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Emerging Business

October 20, 2015 By Don Springer Leave a Comment

Can Entrepreneurship be Taught?

EntrepreneurshipThere are many approaches to entrepreneurship including the psychological approach that focuses on the personality of the entrepreneur, the environmental approach that focuses on the social and organizational aspects, and a combination that looks for systemic elements.

Saras Sarasvathy, Darden School research professor at the University of Virginia, has researched the approach from the context of a domain of expertise and has found that serial expert entrepreneurs use a distinct logic in their decision making that she refers to as “Effectual Logic”. As a method for design, it can be taught like other methods of thought.

A Psychological Approach

A psychological approach to entrepreneurship would consider questions of personality. Does one have a high need for achievement, a high locus for control, a high tolerance for risk, and perhaps, suffer from overconfidence bias? Based on these and similar assessments, one could conclude that an entrepreneur is born and bred.

An Environmental Approach

The environmental approach would ask if the entrepreneurial candidate worked in an environment with supportive mentors who themselves had been entrepreneurs. Is the geographical area influenced and supported by multiple companies, skilled employees, venture investors, institutions of higher learning, etc., similar to a Silicon Valley or Cambridge? In essence, this approach assumes the environment to be a significant impact conducive to entrepreneurship or not.

Both of these approaches would assume that entrepreneurship is not taught, but born as personality or coaxed and supported as a socio-economic outcome.

Sarasvathy was interested in two primary questions: (1) What commonalities and differences exist in the decision making process of a group of expert entrepreneurs, and (2) in the face of a non-existent markets, what underlying beliefs about the predictability of the future influence decisions as they build a new venture?

Entrepreneurship: A Design Approach

This led her to research entrepreneurial thinking as a domain of expertise and, as such, she found it had a logic of its own. She found that entrepreneurs have learned how to build ventures in a market in which the future in not only unknown, but unknowable. Yet, entrepreneurs are able to shape this future by utilizing the following five principles:

  • Start with the Means – they started with their means: who I am, what I know, and whom I know
  • Affordable Loss – they limit risk by understanding what they can afford to lose
  • Leverage Contingencies – they invite surprise as a clue to new markets vs. managing for risk
  • Form Partnerships – they build partnerships with self-selecting stakeholders and change the goals and resources available by doing so
  • Control vs. Predict – they build the future rather than finding it or predicting it.

She refers to this approach as an “Effectual Logic” that can be contrasted with “Casual Logic”, the approach that predicts the probability of the future, manages the risk, assesses the competition, and moves a new venture forward on the basis of returns on assets.

Effectual logic is an approach to design and construction in contrast to casual logic’s approach to decision making. It is, however, simply another method of thinking along side deductive logic, Bayesian analysis, the experimental method, etc., and as such, can be taught just like other problem solving methods.

 

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Filed Under: Emerging Business, Growth Strategy, Innovation Tagged With: Affordable Loss, Be Entrepreneur, Build Partnerships, Business Venture, Deductive Logic, Effectuation, Entrepreneurship, Multiple Companies, Research Entrepreneur, Risk, Saras Sarasvathy, Skilled Employees

October 13, 2015 By Don Springer Leave a Comment

Innovation Management

innovation_cropInnovation can be managed similar to organizational processes like quality initiatives, safety programs, and mergers. Yet, when organizations desire to become more innovative, they seem to move forward in a haphazard way.

Rita McGrath, in The End of Competitive Advantage, argues that a proficiency in managing every aspect of an innovation system is required as part and parcel of the other aspects of operating a company.

Proficiency in innovation requires a management system for planning, monitoring, and budgeting. It also requires a way to manage the resources to be used and a guide of how the innovations will fit into the larger strategic direction.

Additionally, it is important that roles are identified so that the organization knows who is responsible for vision and resource enablement, specific initiative development, and internal launch or market commercialization. With systems and roles in place, the organization can progress innovation phases of ideation, testing, development, and commercialization.

With a strategic direction as guide, an ideation process must include a pipeline of ideas that are promising. McGrath says that this part of the process “encompasses the processes of analyzing trends, connecting innovations to the corporate strategy, scoping potential market opportunities, and eventually defining arenas in which a company may want to participate”.

With regard to focus, there are two schools of thought: (1) ideation must be directed with a clear focus and (2) ideation springs from organizational support of free thinking.

Google, 3M, and others have practiced the latter by providing people with time to work on what they want without restrictions. McGrath argues for the former, coined as “challenge driven” or “needs driven” innovation, because it supports the direction of the firm, even in its widest strategic sense.

Once ideas have been developed, those with promise are further developed, tested, and defined. It is here where customer needs and use cases are defined and a plan developed to test the assumptions. The primary objective is to test those assumptions as quickly and cheaply as possible.

