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JAROSLAV KAPLAN: "BUSINESS INTELLECT CAN BE DEVELOPED"

business intelligence

JAROSLAV KAPLAN: "BUSINESS INTELLECT CAN BE DEVELOPED"

Elizaveta Shebunyaeva, Ekaterina Aladashvili
BUSINESS-INTELLIGENCE

Kaplan Jaroslav
Kaplan Research Company
Founder of the Business IQ project
In business, it is not customary to openly talk about failures. However, statistics show that only 2-3 out of 10 new businesses survive. We spoke with Jaroslav Kaplan, author of the book "Business INCOGNITA: How to Expand the Boundaries of Entrepreneurial Thinking", about the reasons why our knowledge of entrepreneurship is a "survivor's mistake" and where small businesses should look for ways of scaling and strategic development.

PERSONALITY:
Jaroslav Kaplan, businessman, development expert, an academic author, developer of contextual market research methodologies and the book "Business INCOGNITA: How to Expand the Boundaries of Entrepreneurial Thinking".
— Jaroslav, you have been in entrepreneurship for more than 20 years. Please tell us about your path.
I have been involved in business for almost 30 years, I started in the 90s. During this time I have worked my way up from distribution businesses, retail, and now I have been working in consulting for almost ten years. I've run these businesses both alone and with partners. Some businesses thrived while others didn't. In 2015, I decided to figure out why some projects develop successfully, while others which seem to me more interesting and promising, die out. This is how my story began.
— For 7 years you have been conducting research into the causes of high "mortality" in entrepreneurship. Based on the results of this research, you wrote the book "Business INCOGNITA: How to push the boundaries of entrepreneurial thinking". Why did you decide to find the reason for the high level of "mortality" in entrepreneurship? After all, in most cases entrepreneurs are ready to share their successes, but not everyone is ready to talk in public about their failures.
I believe that for an objective result it is necessary to go beyond the experience of one, two or a hundred people and conduct a study of the entire field of activity as widely as possible. Otherwise, we will be limited to the sample that we took "to work". Narrowing the entire field of study to some small sample leads to a huge mistake known as the "survivor's error".

Entrepreneurship today, as it is being studied and developed, often resembles the "survivor's error".

This mistake was mentioned by Cicero as far back as 100 BC in his work "On the Nature of the Gods.” Cicero gave the example of Diagoras of Melos in the temple, where he was asked: "You say that the gods do not like people and neglect people. But look at how many plaques of gratitude there are around from people who have survived shipwrecks and other disasters. And you say the gods don't care about humans." "That's true," Diagoras replied, "only there are no images here of those whose ships were sunk by the storm and they themselves perished at sea". In business the same situation arises. Books about business are written by those who "survived." The "drowned'' will no longer tell us anything. To avoid making the same mistakes, I took the field of entrepreneurial activity as broadly as possible and got an unexpected result.

It turned out that for the past 50 years, after Schumpeter's research, no one had studied entrepreneurship as a separate field of activity. In any case, I did not find any such study. Entrepreneurship has been studied in other sciences: political economy, ecological economics, psychology, sociology, and others, but the field of entrepreneurship has been neglected.

My study is perhaps one of the few that was conducted outside the framework of a specific experience (industry, personal, institutional, organizational), but as a result of an extensive study of activity.



— In 2022, entrepreneurs in Russia experienced the whole range of feelings from worries about how to survive to confidence in business sustainability. How, according to your observations, was business restructuring during this period? Did business understanding of communication with the end consumer change?
The changes that took place can be described as a change in the logic of interaction between the entrepreneur and consumers. When the environment changes, the rules of decision-making by both consumers and entrepreneurs change significantly. Accordingly, a new logic emerges at that moment. For example, long ago there was a logic that the Sun revolved around the Earth, but after Copernicus’s discoveries, it changed. It was discovered that it is actually the Earth that revolves around the Sun. Such changes in logic lead to dramatic changes in interaction.

Now is the time to move from the well-known cliché of "know your customer" to the new cliché of "understand your customer".

We cannot say that knowing some data about a customer means understanding that customer. Understanding the customer means seeing some order of things in the environment, interrelatedness and cause-and-effect relationships. Therefore, the quality of data required for interaction between the entrepreneur and the customer is now an order of magnitude higher than it was 20 years ago.



