Dimensions of entrepreneurship

Clarke’s law is, famously, “any sufficiently advanced technology is indistinguishable from magic.” Entrepreneurship is hardly advanced technology, but I think to those who don’t practice it, it can seem as dark an art as sorcery. An enigmatic practice of certain gifted people. When it works, there is something alchemical about it. A way for people to turn ideas into gold.

Researchers into entrepreneurship, and many others beside, have an interest in trying to demystify it and describe it as a process. Because once distilled into a process, entrepreneurship can be analysed, replicated and taught (perhaps even branded and sold). Repeated observation of entrepreneurial ventures has enabled researchers to document that process, but not so thoroughly as to illuminate all its mysteries.

Reading Baron and Shane’s Entrepreneurship: a process perspective has walked me through that process, but also highlighted its limitations. They point out that there is much debate about how much entrepreneurship is methodology and how much is psychology. Is it like a recipe which can be followed by anyone with access to the correct ingredients? Or is it something innate in certain people, more akin to individual talent – something you either have or haven’t got?

Certainly, entrepreneurship is a process which crosses disciplinary boundaries; it is both economic (in that it is about the exploitation of finite resources) and psychological. The stages of an entrepreneurial venture are clear enough to follow like steps in a manual: idea generation, opportunity recognition, resource gathering, decision making and so on. But although you can follow that process as if you’re assembling a model aeroplane, there’s no guarantee it will fly. Because entrepreneurship appears to need a human factor.

The key psychological element of the process is “entrepreneurial cognition,” a term which describes how entrepreneurs’ thought processes differ from non-entrepreneurs. It’s in the description of the elements of entrepreneurial cognition which aid entrepreneurs’ decision making (risk sensitivity, optimism, pattern recognition) that personal abilities and preferences become relevant. The relative importance of process to personal –  of the macro world in which entrepreneurial opportunities exist to the micro world of how people behave entrepreneurially – is still unknown.

I think there’s a similarity here between entrepreneurship and creativity. Both are essentially processes which require an element of individual talent for full success. You could follow a step by step process on how to write a novel, for instance, and it may still be rubbish. Perhaps “creative cognition” exists in a similar way to entrepreneurial cognition.

Below, my graphical representation of the process of entrepreneurship, as divided along two theoretical concepts about its conception and implementation: the micro and the macro. Not a strict retelling of Baron & Shane, but more of a mind map drawn by me in an attempt to capture the various ideas about entrepreneurship as a process. (In particular, the positioning of resource gathering in the process is mine.)

dimensions of entrepreneurship

Baron, R. A. and S. A. Shane (2008). Entrepreneurship: A Process Perspective, Thomson/South-Western.
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Some initial thoughts on entrepreneurship, business, wealth and innovation.

Recently, I’ve been teaching a subject at AFTRS on Entrepreneurial Finance. This has been a useful exercise in exploring ideas about what an entrepreneur is and who identifies as an entrepreneur. Before I outline a few ideas which have sprung from that class, I must thank my seven students who have been willing to be dragged in a new direction, as I moved the subject from being purely accounting based, to include looking at stories of entrepreneurship, to thinking about types of finance available and to pitching for finance.  Their contributions have been insightful and informative.

In this subject, we have talked about entrepreneurship, but we’ve also been lucky enough to talk to four creative industries entrepreneurs about their careers and about what they do. This has resulted in an ongoing discussion about the personal attributes of entrepreneurs, such as risk-taking, passion, vision and perseverance. We have been hearing about the relationships between entrepreneurship and other social constructs, which seem to share the same space, like overlapping segments of a Venn diagram.

So, this post is a quick summary of a few thoughts about the interdependent relationships which entrepreneurship has with business, wealth and innovation. The blog equivalent of scribbled reminders on post-it notes.

Entrepreneurship and business

As part of Entrepreneurial Finance, I interviewed a film producer with a string of prominent feature credits to her name. Parallel to a successful producing career, she has also established, grew and sold a film related company. But when asked if she identified as an entrepreneur, she said no because in her view, to be an entrepreneur, you have to be in business.

The job of a film producer seems to me to be all business. It involves a range of tasks which are inherently entrepreneurial: raising finance, negotiating with talent, striking distribution deals and so on. Yet for my interviewee, this storm of production duties required to get a film made doesn’t feel like being in business. Business is not just busy-ness, but doing and something that looks and feels like a permanent, ongoing profit-making activity.