Moving forward to commercialization is a process of continual testing, prototyping, costing, partnering, planning and launch. Whether this is accomplished in three phases, as McGrath delineates, or in a phase of product commercialization and marketing, the idea is to move the idea to launch in quick, small, inexpensive steps that have been tested and confirmed along the way.

Proficiency in innovation is derived by managing the innovation process as a system, from idea through development to commercialization and integration with the company.

Furthermore, in a continually changing marketplace, innovation is now part of strategic design and operations. It is not simply a separate initiative to be implemented one time.

 

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Filed Under: Emerging Business, Innovation, Product Commercialization, Strategy Design

September 15, 2015 By Don Springer Leave a Comment

Serendipity

4 leaf clover in blue“Never underestimate serendipity” said one expert serial entrepreneur being interviewed by Saras Sarasvathy, Darden School researcher.

Dr. Sarasvathy was researching serial entrepreneurs to assess and codify the domain expertise they represented. Among the principles she discovered was one she identified as “The Lemonade Principle” evoking the widespread classic notion, “when life gives you lemons, make lemonade’.

Entrepreneurs, business developers, and product marketers all use contingencies for their benefit when the market is unknown and unknowable. New ventures are often products of contingencies or serendipity. The very structure, goals, competencies, and culture of the venture are the residual sediment of human activity striving to fulfill their aspirations with the particular tools and in the particular location and time in which they live.

As Sarasvathy notes however, it is not the contingencies themselves, but how an entrepreneur leverages those contingencies that forms the difference. Their approach is in contrast to the traditional approach of managing for risks and minimizing the surprises.

When you are executing a plan with a clear objective, minimizing risk is relevant. However, when you are creating a new venture with an unpredictable and perhaps unknowable market, your solution logic is more about designing and constructing than deciding. In that context, serendipity becomes an asset.

As Sarasvathy recounts, in 1985 two days prior to a 4th of July weekend, Thomas Stemberg had recently lost his division manager job in a supermarket chain and was working on a business plan for a new chain when he ran out of printer ribbon for his Apple printer. He found that stationary stores had closed for the weekend and those that were open did not carry the ribbon.

Relating the episode years later to a CNN interviewer, he said he realized that small businesses could not purchase ribbons at the cost of large businesses and furthermore could often not purchase the product at all. That weekend he had no printer ribbon, but he had an idea for Staples.

While surprises are usually considered in terms of errors or failures, for the entrepreneur they are sources of opportunities or value creation.

The context of “constructing something” allows serendipity to be viewed as an asset, so it is incumbent upon the entrepreneur to adopt a “designer mindset” and seize upon contingencies in an actionable way.

Serendipity can help you build something better than the original plan if you are open to the nudge.

 

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Filed Under: Emerging Business, Innovation, Product Commercialization, Strategy Design Tagged With: 4 Leaf Clover, Contingencies, Effectuation, Entrepreneurship, Make Lemonade, Printer, Risk, Saras Sarasvathy, Serendipity, Solutions Logic, When Life Give You Lemons

September 8, 2015 By Don Springer Leave a Comment

Evolving Constraints

Blue ink in organic designWriter’s block can arise when staring at a blank page. Likewise for the business strategist, indecision can surface when facing a market of limitless possibilities.  Rather than unbounded freedom, we need form to define the problem space of our work and we need problems to help formulate the work itself.

Constraints and obstacles can be assets to new ventures in that they facilitate and enhance design creativity. “Constraints shape and focus problems and provide clear challenges to overcome”, says Google’s Marissa Mayer, and thus constraints provide direction to our work.

Once you accept that constraints can actually improve your new product, initiative or business, can you identify all of the necessary business constraints at one time, prior to launch? New ventures and products are more about design and discovery than they are about executing a rigid comprehensive plan.

Over time, new constraints are continually revealed, highlighting appropriate problems at the appropriate time. For example, at the heart of agile software development is the segmentation of projects into small problems to be solved. The initial problems are derived from initial user needs. Minimal products with minimal features are then developed and released in a progressive manner, quickly and often. This allows frequent user feedback and product enhancements.

Traditionally, software is developed using a “waterfall” method where the “entire solution” is completely designed, detailed and planned prior to project initiation. Team members have their roles and tasks from the beginning of the development process to the end.

In contrast, agile projects reveal problems and constraints during each phase of software release and use. Small teams encounter new problems and learn as they progress, changing objectives, roles, and product features as needed. This progressive approach can be used for the development of new products and businesses of every kind.

To enter a market quickly, minimizing the cost of entry and ensuring success, it is important to let constraints direct and enhance your initiative or new business. While present markets are predictable to some extent, new markets and offerings are best discovered.

Constraints not only provide focus for creativity, they reveal the reality of markets progressively over time. Leveraging constraints, obstacles, and problems as they arise will enhance your adaptation to the dynamic business environment of today.

 

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Filed Under: Emerging Business, Innovation, Product Commercialization, Strategy Analysis, Strategy Design, Strategy Implementation

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