Trust is the key

The countless studies of success factors in cities, regions, and countries that have achieved high levels of social and economic impact through innovative practices show that there is one element that has never been missing and has proven to be indispensable for entrepreneurship and innovation ecosystems to function. This element is trust.

There is a theory used by innovation experts, which in my opinion is mistaken, that posits that if ingredients such as business accelerators, business plan competitions, co-working spaces, angel investors, university-based applied research centers, and companies acquiring technology developments from universities and startups, among others, are placed in a pot and cooked, the resulting dish will be a successful entrepreneurship and innovation ecosystem. Nothing could be further from the truth than this simplified input-output model, as it lacks the most important element without which nothing works: trust. As long as there is no trust between
entrepreneurs and investors, or between companies and universities, for example, high-quality and sustainable relationships with impact cannot be established.

Spending a week in Silicon Valley, Estonia, or Cambridge attending events and talking to entrepreneurs, investors, academics, or policymakers is enough to realize that there is no mistrust that limits exchange, thus enabling the establishment of solid and sustainable relationships that underpin and build a robust ecosystem.
The same applies to crisis management. A country where there is no trust in the government or in entrepreneurs, or among citizens themselves, has no way of dealing with a national crisis in an orderly fashion. This is evident when we compare ourselves with countries where health systems have never been under pressure, and the economy has functioned relatively well, even with cases and deaths. In a term popularized during the pandemic, we can say that in countries where there is trust, we can “dance” appropriately with Covid-19.

The concept also applies to political life in general. An immature society, where mutual mistrust between groups or individuals still persists, where most people unethically cut corners or think that someone else will take advantage by unethically cut corners, has no way of articulating itself properly.

Trust is achieved by working one-on-one on the quality of relationships between individuals and organizations and gradually making these relationships effective, which in turn generates trust for other relationships to be established. It is indicated that in this way, it takes more than one generation to see effects in a society so that innovation and entrepreneurship work for the creation of wealth and human well-being. Undoubtedly, for the functioning of a country in general, with its people and its institutions, the work takes more time. But it must be done. We must take charge. There is no other way than trust.

Science and business: failure is unavoidable

One of the topics on which many of us agree during this unusual time we are living in is the importance of science. Few people can say they are not keeping an eye on the announcement of a vaccine or better therapies against Covid-19, even if they have little knowledge or do not regularly value science as the most important factor in human evolution. Whether we like it or not, we are dependent on science as the only human discipline that will get us out of this crisis.

Science, as a source of knowledge, is fundamentally based on the scientific method, whose main axis is the trial and error methodology. That is, scientists work to test hypotheses that they formulate based on observation, inference, or other methods, and they do so through the execution of experiments that either prove their hypothesis or discard it for being incorrect.

This cyclical process is repeated with new hypotheses generated from previous cycles until a solid hypothesis is validated with conviction, which becomes a theory or a statement.

One of the elements of the scientific method is error. Without error, there is no science, because every experimental process leads either to an error or, alternatively, to a validation of the hypothesis. The error, which occurs at least half the time an experiment is conducted, is not the end of the process, but rather can be a source of new hypotheses that initiate new cycles of experimentation.

We have seen many people criticizing scientists over the past few months for having been wrong on pandemic-related issues. Such criticisms ignore the foundation of science that knowledge is acquired through trial and error, and that these errors are an inevitable part of the process. Covid-19 is a new disease about which scientists still know little, and from which more will only be learned by applying the scientific method, which necessarily includes errors.

Error has a negative connotation in our culture. From the moment we think of an error, what comes to our minds spontaneously is a negative idea of failure. This is not the case in other cultures, where errors are seen as sources of new knowledge. In fact, the word for “fail” in English is used to describe a process that does not succeed, while in Spanish it is called “fracaso”, a word that has a heavy negative connotation. The same unfortunately applies to school grades and business ventures. Our culture punishes errors and stigmatizes them, even in the way they are named: “fracaso”.

Business models are now more than ever undergoing forced transformations due to the pandemic. These transformations can be temporary or permanent, with the latter often deciding the long-term survival of businesses. No business transformation, especially one that is abrupt like those happening now, is exempt from errors.

Just as there is the scientific method, there are widely tested methodologies for modeling and executing improvements or new businesses that allow errors to occur with the least cost, in the shortest time, and causing the least reputational damage possible. They are the business evolution of the scientific method. They do not avoid errors – which are necessary in the process – but rather decrease their impact. And their mechanics are exactly the same: hypotheses of market needs and solutions are proposed and then iteratively tested with bounded experiments until a solution fits and is adopted and consumed by the market. The main reference for these methodologies was created in the past decade by Eric Ries and is called Lean Startup.

These methodologies acquire much more importance in the current situation, given that what is at stake today is much more than just improvements or new businesses, but the survival of companies, which are often the family legacy and livelihood of many people.

It is imperative that business people get rid of the cultural paradigm that errors or failures are essentially bad. In reality, they are an inevitable part of the process of business transformation or reinvention, but with the proper use of modeling and execution tools, they can be minimized in cost, time, and even damages to the business reputation.