Are entrepreneurship and running a business essential companions? For me, the answer is no. I see entrepreneurship, and the ability to be entrepreneurial, active in a whole range of fields: in the arts, in not-for-profit organisations, in social enterprise. These are fields which may or may not be “in business.” Fields in which the participants (like this film producer) may not identify as being “in business.”

It seems to me like “entrepreneur” and “business person” are different roles. Like the person who has run a service station for thirty years, you can run a business without being an entrepreneur. Like someone who renovates and sells houses for profit, you can be an entrepreneur but not have a business. But there’s a set of implications about being in business – being self-directed, generating profit, financial risk taking, growing a company over time – which seems to sit comfortably alongside business as complementary ideas. They just seem like they go together, but they can and do exist separately.

(I’m grateful to my supervisor Kate Bowles for finding that term entrepreneur has its origins in 19th century France as “the manager or promoter of a theatre production.” Who’d have thought we’d have the creative industries to thank for the term?)

Entrepreneurship and wealth

Over on Radio National’s Big Ideas program, the Class Act podcast has detailed issues about Australia’s class system – insisting on its existence, detailing its complexity and talking about its effect on people and on. In its second episode, ANU’s Frank Bongiorno talks about the image of Australian entrepreneurs that developed in the 1980s. (Relevant section starts at 19 min 26 sec)

Australia became more unequal in the 1980s. Indeed, it was becoming more unequal from the 1970s, with the end of the long post war boom. And many of the long standing economic opportunities that existed within Australia, within industry and manufacturing, within the farm sector were closing off. During the 1980s, as Australia de-industrialised, as farm incomes and the farm economy came under increasing pressure, unemployment was very high, persistently high, much higher than today right through to the 1980s. Home ownership was declining and so, in many ways, that old image of Australia as a workers’ paradise or a working man’s paradise which goes right back to the 19th century… seems to be belied by the ways Australia was being transformed in the 1980s.

And so, you have the emergence of the figure of the entrepreneur, a term which was used in a non-pejorative way for most of the 1980s and then became more pejorative with the corporate collapses of the late 80s/early 90s and the recession. But you had this image really of the entrepreneur as a kind of public benefactor a public hero. Figures such as Alan Bond, for instance, or Robert Holmes à Court, Christopher Skase and they were held up as people to be emulated. The great irony of this, of course, is that it was a period of Labor government and, in many ways, the Hawke government and Paul Keating as treasurer held up these entrepreneurs as models to be emulated. They were new money as distinct from old money. They had a bit of “get up and go” about them. And, in many ways, a different kind of mass in popular culture where such figures, for the first time really in Australian history, I think, are being held up as real heroes. Their conspicuous consumption, their lavish lifestyles, were seen as admirable, because somehow or other we were able to share in them.

It is interesting to consider how our image of the entrepreneur in early 21st century Australia has changed since the time Bongiorno describes. Certainly, I think they are still held up as figures for emulation. We still think they have that bit of “get up and go” and that’s to be admired. But I think the connection to ostentatious displays of wealth is not so strong. The pervading image of an entrepreneur is much more likely to be of startup owners, app developers and hipsters in incubators. Their values seem to be presented as hard work, self-direction and innovation. Their wealth is mostly invisible and mostly presented, I’d suggest, as existing only as a future possibility.

We seem to have extended the definition of entrepreneur beyond the stratified giants of the AFR Rich List. But we’ve retained the idea of heroism and of an entrepreneur’s story being the highs, lows and ultimate triumph of the classic hero’s narrative.

One further thought: linking entrepreneurship and the drive to grow personal wealth is a challenge to the use of the term in the creative industries, where many activities are pursued without the desire to create wealth (in some cases, without the potential to create wealth). As noted previously, there’s a profit/not-for-profit divide within the creative industries and personal wealth creation sits on one side of it. Further, in the field of social entrepreneurship, I suspect it is absent entirely. It’s another example of how the concepts of wealth and entrepreneurship are drifting further apart from each other, through our wider definition of who an entrepreneur is.

Entrepreneurship and innovation

An ongoing conversation in Entrepreneurial Finance was around the role of innovation in entrepreneurship. One of my students, Daniel Punton, works in the startup space and saw innovation as fundamental; to be an entrepreneur, you must be creating something new. My discussion with Daniel and the rest of the class followed the stories told by our guest speakers, but also sprang from this definition of entrepreneurship from Howard Stephenson of Harvard Business School: “entrepreneurship is the pursuit of opportunity beyond resources controlled.” This definition, which doesn’t mention innovation, business or wealth, allows a wide range of activities to be classified as entrepreneurship.

