the entrepreneur control over what’s important, and will leave room for others to influence the outcomes of the venture as well. 

So Do You Open the Door? 

Despite identifying the fears looming for prospective entrepreneurs and outlining strategies to address them, they don’t go away.  They’re going to continue to be there, lurking in wait for the next daring soul attempting to create something new in the marketplace.

But just because you can’t predict what’s on the other side of the door doesn't mean you shouldn’t open it.  It doesn’t mean you can’t face it, react to whatever it might throw your way, and walk away better for having done so.  The end of your entrepreneurial journey doesn’t have to look like a typical horror flick.  Because in this movie, the ending is what you make it. 

 --Written by Sara Whiffen, Founder & Managing Partner, Insights Ignited LLC