Entrepreneurship tends to be quite tricky. I think they call it the ‘valley of death’, the first five years of running a business, meaning that is the time when most businesses fail. These failing businesses have been unable to create a stable customer base, to gain the trust of potential clients, and at some point the entrepreneur becomes tired of trying.
Classical economics based analysis of this would explain this by the inability to compete against the incumbents, whether by way of product or price. In other words, either the product was not as good as that of competitors’, or the prices were not low enough, where the supply meets the demand. A side effect of this view that emphasizes superiority of product quality is the assumption of heroism in entrepreneurship – that the successful entrepreneurs that we know, e.g. Steve Jobs, Richard Branson, Anita Roddick and Henry Ford, are superhuman individuals and who somehow were able to accomplish things and win with their incomparable, heroic effort.
Another interpretation from economic sociology would see this differently. The basic assertion of economic sociology is that economic activity is embedded in social relations, meaning that the outcomes in an economic field (i.e. in an industry) are largely depended on its social arrangements. This view relates to the ‘social construction’ -perspectives in sociology, most famously by Berger and Luckmann (1966), where it is recognised that social interaction largely defines and determines how social arrangements turn out. An example, perhaps rather extreme but nevertheless, is mafia: how do you get your idea through within mafia? It is not the best idea, product or even a price that is necessarily the chosen one, but rather the one that has the support of the boss – and any of the challengers to the boss will have to gather enough support among the top echelon to take over. Battles over standards in industries have similar characteristics in that winning is about gathering political support – Neil Fligstein titled one of his papers ‘Markets as Politics’ (1996) to point out this. As I have pointed out in an earlier blog (Innovation – Stop Talking about Ideas), Andrew Hargadon (of UC Davis) calls this ‘the building of permanent networks of relationships between people and products’.
Further work in this area has taken these ideas further and produced a view called ‘system building’: what entrepreneurs do is they establish relations with suppliers, regulators, customers and even competitors that support their products and service arrangements. Thomas Hughes (1983) wrote about system building already in the 1980’s in his analysis of how the railroad systems were built in Europe and the US. But the four entrepreneurs that I mentioned above have similarly been forced to build systems to support their own business offering: they have needed to convince other organisations, such as suppliers of various sorts and related service providers, to go along and to adapt to system builder’s offering. For Steve Jobs it has meant having to create a sub-system for selling apps to phones and to find people to provide those apps, as well as to make arrangements with the likes of Universal Music to provide extensive music library in the iTunes. For Henry Ford is has meant even more extraordinary efforts, since he was bringing automobiles for the masses at a time when there was practically no infrastructure in terms of car mechanics, petrol stations, electricity provision to power the car factories, production of rubber tires in large quantities, etc.
This point about system building is well explained in a TEDxOxbridge talk by Marc Ventresca, an organisation and management scholar at Oxford, whom I have had the privilege to work with. I finish this comment with a very nice video on a presentation of his, on the subject of system building and entrepreneurship:
Berger, P. L. and T. Luckmann (1966), The Social Construction of Reality: A Treatise in the Sociology of Knowledge, Garden City, NY: Anchor Books.
Fligstein, Neil (1996), “Markets as politics: a political-cultural approach to market institutions“, American Sociological Review, Vol. 61 (August: 656-673). 1996.
Hughes, Thomas (1983), Networks of Power: Electrification in Western Society, 1880-1930. Baltimore: Johns Hopkins University Press.
I return to my earlier point in these blog postings about how innovation is much more about doing than the idea. On the Weekend FT (Financial Times, 3-4.9.2011, Life and Arts section, p.8) there is an article about an alternative to the TED lectures. The Do Lectures, taking place in a forest in Wales, tend to be smaller gatherings than the better known TED lectures where the focus of presenters’ talk is apparently about doing and accomplishing, as opposed to great ideas as in the TED lectures. Among the topics the article mentions for this year’s talks are, perhaps unsurprisingly, micro-lending and alternative energy, these very trendy social enterpreneurship subjects.
