Entrepreneurship and Thinking

1. Entrepreneurship andThinking Critical, Creative and Strategic Thinking Shanghai Economic Summit 21 July 2012 Andy Eyschen

2. Entrepreneurial Thinking • Critical: what is our current state and why • Creative: what new ideas are out there • Strategic: leading to a Strategy, then a Plan, • and then implementation ACTION! Critical Creative Strategic As Is New Ideas Strategy Implementation Plan

3. Five Meanings of Critical • Expressing Disapproval “my manager is always critical of me” • Expressing Importance “these are the critical success factors” • Expressing Danger “he is in a critical condition in hospital” • Expressing Careful Judgment“students used critical thinking instead of accepting everything without question” • (In the context of Art and Performance): “the performance received critical acclaim”

4. Critical Thinking • A way to understand one’s current paradigm or mindset (know yourself, your organization, your society, your market, etc.) • Examine your paradigms (validity, acceptance by others, divergence from the “norm”) and know the reasons why you have the current paradigm (beliefs, rationality, cultural context, assumptions, values, education) • Question the need to change your paradigms in the light of environmental changes, new knowledge and ideas, changes in the “norm”, and ability to find solutions to current and future problems

5. Critical Thinking Traits • Essential traits for fair-minded critical thinking include intellectual humility, empathy, integrity, perseverance, courage, autonomy, and confidence in reason • Without these traits and with intellectual skills alone, critical thinking can degenerate into clever but manipulative or unethical and subjective thoughts • Critical thinking is essential to the construction of knowledge; it should detect prejudice, bias, propaganda, self-deception, distortion, and misinformation

6. Lack of Critical Thinking • Leads to: • Denial • Blind Spots • Distortion/misrepresentation • Missed opportunities • Lies

7. “The important thing is not to stop questioning”Albert Einstein

8. SWOT Analysis • Critical thinking method to evaluate the Strengths, Weaknesses, Opportunities and Threats involved in a project or business venture • It starts by defining an objective or desired end state and the SWOT analysis can be used to determine if the project or venture objective is obtainable; if not, a new objective should be developed and the SWOT analysis repeated

9. SWOT Analysis Internal (attributes of the organisation) Helpful (to achievement of objective) Harmful (to achievement of objective) External (attributes of the environment)

10. Strengths • Something we are very good at or excel in • Something that helps us to achieve our objectives • Something people perceive us to have leadership in • Something in which we have a high level of competence • Something that is a competitive advantage for us

11. Weaknesses • Something we are bad at or not so good (weak) • Something that prevents us from achieving our objectives • Something we need to improve • Something in which we lack leadership and competency or are perceived to lack or be incompetent in • Something that is, or potentially will be, a competitive disadvantage

12. Opportunities • Some external thing, event or condition that is helpful to achieving our objectives • Something we are not doing now but could or should do to achieve our objectives • New uses for our products and services, widening our market or reaching a previously untapped market • New products and services we can supply

13. Threats • External conditions or events that could prevent us from achieving our objectives or undermine our strengths and opportunities • Competitors’ plans or actions • Potential new competitors • Something that could destroy our market, take away our customers, or make our products and services obsolete • An internal condition that could drive our customers away to the competition

14. SWOT Analysis

15. Creativity andCreative ThinkingAn Introduction

16. Importance of Creativity • Our successes are largely due to creativity • It is useful in good times and essential in bad times • It is regarded as a gift that some people (e.g. artists) have and others have not • It usually comes in a “flash of inspiration” but only because we have not developed the type of thinking that encourages it • It is contrary to our “normal” type of thinking

17. “Normal Thinking” • “Normal” thinking is based on Patterns • Our mind self-organizes incoming information into patterns beginning from a young age • This is very useful, like a good filing system, and allows to instantly reject any information that does not fit into our established patterns • As we get older, these patterns tend to become more rigid: they become paradigms

18. Paradigm Characteristics • It is selective and seeks to judge, to prove and to establish points or relationships • It is concerned with stability and continuity • It looks for answers, judges what is right or wrong and concentrates on it • It uses a “yes/no” approach and does not allow you to be “wrong” at any stage; it justifies every step and proceeds in a linear fashion

19. Creative Thinking Characteristics • It is generative, moving from one concept to another, never satisfied with a solution, always looking for a better one • It does not attempt to “prove” anything, just to explore, discover, originate; it looks for change for the sake of change only • It looks for questions, not answers; for what is different, not what is right; it is provocative, not analytical; more interested where an idea leads to rather than where it comes from

