Effectuation

How COACH Became a Home Run

The twentieth century saw a lot of social change, especially related to women.  As they achieved greater independence and a larger role outside of the home, their handbag choices evolved as well.  At the same time, the industrial revolution introduced new manufacturing techniques and expanded shipping and travel options facilitated the spread of brand names and styles between continents. 

Throughout the first half of the 1900s in America, European designer handbags were held in high esteem.  Wealthy American women were able to acquire them through their travels to the continent or exclusive shops in New York City or other large urban areas. 

For most women, however, these handbags were out of reach.  Expensive and impractical for their daily routine, these women had to resort to cheap bags made of thin leather stretched over cardboard.  There was nothing in between. 

But Lillian Cahn saw an alternative.  And with the help of her husband, Miles, she created an entirely new handbag segment – the Affordable Luxury purse category.

Start with What you Know

  • Miles Cahn knew leather. 

He had experience working in leather manufacturing.  In the 1940s, he was hired by a small leathergoods manufacturer that specialized in making wallets and billfolds.  This outfit prided themselves on their craftsmanship and paid close attention to detail. 

Miles embraced this philosophy as well.  He was always inspecting leather products he encountered.  He came across a leather baseball glove.  It was well worn, but maintained a soft, buttery feel and a deep tan hue.  He was intrigued by the strength and suppleness this leather exhibited. 

He began to think about how he could apply this leather to the products he was making in the factory.

  • Lillian Cahn Knew Handbags.

Lillian Cahn was raised during the great depression.  She used to run errands for her family, carting groceries back and forth in shopping bags.  As she matured, she adopted the use of purses for special occasions, but missed the functionality of the shopping bags she carried daily.  The structured purses that were popular at the time were impractical for day-to-day use. 

So Lillian took matters into her own hands.  She designed a tote bag that combined the structure of leather with the functionality of a shopping bag.  Taking the design to her husband, he initially did not see the need for this type of bag.  But Lillian persisted and convinced him to manufacture some of her designs. 

  • They Combined their Knowledge to Create Something New

Miles decided to give Lillian’s designs a try.  He was willing to make a few experimental prototypes of her handbag to see if they attracted any interest.  At the same time, he was experimenting with the baseball glove leather that had intrigued him.  He discovered a process that made it even stronger, softer, and more flexible.  And since he was in an experimental mindset, he decided to manufacture Lillian’s bags using the new baseball glove leather he had improved upon.

Combining detailed craftsmanship, high quality leather, and a practical design that could be used all day, every day, the Coach Handbag was created.  It became highly sought after and opened the door to an entirely new handbag segment – Affordable Luxury. 

Using Ordinary Experiences to Create the Extraordinary

Miles and Lillian Cahn did not live an extraordinary life.  He worked as a leather craftsman.  She ran errands and shopped.  But their actions demonstrate an Effectual worldview.  They did not view their lives as limited, but full of opportunity. 

They applied their ordinary experiences in unique and novel ways.  What began as a simple handbag grew into a company, an esteemed brand, and an entirely new market. 

The Cahns took a shopping bag and a baseball glove and turned them into a homerun. 

--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

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

 

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

 

Using ALL Your Resources to Your Advantage

“We have a great resource,” said Niall Stuart, chief executive of Scottish Renewables, an industry association. “It’s Scotland’s terrible weather.” 

This Washington Post article http://tinyurl.com/j5e27pj shows how Scotland is applying a little entrepreneurial thinking to create a future that today doesn’t exist – a future in which all of the country’s energy needs are met by renewable fuels. 

Scientists are predicting a rapid acceleration in climate change and a decrease in traditional fuel sources.  Visionaries, policy makers, and entrepreneurs are joining forces to co-create a new paradigm for national energy supply.  And they’re using Effectual actions to do so. 

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

What's Effectuation Good For?

Companies are always curious as to what their peers are doing.  One of the questions I’m asked most frequently when I talk to managers about Effectuation is “How are other companies using it”? 

