Six Traits Of America’s Entrepreneurial Culture

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The quality of life we enjoy in America today can be traced back directly to our entrepreneurial culture. The innovations of automobiles for everyone, safe, well-constructed homes, the electricity grid and all the devices attached to it, the internet and all its pages and interconnections, sanitation, medical care, airplanes that whisk us around the world and around America – whatever combination of things makes you think “quality of life” can find its origins in entrepreneurship.

We can differentiate between entrepreneurship and entrepreneurs. Entrepreneurship is an economic function, which can be considered in the abstract, separate from the individuals who practice it. Entrepreneurship is the process of introducing customer-approved innovation – including all those items on the list above, and all the many more that have customer approval, from Disneyland to cosmetic dentistry. The function of entrepreneurship comprises the desire of customers for betterment, the alertness of entrepreneurs to identify this desire as an opportunity for profit, and the implementation of that opportunity as a successful commercial business that delivers the betterment that the customer seeks. Entrepreneurship as a function begins with the customer via an unmet need, and finishes with the customer via their approval. There’s a multi-stage learning cycle: the customer learns what to want, what’s available to meet their need, and how to make accurate choices from everything that’s offered.

There’s an individual who instantiates the function of entrepreneurship – the individual (or firm) we call the entrepreneur. The entrepreneur is not an abstraction but a real flesh-and-blood person who performs the actions of entrepreneurship. These actions include the diagnosis of what the customer needs – which is often not well-articulated, because the customer is better at identifying what’s wrong or what’s missing or what falls short in their current arrangements, but not very good at inventing the future innovation that will fix the problem. Through the use of human understanding, the entrepreneur imagines the new future that the customer can’t yet articulate, and embarks on the process of trying to bring it into existence. Entrepreneurs are dedicated to better futures.

Connecting the abstract function of entrepreneurship and the personal commitments of entrepreneurs is an entrepreneurial culture – the behavioral norms and practices and institutions that provide the social context for entrepreneurship, both in the cultural permission for customers to always demand improvement, and in the cultural approval of the risk-taking entrepreneur pursuing the uncertain market reward of an imagined future. If the consumer culture was one of accepting the status quo, there would be no entrepreneurship, and if the producer culture was one of intolerance of risk and uncertainty, the same would be the case. The consumer culture is as important as the producer culture.

An entrepreneurial culture includes:

  • Optimism for the future – for a consumer to believe in the potential for betterment in the future requires an optimistic outlook; the same goes for the entrepreneurs who believe they can deliver that betterment. Optimism is an American trait. It’s not felt so much in European cultures, for example, where existential dread and a sense of civilizatinal and cultural decline are more the norm.
  • Creativity – entrepreneurial innovation does not result from bureaucracy or linear systems of management or mathematical models or computational projections or even from scientific inquiry experimentation. It stems from creativity. Someone imagines a better future and imagines how to bring it about. A design process brings the future into the presence via sketches, prototypes, blueprints, molds, and trial and error. Americans are creative. They created a nation and a constitution, they populated empty land west of the Rockies, they created railroads and corporations and a legal system where there had previously been nothing. Creativity is a national trait.
  • An open, mobile society – the ranks of the entrepreneurs are not limited to those born wealthy and privileged and educated at the best schools. They’re not even limited to those born in America. Our society is open to mobility in multiple directions and entrepreneurship benefits from this social mobility.
  • Risk – an entrepreneurial culture does not embrace pampering or sheltering or avoidng risk. It seeks risk. It seeks the uncertainty that means it is possible to imagine and seize an pportunity withiut any guarantee.
  • Skin in the game – the reward for risk is profit, acclaim, recognition and influence. Entrepreneurs strive for these outcomes; the entrepreneurial culture grants them this level of privilege if they are successful in improving others’ lives. Skin in the game means taking the risk and thereby qualifying for the reward.
  • The right to succeed – a few entrepreneurs achieve untold riches; many achieve great financial success. The entrepreneurial culture celebtrates their success and sets them up as examples for others and for future generations. Let’s all be entrepreneurs!

