How Effectuation Sparked Innovations in Market Research: The Founding of Procter & Gamble

Procter & Gamble has been a pioneer in the field of market research.  Their list of consumer innovations spans almost two centuries and numerous household and beauty products.  But before Procter & Gamble was a corporate name and logo, it was two last names. 

William Procter and James Gamble lived in Cincinnati, Ohio in the early 1800s.  They had a few things in common.  They were both immigrants.  They were both entrepreneurs.  Procter was a candle maker with a small distribution operation.  Gamble was a shop owner who sold soaps and candles.  And they both married someone with the last name of Norris – Olivia and Elizabeth Ann.  The women were sisters. 

Not long after they were married, their new father-in-law, Alexander Norris, recognized that they were both seeking the same raw materials for their enterprises.  Both soap and candle makers need fat and oil to make their products.  And Cincinnati, as a hub of the meatpacking industry, offered both of these in vast quantities.  Norris saw an opportunity for the two gentlemen to join forces and collaborate rather than compete, hoping this would improve the economic situation of both of his daughters.    

After some convincing, Procter & Gamble agreed to unite as one enterprise.  Collaborating rather than competing allowed the newly formed P&G to negotiate sourcing agreements with more strength.  They increased their volume while decreasing costs.  It also enabled them to pool their resources while decreasing their overhead expenses.  They now had additional savings to pour into the business. 

Procter & Gamble decided to reinvest these newly freed up funds in marketing and research.  The newspaper industry was growing and print advertising had begun to gain momentum.  P&G had the volume of products and cost structure to support growth now, so they tested some ads, which generated positive results.  They continued to experiment with this medium. 

They also deployed some of their excess capital into product research and innovation.  They submitted for patents on candle making molds and researched new and improved ways of making candles. 

As their sales footprint grew, they became meticulous about measuring sales data and analyzing customer trends.  Where were their customers coming from?  What items were selling / stagnant? 

Candles were selling very well for them.  But they could see another innovation would have a significant impact on their growth – the electric light bulb.  In the early to mid 1800s, many of the candles sold by Procter & Gamble were used to light homes and businesses.  As the electric light bulb grew in popularity, demand for candles fell.

Procter & Gamble needed to do something to combat this threat.  One step they took was to take their success in marketing and understanding customer buying habits for candles and apply them to soaps, which had not been selling quite as well. 

They poured research into improving upon their soap product and produced something so pure and effective that it floated.  “Ivory Soap” became the first branded product for P&G and its success opened the door for a breakthrough that would transform marketing and advertising into the industry it is today.

What are the Effectual lessons learned from P&G’s founding?

1.   Fighting competitors drains resources.  Partnering with them can expand resources.  It’s a great way to convert an obstacle into an asset. 

Consider reframing competitors as collaborators and see if you can identify areas of opportunity. 

2.  Your core business is just one of the assets available to you.  Just because it’s what your business is built on today doesn’t mean it’s what will bring you success tomorrow.  Procter & Gamble were able to look beyond soap and candles to their mindset of customer research and observation to identify an asset even more enduring than what they originally built their business on.

What possible assets does your organization have that currently goes unnoticed or underutilized? 

3.  Effectuation and Causation are not an either / or.  They can be used together.  The key is to identify when and how to use each way of thinking. 

Effectuation is best used during times of uncertainty.  When data is not available or the market is giving you mixed signals, try Effectuating. 

If you have validated assumptions and clear data, using causal thinking (such as business planning, forecasting, etc) is a valid approach for predicting future outcomes. 

Effectuation as the Foundation for Today’s Market Research Industry

When the light bulb started to gain prominence, Procter & Gamble were confronted with an unknown environment.  It was a new innovation and technology that was upending an established way of life.  They could have persisted with the data they had, and what they knew, and continued to push candles in new ways. 