These are some examples of how others are applying the Effectual principles in their corporate environments.

A New Product Launch Process

A beverage company used Effectuation to roll out a new soft drink.  While the drink itself was not innovative, they wanted to take an innovative approach to its marketing and launch.  They made a conscious decision to break from their normal marketing launch model.  In its place, they applied Effectual decision-making. 

The primary difference was how they engaged their marketing, sales, and distribution partners in a more co-creative way.   Usually, they would decide at the corporate level which market to roll out to first.  This time, they worked with their partners to seek handraisers.  And in return, they asked them to co-invest in the process.  Their partners contributed sales resources.  They exercised the crazy quilt principle to build a stakeholder network that was mutually vested in the success of the product rather than just executing on orders and agreements. 

The launch was successful and led to a full scale roll out.  After operating this way, it changed how they think of the launch process.  Now, they have incorporated Effectual elements into their early stage innovation efforts, providing them with alternative methods to deal with market uncertainties. 

 Closing a Funding Gap

A national nonprofit organization faced a significant decline in funding.  Every year, they addressed their budget needs as part of a broader strategic planning process.  This year, they applied Effectual thinking to their strategic planning review and it changed their outcomes.

Rather than focus on what was cut from their budget, they looked inward at what resources they did have – their bird in hand.  This assessment uncovered both tangible assets – such as underutilized real estate and technology, as well as intangible assets – such as members and partnerships that were ripe to be built on.

So they took their planning process outwards.  They reached out to members and potential partners to see what it would take for them to increase their investment in the organization.  These dialogues led to several members, groups, and businesses identifying ways in which they would be willing to partner to develop mutually beneficial programs. 

The outcome was that they were not only closed their funding gap, but they surpassed their shortfall and achieved better than expected outcomes because their efforts were buttressed by the partnership of a stronger network. 

Creating a New Revenue Line

A technology services business used Effectuation to develop a product based revenue line. This company grew on the strength of its people and service delivery.  They had an impressive list of corporate clients but were struggling to recruit the talent needed to scale their operations. 

At the same time, they saw gaps in the products they were implementing and additional needs among their clientele.  They put this problem out to their employees and several indicated an interest in prototyping possible technology solutions.  They did this on top of their normal job responsibilities as it was of interest to them. 

The sales team took these product prototypes out to their clients to see if they generated interest.  Not only did they get positive feedback on some of their concepts, but they were able to successfully presell a version.  They partnered with the company on further development and delivered a tech product that they can no repurpose for other organizations.  This will allow them to scale and meet their growth goals.

So What is Effectuation Good For?

Effectuation is not just a process.  It’s also a problem solving method.  Whether you work in a nonprofit or a corporation, there are organizational challenges that could be addressed by applying the entrepreneurial mindset. 

If you see your company in any of these examples, consider how you and your team might apply Effectuation to solve the problems you’re facing. 

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

 

Effectuation: When You Can’t Rely on Miracles

Roche Parmaceuticals is a big corporation in many ways.  It appears on the Fortune Global 500, the list of Best Companies to Work For, and Forbes’ list of the Fifty Most Innovative Companies. 

But when it comes to innovation Roche acts less like a corporation and more like an entrepreneur.  Roche’s CEO Severin Schwan was interviewed for the January 2016 edition of the McKinsey Quarterly, “Organizing for Breakthrough Innovation”.  

There are several examples of Effectual thinking, the mindset developed by Dr. Saras Sarasvathy of the University of Virginia’s Darden School of Business, in this interview.  The specific principles and terms of Effectuation aren’t there.  But underneath some very corporate vocabulary lurk the behaviors of expert entrepreneurs.

What Roche is Doing and How it is Rooted in Effectuation

1.      Bottoms Up Innovation with Top Down Allocation

Roche pushes innovation control down to lower levels of the organization.  Resource allocation remains at the top levels to ensure some coordination and consistency worldwide.  But the freedom to create and pursue new ideas rests at the local level. 

