Is Market Research a Waste of Time?

People have been attempting to predict the future for at least 2500 years. In the beginning, they would trek to an Oracle who would guide them on how to best position themselves to capitalize on future events. Today, the Oracle has been replaced by market researchers.  

Predicting the direction of a market has become more sophisticated and more expensive. But it remains a mainstay of innovation strategy. Companies and novice entrepreneurs alike insist on gathering data through surveys, feedback sessions, and focus groups. And our clients still don’t feel prepared for the future. These are the most common complaints we hear:

1. Market research takes too long. By the time we get the data and the analysis, our priorities or market conditions have shifted so it loses its relevance.   

2. The data is often not actionable. We get a lot of interesting insights, but not a lot that we can put into practice.   

3. The data we get is often conflicting. Different things are heard from different sources. This perpetuates our management indecision internally.

How are companies addressing these complaints? Often, their solution is to hire another market research group with new tools who promise faster, better data. And nothing changes.

If you really want to develop game changing innovations, stop trying to predict a future that cannot be predicted. Truly new and market changing advances are not inevitable or predestined. They are not found or predicted. They are formed, shaped, and created.  

Predictive tools only work when outcomes can be predicted. This seems obvious. Yet managers continue to rely on traditional predictive tools while acknowledging that they are facing unprecedented market uncertainty.

Traditional management theory has taught there are two future states. The known and the unknown. Thanks to the work of Nobel Prize laureate Herb Simon, we know now that there are three future states: the known, the unknown, and the unknowable.  

How do you know if your organization is facing an “unknowable” future?

1. The path forward is ambiguous or unclear. There are multiple possibilities that seem equally advantageous.

2. There is a lack of data available.

3. The data that is available is contradictory.

If one or more of these conditions are present, you are in the realm of the “unknowable”. In the face of this radical uncertainty, Effectuation is the toolset to use. It is how market makers create valuable new products and services when facing a future that is not just unknown, but unknowable.

What is it about Effectuation that enables innovators to create rather than predict the future? The key to getting control in unknowable situations is to co-create. Invite others to participate in building the future with you. Whether you refer to these parties as collaborators, stakeholders, partners, etc. doesn’t matter. What does matter is how you work with them. Base your co-creative relationships on commitments.

Commitments are when both parties put skin in the game to advance an overall idea. Commitments are deeper than feedback and more relevant than data. All who commit to the idea become vested in its success. As a result they will pull their resources into the venture. This expands the accessible means for the venture. It also widens the visibility and support as each party brings their networks and social capital to the venture. Whereas a feedback session is one to one and a finite transaction, a commitment-based relationship is multi-party to multi-party and presents infinite opportunities for growth based on the interests of all parties.

If market research is failing to give you the answers you need, consider giving up. Stop trying to forecast the unknowable. Instead, shift your resources towards crafting a future where you can succeed. Spend your time Effectuating rather than searching for a sign of things to come.

If you don’t create your own future, someone else will.

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

Flip Your Fails Into Sales

When new product launches don’t go your way what’s to blame?  Is it the idea?  Or the process? 

               “We ran out of money before it got traction.”

               “Customers liked it in tests, but we got mediocre sales in market.” 

               “We went out too fast and couldn’t meet customer quality expectations.”

               These are three excuses I’ve heard recently from corporate managers who struggled with unsuccessful innovation efforts.  In each case, they identified the end result as a product failure.  They talked about the loss incurred and how their teams were sent scrambling for a better idea. 

               Companies generally respond to these types of failures in one of three ways.

1.     Restructure the team.  They put a new innovation manager in place.  Or they pull the innovation team out from the business and put it into an incubator.  Or they change the titles of the team members and rebrand the squad.  In the end, it often amounts to a cosmetic change and rarely gets to the root of what caused the innovation failure and how to turn things around. 

2.     Revisit the pipeline.  Most companies are not lacking for ideas.  When one doesn’t work, they dig up the list from past brainstorming sessions and consultant plans.  They put the same process in place to bring the next idea to market. 

3.     Re-research the market.  Seeking better data on customers, the economy, and competitors is often an easy fallback for companies when new products and services don’t behave as desired.  The infrastructure is already there in most organizations.  And every employee wants to be able to answer the “what went wrong” question with stats and charts. 