But by being open to Effectuating, they discovered new assets and ways of operating that not only kept them from becoming obsolete, but which enabled them to create their own game changing innovations in the field of market research sciences. 

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

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

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.

 _______________________________________________________

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

Happy (Effectual) Halloween from Insights Ignited

What are you dressing up as for Halloween? Did you come up with your costume idea first and then try to find all of the pieces to complete the outfit, like doing a puzzle? Or did you look through your house, put items together and then realize you had a costume?

These approaches are examples of two different mindsets.

The First Mindset -- Managerial

Let's start with the first way. You decide on a costume idea.  Then you think of all the items you need to make this idea come to fruition.  Like assembling a puzzle, you begin your quest for the correct pieces. You search your closet and hunt through stores.  This approach is the managerial mindset. 

With this mindset you try to “see” the future and position yourself to benefit from your prediction.  Determining ahead of time what costume to wear immediately limits the possibilities and funnels efforts towards a predetermined end.

An Alternative Mindset -- Effectual

The second approach is effectual, starting with what you already have on hand.  This eliminates the need to come up with the idea ahead of time.  You shape the result as you create it.  Once you see what you have available to you, you develop options and try various combinations until you put together something that works for you.

For those dressing up, this means looking through your closet, your children’s dress-up trunk, your attic, your basement, for possible items to use.  Likely, the costume you end up with is one you hadn’t even considered when you started.

Moreover, once you have an idea of a costume, as you talk with others about it, they might contribute additional props that enhance your costume or take it in another direction.

Effectuation in Action

Although stemming from academic research, effectuation is something that is very much part of everyday life.  One of our own team members said:

"Every year when I think of a dress-up idea there are always a lot of “pieces” I'm missing, which entails time and money spent seeking out what I need. This year I tried an effectual approach.  I combined something from the back of my closet with something my daughter has in her toy room and then I paired up with my son so that I could play off of his costume theme.  When it came together it was an “of course!” moment.  I saved time.  I saved money.  I effectuated."

Maybe you did the same.  Imagine what else you could create if you applied this mindset to your professional life as well.  

Enjoy conjuring up your own effectual creations this Halloween!

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

Get Control by Letting Go

Monster.com, an internet job hunting website, was new to the scene in 1999 when it placed a big bet on a Super Bowl Commercial.  It featured a series of children citing their aspirations to file useless paperwork, create meaningless documents, and brown-nose their way up the corporate food chain.  “When I grow up I want to be in Middle Management”, said one glum looking child, absent of any zest for life.  It closed with the screen going dark and Monster asking people what they really wanted to be when they grew up. 

The ad was a huge success and one of the most memorable Super Bowl ads of all time.  Why?  Because the sentiment resonated with millions of Americans.  Being Middle Management is hard.  And rarely is the position aspirational.  Sandwiched between power and responsibility, it can leave individuals feeling disenfranchised and just plain stuck.  Many times, those in this corporate no man’s land can look fondly on entrepreneurs as working in a fantasy world where one has 100% control.

It turns out that both views are inaccurate.  Middle Managers do have ways to exercise control.  And entrepreneurs do not operate in environments where they have 100% control.  The reality is that the most successful entrepreneurs are able to create control through the framework of Effectuation.  Middle Managers can learn from the tools used by entrepreneurs to derive control and apply these methods in their own company environments. 

How Entrepreneurs Get Control

Control means having the power to influence or shape behaviors and outcomes.  Effectuation is the process by which entrepreneurs gain control in the face of uncertainty.  Using the 5 principles outlined by Dr. Saras Sarasvathy of UVA’s Darden School of Business, entrepreneurs shape the outcomes of their ventures.  This allows them to innovate and bring to life things that could not have been predicted.  The 5 principles are:

•  Pilot in the Plane:  The mindset that things are created, not predestined
• Bird in Hand:  The ability to identify and build on who they are, what they have, what they know, and who they know
• Affordable Loss:  Setting a downside limit for experimentation to enable recovery from the unanticipated
• Crazy Quilt:  Developing strong stakeholder networks centered on commitments and co-creation
• Lemonade:  Reacting to surprises as opportunities to be leveraged, not mistakes to be mitigated 

Underlying all 5 of the principles is the idea of commitments.  Commitments require that parties are co-invested in outcomes.  They mutually agree to pursue a shared vision.  Even if motivations and means differ, at the point of time in which they come together, they share a unity of purpose and are both vested in the success and / or failure of the joint pursuit. 

