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

Happy (Effectual) Halloween from Insights Ignited

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

These approaches are examples of two different mindsets.

The First Mindset -- Managerial

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

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

An Alternative Mindset -- Effectual

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

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

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

Effectuation in Action

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

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

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

Enjoy conjuring up your own effectual creations this Halloween!

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

Entrepreneurship Doesn’t Have to be so Scary

A classic Halloween horror scenario is a person hearing a knock on a door, opening it, and being met with terror and doom.  That’s how many feel about trying entrepreneurship.  They fear that by opening the door to an entrepreneurial opportunity, they risk inviting terror into their lives. 

The list of fears around entrepreneurship can be long.  People fear the pitfalls they’ve heard about, such as product fails, financial struggles, and unending work.  And they fear the weaknesses they know in themselves or their business models, such as whether they can evolve into a salesperson, whether they have the ability to persevere through the hard times, or whether others will notice that their technology chops aren’t as strong as they’d like them to be.

But often, the bigger fear is what’s waiting around the corner.  It’s the fear of the unknown.  Those pitfalls no one mentioned, or the weaknesses that went unnoticed.  The fear of what may be is often what prevents people from creating their own future, preferring instead to take the known that’s handed to them. 

A Fear with Many Faces

Fear of an uncertain future can take on many forms.  It’s ability to change shape and rear its head at unpredictable moments is a powerful deterrent to many who dream of being entrepreneurs.  By recognizing some of its forms and effects, aspiring innovators can develop techniques to lessen its impact. 

·         Fear of failure

Google “fail” and “entrepreneur” and myriad stats pop up citing the likelihood that an innovative venture is doomed to failure.  It’s no secret that launching a new product or service into the market place is a difficult task.  But instead of abandoning the idea, there’s a better way to manage this risk, and that’s using Effectuation. 

Effectuation, the mindset of successful entrepreneurs discovered and defined by Dr. Saras Sarasvathy at the University of Virginia’s Darden School of Business, provides a framework for creating new ventures that manages risk while simultaneously pushing growth.  Through such actions as setting your Affordable Loss at the outset and growing through the creation of a Crazy Quilt, an entrepreneur lowers their own risk while gaining access to far more resources through strategic collaborations with others. 

Beyond a framework, the research on Effectuation shows that the mindset of successful entrepreneurs can be taught and can be learned.  Anything done for the first time can be scary or intimidating.  Effectual research has shown us that practice and repetition of these entrepreneurial behaviors is an effective way to reduce the fear of failure that many novice entrepreneurs feel.  It boosts confidence and optimism, reducing this fear to one of caution rather than deterrence. 

·         Fear of success

For some, the fear of succeeding can be as paralyzing as the fear of failure.  Imagine hearing a knock on the door and opening it to find a stampede of customers.  For experienced entrepreneurs that might be a dream come true, as they’ve developed the skills to handle this level of demand.  For a novice, it can be overwhelming. 

Experience is a strong tool for battling this fear.  Research shows that this fear is greatest at the beginning of the entrepreneurial journey.  Once innovators launch their ventures, they learn quickly that amassing a horde of customers isn’t easy and that product sell-outs can be few and far between.  What’s more likely to happen is that demand is lower than anticipated, leading one to get creative about drumming up business instead. 

Another strategy to address this is to parse the launch into smaller steps.  Stage manageable pilots and controlled marketing to build confidence and test your products, processes, technologies, and teams.  The overnight success stories you read in the magazines are almost always years in the making, full of small steps and pivots rather than single moment launches.

·         Fear of losing control

Businesses start with a single idea.  However, growth requires interactions, and interactions inevitably lead to change.  When thinking up a business idea many think in terms of segments.  Yet when an idea is in the world people relate to it one on one.  As such, each individual reaction will vary.  In order for an idea to become greater than just a passing thought, it has to be embraced, lived, bought, and believed by others.  This requires some amount of ownership on their behalf.  Other stakeholders have to feel that they have skin in the game and an opportunity to shape the future of the innovation. 

For some, this is the scariest fear of all.  They fear that by the time the product becomes “successful” it will have morphed into something unrecognizable.  That it will have so many handprints on it they no longer feel attached to it. 

Understanding the intrinsic motivation for starting the venture can prevent this.  Ask the following: 

o   Why am I doing this?

o   What do I hope to get out of this?

o   What do I hope that those who participate in this venture gain?

o   What are my non-negotiables? 

Setting these parameters upfront will give the entrepreneur control over what’s important, and will leave room for others to influence the outcomes of the venture as well. 

