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Designing Entrepreneurship.
Creating Enterprise Through Design Culture
Dipartimento di Design
Dottorato di ricerca in Desi...
2
3
Acknowledgements
4
5
Acknowledgements
This work would not have been possible without the support of many people. It is now
crystal clear to m...
6
reconstructing the material. To the rest of the team that was part of the adventure;
Hellem Pedroso, Tracy Lin, Helena W...
7
Table of contents
8
9
Table of Contents
1) Preface 17
II) Introduction
a) Designing Entrepreneurship: Relevance Today 22
i) Which entrepreneur...
10
3.3 Case Study: Dyson 79
3.3.1 Analysis of the Dyson Case 81
3.4 Case Study: Kartell 82
3.4.1 Analysis of the Kartell C...
11
6. Field Experiment within the DREAM:IN China project
6.1. Background 133
6.1.1. The Dream:in Project Structure 133
6.1...
12
9.6. Appendix 6: Workshop Outputs 231
Index of Figures
II. Introduction
Figure 1. Creation and destruction of jobs by
n...
13
Figure 10. Design as a mediator. 69
Figure 11. Some examples for meaningful
value propositions using the value creation...
14
Figure 4. Two products created by some of
the hardware companies in HAXLR8R. 108
Figure 5. The Haxlr8r three tracks for...
15
Figure 3. Idea Development Diagram
137
Figure 4. Dream Ideation Framework 137
Figure 5. Example of simplified design
fra...
16
Chapter 7. Conclusions
Figure 1. The design process and the
entrepreneurial process shown in parallel 160
Figure 2. Map...
17
I. Preface
18
19
I. Preface
This research is the result of the work of five years spent in Politecnico di Milano, first
as a research fell...
21
Introduction
22
II. Introduction
“Really, what we’re doing as designers is, ultimately, and inevitably, designing
the business of the c...
23
Figure 2. The positioning of this work within larger macro-topics.
CRISIS
DOWNTURN
UNEMPLOYMENT
ISSUES
GENERATION
OF WE...
24
where the definition is situated as well as the scientific discipline used as a framework
of reference.
For the sake of t...
25
ii) The Relationship Between Design and Business
In order to establish the foundations and basic assumptions of this wo...
26
design method or “a discipline that uses the designer’s sensibility and methods to
match people’s needs with what is te...
27
for a number of reasons that Martin (2009) describes in detail. The variability of
contemporary markets has thus become...
28
barrier to change and innovation.
This throws light to another interesting feature of the design tools: they are
not ba...
29
Figure 4. Similarities between the product-development process and the entrepreneurial process. Ela-
boration by the au...
30
underdeveloped activity, pre-business plan activities such as identifying business ideas,
developing them and assessing...
31
Figure 5. The different subtopics explored by this research
venture. The design focus is on contribution design tools an...
32
has remained subject of much debate.
Among the many research questions that come when studying opportunities are: What
...
33
Third Part. Development of the Hypothesis and Experimental Verification.
Chapter five will summarize the findings from the...
34
these instruments could be used systematically to manage the uncertainty and risk and
generate valid and robust busines...
35
Chapter 1.
Designing Entrepreneurial Opportunities
36
1. The importance of entrepreneurial opportunity
A central construct and fundamental pillar of business ventures is the...
37
EXTERNALLY OR
INTERNALLY
SIMULATED
OPPORTUNITY
RECOGNITION
BUSINESS
CONCEPT
PRODUCT CUSTOMER
MARKET
STRATEGIC FEEDBACK ...
38
Theory Foundations Type of
economic rent
Normative
Implications
Opportunity
Construct
Entrepreneurial
Strategy
SCP Port...
39
outside of the individual7
.
Most authors divide opportunities in two major types: Kirznerian and Schumpeterian.
Inanut...
40
Baron (2006) recalls that opportunities emerge from a complex pattern of changing
conditions – changes in technology, e...
41
entrepreneurs comes from being the first to decide to exploit them. However, since the
information about these opportuni...
42
whether what I am thinking bout here and now, before I have done anything about
it or as I am taking the very first towa...
43
decides to exploit the opportunity, then he or she attempts to enact the opportunity
by engaging the social structure a...
44
company which did not exist before).
Other authors such as Baron (2007) although explicitly embracing discovery theory,...
45
1.6. Individual Cognitive Factors that could contribute to the discovery/creation
of entrepreneurial opportunities
Entr...
46
1.6.1.Individual cognitive factors: Creativity
Creativity is acknowledged to be an important factor in the discovery/cr...
47
imagination and creativity because it involves identifying, defining and structuring
novel solutions to open-ended probl...
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
Laura Mata Garcia's thesis Designing Entrepreneurship
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Doctoral research on the use of service design tools as strategies to structure the front-end of the entrepreneurial process.

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Transcript of "Laura Mata Garcia's thesis Designing Entrepreneurship"

  1. 1. Designing Entrepreneurship. Creating Enterprise Through Design Culture Dipartimento di Design Dottorato di ricerca in Design XXVI Ciclo January 2011 - March 2014 Coordinator: Prof- Francesco Trabucco Thesis For the obtainment of the degree of Doctor of Philosophy in Design Candidate: Laura Y. Mata García Supervisor: prof. Alessandro Deserti Co-supervisor: Prof. Carlos Teixeira Opponent: Dr. Toni-Matti Karjalainen
  2. 2. 2
  3. 3. 3 Acknowledgements
  4. 4. 4
  5. 5. 5 Acknowledgements This work would not have been possible without the support of many people. It is now crystal clear to me that research is a collective endeavor, and although I am the one executing it, many people contributed very significantly and without their help this work would not have been possible. First and foremost, I want to thank those directly involved in the creation of this work. Special thanks to my supervisor Prof. Alessandro Deserti for the countless hours that he dedicated to this work despite his busy schedule. His guidance and advising were fundamental for me in this journey. Another enormous thank you goes to Prof. Carlos Teixeira, whose help was fundamental for me. The passion, rigor and commitment he puts into his work were an inspiration. Being able to join him around the world as part of the Dream:in project was an invaluable experience. He also dedicated numerous hours to my work and I deeply appreciate that. A special thanks goes also to Dr. Toni- Matti Karjalainen, for dedicating his time to act as my opponent, reading my work and providing valuable feedback as well as for the opportunity to spend time with his research group in Aalto University in 2012. It was a very helpful and valuable experience. From my research group in Politecnico di Milano; I want to thank deeply Prof. Flaviano Celaschi for giving me the opportunity to join the research group in the first place, back in 2009 and entering this fascinating community that has the privilege to stand on the edge of human knowledge and being able to share it with each other and the students. Special thanks goes to Prof. Manuela Celi, who was always available to provide feedback for me, and provided a sympathetic ear for personal matters as well. Our written collaborations were fundamental in my training as a researcher. Another special thank you goes to Prof. Giorgio Casoni. The experience of working together in Mantova was fundamental for my growth as a professional and as a researcher. His enthusiasm and “let’s-find-application-in-real-life” approach is inspiring. Thank you also to Chiara Colombi, Elena Formia, Xiaobo Qian and Jennifer Rudkin, for their friendship, support and the times spent together in this journey. Other colleagues from Politecnico di Milano that receive a special thanks are Simona Murina, for being always available to sort through the bureaucracy and paper work to keep the place running, Maria Ventura for her patience and availability and Cristina Argentiero who was always available as well and helped sort many of the trips that this work required, some of them on a very short notice. From the Parsons The New School for Design team that was directly involved in the Dream:in experience in India, I want to thank Bridget Sheerin, Subodh Divekar and Fernanda Alcocer who dedicated time for me even though their master thesis deadlines were around the corner. I also want to thank Ms. Sonia Manchanda for hosting us in India, and organizing the seminar. The exchanges and the experiences of “living” the subject of our study (instead of just studying it) were extremely inspirational. From the New School team that joined us in China, a deep thanks goes to Nelson Lo, his super translation and cultural mediation skills made all the difference for us. Another deep thanks goes to Sophie Han Lou, her super organizing and management skills made everything possible, and the exchanges we had were also very enriching for me personally. A super special thanks goes to Delmo Oliveira that provided me with over 450 pictures of the event practically overnight. His help was invaluable in
  6. 6. 6 reconstructing the material. To the rest of the team that was part of the adventure; Hellem Pedroso, Tracy Lin, Helena Wong and Angie Rodríguez, a deep heartfelt thank you for letting me join the team. Who thought doing fieldwork could be so much fun? From Tsinghua university I want to thank all the organizers of the Dream:in event, Prof. Cai Jun, Yian Guan, Yuanyuan Liu and everyone else that made the event possible. Thank you to the students that accepted to be part of the experiment and became my guinea pigs for one day! During these years I have met many colleagues that provided support and inspiration in one way or another, thanks to Raffaella Trocchinaesi, Marinella Ferrara, Rui Roda, Peter Krogh, Miikka Lehtonen, Fawaz Bakhotmah, Namkyu Chun, Lia Krucken, Gabriel Hernández, Seçil Ugur, Pelin Arslan, Hazal Gumus and Roberto Iñiguez. Your feedback, support and pats on the back when things got rough were definitely helpful. I feel proud to be part of this community of enthusiastic and inspiring people. A huge thanks goes also to Rodrigo Marcos who helped me manage the challenge of sorting out all the data and presenting it visually. His help as well as his unconditional friendship are invaluable to me. A special thanks goes to Huang Yanli, who helped me translate all the material from the workshops. His help was very precious. Last but not least, I want to thank the people in my personal life who made all the difference. First and foremost, thanks to my partner Massimo Menichinelli for all the love and support he provided along these years, for all the weekends and holidays spent working (and not complaining). I feel honored to have him in my life. Super special thanks to my parents, Laura R. García and Raúl Mata for supporting this endeavor, both morally and materially. I would not be here today if it was not for them. This work is dedicated to all of you.
