A Scientific Approach in Entrepreneurship and Strategy

Thinking like a scientist. This may not be new, especially for scientists. And not so much for entrepreneurs who subscribe to Eric Ries’ Lean Startup method1. But it was a hot topic at the recent Academy of Management (AOM) conference.2

I’m a scientist who has lived in the business world for decades. So, I’m excited to see the scientific method embraced at a business-centred conference. The AOM is an organization of business scholars, or people who study business. However, like every business school I’ve been part of, AOM aims to share knowledge with the practicing community.

First observation: Transparent Logic. The term immediately resonated – I knew exactly what it meant and why it was important in entrepreneurship. Transparent logic is part of a model for teaching social entrepreneurship3 and requires a clear link between the proposed activities and the social problem a venture is tackling. For example, providing water purification devices will decrease the incidence of dysentery, leading to fewer hours of lost labour and therefore people earning a better wage, however, it needs to be clear how people who need the device will get them and continue to use them. For many scientists, cause and effect is utopia. Transparent logic in a social venture seeks this holy grail of cause and effect.

At a session on entrepreneurial strategy4, we heard it was less about SWOT analysis and more about observation leading to hypothesis generation. An entrepreneur sees an unsolved problem and hypothesizes they can solve it with a certain product. The term causal logic came up, followed rapidly by notions of testing. Establishing value, after recognizing opportunities, can have its roots in the scientific method. The entrepreneurial process is scientific.

In the same session, a trial to evaluate the impact of the scientific method on startups was presented. Entrepreneurs were randomized into two groups. One was mentored traditionally – entrepreneurs were guided in business methods, product development and organizational development. The other group was tutored in a scientific method, using hypothesis generation, controlled testing and analytical methods to learn from test outcomes. Those using the scientific method pivoted more frequently, acquired and activated more customers and had more revenue generation. From this: the scientific method works for entrepreneurs.

On to a plenary session on strategy.5 There, too, causal identification was presented as a frontier in strategy research. My head started to spin with so many scientific references. I was brought back to objectivity, reminded that physics with its fundamental, timeless certainties such as gravity, was more reliable for test outcomes. The fundamental forces that shape business shift more often. However, like evolution of species, changes in strategic theme occur in leaps and bounds, rather than continuously. An example is the upheaval in retail, with the onset of online shopping. A discrete change in how we shop. It left survivors (Amazon) and the less fortunate (Sears Canada).

The hotness of the scientific method in business strategy looks to me like the mid-point stage on the S-curve6 of adoption of new things (technology, products, buzz-words, sports teams). Following this trajectory, soon it won’t be the new thing, but the common thing.

When I ventured out of the lab many years ago to join an investment bank, I was a foreigner. Welcomed, but in a world of people who thought in different ways. They had vision. Visions of logical explanations. Maybe it’s me that’s catching up, learning that shrewd entrepreneurs see value where other’s don’t.

The scientific method can make sense and compelling arguments out of ideas. It makes it easy to answer hard questions about why you think this new idea you have will make a great business. A great tool for any entrepreneurial business strategist.

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1http://theleanstartup.com

2This is a huge conference, attended by thousands of faculty members from business schools all over the world. With two days of symposia, plenary sessions and papers, each with 7 time slots, and an average of 15 sessions to choose from per time slot, this means there are (15) 14 = 2.9 x 1016 different individual selections of talks to attend. Or maybe it should be 15! which is only 1.3x 1012 I’m not exactly sure how to calculate the number of different permutations of the program but any way you do, the number is really big. So my experience may not be typical.

6Not surprisingly, the S curve is S shaped.

In the beginning, a handful people embrace a new thing. The adventurers, the risk-takers, perhaps those in the field who understand the new thing better than most. This is the first stage, the flattish bottom to the S curve.

Then word starts to get around. The new thing is good. It does exciting things. It’s better than the old thing. People jump on board, start adopting the new thing like it’s the best thing since the last new thing. This is the part of the curve that swings up so rapidly that if it was an airplane, everyone on board would pass out.