But here’s another definition from Scott Shane and S. Venkataraman: “Entrepreneurship, as a field of business, seeks to understand how opportunities to create something new (e.g., new products or services, new markets, new production processes or raw materials, new ways of organizing existing technologies) arise and are discovered or created by specific individuals, who then use various means to exploit or develop them, thus producing a wide range of effects.” It mentions the word new five times, so they must really mean it.

For these researchers, newness can be explored in lots of different ways (it need not, for example, be a new product) but it is essential to entrepreneurship as a process. But how new is new? To take our aforementioned service station owner as an example, his business is not, a new idea. But the personal challenge of starting a business, the need to raise resources and to execute a strategy, may be a new opportunity for him/her. And if a service station in a new (geographic) market, for instance, could fit within Shane and Venkataraman’s definition, and certainly within Stephenson’s.

If we’re looking for a set formula for entrepreneurship, I don’t think we’ll find one. And, to speculate for a moment, the lack of a clear-cut definition seems to allow personal bias to influence perceptions of what entrepreneurship is. Viewed in this way, the extent to which any one aspect of entrepreneurship (newness, risk-taking, profit-making) is seen as essential, would be subjective, depending on each individual’s personal values. You might think of innovation as being essential to entrepreneurship, if you value innovation highly, and so forth. This allows Stephenson, Shane, Venkataraman and Punton to all be correct – but signals (another) a difficult definitional journey ahead.

Australian Broadcasting Corporation (2018). Part 2: How we got here. [podcast] Class Act. Available at: http://www.abc.net.au/radionational/projects/class-act/ [Accessed 20 May 2018].
Baron, R. and S. Shane (2007). Entrepreneurship: A Process Perspective, Cengage Learning.
Eisenmann, T. (2013). Entrepreneurship: A Working Definition, HBR.org, available at: https://hbr.org/2013/01/what-is-entrepreneurship [Accessed 20 May 2018].
Shane, S., & Venkataraman, S. (2000). The Promise of Entrepreneurship as a Field of Research. The Academy of Management Review, 25(1), 217-226. Retrieved from http://www.jstor.org/stable/259271

 

What made the creative industries different then, may not be so potent now.

Management consultants tend to come in two types; generalists and industry specialists. I’m the second type. If I was of the first type, I might tell you (as many have told me) that all businesses are essentially the same – you can consult as effectively to a chair maker as you would to an international arms dealer, because all businesses boil down to the creation of profit via a production process of some kind.

I have always maintained that creative industries businesses are different (well, I would, wouldn’t I? I’m an industry specialist). My point is that a creative work constructs value in a very different way. The profit generated by a chair can be traced through the cumulative addition of each of its components, up to completion when it can be sold for an amount which covers the cost of its production and then some. The profit created by, say, a hit song, is a dependent on a far more complicated formula, with many more unpredictable variables.

Richard E. Caves’ (dauntingly brainy but still pleasingly readable) book Creative Industries: Contracts between Art & Commerce starts with tackling this issue of what makes the creative industries different from all the other industries. He takes an economist’s view of this question, dispassionately considering the sellers and buyers of creative transactions and assuming the perfectly rational decision-making process which underlies economic theory. He lists 7 basic economic properties of creative industries, which, I think, describe the unique combination of complexities which influence the production of creative work.

Caves’ basic economic properties of creative industries

Name of property Summary Detail
Nobody Knows Demand is uncertain. It is almost impossible to tell how a creative product will be valued until it is completed, and by then the costs of producing the good have already been met.
Art for Art’s Sake Creative workers care about their product. Creatives are not indifferent to the traits and features of their work. Instead, they are deeply invested in aspects such as originality, technical prowess, resolution and harmony. In short, artistic achievement.
Motley crew Some creative products require diverse skills. A creative work such as a film requires the cooperation of many different collaborators. But unlike some other collaborative endeavours, a creative work is more than just the sum of the efforts of each part of a production line. It has a “multiplicative production function”, where each input must be present and “do its job – if any commercially valuable output is to result.”
Infinite variety Differentiated products. Creative work can be simultaneously vertically differentiated (a buyer will choose between two similar products on perceived quality) and horizontally differentiated (a buyer will choose between two similar products on personal taste). And the array of choice an artist has in producing a work, and the array of creative products a buyer can choose from, making this variety infinite.
A list/B list Vertically differentiated skills. Creative producers are ranked based on quality, reputation and so on – creating a hierarchy of artists.
Time flies Time is of the essence Maximising profitability of a creative product is dependent on it being finished by a certain date.
Ars longa Durable products and durable rents Creative work can continue to generate revenue after its initial production with no additional inputs, through the exploitation of copyright.