  7. 7. 7 Table of contents
  8. 8. 8
  9. 9. 9 Table of Contents 1) Preface 17 II) Introduction a) Designing Entrepreneurship: Relevance Today 22 i) Which entrepreneurship? 23 ii) Relationship between Design and Business 25 b) Basic Assumptions i) Business and entrepreneurship are based on a premise of repetition and efficiency 26 ii) Creating new ventures is risky and requires a different mindset, prone to exploration and trial and error learning 27 iii) Design possesses tools, cultures and a mindset that encourage experimentation 28 c) Hypothesis 28 i) Research Objectives 30 d) Research design and methodology 31 e) Results 33 First part – Designing entrepreneurial opportunities 1. The importance of entrepreneurial opportunity 1.1. The entrepreneurial process 36 1.2. Definition of entrepreneurial opportunity 37 1.3. The discovery perspective 40 1.4. The creationist perspective 41 1.5. Reconciliation between discovery and creation perspectives 43 1.6. Individual cognitive factors that contribute to the discovery/ creation of entrepreneurial opportunities 45 1.6.1 Creativity 46 1.6.2 Dealing with Ill-defined Problems 47 1.6.3 Generalization over small samples and use of heuristics 47 1.6.4 Alertness and “connecting the dots”. 48 1.6.5. Knowledge of how to serve markets 50 1.7. Discussion: the possible contribution of design to opportunity creation 51 2 Business Models as Enactors of Entrepreneurial Opportunities: Possible Design Contributions 55 2.1 A brief history of the business model construct 56 2.2 Definition of business model 57 2.3 The relevance of design for business modeling 58 2.4 Business Modeling As Entrepreneurial Opportunity Enactment: What about design? 59 2.5 Designing Instruments For Business Model Design 64 2.6 Designing The Value Proposition 68 2.7 Key Insights 72 Second Part – Generating new enterprises through design culture 3. Creating design-oriented enterprises: case studies 3.1 A brief history of design-oriented companies 74 3.2 Product Based case studies of design-oriented companies 76 3.2.1 Selection Criteria 77
  10. 10. 10 3.3 Case Study: Dyson 79 3.3.1 Analysis of the Dyson Case 81 3.4 Case Study: Kartell 82 3.4.1 Analysis of the Kartell Case 87 3.5 Discussion: Lessons learned from product-centered firms 88 3.6 Case studies of design-oriented ICT companies 89 3.6.1 Findings 91 3.7 Case Study: Airbnb 92 3.7.1 Analysis of the Airbnb Case 94 3.8 Case Study: Instagram 95 3.8.1 Analysis of the Instagram Case 96 3.9 Discussion: Lessons learned from ICT firms 97 3.10 Conclusions 98 4. Support ecosystems for design-driven entrepreneurship 4.1 Introduction 100 4.2 Historical aspects 100 4.3 Existing models of support systems 4.3.1 Incubator 102 a) Pratt Design Incubator 103 b) Incubation RCA 104 4.3.2 Accelerators 105 a) Hardware accelerators 107 i) HAXLR8R 108 (a) The Design Accelerator 109 4.3.3 Co-working spaces 110 a) The Stitch Factory 111 4.3.4 Entrepreneurial Ecosystems and events 112 a) Aalto Entrepreneurship Society 113 b) The Designer Fund 114 4.4 Insights from the case studies 115 4.5 Conclusions 119 Third Part – Development of the Hypothesis and Experimental Verification 5. Insights from the literature and case study explorations a) Existing approaches to design entrepreneurship: Designing the business offering 123 b) Gap in the literature identified: Lack of a design approach to discovering/creating entrepreneurial opportunities 124 c) Similarities between the FEI of the entrepreneurial process and the New Product Development Process 125 5.1 Developing the Research Hypothesis: Using Service Design Instruments as Aids in the Opportunity Generation/ Discovery Phase (FEI) 126 5.2 Why Service Design Instruments? 127 5.3 Experimental testing of the hypothesis: a few preliminary considerations 128
  11. 11. 11 6. Field Experiment within the DREAM:IN China project 6.1. Background 133 6.1.1. The Dream:in Project Structure 133 6.1.2. The core of the project: the Conclave 134 6.1.3. The role of design in the Dream:in project 138 6.2. Experiment design 139 6.2.1. Premises 139 6.2.2. Hypothesis and Objectives 140 6.2.3. Research Questions 140 6.2.4. Methodology 140 6.3. The Workshop: Beijing 142 6.3.1. Results 147 6.3.2. Difficulties and Insights on Potential Improvements 152 a) During The Workshop 153 b) After the Workshop 154 6.3.3. Interpretation of the Results and Implications 154 6.4. Conclusions 156 7. Conclusions 7.1. Synthesis of the Research 159 7.2. Results and Original Contribution 162 7.2.1. Theoretical contribution: Similarities between the Front-end of Innovation of the Entrepreneurial Process and the New Product Development Process. 162 7.2.2. Experimental Verification: Entrepreneurial Opportunity identification May be Systematized 163 7.2.3. Experimental Verification: Using Service Design Tools in the Discovery/Creation of Entrepreneurial Opportunities 164 7.2.4. Production of Instruments: Design of a Service Design Toolkit for the generation of Business Ideas 167 7.3. Limitations of the Research 168 7.4. Relevance and Implication of Findings for Academia and Practice 168 7.4.1.Academic relevance 168 7.4.2. Relevance for Practice 169 7.5. Reflections on Open Questions for Future Research 170 7.5.1. The quality and innovativeness of business ideas using this methodology 170 7.5.2. Discovery vs. Creation of Entrepreneurial Opportunities: A Design Perspective? 171 7.5.3. Possible Applications of Service Design Tools in Non- Design Related areas 173 8. Bibliography 175 9. Appendixes 9.1. Appendix 1: Design Driven Firms Case Studies 187 9.2. Appendix 2: Design-Driven Entrepreneurship Support Systems Case Studies 189 9.3. Appendix 3: Selection of Service Design Tools 213 9.4. Appendix 4: Workshop Planner 215 9.5. Appendix 5: Service Design Simplified Frameworks 217
  12. 12. 12 9.6. Appendix 6: Workshop Outputs 231 Index of Figures II. Introduction Figure 1. Creation and destruction of jobs by new firms and existing firms. 22 Figure 2. The positioning of this work within larger macro-topics 23 Figure 3. Mainstream idea of design as an agent capable of influencing organizational strategy 26 Figure 4. Similarities between the product-development process and the entrepreneurial process 29 Figure 5. The different subtopics explored by this research 31 Figure 6. The research structure 31 Chapter 1. The Importance of Entrepreneurial Opportunities Figure 1. Complex factors that influence the formation of new ventures 36 Figure 2. Process model of entrepreneurial venture creation. 37 Figure 3. Value creation capability 40 Figure 4. Mapping of the different strains of entrepreneurial research that analyze the variables that contribute to opportunity discovery/creation 45 Chapter 2. Business Models as Enactors of Entrepreneurial Opportunities: Possible Design Contributions Figure 1. Components of business models affinity diagram 57 Figure 2. Elements of a Choices- Consequences Business Model 62 Figure 3. Ryanair’s business model representation with its virtuous cycles 63 Figure 4. Osterwalder and Pigneur’s business model canvas 65 Figure 5. Business Model Framework. IDEO (2011) 66 Figure 6. The Lean Canvas. 67 Fig. 7. The Social Enterprise Tool. NESTA (2011) 67 Figure 8. The Product-Service System 68 Figure 9. . Intersection of value creation for multiple actors leads to meaningful innovation. 68
  13. 13. 13 Figure 10. Design as a mediator. 69 Figure 11. Some examples for meaningful value propositions using the value creation framework 71 Figure 12. Example of a systemic value proposition with value flows and a variety of different actors 71 Chapter 3. Creating design-oriented enterprises: Lessons from Case Studies Figure 1. The cyclone at the lumberyard that inspired James Dyson 80 Figure 2. The Dyson G-Force vacuum cleaner 80 Figure 3. A recent Dyson vaccum cleaner model 81 Figure 4. Dyson hand drier 82 Figure 5. James Dyson with the Air Multiplier, the bladeless fan 82 Figure 5 & 6. The first product designed by Giulio Castelli using Nastrocord 84 Figure 7. Early Kartell products designed by Gino Colombini 84 Figure 8. The 4999 Chair, designed by Marco Zanuso and Richard Sapper 84 Figure 9. Universale chair, designed by Joe Colombo 84 Figure 10. Bookworm library designed by Ron Arad 84 Figure 11. Mr. Impossible chair by Philippe Starck 86 Figure 12. Louis Ghost chair, by Philippe Starck 86 Figure 13. Bourgie Table Lamp by Ferruccio Laviani 86 Figure 14. Dr. Glob chair by Philippe Starck 86 Figure 15. Kartell Shoes by Moschino 86 Figure 16. La Marie Chair by Philippe Starck 86 Figure 17. Traditional role of design in design-driven entrepreneurship 97 Figure 18. Service-based design-driven entrepreneurship: design shapes the business strategy 97 Chapter 4. Support systems for design- driven entrepreneurship Figure 1. The Business Incubator Continuum 103 Figure 2. Some of the companies currently incubating in the Pratt Design Incubator 104 Figure 3. Two of the most successful startups from Innovation RCA 105
  14. 14. 14 Figure 4. Two products created by some of the hardware companies in HAXLR8R. 108 Figure 5. The Haxlr8r three tracks for startups 109 Figure 6a. A product from the startup Khora. 110 Figure 6b. Electrical commuting bicycles from The Conscious Commuter. 110 Figures 7a & 7b. Images from The Stitch Factory in Las Vegas. 112 Figure 8. Some of the most famous Internet startups that had a designer founder or cofounder. 114 Figure 9. Example of the graphic mapping. Case Study: Design Incubator (Serbia). 115 Figure 10. Incubation RCA mapping. 116 Figure 11. The different levels of design value. 117 Figure 12. Different standard formats of entrepreneurial support actors and their positioning along the entrepreneurial process. 118 Figure 13. The mapping of the case studies shows clearly gaps in the lower right quadrant, which corresponds to investment and funding. 120 Chapter 5. Insights from the literature and case study explorations. Figure 1. Traditional role of design in design-driven entrepreneurship. 124 Figure 2. The New Concept Development Model (NCD) provides a common language and a visual representation to the components of the Front End of Innovation. 125 Figure 3. The design process and the entrepreneurial process shown in parallel. 126 Figure 4. Hypothesis: Design could enable the generation and development of business ideas. 127 Figure 5. A model of the sub-phases inside the front-end of innovation with the space that was tackled during the experimentation phase 129 Chapter 6. Field Experiment Within the Dream:in China Project Figure 1. The different phases of the Dream:In project with their respective duration 134 Figure 2. Participant profiles for the Conclave workshop and their respective roles 135
  15. 15. 15 Figure 3. Idea Development Diagram 137 Figure 4. Dream Ideation Framework 137 Figure 5. Example of simplified design framework elaborated taking the widespread Mindmapping design tool 142 Figures 6,7 & 8. Participants who used the simplified service design tools during the first day of workshop. 143 Figures 9, 10, 11 & 12. Participants of the control group during the first day of workshop. 144 Figure 13. Overview of all the frameworks produced by the teams using the tools in day 1. 145 Figures 14, 15 & 16. Dream Ideation Frameworks produced by teams using the service design tools. 145 Figures 17, 18 & 19. Dream Ideation Frameworks produced by teams NOT using the service design tools. 146 Figure 20. One of the groups using the SDT during the second day of the workshop (Violet Team) 148 Figures 21 & 22. Team Green 2 using the tools in the second day started prototyping out of their own initiative when faced with the Business Model Canvas tool 148 Figure 23, 24 & 25. Teams from the control group (NOT using the tools) on the second day of the workshop. 149 Figure 26. Outcome from team purple- during day 2 of the workshop working using the service design tools. 150 Figure 27. Outcome from team green 2 during day 1 of the workshop working by themselves 150 Figure 28. Outcome from team green 2 during day 2 of the workshop working using the service design tools 150 Figure 31. Outcomes from control group during day 2 of the workshop working NOT using the service design tools 151 Figure 32a. Graphic synthesis of the results of the first day of workshop. 152 Figure 32b. Graphic synthesis of the results of the second day of workshop 152 Figure 33. The way participants filled the dream ranking tool 153 Figure 34. How I expected participants to use the tool. 153
