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91. Curt Carlson on Innovation Champions

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Austrian economics sees an economy in motion, perpetually renewing itself. Economic agents (firms, customers, investors) constantly change their actions and strategies in response to outcomes they mutually create. This further changes the outcome, which requires them to adjust afresh.

Entrepreneurs live in a world where their beliefs and strategies are constantly being “tested” for survival within an outcome these beliefs and strategies create. It’s complex.

Key Takeaways and Actionable Insights

One of the strategies required in this dynamic system is innovation: the enabling of new value propositions to customers, sustained by new resource combinations, new technologies, new go-to-market capabilities, new channels and new delivery mechanisms.

Innovation has often been characterized as presenting the entrepreneur with an unmanageable level of uncertainty. Curt Carlson challenges this idea and believes innovation can be predictable via the utilization of sound process, captured in his N-A-B-C method, which we explained fully in E4EPod episode #37.

In addition, Curt tells us in episode #91 that the right individuals can strengthen the process by acting as innovation champions. Here are their characteristics.

1. Originate a value proposition.

The route to value starts with a value proposition — accurately identifying a need and developing the appropriately differentiated approach with the right cost structure. Champions are those who can originate innovation projects with an energizing and inspiring proposition. They are customer advocates with creative capabilities. Champions can use Curt’s process map for guidance, or our own “Economics For Business Template” ().

2. Collaborate with a complementary partner.

Innovation is a team game, and it often starts with a partnership of two. Venture capital funds often look for a team of co-founders rather than on brilliant individual. A combination of an engineer and a marketer is a good one, but there are many more. The key is that the partner is complementary: different skills, different experience, same commitment and passion.

3. Build a team over time.

The benefit of complementary skills is not limited to co-founders or co-champions. As an innovation project evolves, the need for more skills and different experiences expands. A champion is able to add complementary skills via new team embers over time, while maintaining team cohesion and integrity.

4. Learn necessary value-facilitation skills.

Recruitment is not the only route to new skills for the team. The champion should be able to recognize skill gaps and fill them via their own learning. For example, mastering the interpretation of qualitative data from customer learning sessions is imperative but not intuitive. Champions work hard at gathering the data (listening and empathy skills) and processing the data (interpretation skills) to project possible future solutions (imagination skills). These new skills are learned over time.

5. Iterate with the team and in larger forums.

It is impossible to predict how an innovation process will proceed, and what twists and turns will be necessary. A champion is able to iterate the understanding of the need, the approach to solving it, the use of technology, and the management of costs. Change is constant not only in the world, but in the innovation project. Iteration can be conducted in the small team, but the champion should also seek larger — perhaps company-wide — forums for sharing and commentary. Everyone’s input counts. Champions don’t become too possessive of their ideas.

6. Champions exhibit enviable human values.

Project teams are often under stress. Deadlines loom, experiments fail, ideas clash. A champion demonstrates human value of trust and respect and integrity that bind teams and projects together. People want to work with champions.

7. Champions take organizational responsibility.

All innovation projects are fraught with risk and uncertainty. Some will fail. Others will take unexpected turns. When the unwanted or unexpected happens, a champion takes responsibility and does not try to deflect blame to exogenous factors. All decisions are subjective, and champions take ownership of their decisions.

8. Champions persevere.

Innovation project timelines can be long. Curt described some that took 10 years or more (like the development of Siri, which eventually became associated with the iPhone4). Despite barriers that might seem insurmountable, and setbacks that might feel humbling, champion s keep going no matter what. They are inspired, and inspirational to others.

9. Champions succeed.

Success is not a behavior or a characteristic, it is an outcome. Nevertheless, with the right process and a good team, champions succeed repeatedly.

In our hyper-competitive world, without a champion success is not possible. The only viable path is to aspire to be the best at what we do. That starts and ends with someone committed to success — a champion.