As time goes on, people remain excited about the new thing, but many people have the new thing, so the adoption curve starts to lessen its assent – the plateauing phase of the vertical rise.

Finally, just about everyone who will ever want the new thing, which isn’t so new any more, has it. The S curve flattens. No additional adoption because everyone loves and appreciates the new thing.

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Startup Communities/ Entrepreneurial Clubs

Reviewing your projects and initiatives may be about as exciting as spring cleaning, but it feels good once it’s done and you may find something you didn’t know was lost. About six months ago, a colleague of mine (Jeff Kropman) and I started an entrepreneurs group with the support of the people who had the vision to create Core21, the shared office community.

We started Entrepreneurs in our Community @Core21 to grow the entrepreneurial community in Durham Region, looking to fill a gap – provide a safe environment for entrepreneurs to meet and share their challenges. It’s a venue where solopreneurs wouldn’t be alone. Our group complements networking and professional development sessions available in the area.

With a few simple principles, the get-togethers should be fun – a safe environment to share experiences. No talking heads, but semi-structured. I usually facilitate to ensure everyone gets a chance to participate. The meeting agenda keeps the group from going too far off topic. We introduce ourselves, present challenges, work on the challenges in small groups, then debrief. Applying lean startup principles, we asking for feedback at the end of each meeting, then amend the format.

On average, 10 people attend each meeting but it’s never been the same group twice. This is great, the group is there for those who want to come and chat with their peers. This is our hope, that each individual entrepreneur knows where to find others who they can reach out to.

What have we learned and what can we do better?
The most striking thing is that everyone who attends wants to solve the other attendee’s challenges, immediately. This is wonderful, the spirit of helpfulness. Because people may or may not return to the next meeting, we’ve had a hard time coming up with a system of accountability, or using the group to hold us to our goals, which is something we decided we wanted in the beginning.

Is there something we can learn from similar groups in other cities? There are a couple of (informally) syndicated groups of coffee clubs for entrepreneurs: 1 Million Cups and Open Coffee Club. Perhaps we need a cooler name. The Open Coffee Clubs¹ were started by venture capitalists in London and Boulder, who wanted to build community in their local tech startups. 1 Million Cups², which has chapters in dozens of US cities, was created by two people from the Kauffman Foundation, to tied together unlinked entrepreneurs in Kansas City. I’ve been to a few other events in my local area such as The Inventors Circle and the Small Business Network at the Metro Reference Library, both have presenters with networking before and after the presentations.

The other coffee clubs primarily start at 8 am – do people have more energy in the morning than at 7 pm, when our meetings are? Some are limited to an hour (that makes sense if you’ve got a day of work ahead of you). Formats differ. At 1 Million Cups, a couple of companies share their story and get feedback from the audience. At the tech focused Open Coffee Club, they open with discussion of current events, followed by an open floor for attendees to presentation ask the groups for input on specific questions.

Themes that transcend all the groups:

  • to be the opposite of large events or special events.
  • for the community by the community – to find peers to reach out to when trying to solve problems.
  • providing support to your fellow entrepreneurs – to answer ‘what can this community do to support you?’
  • to be friendly and low key – to get every attendee invested in the success of every other attendee.

How can we build a better group in Durham Region? Should we:

  • hold the meetings at a different time, such as early morning?
  • change the format – have presenters or time limits for each attendee to share or a different agenda?
  • make the attendees more accountable to the group?

How to answer these questions and make Entrepreneurs in our Community @Core21 a more vibrant entrepreneurial community so that we all have a better chance of surviving and flourishing? I’m going to ask the members what they want. And then do it.

 

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¹ Brad Feld (2012) Startup Communities. Building an Entrepreneurial Ecosystem in Your City John Wiley & Son, Hoboken, NJ

http://www.forbes.com/sites/kauffman/2013/11/05/six-lessons-for-building-startup-communities-from-the-founders-of-1-million-cups/2/

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