  16. 16. 16 Chapter 7. Conclusions Figure 1. The design process and the entrepreneurial process shown in parallel 160 Figure 2. Map of areas of service design research 165 Figure 3. The perspective of this work: design can have a role in the earliest phases of the entrepreneurial process. 166
  17. 17. 17 I. Preface
  18. 18. 18
  19. 19. 19 I. Preface This research is the result of the work of five years spent in Politecnico di Milano, first as a research fellow and then as a doctoral candidate. It’s also an international research that was developed mixing two different ways of doing, thinking and conceiving design: the Italian culture of design, and specifically the Polytechnic culture embraced inside our school and the American way of approaching design, as it is lived within Parsons The New School of Design and its roots in the IIT Institute of Design through the invaluable contribution of my co-advisor, Prof. Carlos Teixeira. The topic started forming quite organically following the experience as a research fellow working for Small-Medium Enterprises in the Mantua region (Italy). The overall goal of the collaboration with those companies was to enable them to become design- driven and foster design culture within the organizations. The year was 2009 and the effects of the Great Recession that began in 2008 in the United States were starting to be felt in Italy in full force. Some of the companies that participated were in serious financial difficulties, struggling to keep afloat. Some others were going through generational family successions that created a lot of tension between the members of the families. These factors left the companies with no energy or resources to invest in design. I discovered through experience that trying to change an existing company is very hard, and requires a lot of commitment, time, resources and even a little bit of good luck. It was that moment when we started speculating, what if instead of working with existing SMEs we worked with small young companies, or even startups? What if insteadofcomplainingaboutthedifficultytochangeacompanywecreatedacompany? What could possibly be a designerly contribution to that area? I come myself, from a very entrepreneurial culture. I was born and raised in Monterrey, Mexico. A city that was founded in the middle of nowhere, with a semi-arid weather that can roast the city with temperatures over 40ºc for 10 months a year, freeze it in the winter with temperatures below 0º, and flood it with torrential rains and even hurricanes in the fall is the entrepreneurial hotbed of Mexico and it’s most prosperous city. I have no doubt that the reasons behind the city’s prosperity have to with its entrepreneurial character and its toughness and perseverance to thrive in such a hostile environment. I came to Italy 10 years ago to study design and learn and embrace the Italian way of doing design. I became fascinated with the work of professors Deserti and Celaschi, and my colleagues of the Advanced Design Research group. As time went by, the more I learned about the contributions of design in the Front End of Innovation, developing scenarios and innovation pathways, looking at trends and weak signals, using design as an instrument to envision a desired future the more it fascinated me, and the more I was convinced that these instruments could be useful in other contexts, not strictly design-related. Thus, the threads that made the topic started coming together. What can design bring to the entrepreneurial process, and specially to its earliest phases? In a context of deep economic recession, I sincerely hope that this research contributes to advance a design perspective on entrepreneurship, to bring design expertise and capabilities to the entrepreneurial process, and bridge both disciplines so that maybe more entrepreneurs can profit from design and perhaps more designers might decide to become entrepreneurs.
  20. 20. 21 Introduction
  21. 21. 22 II. Introduction “Really, what we’re doing as designers is, ultimately, and inevitably, designing the business of the companies that we’re working for. Whether you like it or not, the more innovative you try to be, the more you are going to affect the business and the business model.” -Tim Brown (2005), Speech at the Rotman Business Design Conference a. Designing entrepreneurship: relevance today Net Job Change - Start-ups Net Job Change - Existing Firms Source: Business Dynamics Statistics, Tim Kane 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 -1,000,000 -2,000,000 -3,000,000 -4,000,000 -5,000,000 0 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 Entrepreneurship has gained a lot of attention in recent times, in which the economic crises has reflected severely in massive unemployment – particularly among young people in Europe. It has become the focus of attention of governments and private sector alike particularly because it has been positively correlated to job creation. Authors like Acs and Armington (2003), Audretsch and Fritsch (1996), Carree and Thurik (1998, 1999a), Thurik (19996) and Robbin, Pantuosco, Parker and Fuller (2000) in Bunyasrie (2010) all have correlated positively entrepreneurship and economic growth in different industrialized regions. In the United States, start-ups created 3 million jobs annualy between 1996 and 2006 whereas all other ages of firms, including companies in their first full years of existence up to firms established two centuries ago, are net job destroyers, losing 1 million jobs net combinedperyear.InFinlandbetween2007-2010ithasbeencalculatedthattherewere 668 startups which created a net of 51,000 new jobs — over half of the total number. According to studies performed by the Kauffman foundation, start-ups create the most newnetjobsintheUnitedStates.Thesenumbers,althoughtakencautiouslytakinginto accountthatEuropeisnotasinnovativeandaccessibletoentrepreneurshipasAmericais , reflect how much the world’s largest industrialized Western economy depends on new firms for job creation. AlthoughotherauthorssuchasSalgado-Banda(2007)advocateforothermeasurements of entrepreneurship relevance other than jobs created, such as the number of patents generated. However, in the design industry, not all design creations are patented, and as such patents are an unreliable measurement of industry size and growth. The importance of new small firms to the economy has been the result of many structural shifts. Many studies indicate that there has been a structural shift in the OECD economies from large companies competing through mass production, product differentiation, and economies of scale, towards smaller companies relying Figure 1. Creation and destruction of jobs by new firms and existing firms. The Kauffman Foundation.
  22. 22. 23 Figure 2. The positioning of this work within larger macro-topics. CRISIS DOWNTURN UNEMPLOYMENT ISSUES GENERATION OF WEALTH SPECIFIC INTEREST OF UNIVERSITIES ENTREPRENEURSHIP NEW FIRMS ROLE OF DESIGN on knowledge, initiative and flexibility. This transition from a “managed economy” towards an “entrepreneurial economy” appears to have taken place between the mid-1970s and the early 1990s. (Acs, 1996 and 1999;AcsandAudrech,2001;AudretschandThurik,1997,2001aand2001b;Audretschet al,2002;CarreeandThurik,1998;Carreeetal,1999and2002;Thurik,1996;Verheuletal, 2003inKarlsson,C.,Friis,C.,&Paulsson,T.,2004).Amongthevariablesthatinfluenced this shift are increased global competition, changes in demand and demographics, intensifieduncertaintyandnewtechnologies.Inthiseconomy,(namedbysomeauthors “new economy” or more recently “knowledge economy”) the main focus of economic activities is information: its acquisition, manipulation and transmission. This is greatly enhanced by ICT, which allow teams of people to collaborate together in non- hierarchical networks that allow them to self-organize and innovate (Den Ouden, 2011) . i) Which entrepreneurship? It is widely acknowledged that there are many different types of entrepreneurship, as well as entrepreneurs. Most authors would divide entrepreneurship into two different spheres: those seeking profit, traditional businesses, and those with a non-profit aim. These organizational forms are largely divided among three criteria: their search for profit, their social impact and an organizational form that divided profit among its members (co-ops). However, for the sake of simplification, this research is focused in for profit entrepreneurship. Although many authors1 have advocated for entrepreneurial research on opportunities to include also opportunities exploited by existing firms, instead of through the creation of new firms this research will largely focus on entrepreneurship and opportunity exploitation through the creation of new firms. One of the first tasks before approaching the research was to define precisely what type of entrepreneurship we are referring to. Many authors have different definitions that range from extremely general to very specific, and vary according to the context 1 Shane, S.A. (2003) A General Theory of Entrepreneurship: The Individual – Opportunity nexus. Edgar Elvar Publishing, Inc. Massachusetts, USA. P. 267
  23. 23. 24 where the definition is situated as well as the scientific discipline used as a framework of reference. For the sake of this research, the preferred definition of entrepreneurship is based on two major pillars: first of all, as advocated by Schumpeter in the German tradition. This definition focuses on the entrepreneur as an innovator and inspirer, the implementer of creative destruction, creating instability, disequilibria and economic development (Karlsson,FriisandPaulsson,2004)2 .ForSchumpeter(1934)theentrepreneurisabearer of the mechanism for change and economic development, and entrepreneurship is the undertaking of new ideas and new combinations, (i.e. innovations). An entrepreneur would have 5 basic ways of manifesting entrepreneurship: introducing a new good, a new method of production, a new market, a new source of supply of intermediate goods, and a new organization (Karlsson, Friis and Paulsson, 2004; Salgado-Banda, 20073 ). Wennekers and Thurik (1999) provide a more complete definition: “Entrepreneurship is the manifest ability and willingness of individuals, on their own, in teams, within and outside existing organizations to perceive and create new economic opportunities (new products, new production methods, new organizational schemes and new product-market combinations) and to introduce their ideas in the market, (acting) in the face of uncertainty and other obstacles, by making decisions on location, form and the use of resources and institutions”4 Secondly, this work will adopt the opportunity-based definition of entrepreneurship, thus, the entrepreneur is assumed to be acting because s/he recognizes (or creates) an entrepreneurial opportunity unlike necessity-based entrepreneurs who start businesses because they have no other work options and they need a source of income. The Global Entrepreneurship Report defines the latter type of entrepreneurship as “improvement-driven”5 . It is therefore now acknowledged that entrepreneurs, in a Schumpeterian perspective act as innovators. Innovation – the introduction of new and/or improved products, services and production processes, or marketing methods is the driving force of a nation’s economic growth and improves competitiveness of its firms. (Oerlemans et al. 20016 ) However, most of current research is focused on technology-driven innovations and its role in generating IT startups. Most of the research comes from the management, economics or entrepreneurship research and the role of design is not acknowledged as a lever that can spark entrepreneurship, besides being the content of the business offering. 2 Karlsson, C., Friis, C., & Paulsson, T. (2004). Relating entrepreneurship to economic growth. (CESIS/ JIBS), September, (13), 1–27. Retrieved from http://papers.cesis.se/CESISWP13.pdf 3 Salgado-Banda, H. (2007). Entrepreneurship and economic growth: An empirical analysis. Journal of Developmental Entrepreneurship, 52(55), 1–46. Retrieved from http://www.worldscientific.com/doi/abs/10.1142/ S1084946707000538 4 Wennekers, S., & Thurik, R. (1999). Linking entrepreneurship and economic growth. Small Business Economics, 27–55. Retrieved from http://www.springerlink.com/index/M63P6311184114Q5.pdf 5 Kelley, D. J., Singer, S., & Herrington, M. (2011). The Global Entrepreneurship Monitor 2011 Global Report. Retrieved from http://www.gemconsortium.org/docs/2409/gem-2011-global-report 6 Oerlemans, L.A.G., Buys, A.J., and Pretorius, M.W. Research Design for the South African Innovation Sur- vey 2001, Working Paper 01.02, The Netherlands: Eindhoven Centre for Innovation Studies, 2001.