Additional Resources

Check out Curt Carlson’s HBR article, “Innovation for Impact” (PDF): Click to Download

Curt’s website is PracticeOfInnovation.com. Click on “Innovative Indices” to see how to assess the innovative potential of your firm and projects.

“N-A-B-C Innovation Process” (PDF): Click to Download

“Curt Carlson: There is a Systematic, Repeatable Process to Generate Customer Value”: E4EPod episode #37

83. Clay Miller: An Entrepreneurial Journey to New Lands, New Organizational Designs and New Value

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Key Takeaways & Actionable Insights

The entrepreneurial instinct can be sparked in K-12 and around the family dinner table.

An entrepreneurial culture is highly beneficial to society at the global, national, and local level. We should examine how well we nurture the entrepreneurial instinct in K-12 schooling and in the discussions we have with our kids at home.

Clay Miller got a Commodore 64 (you can look it up!) when he was 11 years old, and his interest in computing, software and writing code started there. He was a programmer at 11 years old (something that is more common today than it was when Clay was young) and developed a taste for programming and an aptitude and some skills. He learned how to jump over hurdles of software-writing complexity at a young age.

A mentor can reinforce a young person’s disposition towards entrepreneurship, and accelerate their progress.

A local tech entrepreneur took Clay under his wing and hired him for programming projects. Clay built accounting software and other products in this arrangement as a high school student. Observing and participating in this entrepreneurial environment at an early stage in life gave Clay the idea of entrepreneurship as a future pursuit. He started to take on consulting assignments while at college, although he wouldn’t yet identify tech entrepreneurship as a “career”. He was able to begin to make the transition from pure programmer to customer service entrepreneur. Starting early can influence a lifelong entrepreneurial journey.

There are many ways to accumulate knowledge, and entrepreneurship is a fast track to applicable knowledge.

Clay chose serving customers as a pathway as opposed to continued learning in school and a conventional corporate career path. Both paths are ways to acquire knowledge. Identifying the process you prefer for knowledge acquisition – school or entrepreneurship – is a valid choice. Entrepreneurship may be the quicker and more direct route. And entrepreneurial knowledge is often more applicable, and more rapidly applicable, for your own individual economic ends.

An entrepreneurial leap forward resulted from identifying and supporting a new emergent industry.

Clay took a job as a CTO in an emerging industry; organ and tissue transplants. This enabled him to experience economic growth at a higher level through the application of technology in a high-demand environment. He learned about fundraising and financing and shaping resource allocation based on the funding available. He learned about mass customization for a diverse customer base. He learned the role of the technical advisor vis-à-vis the CEO, enabling the executive suite to achieve its vision. Finding a growth industry can accelerate your individual development.

Transition from tech expert to global customer service entrepreneur.

Clay was initially a user of offshore outsourced technological services. He mastered the economics and logistics of this organizational arrangement. Quickly, he founded his own Asia-based outsourcing corporation, and added a significant innovation: the embedded outsourced CTO. Often, firms use outsourced technology services for the flexibility of dialing up and dialing down service intensity on demand. There is a downside to this flexibility, which is loss of continuity and accumulated knowledge, as contractors move on to other jobs. Clay performs the role of CTO for his clients, ensuring them continuity of strategy, and keeps his outsourced tech talent available in his own ecosystem, so that accumulated client knowledge is not lost and can be reapplied later in the cycle.

Perception-Decision-Action

Clay’s journey can be seen as an illustration of what psychologists call the PDA cycle – Perception, Decision, Action. Entrepreneurs perceive the world around them in a subjective manner, conditioned by their individual circumstances. In Clay’s case, those circumstances included exposure to technology, and some experimentation with it, at an early time in his life. Later, he made some decisions on best choices – e.g. between school and entrepreneurship – based on his perceptions. He acted, became a tech entrepreneur and then a customer service innovator. Every action changes the world, and so changes the entrepreneur’s (and the client’s) perceptions, leading to new decisions and new actions. Entrepreneurial success emerges from the process.

