The Plunge: An integrated metric for shall-be entrepreneurs

Posted on by Bart Doorneweert

Entrepreneurship is attracting attention from a lot of people. Many are choosing or thinking to pursue the entrepreneurship function. It is part of what Steve Blank calls the democratization of entrepreneurship. Building a company has become more openly accessible because of the falling cost of technology, access to information, and capital. On top of that entrepreneurship methods like customer development are revealing the blue print of entrepreneurial discovery and business development. The field of entrepreneurship itself is accelerating.

While the environment is becoming more conducive to entrepreneurship, it should not be overlooked that there is also a pivotal personal side to the entrepreneurial conduit. If you don’t have an anchored personal foundation to pursuing entrepreneurship, you could end up becoming the constraint to your own ambition. You could be costing yourself and anyone you approach for support in your pursuit a lot of time and effort in vain. You stand to lose a lot.

In the name of saving yourself and others around you from the adversity of making a half-baked decision to become an entrepreneur, I have reflected a bit on my own experience (failure rather). I took a look back at the friction that I have caused by wasting other people’s time with half-bakedness, and discussions that followed on what this “anchoring” would be.

I have come up with the several topics , or a set of metrics if you will, to frame a discussion between founder, friends, family, and mentors, to help determine whether you are still a wish-be entrepreneur -in need of a bit more foundation- or that you are definitely a shall-be. I call this assessment “the plunge” because it is a discussion you should have, before taking it.

To my understanding, a plunging assessment would contain the following elements:

Taking a decision
Naturally there is a line of thinking underlying the choice to become an entrepreneur. It is a balanced assessment between history of a person, their current situation, and a logic to why entrepreneurship would be a potentially fruitful option. This is not only a decision based on “do you have what it takes”. Equally so you need to consider whether your life (health, kids, state of mind, debt, etc) is currently ordered in such a way that you can scrape together the time to pursue your dream. – Can you take the decision in the first place?

Irreversibility
The decision must contain an element of irreversibility. One of the hard aspects of going for “it” is that “it” doesn’t easily allow for a way back. When you intentionally leave a window open to return, you suppress your pursuit. But most importantly you will also most likely back down from your initial decision, because, well, you can. When you make an irreversible decision, you create room to focus on your goals, and give your external support the confidence that you are really putting your skin in the game. Choosing for something irreversible doesn’t mean burning your bridges. Rather it means actively taking a step in a new direction and accepting that the path you choose will never bring you back to the situation you leave behind. – Are you ready to stop looking back?

Pursuing an ambiguous opportunity
The opportunity is something that lies external to yourself. Entrepreneurship is not a structured opportunity like a job opportunity; it is a decision you’re making here, a journey you begin at, not a choice where you select according to preference. Entrepreneurship is deep ambiguity which can only be cleared up by embarking on the journey. So the question here is if the value you can create is worth the effort of battling ambiguity: – do you have enough understanding of your opportunity to determine the known-unknowns and whether they, at least, are worth the pursuit?

Ultimate responsibility
Taking the entrepreneurship journey entails picking up a huge responsibility. This responsibility is not only for yourself, but also for your family, friends and their well-being. If you get caught in a rut, there is no one else to turn to but yourself. When facing a choice for a job-offer, then the risk for the opportunity is spread over at least 2 people: yourself, and the person who hired you. When you become an entrepreneur it’s just you. So regardless of the ambiguity, the difficulties it will create, the failures you will encounter, the ultimate responsibility for the consequences will always lie with yourself. This is unlike any job responsibility. So if that sort of pressure would cloud your judgment and cause inertia you should ask yourself: – can you take the responsibility?

Take-away
In this post I have attempted to highlight some of the topics that could be addressed in a discussion between someone who is thinking of becoming an entrepreneur and their close circle of personal and business supporters. I have gradually learned about the value of this discussion from my plunges in the past, and will use it for those to come. Regardless of whether the questions above are of use to you, please take some time and determine whether you are ready to take the plunge. Prevent adversity as much as possible, save yourself and others time and effort. And, if you find the questions useful do tell me:

Are you ready to take ultimate responsibility for an irreversible decision to pursue an ambiguous opportunity?

Let me know your thoughts. And… good luck!

——–
This post is dedicated to my wife, and life venture partner, Anne, whom I’ve fought with much to come to truly understand what’s at stake. I thank you for sticking with me through hardship, never giving up on me, and still allowing me to pursue my dreams

Disruptive innovation and sustainable development

Posted on by Bart Doorneweert

When companies work on sustainability they are rarely inclined to contemplate the structure of their current business model. Any action related to sustainable development needs to fit within their current system of activities. Changing the model to become more sustainable is usually not worth the investment in the short and medium term, and is thus not pursued. Rather, companies prefer to work on incremental changes to improve on sustainability where they can, steering well clear of the root of the problem which lies in the impact that flows from their current business model design. What is the reason that companies seem so unwilling to opt for radical change, even if it were for the better? With this blog I would like to share some thoughts.