  24. 24. 25 ii) The Relationship Between Design and Business In order to establish the foundations and basic assumptions of this work, it is first necessary to take a look at the relationship between design and business, in a wider scale. During the last decade, design and business grew closer to each other, finding in Design Thinking a common ground where an interdisciplinary approach could take shape: design researchers and practitioners became interested in strategy and business while the management scholars and practitioners became interested in design as if mutually acknowledging that both fields could benefit from each other’s contribution. The first notable appearance of the term Design Thinking, bound to the idea that design research could and should become an independent area of study, was in Bruce Archer’s statement “there exists a designerly way of thinking and communicating that is both different from scientific and scholarly ways of thinking and communicating, and as powerful as scientific and scholarly methods of enquiry when applied to its own kinds of problems.” (Archer, 19797 ) From then on, research on Design Thinking worked to extract and model designers’ thinking processes and cognitive style, their tools for application, the composition of design teams and the interaction among its components, the procedures and the processes that designers activate. (Dorst and Dijkhuis, 19958 ; Dorst and Cross, 20019 ). Starting from Archer’s idea and from Lawson’s (198010 ) research on the mental process that architects undertake in solving problems, Rowe (198711 ) popularized the term Design Thinking. Traditionally, this field of research was based on the premise of analyzing designers and design practice to understand the “designerly” ways of problem finding, setting and solving by observing the ways they approach the design of different artifacts. (Cross, 198212 ; Schon, 198413 ; Schon, 198714 ) According to the most relevant studies, designers use envisioning capabilities, divergent idea generation, visualization tools, synthesizing and prototyping, just to mention some of the skills and tools generally associated with designers and their cognitive style. Design Thinking can tackle ill-defined or indeterminate problems (Buchanan, 199215 ) with a solution-oriented attitude (Cross, 1982), generating ideas and transforming them into new solutions (Buchanan & Margolin, 199516 ). Following the expansion of its scope, Design Thinking moved away from design practice as a promising approach for dealing with problems in different fields by employing formalized processes and techniques that can be applied by professionals of all disciplines, not necessarily by designers. Design Thinking became a new robust 7 Archer, B. (1979) Design as a Discipline. Design Studies. 1 (1), pp. 17-20 8 Dorst, K. & Dijkhuis, J. (1995) Comparing Paradigms for Describing Design Activity. Design Studies. 16 (2). pp. 261-74. 9 Dorst, K. & Cross, N. (2001) Creativity in the Design Process: Co-Evolution of Problem–Solution. Design Studies. 22(5) pp. 425–37. 10 Lawson, B. (1980) How Designers Think. The Design Process Demystified. Architectural Press-Elsevier, Amsterdam. 11 Rowe, P. G. (1987) Design Thinking. The MIT Press, Cambridge, MA. 12 Cross, N. (1982) Designerly Ways of Knowing. Design Studies. 3 (4). pp. 221-27 13 Schön, D. (1984) The Reflective Practitioner. How Professionals Think in Action. Basic Books. New York, NY. 14 Schön, D. (1987) Educating The Reflective Practitioner. Jossey-Bass. San Francisco, CA. 15 Buchanan, R. (1992). Wicked Problems in Design Thinking. Design Issues 8 (2), pp. 5-21. 16 Buchanan, R. & Margolin, V. (1995) Discovering Design: Explorations in Design Studies. Chicago University Press. Chicago.
  25. 25. 26 design method or “a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity” (Brown, 200917 ). Behind Design Thinking stands the idea that managers should apply Design Thinking and practices to improve business and succeed in future challenges (Kelley, 200118 ; Boland and Collopy, 200419 ; Martin, 200920 ): according to Brown (2009), thinking like a designer can help managers and organizations to develop innovation in products, services, processes, and strategy. Nevertheless,theemergenceofDesignThinkinganditswidespreaduse(and,according to some authors, abuse) helped position design as a discipline that could influence aspects of the business process that were previously thought to be beyond the scope of design, such as the business strategy (Image 2). Since 2008, this idea has become mainstream and design is now routinely acknowledged to contribute to strategic aspects of the business (Martin, 200921 ). b) Basic Assumptions i) Business and entrepreneurship are based on a premise of repetition and efficiency One of the reasons why, throughout this work I sustain that design can be a tool that enables innovation and creativity is because it is a discipline that is based on different logical principles that are almost the opposite of those used in business. While innovation requires entering unexplored fields, and introducing (still) unverified solutions, established business organizations tend to rely on existing knowledge, or else on procedures that have proven to be efficient and reliable. Martin (200922 ) describes this “persistence of the past” as the natural condition of established companies, since the predominance of analytical logic draws them to look at the past as a way to predict the future. This is a recurrent knowledge bias, based on the idea of linear evolution: if we map where we used to be yesterday, and where we are today, we can tell which is the direction towards the future by extending the line that joins the past to the present. Unfortunately, this assumption is proven true only when tomorrow will be exactly like today: a condition quite far from the instable nature of contemporary markets. Managing a company with this conservative mindset is like driving a car looking at the rear-view mirror, yet this is still the predominant approach, 17 Brown, T. (2009) Change by Design. HarperCollins. New York, NY. P. 86 18 Kelley, T. (2001), The Art of Innovation. Lessons in Creativity from Ideo. Crown Business, New York. 19 Boland, R. J. & Collopy, F. (2004) Managing as Designing. Standford University Press. Stanford, CA. 20 Martin, R. (2009) The Design of Business. Harvard Business School Press, Boston, MA. 21 Martin, R. (2009) The Design of Business. Why Design Thinking is The Next Competitive Advantage. Har- vard Business Press. Boston, MA. 22 Martin (2009) Ibid. Pp. 44 - 45 DESIGN BUSINESS OFFERING BUSINESS STRATEGY BUSINESS IDEA Figure 3. Mainstream idea of design as an agent capable of influencing organizational strategy stemming from the work of Brown (2009)
  26. 26. 27 for a number of reasons that Martin (2009) describes in detail. The variability of contemporary markets has thus become a quite relevant problem for managers: while their historical attitude and knowledge are based on deductive and inductive thinking, the integration of adductive thinking is now highly required. The world of business is characterized by a constant tension between change, requiring the capacity and the tools to enter unexplored territories, and preservation, bound to the need of repeating, optimizing and standardizing processes to make them effective and efficient. Martin (200923 ) refers to this tension as that between validity and reliability, or else between the need of exploration and that of exploitation, telling that it cannot be solved but just managed and balanced. Studies on organizational change pinpointed the relevance of this issue: Lawrence (195424 ) dedicated an article to how to deal with resistance to change long ago, and from then on the topic was widely discussed in the frame of change management. At the same time, studies on product innovation highlighted the importance of managing the interfunctional conflicts occurring during the innovation processes (for example: Xie, Song & Stringfellow, 199825 ). These conflicts reveal the different mindset of different areas/divisions of an organization, the natural resistance to change that characterizes both individuals and organizations, and the need of repetition as a base for efficient processes. Organizations sense both the need to innovate and the risks associated to innovation and change, and naturally develop an attitude towards these contradictory perceptions, bound to their culture (internal factors) and to the characteristics of the environment they are immersed in (external factors). This attitude can be defensive or offensive, passive or active: some companies understand the need of change only when competitors or new entrants start affecting their business, while others pursue innovation and change actively. In the perspective of the entrepreneurial risk, new ventures represent the highest achievement: in the famous Ansoff’s product/market matrix we can place them in the same position of a corporate diversification (new products for new markets unrelated to the current technological and marketing base). ii) Creating new ventures is risky and requires a different mindset, prone to exploration and trial and error learning. New ventures are in fact characterized by a high level of uncertainty and risk; there is a need to deal with systemic problems related to the creation of an entire value chain; the need to build new networks to develop and sustain the new businesses; the difficulty to give incontrovertible proof of the potential success of the entrepreneurial idea. This last characteristic, together with the need to reduce the risk, led to a typical two-step structure of the venture capital funding scheme: seed money to get to the “proof of concept”, and real funding to start-up and ramp-up the business. An interesting lesson coming from design culture is bound to its “trial and error” mindset. While in business the fear of error is the most powerful motivation of stillness, in design it is regarded as a natural condition of innovation. Even if the idea of resilience was discussed in the business field, noticing that companies can recover and learn from errors, and base on them their future success (Hamel & Valikangas, 200426 ; Gunther McGrath, 201127 ), the fear of error still stands as the greatest cultural 23 Martin (2009) Ibid. Pp. 53-54 24 Lawrence, P. R. (1954) How to Deal with Resistance to Change. Harvard Business Review. 32 (3). pp. 49-57 25 Xie, J. Song, M.X. & Stringfellow, A. (1998) Interfunctional Conflict, Conflict Resolution Styles, and New Product Success: A Four-Culture Comparison. Management Science. 44(12). Part 2 of 2. pp. 192-206. 26 Hamel, G. & Valikangas, L. (2004) The Quest for Resilience. Harvard Business Review. 81 (9). pp. 52-63 27 Gunther McGrath, R. (2011) Failing by Design. Harvard Business Review. 89(4). pp. 77-83
  27. 27. 28 barrier to change and innovation. This throws light to another interesting feature of the design tools: they are not based on the idea to fully prefigure a future situation from the very beginning, but to continuously adjust it along its construction, and even to completely change the direction if some new intuition or unexpected event suggests so. In new entrepreneurial ventures the fear of error might be at the same time a safe and a misleading sentiment: it will help reducing risk, but will force concentrating on the reliability rather than on the validity of the idea. Viability studies build an analytical frame around business ideas, and are thus likely to select not those with the highest potential of being desirable, but those with the lowest potential risk. A designerly mindset would help in applying a different attitude at different stages: the decision to kick-off a new business should be based on the validity of the idea (prevalence of adductive reasoning), while analytical tools should be used to assess and make it robust (prevalence of inductive and deductive reasoning). Entrepreneurial process phase Idea generation and validation Idea prototype and assessment Design process phase Front end of innovation New product development Prevailing mode of reasoning Abductive Deductive and inductive What to consider Validity Reliability Table 1. Modes of reasoning in the different phases of construction of a new entrepreneurial venture Design Thinking could be an answer to the fear of new ideas and change pervading the world of business: a large number of consultancies are today focused on introducing a culture of innovation into companies through Design Thinking. Within this frame, designisprimarilyinterpretedinaromanticperspective(Fallman,2008)andassociated to creativity, and the use of design skills is essentially seen as a way to force out-of-the- box thinking in situations that inhibit innovation. Today, some authors like Deserti and Rizzo (2013), and even Brown himself, question the application of design thinking like a linear, decontextualized, top-down efficiency-based process like total quality or Six Sigma methodologies in the 1990s. However, that debate is beyond the scope of this work. iii) Design possesses tools, cultures and a mindset that encourage experimentation While recognizing the importance of creative and divergent thinking in the front-end of innovation, it should be noted that what design can really bring to business is not just creativity, but a comprehensive way of facing the question of innovation, balancing the constant tension between change and preservation. In this comprehensive perspective, designisnotonly“thinkingout-of-the-box”,butitisasituatedpracticebasedonatough contextualinquiry,takingintoaccountawidenumberofconstraintsproducedbydifferent actors and stakeholders. This point was well defined by Vandenbosh & Gallagher (2004) : while contemporary managerial perspective on innovation is fraught with the idea of out-of-the-box thinking, what should be learned from design is not a further push towards a romantic view of creativity but the capability to stay “inside the box”, thus, innovating while respecting constraints. c) Hypothesis In recent years, the focus of attention of many designers has turned to the earliest phases of the design process, the so-called “Fuzzy Front End of Innovation” (FFEI). The FFEI has become important because, according to Reid and De Brentani (2004), “the activities and decisions comprised in the FFEI are the starting point and, therefore,
