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Business Genius Can Be Borrowed

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When Elon Musk was looking to overturn the business models of the auto industry, one of his crucial inspirations was not a car but a computer. Musk has described the all-electric Tesla Model S sedan as his Macintosh.

As different as they might appear, both products faced the same basic challenge, says Professor Luis Martins, director of the Herb Kelleher Center for Entrepreneurship, Growth, and Renewal at McCombs. “At its core, Tesla was dealing with the question, ‘How do you go up against the dominant technology?’ Apple was going up against Intel and Windows machines.”

Like Apple, he says, Tesla’s answer was to compete not on price or functions, but on aesthetics. It created a cult following through obsessive attention to upscale design, from aerodynamic lines to pop-out door handles. It added cachet by building its own network of showrooms — designed by none other than the man who had masterminded the Apple Store.

Call it a case of creative copying. In new research, Martins and former McCombs colleagues Violina Rindova and Bruce Greenbaum find that some of the boldest business models of recent years have been borrowed from other industries.

What’s more, they say, such extreme innovation doesn’t require the genius of an Elon Musk. Instead of the traditional understanding of new business models — as reactions to economic forces — they use concepts from cognitive psychology, which analyzes the structures of everyday thinking. With that framework, they lay out a visioning process anybody can follow to create new business models.

“We wanted to provide reliable examples of processes that are based on a solid psychological foundation,” says Rindova, now chair in strategic entrepreneurship at the University of Southern California Marshall School of Business. “There’s no way to take creativity out of the business innovation process, but we wanted to provide a bit of scaffolding.”

Method 1: Cloning

According to cognitive psychology, what we call creativity is actually the process of reorganizing old models into new ones. Says Martins, “To come up with a whole system of meaning from scratch is quite difficult for the human mind.” Borrowing concepts and applying them in new ways, however, isn’t.

He and his colleagues focus on two common methods for doing just that. One is called analogical reasoning — as in making analogies or comparisons — and it maps the structure of a whole system from one realm to another, as from Apple to Tesla.

As another example, take Aravind Eye Care, a chain of 11 nonprofit hospitals in India. When founder Dr. Govindappa Venkataswamy wanted to cut the cost of cataract surgery for low-income patients, he took his template from a pioneer of fast food: McDonald’s. He went so far as to attend the company’s Hamburger University in Oak Brook, Illinois.

“What he borrowed were processes for standardization, cost reduction, and ensuring quality,” Martins says. “But he made sure to tailor them to eye care.”

Like a McDonald’s kitchen, Aravind’s operating rooms are set up for efficiency. Each has two tables. While one patient goes under the knife, nurses are prepping the next one on the other table. When the first operation is done, the doctor turns around, sterilizes hands, and starts the second procedure.

The trick in analogical reasoning is to pinpoint your chief problem, then look for a business that’s already solved it, says Martins. That’s also the chief stumbling block. “You have to be careful what problem you’re trying to solve,” he says. “If you get that wrong, you pick the wrong analogy.”

As an analogy gone bad, he points to Better Place, an Israeli electric car company that tried to emulate cellular carriers. Just like cell phone customers add new minutes, they designed a model where car customers would load new miles as their electric batteries depleted their charge. The plan was to swap out batteries every 100 miles at charging stations, which were dispersed like a network of cell towers.

After six years, though, the company folded. It turned out that stations were twice as expensive to build as cell towers and that long-distance drivers found it inconvenient to seek them out. “The key flaw in the analogy was that miles don’t just come to you, like minutes on a phone,” Martins says. “Acquiring miles involves the effort of driving to a station and getting your battery changed.”

Method 2: Combining

When Howard Schultz reinvented a once-small Seattle coffee chain in the late ’80s, he didn’t import an entire model from another industry. Instead, he plugged in elements from several different sources — a process the researchers call conceptual combination.

One source was the neighborhood bar, where people socialized over mixed drinks. Schultz’s Starbucks mimicked that and dubbed its counters “coffee bars,” and the bartender became the barista, a job title borrowed from Italian cafes. Says Rindova, “They originally trained baristas to remember the names of all their regulars, to remember their drinks and how to customize their drinks.”