 

I can’t recall seeing these characteristics of the creative economy expressed so clearly. I can add one more:

Name of property Summary Detail
Inspiration knows no timetable How long it will take to come up with a creative concept is unknown. Unlike other industries, where the time taken to produce a good can be accurately predicted, creative concepts can emerge quickly or slowly, and you can’t tell which it will be. This matters because the creative concept is often the component of a creative work which consumers value most and increases profitability – but it’s the part of the process which is the least predictable.

 

Meanwhile, I have been prompted by my tutorial class of Management Consulting students to think about startups and their relationship to entrepreneurship. They have been asking about the threat which start-ups might present to bigger, more established companies, and the predilection of some multi-national corporations to acquiring start-ups. I suspect that this conversation, as with so many on this topic, is actually defining “start-ups” as newly established tech companies. It’s that subset of companies which we, as a society, seem particularly enamoured of.

That particular definition, personified in sneaker wearing, tablet wielding, young tech nerds, successfully raising capital to accelerate their SAAS product’s growth, has become an early 21st century archetype. That archetype is a kind of start-up rock star; the version of an entrepreneur where everything has gone right. I worry that the far more common experience of tech start-ups – the long, lonely slog with no money, no angel investors and time rapidly running out before they need to go get a job – is rarely talked about. If there’s a rerun of the 1990s dot com crash, this time starring exhausted start-ups which never accelerated beyond a brief canter, and with investors looking for their money back – what will this do to our current idolisation of entrepreneurship?

But putting that aside, it struck me that when Caves was writing about his economic properties of creative industries, it was in the immediate shadow of that dot com crash. Caves sought – as I have done – to differentiate the creative industries from the non-creative industries, and in 2000 he could clearly do that.

Would it be so easy now? Because if we consider the new breed of tech industry startups, typically pushing an online software product, across multiple platforms but addressing distinct, almost niche, customer needs… don’t all Caves’ properties apply to them? Is it possible that the distinction between creative industries and non-creative industries (the definition of creative industries, as I’ve been describing it) is actually getting harder over time?

If so, the reason why may be that today’s emerging industries look and feel more like creative industries than traditional industries; that the promising, rock star tech industries which we all have such a crush on, actually operate more like creative industries than anything else. In which case, studying what makes creative industries tick may have much wider future use and significance.

Caves, Richard E. Creative Industries: Contracts between Art & Commerce, Cambridge, Mass.: Harvard University Press, 2000.

The Dimensions of Worth

Everyone loves a good list. Lists of things, if complete, give us a definitive account of the contents of a category. They let us put things into easily understood groups and help us make sense of what those groups are. Colours of the rainbow. Planets in the solar system. Quantifiable and legitimised, tick ‘em off at your pleasure.

Lists also provide great fodder for debates, because who’s to say that a list is truly definitive? It’s not just that everyone loves a list, but that everyone loves the list they love, and loves to contest the lists other people love. Seven colours of the rainbow? What about the myriad hues between those seven colours? There are lots of people still insisting on putting Pluto on their list of planets.

Defining the creative industries seems to me to be a similar debate about what to include on a list. It seems to have started, by nearly all accounts, in 1998, when the UK’s Department of Culture, Media and Sport (those three happy bedfellows) described the creative industries as “those industries which have their origin in individual creativity, skill and talent and which have a potential for wealth and job creation through the generation and exploitation of intellectual property” and provided a handy list of 13 sectors. And it seems people have been arguing about that list ever since.

I’ve written about that debate before and the variations proposed and rejected. It is a crucial debate for policy makers and researchers, as boundaries need to be set in order to effectively map, measure and learn about the creative industries (how can we analyse the solar system if we don’t know where it starts and finishes?). At the same time, it’s a pointless debate for many creative industry practitioners, with no day to day impact on their activities (call it what you like, Pluto is still a big ball of rock and ice orbiting the sun).

Having sampled this debate, I’ve been considering a couple of questions. One, how to add to this discussion, in a way which isn’t simply arguing about other people’s lists. And two, what do we mean by the term ‘industry’ anyway? What is one and how do we recognise it?

This article, by Mukti Khaire, offers an interesting perspective on these questions. In it, she talks about the identification of a new industry, not by its vital statistics (is it in orbit around the sun, does its self-gravity make it a globe, has it cleared its orbit of smaller objects) but by a series of socio-cognitive actions.