  28. 28. 29 Figure 4. Similarities between the product-development process and the entrepreneurial process. Ela- boration by the author. determine the direction of any new product path, it is clear that a better understanding of the activities and decisions comprising this starting point ultimately could lead to competitive advantage”. Additionally, according to Smith and Reinertsen (1991), of all the actions firms can take to improve their NPD process, those taken at the fuzzy front end give the greatest time savings for the least expense”. Thus, actions taken place during the FFEI, could potentially provide the most benefits with the least effort in the new product development process. Different stages of the innovation process ask for different designerly mindsets: while in the front-end of innovation a primarily explorative attitude supports the generation of new ideas, their honing requires considering many constraints. Moving along the innovation funnel to transform an idea into a product to be marketed requires both the adductive leaps of mind that might make that idea innovative, and the analytical processes based on deductive and inductive thinking that give the possibility of developing and honing it. Design is thus far from being a “compact” activity: in almost all the literature on design methods it is actually described as a complex process, requiring different attitudes and competences at different stages. This knowledge led to an intuition that eventually became the hypothesis of this research. Couldtheentrepreneurialprocessbeparalleledinsomewaytotheproductdevelopment process? Both aim to produce new products or services to be introduced to the market, however in the entrepreneurial process the scale and complexity increase importantly. Just as many products fail because there was not an appropriate FFEI process leading to the pursuit of products very few people want to buy, could the same reasoning be applied to the entrepreneurial process? This intuition was supported by the finding of the work of Barringer and Gresock (2008), which became the bridge linking the design discipline, and the traditional stage-gate process in product development as a way to structure the front-end of the entrepreneurial process and apply the same competences of product development to the generation and assessment of business ideas. Barringer and Gresock (2008) report a study of 600 entrepreneurs in which only 31% of them had done a business plan before starting the venture. Although this is enough reason for serious concern for entrepreneurship scholars since planning is acknowledged to be a critical, they claim that it could be easily inferred that, if developing a business plan is still a widely
  29. 29. 30 underdeveloped activity, pre-business plan activities such as identifying business ideas, developing them and assessing them are even weaker or non-existent. Barringer and Grasock proposed to transfer the State-GateTM model to the front-end of the entrepreneurial process because of its success and popularity in product-development literature. However, the front-end is not considered part of the new product development process and a linear process is not deemed appropriate for the FEI. According to Koen (2002) many of the practices carried out during the NPD don’t apply to the front-end, because the nature of the work, commercialization date, funding level, revenue expectations and other factors are fundamentally different and the activities in the FEI are often chaotic, unpredictable and unstructured. However, there is little literature regarding entrepreneurial experiences in which design plays a key role in early stages of new firms. There are basically two major strands of research that deal with the relationship between design and entrepreneurship: Designers as entrepreneurs, either designing and selling their own products (typically furniture, clothing or other traditional design-intensive products) or selling their design services from a “creative industries” perspective. Design as an instrument that acts in the front-end of innovation in existing firms in new product development processes (however, this is not related to entrepreneurship but rather, to intrapreneurship). Nevertheless,theideathatdesignmayhavearoleinthefront-endoftheentrepreneurial process until now has not been addressed in research, neither from entrepreneurship nor from design scholars. Thus, the hypothesis of this work began to take form. Given that design has developed instruments and a mindset to deal with the fuzziness and vagueness of the front-end of innovation and that both processes aim to introduce a new product or service to the market, could design bring some of these instruments to the early phase of the entrepreneurial process? And if so, how? Following these observations, it became quite quite clear that it was worth exploring the earliest phases of the entrepreneurial process from a design perspective, and more specifically how design can help identify and construct business ideas. The hypotheses of the research was constructed as follows: Design can be a driver of entrepreneurship by enabling the generation, setting up and development of business ideas to turn them into potential entrepreneurial opportunities. i) Research Objectives The research has two types of objectives. The general objectives are: To provide a panorama of the phenomenon of design-led entrepreneurship. Toadvancetheknowledgeofpossibledesigncontributionstoentrepreneurship. The specific objectives are: To codify the different existing models of design-led entrepreneurship. To identify design instruments that may be transferrable to the entrepreneurial process. The research area is the role of design in the generation, setting up and development of business ideas before the decision to exploit the opportunity and build the
  30. 30. 31 Figure 5. The different subtopics explored by this research venture. The design focus is on contribution design tools and design culture could bring to the earliest phases of the entrepreneurial process. If time allows, the final design output will be macro-tool (or perhaps a toolkit) that enables entrepreneurs (or aspiring entrepreneurs) to shape their business idea in order to perhaps, creating a business opportunity. Specific objectives of each section of the thesis will be subsequently described. d) Research Design and Methodology NEW FIRM CREATION OPPORTUNITY DISCOVERY TYPES OF OPPORTUNITIES BUSINESS MODELS DESIGN PROCESS, TOOLS & PROTOTYPING IN OPPORTUNITY IDENTIFICATION/ CREATION AND NEW FIRM CREATION CASE STUDIES: ECOSYSTEM OF SUPPORT TO DESIGN-DRIVEN START-UPS PILOT EXPERIENCE WITH A DESIGN- DRIVEN BUSINESS GENERATION PLATFORM TESTING OF A TOOLKIT OF DESIGN TOOLS IN AN OPPORTUNITY DISCOVERY SIMULATION PROCESS RESEARCH RESULTS. OPEN QUESTIONS FUTURE DEVELOPMENTS LITERATURE REVIEW CASE STUDIES CASE STUDIES ACTION RESEARCH + MODELLING TESTING ACTION RESEARCH LITERATURE OVERVIEW RELEVANCE EXISTING APPROACHES BEST PRACTICES HISTORICAL & CONTEMPORARY PERSPECTIVE MAPPING BEST PRACTICES MAPPING ESTABLISHMENT OF CONTEXTUAL DIFFERENCES CODIFYING OF ENABLING MODEL AND TOOLS ANALISYS OF RESULTS ACTION RESEARCH + DESIGNING Figure 6. The research structure. The top row describes the methodology used in the section, the central row describes the content of the research and the bottom row describes the outcomes of each section. The research was structured in three distinct blocks: a first part of literature review, a second part of case studies analysis and an experimental action research part (figure 5). First part – Designing entrepreneurial opportunities A central construct and fundamental pillar of business ventures is the entrepreneurial opportunity.Thereisalargebodyofresearchthathasrecentlyfocusedonopportunities, since they were largely overlooked in entrepreneurship literature and the construct
  31. 31. 32 has remained subject of much debate. Among the many research questions that come when studying opportunities are: What are entrepreneurial opportunities? Do opportunities exist and are waiting to be discovered or are created? If they are discovered, why do some people discover them and others don’t? If they are created, how is it possible to do so? What are the factors that contribute to the discovery/creation of an opportunity? Is this an individual or a collective endeavor? Can design contribute to the production of business opportunities? Although synthetically, the first chapter will summarize the contributions of entrepreneurship research on the opportunity construct and its implications for this research,aswellasattempttolinkthepossiblecontributionofdesignersinopportunity discovery (creation), since many cognitive traits possessed by successful entrepreneurs overlap with many skills designers are formally trained in. The second chapter will describe the business model construct, which is essential to understand the logic behind a profit-making business and how designers have contributed to the process of business model design. Some authors such as Eppler and Hoffmann (2011)28 and Eppler, Hoffmann and Bresciani (2011)29 argue that the visual solutions and visual artifacts designers bring to the business model design process can greatly help teams working in business model innovation because visual tools “help teams collect, process and distribute information, structure an inclusive and creative process (…), develop scenarios in order to explore the feasibility of new business models,(…) sense customer needs and business model requirements, minimize the risks of failure through testing new business model prototypes (…) and facilitate knowledge creation and transfer”.30 The central argument of this chapter is that the business model and the entrepreneurial opportunity are strongly related, and that design could help framing and shaping the entrepreneurial opportunity in the same fashion as it is facilitating and enabling the design of business models. Second part – Generating New Enterprises Through Design Culture In chapter three, two sets of case studies will be analyzed. These two sets of cases represent two different experiences in design entrepreneurship: the first one, which is historical analyzes product-based design-oriented companies, particularly Italian companies operating in design intensive industries; the second one, which is a more recent phenomenon, analyzes the ongoing trend in the United States of designers who have become founders of very successful IT companies. The chapter focuses specifically on how these companies were created and what was the role of design in the discovery or creation of the entrepreneurial opportunity that led to the creation of the firm. Chapter four will analyze case studies of different models of support systems for entrepreneurs, particularly design-related entrepreneurship, such as incubators, accelerators, co-working spaces, etc. in order to understand the differences of each format, the services they provide and the type of support that each actor proposes. The chapter maps the differences between the various formats and outlines the gaps that few of the actors have covered and that would be necessary to support better design- driven startups. 28 Eppler, M. J., & Hoffmann, F. (2011). Challenges and Visual Solutions for Strategic Business Model innovation. In M. Hülsmann & N. Pfeffermann (Eds.), Strategies and Communications For Innovations (pp. 25–36). Berlin, Heidelberg: Springer Berlin Heidelberg. doi:10.1007/978-3-642-17223-6 29 Eppler, M. J., Hoffmann, F., & Bresciani, S. (2011). New Business Models Through Collaborative Idea Generation. International Journal of Innovation Management, 15(06), 1323–1341. doi:10.1142/S1363919611003751 30 Eppler, M. J., & Hoffmann, F. (2011) Ibid. P. 26
  32. 32. 33 Third Part. Development of the Hypothesis and Experimental Verification. Chapter five will summarize the findings from the previous two sections and detail how they have contributed to the formation of the research hypothesis. Particularly in this chapter, the hypothesis is fully formed. The hypothesis of this work is that the design discipline possesses tools, methodologies, frameworks and a “designerly mindset” that could make the creation, framing, positioning, development and assessment of business ideas more reliable and efficient when exploring entrepreneurial opportunities. These toolsets could be transferred from the field of design to that of business to support the construction of new entrepreneurial ventures. The word “construction” is used since some of these tools are a step ahead of prefiguring: they are not just meant to design, but to dialogue, convince, construct, assess, and build a working prototype. (Nesta, 201131 ). The author opted for selecting service design tools as a potentially valid alternative for structuring the front-end of the entrepreneurial process because they enable and facilitate the framing, design, prototyping and assessment of complex intangible artefacts that require developing networks of actors and partners that support execution (Blomkvist, 201032 ; Meroni & Sangiorgi, 201133 ). The sixth chapter of the research describes the experimental verification of the hypothesis, in the context of an entrepreneurial open innovation platform. The platform was founded by prof. Carlos Teixeira, who kindly agreed to co-supervise the authors’ work, and Sonia Manchanda, founder of IDIOM design consultancy in Bangalore, India. The platform was founded and conceived in 2010 and started as a pilot project in India in January and February 2011. The project consists of three phases called Dream, Believe and Realize. However the focus of the research is in the Believe phase, when a workshop called “The Conclave” takes place. During the workshop participants refine the business ideas with the help of a multidisciplinary team with the objective of empowering and facilitating the creation and innovation process. The team is made up of students, professors, entrepreneurs, industry experts, ONG members and local authorities, among many others. Then, the ideas are pitched and refined, and teams who have a good idea and want to carry on and start the venture move to the next phase, in which they are mentored and put in contact with a network of investors. The chapter is divided in two parts; the first one analyzes and dissects the structure of the DREAM:IN platform in order to understand the model. The second part describes the experiment, a workshop performed within the first phase of the DREAM:IN China project in Beijing. The experiment applied a series of simplified service design tools during a workshop aimed to generate business ideas. One group used the tools and a larger control group did not. The results of the workshop are described, as well as the issues identified. e) Results The research provides an overview of the phenomenon of design-led entrepreneurship, andthestate-of-the-artofthemindsetandinstrumentsdesignhasbroughttobusiness. The empirical evidence correlates positively the use of service design tools with the marked increase in efficiency, reliability and rigor in business idea generation from the participants that used them. This is a promising sign for aspiring entrepreneurs since 31 NESTA (2011). Prototyping Public Services. Retrieved from www.nesta.org.uk/library/documents/Proto- typingLearning.pdf 32 Blomkvist, J. (2010). Conceptualising Prototypes in Service Design. Linköping University. Retrieved from http://liu.diva-portal.org/smash/record.jsf?pid=diva2:412916 33 Meroni, A. & Sangiorgi, D. (2011) Design for Services. Gower Publishing. Surrey, England.
