assets to action

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

A Better SWOT

How are you going to grow revenue this year?

September for many managers is the start of the business planning process.  That means making a lot of predictions about the economy, consumer behavior, and competitors. 

Instead of being a truly thoughtful exercise, business planning is often an exercise in busywork. Rather than discern real possibilities for innovation, managers populate forms with minutiae that becomes absorbed in the bureaucratic abyss.  And the discussions can often be a rehashed version of previous years.  The outcomes usually come down to how to lower costs or grow revenue based on the research data available.  It’s a lot of the same old, same old. 

If you’re finding yourself going back to the same approach as always when it comes to business planning, it might be time to consider a different way. 

Effectuation is the process expert entrepreneurs use to grow new ventures.  It can also be used by corporate managers and introduces a new way of thinking to the business planning process.  Instead of relying on data to predict what might happen, it provides a methodology for creating opportunities.  

Companies apply Effectuation by using the Assets to Action™ Model.  

This model has been called “an actionable SWOT”.  It is divided into 5 key parts. 

1.      Commitments

Successful implementation of Effectuation rests on commitments.  Decisions to invest money, time, effort, etc. depend on whether or not one attains commitments.  A commitment is the act of putting skin in the game.  Nothing is done without a commitment attached to it.  The more varied your stakeholders and the deeper the commitments, the more likely your success. 

2.      Inside

Start with an internal audit.  List your strengths.  Then think bigger.  Consider things that you own, things that you can access.  Look at your processes, culture, values, goals, etc.  Write these items on the left.  Whatever you’re willing to commit towards the innovation process, pull into the center “commitments” square.

3.      Downside

Rather than forecast expected return, identify what you’re willing to risk in pursuit of revenue growth.  This has tangible and intangible components.  Of course you’ll want to consider how much money you can spend in pursuit of your ideas.  But you’ll also want to think about the social capital and brand equity you want to expend while experimenting with your ideas. 

4.      Outside

Make a list of people / groups / brands you currently have relationships with.  These are entities that already have a vested interest in your success.  How might you approach them to join in your pursuit of revenue growth?  What could you develop that would be mutually beneficial?  Engage entities at the idea formation stage.  When you get commitments, move these into the center as well.

 5.      Upside

Look at all of the possibilities in the commitment center.  Connect and combine options.  Pull in stakeholders to help with this.  Reach consensus on a go-forward idea that involves stakeholder commitments.  Now choose specific action steps you can take to advance your idea.  These action steps should be concrete and measurable.  Track your outcomes and learnings. 

The results of these action steps serve as validation for your innovation.  They provide real market feedback, instead of guesswork, as to your idea’s acceptance.  And they provide evidence that becomes the basis for a valid business plan.   

An Example

One organization that used this process discovered that they had space that was dormant 20% of the time.  They had a partner they approached to talk about revenue growth and this partner expressed interested in “renting” the space on the off hours.  An agreement was reached to pilot this in a limited way.  Once there was evidence that it was working, they built a business plan leading to the creation of a new joint revenue stream for both organizations.   

Next Steps

You have an opportunity this year.  Why fill out another SWOT that doesn’t lead to action or revenue growth?  When you’re faced with the kick off of another business planning cycle, consider introducing a new approach – the Assets to Action™ Model.   

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

State of Effectuation 2016

The Arctic Circle was a hotspot for Effectuation this week. The 4th Effectuation Conference was held in BodØ, Norway, June 6 & 7, 2016. Participants included academics and practitioners of Effectuation from all over the world.

Future Research Questions

Dr. Sarasvathy, the “founder” of Effectuation, was there to offer her insights on where the field is going and what she will be focused on for the coming year. A core area of interest for her is understanding what is at the “core” of Effectuation. The current hypothesis is that the Ask is the foundation for effectual competence.

Insights Ignited is partnering with Dr. Sarasvathy to research how Asking varies between novices and expert entrepreneurs and what we can learn from these entrepreneurs to facilitate entrepreneurial expertise in others. We have collaborated with her on data collection and are now in the analysis phase. Check back for more information. We’ll be writing about this in future blogs.

Assets to Action Model

Sara Whiffen, of Insights Ignited, presented our Assets to Action Model for applying Effectuation. It is a simple, tactile way to walk through the effectual process with teams, and a great way to figure out how to respond to a “VUCA” environment – volatile, uncertain, complex, and ambiguous. The outcomes are specific next steps the team can take as well as a tracking tool to monitor progress.

Participants called the Assets to Action Model a “business model canvas for Effectuation” and expressed a desire to apply it with their teams for both venture creation and as a general problem solving methodology to manage uncertainty. They commented favorably on how it engaged the team in broader discussions, ensured goal convergence, and by driving to concrete action steps, took some of the risk out of innovation.

Large Organizations Seeking Effectuation

We also heard from other Effectuation practitioners who are working with Procter & Gamble, BMW, Boehringer Ingleheim, and even the Catholic Church to solve problems using effectual thinking. It’s amazing to see how this method is taking off with organizations around the world. As things become more complex and uncertain, and traditional predictive tools don’t work as well as they used to, organizations are turning to Effectuation to manage their uncertainty.

Effectuation Increases Employee Contributions

Sara Whiffen was also featured on a panel discussing the opportunities and challenges for Effectuation. One of the questions asked was about the “cash value” of Effectuation. The discussion centered on not just venture creation, but broader societal value. Insights Ignited firmly believes that Effectuation increases the ability to control outcomes in an uncertain world by loosening control over individuals. Instead of requiring others to co-opt an existing vision, Effectuation requires that the vision be shaped by others willing to commit to participating in bringing it into the world.

This idea of loosening control to gain greater control is something that the researchers are exploring in more detail. On a societal level, it heightens the dignity of workers by restoring creative freedom and individual contributions even within highly structured company environments. We are working with companies to help them achieve this while at the same time address corporate shareholder and governance needs. The result: more innovative outcomes, stronger working teams, greater problem solving creativity and ownership, and the accompanying financial metrics to support this.

Public Policy Benefits

Applying Effectuation to public policy was also a topic of discussion. Our view is that focusing Effectuation training on a narrow segment of the population limits its effectiveness.  Effectuation is by its nature an exercise among multiple parties. It is not something to be done in isolation. Therefore, training should be open to anyone who is interested. This creates more potential partners as a wider array of people are comfortable interacting in this way, multiplying the cumulative impact.

This was of particular interest to policy makers looking at how immigration is impacting their community and how they can maximize in tandem the opportunities for both newcomers as well as existing members of the community.

For this same reason we encourage companies not to limit Effectuation training to their new product development or innovation teams. While it is possible for these teams to effectively apply Effectuation, the impact is much more powerful when dispersed throughout the organization. We have great examples of how innovation has arrived in some unexpected ways through broader Effectuation exposure.

These were just some of the highlights of 36 hours of Effectuation discussions and non-stop sunlight in the Arctic Circle. Keep checking in. We’ll be writing about these and other specific examples in the weeks to come. And if you have any questions or topics you’d like us to expand on, comment here and let us know.  

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

Insights Ignited Featured in the National Association for Community College Entrepreneurship (NACCE) Journal

In 2015, Sara Whiffen, Principal, Insights Ignited, and Christine Pigsley, Adjunct Professor of Applied Organizational Studies at Minnesota State University - Mankato,  reflected on the similarities and differences of implementing the entrepreneurial method with entrepreneurs at the corporate levels and at community colleges.  Here is what they had to say.