An industry is self-defined by a process she calls “distributed sanctification”, whereby a variety of participants in an activity take a series of self-directed actions which legitimise that activity as an industry. It is a gradual and unplanned process, the start and end points of which are undefined. In essence, no-one says, “this is now an industry,” in an ABS sort of way. Instead, people start behaving like they’re in an industry and sooner or later, everyone else agrees with them.

To illustrate this process, she looks at the rise of the high fashion industry in India. This is useful because she can identify a time period (the 1980s) before which there was no such thing and after which there was. She then examines the actions which participants in the formation of the industry took during this time.

As might be expected, the steps taken by designers, clothes makers and sellers are important, but she argues, so are the actions taken by other more tangential players – educational institutions, the media and so on. The cumulative effect of these actions is the accumulation of social currency in the term “high fashion industry” in India. In her own words, she is mapping “the dimensions of worth.”

This process, she says, is difficult but essential for new industries:

These complexities make the construction of worth of new industries particularly difficult. New industries […] lack definition and coherence—that is, clear boundaries and identities, so they are difficult to understand.

Which seems to be to be exactly the problem faced in describing the creative industries. She goes on to say:

In addition, new industries  […] typically lack norms and conventions of evaluation, so it is difficult to determine their worth. However, the construction of the worth of a new industry is particularly important because worth is a prerequisite for cognitive legitimacy, which is a critical resource that pioneering entrepreneurs in new industries lack. A cognitively legitimate industry—one that is accepted “as a taken-for-granted feature of the environment”—is well defined and understood by both industry actors and audiences and broadly accepted as appropriate. Cognitive legitimacy, or taken-for-grantedness is a condition of complete intersubjective agreement and total absence of dissent regarding the right of an entity to exist.

Which again, seems to aptly describe the creative industries – lack of definition, leads to complexity in evaluation, leading to a lack of legitimacy and “taking-for-grantedness” which in turn is an impediment to entrepreneurship.

It’s tempting to describe Khaire’s approach as the opposite of “definition by list making”. But actually, she does provide a list of actions she says participants take which legitimise an industry:

Curation Customers and outside influencers, like education, media and government orgs, identify what’s high and low quality product.
Certification Educational institutions start offering qualifications for entrants into the nascent industry.
Commentary Educational institutions offer instruction on what’s good and bad practice in the industry.
Critique Media publications offer opinion on what’s good and bad practice in the industry.
Co-presentation Various examples of competing product are displayed together enabling…
Comparison Customers to make judgements about the qualities of those products.
Commensuration The growing number of comparisons allows the development of standard measures of quality.

Khaire’s example (high fashion in India) springs from the creative industries, which she says is appropriate because, “the highly symbolic nature of the products makes collectively understood definitions, shared meanings, and broad agreement on norms and rules crucially important…value construction in creative industries is a complex process because of the relative “singularity” of the products, and involves multiple actors and cognitive processes.”

No argument there. But while her criteria can be applied consistently to fashion, I suspect they could not be as easily applied to the creative industries, as defined as a collection of creative sectors, of which fashion is only one. I think all of her 7 Cs listed above create the “worth” she describes, but only within each creative sub-sector. We can’t measure a fashion designer by the same yardstick as a musician or an architect and so on.

This is leading me to the conclusion that whatever the “creative industries” is, it is not an industry in and of itself – at least not yet. It might be more helpful to see it as a selection of like industries, and that selection as being influenced by a variety of social and political pressures on the entity defining the term.

What makes them “like” is something we can’t quite grasp. Something alchemical, the transformation of imagination into IP. But just because a beautifully designed gown springs from the same creative well as a symphony or a grand old building, doesn’t necessarily mean they together form a cohesive creative industry. Pluto’s a really different place to Jupiter.

Khaire, M. (2014). Fashioning an Industry: Socio-cognitive Processes in the Construction of Worth of a New Industry. Organization Studies, 35(1), 41-74. Available at http://journals.sagepub.com.ezproxy.uow.edu.au/doi/full/10.1177/0170840613502766

What I learned from 100 Uber rides

About 18 months ago, my boss issued an instruction to all staff: for regular travel to client meetings, work functions and so forth, he wanted us to use Uber-X. His reason was simple; it’s cheaper than using taxis.

The biggest taxi user in the office is me; my job requires me to shuttle around Sydney to meet clients on a daily basis. I hadn’t tried Uber before, but I was happy to comply. And I quickly became oddly fixated on it. Yes, it was saving us a few bob. And yes, it was a novelty. But it also gave me a new mini hobby: talking to Uber drivers.