— You are introducing a new concept - "business Intellect". In view of the recent emphasis on the development of young entrepreneurs, how should we develop business Intellect in young businessmen, in your opinion?
Let's start with the definition in which I understand business Intellect in order to define the topic of our discussion more clearly. In the book "Business INCOGNITA: How to push the boundaries of entrepreneurial thinking", I derived a central definition of business Intellect. It is 1) the ability to recognize market opportunities and 2) the desire and willingness to use available resources to turn them into those market opportunities.

Entrepreneurs need to be taught to recognize market opportunities and to use available resources effectively, including the very understanding of available resources.

The concept of "available resources" is ambiguous for everyone. There are nuances and peculiarities that arise here that need to be recognized. This requires a certain kind of familiarity.
— Can business thinking be taught?
The answer to this question was one of the main results of my research. When I started it, I did not yet have a positive or negative answer to this question. But since I decided that I would start from scratch and not take into account any authoritative opinions, I got a very unexpected and interesting result.

Yes, entrepreneurial thinking can be taught and business Intellect can be developed.



— In your book "Business INCOGNITA: How to Expand the Boundaries of Entrepreneurial Thinking" you express an interesting idea: "...business Intellect can exist only where thinking and activity are studied separately - this is a necessary condition for its existence". Could you explain this statement a little bit?
When we talk about action, we almost always mean using some kind of tools. If I am a programmer, my tool is a computer and a program, and if I am a builder, my tool is a hammer and a chisel. There are no tools in the very process of thinking - all human thinking is defined within the framework of using a tool. If my tool is Photoshop, then in my activity I think within the framework of this tool. In a sense, the tool becomes an insurmountable barrier for my imagination and further development, although of course it is comfortable and convenient to live with this tool. A person becomes an "appendage" of the tool, they are used together - the tool and the person who uses it.

This topic has a long history. For example, up to the 15th century inclusive, almost every building was built by a separate architect, because at that time there were no drawings, schemes, plans. Even much later, almost 200 years later, Peter the Great came to Holland to learn shipbuilding, but because of the lack of drawings there he went to England, where they had already appeared and were actively used. A drawing, a project, a scheme - these are all tools of thinking, they are not tools of doing. Thinking must have tools.

If my thinking is limited solely to the tools I use for activity, then I am a craftsman who cannot scale or carry my activity beyond my own capabilities.



— Can we talk about this distinction in relation to small business?
No, to my great regret, there is no such division here yet. Entrepreneurship today, in my opinion, is five hundred years behind many other industries.

95% of small entrepreneurs are artisans who, just like Italian architects, have a hard time "building houses" outside of their direct involvement.

It should be understood that serial construction of buildings did not exist until the appearance of Leon Battista Alberti, who was one of the first to use the method of designing buildings and built buildings "with other people's hands", but according to his own designs. Of course, there were brilliant architects before him. But in the absence of building projects, they literally sat on the construction site and personally supervised their construction, like Brunelleschi, who for 15 years, literally, lived in the dome of Florence Cathedral.

An entrepreneur should have his own set of thinking tools in his head, his own "Brunelleschi dome", his own project so that he can pass it on to his assistants, partners and clients.

But it is not a fragment or a script of instrumental actions that should be handed over. The whole project must be handed over. Clients should understand what kind of "building" we are "building" for them, because entrepreneurs build it not for themselves, but for clients.



— One of the pitfalls of scaling up you cite is to immediately increase sales in order to attract customers as quickly as possible. Could you give some recommendations to entrepreneurs on how to proceed and what indicators to watch out for when scaling their project?
Let's start by answering the question of what exactly it is that we are scaling. Most entrepreneurs I've talked to have scaled a business. However, a business is not the object of scaling.

Over the past 20 years, the very fundamental role of the product has changed.

A product today and a product 20 years ago are different things. I understand a product not as something that we create in isolation from our environment, but as a particle that connects the entrepreneur and the consumer. You could call it a quantum of interaction.

By "connecting" the entrepreneur and the consumer through the product, a system of relationships is formed. From this point of view, the entrepreneur scales his system of relations with the consumer, not something else. The indicators of this relationship scaling will be the quantity and quality of their interactions. If your customers are contacting you more often and of higher quality as a result of your activities, then you have business scaling. Obviously, "more often" and "higher quality" will have different meanings in every business.



