just start take action embrace uncertainty create the future len schlesinger baker foundation...

JUST STARTTAKE ACTIONEMBRACE UNCERTAINTYCREATE THE FUTURE

Len SchlesingerBaker Foundation ProfessorHarvard Business SchoolMarch 2014

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Continuum of “Predictability”

Known Unknown

UnpredictablePredictable

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The Predictable

4

Google Maps, GPS Universe

You always know the optimal thing to do

You’re never lost

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What is the best logic in relatively “known” futureswhere things can be predicted based on the past?

1. Where are you now? and What result is wanted, needed and best?

2. What are the various ways of achieving the result?

3. What are the required resources

and their costs

4. Select the optimal path

5. Assemble the required resources

6. Execute the plan, and, if required, get back on track.

Inductive and deductive logic

Mathematical and analytic methods

Rules of thumb

Core logic of virtually all educational settings

Core logic of large organizations

Works great when the future can be extrapolatedP

redic

tion

Logic

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What logic works best when things are very unpredictable?

Pre

dic

tion

Logic

7

t

t

YOU’RE IN A PITCH BLACK

ROOM

Discuss with 1 or 2 colleagues:

What principles do you use to get out?

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What would rational thinking and

behavior look like in the face of unknowability?

You either sit

and think or you act…

But, you can’t think

your way into an unknowable

future

Therefore, the only logical

thing is to ACT.

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What would rational thinking and

behavior look like in the face of unknowability?

Therefore, the only logical

thing is to ACT.

How to Act Smartly?

Where are you?

Do you want something else?

What do you have at hand?

Anyone who can help/rescue?

Small steps. On firm ground.

Take stock & learn.

Build off what you actually findBuild

LearnAct

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How well does Prediction work in the face of unknowability?

What’s current reality - what is wanted, needed

and best?

How can you achieve that result?

What resources are required?

What’s the best path?

Assemble the resources.

Then, execute the plan and get back on track if you get

off

You don’t knowYou can’t know

BuildLearnAct

Small steps.Take stock & learn.Build off what you actually find

What do you have at hand? Who can help?

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Popular Views of Entrepreneurs

High Appetite for risk

Visionary

Able to foresee the future

Creative

Self Confident

Determined, controlling, decisive, egotistical…

Popular Perception

Closer to Truth

LOW Appetite for risk

Often start with no sharp goal

or vision

Distrust predictions of the

future

Creates new businesses, but not necessarily original

No more self confident than

others

Determined, controlling, decisive, egotistical… but not always

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Behavior or thinking?

Behavior &

Actions

Behavior looks idiosyncratic and contradictory

Results

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Started multiple enterprises ranging from $200Million to $6.5Billion

How they thought about taking action

Entrepreneurial Thinking

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Saras Sarasvathy, University of Virginia studied 30 “expert” entrepreneurs

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Behavior or thinking?

Behavior &

Actions

Results

Thinking

Behavior &

ActionsResults

Strong consistency in thinking that explains

unconventional behavior.

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Prediction and Act Learn BuildTwo Complementary Logics

Contrasts with prediction

Favored by entrepreneurs 89%

Favors what is real and confirmable

Smart action trumps analysis

Use when the future cannot be predicted from the past

BuildLearnAct

Prediction

Taken together they formEntrepreneurial Thought

and Action

Uncertainty / Unknowabilitythe Context and Setting for

Build

LearnAct

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DESIRE fuels…

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Entrepreneurs are always doing what they want, or something that will get them what they want.

In the face of the unknown, it makes no sense to act unless you want to, whether you have to or not.

Build

LearnAct

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DESIRE Intriguing area, attractive partners

Fully formed vision,robust plan

Sufficient to get

startedAct quickly with means at handAct Learn Build is based on current reality: who you know, what you know and anything else relevant

Pay only what you can afford toand want to – Acceptable Loss• Money & time• Reputation (professional & personal)• Opportunity cost

Bring others along• Tangible sales and other assets• Other borrowed or bartered resources• Intangible assets (ambassadors,

reputational capital) through enrollment

Act quickly with means at hand

Pay only what you can afford to and want to – Acceptable Loss

Bring others along

ACT

Build on what you find

ACT

Passion isn’t required

Smart Steps

• Surprises are often good. Make them an asset

• Befriend reality

• With each action, reality changes

DESIRE fuels…

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Known Unknown


More logical to actEmploying the tools of

prediction doesn’t make sense and

wastes time and resources

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Is it big enough to interest me?

How do I get started with the means at hand?

How do I make progress with a step-by-step acceptable expenditure of resources?

How do I bring other people along and spread the risk?

How do I build each next step of the reality I have created with the previous one?

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Known Unknown


Every ALB includes some Prediction

At some point predictive tools

require evidence to work

As you learn, you can begin to

Predict

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You need both You employ them reflexively, like a second

language Consider using ALB even in predictable

situations• Derails the habit of prediction• Action might be equally reliable, cheaper and faster• Action changes reality, predicting doesn’t

Use both simultaneously

BuildLearnAct

Prediction

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12%

88%

Where Serial Entrepreneurs Like to Play

23New

MarketExisting Market

ExistingProduct

NewProduct

SuicideQuadra

nt

Manage (incremental)

Adapt(evolutionary)

Extend(evolutionary)

Everywhere

Opportunities are largely found

Create(revolutionary)

unusual in their comfort and

preference for this quadrant

Opportunities are largely made

Act Learn Build is required.

In this quadrant

Action Trumps Everything

Why?• No competition• Expensive

Prediction tools are not required• They like to create

opportunities

Optimize Your Actions

DESIRE

Predictable

Optimization

is possible

Unpredictable

Optimizationis

impossible

You must Satisfice

Satisfy (desire) + Suffice (good enough, not necessarily optimal or “the best.”)

Nobel Laureate Herbert Simon

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Sufficient to get



Smart Steps

DESIRE fuels…

Passion isn’t required

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Acceptable Loss

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Currency:o Time , money and other

tangible resourceso Reputation and social

capitalo Opportunity cost

These are all knowable in the present moment

Acceptable Loss removes

all of the psychological and most of the actual

risk

Is it big enough to interest me? Pay to Play

• What can I afford to lose?

• What am I willing to lose?

How big is the “prize”?

Expected Return

Cost to execute

the plan

PAYBACK

$ x 75% =

“Risk Adjusted Return”

Acceptable Loss

Specific Desire

+Means at Hand

+

within Acceptable Loss

ACT

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Sufficient to get


Smart Steps


Bring others along

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Bring Others Along

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Thanks for joining me…

Tangible

resourcesEarly Sales and

Cash

Bartered and

borrowed

resourcesFree helpIdle capacity

+Intangible

resourcesReputational

capitalRelationships

Reduced load on entrepreneur’s

assets

Spreads the cost and therefore the risk for any one player

Confirms your judgment

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Sufficient to get


Smart Steps


Bring others along• Tangible sales and other assets• Other borrowed or bartered resources• Intangible assets (ambassadors,

reputational capital) through enrollment

ACTBuild on what you find



Bring others along

ACT

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Build on What you Find

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In a predictable world,

surprises

are a problem… And you

solve them when you can

In the unpredictable world,

you can’t know what you will

find until you act.

Transform problems and

obstacles into assets

Befriend reality and welcome

surprises

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DESIRE Smart Steps



Bring others along

ACT • Surprises are often good. Make them an asset

• Befriend reality

• With each action, reality changes

Intriguing area, attractive partners


Sufficient to get

started

Build on what you find

just start take action embrace uncertainty create the future len schlesinger baker foundation...

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