20. Creative Thinking Generates Does not judge/prove Movement Discontinuity Different Where are we going Provocative Jumps, creates gaps Major Differences “Normal” Thinking • Chooses/selects • Judges • Stability • Continuity • Right or wrong • How did we get here • Analytical • Sequential

21. Changing your “Paradigm” • Your paradigm will keep you “safe” and will not allow you to take unknown risks • By its very nature, it stifles creativity • When you need to be creative, you need to consciously “suspend” your paradigm • This will be difficult until you have become used to think creatively more often, i.e. practice creative thinking on regular basis

22. Words on Effective Change The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man George Bernard Shaw You see things and you say, ‘Why’? But I dream things that never were and I say, ‘Why not’?” George Bernard Shaw Some men see things the way they are and ask why, I see things as they could be and ask why not. Bobby Kennedy, 1961, Former Attorney General of the U.S.

23. “Outside the Box” Thinking • Means to think differently, unconventionally or from a new perspective • It often refers to novel, creative or smart thinking • The “box” may also refer to a paradigm and so “out of the box” means to “leave” your paradigm and open your mind to new paradigms or at least new possibilities

24. Thinking “Outside the Box” The “Nine Dots” Puzzle Thought to originate from the Walt Disney Company in 1969 Task: Connect all 9 dots in 4 straight lines without lifting the pen

25. (One of the) Possible Solutions 2. 3. 4. 1. Notice the “Enlargement” of the “Box”

26. A dizzying array of tools to “help”

27. Three Techniques of Creative Thinking • Blue Ocean Strategy • Innovation Sandbox • Lateral Thinking

28. Blue Ocean Strategy Published in 2005 By Harvard School Press 256 pages Translated into 41 languages Authors: W. Chan Kim Renee Mauborgne (both from INSEAD)

29. Blue Ocean Strategy (BOS) • Business Strategy Book written by W. Chan Kim and Renee Maubourgne, both of INSEAD, the second largest business school in the world • BOS is about companies gaining high growth and profits by creating new demand in an “uncontested” market space, or “Blue Ocean” • Red Ocean represents the conventional way of competing head-to-head with other suppliers for the same or known customers in an existing industry

30. BOS – Value Innovation • Value Innovation is the cornerstone of BOS and refers to the simultaneous pursuit of differentiation and low cost • Using examples from across industries, the authors try to align innovation with utility, price and cost positions • BOS mocks the conventional approach of choice between differentiation or cost and suggests that both are achievable simultaneously

31. Profitable Growth • The BOS authors suggest that neither company nor industry are the best unit of analysis for profitable growth • Rather, strategic moves that create “blue oceans” and sustained high performance will lead to profitable growth • Examples are given from the wine, cement, watches, computers, retail, airlines, textiles, coffee makers and even from the circus to illustrate the authors’ points

32. “Blue Ocean” Circus Blending: Opera, Ballet, Circus Format Example from BOS Book Eliminate: Star Performers Animals Reinvented the Circus “Cirque du Soleil”

33. BOS Four Actions Framework • Aimed at crafting a new value curve, the framework asks 4 key questions:

34. Examples (Circus, Wine, Budget Airlines)

35. Traditional Approach • Avoid the following “mistakes”: • Define your industry the same as your competitors do and aim to be the best within it • Segment your industry the way your competitors do and strive to be the best within your segment • Focus on the same buyer group (purchaser, user, influencer) • Define the scope of your products and services the same way as competitors do • Accept the industry’s functional and emotional orientation • Focus on the same point in time and perceived threats in formulating strategy as your competitors do

36. 6 Paths Framework

37. Path 1 • Look across alternative industries! • This includes substitutes but also industries that offer the same core purpose but have different forms and functions in their products and services • e.g. cinemas vs restaurants vs circuses • purpose is the same: enjoy a night out! • Blue Ocean: Kinepolis • What alternative industries offer the same purpose as a telco?