The opposite traits will undermine the entrepreneurial culture. If we become pessimistic and subscribe to the idea of American decline; if we permit ourselves to be governed or managed by bureaucrats following restrictive standardized rules; if we close ourselves off to immigration or mobility of any kind; if we fear risk and give up on the rewards that come with it; if we criticize and decry entrepreneurial success because we resent the level of reward our successful entrepreneurs are accorded; these are the feelings and actions and tendencies that will bring an end to American entrepreneurship. We’ll catch the European disease of restraining entrepreneurship by over-regulating and over-bureaucratizing. We might fall into the Asian error of state-mediated entrepreneurship. We might inherit the South American fear of entrepreneurship.

The entrepreneurial culture is not something that can be governed by the apparatus of the state. It’s not something that can be taught at university. It’s much more likely to be communicated at the family dinner table, and spread by sharing optimistic attitudes and open-minded delight in possibilities. It is strengthened by open-minded acceptance of every experiment, and by welcoming innovation on principle. It’s collaboration and participation and inclusion and expansiveness. It’s the embrace of change, even when it is uncomfortable. It’s open-minded active learning.

Let’s hope we can maintain it. Let’s try hard.

167. Mo Hamzian: Everyone Deserves the Best Workplace

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There’s a lot of speculation about the future of work — what form it will take, where it will be done, and who will do it (including the robots versus humans debate). We talk to Mo Hamzian, an entrepreneur who is not only theorizing about the future of work, but building newly imagined workspaces that combine spatial design with technology and custom services, making elite workspaces available to everyone.

Key Takeaways and Actionable Insights

Entrepreneurship is now both an economic and societal trend, opening up business opportunities of its own.

Entrepreneurship is now, as our guest Mo Hamzian styles it, “a thing”. It’s in the forefront of culture, it’s always in the news, it’s a lifestyle choice as well as a business choice, it’s a career, it’s a source of new heroes for our time.

  • Institutions of entrepreneurship are growing: schools are teaching entrepreneurship, media are covering entrepreneurship, technology is supporting entrepreneurship.
  • Standards are emerging: tools like our own value learning process and 4 Vs value generation model, as well as processes like the Business Model Canvas are becoming standards of the entrepreneurial method.
  • The sharing of entrepreneurial knowledge in a community is expanding via mentoring by experienced entrepreneurs.

As a consequence, we see the emergence of new societal norms.

An entrepreneurial society favors self-reliance over dependency, resourcefulness over entitlement, breakout achievement versus structured conformity, and creativity over formula. Entrepreneurship is understood as a journey that is never completed, and may adaptively follow many diversions in pursuit of evolving goals, rather than a predictable climb up the hierarchical ladder of the corporation. Keep thinking rather than keep climbing.

Even inside the corporation, structure is giving way to small self-organizing teams and corporate procedures are being replaced by adaptiveness and agility.

One of the implications of the growth of entrepreneurship is the trend that gets the name “The Future Of Work”.

Entrepreneurship brings many significant social changes, including flexibility of time and place and methods of work. And the government’s pandemic policies of shutting down office and work spaces and encouraging work-from-home accelerated those changes. Now it is clear, more than ever, that, in the digital age, there is no need whatsoever to commute through grey suburbs on jammed roads or overcrowded trains to get to a dull and depressing cubicle farm just so that you can be in the same building with the other sad souls who are your colleagues.

Cities will empty out, commercial office markets will enter a period of secular decline, and individuals will feel liberated and empowered to do their best work in the physical location and surroundings of their choice.

One way to seize the opportunity represented by the future of work is via real estate itself — repurposed and re-imagined.

Mo Hamzian is an entrepreneur who sees the opportunity in real estate for work where many might see only decline. He looks at it through a different lens, as entrepreneurs do. Can real estate provide the multi-purpose flexibility and adaptiveness required for today’s and tomorrow’s work patterns? It can if looked at creatively.

The creative lens is the customer-first lens: everyone deserves the best workplace.

Business thinking that prioritizes customer sovereignty can often solve the most challenging problems. Mo Hamzian translates the unmet needs of today’s distributed workforce as seeking the best space from which to work — comfortable, well-equipped, good acoustics and conferencing technology, a place that “recognizes you” and your needs.

He developed his ideas, in part, by studying the workspaces of the business elites — the top bankers, tech executives and corporate CEO’s. These are immersive, high tech, high comfort, high style ecosystems you never want to leave. They’re available to a very few. What if they were made available to a much wider audience? This is the way many markets evolve — first, affordable at great expense only for a few, then quickly expanded to a mass audience.