But maybe it wasn’t the idea that failed.  Maybe it was the process. 

Effectuation shows us that successful entrepreneurs are able to turn all of these excuses into market successes.  Nobody intentionally tries to exhaust all of their start up funds, launch something that doesn’t resonate, or bring a less than ready product to market.  But the act of creating leads to unknowable outcomes.

Expert entrepreneurs use them to their advantage.  Effectuation refers to this as the Lemonade Principle.  They turn lemons into lemonade. 

Here is how successful entrepreneurs react in similar situations.

1.  “We ran out of money before it got traction.”

Precommitments and partnerships are a way around this.  Have customers pay prior to development for investment heavy products.  It ensures a buyer for what you’re building. 

Partnerships also help to spread the risk and expand the network of possible payers for your innovation.  Resource constraints also force creativity.  In all likelihood if you are having trouble funding the venture, others are as well.  This opens opportunities for collaboration.  

2.  “Customers liked it in tests, but we got mediocre sales in market.” 

View your customers as partners in your innovation venture.  One way to do this is to employ some form of pre sales.  Another way is to actually co-create with them.  How can you take advantage of the skin in the game that early adopters are willing to commit?  Deepen your relationship with them and make them part of your sales force.  

Also, take a wide view of your innovation efforts.  Look not just for what you expect to happen, but what is actually happening.   Is it the product / service that customers are reacting to?  Or is it your distribution channel?  Your marketing?  Your packaging?  Your pricing?  Are they giving you an indication of what they do want that you’re not noticing?  Engage your customers in figuring this out. 

3.  “We went out too fast and couldn’t meet customer quality expectations.”

Things don’t go as planned.  So be it.  What can be controlled is your response to the unforeseen. 

Product flops, quality issues, and marketing gaffes attract customer attention.  Customers are in dialogue with you.  Make the interaction a pleasant one, and you’ll acquire a customer for life.

The lesson for managers and entrepreneurs alike: the failure might be your innovation process, not your products.  Flipping your fails into sales could be well within your control.

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

Turn Frustration into Creation

Remember the last day of school? You couldn’t wait to break free. No more homework, teacher oversight, busy work assignments. Just the freedom to be creative. You explored. You invented.

Now think about your current work environment. Feeling the same restrictions? Boxed in? Beaten down? Micromanaged? Confined to your desk, or worse yet, a cube?

Insights Ignited worked with a multinational that had high employee fatigue. They had lots of ideas in their pipeline, yet were still losing market share. Their predictive models failed to indicate a clear winner among all of their possible options. Employees saw the writing on the wall. If they didn’t come up with some breakthrough products, another round of layoffs was inevitable. This elevated the stress level of their associates even more.

Their first solution was to bring in an entrepreneur as an inspirational speaker. That didn’t work. At the end of the “motivational” speech by the successful entrepreneur, employees had one of two reactions:

1. “Everything the entrepreneur said was true. But that will never work here”.  Or.....

2. “I’m so inspired. I have an idea of my own. I want to quit this job and work on my own idea”.

Either way, the company wasn’t the beneficiary. All they got was an increasing level of frustration as people sought external outlets for their creativity.

Then they tried Effectuation.

Effectuation empowers employees.

Effectuation puts a limit on the downside. Managers explicitly set an acceptable level of risk. But within those parameters, employees are free to innovate. Effectuation provides a framework for communicating both the risks and the process of innovating that allows managers to be comfortable with letting their employees have creative freedom.

How?

In this case, the company cited 4 components of Effectuation that they felt most contributed to increased employee engagement.

1. A common vocabulary - The language of Effectuation (e.g. Bird in Hand, Lemonade, Crazy Quilt, etc.) is memorable and easy to understand. There’s not a lot of technical jargon.

2. A shared understanding of boundaries - Effectuation requires explicit acknowledgment of risks. This allows managers to feel confident that employees understand the non-negotiables, while leaving them free to pursue innovative outcomes.   

3. Conversion of perceived negatives into positives - Setbacks are a part of trying new things. Effectuation provides a way to transform unexpected events from a project risk to a potential benefit.  

