Musings on Entrepreneurship and Innovation
Thursday, September 01, 2005Continuous Bootstrapping as Strategy
Bootstrapping has long been associated with startups. Having few resources of their own, startups are forced to find ways to leverage the complementary resources of others in order to achieve their objectives. However, the pervasiveness of information technologies is forcing all of us - big and small - to adopt continuous bootstrapping as a fundamental strategy.
As the information content of products and services increases, the clockspeed of business accelerates. The facts are clear: the majority of business value is attributable to information-based (intangible) assets, and the average industry clockspeed (the average interval between new product introductions) is accelerating by over 9% per year. As I showed in my previous post, that kind of acceleration can easily require a doubling of the flow of a company's successful new product introductions just to maintain current revenues over the medium-term.
Throwing money and resources at the challenge isn't much of a solution: increasing your investment to maintain current returns kills your return on investment and will drive away investors and other resource providers. Rather, the ability to stay in the game requires accelerating improvements in your innovation productivity, your capability to apply resources effectively.
This isn't a new idea, of course. I just ran across a paper by Charley Fine of MIT written in 1999, in which he wrote the following:
The clockspeed framework suggests a dynamic theory of the firm where the "inner core" competency of an organization is the ability to continuously design and assemble chains of competencies to deliver value to the marketplace.
More recently, John Hagel III and John Seely Brown concluded The Only Sustainable Edge by admonishing companies to continously ask the following question:
Which process networks of complementary capabilities will be most effective in amplifying the value of our distinctive specialization and in accelerating our capability building over time?
In other words, bootstrapping isn't a transitional state. It's a perpetual process that requires us to address the following questions:
- What is our greatest relative competency at this point in time?
- What capabilities complement ours? In other words, which capabilities magnify our own?
- Who has those capabilities?
- How do we successfully collaborative with those sources of capability?
- How do we maintain the flexibility to shift our collaborative network over time?
Admonishing people and companies to "be more entrepreneurial" sounds swell, but isn't very actionable. Helping people and organizations learn how to think dynamically, pay attention to pacing, understand complementarity, and develop collaboration skills sounds more promising.
More: Perpetual Bootstrapping
