Building an entrepreneurial society

Archive for the month “October, 2012”

The role of inventors in an entrepreneurial society

Most of the new business ideas I see are technology related to services, digital media or software.  This trend should be expected since there are many great opportunities in these sectors.  But I am beginning to feel like we have given up on making things.  If this belief I have is true it is unfortunate for us as a society.  We still buy things and the creation of things puts people to work and gives them a sense of accomplishment.  The people employed are also not likely to find a comparable opportunity in the digital or service based markets.  For these reasons I think we need to find and nurture the inventors in our society.

There is a substantial group of people who are garage tinkerers and basement inventors.  Maybe they have seen something that could be done better and tried to build it.  Often they just love to build and fix things without any real thought as to the immediate need or size of the market.  That is a lot of ingenuity, energy and passion that could be put to use in building an entrepreneurial society.

There are other trends taking place that could magnify the impact of these inventors.  Technology such as social media and ecommerce combined with 3D printing and other low tools make it possible to create distributed and low cost manufacturing.  Build things where the markets are, customized to the needs of the buyer.  Not everything needs to be mass produced.

The cost advantages in remote countries is also declining with rising wages, supply chain complexity and increased transportation costs.  Interest is growing in the US in bringing production back from overseas.  We need to make sure the same trends happen in Canada.  But we won’t necessarily be bringing back the old model of large scale operations employing hundreds of people.  We should leverage the new business models and home-grown ingenuity to create a new manufacturing industry.

The first step is to surface these garage inventors; find out who they are and engag them.  From there we can work with them to build business models, fill in the gaps in their teams and provide support and financing.  Instead of two or three plants employing hundreds of people maybe we have a number of plants that each employ 10 to 50 people.  There would be less exposure from the failure of a single business and I suspect people would enjoy working in these smaller environments.

What is a business model?

In my last post I discussed the need for business model innovation to enable entrepreneurs to find solutions to the problems and opportunities we face.  In this post I will expand on that by proposing some structure around the term business model.  Having this structure is important if business model innovation is going to be a major driver of an entrepreneurial society.

We have all had discussions with colleagues and clients around an idea or concept where we all believed we had a common understanding.  Later when we tried to execute what we had discussed we found that we didn’t have common ground at all.  That is the danger with certain terms we use in business such as business models or innovation.  We each have our own interpretation of the terms and often believe that everyone in our discussions has the same one.  It will be difficult to have a conversation with a potential investor, customer or supplier if we don’t all have a shared interpretation of what a business model is.

Saul Kaplan, the founder of the Business Model Innovation Factory defines a business model as  a “story about how organizations create, capture, and deliver value.”  This is a good one line definition but doesn’t provide enough structure to build a business on.  Fortunately a structure has emerged from work done by Alexander Osterwalder that is outlined in his book Business Model Generation.

In Business Model Generation a business model is comprised of a set of interrelated building blocks:

  • Customer segments
  • Value propositions
  • Channels
  • Customer relationships
  • Revenue streams
  • Key resources
  • Key activities
  • Key partnerships, and
  • Cost structure.

A worksheet has also been designed that summarizes all of these elements on a page to facilitate the development and evolution of business model generation.  There are also good resources on this framework at www.BusinessModelGeneration.com.  These tools are used in conjunction with the lean approach to business startups.

Using the canvas a founding team can quickly develop a version of a business model in order to get the startup process moving.  It is understood that the first draft of the business model is based on the founding team’s assumptions about the various elements.  Each of these assumptions will need to be tested resulting in successive iterations on the business model design.  Ultimately the team will end up with a final business model that has been vetted by customers and may look quite different from the initial concept.

The structure proposed in this post is not the only way to look at business models but it is becoming widely adopted and it is the one we will use when discussing business model innovation.  We will expand on the list of business model elements in future posts as we explore business model innovation.


Finding a real world problem to solve

As I have mentioned in previous posts a wave of entrepreneurs creating new ventures has a greater ability to solve the problems and capitalize on today’s opportunities than existing top down institutions.  Since that time I have had the opportunity to work with many entrepreneurs and speak with other mentors and funders of entrepreneurship.  While there are many good venture concepts that could lead to improvements in the world there are still many entertainment or recreation based ideas.  These ideas add value by raising an interest in entrepreneurship, testing business models and advancing the technology itself.  Now it is time to start turning the attention of entrepreneurs to serious problems and opportunities.

I have also discussed in previous posts that the entrepreneurial process starts with the problem and not the solution.  The success of an entrepreneur that finds a problem that their potential customers consider worth paying to solve is substantially higher than the ones that start with a solution and try to find acceptance later.  So we should start with the problems to solve.

The good thing about starting with problems to solve is that we have alot of them.  And many of these are worth solving with people willing and able to pay for the solution.  We need to look around us and see where we can improve life for ourselves and others.  The problems don’t have to be the huge, change the world in one day kind.  Often we are better to start small since we expect the ventures to build momentum over time as they grow and merge with other ideas.

Being critically observant or curious is a trait is essential to finding truly unique but important problems to solve.  When you see things that don’t work as they should we can ask ourselves why and what would need to change to fix it.  We should look at the system of cause and effects that created the problem.  Use a series of questions to drill down to root causes.  The first things we see are usually symptoms but not the cause of the problem.  A systems view is important to understanding a problem well enough to begin looking for a way to solve it.

Many solutions will require the use of a unique business model to deliver it successfully.  It is often not enough just to find a problem and build a simple solution. In the next post I will spend time talking about business model innovation and how to incorporate that.

For some background on finding problems to solve I refer you to the first three chapters of Innovator’s Solution by Clay Christensen.  I also encourage you to work in small teams since people often see things from different angles.  So I leave that as a starting point to find problems that matter where the solution helps the society we live in.

Post Navigation