4. Innovation accountability - When a group pivots, it can be difficult to track progress. Effectuation provides metrics that hold innovation teams accountable to process as well as outcomes.

Using Effectuation, this company was able to develop and launch a product that opened a new segment for them. And they did so in a non-traditional way, using a new process and marketing approach as well. Employee satisfaction improved and they cited feeling more empowered to do their jobs.

How about you? Feeling frustrated at work? Empower yourself – and your team – through Effectuation.

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

State of Effectuation 2016

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

Future Research Questions

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

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

Assets to Action Model

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

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

Large Organizations Seeking Effectuation

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

Effectuation Increases Employee Contributions

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

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

Public Policy Benefits

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

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

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

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

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

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

Where Design Thinking Falls Short

Who do you call when you’re in need of innovation help? For many companies, the answer is a design thinking expert.

Design thinking first emerged in the 1990s and has grown in popularity. It’s a problem solving approach that gained momentum at Stanford. Now firmly embedded in Silicon Valley, it has had a worldwide impact. The systematic approach appeals to many corporate managers.

But businesses make a mistake when they rely solely on this approach to innovation. In today’s business environment, there are two primary ways in which design thinking falls short.

1. Design thinking is idea focused.

Design thinking starts with a goal in mind. It encourages people to identify problems and then seek the solutions to them. The solutions are often creative and result in an unexpected outcome.

The problem with this is that great ideas don’t always make it to market. In the context of a business, market acceptance is key. And while the solution developed in the design thinking framework might be fantastic, if it’s too expensive to manufacture or lacking in customer acceptance, etc., it might remain just that – a great idea.

2. Design thinking is feedback focused.

Design thinking encourages people to solicit feedback from stakeholders. This is done through both ethnographic observation as well as direct conversations. As more data and opinions are collected, the design thinking team incorporates the feedback into the product / service build. However, despite all of the conversations, the most important one is often missing –that of asking someone to commit to purchasing the new product.

Effectuation addresses these shortcomings in the following ways:

1. Effectuation is assets focused.

Effectuation starts with what you have on hand. Tangible assets, intangibles, excess, slack, waste, anything that is accessible is fair game. This shifts the emphasis away from an acquisitive strategy to one of optimizing existing resources. In today’s budget constrained environment, it’s a much more effective approach for organizations. Rather than focus on building from scratch or buying from others, it begins with leveraging what is already available and building out from there.

2. Effectuation is commitment focused.

Effectuation is based on commitments from participants. Decisions to invest, bring products to market, change course, etc. are based on actual commitments from stakeholders. These commitments can take many forms. They can include letters of intent, prepaid purchase agreements, partner contracts, among others. The primary objective is to attain stakeholder agreement to contribute resources to the venture to ensure its success.

Many of the companies we work with begin their discussions with us by saying “we did lots of customer research where they told us they liked this idea, but when we brought it to market it didn’t sell”. This is because they only solicited feedback. We prevent this by showing them how to use a commitment driven approach when interacting with customers and other stakeholders.

Even innovation has undergone innovations since the 1990s, when design thinking emerged. Add effectuation to your innovation skill set. Whether as a complement to design thinking or as a stand-alone innovation tool, effectuation works.   

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

Finding Value in Slack Resources

Most people have a love / hate relationship with email. While convenient it can also quickly become overwhelming. It’s been a hallmark of the digital age. And it’s also ripe for innovation. Now there’s Slack. Slack is a communication tool that’s aiming to address the annoyances of email while maintaining its benefits. And it has over 2.5 million people on board as active users.

Stewart Butterfield, the CEO of Slack, saw the time was right for upending traditional email. An MBA, he researched the industry, talked with potential users, got their feedback, and built a business plan to revolutionize the way email is used. After convincing a wealthy investor to fund his new platform, he rolled it out to great fanfare with a huge marketing budget and nationwide launch.

Or did he? Here’s the real creation story for Slack….

Stewart Butterfield, a college graduate with a degree in Philosophy, was very interested in the study of the mind and how people think. He gathered some friends of his and set out to build a new online-video game called “Game Neverending”, a massive multiplayer roleplaying game. Along the way, they built a photo sharing platform which they used among themselves. After a few years, it was clear that the video game was going nowhere, but Stewart was able to extract the photo sharing platform and build it into Flickr.