  33. 33. 34 these instruments could be used systematically to manage the uncertainty and risk and generate valid and robust business ideas in the earliest phases of the entrepreneurial process, a crucial moment in the birth of a new venture. Entrepreneurs could then, focus their time and energy in searching, framing, developing and assessing business ideas in a structured and rigorous manner avoiding inefficient activities and the waste of scarce and precious resources. The tools also helped the participants get a marked increase in efficiency both of time and material resources. The tools are inexpensive to design and print (they can be used at no cost) as well as materials for the workshop therefore valuable results can be achieved with very little resources. This is no small factor for bootstrapping entrepreneurs, especially in this tough economy, so they need to be assertive about where they spend their valuable time, money and energy. The results are encouraging in this direction: valuable results can be achieved with very little. The positive results from the workshop also point at the potential of the use of design strategiesinthefront-endoftheentrepreneurialprocess.Participantsusingdesigntools produced more detailed and comprehensive ideas, analyzed the issues at stake more deeply, and satisfied multiple constraints and guidelines in a reliable and systematic way. The design tools also enabled the participants to use their tacit knowledge about their culture and personal expertise to contribute and enrich business concepts. This is also an auspicious sign of the potential of design in knowledge brokering. Overall, the use of design tools and strategies correlated positively with the quality and quantity of the results produced. Furthermore, the design tools helped structure and de-mystify the front-end of the entrepreneurial process. Participants could focus on generating valuable ideas and refine them through multiple iterations without being distracted by factors related to managing the work process, the learning curve of the design instruments or cognitive overload brought on by the complexity of the issues at stake. The design of new services is quite similar to that of the starting up of new entrepreneurial ventures: they might have a material substrate, but they primarily pose problems related to the business model and to the ecosystem of actors and stakeholders. Designing a new service requires the construction of a complex network - which means that it is really new to the company that brings it to the market - its development is quite close to that of shaping a new business. The toolset used to build a new service can be thus adopted to give shape to a new entrepreneurial venture, since the front-end of new product (or service) development and the front-end of the entrepreneurial process are very similar. This similarity opens up promising cross- pollination of methods between design and entrepreneurship. The experimental model, using service design tools as aids in structuring the front- end of the entrepreneurial process, proposed reliable and replicable design strategies for dealing with multiple aspects to be considered when designing business ideas, and introduces the novelty of the contribution of design tools to add rigor, validity, reliability and efficiency to the front-end of the entrepreneurial process.
  34. 34. 35 Chapter 1. Designing Entrepreneurial Opportunities
  35. 35. 36 1. The importance of entrepreneurial opportunity A central construct and fundamental pillar of business ventures is the entrepreneurial opportunity.Thereisalargebodyofresearchthathasrecentlyfocusedonopportunities, since they were largely overlooked in entrepreneurship literature. Among the many research questions that come when studying opportunities are: What are entrepreneurial opportunities? Do opportunities exist and are waiting to be discovered or are they created? If they are discovered, why do some people discover them and others don’t? If they are created, how is it possible to do so? What are the factors that contribute to the discovery/creation of an opportunity? Is this an individual or a collective endeavor? Although much attention and energy has been dedicated to a generic approach to the discovery and creation of entrepreneurial opportunities from an entrepreneurship perspective, Can design contribute to the discovery of business opportunities? If so, what could be some of the contributions of design of their discovery? Although synthetically, this chapter will summarize the contributions of entrepreneurship research on the opportunity construct and attempt to link design thinking with cognitive traits necessary to discover business opportunities. 1.1. The entrepreneurial process There is a wide acknowledgement that the entrepreneur is the person who perceives/ creates an opportunity and creates an organization to pursue it. The entrepreneurial process involves all the functions, activities and actions associated with perceiving opportunities and creating organizations to pursue them. Bygrave (2010) describes the factors that influence the entrepreneurial process highlighting the fact that there is always a triggering event that pushes the entrepreneur to pursue an entrepreneurial opportunity. The diagram synthesizes the many complex factors that contribute to the formation of new entrepreneurial ventures. However, Bhave (1994) proposes a non-linear, iterative, feedback-driven, conceptual and physical process highlighting that, even after the business concept has been Figure 1 Bygrave (2010) p. 4 Adapted from Moore (1986) Personal Achievement Locus of Control Ambiguity Tolerance Risk Taking Personal Values Education Experience Opportunity Recognition Personal Risk taking Job dissatisfaction Job Loss Education Age Gender Commitment Resources Sociological Networks Teams Parents Family Role Models Advisers Personal Entrepreneur Leader Manager Commitment Vision Organizational Team Strategy Structure Culture Products INNOVATION TRIGGERING EVENT IMPLEMENTATION GROWTH Environment Opportunities Role Models Creativity Environment Economy Competition Resources Incubator Government Policy Environment Competitors Customers Suppliers Investors Bankers Lawyers Resources Government Policy Economy
  36. 36. 37 EXTERNALLY OR INTERNALLY SIMULATED OPPORTUNITY RECOGNITION BUSINESS CONCEPT PRODUCT CUSTOMER MARKET STRATEGIC FEEDBACK OPERATIONAL FEEDBACK SENSEMAKING PROCESS SUPPLY & DEMAND BOUNDARY OPPORTUNITY STAGE TECHNOLOGY SETUP & ORGANIZATION CREATION STAGE EXCHANGE STAGE ORGANIZATION CREATED & PRODUCTION TECHNOLOGY COMMITMENT TO VENTURE CREATION defined, feedback from other actors (suppliers, customers, distributors, etc.) along the process can lead the entrepreneur into modifying his/her initial idea. This results into the entrepreneurial process being a non-linear iterative process. Murphy (2009, 2010)1 ; refers that many authors, although acknowledging that explaininghowopportunitiesareformedisvitaltoentrepreneurshipresearch,referthe existence of ambiguity on the ontological status of opportunities in entrepreneurship theory. However, most authors agree that the entrepreneurial opportunity is fundamental for the existence of the new venture and that it is placed very early in the entrepreneurial process although the debate on their nature and role in the entrepreneurial process is still ongoing (Murphy, 2010)2 . 1.2.Definition of entrepreneurial opportunity A first step in identifying what an opportunity is, depends on the school of thought. Shane (2003) 3 defines an entrepreneurial opportunity, as “a situation in which a person can create a new means-end framework for recombining resources that the entrepreneur believes will yield a profit”.4 Other authors like Plummer, Haynie & Godesiabois (2007)5 have categorized opportunities according to different economic perspectives (Table 1), however, Shane (2003) notes that these perspectives assume that the entrepreneurial opportunity is always profitable, whereas this is not always the case.6 1 Murphy, P.J. (2009) A model of the discovery, assembly, and viability of entrepreneurial opportunities. Entrepreneurship: values and responsibility. Retrieved from: http://works.bepress.com/profpjm/7 2 Murphy, P. J. (2010). A 2x2 conceptual foundation for entrepreneurial discovery theory. Entrepreneurship Theory and Practice, 35(2). Wiley InterScience Early View DOI: 10.1111/j.1540-6520.2010.00368.x 3 Shane, S.A. (2003) A General Theory of Entrepreneurship: The Individual – Opportunity nexus. Edgar Elvar Publishing, Inc. Massachusetts, USA. P. 18. 4 Murphy, P.J. (2009) A model of the discovery, assembly, and viability of entrepreneurial opportunities. Entre- preneurship: values and responsibility. Retrieved from: http://works.bepress.com/profpjm/7 5 Plummer, L.A., Haynie, J.M., Godesiabois, J. (2007) An Essay on the Origins of Entrepreneurial Opportuni- ty. Small Business Economics. 28:363-379. 6 Some of the definitions of opportunity included in the table are non-productive such as rent seek- ing. Technically other non-productive activities could also be considered entrepreneurial opportunities such as organized crime, therefore although the definitions could fit a variety of activities the context and content of the economic activity must be taken into consideration. Figure 2 Process model of entrepreneurial venture creation. Adapted from Bhave (1994)
  37. 37. 38 Theory Foundations Type of economic rent Normative Implications Opportunity Construct Entrepreneurial Strategy SCP Porter Structure- conduct- performance paradigm: Firm as a production function Monopoly rent accruing to industry structure Assess the industry structure (five forces) to implement one of three generic strategies: cost leadership, differentiation o r niche. Opportunities are objective artifacts defined by unmet needs or demand Entrepreneur chooses a market positioning strategy; initial environment conditions and “correctness” of choices have stronger implications. Resource- based view Firm as a bundle of resources Ricardian rents accruing to valuable resources Acquire and leverage valuable advantage- granting resources; develop and upgrade core competences or dynamic capabilities. Opportunities are objective artifacts that exist because of the firm and its access to resources and capabilities. Earliest decisions that influence among other things the ability to acquire and leverage valuable resources (e.g. location, legal form) are pivotal. Transaction cost economics New institutional economics, firm theory; firm as a governance structure for exchange Pareto (quasi) rents accruing to assets put to first-best use. Assess the nature of the difficulties for a given transaction; select most efficient governance structure (i.e. firm, market or hybrid) Opportunities are objective artifacts defined by possibility for reducing or exacerbating transaction “frictions” Aside from the mode of exploitation (firm or market) a key decision is the governance structure and the boundaries of the firm (ex. What to make and what to buy) Evolutionary Theory Evolutionary economics (Schumpeter): firm as a repertoire of routines Schumpeterian rent accruing to search and selection of new combinations (i.e. organizational and technological innovation) Selection of a first-best strategy is not possible, efforts to optimize lead to inefficiency. Opportunities are objective artifacts to be “found” by search routines. Less clear than other theories, but the concepts of search and discovery are strongly related. Real options reasoning Focused on the “components” representative of a firms’ total market value Schumpeterian rents based on opportunities flowing from the options “to purchase additional productive capacity in future periods” Value of flexibility in the face of uncertainty and dynamic conditions Opportunities are representative of investments today in anticipation of future investments given uncertainty. Focused on entrepreneurial strategies that allow for the leveraging the benefits of flexibility and entrepreneurial discretion. Table 1: Classification of entrepreneurial opportunities. (Plummer, Haynie & Godesiabois, 2007) Plummer, Haynie & Godesiabois (2007), identify in their table the different factors that could account for a firms’ superior performance and thus, be an essential part of the opportunity construct. These authors claim that it can be deducted from these perspectives a support for the idea that opportunities are objective not subjective phenomena that theoretically exist