Entrepreneurs get control by first letting go of their idea.  It starts with conversations.  Successful entrepreneurs don’t keep their ideas to themselves.  They share them with others.  It’s not that they trumpet them proudly or broadcast them for publicity’s sake.  Instead, they offer them in conversation as opportunities for others to opt in and participate in building on their idea.

The more people who are exposed to the entrepreneur’s concept, the more likely the entrepreneur is to find others who connect with their idea and offer to join efforts with him or her in a meaningful way. 

Once a link is established between entrepreneur and potential stakeholder, a discussion ensues in which both parties seek to understand more about each other, the outcomes being pursued, and the resources they could bring to bear. 

Eventually, if both parties can envision a mutually beneficial outcome, the next step is for each party to make commitments to the pursuit of this vision.  These commitments could be an investment of time, money, social capital, or any additional resource imagined.  Balancing the investment so that both parties feel a significant stake in the outcome is optimal.  This does not mean that the investments should be equal.  The venture benefits from each party bringing their unique contributions to the table.  But while resource inequality is expected, relative equality in gains and losses is desired. 

The entrepreneur replicates this exercise with numerous stakeholders of various forms throughout venture creation.  With the addition of each stakeholder, the entrepreneur cedes control.   But they gain control over the process and likelihood of successfully creating a new market. 

What can Middle Managers Learn from this? 

There are several steps Middle Managers can borrow from the entrepreneur’s playbook:

1.      Building partnerships is a way to exert control. 

If you have an innovative idea you want to grow but the corporate structure you’re in limits your authority, seek to build alliances.  Like an entrepreneur, start talking about your ideas with others.  If your environment requires it, be political about how you phrase things and who you approach, but don’t completely rule out your ability to move things forward by creating a team of champions. 

2.      Alignment of goals increases control. 

If your team or division is responsible for certain outcomes but not for the entire process, look for ways to establish mutual responsibility along your entire delivery chain.  Engage stakeholders in the process to create linkages that build on opportunities to support each other in achieving desired shared outcomes. 

3.      The future doesn’t have to be just as you imagined it. 

This might be the most important lesson entrepreneurs can teach.  Even Steve Jobs, acclaimed by many as a great visionary, thought the future was going to be in “make your own computer kits”. It was only because hobby stores wouldn’t buy them and instead encouraged him to bring his computers in already assembled that he began down the path of the Apple we know today. 

When entering into conversations with stakeholders, whether internal or external to your organization, don’t position things as “yes or no”.  Instead, be open to the other participant adding their input to your vision.  If it’s something you agree with, build on it.  And then, make sure that they contribute something of value towards achieving what is now a shared goal. 

Empowering Middle Management

Middle Management might not be glamorous, but it doesn’t have to be glum.  There are ways to gain control of organizational outcomes and exercise management creativity, even if company structures are not designed to explicitly offer this authority.  Use relationships, experience, technical knowledge, and influence to shape your ideas and outcomes in ways that benefit both you and your organization.  Knowing that you can exert control in ways other than top down will help you see ways to lead through problems and uncertainty. 

In business, having control is viewed as a sign of strength.  We seldom boast of giving it away.  But successful entrepreneurs frequently do let go of control – and for good reason.  It’s how innovative ventures grow. 

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

Don’t Cry Me a River

Snow.  Wind.  Lake Michigan.  These are the three main natural elements usually associated with the City of Chicago. 