Value networks determine which business models apply
Part of the answer is revealed through Clayton Christensen’s theory of disruptive innovation and the role value networks play. A value network comprises of interdependent value chain actors, from sourcing to marketing. This network of actors is pieced together to provide for the product or service features, which are defined by carefully listening to customer demand (which ultimately closes off the value network). The value network is thus the context within which the firm responds to customers’ needs.

All activities by each member in the value network, are geared to deliver on the requested product features as efficiently as possible. A value network knits all the different business models of all the participating value network members together. In practice the interrelations can be so strong that the composition of a value network is formed as a hierarchy which mirrors product or service architecture.

This value network is visualized by Christensen as a nested system, where each part of the value chain fits into another one like a Matryoshka doll (original can be seen in the Innovator’s Dilemma, 38-39). I’ve made a slight alteration to Christensen’s figure by drawing out one for the agricultural system, changing its shape to show how different uses, or purposes for the use of agricultural production [food, non-food, fuel] shape the hierarchy of a value network.

If you consider the value network of local food, then you are dealing with something totally different than when you’re looking at value network that belongs to conventional agriculture. It’s just not possible to take out one part of the value network you don’t like (eg. lack of scale in local food distribution), and replace it with a bit that you do like from another system (large distribution from conventional agriculture). Most companies are thus “locked” in their interdependent value network, and couldn’t change their business model to become more sustainable even if they wanted to.

Christensen describes this impossibility very well by analogy to the components of computers, where components belonging to the mainframe computers (physically) can’t fit into the architecture of the mini computer. Both technologies, even though the same in nature, belong to very different value networks. The upshot is that value networks can only keep innovating along the same line of improvement of those business models that befit their network. This is what Christensen calls sustained innovation. It could provide part of the explanation of why companies usually prefer to stick to incremental change when it comes to sustainable development.

Value system order determines how business models deliver on sustainability
Through disruptive innovation it is possible to challenge existing value networks and replace them with new networks with new business models. However, you often see that these disruptive business models are no guarantee that business will deliver on sustainability.

In order to understand why value networks, even though they can be disrupted, will rarely changes in terms of delivery on sustainability, we need to consider a second value system layer: one which expresses the overall order of values which permeate throughout the value network. Let’s call this value system order. I have taken the liberty to use the figure below to depict value system order, taken from the MIT Sloan Management Review. Again, the value system order is a nested system. Ideally the sustainable value system order consists of a well-proportioned spacing between the values of economy, society, and the environment like the one below.

 

If the value order prioritizes economy over the environment, like for instance in conventional agriculture, the order will look different, something akin to the next figure on the left. Any choice made for business model innovation in this order of values will result in this proportion of delivery on sustainability, regardless of whether we’re talking about sustained innovation, or disruptive types. If you look at the design order of a contrary example, a national park or reserve, then sustainability will look something like the figure on the right. The choice here is always for models which take lots of environment into consideration, link to society but more limitedly so, and the economics of it all is quite negligible.

The main point is that the value system order provides guidance for the designing the hierarchy that you want to implement in the actual value network that operates the value chain. Each value system order will result in a corresponding set of value system hierarchies and business models, which deliver on sustainability according with the proportion of the order.

Redesign of value system order and the value network makes or breaks sustainable development
If you look at the relation between the role the value network plays in business model innovation in combination with the value order proposition, we can now argue why existing industry finds it so difficult to deliver on sustainability. They might be willing to reconsider the value order (commiting themselves to sustainability covenants, like the World Business Council for Sustainable Development), but they soon find that they are not  ready or able to disrupt their own value network with a different network design hierarchy that will deliver on sustainability in line the with desired value order.

So what might be the alternative? Though still a budding sector, the alternative might lie in the social entrepreneurship sector. Social entrepreneurs practice innovation alchemy, where new business models are designed from an uncompromising value order perspective, but fully flexible in the design of the corresponding value network. This article in Forbes explains along these lines how social entrepreneurs are hacking capitalism. In practice you will find that social entrepreneurs are using their alchemy in an attempt to disrupt incumbent value networks, and replacing them with more sustainability oriented ones.

Regardless of the promise of social enterprise, sustainable change in any case, even from incumbent industry, will need come from the same process. This is a process where firstly a clear sustainable value order is chosen, through which new value network hierarchies are consequently designed that are able to challenge the old capitalist system. Combining both will create the type of disruptive innovation which is needed to transform an industry’s practice to a more sustainable design.

Take away points:

–       incumbent firms are often locked in value networks that prevent them from innovating towards more sustainable business models

–       disruptive innovation does change value network designs, but they are no guarantee in themselves for sustainable development

–       sustainable market transformation will more likely come from companies that adopt well-balanced priorities between economy, society, and the environment, and accordingly create scalable and replicable business models that are able to disrupt an industry’s status quo

–       it is more likely that those companies will be social enterprises than existing multinational publicly listed enterprises.