His interest in online gaming persisted and he gathered a group together a few years later to collaborate on the production of a new game idea called “Glitch”. To facilitate communications between the team members and organize the project, they built a custom communication tool. Glitch also failed. But that communication tool that the team was using was again extracted. It was the origins for Slack.

In “The Slack Generation”, an article that appeared in the May 14th edition of The Economist (http://goo.gl/e2HjcP), they claim that Mr. Butterfield is “wonderfully unlucky”. I claim that he is Effectual.

Mr. Butterfield experienced two big failures in his quest to create new online games. But each time, he was able to turn the failure into something positive. This is part of the effectual mindset that converts failures into opportunities (the Lemonade Principle of Effectuation). He took remnants of his failed projects and turned them into valuable assets. In fact, he made $35 million on his first failure when Yahoo purchased Flickr in 2005.

The future of Slack remains to be seen. There’s a lot of speculation as to whether it will be acquired or go public. But my guess is that Mr. Butterfield isn’t one of those who are speculating. Instead, he’s effectuating his path to innovation success.  

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

Take the Sting out of Failing

Failures can be funny. The Pontiac Aztek. New Coke. Microsoft Zune. These have all been the butt of jokes. But the companies responsible for them weren’t laughing with the rest of us.

There’s been a lot written about the need to accept failure as part of developing a culture of innovation. Companies are often criticized for encouraging managers to take risks and experiment with new ideas but abandoning them if the new growth areas fail to take hold. The future success of managers who take on innovation assignments is often tied to the idea they pursue rather than to the process they execute. So if the idea doesn’t take off fast enough, or at all, the manager sees their professional support and future opportunities dissolve.

Why is failure so toxic in large organizations? Because innovation is approached from a causal standpoint rather than an effectual one. Effectuation limits the amount of resources lost in a failure. This takes the sting out of failing.

The causal approach is based on predicting what the future holds and lining up resources to be the first to capitalize on the opportunity when the forecast comes true.

The effectual approach eschews forecasting for control. Managers create opportunities rather than find them.

A critical component of the effectual approach is Affordable Loss. Before setting out to innovate, the parties involved determine what they’re willing to invest with no expectation of return.

The initial assumption is that the innovation will be a failure. So the company invests the minimal amount required to validate that assumption. If, however, that assumption proves to be false, and the idea does in fact gain market traction, the company has the ability at that point to put more investment into the concept. That level of corporate commitment then increases as the idea gains greater market validation.

Innovation and failure go hand in hand. The method of business forecasting most companies currently use for innovation leads them to overinvest in ideas that seem great in the boardroom but often fail to live up to expectations in the market.

Effectuation takes the opposite approach. It uses small bets to bring big results. The organization gains more comfort with innovating because the financial risk is reduced, managers are more confident taking on innovative roles because the downside is limited, and the culture of innovation thrives through effectual experimentation.

This seems like something worth celebrating.

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

Does Innovation Have to be Chaotic?

“…, the slow search for precision and perfection might no longer be in Apple’s best interest. Mr. Cook’s goal, now, should be to alter Apple’s governing ethos to induce a small measure of chaos into his company.”

- Farhad Manjoo – NY Times, May 4, 2016

“Apple, Set to Move to its Spaceship, Should Try More Moonshots”

http://tinyurl.com/zrl2b2c

Does innovation have to be chaotic?

In the article referenced above, the author suggests that Apple accelerate the rate and intensity of its innovations. He asserts that the methodical approach they’ve relied on to date won’t be sufficient to maintain their leadership position in the tech sector. His proposed solution is that they inject more chaos into their operations.

Aligning innovation with chaos can be a barrier in the corporate world. Companies who have reached Fortune 500 levels of maturity have usually done so through standardization. They function smoothly through established processes, proven methods, and entrenched cultures.

So when managers with an entrepreneurial spirit, or worse yet, consultants from the outside, start talking about introducing innovative practices into the organization, its not surprising that many corporate executives want to put the innovation team and initiatives in an incubator somewhere offsite where their wacky ways won’t spill over into the rest of the company. Disruptive new product groups are meant to disrupt the external market – not their internal organization.