Until recently, the Chicago River was an afterthought.  Its primary function was as a dumping ground.  One day a year, St. Patrick’s Day, green dye is dumped into it for a festive flare.  The remaining 364 days it was often filled with run off, waste, and sewage.  Coursing through the heart of Chicago’s Loop, the river was used as a conveyance to transport pollution away from the city. 

Now, it is being used as an attraction to draw people into the heart of the Loop.  And the process the City of Chicago is using to enact this change is an Effectual one. 

Here are some of the Effectual principles evident, as defined by Dr. Saras Sarasvathy, of the University of Virginia’s Darden School of Business. 

1.      Pilot in the Plane Principle:  The future is not predetermined; it can be shaped. 

The City of Chicago has embraced this wholeheartedly.  Going back to the early 1900s, they were unwilling to accept the River as it was.  Originally, the River flowed into Lake Michigan.  This proved to be a disadvantage when the waste being dumped into the River by Chicago’s factories and meatpacking plants polluted the city’s drinking water. 

So what did they do?  Instead of changing their business practices, Chicago reversed the flow of the River.  After this switch, the River flowed away from Lake Michigan, outside Chicago, and down the Mississippi to St. Louis.  This kept Chicago’s drinking water clean (much to the dismay of cities further South).

Recently, the City applied the Pilot in the Plane principal in a more environmentally friendly way.  Many of the River’s main polluters are no longer operating along its shores.  Yet the waterway was still used as a waste transport channel. 

Refusing to accept this as the waterway’s destiny, the City identified the River as an opportunity for transformation, renewal and a way to stimulate the economy while improving the overall livability of Chicago. 

2.      Bird in Hand Principle:  Look at everything you have access to as a possible asset. 

Despite its presence in the middle of the Loop, the River was ignored for decades.  Now, the residents and leaders of the City are looking at it with fresh eyes.  They see potential for economic revival, ecological renewal, and a host of public – private partnership opportunities.

The results so far include construction of an expanded Riverwalk, the building of new residences that are designed to accentuate the benefits of being near the river, and the creation of protected marshland to encourage the proliferation of native fish and birds. 

3.      Co-Creation Principle:  Find others who opt in to working with you and are willing to commit resources to create a shared vision. 

The Great Rivers Chicago project has employed co-creation on a massive scale.  Over 6,000 people have contributed their ideas to the project and numerous public and private groups have participated in creating a shared vision for what the Chicago River can become. 

In addition to providing input, the participants are being asked to contribute resources.  Manpower and financial contributions are being aggregated across various stakeholders.  The outcome they are striving for is a comprehensive implementation package to bring the vision to reality in the next couple of decades. 

Building a New Future on the Past

Chicago’s grandiose temple to retail, the Chicago Merchandise Mart, sits alongside the Riverbank.  In front of the Mart Plaza, eight bronze busts are perched atop individual podiums.  Each of these busts memorializes an entrepreneur who contributed to the success of the city – Montgomery Ward, Woolworths, Filene, etc.  Chicago once thrived on the backs of these retail giants. 

Today, the spirit of entrepreneurship remains strong.  Because of Effectual thinking on behalf of the City and its residents, the River that once served primarily to export the waste of the City will welcome the next generation of Effectuators, innovators, and entrepreneurs to live and work along its shores.

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

How a Simple T-Shirt is Changing Retail

For the online clothing retailer Everlane, it all started with a $15 T-shirt.  And while this T-shirt was a catalyst for their success to date, it could just as easily have been their downfall. 

Michael Preysman, founder of Everlane, saw an opportunity to improve online clothes shopping.  Even though big retail fashion brands are teeming with inventory, offering steep discounts and struggling to attract customer attention, he believed that the products being sold were only partially to blame.  He perceived a problem with the entire shopping process. 

Preysman noticed the changes that the food industry was undergoing.  He extrapolated that the same customer interest in sourcing, pricing, and quality could be translated to the retail shopping experience. 

