Guest post by Greg Smogard:
Last September, I was delighted to host one of the sessions for the Florida Business Incubation Association’s (FBIA) Fall Conference on our beautiful University of South Florida’s Sarasota-Manatee campus. It was at that session that I had the pleasure of meeting Charles Ross, our keynote speaker, who after my presentation asked if I would be willing to contribute to the International Business Innovation Association blog (InBIA). Although I don’t typically blog, I wanted to support the important role that ESOs and all of you play in the global entrepreneurial ecosystem, so here is my second of two blog posts.
Welcome back! I hope everyone is off to a great start for 2022.
This month I want to follow up on my January post, where I discussed new opportunities for ESOs resulting from the impact of a worldwide pandemic. Before I discuss these challenges and ways to address them, I want to summarize a few key points from Part One.
During the early phases of the pandemic, people left the workforce voluntarily or involuntarily due to the wide-ranging effects of an economic shutdown. More recently, job satisfaction, quality of life, the desire to work from anywhere and salary and benefit issues have also risen to the surface. I believe rapidly evolving changes in the global economy and workforce as a result of a global pandemic have led to the emergence of a new segment of entrepreneurs which I refer to as “transitional entrepreneurs” (TEs). Although each entrepreneur’s story is unique, I have observed some common characteristics with these new TEs who have:
- Access to new funding channels
- Interest in working from anywhere, including more affordable or international locations
- Willingness to become a part-time entrepreneur or to boomerang in and out of entrepreneurship depending on economic and workforce factors
- Access to a new pool of potential, multi-generational mentors and business partners
- Development of more “disruptive” business models
Given this influx of new, potential entrepreneurs, ESOs have an opportunity to expand not only their client base but their mentor and investor ecosystem. However, this expansion will require recalibrating some of their processes and service offerings. I described two ways for ESOs to penetrate this new target market through increased marketing and more engagement on the front end of the startup process. Now I would like to suggest some less obvious ways ESOs may engage these TEs at the early-stage of ideation.
Recently some of my colleagues and I have had the opportunity to provide workshops for leaders in various businesses, organizations, and innovation spaces. These workshops focused on how improving one’s critical thinking, creative-design thinking, and awareness of various biases can make one’s decision-making more effective. I believe these concepts can also be utilized by ESOs to provide important guidance and support for startups, mentors and investors much earlier in the ideation and design stage of the process.
In my experience, by the time most startups approach or are accepted for a bootcamp, incubator or accelerator program, they have already established or developed the beginning elements of their idea and are seeking assistance in the development and/or business planning for their business model. By the time they get to this point, they have invested a substantial amount of time, money and commitment.
What if their idea is not viable? How long do they pursue their idea to reach that conclusion? Who makes that determination? How do you convince highly motivated, fully-committed founders to pivot or move on to the next idea? In my opinion, it is easier to make these decisions sooner in the process rather than later. Therefore, ESOs that can incorporate elements of a robust critical and creative design thinking process early in the ideation stage can significantly contribute to either greater future success or accelerate pivoting to a more viable business model. Questions for a startup might include:
- What problem or opportunity are you “really” solving? Is this clearly defined?
- Are you treating the root cause of an issue or simply reacting to a symptom?
- Have you created a solution looking for a problem or a market?
- Have you thoroughly evaluated your idea based on the customer’s perspective and experience?
- Have you vetted your idea with subject matter experts and potential customers or just friends and family?
- Have you created and tested enough of a minimal viable product that you have received enough market validation for your idea?
- Are you willing to pivot quickly even though you have already invested a great deal of time, money and energy into your idea?
Although these seem like basic questions and activities that founders should have already addressed by the time they arrive at your organization, we frequently take them for granted. However, in many cases, the entrepreneurs have not taken the actions or asked the questions to effectively validate their business concepts. Some TEs who have left the workforce, have a great deal of experience, have been very successful and/or have enough seed money to temporarily self-fund their startup may feel comfortable piloting a new concept before answering those key questions. However, those factors and that level of comfort do not make them immune from the rigors of the startup process. This is where an ESO with a robust, early-stage critical and creative-design thinking process can be an invaluable resource.
ESOs can also incorporate a step that helps raise awareness of decision-making biases* that founders, mentors and investors face as they move through the startup process. Here are some examples of biases that I have personally encountered throughout my entrepreneurship journey:
- Confirmation bias or seeking information that confirms one’s idea while discounting or ignoring information that does not support or may even invalidate one’s idea. When referring to the questions above, one can see how important it is to get feedback from many different perspectives before investing a significant amount of time, money and emotional equity into an idea. ESOs that can help startups avoid blind spots and echo chambers or encourage pivots early in the startup process can be invaluable in the ideation and early development process.
This concept is also relevant for mentors and investors who are faced with new concepts or models that are outside their zones of expertise, possibly limiting the scope of startups with whom they will work or provide funding. There may be a lot of lost opportunities for mentors and investors over the next few months if they restrict their scope or decision-making. By keeping an open mind and soliciting a wide range of perspectives, many more opportunities may come their way-especially with disruptive business models.
- Anchoring bias or an over-reliance on the first information one receives. Frequently, at the ideation stage, founders tend to solicit feedback and funding from friends and family who may be more complimentary and less critical about their idea than subject matter experts. This can also be true of some potential customers who may react in a similar fashion as friends and family and not be as critical about an idea. An over-reliance on this positive, less critical information on the front end of one’s idea may lead to over-confidence, a significant investment of time and money, and a resistance to early pivoting or abandonment of an idea early in the process, even before seeking out an ESO for support. An ESO that can provide subject matter experts and rigorous idea evaluation at the very beginning of the ideation process provides critical support for founders and successful startups.
- Sunk cost bias or having difficulty changing or abandoning an idea because of the time, money and/or emotional attachment already invested in a business idea. This is a concept I have seen throughout my corporate and entrepreneurial careers. Executives, founders and investors, including myself, have clung to ideas, concepts or investments far longer than necessary because of the time, money, ownership of or commitment to an idea, or project. By being more engaged with a rigorous process both at the front end and throughout the process, ESOs can expedite a startup’s “go-no go” and pivot decision-making. Again, this is also important for mentors and investors who could easily become invested in or overly committed to an idea that may not be as commercially viable as they originally believed.
ESO engagement on the front end of the startup process can not only be a game-changer for successful startups but can also be a major competitive differentiator. Many ESOs are not structured for this step, but I believe those who can adapt and recalibrate will become even more critical components of the global entrepreneurial and innovation ecosystem. 2022 is positioned to be a pivotal year full of opportunities for innovation and reimagining the way we do things all over the world. I wish you all the best in your journey!
Dr. Greg Smogard is the author of the book, “A World of Opportunities for Aspiring Entrepreneurs: Creating Your Own Job in the New Normal.” He has worked with Fortune 500 companies and global brands in more than 40 countries, held management positions at American Express’ Latin American Division, Blockbuster/Viacom and worked with and invested in multiple startups throughout his career. Dr. Smogard is currently the Assistant Vice President of Innovation and Business Development at the University of South Florida’s Sarasota-Manatee campus. He can be contacted at [email protected]
*If you are interested in learning more about bias and decision-making, there are a wide array of sources. One I recommend and which I used above is, from an article in the NeuroLeadership Journal, Vol. 6, Nov.,2015, entitled Breaking Bias Updated: The SEEDS Model by Lieberman, Rock, Halvorson and Cox.