  38. 38. 39 outside of the individual7 . Most authors divide opportunities in two major types: Kirznerian and Schumpeterian. Inanutshell,Kirzner(1975)andSchumpeter(1934)disagreedoverwhethertheexistence of entrepreneurial information involves the introduction of new information or just differential access to existing information. In simple words, Kirznerian opportunities are viewed as “discoveries” whereas Schumpeterian opportunities are viewed as “creation”. Schumpeterian opportunities Kirznerian opportunities Disequilibrating Equilibrating Requires new information Does not require new information Very innovative Less innovative Rare Common Involves creation Involves discovery Table 2. Taken from Shane (2003) The debate on whether opportunities are found or created has been going on for decades, with authors presenting inconclusive and contradictory results that will be detailed in the following pages. On a very basic level however, all opportunities must include references to three central characteristics: potential economic value (i.e. the capacity to generate profit), newness (i.e. some product, service or technology that did not exist previously), and perceived desirability (e.g. moral and legal acceptability of the new product or service in society)(Baron, 2007). Opportunities begin in a very elemental form, as fuzzy constructs such as “imprecisely- defined market needs, or under-employed resources or capabilities” (Kirzner,1997). The latter may include basic technologies, inventions for which no market has been defined, or ideas for products and services. Prospective customers may or may not be able to articulate their needs, interests or problems (Von Hippel, 1994).” Ardichvilietal.(2003)distinguishopportunitiesintermsofthevaluecreationcapability (known or unknown) and the value sought (or market needs). Defined value creation capability includes specifications or intellectual, human, financial and/or physical resources (e.g. general specifications for a product/service). In the matrix, value sought may represent problems and value creation capability may represent solutions. This matrix, which the abovementioned authors adapted from the creativity literature (Getzels, 1962), differentiates between opportunities based on their origin and degree of development. The authors however point out that these phases could be subsequent, with opportunities going through the four phases. Nevertheless, it is assumed that the solutions are technology-based. 7 Plummer, L.A., Haynie, J.M., Godesiabois, J. (2007) Ibid. P. 373
  39. 39. 40 Baron (2006) recalls that opportunities emerge from a complex pattern of changing conditions – changes in technology, economic, political, social and demographic conditions. They come into existence at a given point in time because of a juxtaposition or confluence of conditions that did not exist previously but is now present. For Byers, Dorf and Nelson (2010) an opportunity is a timely and favorable juncture of circumstances providing a good chance for a successful venture. They acknowledge that discovering (or creating) opportunities is a creative process that relates a need to the methods, means or services thatsolvetheproblem.Agoodopportunitycreatesvalueforthecustomer.Anotherway of describing a good opportunity is to describe the customer’s pain, which represents the extent of need for the solution of a problem. Thus, a high value solution is sought by a customer who feels significant pain or need. 1.3. The discovery perspective One of the two major perspectives on the origin of entrepreneurial opportunities is the discovery approach. According to these authors, opportunities exist and are objective entities that are waiting to be discovered by alert individuals. The basic assumption of this perspective is that there are sub-utilized resources in existence and the entrepreneur re-configures these resources so they can yield a profit. An example would be, for instance, the existence of an empty commercial space in a neighborhood. The entrepreneur might then decide, based in different cognitive processes, that if s/he set up a restaurant in that place, s/he might yield a profit. In doing so, s/he establishes a new means-end framework for a profit. Shane (2003) argues that this process, since it is cognitive, can only be carried out by an individual. Therefore most research on the Kirznerian perspective is focused on why some individuals perceive opportunities and not others. Critics of this perspective argue that these types of opportunities are not innovative (for example, speculating with values in the stock market and or buying and reselling a property for a profit are also examples of Kirznerian opportunities). “Discovery entrepreneurs” focus on predicting systematic risks, formulating complete and stable strategies and procuring capital from external sources. The advantage of these MARKET NEEDS VALUE CREATION CAPABILITY Undefined Defined Unidentified Identified Dreams I Problem Solving II Technology Transfer III Business Formation IV Figure 3. Value Creation Capability. Adapted from Ardichvili et al. (2003)
  40. 40. 41 entrepreneurs comes from being the first to decide to exploit them. However, since the information about these opportunities and their exploitation is widely available these first mover advantages are difficult to sustain (Lieberman and Montgomery, 1988). Nevertheless, discovery authors mention some individual traits that contribute to the “discovery” of entrepreneurial opportunities. These traits could enable entrepreneurs to react to information in their environment and produce numerous business ideas. Someofthesetraitsaretypicalofdesignersanddesignculture,andonecouldarguethat designers could be well equipped to detect and perceive entrepreneurial opportunities. This does not imply that they could be successful entrepreneurs but merely that they could be better trained at detecting potential opportunities. However, the current trend is to integrate some of this “designerly” capabilities into business curricula, or to create design-driven curricula created ex-facto for business managers, given that design has been deemed a suitable answer to the challenges of finding new ways of thinking and working, that can be applied in situations of complexity, uncertainty and ambiguity and generate new insights and new solutions (Matthews, Bucolo and Wrigley, 2011). Some of the early attempts to integrate design education in business curricula included joint courses by the Rotman School and the Ontario College of Art and Design; The Illinois Institute of Technology’s Institute of Design, a nine-month-long executive master’s degree program in design methods; and Stanford University’s $35 million commitment to launch its ‘d.school’, for people from large companies and startups to come to learn design thinking. 1.4.The Creationist Perspective In creation theory, opportunities to produce and sell new products or services do not exist until entrepreneurs act to create them. According to this theory, entrepreneurs do not “recognize” opportunities and act upon them but rather, they act and wait for a feedback from the market. Then they readjust their initial offering and act again. In acting, entrepreneurs create opportunities that could not have been known without the actions they took. Entrepreneurs also may not be able to foresee how the market will react to their offering and can only have hypotheses. A key difference between a “business idea” or “creative idea” and an entrepreneurial opportunity from a creationist point of view is the fact that the entrepreneur must act on the idea so it can become an opportunity (Dimov, 2007) . A fundamental fact for classifying as an entrepreneur is do to something about the idea, since entrepreneurship can be characterized as acting in the face of uncertainty (McMullen&Shepherd,2006inDimov,2007).Anopportunitycanonlybeconsideredas such when it is considered to be viable. Thus, it’s the work of the aspiring entrepreneur to work in the idea, make it as robust as possible, assess it and test it in order to turn it into an opportunity. Dimov deepens this ontological contradiction: “It is not about the idea per se; rather, it is about finding out whether the idea can really deliver its original promise. But then, how far should my idea stretch in order to be considered entrepreneurial, i.e. an opportunity? How can eventual commercial viability – and who is to make this judgment? - Have a bearing on
  41. 41. 42 whether what I am thinking bout here and now, before I have done anything about it or as I am taking the very first toward pursuing it, be considered an opportunity?” His definition of entrepreneurial opportunity embraces creativity as a fundamental part of the generation of the idea: “Opportunity as a creative product in entrepreneurship is the progress (idea + action) along a continuum ranging from an initial insight to a fully shaped idea about starting and operating a business”. This is the definition that will be used throughout this work. In the creationist perspective, the opportunities are first and foremost, imagined. The viability of the idea remains to be seen. Then, a sense-making process will begin in order to clarify the viability of this vision of a possible future. The sense-making process needs the feedback of the entrepreneurs’ peers and members of his social network. During this process the idea will be refined and it will progress from “opportunity” into a more structured form of business concept. As the business concept is refined it becomes more complex, including product/service concept (what is to be offered), market concept (to whom it will be offered), supply chain/marketing/operations concept (how the product/service will be delivered to the market)(Cardozo, 1986). This development process, which some authors call objectification, involves proactive efforts much like that of new product development but the development process here gives rise to an entire business, not just a product (Pavia, 1991). A key point of this theory is the generation of new knowledge by acting and creating. The process is refined and repeated for as many times as possible. This process, called effectuation, is acknowledged to be messy and non linear. As such, the opportunity develops as a social construction and does not exist apart from the entrepreneur (Shackle, 1979; Sarasvathy, 2001; Baker and Nelson, 2005) . In this context of high uncertainty what matters the most is not just reorganizing existing resources and information but rather, asking the right questions, designing new experiments, remaining flexible and learning (Mintzberg,1994). When entrepreneurs do not have well understood and deep knowledge of the opportunities they are enacting, learning by doing is a more effective guide to entrepreneurial action than detailed planning (Argote, 1999 in Álvarez and Barney, 2007). Entrepreneurs in these conditions develop their own knowledge structures through repeated experiments and then use those knowledge structures to give the information they create form and meaning (Walsh,1995 in Álvarez and Barney, 2007). Furthermore, even though the creationist perspective acknowledges the role of the individual in the creation of the initial business idea, the picture is not complete. Dimov (2007) argues that the context, the environment and the entrepreneur’s social circle can heavily influence the entrepreneur in this very early stage. Because in this perspective opportunities are viewed as social constructions, a key ability of the entrepreneur would be the ability to reach consensus and produce coalition building to effectively influence current economic and social structures in ways that give rise to opportunities for profit (Shackle, 1979; Weick, 1979; Giddens, 1984; Sarasvathy, 2001; Dimov, 2007; Felin and Zenger, 2009 in Wood and McKinley, 2010). Thus, the entrepreneur first envisions his or her idea, and then initiates a sensemaking process to clarify the viability of the idea. This sensemaking process takes place through interactions between the entrepreneur and his or her peers: for example, family, friends, and mentors. If the entrepreneur
