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

Relax Parents, Video Games Can Lead to Good Things

“Put down that video game and….”  Most Moms could find some way to fill in that sentence.  “clean your room”  “do your homework”  “play outside”.  Luckily, James Park’s Mom didn’t pull the plug on his Wii playing.  Using the accelerometer in the Wii, James was inspired to create FitBit, which was valued at $4.1 billion at its 2015 IPO.  Looking at the evolution of FitBit from a startup to an IPO, it’s evident that the founders followed a very Effectual path.

When the Wii came out in 2006, it got FitBit founder and gamer James Park off his couch.  Not just to play, but he waited in line at Best Buy to get one of the new sets.  He immediately saw the power of using technology to get people to move more.  He noticed that his own physique had gotten soft after long hours of working with Silicon Valley startups and coming home to relax with video games.  He thought about making the actual technology smaller, making the impact larger, and rather than taking a break from life to game, making life itself the game. 

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

Putting these pieces together, he reached out to a friend and colleague of his to share his idea for wearable technology.  This friend was Eric Friedman.  Eric has a computer science background and had participated in both successful and failed startup efforts in the past.  They had been colleagues at a previous startup venture, so they knew that they could work well together and that they had complementary skill sets. 

Second Effectual Principle:  Bird in Hand.  Start with what you have, what you know, who you know.

James and Eric both had startup experience, Silicon Valley and Ivy League networks, and computer science backgrounds.  They had the knowledge to get into a high tech business and access to resources to help them with funding and additional know-how.  The pair formed the company in 2007 and set about to make a prototype of their idea.  They initially raised $400,000 from their network of “friends, family, and fools”.  And they leveraged connections in Asia to find suppliers to help them get a very basic model made.  It had a sensor, antenna, and a circuit board jammed into a wooden case that was scotch taped together.  It certainly didn’t have the sleek appeal of today’s FitBit model, but it was what they could afford at the time and it got the idea across.

Third Effectual Principle:  Affordable Loss.  Don’t risk more than you can afford to lose. 

By 2008, the new company had managed to get a spot in a TechCrunch Conference to show off their prototype. Beyond revealing what they had made, they were prepared to take pre-orders.  Their hope was that 50 of the audience members would be excited enough about the possibility to pre-order the product.  At the conclusion of the conference, over 2,000 attendees had made a commitment to purchase the first round in production. 

Customer purchase commitments gave them access to more funding and partnerships with larger organizations, such as Best Buy. 

Fourth Effectual Principle:  Crazy Quilt.  Grow through partnerships obtained through stakeholder commitments. 

Getting orders seemed easy for this new company.  But fulfilling them was not.  They’ve faced a series of manufacturing and design disasters but by using the Effectual principles of “affordable loss” and “crazy quilt”, the damage inflicted has not been fatal.  In fact, James Park told Forbes magazine, that struggles “have almost put the company out of business seven times” over seven years.   While FitBit hasn’t been particularly adept at turning these setbacks into advantages, they have managed to prevent them from being ruinous. 

Fifth Effectual Principle:  Lemonade Principle.  Turn disasters into advantages. 

In the Game of Wearables, Who’s Winning? 

As consumers change in their usage of wearables and technology shifts, the space becomes more crowded.  But James Park remains adamant that he doesn’t focus on competitors and instead keeps his sights on what customers want.  He’s played the startup game long enough to know that the winner isn’t the player who comes up with the best idea, but the one that continues to execute well. 

Less than a decade ago, “wearables” weren’t even a market. Entrepreneurs like James and Eric made it one. 

Game on.

--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

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

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

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

Empowering Graduates to Create their Futures

As graduation season comes to a close, numerous websites offer their take on the best commencement speeches of 2016. Whether delivered with nostalgia, comedy, or regret, they offer graduates inspiration for tackling their next steps as they leave scripted curriculum paths for a world perceived by some as full of opportunity and others as riddled with chaos.

I’ve been thinking about some of my graduates, those who I’ve taught Effectuation to, and their stories. When people reflect on Effectuation and how it’s impacted their lives, I often hear them refer to it as “empowering”. I think the Pilot in the Plane principle has a lot to do with this.

Pilot in the Plane Principle

This is the mindset principle. When teaching Effectuation, some teach this principle at the end as the unifying principle. I prefer to start with it.

I find this principle is foundational. It is the belief that the future does not have to be known and predicted. Rather it can be controlled.

Pilot in the Plane Principle says that what you do matters. That success in innovation is not predetermined. It is not limited to those with an MBA. Or a research team. Or a big product development budget. Or who are located in New York City or Silicon Valley or London or Tokyo. While none of those attributes necessarily inhibit entrepreneurial success, they are not a requirement for it either.

Effectuation is a great equalizer. It recognizes that it’s not a single ingredient, but a combination of things, the process of bringing those things together, and the mindset to believe that you can make an impact, that creates new markets.

Effectual Mindset in Action

I am reminded of a young woman who received some Effectuation coaching recently. She didn’t have a particularly nurturing upbringing. During high school her grades were fairly middle of the pack. She didn’t cause trouble and didn’t attract praise. She enjoyed art and wood shop, things that she could make with her own hands. But she pretty much did as she was told, putting up with “the system” until she graduated.

Not particularly academic, she didn’t pursue college. Instead, she opted to go into contracting. Her focus was masonry and tiling. After working for a few years, she began to be recognized for her handiwork. Eventually, the thought of working for herself began to gnaw at her. Not knowing how to go about setting up her own business, she enrolled in a business class at the local community college.

In class, she was asked to speak about the greatest obstacle preventing her from going off on her own. She answered, “I’m a woman. And most people don’t think of asking a woman to do this kind of work”.

Her “market research” was showing that there wasn’t an opportunity for someone like her in this line of work. She could either change who she is, or what she does.

Fortunately, her teacher was instructing her in the effectual method. He challenged her not to accept the future as determined, but to change her mindset to one of “how can I turn this potential obstacle into a benefit?”

The result? She changed her thinking. Instead of focusing on what she couldn’t do, she thought about how she might be able to impact her career outcomes. She reached out to other women she knew in the industry with different skill sets but similar complaints. They discussed possible collaboration opportunities and decided to create a “by women / for women” contracting agency. They began to understand that many women are responsible for overseeing the maintenance work done by contractors during the day. These women might prefer having a female contractor working in the house while they are home alone instead of a male. Also, they began to look at ways they could better communicate with and educate women on issues in their industry.

When asked how she felt after applying Effectuation to her business, she replied, “I now have a big strength. I can do this because what I once perceived as negative societal factors I now see may give me an edge and put me on top of many established businesses”. She is confident and enthusiastic about creating her future. Now, she wrestles with having more ideas and possibilities for growing her business than time to achieve them all.

So to those who are embarking on something new, something unscripted, something unknown, I encourage you to embrace Effectuation. It won’t give you the power to predict the future, but it will give you the confidence and optimism to face it and the tools to create the future as only you can imagine.

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