business innovation model

Modern Times 2.0

Changemaking through the 21st century

I’ve been writing about the role of entrepreneurship in the creation of value and prosperity for many years. This is a natural deduction for me, having spent about half my career working as an economist and the other half starting and running businesses.

In fact, looking back in history, there is enough evidence to support this. The countries that have prospered the most – Netherlands in the XVII-XVIII centuries, nineteenth century England, twentieth century U.S. and, more recently, places like South Korea and Israel – were the ones where people with good ideas had access to capital, under systems that promoted accountability (see here for full discussion).

That said, in today’s world, I’m convinced this vision needs refinement.

Recently, I’ve had the privilege of spending a few hours talking to Bill Drayton, the founder and CEO of Ashoka. Bill enlightened me with his vision of “frame change” and “everyone a changemaker” (EACH) world. During our conversation, it became clear to me that the original model of “entrepreneurship + access to capital” alone is no longer sufficient to promote wealth and prosperity.

In the twenty-first century, the success of people, organizations and countries alike depend on the understanding and implementation of a new framework.

The new model for problem-solving at all levels requires a rupture with the old way of doing things. From the Industrial Revolution through late twentieth century, value was created with efficiency gains, mostly through specialization and repetition. The roles of leadership and innovation were confined to a handful of people, who also benefited disproportionately from the system. The majority of the workforce was limited to dully specialized labor.

As satirized in Charles Chaplin’s “Modern Times” (1936), depicted above, a typical worker would spend most or all of his time doing the same job. Each person would have a defined task, compatible with the education and training received, and would follow orders according to a strict hierarchy. Decisions were made from the top down, by those who controlled information and knowledge.

Nowadays, there is a new game, which is driven by change, not repetition. And everyone wants to be a player.

Information is no longer the privilege of few. Enabling technologies are cheaper and more accessible. Almost anyone, anywhere, has the ability to gather the resources needed to be a changemaker – in their communities, institutions, and country. In this context, the rate of change becomes exponential.

Twenty-first century problems are increasingly being solved by (social) entrepreneurs, who are strategically positioned to come up with the best solutions. People no longer wait passively for others to solve their problems. As the changemaker mantra goes: “everything you change changes everything”, and that’s contagious and unstoppable.

What does this mean for businesses? In such scenario, old structures are doomed. Companies that are not able to adjust will lose relevance and eventually die.

There is no coming back. Institutions must reform and embrace the new world. Leading firms can no longer expect people to work in silos, perform monothematic jobs, take orders at face value, remain detached from the organization’s vision and decision making. Walls must come down.

Teams need to be formed – and dissolved – quickly and seamlessly in order to tackle problems and innovate continuously, under a fluid “team of teams“. This requires embracing a new framework, where every person is offered the resources, networks and tools to become a co-leader in the respective team. Leadership and innovation are no longer the privilege of few, but the responsibility of all.

The EACH framework and the team of teams system reinforce each other and bring the best out of each player.

The new paradigm relies on pro-activeness, empathy and collaboration. Top-down leadership, rigid hierarchies, and aggressive behavior towards others become liabilities. The same values one applies at home, with family and friends, become vital in the work environment. Measures of character and success at work and life are no longer distinguishable. Empathy, teamwork, and leadership become the norm. Those who don’t embrace these values will fall behind.

Make no mistake: changing the way societies think and operate is one of the greatest challenges imaginable.

However, we live in a historical moment. We have the resources to take on this challenge, transforming mindsets and behavior. How exactly? Well, that’s the “seven-billion-people question”. Breaking this code, however, I’m convinced is the key to a more prosperous and peaceful world.

Like Chaplin in the 1930s, Bill Drayton is telling us that there is something fundamentally wrong with our current values and system. And this is no laughing matter.

Andre Averbug is an entrepreneur and economist.

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Greatest Entrepreneurs Adapt to Survive

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Successful entrepreneurs welcome change

There are tons of studies about the key traits that make up a successful entrepreneur. Some of the characteristics attributed to the greatest entrepreneurs are: vision, talent, perseverance, ability to innovate, leadership. However, from my observation, their single most important common characteristic is the ability to adapt. In a clear Darwinian fashion, those who adapt the best, thrive. No entrepreneur has succeeded without going through at least one of three forms of adaptation: adjustment, pivoting and rebirth.