For ambiance, however, Schultz borrowed not from bars but from art galleries, hanging java-themed paintings and photos. He added in ideas from specialty retailers, too, by selling beans with brewing tools and accessories.

That sort of mixing and matching is the essence of conceptual combination, Rindova says. “Analogical reasoning reflects a whole structure. Conceptual combination allows you to modify specific bits and pieces.”

A Checklist for Creativity

Can any CEO develop innovative business models in the same vein as a Steve Jobs or a Herb Kelleher? The answer is yes, the researchers say. They suggest a four-step process for applying both analogical reasoning and conceptual combination:

  • Choose a business concept you’d like to copy.
  • Compare it to your company; see what’s similar and what’s different.
  • Select which elements to borrow.
  • Modify them to fit your business context.

The process is not just theoretical. Both Rindova and Martins use it in their teaching. In one of Martins’s classes, students borrowed an analogy from the dating app Tinder and applied it to the problem of finding tennis partners.

To him, that’s the beauty of both types of reasoning: Anyone can use them. “You don’t have to wait for ideas to strike out of the blue,” Martins says. “You could use this process to come up with hundreds of ideas. It’s a structured process for thinking outside the box.”

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About the Author

This article was written by Steve Brooks of Texas Enterprise an organisation created to share the business and public policy knowledge created at The University of Texas at Austin with Texas and with the world. see more.

Callum Connects

Clairine Runtung, Investment Manager of Convergence Ventures

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Early-stage venture capitalist, Clairine Runtung, shares her story and passion for helping build Indonesia’s technology ecosystem. In her role, she helps local entrepreneurs looking to grow their business, while also finding time to coach and mentor young women in venture capital through an organisation she co-founded in early 2017.

What’s your story?
Having lived in 4 different cities within 3 different countries throughout my career working in finance, I had always been drawn to not only numbers but also diversity, people and their stories. When an opportunity came about for me to join a tech VC firm in Jakarta, I jumped at the chance, after working for a number of years in a boutique investment consulting firm, a global asset management firm and a non-profit foundation.

I currently lead the investment team at Convergence Ventures, an Indonesia-based early-stage venture capital fund. My work includes sourcing deals, conducting due diligence, reviewing legal documents and most importantly, working with my colleagues in Investment, HR and Business Development teams to support our founders. My job requires relentless intellectual curiosity, analytical and communication skills, and ultimately passion to help the shaping and building of Indonesia’s tech ecosystem.

Early in 2017, I co-founded a Young Women in VC (renamed SheVC Indonesia in September 2017, as part of the global Pan-Asian SheVC network), focused on networking, mentoring and building a community for junior to mid-level female VCs. Our local membership grew to over 20 people within 6 months, and I personally mentored 3 young women just joining the industry. Aside from tech VC, I am also involved in being a Council for Yayasan Cinta Anak Bangsa, a non-profit organization focusing on youth and education, as well as being a mentor and a judge to a number of local tech startup events and competition. Beginning September, I will be attending Yale School of Management to pursue a 2-year MBA program.

What excites you most about your industry?
The never-ending learning, rapid progress, and people attempting to solve real problems through technology. I cannot wait to see what will unfold within tech-VC space in Indonesia in the next 5-10 years. My team and I think we are following China’s growth trajectory though to get there we need major support from the Government and foreign investors.

What’s your connection to Asia?
I was born and raised in Jakarta, Indonesia. I worked for 2.5 years in Singapore. I was educated in the United States and lived there but I am still very much deeply-rooted in Asia. After grad school, I plan on moving back to Asia for sure.

Favourite city in Asia for business and why?
Jakarta and Singapore for two extremely different reasons.
Jakarta, because the city’s urban challenge actually shapes you to become a resilient hustler. Not to mention the fact that the city has a dynamic tech VC landscape that’s rapidly evolving year by year.
Singapore, because I take pleasure in how efficient, effective and structured the city state is!

What’s the best piece of advice you ever received?
“The only way out is through”
“Leave your mark, build a legacy, no matter how tiny you think it is.”

Who inspires you?
My dad and everyone around me who was not born with silver spoons in their mouth.