This is the idea behind VEL — Mo Hamzian’s startup to bring elite workspaces to a wide audience of users on demand.

  • Do your best work: the VEL concept is aimed at personal productivity, encouraging the individual to achieve high quality output in a temporary workspace. This implies, of course, some responsibility and commitment on the part of the user.
  • Achieve flow: the ultimate level of individual work is characterized by the feeling of flow — the fulfilment of experiencing how good you are and how much you are improving while doing your work. VEL’s workspace and technology are designed to support flow.
  • Elite environment for everyone: Mo Hamzian’s study of immersive elite workplaces enables designs that bring the same experience to a temporary workspace.
  • Technology: From wi-fi telecommunications and conferencing to (in the future) A.I. and VR and holography, there’s a lot that technology can do to support high quality and high productivity work, and VEL can provide it on demand at variable cost and affordable pricing.
  • Flexible access: customers can rent VEL space and technology by the hour or by the day, in whatever configuration they prefer.
  • Democratization and decentralization: VEL workspaces are available to all, with an aim to distribute them across the country for wide availability, whether urban, suburban, or rural, wherever work can be done.
  • Customization and recognition: Ultimately, the high-tech VEL workspace will recognize the individual when they walk in and configure to their customized set of needs.

The VEL concept removes frictions and barriers that might otherwise stand in the way of the future of work and the future of distributed entrepreneurship.

As we advance towards a more entrepreneurial future across the entire business landscape, from big corporations operated by flexible, agile teams to individual practitioners, gig workers and small, highly specialized and highly networked companies, concepts like VEL will be an important part of the enabling infrastructure.

Additional Resources

Mo’s LinkedIn page: LinkedIn.com/in/MoHamzian

Mentioned by Mo as a worthwhile mentoring site: GrowthMentor.com

VEL website: MyVEL.com

99% Of Businesses Practice Free-Market Capitalism. Our Largest Corporations Practice Something Else.

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Markets are incredible. They are the poetry of economics. We use them every day to solve complex social issues.

These phrases are taken from Anthony J. Evans’s book Economics: A Complete Guide For Business. Professor Evans is right: we don’t appreciate the wonder of markets as much as we should. They enable people who don’t know each other to collaborate and exchange worldwide and to find their specialties and contribute individually in the most productive way they can to the economic growth, progress, and prosperity that eliminates poverty and elevates prosperity and makes lives everywhere more comfortable, safe and purposeful.

Within markets, there are producers and consumers – firms and their customers. 99.9% of the firms are what are often called small businesses. They’re the backbone of the economy, acting as the producer in collaboration with customers in the co-creation of the majority of economic value. Their mode is entrepreneurship, the customer-centric approach to business that elevates the identification and understanding of customer needs to the level of primacy above all other activities. The understanding of customer needs is the necessary and irreplaceable asset in which these businesses know they must invest. Once they have assembled the asset, they creatively apply it to the design and delivery of the best solution among all those the customer could choose from. These businesses understand what Austrian economists refer to as customer sovereignty: the customer is the boss and decides which firms are successful or not successful – i.e. receive the market’s reward or the market’s penalty – through their buying or not buying what’s on offer.

In these cases, we can think of business firms as mini-markets. They operate via the matching of supply with demand. The fundamental market signals of customer choice (whether the customer is willing to buy or not) and pricing (what the customer is willing to pay) flow through the firm as indicators of how the firm should allocate its resources – how much to invest in particular lines of production or service, how assets should be allocated and focused, who should work on what, what improvements are needed, what innovations should be targeted to the future, what to spend R&D dollars on. In the metaphor employed by Austrian economist Ludwig von Mises, the customer is the captain of the ship, and the business takes the captain’s orders and points the ship in the direction the customer wants to go.

In aggregate, that’s why markets are incredible. They are tools for us all to co-create the value we seek, and collaborate in making life better for all of us.

Outside of the 99.9%, however, value co-creation is not quite so pure or unadulterated. In the big corporations that dominate the business news and many people’s thinking about the production side of the economy, there are three significant distractions from customer value creation.

The focus on shareholder value detracts from customer value creation.