I made a decision before that first Uber ride, that I would talk to every driver who picked me up. I have now taken about 100 Uber rides in the last year and a half. I have only broken my “talk to every driver rule” twice. Once when a driver and his car smelt so terribly that the olfactory assault of it all shocked me into stunned silence. And once more when a driver’s inability to follow his own GPS system, made him take a wrong turn, and head to the other end of the Harbour Bridge from where my meeting was at, making me embarrassingly late and leaving us sitting in awkward silence with each other.

I had no strong reason for wanting to talk to Uber drivers, other than to discover what (ahem) drove them to take it up in first place. Was there also part of me which wanted to democratise the whole process? Did I not want to feel like I was participating in a sort of 21st century servitude? I don’t know. But I can report back on what I’ve found after slightly fewer than 100 conversations with Uber drivers.

I always start off by asking how long they’ve been an Uber driver. There is a genuinely wide response here, but I think within that range there are two clusters; people who have been doing it for less than 3 months and people who have been doing it for over 2 years. The newbies and the veterans. Interestingly, the veterans aren’t necessarily jaded and the newbies aren’t necessarily in love with it all. Why there’s not as many people in the middle of the range, I don’t know.

But nearly all of them are men. In 18 months I’ve had two female Uber drivers. One, a cheery middle aged woman in an SUV who had started driving that day (“you’re my third passenger!” she beamed) and one rock chick with purple hair and a silver floor matted hoon mobile. She advised me to correct my pick up address if the app had got it wrong, which it frequently does. This was after she gently scolded me for not being where the pin said I was.

She gave an interesting response to another question I often ask, about whether or not it’s a lucrative exercise for them. Her system, she told me, was to drive each day for as long as it took her to meet her self-imposed sales target. Then she went home. Having such as system is rare amongst my informal sample. But the general consensus on it being a money making exercise seems to be that to make good money, you have to drive a lot of hours, capitalise on the surge pricing and drive on Friday and Saturday nights, thus running the risk of drunken revellers vomiting in your mobile workplace.

When asked what they like about Uber driving, there’s one thing I heard over and over again: flexibility. Flexibility is something I take for granted in my working life. Whether it be through understanding employers or a blundering habit of mine to do my own thing without asking, it’s something I’ve always felt I had and naively, I get slightly confused when I hear others longing for flexibility around hours worked, time off and so on. But time and again I’ve heard Uber drivers nominate that as it’s number one benefit. I work when I like. I’m my own boss.

If I’m being judgemental, some of these blokes (as they almost overwhelmingly are) don’t seem like the sorts who would be happy working for a boss anyway. There’s a notable subset of people who quit their last job because, “the boss was an idiot” or something similar. There’s a definite streak of anti-authoritarianism. Many are between jobs; the one who sold his café and looks for a site for his next business as he drives around, the 63 year old laid off last year who’s doing this while waiting for job interviews and – worryingly – the management consultant who takes it up during the inevitably quiet months of December and January. The film producer, waiting for his project to be financed (turned out we once both worked on a location shoot for Home & Away which resulted in Chris Hemsworth being pushed over a cliff in a car).

Others have something else on the go. They’ve got a business on the side, there’s a project they’re working on, they work another job at night. Entrepreneurship can do with some regular income coming in. Some have grander plans; like the one who plans to use Uber to fund the purchase of a second car, which he’ll then lease out to other Uber drivers to raise money for a third car, and so on until he has a fleet of five and he’s given up driving, and living of the lease income.

Many are students; the engineering student who wants to work on cars, but can’t see the prospect of any jobs in Australia, the communications student selling health food parcels as well (“here, take my card”), the Iranian migrant earning money to complete his course in aviation.

Some gripe about Uber, but not many. Some gripe about riders, but not many. Some talk of the inevitable conflict with taxi drivers, of being abused as allegedly happened to one in Wollongong this week. Many are taxi drivers who having failed to beat ‘em, have joined ‘em. (These are the least talkative but the strongest on navigation, the perennial weak spot of Uber drivers, despite GPS assistance.)

And all the time, I’m thinking about the good and bad of all this. The freedom and flexibility of it, versus the lack of workplace conditions, seemingly left behind without a thought. In this post, futurist Sam Sammartino says we should all be giving up our fixation with jobs anyway, thinking about how we can use our own assets and skills to generate the revenue we need and want, taking charge of our own destiny. I think that’s hugely problematic, but his call is part of ongoing national crush on entrepreneurship. Through this lens, being an Uber driver is the opposite of servitude; it’s picking yourself up by the bootstraps and having a flamin’ go.