See our PDA graphic to further stimulate your thinking.

You might also enjoy reading this paper from our colleagues Nicolai Foss and Peter Klein on the language of opportunity. They say that opportunities do not exist in any objective fashion. They are not “out there” to be “seized”. Entrepreneurs create their own outcomes. Foss and Klein call their process B-A-R: Belief, Action, Results. See if you think B-A-R is different from P-D-A.

Free Downloads & Extras From The Episode

The Entrepreneur’s PDA Cycle: Download PDF

Foss & Klein’s Entrepreneurial Opportunities, Who Needs Them?: Download The Paper

“The Austrian Business Model” (video): https://e4epod.com/model

Start Your Own Entrepreneurial Journey

Ready to put Austrian Economics knowledge from the podcast to work for your business? Start your own entrepreneurial journey.

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81. Dr. Keith Smith: The Free Market Medical Association Brings Entrepreneurship to Medical Services

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Dr. Keith Smith, co-founder of The Free Medical Association (FMMA.org), is an entrepreneur and free market warrior who is undaunted by the seeming scale of his innovation task: to bring to healthcare the kind of customer experience only entrepreneurial free markets can deliver (see “Pillars of the Free Market Medical Association” PDF).

He is laser-focused on the problem to solve.

(Full episode transcript available here.)

Key Takeaways and Actionable Insights

The aim is to bring buyers and sellers together.

As Dr. Smith explains, simply stating that there is a need to bring buyers and sellers together is an indication of dysfunction in the market for healthcare. Buyers and sellers talking directly with each other is what makes a market: willing buyer, willing seller, mutually agreed price.

Buyers are patients who care what healthcare costs. Today, they have sticker shock.

Buyers who care about price can be direct-buying individuals, and their proxy buyers, who can include self-funded employer health benefits systems, more and more of which are emerging. Innovations like Health Savings Accounts and high-deductible insurance policies are bringing more direct buying into the market.

Willing sellers should be complete and comprehensive advocates for the patient, across the whole range of their needs, including financial aspects.

The targeted customer experience is for patients to feel confident when they visit a doctor that they have an unapologetic advocate. Today, physicians are medical advocates, but to be a more complete advocate, physicians must think and act like entrepreneurs, bearing some risk in serving their patients. Many say, “I don’t want anything to do with the business side or the money side of medicine.” By doing so, they are abandoning their patients to the financial wolves, many of whom are willing to step in and make a living off the patient. It’s not so much willful neglect of the patient’s interests, as simply caving in to a system that has become extremely difficult to navigate.

A problem in healthcare is the dominant presence of intermediaries between the buyer and the seller.

Dr. Smith described the wide range of intermediaries, cartels and proxies that get in the way of a direct, transparent and mutually beneficial relationship between buyer and seller. Insurance companies are “money handlers and money changers”, keeping healthcare prices high, so they can offer false discounts and skim off the difference. There are brokers and consultants to employers, whom Dr. Smith calls “self-dealing”, who add a layer of costs. There is Big Pharma, the pharmaceutical industry that largely funds the FDA, making it inevitable that the regulator will protect the pharmaceutical companies and their business model and their pricing.

In the end, the “ultimate culprit” is the Federal Government. None of the financial abuse of the patient would be possible “without Uncle Sam riding shotgun for all of this thievery”.

A solution lies in decentralization, disintermediation and the application of Hayekian knowledge theory.

Dr. Smith alluded to F.A. Hayek’s concept of dispersed tacit knowledge in describing the FMMA’s decentralized approach. The Free Market Medical Association establishes local chapters, who follow a small number of “pillars” regarding price and value and mutually beneficial exchange, including equal pricing to all cash buyers of the same service. The chapters are completely free to respond to customer preferences in their own local market. These chapters create new knowledge based on their transactions and experiences in their local market, and can share it with all other chapters.

Austrian principles of decentralization, free exchange without intermediaries, and the recognition of the value-creating dispersed knowledge of patients and entrepreneur-practitioners are Dr. Smith’s starting point.