38. Path 2 • Look across strategic groups within the industry! • A strategic group is a group of companies within an industry that pursue similar strategies (in most industries, the fundamental differences between players are captured by a small number of strategic groups, e.g. luxury, family, or sports car) • Understand which factors drive customers to trade up or down • Example: Curves (women-only fitness clubs, cross between traditional clubs and home exercise)

39. Path 3 • Look across chain of buyers! • Distinguish between buyer and user • Industries typically converge on a single buyer group, result of “industry practice” • Example: Novo Nordisk (Danish producer of insulin, used to sell to doctors, now to end users by designing NovoPen and NovoLet, from producer of insulin to diabetes care company) • Bloomberg: sells to traders and analysts, not IT managers like Reuters (focus on end user needs) • SAP shifted from functional to corporate user

40. Path 4 • Look across complementary product and service offerings! • Few products and services are used in a vacuum: other things affect their value • Most players concentrate within the boundary of their product or service and don’t think about what happens before or after their product is used • Example: Cinemas introducing car park valets and baby sitting services, ground transportation for airline passengers, NABI (Hungarian bus company) and municipal buses (focused on service component rather than purchase price in bus manufacturing)

41. Path 5 • Look across functional or emotional appeal to buyers! • Traditionally 2 possible bases of appeal: function (rational) or emotion • Blue Ocean: offer both! • Examples: Swatch, transformed functionally driven watch industry into a fashion statement • Example: The Body Shop, transformed emotionally driven cosmetics industry into a functional, no-nonsense cosmetics house • Example: QB House (haircuts in 10 minutes at low cost)

42. Path 6 • Look across time! • All industries subject to external trends that change over time (Internet, environmental movement, Sarbanes-Oxley, the Euro, etc.) • Most companies project the trend into the future and pace their actions accordingly • Blue Ocean: find insights in trends that are observable today (trend must be decisive to your business, be irreversible, and have a clear trajectory) • Example: Apple introducing iTunes in reaction to flood of illegal file sharing

43. “Blue Ocean” Criticism • No single documented success story applying Blue Ocean Strategy: the strategy is “descriptive”, not “prescriptive” • No way of knowing how many companies failed using BOS as no control group was used and their research process is flawed • The example given of New York crimes dropping has been explained by reasons other than those in BOS and crimes have dropped in cities without using BOS • Its success is due purely to branding already existing concepts and frameworks by other management theorists

44. Innovation Sandbox • Defined by C.K. Prahalad • Innovations that meet 4 “must” conditions: • result in a product or service of world-class quality; • Achieve significant price reduction – 90% off comparable price in the West; • Be scalable – can be produced, marketed and used in many locales and circumstances; • Be affordable at the bottom of the pyramid • Examples: Indione (now Ginger) Hotels, “Chula” stoves, “Jaipur Foot”, Nano car

45. Innovation Sandbox (2) • No generic sandbox • Sandbox on right show the constraints and innovative activity for the health-care industry in India • Start by identifying the core constraints that must be overcome to achieve the breakthrough innovation – 4 is a good number The defined sandbox can force unconventional thinking: • Specialisation can bring about focus, branding, motivation • Measures to achieve affordable pricing (market-pricing vs cost plus?) • Capital intensity reduction, sweating the assets • Talent leverage • Workflow • Customer Acquisition • Values & Organisation

46. Adopting the Innovation Sandbox approach

47. De Bono: Lateral Thinking • Lateral Thinking (introducing a deliberate discontinuity: a random word) • Examples (sugar refinery - pink, snow on electrical cables in Canada - honey, trained staff leaving - break) • Possible words for exercise: pink, green, sweet, break, drive, show, healthy, safe, store, fly, swim, open, cut, hot, help, space, fast

48. Edward de Bono Born 19 May 1933 Malta Physician, Author, Inventor, Consultant Originator of term “Lateral Thinking” Major Works: Lateral Thinking Six Thinking Hats Parallel Thinking Sur/Petition Tactics How to have creative Ideas 5-day Course on Thinking Proponent of deliberate teaching of “Thinking” as a subject in school Founder of the Cognitive Research Trust (1969) Has written 82 books, translated into 41 languages

49. STRATEGY In strategy it is important to see distant things as if they were close and to take a distanced view of close things. Miyamoto Musashi, 16th Century Samurai, author of The Book of 5 Rings All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved. Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat. Sun Tzu, 6th Century military strategist/philosopher, “Art of War”

50. someApproaches • 3Cs Kenichi Ohmae • 5 Forces Michael Porter • 7Ss McKinsey • 3Ss Situation-Specific Strategy • 8 Strategic Laws of Gravity Model • 9Ss Shintaro Hori – 7S + Steering pattern, Syndication • 7Cs • Use your own “good sense”!!