I wouldn’t discount this view out altogether, but it neglects that at the end of all of this homespun entrepreneurialism, there’s a multinational corporation taking 25% of every drive, not paying for leave or insurance and waiting to replace the whole system with driverless cars. Can something be entrepreneurial on a personal level for its participants, while being an exploitative business with lowly paid suppliers at heart?

My one-hundredth Uber ride was to Melbourne airport with a man from Pakistan, and if he felt exploited, he didn’t show it through his cheery demeanour. I asked all my questions and got my standard responses. Then the subject turned to Australia and he said he had come here by boat. From Pakistan to Malaysia to Indonesia to Christmas Island. From there to months in a detention centre in Weipa. And finally on to Melbourne where no job awaited, but where he could drive an Uber and work on his citizenship application. Enterprise. Entrepreneurship. Courage. Tenacity.

“Thing is,” he says, “when Chinese people get out at the airport. They don’t know how to call a cab. But they can work Uber. Uber is everywhere.” He’s got that right.

Decisions, visions, brain functions and storytelling

Recently, I’ve become interested in decision making. My job is frequently about helping people make decisions which impact their businesses and their lives. It’s also about selling services, which requires some clue about how and why people make purchasing decisions. And these professional interests in decision making, and underscored by the constant stream of decisions contemplated every day, both large and small. What shirt will I wear? What car should I buy? Where should my kids go to school?

With all this bouncing around my prefrontal cortex, I’ve found much insight in Jonah Lehrer’s book How We Decide. It’s about what happens in our brains when we’re making decisions, the roles played by rationality and instinct. It’s also about which parts of our brains are used when making these decisions. As you’d expect for a popular science book, narrative accounts play an important role in bringing the various examples of decision making to life. When you’re kicking around terms like ‘stochasticity’, ‘posterior cingulate’ and ‘dopamine receptors’, it helps if you can relate it to stories about football matches and Deal or no Deal.

There’s a couple of stories about mid-flight incidents on board passenger jets, a topic which can always be relied upon to raise the heart rate. One is about a United Airlines flight from Denver to Chicago, which was interrupted by an internal explosion which took out all the hydraulics, leaving the pilots without the ability to steer the plan. The story is about decision making under pressure, and the ability to invent a tactic for landing the plane on the run.

“…[the pilot] needed to solve his problem, to invent a completely new method of flight control. This is where the prefrontal cortex really demonstrates its unique strengths. It’s the only brain region able to take an abstract principle – in this case, the physics of engine thrust – and apply it in an unfamiliar context to come up with an entirely original solution. It’s what allowed [the Pilot] to logically analyse the situation, to imagine his engines straightening [the plane’s] steep bank.”

This last phrase, about imagining an end result and creating a process to achieve that result, caught my eye. This is, I think, what many creatives do. They imagine the end result and corral the resources (time, capital, labour etc) to bring about that vision. Some will be able to design prototypes to communicate that vision to others in the production process; a fashion designer will do so through sketches and patterns. Others will have to do so without visual tools; a screenwriter has to imagine what a film will look like and sell that vision to others, long before a frame is shot.

Entrepreneurs do this too. They have to imagine a version of their business which fulfils what they want from it: money, lifestyle or whatever it is that sparks their motivation for being in business. They have to imagine the end result and ‘see’ it long before others can. Then they invent a way to achieve it. And ‘invent’ is really the right word because although they can follow the steps others have taken in the past, each business’s journey is unique, with its own ups and downs.

The Pilot’s story is about the suppression of emotion (in this case, panic) to focus on rationality.( It’s not always like this though; the book also highlights decision making which is enhanced by instinct and emotion). But it’s also about the ability to screen out all unnecessary information in order to concentrate on the crucial data. For example, the Pilot had no time to focus on the hydraulics – they were gone and never coming back. He had to focus on the elements he could control – in this case engine speed –and block out the rest.

Again, there’s something in this for entrepreneurs. I met this week with a fellow who runs a creative industries business and he told me that his company now focuses less on small, labour intensive jobs and more on larger scale jobs for corporate clients, on which he can spread his resources more evenly. Such is the dream of many a small business owner, so I asked him how he achieved it.