Free Downloads & Extras From The Episode

Pillars of the Free Market Medical Association: Download PDF

The Free Market Medical Association’s annual conference, “Mission Possible: Healthcare Entrepreneurship as the Antidote to the Broken Healthcare System”: FMMA Annual Conference

“The Austrian Business Model” (video): https://e4epod.com/model

Start Your Own Entrepreneurial Journey

Ready to put Austrian Economics knowledge from the podcast to work for your business? Start your own entrepreneurial journey.

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65. David Bienstock on the Business of Politics

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When we talk about entrepreneurial alertness to opportunity, it can sound pretty vague. What exactly does that mean? How is alertness translated into profitable action?

Key Takeaways and Actionable Insights

This week’s guest, David Bienstock, provided us with a very precise example. He had just started his media buying services business when a phone call came in. Do you provide service in the category of political advertising? David’s answer was yes. There was no reason for it to be otherwise because there was no information at the time that would indicate any differences between media buying services in the political advertising category compared to the commercial advertising category.

He was able to transfer existing knowledge from his expertise in media buying and placement, and also develop more and more new knowledge. He thereby identified more and more ways in which political advertising was specialized — factors of timing, competitiveness, geography, pricing, regulation, and many more. David built his own island of specialization and became the foremost expert in a burgeoning field.

What can we learn from following David’s entrepreneurial journey?

David Bienstock's Entrepreneurial Journey

1) The alertness we talk about that entrepreneurs display to opportunities can be triggered by the smallest piece of data. For David, it was one phone call. His instantaneously positive and open response led to a long and successful journey.

2) Wherever there is business expenditure there is an opportunity for an entrepreneurial business service. The business we discussed in episode #65 is campaigning — political, public affairs, ballot measures. How much is spent on campaigns? A lot. There’s the opportunity.

3) The best entrepreneurial businesses are often the ones that clients put you into. David’s inbound phone call was a new client stating an unmet need. That’s all the invitation the alert entrepreneur requires.

4) Opportunities, once seized, expand. David has expanded his original business by adding many related services for current clients to utilize, including multi-channel media, market research and analytics. In addition, he has added multiple new businesses in related spaces. He’s been creative, he’s taken action, he’s been constantly looking for new opportunities that are complementary to the first one that he spotted. However small the start, the next steps will quickly become apparent to the entrepreneur who is not only alert to opportunity but also to expansion and growth.

Free Downloads & Extras

“David Bienstock’s Logic Of Customer-Led Growth”: Our Free E4E Knowledge Graphic
Understanding The Mind of The Customer: Our Free E-Book

Start Your Own Entrepreneurial Journey

Ready to put Austrian Economics knowledge from the podcast to work for your business? Start your own entrepreneurial journey.

Enjoying The Podcast? Review, Subscribe & Listen On Your Favorite Platform:

Apple Podcasts, Google Play, Stitcher, Spotify

37. Curt Carlson’s Systematic, Repeatable Process to Generate Customer Value

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Is successful value creation through innovation the product of genius? Or of luck? No, it’s the product of a system, applied with discipline. Utilizing the system can result in repeated success in customer value generation.

Key Takeaways and Actionable Insights

Curt Carlson is the world’s leading expert practitioner. He is the founder and CEO of Practice Of Innovation, LLC, and was President Of SRI International, identified as the most successful innovation company in the world based on its development and introduction of globally important innovations like Siri for the iPhone4 and HDTV. Under Curt’s leadership, SRI grew 3.5X and created tens of billions of dollars of new customer value.

Curt believes any company can systematically generate new value for customers, and reap the rewards of the market for doing so, when they rigorously apply three fundamental rules.