My initial attention was caught by the action oriented focus – as I said before in the first blog posting, there is no shortage of ideas, but we should put more effort into thinking about and discussing how to build those networks of relationships with people and things that make these things take their place in our daily lives. Yet, the journalist in question has interpreted these lectures to be another way of passing along or exchanging good ideas. According to the article text, the stories of these lectures are supposed to inspire the listeners ‘to go and do amazing things too’. Of course it could be that drawing any deeper underlying insights from these stories and other cases will still in future need to be left to academics, who are supposed to do that for living. But certainly it does not require a PhD to think about patterns and recurring themes in cases like these, mere common sense will get you far already. What better raison d’etre there could be for a program like the Do Lectures, where one would expect it to be the next step.
This might be a somewhat small point, but a point nevertheless: there is a parallel between change in politics and change in business. Recent events in political changes offer a glimpse to general dynamics of change. In more ‘normal’ conditions it is perhaps unsurprising that change requires longitudinal effort. One of the most extraordinary analysts of international politics, Noam Chomsky, recounts in one of his latest interview audiobooks how the large and transformative social movements, like the women’s rights movement, the civil rights movement or opposition to the Vietnam War, tend to take years and years of persistent activism and work in order to achieve change (Chomsky and Barsamian, What We Say Goes, 2010). These changes, at least the first two, were successful in bringing about change, but it did not happen quickly, because change tends not to.
The Arab Spring of 2010-11 offers evidence for change effort in different conditions, i.e. conditions of revolutionary action, which is trying to bring about a specific type of change in a shortest possible time – but even there change is slow. A series of events has brought about quick changes at the apex of the political systems in Tunisia and Egypt, but from the perspective of lasting change, post-revolutionary unrest in these two countries (Financial Times, July 30, page 4), suggests that much remains to be resolved. The conclusion is that quick combat victories tend to be just the beginning, and that lasting change is a complicated, time-consuming affair.
In the field of management and organisation sciences these processes have been studied, i.e. how changes that embed e.g. new technology, along with new practices, organisational relationships and thinking, become stable part of existing social systems. To begin with, there is a popular tendency to approach new innovations through iconic personalities or companies. A good example is the most recent one, where the ‘smartphone-revolution’ is by and large seen as the work of Steve Jobs and Apple. This approach is problematic in many ways, but for one thing it is analytically unhelpful as it does not tell us much about where the next great transformation will come from – unless we can recognise genius in advance in some ways. What can be more helpful is to consider such transformations through a different kind of imagery which takes into account all that is needed for these changes to happen. This is a view from economic sociology that puts all the economic activity into its social context and recognises the importance of all social contacts and activities. When analysed this way, change efforts start looking different from the heroic accounts: change takes time, it is incremental, and it requires effort from a diverse set of actors, involves politics between actors, tends to be dependent on and built on existing systems, but eventually have a more solid foundation as a result of these features. This view would then recognise the long-term efforts of Apple internally in developing thinking, organisational practices and technology but especially externally, as relationships in related industries (e.g. Universal in music industry, Disney in entertainment, Qualcomm in chip manufacturing) by which an iPod and its offering (i.e. the device, the iTunes store and all content there) becomes a package that is stable, lasting part of our lives.
In their critical analysis of innovation as a change project Lucy Suchman and Libby Bishop put this same message this way:
‘The premium placed on discrete, discontinuous change events, and the generally negative value attributed to processes of ‘incremental’ change are part of a form of wishful thinking that aims to bring about desired transformations without the associated costs in time and human effort.’ (Suchman and Bishop, 2000)
Consequently, in order to understand change, whether in politics or in business, we ought to track the underlying micro-changes that are accomplished by a variety of actors, through putting in place permanent or emerging structural elements or add-ons to extisting structures. This is by no means an easy and uncomplicated task, but the efforts take time and therefore do not require us to be hasty in our analysis. The usefulness of this argument here relates to a question on the general feature of change: Is all change slow? At least in politics and business it is.
PS. Suchman and Bishop’s actual point is, however, less about the question of incremental vs. radical in innovation but more about innovation as automatically positive. Quite interestingly, Suchman and Bishop suggest at the end of their article that it is in fact resistance to change that may be the source of long-term and lasting innovation: Along their thinking, change has become another keyword covering the maintenance of the established distributions of ‘symbolic and material rewards’. Thus resistance to the underlying premises of change, i.e. of making cosmetic rearrangements while keeping the basic conditions and distributions in the social system the same, may be the beginning of a transformation in those premises. Interesting point, although, unfortunately they end their article before they elaborate much further on the point of what is the theory of change of this resistance.
