Post on 14-Dec-2015
JUST STARTTAKE ACTIONEMBRACE UNCERTAINTYCREATE THE FUTURE
Len SchlesingerBaker Foundation ProfessorHarvard Business SchoolMarch 2014
5
What is the best logic in relatively “known” futureswhere things can be predicted based on the past?
1. Where are you now? and What result is wanted, needed and best?
2. What are the various ways of achieving the result?
3. What are the required resources
and their costs
4. Select the optimal path
5. Assemble the required resources
6. Execute the plan, and, if required, get back on track.
Inductive and deductive logic
Mathematical and analytic methods
Rules of thumb
Core logic of virtually all educational settings
Core logic of large organizations
Works great when the future can be extrapolatedP
redic
tion
Logic
7
t
t
YOU’RE IN A PITCH BLACK
ROOM
Discuss with 1 or 2 colleagues:
What principles do you use to get out?
8
What would rational thinking and
behavior look like in the face of unknowability?
You either sit
and think or you act…
But, you can’t think
your way into an unknowable
future
Therefore, the only logical
thing is to ACT.
9
What would rational thinking and
behavior look like in the face of unknowability?
Therefore, the only logical
thing is to ACT.
How to Act Smartly?
Where are you?
Do you want something else?
What do you have at hand?
Anyone who can help/rescue?
Small steps. On firm ground.
Take stock & learn.
Build off what you actually findBuild
LearnAct
10
How well does Prediction work in the face of unknowability?
What’s current reality - what is wanted, needed
and best?
How can you achieve that result?
What resources are required?
What’s the best path?
Assemble the resources.
Then, execute the plan and get back on track if you get
off
You don’t knowYou can’t know
BuildLearnAct
Small steps.Take stock & learn.Build off what you actually find
What do you have at hand? Who can help?
11
Popular Views of Entrepreneurs
High Appetite for risk
Visionary
Able to foresee the future
Creative
Self Confident
Determined, controlling, decisive, egotistical…
Popular Perception
Closer to Truth
LOW Appetite for risk
Often start with no sharp goal
or vision
Distrust predictions of the
future
Creates new businesses, but not necessarily original
No more self confident than
others
Determined, controlling, decisive, egotistical… but not always
13
Started multiple enterprises ranging from $200Million to $6.5Billion
How they thought about taking action
Entrepreneurial Thinking
13
Saras Sarasvathy, University of Virginia studied 30 “expert” entrepreneurs
14
Behavior or thinking?
Behavior &
Actions
Results
Thinking
Behavior &
ActionsResults
Strong consistency in thinking that explains
unconventional behavior.
15
Prediction and Act Learn BuildTwo Complementary Logics
Contrasts with prediction
Favored by entrepreneurs 89%
Favors what is real and confirmable
Smart action trumps analysis
Use when the future cannot be predicted from the past
BuildLearnAct
Prediction
Taken together they formEntrepreneurial Thought
and Action
DESIRE fuels…
17
Entrepreneurs are always doing what they want, or something that will get them what they want.
In the face of the unknown, it makes no sense to act unless you want to, whether you have to or not.
Build
LearnAct
18
DESIRE Intriguing area, attractive partners
Fully formed vision,robust plan
Sufficient to get
startedAct quickly with means at handAct Learn Build is based on current reality: who you know, what you know and anything else relevant
Pay only what you can afford toand want to – Acceptable Loss• Money & time• Reputation (professional & personal)• Opportunity cost
Bring others along• Tangible sales and other assets• Other borrowed or bartered resources• Intangible assets (ambassadors,
reputational capital) through enrollment
Act quickly with means at hand
Pay only what you can afford to and want to – Acceptable Loss
Bring others along
ACT
Build on what you find
ACT
Passion isn’t required
Smart Steps
• Surprises are often good. Make them an asset
• Befriend reality
• With each action, reality changes
DESIRE fuels…
19
Continuum of “Predictability”
Known Unknown
UnpredictablePredictable
More logical to actEmploying the tools of
prediction doesn’t make sense and
wastes time and resources
20
Continuum of “Predictability”
Is it big enough to interest me?
How do I get started with the means at hand?