  1. They have a simple value creation methodology that everyone in the company (and its collaborative partners) can describe, understand and apply every day in every job function. (Curt’s test: ask everyone in the company what the firm’s value creation method is: if they can’t describe it, there isn’t one.)
  2. They have metrics to define innovation work that is important rather than merely interesting. While subjective value is not quantifiable, there are proxies for measuring importance and market potential.
  3. They have a system for active learning. Innovation is a learning science, and active learning is a specific, high speed, high productivity version of learning, applying the best learning science principles.

In this week’s podcast, we focused especially on the simple, effective value creation methodology that Curt identifies by the initials N-A-B-C.

NABC Innovation Process

Click the image to view and download the full PDF

N is the identification and quantification of the important customer need. In B2B businesses, it’s possible to monitor financial flows and identify needs based on quantifiable elements – cost savings, time savings, and measurable quality improvements. In consumer businesses, need identification is much harder, and quantification impossible except by proxy, since needs are subjective and individual. Importantly, they are also multi-dimensional, and need identification must encompass all the dimensions.

It’s important to deeply understand human wants, whether it’s for convenience, or higher order wants such as pride and identity. Surveys told Steve Jobs that consumers wanted a “new keyboard” for existing Nokia phones that were hard to use. Jobs’s intuition was that what they really longed for was convenience. The touchscreen on the iPhone provided convenience and opened a doorway to all kinds of additional services.

A is the Approach the entrepreneurial innovator takes to meet the customer need. The approach is the design of an experience that the customer will desire. The Approach mist embrace both the assembly of the right resources into a technical solution, and the business model so that the solution makes money. There’s an iterative back-and-forth between technical solution and business model that can continue for years. Nike’s technical solution for shoes is good but not unique; its business model for sponsoring athletes to inspire aspirational consumers who wanted to “be like Mike” (or today like LeBron) elevated their offering from product to experience.

B is Benefits Per Costs. Curt uses this construction to emphasize that there are large buckets of both benefits and of costs. Benefits include not just features and performance and appearance, but also the feelings produced by the experience. Costs are similarly multi-layered: not just dollars, but also the effort required to acquire the product, and perhaps to master its use, the opportunity cost of what is given up, durability, and more. The innovative entrepreneur must look at costs from all of these angles and calculate that the “benefits per costs” for customers are much better than alternatives.

Curt’s rule of thumb is 2X to 10X better. People measure perceived benefits in percentages. 10% better, 50% better, 100% better than the status quo or the alternatives. Transformational innovations are 2 – 10X better.

C is the competition and other alternatives – both today and in the future. What are all the other ways the customer can experience the benefit they seek? What are alternative ways for them to spend their money – perhaps on a different experience that’s not a direct substitute but on which they’ll spend instead of buying our solution. How does your innovation fit into their lives so compellingly as to become preferred over all these alternatives?

N-A-B-C is a simple framework, but it’s not easy to achieve results. It requires iteration at speed among many collaborators (including customers, and possibly investors), all with different and specific talents and tacit knowledge. No individual can command sufficient knowledge, so team learning – active, comparative learning, frequently updated – is critical to the outcome.

The result is transformational: for customers who experience new value, for the firms that facilitate it, and for the individuals who practice the discipline of innovation.

DOWNLOADS & EXTRAS

Download Curt Carlson’s NABC Innovation Process PDF: Our Free E4E Knowledge Graphic

Buy a copy of Curt Carlson’s book, Innovation: The Five Disciplines For Creating What Customers Want.

SUBSCRIBE

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36. Professor Arthur Diamond on Sustaining Innovative Dynamism

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This week, while keeping our eye on our highest value – entrepreneurial success – we raised our focus to the system level and the meta-ideas that sustain entrepreneurial effort and Austrian innovative dynamism.

Key Takeaways and Actionable Insights

Professor Arthur Diamond has written a wonderful book about nurturing the system in which we entrepreneurs operate. The subtitle of his book is Sustaining Innovative Dynamism. Like all great writers in the Austrian tradition, he recognizes and celebrates the contribution of the entrepreneur to society: to make others’ lives better.