Time to reinvent oneself

Those with responsibilities in companies or organizations have faced a complex situation in recent weeks, which has led them down paths never before taken, and they are having to make complicated decisions and act almost immediately. How important and decisive are these decisions and actions for future success, and even for the survival of their companies or organizations?

Many see the pandemic as a tragedy and calamity that has brought suffering and death, and also potentially will bring secondary effects such as poverty, hunger, and other diseases.

However, as Eastern philosophies dictate, every problem is actually an opportunity.

And not just a business opportunity, but an opportunity for adaptation, change, improvement, and evolution towards new ways of living, acting, enjoying and suffering, traveling, buying and selling, among many other aspects of life.

Those of us who have the privilege of living in this moment, and are in a position to drive these changes through our companies, organizations, and projects, can take advantage of it to rethink our work in order to adapt to the new reality, through marginal improvements in what we do or, in contrast, designing new products and/or services from a radically different perspective that adds value to a world that is and will continue to change rapidly.

Carrying out these changes requires not only the will and courage to make them, but also using a methodology that allows for the management of current activities that generate short-term resources, together with the ideation, validation, and implementation of new initiatives, in a way that allows for the efficient use of resources such as money and time. It is not easy to manage day-to-day operations in parallel with the gestation of new projects, but there are proven work schemes that allow for efficient management with moderate risk.

Another angle of the current opportunity before us is the ability to detach from current activity, or even completely initiate, scalable initiatives that do not depend on high fixed costs or huge investments, taking advantage of the inevitable and urgent trend towards digitization, remote work, virtual shopping, distance learning, and many other emerging and rapidly adopted trends. Scalability is a term still little known but widely used by companies that we have all seen or used, such as Uber, Airbnb, Degusta, Appetito24, among others, which allows the organization to scale to large sizes without the need to grow in the same proportion in fixed costs. Scalability is a science, studied for at least a couple of decades now, from which powerful and proven methodologies can be derived to successfully design and manage scalable projects, companies, or organizations.

The world is changing, perhaps in one of the worst possible ways, but this presents us with the opportunity to be protagonists of the inevitable evolution that is happening, to improve people’s lives, change the way industries work, or even create new industries, always adding more value to society and, therefore, capturing part of that value to create wealth. Will we be part of the change or just witnesses to it?

Validate or die

One of the most important hidden costs for companies, especially those with research and development departments, or IT development for sale or internal use, is the resources dedicated to improvements, fixes, or new developments once products are sent to production and are first used by customers or collaborators. The same happens with companies that offer services or manufacture products, whose costs for improvements, redesigns, or sometimes even failures are sometimes higher than those of manufacturing and/or design.

This is because we are trained to use linear product development systems, in which -in general-the order of analyzing, designing, programming or manufacturing is followed, and only then is the product or service launched for use or sale. The costs incurred from that moment on are very high, and are practically never in the development budgets. Failures are multiple because of this.

Innovation methodologies allow for reducing the costs associated with the late confrontation with the reality of the market, through successive iterations of validation of the solution. The most valuable factor about these methodologies is that they allow for successive and increasing validation of hypotheses about what the market would adopt. This way, we go from a minimum viable product, through successive improvements from customer feedback, to a final solution.

But this is not enough. Perhaps the critical success factor of these methodologies is that prior to validation of the solution, it is proposed to validate the problem or need of the consumer. Very few times do we think that the hypothesis we create about the customer’s need may be incorrect, leading in numerous occasions to avoidable, disastrous failures. Innovation methodologies include the validation of the need as a fundamental element of the product or service development process, which is where everything begins.

In the end, validation is an essential mechanism in any company that sells products or services, big or small, to reduce hidden costs when launching novelties, to decrease the risk of failures, and to face competition, especially from innovative startups that naturally use these methodologies to operate.

The key to everything is that customers are at the center of the strategy and the product development process, and they are the main source of information from the stage of initial hypothesis formulation. If we do not have customers at the center and see them as part of the product or service development process, we will be out of the market sooner or later.

Innovation 1.0.1

During the last few years, we have heard the word innovation in an exaggerated way. If we ask ten high-level executives for the meaning of that word, we will almost certainly get tendifferent definitions. It is a term with a diffuse definition, but paradoxically exerts a power fulattraction to be incorporated into the strategies and mission statements of many companies and organizations.

Probably the best definition of innovation that I have heard in the last fifteen years, and that remains valid, is one that mixes two concepts: new and useful. That is, innovation is any action hat leads to doing new and useful things. A very simple definition, almost childish, but it is the one that best fits what I consider innovation based on experience.

This means that, for example, not all inventions belong to the realm of innovation. Only those inventions for which a practical use is found can be considered innovations. Now, what do we call practical use? Well, anything whose use is adopted by human beings, in any scope and reach, because it improves quality of life, whether it be for speed, efficiency, comfort, pleasure, health, aesthetics, or any other criterion of improvement.

Similarly, we refer to innovation in products and services, which can only be considered as such if there is adoption by collaborators and/or customers. In many cases, to be a successful innovation, it must be demonstrated – beyond increasing adoption (traction) by customers – its measurable benefit in savings or profits for those who adopt its use.