How do I make progress with a step-by-step acceptable expenditure of resources?
How do I bring other people along and spread the risk?
How do I build each next step of the reality I have created with the previous one?
21
Continuum of “Predictability”
Known Unknown
UnpredictablePredictable
Every ALB includes some Prediction
At some point predictive tools
require evidence to work
As you learn, you can begin to
Predict
22
You need both You employ them reflexively, like a second
language Consider using ALB even in predictable
situations• Derails the habit of prediction• Action might be equally reliable, cheaper and faster• Action changes reality, predicting doesn’t
Use both simultaneously
BuildLearnAct
Prediction
23
12%
88%
Where Serial Entrepreneurs Like to Play
23New
MarketExisting Market
ExistingProduct
NewProduct
SuicideQuadra
nt
Manage (incremental)
Adapt(evolutionary)
Extend(evolutionary)
Everywhere
Opportunities are largely found
Create(revolutionary)
unusual in their comfort and
preference for this quadrant
Opportunities are largely made
Act Learn Build is required.
In this quadrant
Action Trumps Everything
Why?• No competition• Expensive
Prediction tools are not required• They like to create
opportunities
Optimize Your Actions
DESIRE
Predictable
Optimization
is possible
Unpredictable
Optimizationis
impossible
You must Satisfice
Satisfy (desire) + Suffice (good enough, not necessarily optimal or “the best.”)
Nobel Laureate Herbert Simon
25
DESIRE Intriguing area, attractive partners
Fully formed vision,robust plan
Sufficient to get
startedAct quickly with means at handAct Learn Build is based on current reality: who you know, what you know and anything else relevant
Pay only what you can afford to and want to – Acceptable Loss
Smart Steps
DESIRE fuels…
Passion isn’t required
26
Acceptable Loss
26
Currency:o Time , money and other
tangible resourceso Reputation and social
capitalo Opportunity cost
These are all knowable in the present moment
Acceptable Loss removes
all of the psychological and most of the actual
risk
Is it big enough to interest me? Pay to Play
• What can I afford to lose?
• What am I willing to lose?
How big is the “prize”?
Expected Return
Cost to execute
the plan
PAYBACK
$ x 75% =
“Risk Adjusted Return”
Acceptable Loss
Specific Desire
+Means at Hand
+
within Acceptable Loss
ACT
27
DESIRE Intriguing area, attractive partners
Fully formed vision,robust plan
Sufficient to get
startedAct quickly with means at handAct Learn Build is based on current reality: who you know, what you know and anything else relevant
Smart Steps
Pay only what you can afford toand want to – Acceptable Loss• Money & time• Reputation (professional & personal)• Opportunity cost
Bring others along
28
Bring Others Along
28
Thanks for joining me…
Tangible
resourcesEarly Sales and
Cash
Bartered and
borrowed
resourcesFree helpIdle capacity
+Intangible
resourcesReputational
capitalRelationships
Reduced load on entrepreneur’s
assets
Spreads the cost and therefore the risk for any one player
Confirms your judgment
29
DESIRE Intriguing area, attractive partners
Fully formed vision,robust plan
Sufficient to get
startedAct quickly with means at handAct Learn Build is based on current reality: who you know, what you know and anything else relevant
Smart Steps
Pay only what you can afford toand want to – Acceptable Loss• Money & time• Reputation (professional & personal)• Opportunity cost
Bring others along• Tangible sales and other assets• Other borrowed or bartered resources• Intangible assets (ambassadors,
reputational capital) through enrollment
ACTBuild on what you find
Act quickly with means at hand
Pay only what you can afford to and want to – Acceptable Loss
Bring others along
ACT
30
Build on What you Find
30
In a predictable world,
surprises
are a problem… And you
solve them when you can
In the unpredictable world,
you can’t know what you will
find until you act.
Transform problems and
obstacles into assets
Befriend reality and welcome
surprises
31
DESIRE Smart Steps
Act quickly with means at hand
Pay only what you can afford to and want to – Acceptable Loss
Bring others along
ACT • Surprises are often good. Make them an asset
• Befriend reality
• With each action, reality changes
Intriguing area, attractive partners
Fully formed vision,robust plan
Sufficient to get
started
Build on what you find