The maximization of shareholder value has been an almost exclusive focus of the largest S&P 500 companies over their recent history. Maximizing shareholder value means that the customer is not in first position for these corporations. Not their first priority, not the most important focus of their time, effort, resources, and investment. They have more important things to do.

One of those things is the buying back of their own stock from shareholders, a pure act of financial engineering designed to boost total stockholder returns. Reducing the number of outstanding shares on the market artificially inflates a key measure of a company’s value: its earnings-per-share, or EPS. Buybacks are often followed by an immediate surge in stock price, at least in the short term. According to Knowledge At Wharton:

The buyback boom began in the 1980s, and has only accelerated since. In the last decade, the author writes, “American firms have spent a stunning $7 trillion buying back their own stock — the equivalent of half their profits.” In the last two years, buybacks and dividends have actually exceeded the net earnings of publicly traded American companies. Adding insult to injury, companies like Apple often fund these buybacks, not by dipping into their substantial cash reserves, but by borrowing. In 2013, despite having $145 billion in the bank, Apple borrowed $17 billion. 

https://knowledge.wharton.upenn.edu/article/pitfalls-financialization-american-business/

The Institute For New Economic Thinking reports

The most egregious buybacks offender is Apple, which from October 2012 through December 2021 threw away $484 billion—92 percent of its enormous net income—on open-market repurchases, the sole purpose of which was to boost the company’s stock price. In addition, Apple funneled $118 billion in dividends to shareholders, sucking up another 23 percent of net income. For March 1, 2022, Apple’s safe-harbor daily “limit” for buybacks under Rule 10b-18 was $3.5 billion.

https://www.ineteconomics.org/perspectives/blog/where-did-you-go-vice-president-joe

Knowledge At Wharton summarizes the financialization of American business this way:

Today, finance, while making up only 7% of the economy and creating a mere 4% of all jobs, generates more than a fourth of corporate profits. Large corporations increasingly came to mimic the banks that were supposed to serve them and to seek profits in ‘financial engineering.’

https://knowledge.wharton.upenn.edu/article/pitfalls-financialization-american-business/

Bureaucracy Has No P&L Motive And Therefore No Customer Focus.

In his book titled Bureaucracy, published in 1945, economist Ludwig von Mises outlined the threat that an expanding bureaucracy poses to economic prosperity and a free society. His concern was with government bureaucracy. He did not believe that private companies would develop throttling bureaucratic structures, because bureaucracy develops where there is no profit and loss motivation. Companies can’t afford bureaucracy that is not responsive to customer signals, because the approval of customers determines whether the company is profitable or not, and whether it survives.

He was wrong. Our largest corporations have now been overrun with their own internal bureaucracy. It started as compliance: bureaucracy as a defense against government legislation and regulation. When government creates OSHA (Occupational Safety And Health Administration) for example, firms must create an OSHA compliance bureaucracy, people, and resources that are dedicated not to creating customers and fulfilling their needs but to compliance with OSHA directives and standards. There are many such government departments and repositories of regulations that require corporate compliance bureaucrats.

But recently, the role of bureaucracy in corporations has changed. It is no longer confined to the defensive role of avoiding the fines and jail sentences the government hands out to those who fail to comply with regulations. The corporate bureaucracy has now gone on the offensive. It proactively asserts, in the names of its acronymic policies of ESG, DEI and CSR, the right to compel corporate behavior that has nothing to do with serving customers and everything to do with curtailing the capitalist focus on profitably serving customers. Bureaucracies impose internal costs on the firms that employ them, and make sales and revenues more difficult to attain, not easier. The anti-capitalists have infiltrated capitalism.

Ludwig von Mises was right: bureaucracy lacks the profit-and-loss motivation that drives businesses to thrive. Now it’s no longer the external enemy but rather the virus inside the system.

Crony Capitalism Is Not Capitalism.

The third stage of corporate decline following financialization and bureaucratization is statification: they become the state, they merge with government so that it becomes hard to know whether the state owns the means of production or the means of production own the state. In the US, we refer to the outcome of this merger as crony capitalism, but it’s worse than that mild term for fascism implies. The corporations begin to be policy designers and implementers, such as Shell Oil on climate change policy and Ford Motor on energy policy. In the opposite direction, Amazon becomes a recipient of government subsidies.