  42. 42. 43 decides to exploit the opportunity, then he or she attempts to enact the opportunity by engaging the social structure and trying to involve potential stakeholders into supporting the venture. The support of these individuals is needed to turn the opportunity into a working business (Lounsbury and Glynn, 2001 in Wood and McKinley, 2o1o). In this perspective consensus building is a key to the successful enactment of opportunities and that social relationships and reputation help facilitate that task (Wood and McKinley, 2010). 1.5. Reconciliation between discovery and creation perspectives. In recent years, however, a few authors have come to the conclusion that both discovery and creation theory can coexist, or perhaps even be two ends of the spectrum. They are rarely found “pure” in practice, and many authors acknowledge that most entrepreneurial opportunities entail a phase of discovery, a phase of creation and even the influence of luck. Chandler,DeTienne&Lyon(2003)discussthedifficultyofcategorizingentrepreneurial opportunities and advice that most of them are a mixture of the following factors: 1. Pro-active search: Individuals identify opportunities through purposeful, deliberate search. The abovementioned authors highlight the fact that many authors pinpoint at this modality of discovery within existing organizations (corporate entrepreneurship). 2. Problemistic search: Search of solutions to specific problems expressed in terms of dissatisfaction with the performance of existing activities. 3. Fortuitous discovery: Opportunities are discovered fortuitously by those individuals that are alert to changes in the environment and “have the ability to notice without search”. Other authors acknowledge that entrepreneurs must have also knowledge in order to recognize potential opportunities when they arise. 4. Opportunity creation: As proposed by Schumpeter, the opportunity is created by the entrepreneur or the firm and the consumer is “educated” to desire the particular product . In this perspective opportunities can be created in five areas: the introduction of a new good, a new method of production, the opening of a market, the conquest of a new source of supply and the carrying out of the new organization of any industry. This model particularly is the one that has longest development times and requires high levels of individual creativity and action since, as Shane (2003) recalls, it must be remembered that opportunities in themselves lack agency. The mere existence of an opportunity does not spontaneously result in exploitation. This can only happen through the action of a human being. Chandler et al. (2003) give the example of an animal bandage company created by a retired magazine manager, as an example of the difficulty of classifying opportunities. The manager’s cat got into a fight and needed stitches. When the cat was brought home from the veterinarian he started knocking things over because of the collar they put him to stop him from licking his wounds. He and his wife fashioned a bandage out of a stocking for him to use as a control top. This eventually became the company’s first and primary product. This story involves nearly all of the above-mentioned factors: a fortuitous circumstance (the cat fight), focused problemistic search (finding a substitute for the collar), and opportunity creation (creating a new product and new
  43. 43. 44 company which did not exist before). Other authors such as Baron (2007) although explicitly embracing discovery theory, acknowledges that designing and developing a product involves creation. Thus, discovery may be referred to the moment of perceiving a need or “connecting the dots” in order to envision a potential opportunity however when it comes to designing an offering one can talk about creation. One could, for instance, discover a market need or a change in consumers’ behavior but then in order to satisfy this need, the entrepreneur should create a product or service to satisfy this need.
  44. 44. 45 1.6. Individual Cognitive Factors that could contribute to the discovery/creation of entrepreneurial opportunities Entrepreneurship research has been studying the factors that contribute to the discovery/creation of entrepreneurial opportunities. So far, these contributions can be mapped along two axis: Figure 4. Mapping of the different strains of entrepreneurial research that analyze the variables that contribute to opportunity discovery/creation This section of the research will focalize mostly in the research that has been done in the areas covered by the inferior right quadrant: those factors inherent to cognitive factors internal to the individual, since a firm body of literature supports the notion that internal cognitive traits of people enable them to identify and construct entrepreneurial opportunities. Support systems that enable the creation of new firms such as incubators, clustering, venture capital etc., thus, external system models to the organization will be discussed in chapter 4. Since the initial phase of opportunity idea or “insight” happens inside the individual’s mind, a big strain of research has focused on the personality traits, cognitive processes, life experiences and knowledge possessed by individuals who discover/create entrepreneurial opportunities. Some of the cognitive traits possessed by alert entrepreneurs, overlap with cognitive traits that are also characteristic of design thinking. Thus, it could be argued that designers may be more inclined to spot opportunities because they are formally trained in the same thinking skills that facilitate discovering them.
  45. 45. 46 1.6.1.Individual cognitive factors: Creativity Creativity is acknowledged to be an important factor in the discovery/creation of entrepreneurial opportunities. However, detailed research is lacking and some of the findings are mixed (Gielnik, Frese, Graf et al., 2011)8 . Creativity is best understood as an iterative process of divergent and convergent thinking to generate, evaluate, refine and eventually come up with a creative idea. (Basadur et al., 1982; Mumford et al,. 1991; Ward et al., 1999). A systematic examination of creativity in the entrepreneurial process would thus require disentangling the different stages of both the creative process and the entrepreneurial process.9 Some of the mixed findings relating to the relationship between creativity and generation of entrepreneurial opportunities may have to do with the fact that different measures of entrepreneurial success are used such as business ideas, business opportunities, venture growth, etc. which scholars have attempted to link with creativity. Shane (2003) also acknowledges that there is evidence that creativity and innovation of a firm’s founders is positively linked to some measures of innovation and success of a firm. Creativity can be defined as a process that alternates divergent and convergent thinking. Divergent thinking facilitates the generation of multiple novel, and original ideas whereas convergent thinking facilitates the detection of applicable, correct and useful ideas (Basadur et al., 1982; Brophy, 1998; Cropley, 2006; Mumford et al., 1991 in Gielnik at al., 2011.) Through divergent thinking, people produce an initial set of multiple and original ideas that form the basis for subsequent stages of evaluation and refinement. In the case of designers, it needs to be highlighted that although they have been stereotyped and portrayed as being exclusively “creative” and “thinking outside of the box” in popular media, they possess both sets of skills that distinguish creativity as an asset: training in both divergent and convergent thinking. It is also to be noted that although design is most notable for its “creative outcome”, (creativity in the form of a product), in recent years design’s focus has shifted into creativity as a process. Cross (200610 ) reports that the mental insights defined as creative leaps are not as personal and idiosyncratic as the “romantic” popular notion of the creative genius tends to repeat. In a protocol study done in 1998 with experienced industrial designers, Cross and Dorst reported that all subjects when confronted with a design problem had the same creative breakthrough. All nine linked together the same pieces of available information and used this as a basis for their solution concept. All nine thought their insight was a unique personal insight11 . Thus, it can be deducted that the training and experience these designers had enabled them to combine the information correctly. Even in a discovery perspective the creativity factor is important, because according to Kirznerian scholars, entrepreneurial opportunities mean the need to reorganize resources into a new means-end framework. In order to do so an entrepreneur needs 8 Gielnik, M.M., Frese, M., Graf, J.M., Kampschulte, A. (2011) Creativity in the opportunity identification process and the moderating effect of diversity of information. Journal of Business Venturing,27, (5), September 2012, Pages 559-576, ISSN 0883-9026, 10.1016/j.jbusvent.2011.10.003. 9 Gielnik et al. (2011) Ibid. P. 560 10 Cross, N.(2006) Designerly Ways of Knowing. Springer-Verlag. London. P. 85 11 Cross, N. (2006) Ibid. P. 86
  46. 46. 47 imagination and creativity because it involves identifying, defining and structuring novel solutions to open-ended problems. (Harper, 1996; Sarasvathy, 2001 in Shane, 2003). 1.6.2. Dealing with ill-defined problems A fundamental characteristic of design thinking is the fact that it deals with ill-defined or wicked problems. As Cross (2006)12 puts it: “It is also now widely recognized that design problems are ill-defined, ill- structured, or ‘wicked’ (Rittel and Webber, 1973). They are not the same as the ‘puzzles’ that scientists, mathematicians and other scholars set themselves. They are not problems for which all the necessary information is, or ever can be, available to the problem-solver. They are therefore not susceptible to exhaustive analysis, and there can never be a guarantee that ‘correct’ solutions can be found for them. In this context a solution-focused strategy is clearly preferable to a problem-focused one: it will always be possible to go on analyzing ‘the problem’, but the designer’s task is to produce ‘the solution’.” Thus, designers are used to dealing with open-ended problems and have developed the ability to handle them and produce solutions, even in absence of all the possible information about the problem. This also deals with another important traits that entrepreneurs should possess when starting a venture: the ability to deal with uncertainty. 1.6.3 Generalization over small samples and use of heuristics Another characteristic of entrepreneurs is their overconfidence in their own abilities. This might be considered a positive optimism bias because overconfidence is the belief in the accuracy of one’s judgment that is too high given actual data. Overconfidence encourages people to exploit entrepreneurial opportunities (Busenitz, 1999) because it leads people to take action in situations in which they do not have enough information to assess the likelihood of their success, but where further investigation would reveal the poor odds, a short opportunity half-life, or the low value of the opportunity facing them (Busenitz and Barney, 1997; Johnson, 1986; Cassonm 1995; De Meza and Southy, 1996; Wu, 1989 in Shane, 2003). This overconfidence is related to another cognitive trait that is characteristic not only of entrepreneurs but of designers as well: a tendency to generalize over small samples. This trait, called representativeness bias, encourages a person to exploit entrepreneurial opportunities. Decisions to exploit opportunities must be made in situations where there is little historical information to guide the decision. Moreover, these decisions have to be made under significant uncertainty, in settings in which greater effort to analyze information will not resolve that uncertainty (Busenitz and Barney, 1997 in Shane, 2003). This is related to another individual trait: optimism, meaning they expect positive outcomes even when such expectations are not rationally justified (Hmierleski and Baron, 2009). Busenitz and Barney (1997) also demonstrated that entrepreneurs tend to overestimate the probability of being right and overgeneralize from a few characteristics or observations more than managers of large, well established organizations. Busenitz and Barney (1997) point to the use of heuristics, or “rules of thumb” as a way 12 Cross, N. (2006) Ibid. P. 7

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