Because of local level autonomy, Roche sees some overlap in ideas from time to time.  Recognizing that this signals an inefficiency, there is a conscious cultural decision to absorb this inefficiency for the benefits gained from letting the lower levels innovate with less top-down interference. 

Moreover, Roche goes beyond dismissing the inefficiencies to embrace the notion that duplicate ideas could even serve the benefit of providing backups or collaborations for innovations.  This mindset that similar ideas do not have to be competing with each other, or a waste, is something we see in the Effectual mindset of expert entrepreneurs that allows them to view competitors as potential partners and collaborators.  This often leads to an “increase the pie” mentality that spawns new innovations rather than an “all or nothing” fear based mentality. 

2.      Scale is not an Early Stage Concern

Roche is a huge company in search of big ideas to solve big problems, so of course large-scale breakthroughs are desired.  However, the Effectual mindset prevails in that they are able to successfully hold off on evaluating the scale potential of an idea until it is given its chance to succeed. 

This is often a struggle for large companies that want to see instant results.  If not, they kill the new program or product.  Roche is in it for the long haul and gives new research the chance to take effect, and the scientists the chance to learn, grow, and adapt their treatments before they evaluate the scale potential of the idea. 

3.      Individual Accountability and Skin in the Game

Ideas require champions.  Individuals must commit to the ideas they back and they must get others on board as advocates.  If people aren’t willing to back their innovation and put skin in the game towards advancing them, the idea is not pursued. 

Once an idea is adopted as a corporate priority, one individual is given accountability for the success of that initiative.  And that accountability is pushed to the lowest level possible to give them the greatest amount of hands on control. 

4.      Cultivation of Specific Behaviors

 Three behaviors are observed as essential to their innovation success.

o   Self-initiative

o   Action in the face of ambiguity

o   Openness to outside ideas

These are all fundamental components of Effectual action.  Comfort with taking action in the midst of uncertainty stems from the knowledge that the individual has the opportunity to control the outcomes they are pursuing.  They’re not taking a chance on fate, but entering an arrangement they can influence in their favor.  Coupled with self-initiative, this aligns closely with the Pilot in the Plane Principle of Effectuation. 

Openness to outside ideas is expressed as both openness to diversity as well as openness to the value of partnering with other people, groups, or companies.  This is what opens the door to successful co-creating (i.e. the Crazy Quilt Principle)

5.      Management and Board Alignment

Mr. Schwan talks of going to the Board with long shot ideas.  But he presents those ideas in “digestible” pieces and “doesn’t bet the farm” (i.e. the Affordable Loss Principle).  Married with a strategic focus on the long-term, this enables the Board to back Mr. Schwan’s vision and leadership and creates a supportive management environment for innovation.   

Creating the Cures Instead of Hoping for Them

Roche isn’t the only corporation seeking to solve big problems with innovative solutions.  Effectuation has been proven to be an effective decision making framework in the face of uncertainty.  It’s the mindset that enables successful startups to navigate the early stages and create unforeseen outcomes. 

Mr. Schwan never mentions the word “Effectuation”.  He might not even know that there’s a word to describe this mindset.  But it’s clear by his actions that he values the Effectual process.  And this puts Roche one step closer to creating miracles, not just hoping for them. 

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

Obstacles to Asking and How to Overcome Them

Heads you lose.  Tails you lose.  If that’s the bet, do you take it?  No.

For many people, that’s how they look at Asking.  Making an Ask can be a scary prospect.  If you don’t ask, you don’t get.  That’s a losing proposition.  Yet if you do ask, the result could also go poorly.  Another loss. 

How do you manage this?  The answer for many is – avoid asking.  But if you’re trying to bring an innovation into the world, that’s not an option

Instead, try these three steps:

1.      Recognize what’s keeping you from asking.

2.      Learn the tactics to overcome that issue.

3.      Ask, ask, and ask some more.

Over the past five years, Sara Whiffen of Insights Ignited has worked with Dr. Saras Sarasvathy of the University of Virginia’s Darden School of Business to uncover what it is that prevents people from asking.  They have interviewed and surveyed successful askers, unsuccessful askers, and those who avoid asking altogether.  While there is still a lot of analysis to be done, a few key obstacles to asking are already emerging.  