As George Orwell put it:

The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.

George Orwell, Animal Farm

For customer-first capitalism, we must look to the 99.9% who are not at the trough like the pigs and the farmers – the corporations and the government – and who uphold the promise of free markets and their customer-granted rewards.

166. Murray Sabrin: What Entrepreneurs Do When The Yield Curve Inverts

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To what extent should entrepreneurial businesspeople concern themselves with macro-economic variables? At E4B, our point of view is: not much. We don’t believe you can fully trust the data, we don’t believe you should put much credence in the interpretations of it, and we encourage businesses to concentrate on serving customers and generating value.

We made an exception this week to discuss the phenomenon of the inverted yield curve, because it might, conceivably, have some immediate effect on businesses and their customers. We talked with Dr. Murray Sabrin, author of Navigating the Boom/Bust Cycle:  An Entrepreneur’s Survival Guide.

Key Takeaways and Actionable Insights

The yield curve inverted. What does that mean?

Technically, the yield curve inversion refers to short term interest rates on the 2-year treasury note doing above the interest rate on the 10-year treasury note.

Chart 1

The reason this is of interest is that, historically, it’s a signal that the countdown to a recession has begun. At the human level, it means that market participants expect tighter short-term borrowing conditions, potentially making financing business activity more expensive and more difficult.

In reality, there’s no way to be certain of future conditions, and there are so many variables, from inflation to unpredictable Federal Reserve activities, that prediction is inevitably inaccurate.

Moreover, on their own terms, the Federal Reserve interest rate data are not consistent. The 3-month treasury rate remains 2% below the 10-year rate — no inversion there.

Chart 2

Therefore, predictions of a recession should be taken with the proverbial grain of salt. It may be different this time.

What matters is what entrepreneurs do in the face of this uncertainty.

Dr. Sabrin has a number of ideas and pieces of advice for businesses.

  • Examine conditions in your own sector rather than in macro-economic variables.

Economic conditions and trends and outcomes vary significantly by sector. What’s happening in automobiles, housing, energy, and retailing is sector specific.

Look especially for those sectors where free markets are allowed to operate; there may be different trends there. For example, deflation (a continuous trend towards lower prices) might be anticipated from the technology sector as result of innovation and competitive striving, rather than the price inflation we are being promised from other sectors.

  • Similarly, pay greatest attention to your most relevant geography: neighborhood, city, and state.

Economic conditions in Florida are a lot different than in California. Manhattan is different than San Diego. Your neighborhood might be different. Maybe your business operates internationally. Think about your relevant geography and not about the macro-economic headlines.

  • Focus first on your supply chain.

Dr. Sabrin’s extensive research into the longitudinal success of entrepreneurial businesses emphasizes the important of reliable inputs. In risky economic periods, the supply chain may need bolstering — extra inventory coverage, additional suppliers in case of disruptions. This may be expensive and more expensive to finance amidst rising rates, but guarding against supply chain disruption is a primary concern. Don’t risk disappointing your customers because your supply chain breaks.

  • Maintain your most important lending relationships.

If financing is a concern, look to bolster and strengthen lending relationships. Secure a line of credit. Nurture the relationship with your bank. And explore the newly emerging landscape of fintech lending — another example of free markets expanding the range of options and possibilities for entrepreneurs.

Here’s a financial landscape map from an earlier E4B podcast — use it to become familiar with the latest financing options: Mises.org/E4B_166_PDF

Your individual cost curve is not the same as that of the market.

The current pervasive concern is with higher interest rates and higher costs. These are macro-economic variables. But the cost curve for your business does not have to be the same. Many suppliers will be lowering prices and offering promotions or special terms to maintain their business flow. You can take advantage by shopping around, rebidding contracts, and seeking out the most eager suppliers. Your micro-economics can be different than the headline macro trends.

Most importantly, seek opportunities within changing economic circumstances.

An inverted yield curve is just another instance of continuous change, and change is the condition under which entrepreneurs thrive. They find opportunities in change. There are always growth sectors, there are always customers with needs, and there are always new openings, even when some doors are closing. The agile entrepreneur is alert to new possibilities.