He didn’t really know how; there had been no deliberate strategy, other than to adopt a vision for his company which involved work with large corporate clients. He was inspired to do so by a presentation by a Hindu priest he met at a bank’s innovation conference (I know, right?). The priest talked about balancing a peacock feather on your finger. If you look at your finger, apparently it’s really hard to balance the feather. But look at the top of the feather, and it’s much easier. (Peacocks are hard to come by at my place, so I have yet to try this for myself.)

Choose the metaphor you like – looking at the top of the feather, forgetting about the plane’s hydraulics – the point is that focus on an end goal and screening out distractions count for something. And that there’s nothing like telling a good story to illustrate abstract concepts.

PS. Talking of good stories..While adding some links to this article, I discovered that How We Decide has been withdrawn from sale by its publisher. The story’s here.

Ref: Lehreh, J. 2009, How We Decide. Houghton Mifflin Harcourt, New York.

 

Entrepreneurship: led by data, design or instinct

This blog has been on pause for a bit while I’ve been attending to various other bits and pieces. But throughout that time, I’ve been savouring a book called Streaming, sharing, stealing by Michael D Smith and Rahul Telang. (As recommended to me by Tony Shannon, who can be found on Twitter here. He likes likes and retweets.) Smith and Telang outline a number of examples of creative industries (defined for their purposes as consisting of music, film and publishing) businesses which have responded successfully to technological disruption. They did so while others floundered, they argue, because they effectively harnessed data about customers to predict what they wanted to listen to/watch/read and how they wanted to access it.

An example like the failure of the Encyclopaedia Brittanica to move to a digital format fast enough, and therefore allow Encarta and later Wikipedia to neutralise its business model, is a familiar cautionary tale against stubborn refusal to innovate. More interesting are the examples of companies which adopted strategies which seemed counter-intuitive because they went against long standing industry practice, but were successful because they tapped into customer data their competitors either didn’t have or were ignoring.

The example of Netflix’s commissioning of House of Cards is one of the book’s killer examples. Using data gained from the viewing habits of its subscribers, Netflix knew that its customers liked Kevin Spacey, David Fincher and movies with strong female leads. Their confidence in this data led them to commission two series of House of Cards without a pilot, a strategy its competitor networks would have considered prohibitively risky. The existing system of selecting pilots, tryouts in sweeps, executive interference and eventual progress through to series was slow, but safe. Except for Netflix, the risk of failure had been negated by having reliable customer data. No experimentation involved; they already knew their audience would lap up House of Cards. And they did.

Smith and Telang’s argument, that those disrupting the creative industries are really collecting and mining customer data smartly, seems to me to have something in common with the design thinking movement (which started at IDEO, and who knows where it will end). The design thinking credo is that by observing the way customers use products, unique insights can be gained which can then be used by designers to create new features, or whole new products. These products will then have a competitive advantage in the market place. (The most practical example I’ve found of this in action is the development of the “croc jaw” catcher on the  Rover Challenger Mower.)

So whether a company is using data about customers buying habits, or conducting qualitative research into how products are used, the end result is products better suited to the needs of the customer.

How does this matter to creative industry entrepreneurs? After all, most people starting up a business will have no access to the resources of Netflix or Apple or whichever corporate behemoth is capturing information about you as you read this. Collecting and analysing such data is likely beyond them. As is having a team of design thinking poring over their work.

This has never stopped entrepreneurs succeeding without the competitive advantages gained through data mining, design thinking or any other process. A small set of entrepreneurs will succeed based on gut feel alone. How does this process work? Is it some innate ability to know your target customer well enough and correctly predict what sort of services they need? In short, do successful entrepreneurs do what Netflix does without realising?

This week, I was asked to think about arts organisations and how they might be supported to generate new sources of revenue. It’s a familiar old chestnut, but the House of Cards example led me to wonder about the role on in-depth customer data collection in prompting initiatives which might generate these new income streams. If we could suddenly grant arts orgs the sort of data Netflix had about their consumption of all sorts of media, would they allow that to shape their creative decisions? Or would they resent being forced to create content to a target market’s demand.

Another potential less controversial route would be to identifying the skills inherent in those entrepreneurs who seem to instinctively know what an audience/customer base wants. And/or identifying the processes they go through in identifying various business opportunities and evaluating their chances of success.

These practices are not usually taught in creative industries vocational courses. But if creative industries practitioners could learn them, perhaps it would go someway to reducing the perceived risk involved in a new venture (without the need for customer analytics or end-user observation) and provide the confidence needed to turn a new idea into money in the bank.

Ref: Smith, M D and Telang, R. 2016, Streaming, sharing, stealing. MIT press, Cambridge, MA.