1.      Cultural Bias of the Self Made Myth

American culture is deeply rooted in the idea of being self made – lifting yourself up by your own bootstraps.  The idea that one person can do it all and grow a successful venture without assistance is completely unrealistic.  All innovative ideas require someone to take a chance on them, to opt in to participate.  Asks are necessary to grow ideas.

Tactics for Overcoming

Stories of legends are often written to inspire.  But they can gloss over many of the gritty details.  Take another glance at entrepreneurs you admire.  Look deeper into their stories for how Asks have fueled their success.  As a tool, Asking is amazingly versatile and can be applied in myriad ways.  

2.      Excess Empathy

No one likes to be put on the spot.  To be cold called, feel unprepared, or blindsided.  Everyone has had that experience at some point; feeling time stand still while you search for an appropriate answer to a tough questions. Some people hesitate to make Asks because they identify strongly with that uncomfortable feeling and don’t want to put others in that situation. 

Tactics for Overcoming

If you tend to exhibit a high degree of empathy, go ahead and put yourself in the shoes of the person you’ll be asking, but do so from a positive perspective. Imagine them wanting to help, wanting to build a relationship with you, wanting to connect with your idea and move it forward.  Phrase your Ask in a way that invites them to collaborate with you.  Don’t make demands or leave them feeling as if it is easier to disengage than to form a partnership with you.  

3.      Fear of Rejection

This is the most common explicit fear.  “What if the person I ask says No to my request?”  In that case, you won’t get what you want.  Which would happen anyway if you didn’t ask.  Either way, the outcome is identical.  But by putting your Ask out there, you risk a loss of pride.  Fear of personal rejection can be even stronger than the fear of not getting your request.

Tactics for Overcoming

Separate yourself from the Ask.  A rejection of the request is not a rejection of you personally.  It might not even be a rejection of your idea. 

Why, then, is the person saying No?  For whatever reason they don’t feel that they can commit resources towards your request. 

Studies have shown that most people want to respond to requests in a positive way.  Take comfort in knowing that as awkward as you felt hearing a No, it’s likely the other party felt just as awkward saying No. Successful salespeople and entrepreneurs alike know you will often hear many No’s before you hear a Yes. 

 4.      Fear of Acceptance

You’ve asked.  They’ve said, “Yes”.  Now what?  You have to deliver.  This is when things become real.  Now you’re on the hook to make things happen.  This can also keep people from Asking.

Tactics for Overcoming

Start with asking yourself “Do I really want to do this?”  and “Why?”. Understanding your motivations for entering into this new venture can help you overcome the Fear of Yes.  Keep it front of mind when the panic of delivery creeps in or you feel a crisis of confidence and go back to why this new venture matters to you. 

Also, now is a good time to lean on your co-founder.  Leverage this relationship to ease doubts and improve your ability to follow through on new commitments. 

5.      Fear of Maybe

Sometimes, hearing a “maybe” can be even worse than a “yes” or “no”.  It leaves things in an ambiguous state.  It elicits more questions than when you began and throws the Asker back into wondering what the resolution will be.  Avoiding this uncertainty is enough to keep some from making an Ask in the first place.

Tactics for Overcoming

Try asking in a more open way.  Instead of using “closed” Asks, drive towards a commitment by asking “What would it take to...” or “How could we…”.  These lead to more conversational opportunities and give the person being asked more room to discuss options and possibilities.  As the asker, you get more insights into how they make decisions, their priorities, and considerations.  Even if the discussion results in a “maybe”, you will have more information at your disposal for future interactions. 

Moving Forward with Asking

You can’t be a successful entrepreneur without the Ask.  It’s a necessary component of bringing innovations out of your head and into the world.  If you identify with any of these obstacles to asking, try the tips suggested.  And then Ask away.  Whatever the answer – you can’t lose. 

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