What have you just learnt recently that blew you away?
It’s amazing how your body can truly adjust to the power of your mind. I have recently increased the frequency of my Intermittent Fasting routine, from only once a week to twice a week. Essentially, twice in a week I’d fast between 22-24 hours. Though skeptical and challenging at first, after a month, I rarely feel hungry/starving on those two scheduled fasting days. Interestingly, I also feel the most productive at work on days that I am fasting.

If you had your time again, what would you do differently?
Nothing. If there is anything I’d like to tell myself over and over again, is to never regret and to look only forward.

How do you unwind?
Take a hot shower, drink a cup of tea and read a book (I alternate between fiction and non-fiction) or watch videos (I also alternate between entertaining and educating videos). On some days, you can find me winding down over a nice dinner with friends or family.

Favourite Asian destination for relaxation? Why?
Bali, Jogjakarta and Manado. All cities are in Indonesia.
Bali for its beaches, sunshine and the feeling of being surrounded by carefree people. Jogjakarta for its Javanese cultural and heritage. Manado because it’s where my dad was born and where my grandparents live. In my opinion, each city has something different to offer that contributes to my way of relaxing.

Everyone in business should read this book:
The Golden Passport – Duff McDonald

Shameless plug for your business:
Instagram Story and straight up telling friends, acquaintances and even strangers about how awesome the work that I do is.

How can people connect with you?
LinkedIn: https://www.linkedin.com/in/clairineruntung/
Personal email: [email protected]

Twitter handle?
@clairineruntung though I have been inactive for years. I am much more active on LinkedIn these days. Find me on IG @clairineruntung as well.

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Callum Connects

Rishabh Singhvi & Varun Saraf, Co-Founders of Why Q

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Surprised by the lack of delivery services available for local Singaporean hawker stall foods, Rishabh and Varun started their own delivery service.

What’s your story?
Varun and I moved to Singapore in 2008 and soon turned into foodies. After completing our studies at SMU, we worked in corporate offices in the Singapore CBD for 4 years. Here, we faced the problem of long queues and found it hard to find feasible delivery options on a day to day basis. We made it our goal to help others like us, so they don’t face the same problem of finding affordable yet tasty options to eat their daily meal. The name asks all those queuing up at food courts and hawker centres a simple question – Why Queue … when we can bring Singapore’s favorite hawker food to you?

What excites you most about your industry?
The Hawker culture is the most exciting and intriguing part of the food industry in Singapore. It is deep-rooted in the local Singapore culture. There is rich variety of cuisines available under one roof, food is delicious and very affordable. We were very surprised how this part of the food industry was completely ignored by other food deliveries.

What’s your connection to Asia?
I was born and brought up in India and have been staying in Singapore for the past 10 years.

Favourite city in Asia for business and why?
The ease of running a start-up and the professionalism makes Singapore my favourite city for business. It has the most business-friendly regulations, low start-up costs and takes only a week to register and get your business going.

What’s the best piece of advice you ever received?
“If you do build a great experience, customers tell each other about that. Word of mouth is very powerful.” – Jeff Bezos

Who inspires you?
Hawker Uncle and Aunties are our Hawker Heroes. Most of the stalls are family-run businesses. The dedication and hard-work that they put in is commendable. They come to the hawker centre at 3am to start preparing food for the day and leave only in the evening after cleaning and washing everything.

What have you just learnt recently that blew you away?
We are leaning so much about our hawker partners through our #HawkersOfSG series, inspired by #HumansOfNewYork. For example, one of our hawker partners was into advertising (until the 2008 recession started, after which he started one of the most popular hawker stalls in the country) while the other used to sell and ride Harley Davidson bikes (and now sells black pepper rice bowls). Their stories and how they turned into our Hawker Heroes continues to inspire us and blow us away.

If you had your time again, what would you do differently?
I think I haven’t reached that stage in life yet where I look back and want to do things differently.

How do you unwind?
Watching and playing football 🙂

Favourite Asian destination for relaxation? Why?
Bali, definitely. One of the most beautiful and chill places.

Everyone in business should read this book:
Zero to One by Peter Thiel

Shameless plug for your business:
Cheapest and largest Hawker Food delivery in Singapore.

How can people connect with you?
On whatsapp at 90268776 or email at [email protected]

Twitter handle?
We’re on Instagram – https://www.instagram.com/whyqsg/ and Facebook – https://www.facebook.com/whyqsg/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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