Additional Resources

Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide by Murray Sabrin: Mises.org/E4B_166_Book

“Financial Capital Options For Businesses at All Stages” (PDF): Mises.org/E4B_166_PDF

The Boundless Promise Of Decentralization For Business.

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Asked for one single principle for the advance of business in the current digital age, I would vote for decentralization, defined as the intentional and designed release of control and leadership from the center to the edge.

There are two major reasons for picking out decentralization as the primary focus for business improvement. The first stems from the increasing understanding of complex systems, whether from the point of view of economics or business or biology or physics. Across all the sciences, the study of how systems work, and how they can self-organize and self-improve, is revealing new ways of management. The essential finding is: don’t manage. 

The absence of imposed centralized control, i.e. no management from a center or the top of a hierarchy

The autonomous nature of subunits: individuals, teams, divisions, projects, units given autonomy and freed from management restrictions. 

In his book Out Of Control: The New Biology Of Machines, Social Systems and The Economic World, Kevin Kelly describes four properties of complex systems.

  • The absence of imposed centralized control, i.e. no management from a center or the top of a hierarchy
  • The autonomous nature of subunits: individuals, teams, divisions, projects, units given autonomy and freed from management restrictions.
  • High connectivity between the subunits: information should flow freely and multi-directionally between these individuals, teams and divisions, etc, rather than vertically up and down a hierarchy with information sharing dictated by policy and procedure, or “need to know”.
  • There’s a webby nonlinear causality of peers influencing peers. The linear connection between cause and effect, as we have always tended to understand it in management, does not apply. At best, there’s a web of causality, and, since it is non-linear, it can’t be predicted. 

These four characteristics could be summarized as the opposite of conventional organizational management in business. Corporate management wants central control, abhors autonomy, limits interconnectivity, and believes in linear causality: if we decree X, Y will be the result.  We’ll congratulate ourselves when it comes about.

Decentralization, incorporating Kelly’s 4 characteristics, can open up the world of business to new forms of organization.

Why should we seek new forms of organization? That question brings us to the second reason for decentralization: the emergent reality that in the digital age, value generation and competitive advantage are correlated with speed, including speed of learning and speed of adaptation. Releasing control will enhance speed and therefore value creation. Speed is the new economic resource; capital and people are no less relevant than before, but speed is the variable that is inexorably increasing in importance while we debate the future of the others.

This raises a new question: how do corporations “do” speed? How do they adapt in the conditions of VUCA (volatility, uncertainty, complexity, and ambiguity) that prevail in the new age? How do they activate and operate the rapid feedback loops and feed-forward loops required for market responsiveness?  How do they implement “explore and expand” – the digital age alternative to strategy and planning –  at speed? How do they do continuous change when their model has always been comparative statics – a one-year plan, a 5-year strategy, a quarterly review?

Some of the answer lies in orientation, an orientation to continuous change, but some of it must be organization and structure. Structure can change when systems change. We have some possible new models. There’s the bossless model of game-maker Valve, interesting because it aims to eliminate structure. There’s the simple rules-based model of CAS. There’s the Rendanheyi model of Haier which follows entrepreneurial principles rather than corporate structure principles, breaking the corporate structure into small self-organizing entrepreneurial groups with paid-by-customer as the business model. There’s the delegated judgment model that keeps structure but enables fast decision-making at the edge. There’s the flow model, which changes corporate hierarchy and structure to a flow, but is not fully fleshed out yet, and has theoretical variants with strong hierarchy, flexible hierarchy, and no hierarchy. There is potentially a networked model of many small specialized firms held together and capitalized by a different sort of financial engineering than today’s.

A winning model has not yet emerged, and there may be many models that succeed. They all would exhibit some characteristics of decentralization, both organizational and structural, defined as the complete release of control from the center for the purpose of speed of change and adaptation. Decentralization has the potential to create more customer value faster and more employee value. Kelly’s book suggests these emergent paths to new value creation;

Adaptability: when environmental change comes along at speed, whether it’s changing consumer tastes or new competitors,, or new regulations, decentralized organizations can adapt quickly, because they adapt at the front line, where the edge of the company interacts directly with the new conditions.