SUCHMAN, LUCY & BISHOP, LIBBY. “Problematising ‘Innovation’ as a Critical Project.” Technology Analysis & Strategic Management 12.3 (2000)
Saleh, Heba. “Islamist show of force deepens rift in Egyptian revolution.”
Financial Times (London) 30 July 2011: 4.
Chomsky, Noam and Barsamian, David. “What we say goes: Conversations on U.S. power in a changing world.” New York: Metropolitan Books, 2007
I came across an interesting news piece the other day. It discussed Tesco’s, the British supermarket chain’s, attempts to gain ground in the South Korean market, where it has been number 2 behind the local incumbent, E-Mart. They did not want to necessarily increase the number of shops, and thus were considering alternative (or some might say ‘more innovative’) ways by which to increase sales. They did a market study, and found that people thought the grocery shopping experience in Korea is bit of a mess, probably not unlike in many other crowded cities and countries.
Their solution has two key features that hightlight what innovations are about. First, innovation is about the recombination of things. They combined a few things: waiting for subway/metro/underground and shopping – they put on the walls displays of products, just as they are displayed in the physical shop. Thus, people can shop as they wait for an underground train. Mobile technology and online shopping – one chooses the products from the pictures by using the QR-code technology, i.e. by which the user takes a mobile video shot of (i.e. scans) the code, the product is put in their online shopping basket and delivered eventually at home later that day. Instead of going on a website to browse through products, merely seeing them and pointing at them one can choose products, and still have them delivered at home in the more (internet-age) traditional way.
Secondly, innovation is critically dependent on existing structures. One of the key issues for Tesco in this project was to make the shopping experience appear as similar to the old fashioned shopping at stores as possible, and where possible. The displays of products thus appear very much like in an actual shop, making it in some ways seem like nothing much has changed. This point has been discussed in academic literature (e.g. Hargadon and Douglas, 2001, on Edison and the introduction of electric lighting), but tends to be overlooked in much innovation related work on a more practical level.
Tesco says in its video that this operation was a great success, with online shopping figures skyrocketing. Interesting case in itself, but the more analytically helpful insights here are what is highlighted here nicely: that a new innovation, whether here the whole concept, the use of the QR-code, or the location where this new practice primarily takes place, needs to connect to other technologies, practices and meanings, and that those are almost always the existing ones, not all brand new. Therefore, any innovation is bound to be heavily anchored in today’s ways of life, and should not be thought of as something in the future.
You can see the video from the link below, or look on youtube for Tesco: Homeplus subway virtual store.
The most recent discussion in my current research project, on how a new technological innovation (here mobile technology) begins to take shape in a highly structured and established area of societal activity (here health care), raised one particularly interesting insight. The person I was discussing with, an experienced commercial manager of a software manufacturer for specialist hospital IT, noted that while the tablet computer and the mobile phone both are, for them, referred to as ‘mobile technology’, these two in fact have a significantly different dynamic. The simple, practical observation has been that e.g. patient information on a tablet computer tends to be shared by a care team, i.e. viewed by more than one, whereas information coming to a mobile phone will be viewed only by one person. Difference in size, unsurprisingly, appears to be the factor causing this variation in usage. But this has had implications on software application design, i.e. what kind of information will be put on the device and how it will be displayed, as a result of the different use. Information that a care team can use can be made more prominent for tablets, while information for a single care professional’s use can be tailored more for mobile phones. Furthermore, the larger size of tablets means they are easier for typing in data while mobile phones are less so has had implications in interface design: instead of asking for data input by typing, mobile phone applications for care professional use tend to operate with graphics, i.e. providing options to merely click on a touch screen.
The person I was discussing with saw a phenomenon of some significance here. While tablets represent only a minor change to an earlier use of desktop computers, where information is typed in and it may be viewed by a team of care professionals at a time, mobile phones represent a paradigm shift – graphic icons being the ‘language’ or means of transfer for exchange of information and only personalised use. If we consider personal use of information technology this might not be a radical change, as personal messaging and media consumption has by definition tended to be individual anyway, regardless of the device. But in formal, professional organisations, group use of technological devices has implied corresponding design choices. For now, let the above hospital care unit serve as an example of such a situation.