But innovation doesn’t have to be chaotic. While the outcomes might be unknowable, there is in fact a process to innovating. This process is Effectuation. Discovered through social science research, it is the way that successful entrepreneurs build businesses.

The current chaos approach to innovation inside companies doesn’t work for those innovating or for those managing the organization. Those charged with innovating are viewed as “flying by the seat of their pants”, making wild guesses and placing risky bets while the rest of the organization moves forward responsibly. And those in the core business chafe at being unable to track the progress of innovative initiatives or to hold innovation groups accountable for their actions.

Effectuation addresses this by providing these three components:

• It is Replicable. Effectuation is a defined process. It is an approach with the rigor of business planning. It can be taught. It can scale. And it provides innovation teams with control over creating their future rather than the chaos of guessing what the future might be.

• It is Actionable. Conversations and commitments are at the core of Effectuation. It is about getting results. Investments are not made without customers. Resources are not committed without progress.

• It is Measurable. Teams can track their progress through the effectual process and can communicate this to the broader organization. No longer do innovation teams get a pass at quarterly meetings.

Does Apple need to continue to push the boundaries on its innovation efforts? Yes. But if it uses an effectual approach, it will be able to do this without unnecessary mayhem.

Instead of spending their energy on creating chaos they can spend it on creating their future.

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

Effectuation: Innovating like an Entrepreneur

There are a lot of ways to innovate. Googling “how to innovate” elicits over 24 million results. When companies want to explore innovation, they often seek out the wisdom of entrepreneurs. They’ll invite them to speak, share their experiences, and provide tips.

The result? A lot of advice. You’ll get one individual’s take on what made them successful. It’s an “I did this and it worked for me – so you should do it too” approach. While valuable, there are pitfalls in this.

• It’s incomplete. Entrepreneurs often pick up the story from when they started to gain traction on their idea. Many times, the attempts, missteps, and failures along the way are omitted.

• It’s individual. Each entrepreneur has their own set of circumstances that influence their outcomes. These are not necessarily applicable to everyone.

• It’s inconsistent. Each entrepreneur speaks from his/her own perspective. Sometimes their experiences conflict with each other.

So how do you get at what it really takes to develop and launch successful innovations?

The answer is effectuation. Effectuation is the science of how successful entrepreneurs operate. Developed through social science research, it is both an academic discipline and a practical framework for problem solving that results in innovative products, services, processes and solutions. It is based on control rather than prediction.

Before building a business plan or drafting a financial model, successful entrepreneurs put their attention on what they have within their reach – the assets they already have on hand. Then they reach out to others and seek commitments rather than feedback. This dual emphasis on control and commitments is the secret sauce that separates expert entrepreneurs from their novice counterparts. And it ensures truly unique solutions.

How can large corporations with rigid organizational structures gain this entrepreneurial “advantage”? By following the principles of effectuation:

• The Pilot in the Plane Principle: Start with a mindset of control rather than prediction. Make your own opportunities – don’t go looking for them or attempt to replicate what others have done.

• The Bird in Hand Principle: Leverage what’s already available to you. Consider who you are, what you know, and whom you know.

• The Affordable Loss Principle: Failure is inherent in the innovation process. Resourcefulness is a requirement for innovation longevity. Figure out in advance how much you are willing to lose pursuing your idea. Evaluate your opportunities based on this. It will ensure that when you do encounter a bump, it is a mere obstacle rather than a derailer.

• The Lemonade Principle: Embrace the unpredictable. As long as you remain flexible and willing to change based on the real time market data you receive, you are in control of your goals.

• Crazy-Quilt Principle: Form partnerships. Find those people already around you who are willing to make a real commitment and collaborate to jointly create something truly innovative. Feedback is plentiful but develop deeper relationships with stakeholders, inviting them to put some skin in the game to advance your idea. By doing so they will be encouraged to bring their assets to bear and will significantly increase your ability to get traction.

Where can Effectuation take you and your organization? Who knows. That's what innovation is all about. So don’t wait – Effectuate.   

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