So Do You Open the Door? 

Despite identifying the fears looming for prospective entrepreneurs and outlining strategies to address them, they don’t go away.  They’re going to continue to be there, lurking in wait for the next daring soul attempting to create something new in the marketplace.

But just because you can’t predict what’s on the other side of the door doesn't mean you shouldn’t open it.  It doesn’t mean you can’t face it, react to whatever it might throw your way, and walk away better for having done so.  The end of your entrepreneurial journey doesn’t have to look like a typical horror flick.  Because in this movie, the ending is what you make it. 

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

Using ALL Your Resources to Your Advantage

“We have a great resource,” said Niall Stuart, chief executive of Scottish Renewables, an industry association. “It’s Scotland’s terrible weather.” 

This Washington Post article http://tinyurl.com/j5e27pj shows how Scotland is applying a little entrepreneurial thinking to create a future that today doesn’t exist – a future in which all of the country’s energy needs are met by renewable fuels. 

Scientists are predicting a rapid acceleration in climate change and a decrease in traditional fuel sources.  Visionaries, policy makers, and entrepreneurs are joining forces to co-create a new paradigm for national energy supply.  And they’re using Effectual actions to do so. 

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

What's Effectuation Good For?

Companies are always curious as to what their peers are doing.  One of the questions I’m asked most frequently when I talk to managers about Effectuation is “How are other companies using it”? 

These are some examples of how others are applying the Effectual principles in their corporate environments.

A New Product Launch Process

A beverage company used Effectuation to roll out a new soft drink.  While the drink itself was not innovative, they wanted to take an innovative approach to its marketing and launch.  They made a conscious decision to break from their normal marketing launch model.  In its place, they applied Effectual decision-making. 

The primary difference was how they engaged their marketing, sales, and distribution partners in a more co-creative way.   Usually, they would decide at the corporate level which market to roll out to first.  This time, they worked with their partners to seek handraisers.  And in return, they asked them to co-invest in the process.  Their partners contributed sales resources.  They exercised the crazy quilt principle to build a stakeholder network that was mutually vested in the success of the product rather than just executing on orders and agreements. 

The launch was successful and led to a full scale roll out.  After operating this way, it changed how they think of the launch process.  Now, they have incorporated Effectual elements into their early stage innovation efforts, providing them with alternative methods to deal with market uncertainties. 

 Closing a Funding Gap

A national nonprofit organization faced a significant decline in funding.  Every year, they addressed their budget needs as part of a broader strategic planning process.  This year, they applied Effectual thinking to their strategic planning review and it changed their outcomes.

Rather than focus on what was cut from their budget, they looked inward at what resources they did have – their bird in hand.  This assessment uncovered both tangible assets – such as underutilized real estate and technology, as well as intangible assets – such as members and partnerships that were ripe to be built on.

So they took their planning process outwards.  They reached out to members and potential partners to see what it would take for them to increase their investment in the organization.  These dialogues led to several members, groups, and businesses identifying ways in which they would be willing to partner to develop mutually beneficial programs. 

The outcome was that they were not only closed their funding gap, but they surpassed their shortfall and achieved better than expected outcomes because their efforts were buttressed by the partnership of a stronger network. 

Creating a New Revenue Line

A technology services business used Effectuation to develop a product based revenue line. This company grew on the strength of its people and service delivery.  They had an impressive list of corporate clients but were struggling to recruit the talent needed to scale their operations. 

At the same time, they saw gaps in the products they were implementing and additional needs among their clientele.  They put this problem out to their employees and several indicated an interest in prototyping possible technology solutions.  They did this on top of their normal job responsibilities as it was of interest to them. 

The sales team took these product prototypes out to their clients to see if they generated interest.  Not only did they get positive feedback on some of their concepts, but they were able to successfully presell a version.  They partnered with the company on further development and delivered a tech product that they can no repurpose for other organizations.  This will allow them to scale and meet their growth goals.

So What is Effectuation Good For?

Effectuation is not just a process.  It’s also a problem solving method.  Whether you work in a nonprofit or a corporation, there are organizational challenges that could be addressed by applying the entrepreneurial mindset. 

If you see your company in any of these examples, consider how you and your team might apply Effectuation to solve the problems you’re facing. 

--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

Don’t Cry Me a River

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Building a New Future on the Past

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

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

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

How a Simple T-Shirt is Changing Retail

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

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

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

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

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

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

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

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

Learnings from Everlane

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

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

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

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

Will Everlane Last? 

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

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

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

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

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