— In the context of the aforementioned, how can a business leader transfer his values within the company?
This is a sore subject! Let's start looking at this issue with a sequence of actions. When you cook, for example, soup, you follow a certain sequence and do not start by putting a spoonful of sour cream in the pot - sour cream is the last one.

But in entrepreneurship, for some reason it is very common to start with a spoonful of sour cream. I'll clarify what I mean by that.

Going back to the thinking tools, let's say that I have something that can be called a "consumer interaction project". This means that I understand my consumers, I understand a certain order of things in this interaction, its rules and cause-and-effect relationships. Knowing this, I can broadcast it to my organization in terms of what its goals, rules, division of labor and coordination processes should be. That's easy.

Alternatively, I start doing business by building an organization - organizing people, dividing and coordinating processes on my own, as it should be from a business owner's point of view. And then I "spit out" what I got as a result of this construction: if the market accepted it, good, and if not, bad.

But let's think for a moment! What are our chances in our "own brew" of guessing what will work in real consumer interaction and what won't? That's why 8 businesses out of 10 die within 2-3 years. Because you should start not with building an organization, but with a project of interaction with consumers. But it almost always happens the other way around: first an organization is created, which then tries to adjust to consumers. Perhaps someone will be lucky enough to build the right consumer interaction project from the start. However, this seldom occurs.



— Usually in such cases they say "the market hasn't grown enough for my product"....
That's great. But it would be good to know about it in advance, before you "burn" resources and your mental health. It's like building a tower and when it falls down saying that the construction methods haven't grown to my brilliant design yet.



— Another statement from your book, "Analyzing success stories shows that a strong competitive advantage depends not only and not so much on material resources or the technology used, but on the quality of the strategy for the future path." But small businesses often operate in the here and now, and few grow their businesses strategically. How to teach this and what methods to popularize it?
Let's point out that the word "strategy" can no longer be used in business. It has been corrupted. Strategy, especially often in small business, is now called anything: a roadmap (i.e. a certain sequence of work), a schedule of posts in social networks is now also called "advertising strategy". And what is worth one strategic session, when a bunch of employees gather to think together how to accomplish local tasks. So, in my opinion, the word "strategy" doesn't need to be used anymore.

Why? It's a word that came into business from the military. It should be clearly understood that strategy teaches the use of combat operations for the purposes of war. And tactics teach the use of armed forces in combat. There's a huge difference. Dumas in The Three Musketeers had Partos saying, "I fight simply because I fight." But when there are no war aims, accordingly, there is no strategy, there are only tactics.

If an entrepreneur has no blueprint for his relationship with the consumer, no blueprint for the "building" he wants to construct to invite the consumer to interact with them, what kind of strategy can we talk about? It simply cannot exist.

I use the word “development" in my work. Development is a vector that goes from old meanings of interaction with consumers to new meanings of such interaction. In Japanese there is a word "Ba" for a place or space to build relationships. Each entrepreneur needs his own "Ba" - the space of meanings in which he builds his relationships with customers.

For a business to survive, it is necessary to draw a development vector and understand what meaning we put into our interaction with the consumer yesterday, what meaning we put into our interaction with the consumer today, and what meaning we will put into our interaction with the consumer tomorrow. And this direction will show us the way in our journey across the ocean of business, just as the "polar star" shows the way to brave conquerors of uncharted lands.
Jaroslav Kaplan
Author of the book "Business Incognita. How to push the boundaries of entrepreneurial thinking". Expert in the field of sustainable development of organizations and discovering new sources of growth. Developer of the methodology of contextual market research. Member of the International Association of Strategic and Competitive Intellect Professionals SCIP (USA).

Blog: https://www.kaplanresearch.pro/eng

In this light (yet profound) business fable a very magical and sincerely nice goldfish, Goshio, navigates her aquarium and the seas of the Paraquarian world beyond. The heroine's journey is an allegory of the entrepreneurial world (and of life) – based on the author's own research journey to circumnavigate the fascinating World of Entrepreneurship. www.goshio.com

Contact:
E-mail: work@kaplan4research.com
Linkedin: www.linkedin.com/in/jaroslavs-kaplans-11255b