Evolving: over time, adaptability becomes evolution. Evolution is the term we give to long-term change that might look and feel gradual but is, in actuality, massive. From animals that swim to those that walk on earth, for example. Evolution is survival and the purpose of all life – and corporations – is survival. Depending on which decade you study, examining a list of the Fortune 500 companies will show that roughly one-third of them dropped out – failed to evolve and failed to survive.

Decentralization has the potential to create more customer value faster and more employee value. Kelly’s book suggests these emergent paths to new value creation;

Adaptability: when environmental change comes along at speed , whether it’s changing consumer tastes or new competitors or new regulations, decentralized organizations can adapt quickly, because they adapt at the front line, where the edge of the company interacts directly with the new conditions.

Evolving: over time, adaptability becomes evolution. Evolution is the term we give to long term change that might look and feel gradual but is, in actuality, massive. From animals that swim to those that walk on earth, for example. Evolution is survival and the purpose of all life – and corporations – is survival. Depending which decade you study, examining a list of the Fortune 500 companies will show that roughly one third of them dropped out – failed to evolve and failed to survive. Decentralized companies have better prospects.

Resilient: Bad things happen to good companies. It may seem random, although it’s not always clear whether that is the case. But if they’re not resilient – anti-fragile as Nassim Nicholas Taleb frames it – they can’t bounce back. Decentralized structures are faster at identifying damage, more honest about it (no need to defend bad strategy) and quicker to react.

Boundless. What business are we in? A lot of business theory and strategy is about defining boundaries, defending them, and staying within them. Decentralized companies can ignore boundaries, and focus on the interconnections to made from edge-to-edge, perhaps eliminating old boundaries.

Novelty. In the end, business must produce novelty. Defending share, retaining customers, maintaining and sustaining are not enough in the high-speed, always changing digital world of complex systems. Decentralization, letting lot of individuals and teams experiment and explore without asking permission from the center, is more likely to produce novelty. More experiments conducted means more surprise successes. They’ll be reported to the center soon enough.

However counter-conventional it sounds and feels, businesses should make a drive towards decentralization immediately.

165. Darshan Mehta: Insights Are Game-Changers For Business

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What drives customer behavior and customer choices? It’s the existential question for business; you’ve got to know the answer. But it’s a mystery, hard to unlock. The solution to this answer lies in what market researchers call insights, based on the Austrian deductive method that we summarized in episode #164 with Per Bylund. In episode #165, we talk to Darshan Mehta, a lifelong professional in the field, an advisor to global and local brands, an originator of insights technology, and a deep thinker in the field.

Key Takeaways and Actionable Insights

Insights mark the road to innovation and differentiation and give businesses a competitive advantage.

By definition, an insight is a deep understanding of the motivation of an individual: why they do what they do, choose what they choose, and stop doing what they used to do? What guides their behaviors, what they do with their time, and how they find betterment and ease?

These individual motivations can sometimes be exhibited as technology trends, social trends and cultural shifts. Insights help businesses understand the drivers of these shifts in the landscape, as well as how these shifts, in turn, change individual behavior. Causality works in both directions.

Insights are multi-dimensional, and businesses need to install multi-dimensional systems to generate insights.

No single method and no single information or data source will deliver the deep and rich insights businesses need. Darshan Mehta recommends a multi-dimensional approach.

Conversations with customers

This is the number one source of data for insights generation: deep, rich, personal, subjective, and revealing. It requires some skill development to be good at customer conversations. Empathy is a key ingredient — what Darshan calls “being a people person”, interested in how people feel, and with the curiosity to learn and the humility to understand that a lot of what is important to customer decision-making resides in the sub-conscious and is difficult to articulate. In fact, conversation helps people to learn how to describe their feelings and motivations, if the interviewer lets the conversation develop slowly and with time for self-reflection to dawn. The human-to-human connection factor is important, whether in a one-on-one conversation, a group setting (such as a focus group) or an online chat.

Whether your business is present in the conversation or not, customers are having those conversations, so it’s important to listen and take part.

There are tools on the econ4business.com website to frame in-depth interviews:

  • Contextual In-Depth Interview Method: View Tool

and for listening with empathy:

  • Episode 33 – “Isabel Aneyba: Listening From the Heart and the Techniques of Empathy”: Listen to the episode

Behavior observation

The Austrian deductive method comes into play when the data is in the form of behavior that we can actually observe — accompanied shopping, ethnography, buying data, shopping data, video data, eye-tracking, A/B testing. All of these give us information about behavior. The next step in insight generation is to deduce the drivers of the behavior. Sometimes we may have some conversational data or sentiment data (such as from surveys) to combine with the behavioral data, sometimes not.