Everlane was created in 2011 to bring transparency and simplicity to online shopping.  “Radical transparency” is its mantra.  Everlane informs its customers where their clothing is made and how it is priced.  Their markup is explicit and they offer minimal discounts.  When they do promote a sale, they experiment with concepts such as “pay what you will”, where the customer is provided with the input costs for the item and is asked to select what they think is a “fair” price.  And all of this is done online. 

Preysman created the company in a very Effectual way.  His mindset from the beginning was that he was the Pilot in the Plane.  He believed he had the vision and capability to assemble the resources needed to create a new retail experience. His venture capital experience and connections in Silicon Valley made this start up a plausible venture for him. 

He started with what he knew – his Bird in Hand.  He was an online shopper confused by the haphazard method of displaying and pricing items online.  He was also baffled by why a retailer would price the same item differently in the store versus on the web.  Envisioning a new business model, he applied his operational experience from other tech ventures to the fashion industry and pulled in friends and family to help him develop the concept. 

From there, he picked one item that he wanted to start with – the T-shirt.  His approach was to sell that item until he was confident that he had a good handle on the operational and customer experience requirements for top notch service.  This was within his Affordable Loss.  He could afford to do an initial product run of 1,500 T-shirts.

Even with this carefully crafted strategy, Everlane has had its share of mistakes.  One of them was the mis-ordering of 12,000 men’s pocket T-shirts.  When the order was received it was obvious they were cut about two inches too short.  But using the Lemonade Principle, Everlane adjusted.  The tees were rebranded and sold as women’s Box-Cut Tees. 

Learnings from Everlane

Everlane has developed a process of acquiring, pricing, and selling clothing that is unique in the retail space.  However, there are lessons from their start up story that can help people in companies who are pondering how to innovate in their own industries. 

·         Mindset matters.  It’s important to cultivate a culture that systemically believes that what one does makes a difference.  Overreliance on benchmarking and prediction quells innovation.  It puts an organization in catch-up mode, trying to replicate and repeat rather than innovate and experiment. 

·         Import ideas.  Get out of your industry.  Look beyond your field of focus to what’s happening elsewhere.  Borrow ideas from science, the arts, different disciplines and sectors.  Look at how customers behave in completely difference scenarios and see if there is anything that sparks your imagination.  Imagine, invent, and apply.    

·         Perfect and proceed.  Start small.  Experiment.  Set your affordable loss.  Pilot and pay attention not just to bottom line results but the entire experience.  Capture learnings.  Adjust.  As you gain confidence in your real world observations expand your efforts. 

Will Everlane Last? 

Everlane is trying something very innovative in fashion retail.  It’s not amassing significant speculative inventory.  It’s not jumping into discounts and flash sales.  Instead, it’s sticking with its core promise of transparency and simplicity.  And it regularly sells out of its product inventory. 

Everlane’s primary focus is on the stakeholders who buy into their promise of radical transparency.  They want to partner with their customers, suppliers, and investors to figure out how to create a win-win value proposition for both the retailer and the consumer. 

There is no pre-determined path for Everlane’s success.  Its creation wasn’t predestined.  And Preysman can’t predict what the future will look like.  But what he can do is continue to shape Everlane’s products and processes in pursuit of a different future for retail.  

All of the major fashion retail brands know their existing operational model is in trouble.  They have invested a lot in competitive benchmarking, market research, and strategic analysis.  But it might all come down to a simple tee.

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

It’s Not What You See. It’s How You See It.

Do you see an old lady in this picture?  A young lady?  Both? 

When viewing something, the mind often fills in what it expects to see.   Humans have a tendency to rely on experience and expectation instead of sight alone.  It lets us make decisions faster and process things more quickly.  The downside of this is that there are things that get overlooked.

Innovations can emerge from looking at familiar things in new ways. 