Successful entrepreneurs adjust, pivot and resurrect

The first form of adaptation, and one that most companies go through in one way or another, is business model adjustment. Companies need to constantly evolve and adjust, quickly reacting to customer feedback, market changes, competitors’ moves. Facebook started as a simple “hot or not” website and evolved to the giant social media platform it is today, by exploring new forms of social interactions and testing monetization schemes. Apple tinkered with several consumer electronics before focusing on computers and then expanding to music and other business lines. Google stumbled for many years as an unprofitable search engine, before it figured out how to make money and expand to other (profitable) areas.

The second form is business pivoting, which implies a more radical change in direction. I’ll use the example of one of my companies, Brazil’s PV Inova. We started the business as a BoP (base of the pyramid) model, developing telecommunication technologies for public transportation vehicles, targeting the low-income population. However, because margins were too thin, after a few years, we decided to capitalize on the knowledge acquired dealing with fleets and changed the business completely. We developed a fleet management software to be offered on the cloud to companies that manage large fleets. The company was pivoted, from a hardware telecom business to a scalable SaaS logistics venture. Also, to use a more well-known example, Paypal started as a cryptography company and only later reinvented itself to become an online payment pioneer.  

Finally, the last and most traumatic form of adaptation is rebirth after failure. Most successful entrepreneurs have folded at least one business (sometimes several) before they hit the jackpot. Being able to rise from the ashes is the ultimate adaptation challenge and requires passion, conviction, and courage. Most iconic tycoons have dealt with failure before launching a successful venture. Henry Ford had two unsuccessful car companies before getting it right. Bill Gates failed with Traf-O-Data before launching Microsoft. Even Richard Branson, with all the amazing businesses he launched, went through more failures than successes, including Virgin Cola and Virgin Records, which were never sustainably profitable.

When it comes to launching a startup, there is only one certainty: it will not become a great company if you stick to a rigid plan that was set out in the beginning. If you are doing something minimally innovative, you will have to go through many transformations. The entrepreneur is the chameleon of the business world. 

See also An Idea is Just That. Image: scribblitt.com.

Are you an entrepreneur and pivoted a business or failed? Leave us a comment!

An Idea Is Just That – Not Yet An Innovation

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Innovation and new ideas

I am frequently approached by people who want to share a new business idea with me. Some are actually good, others, well, you know. Usually the pitch is accompanied by a good amount of mystery and secrecy: “Andre, I’m telling you this because I trust you, but don’t tell anyone; this could be big”. So let me summarize what I tell friends who approach me like that.

Turning an idea (hopefully) into an innovation

First, don’t worry too much about secrecy. Your new idea is likely not as much of an innovation as you think, it has probably come up before in one way or another. And even if it is (almost) that great, you will only be able to go somewhere by sharing it with other people who can give you useful feedback and leads. The chances of someone stealing your idea are probably slimmer than you turning it into a business without sharing it with others. Competent people are busy and know how time consuming and risky it is to start something new.

Second, ask yourself what YOU would bring to the table. Are you business savvy? Have the relevant technical skills? Money to invest? An amazing network in the industry? Lots of time to spare (on top of at least a bit of one of the former)? If you answered “yes” to one or more of the questions, then great, you should move forward. Try to find the people and resources needed to complement your skill-set and hit the road. But if the answers are straight “no’s”, I need to say you should probably let go and try to think of another idea.

To illustrate this, once a friend came to me with a pretty good idea for a mobile app. However, he didn’t know a thing about starting a company or building an app, didn’t have money to invest, didn’t know anyone in the industry, and was not willing to invest a good chunk of his time on it. Seriously? Don’t expect that someone will start a company with you just because you had a decent idea, especially because the idea will evolve/change as the business matures. You need to bring something concrete to the table. Ideas are just ideas… We all have tons of them.

See also Not All Angel Investors Are From HeavenImage: shutterstock.com

Have you ever had a business idea? What did you make of it? Leave us a comment!