In many ways, this is both an economic and an ethical stance. To quote Jesus Huerta De Soto (in a similarly titled essay, The Theory of Dynamic Efficiency):

….the most just society will be the society that most forcefully promotes the entrepreneurial creativity of all the human beings who compose it1.

But Professor Diamond is a little bit concerned that the environment for entrepreneurial dynamism is under assault in the US. It’s up to all of us to work hard to sustain the system. Professor Diamond lays out the threats under three headings.

Sustaining Innovative Dynamism Infographic

Click the image to view the full PDF.

Culture

The entrepreneurial culture would celebrate the contributions of its entrepreneurs to a better life for all: prosperity, comfort, efficiency, health, personal achievement, and the human augmentation that comes with technology. Our lives are not only more prosperous, but more productive and more enjoyable, longer and healthier, thanks to entrepreneurs.

Often when we do celebrate entrepreneurs, it’s one hand clapping. Bezos, Musk, Gates and Jobs and others are recognized, but also sometimes vilified, and often judged on whether they “give back” – as if there was some guilt about their incredible contributions to human well-being.

And, Professor Diamond points out, a truly entrepreneurial culture would celebrate the lives of meaning and purpose led by entrepreneurs on every scale, from small business to big business.

We can all participate by celebrating the heroic stories of the entrepreneurial life, telling them loud and often.

Institutions

Under this heading, Professor Diamond focuses on the law, private property and markets.

We can observe our legal institutions turning against entrepreneurs in the form of tort suits and punitive damages. Professor Diamond calls for reform to preclude unreasonable awards of damages, and points to examples where doing so has resulted in unleashing entrepreneurship (such as 7000 new doctor’s practices opened in Texas after a damages cap on malpractice cases was put in place).

Private property protection is fundamental to the economic freedom entrepreneurs exercise to bring the benefits of innovation to society. Government is always tempted to seize private property, and often succumbs to the temptation. We must publicize each instance and protest each time.

Markets are the institution that facilitate the entrepreneur’s presentation of new offerings, and the consumer’s freedom to choose from what’s on offer. We talked about matching venturesome consumers (early adopters) with venturesome entrepreneurs, and removing the barriers that often come between them (for example, in medical innovation markets).

Governance

At this point, Professor Diamond exhibits amplified animation, recognizing that government regulation is the greatest threat to entrepreneurship and innovative value creation on behalf of others. He’s angry. He discerns two types of anti-entrepreneur regulation. The first is regulation that is sourced in purportedly well-intentioned (but demonstrably wrong-headed) efforts to protect consumers or workers. Here, we must energetically point to the greater benefits that ensue from the exercise of economic freedom than from its constraint.

One particularly important example is medical innovation. Too often, the heroic efforts of medical entrepreneurs to alleviate pain and suffering are thwarted by FDA regulation.

The second kind of regulation is the overtly corrupt protection of industry incumbents and big business, lubricated by lobbying and political quid pro quos. Here, we must all be whistleblowers.

Key Takeaway

Maintain entrepreneurial energy at all times and spread it in all directions. Celebrate heroic stories at every scale. Educate the world on the ethical and moral superiority of the entrepreneurial society, as well as its prosperity and well-being. Denounce legal predators, regulation and protectionism. We must contribute to the development of the entrepreneurial culture, institutional framework and governance as much as we do to customer betterment.

Downloads & Extras

Sustaining Innovative Dynamism: Our E4E Knowledge Graphic

Entrepreneurial Stories For Young Socialists: Arthur Diamond tells Walt Disney’s story.

When New Yorkers Cheered The Wright Stuff: Arthur Diamond tells The Wright Brothers Story.

Openness To Creative Destruction: Sustaining Innovative Dynamism: Arthur Diamond’s book.

Visit Professor Diamond’s personal website and blog, and read his article on Innovation Unbound, which begins: Inventors and entrepreneurs are key drivers of innovations that result in improvement in human welfare.