Re-see and Repurpose

Incremental change often goes unnoticed.  If you look at your yard every day, you don’t notice the grass growing.  But go on a two-week vacation.  When you come home, the first thing you notice is how much the grass has grown.

The same applies to the assets around us at work.  We become so accustomed to what’s always been there that we take things for granted, overlook them, or even start viewing things as liabilities that were once considered strengths.

One way to jump start innovation is to consider things from a different perspective.  Can what’s around you be viewed differently?  Can resources be used differently?  Some methods taught by academics include:

·         Adaptation

Transform something that you have into something even more useful in your existing environment.  Are there any modifications or adjustments you can make to things you already have access to which would render them of even more value to you? 

·         Exaptation

Perhaps something that you’ve taken for granted is no longer working as it once was.  It might have evolved into something new, or it might be used in a way that is different from its original intent.  This can spark an innovation if you’re aware of the change.  Discerning whether something you have has undergone an exaptation requires stepping back and looking at it with a fresh set of eyes and without the blinders of past expectations. 

 ·         Connect and Combine

The value of an individual asset might be greatly enhanced by connecting it with another asset you have access to or combining it with the assets of others.  This is an opportunity to look for synergies across multiple platforms or environments. 

An Example:  Rising Tide Car Wash

The D’Eri family is very entrepreneurial.  The father, John, ran his own business and considers himself a tinkerer.  His son, Tom, shares the same interest in building and creating.  Wanting to start his own company, he took an effectual approach.  He started with assessing his Bird in Hand, one of the principles of Effectuation.  The Bird in Hand principle states that expert entrepreneurs usually initiate a new venture based on what they have immediate access to.  This usually involves considering who they are, what they know, who they know, and what they have. 

John and Tom started by looking at the resources available to them.  A novice entrepreneur will often look only at those items they consider to be beneficial.  An expert entrepreneur, however, goes deeper.  They survey their surroundings and consider how anything and everything that can be accessed can be converted into an asset. 

In the case of the D’Eri’s, one resource they had access to is an autistic family member.  Their son / brother, Andrew, is autistic.  They desired to create a business where he could not just work, but thrive and where autism would serve as a competitive advantage. 

Their outcome:  the creation of Rising Tide Car Wash. 

Here are the steps they took to grow Rising Tide from a concept in 2012 to a thriving enterprise today.    

1.      Maximized resources

People with autism often exhibit similar behavioral characteristics, such as attention to detail, enthusiasm for work, and appreciation of routine.  The father / son team considered ventures that benefited from these skills.  One that emerged was car washing.  It’s a very rote process and the use of more sophisticated technology today requires an element of standardization.  It’s also an industry where operational efficiency is a strong driver of profitability, so it seemed to be a good fit. 

2.      Translated strengths into processes

Next, the duo took a regimented approach to operations.  They defined all of the required processes and mapped them out in detail.  This became the bedrock of the business model. 

3.  Invested in training

Instilling the processes into all employees was paramount.  Rising Tide focused its efforts on building the confidence and competence of its workforce through an in-depth onboarding program.  This allowed them to staff a workforce of whom approximately 80% are autistic. 

4.       Marketed the message

An innovation spreads as its embraced by others.  In this case, Rising Tide let its community know of its efforts and results.  They provide good work opportunities for individuals with autism and a fast, quality car wash for patrons.  Many have embraced both the customer and social benefits as Rising Tide has more than tripled its volume in about 4 years.

Look Again – With Effectual Eyes

Are there things in your environment that you’re overlooking? 

Take another look at what you have around you.  Pull out that list of organizational gaps and weaknesses and give it another glance.  Can you convert anything on that list that you’re currently viewing as a negative into an advantage?  Is there something you’ve taken for granted that can be reimagined? 

The innovation you’re looking for might already be in front of you.  Maybe it’s not about looking to acquire what you don’t have, but instead, looking differently at what you do have. 

--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