The process of working backwards from behavior to motivation uses the question, “Why?” Why did they act that way? Why did they reject an alternative? What could possibly be behind the behavior? If they acted unexpectedly, or out-of-pattern, or differently than last time, why was that? The standard of 5 Why’s is often invoked to get to the deepest understanding. But it’s not the repetitive 5 Why’s of the child asking mom why they can’t have a piece of candy. The Why’s must be deeply thought-out, probing, significant Why’s to get to the next level of understanding.

Data analytics

Analysis of so-called big data can make a contribution to multi-dimensional insights generation, especially if the data relates to behavior such as buying patterns, clickstreams, and cultural shifts in behavior (like Tik-Tok usage). Data can’t reveal drivers or deeply felt dissatisfactions, but it can reveal trends and even suggest some preferences (e.g., shifts in usage from one brand of social media to another). Data analysis algorithms don’t ask why, they ask what — especially what data patterns and pattern shifts can be observed. Bear this in mind when integrating data analytics into your multi-dimensional insights generation process.

Learn the language of dissatisfaction.

The drivers of customer choice are always derived from dissatisfaction. Because they are seeking betterment, they must, logically, be dissatisfied with current conditions. It’s very tricky to identify dissatisfactions because the language of articulation is subjective and personal. Researchers and engineers and designers talk about “pain points”, but customers probably don’t. They may talk about what makes them “crazy”, or “upset”, or “frustrated”. Relative satisfaction / dissatisfaction could be revealed by brand-switching. Installing feedback loops for activation immediately after the customer’s product or service experience can help gather relevant data, especially if you can gather the feedback in the customer’s language rather than your own.

Insights are built through combination, recombination, and synthesis.

“Insights lie where worlds collide” is a quote from Darshan’s book (Getting To Aha! Why Today’s Insight Are Tomorrow’s Facts). What he means by that is it’s a combination and recombination of conversational data and analytical data and trend observations and cultural shifts that ultimately generate the insight.

Blending and mixing and putting elements together to reveal new possibilities beats logic in the process of insights generation. Call it synthesis. And before synthesis can take place, the ability to break down wholes into component parts in a creative way is required. Analysis and synthesis, destruction and creation.

Ultimately, human emotion lies behind all insights and all innovation: experiences are feelings.

Technically, the drivers of customer behavior change can be tracked to functional factors such as speed (faster), cost (cheaper), and / or convenience (easier). But beyond these lies emotion — the feeling that an experience is, was, or can be great. Customers buy experiences, not goods or services. A solution that evokes emotion results in (according to Darshan) a response that’s 12X stronger than one based on just faster/cheaper/easier. Therefore, an insight that evinces emotion — reveals it, brings it to light — is the most valuable of all.

It’s important to understand the language of positive emotion, as well as the language of dissatisfaction. An experience evokes emotion when customers call it amazing or super-cool or use superlatives of that kind.

Customers bond most strongly to businesses that can align with their highest values.

Beyond even the strongest emotional benefits lie highest values: lifetime values for which customers are always striving. Examples include family security — always a goal and never entirely realized — a sense of achievement — there’s always more to achieve — and a world of peace — we know today how elusive that is.

Brands that can associate themselves with these highest values — purpose-driven brands — or help customers attain them for themselves will be especially prized and loved in today’s markets. Humanizing brands in a digital world is a difficult standard to attain, and making the emotional connection with the customer on the subject of their highest and most strongly held values is the pathway.

Listen to the Economics For Business Podcast on the role of highest values in business.

It’s a modern expression of customer sovereignty that brand buyers are so active in evaluating products and services based on their assessment of the values exhibited by the corporations behind them, and that they seek to change the world through buying and not buying.

Better insights can help led us to a better world by identifying dissatisfactions and pointing to new solutions. Insights are visions of what makes us human, improving what connects us and unites us.

Additional Resources

Getting To Aha! Why Today’s Insights Are Tomorrow’s Facts by Darshan Mehta: Buy It On Amazon

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