This sprinkles light on also on the subject of sociomateriality (e.g. Orlikowski, 2010), in that administrative/organisational systems tend to be dependent on both social as well as technical organising – they depend on how do we agree in our social group on how to operate and what is the process of a certain activity, but also what constraints and possibilities the technical devices afford us. This instance of the influence of the two is interesting, as the last few decades in organisational science, since the Berger and Luckman (1966) thesis of the social construction of reality, has focused on the social.
An afterthought: would this also hint at a larger move away from texting in mobile phones – let’s be honest, whether QWERTY keyboard or touch screen, texting with adult’s fingers is not that easy, at least not as easy as clicking icons?
For some time already I have been struck by how thin most (popular press as well as casual) discussions regarding innovating and innovations are. This showed particularly clearly at the Healthcare Innovation Expo in London in March 2011, where I was involved in the Innovation Hub experiment – a UK Cabinet Office attempt to promote grassroots engagement in innovations and entrepreneurship. The simple idea was to provide a wall on which passers-by in this health care exhibition could propose new, especially digital, solutions to health care related challenges. These would then be nurtured by the network developing online and offline. The Cabinet Office itself does not promise any money nor official status for these ideas, but rather wishes to give a helping hand in the generation of ideas, hoping that entrepreneurial people and organisations will take the ideas into production.
Plenty of ideas were generated and placed on the wall on Post-it notes. And here lies the general problem: innovations are seen as good ideas. One, thought not the main, shortcoming with this view is that so often good ideas do not go much further than the wall, or wherever else they have been voiced or published. More importantly, this view of innovations relates to the Schumpeterian theory of winning, more formally labelled as ‘innovation economics’: new innovations overtake older ones just by grace of being better, whether technically or otherwise. Yet, there is plenty of evidence that this view is simplistic, does not explain change, and thus is analytically unhelpful. One of the classic cases cited in organisation and management literature is the case of video cassette technologies where the technically inferior VHS format won the race over the superior Beta format.
Now, it is widely recognised in organisational science that innovation is invention plus impact. While the above approach may still fit within this definition of innovation, a more compelling view of how innovations become adopted comes from economic sociology. It argues that all economic activity, and here resource allocation decisions (as economists would put it), is heavily embedded in social relations, as argued e.g. by Mark Granovetter of Stanford already in the 1980’s. As a result, whether an innovation will become adopted, in one organisation or large scale in society, tends to depend on how it relates to existing social, but also organisational and administrative, structures. Organisational and administrative as well, because the world has been organised largely by formal organisations (about this thesis, more in another blog post), and therefore adoption tends to be decided in formal organisations. Andrew Hargadon of UC Davis, in his recent visit to Oxford, put it well: Innovation work is about building permanent networks of relationships. It is by building these network relations that an organisation may bring an innovation into practical use (impact). On the ground this will mean negotiating with customer, supplier, regulatory, and even competitor organisations the implementation, and possible adaptation of existing systems. Just think of how much negotiating with various public and private organisations would the implementation of electric automobiles require: in order to arrange e.g. recharging facilities at petrol stations, new parts to and rearrangement of parts within automobiles, new assembly lines for building automobiles, possibly new logic for city planning (that caters to the shorter driving distances of electric cars), and different taxation treatment from petrol cars, just to mention a few issues. Therefore, the impact part of innovations requires careful thought, beyond merely the shiny new idea.
While tasked to canvas for ideas for the ‘Innovation Hub’, I tried to raise discussion with the visitors to the ‘Hub’ whether the mere idea is really what we should focus on or is there something else more important. I even suggested that as part of the proposal for a solution the author should also name the existing solution that needs replacing, by which it then would be easier to locate the whole network of actors and systems that will be affected by the adoption of the new innovation. However, this idea did not seem to catch on, just yet anyway…..
Doctoral research at the University of Oxford (Oxford Internet Institute), with earlier academic background in organisational and management science (Said Business School), as well as political science. My earlier professional background consists of (largely implementation) work relating to novel organisational and societal systems in transportation and regional economy, as well as entrepreneurship. In my current research project I am investigating on a broader level how social change begins to happen, which at a lower level means to study how innovations begin to take shape within a specific area of social activity. The empirical case is the emergence of mobile communication technology in health care, which I am making a comparison in Finland and the UK (- or just England, actually). The theoretical framework I am using is one of the core constructs in sociology, 'institutional theory' and within that 'institutional work'. This work has a home in economic sociology.