How to solve unsolvable problems in entrepreneurship

ENTREPRENEURIAL CHALLENGE BUSINESS INTELLECT
CONTEXTUAL ANALYSIS

Kaplan Jaroslav
Kaplan Research Company
Founder of the Business IQ project

Original Article: https://kontur.ru/articles/48654-kak_reshat_nereshaemye_zadachi

In the area of business, context can help identify hidden factors that have a significant impact on a company's performance. The object of study is the context and circumstances in which your business exists. And in different contexts you will have different evaluation criteria and ways of solving the "same" problem.

Let's understand how to improve business performance with the help of contextual analysis - a new tool for solving entrepreneurial problems.

How context matters for business
The modern world is undergoing profound changes before our eyes. Values, views on traditional ways of life, principles and approaches to human interaction, etc. are changing. One minute it seems that everything has normalized, but instantly there is a change of scenery: what used to be unacceptable is now becoming the norm of society. New technologies have a huge impact on business, and the speed of innovation is another major challenge facing entrepreneurs.

At the same time, it seems that many entrepreneurs produce new products "in a vacuum" without having the slightest idea about the context of their further sale and use. This is also evidenced by the statistics of failures in launching new products.

According to Harvard Business School professor Clayton Christensen, more than 30,000 new products are introduced each year and 95% of them fail. According to University of Toronto professor Inez Blackburn, "the failure rate for new products in grocery stores is between 70 and 80%."

Obviously, there is some inertia in the entrepreneurs' thinking here, because they are using the same principles and approaches as they did 5, 10 or even 25 years ago. And the mere understanding of the fact that their context of interaction with consumers has changed gives them a chance for growth and development. But that's not enough to be effective - you need action.


Identifying the problem
Oftentimes, when a problem arises, entrepreneurs see only the manifestation of symptoms and not its source, which may be in a completely different "layer" of activity. The cause remains undiagnosed, hidden from their eyes in the form of one or another "contextual factor", which has its hidden impact on the whole area of their activity. It is impossible to solve the problem of headaches by endlessly increasing the dose of pain pills. If it is not diagnosed, many other problems will soon appear, already with completely "new" manifestations.

At the same time, the main irrationality in entrepreneurship is that one often proceeds to a solution without first formulating the problem, structuring it, and identifying the main elements relevant to it, including the very hidden contextual factors. For example, in a moment the sales volume decreased, and without understanding why it happened, the entrepreneur throws all his forces to solve this problem by habitual actions. In a short period of time, the issue may be solved, but if the real cause is not found, this situation is bound to happen again soon. When the cause of the problem is known, the search for a solution is reduced to identifying its elements and their relationships to each other. Such a problem is called a well-structured problem. Its solution can be controlled, because the main condition for control is the presence of some degree of order in the field of activity. Have you ever tried to control chaos?

In business, all attempts to solve problems combined with ignoring their causes leads to the unfortunate consequences outlined in the high bankruptcy rate statistics. This is why the study of context - the environment in which the entrepreneur's activities take place - is so important. It includes two main areas:

• analysis of the external environment - changes in consumer preferences;
• analysis of the internal environment - available resources, organizational culture, business processes.

As a result, the entrepreneur gets a complete picture of the situation in the market and within the company, can identify opportunities and threats, and determine the strengths and weaknesses of his or her business. Both of these components are important. It is often possible to see a situation when a company spends all its energies on maintaining "internal order", and there is neither energy nor attention left for interaction with consumers "outside". The boundary of the entire organization's activity passes right in front of the consumers' noses, leaving them completely bewildered.

I estimate that approximately 90% of tasks in entrepreneurship turn into "unsolvable" ones in two cases. The first is due to the lack of understanding of the dynamics of how consumers perceive the value of products, and the second is due to the existence of one or more unpredictable variables - so-called "contextual" factors - in the field of operation.


What is an "unsolvable" problem
A typical example of an "unsolvable problem" is a corporate program for reimbursement of employee training expenses. At first glance, reimbursement of training expenses should make employees eager to learn, increase their competence and, as a result, reduce staff turnover.

Factors that have a significant latent influence on the area of activity and largely determine the outcome of the entire activity are called "contextual". It is their understanding that determines the entrepreneur's ability to get answers to his or her questions. For example, such as: "Will an employee tuition reimbursement program be effective in combating employee turnover?".

Any "unsolvable problem" in entrepreneurship most often contains one or more "contextual factors" that act as an unpredictable variable in the problem. Solving such a problem without understanding the contextual factors is like trying to add two and two on a calculator without knowing that the calculator has a button with the number "five" that always adds to the result. With such a defect in calculations we will always get an incorrect result and until we understand the cause, it will be difficult to reach an agreement with people that 2+2=9.


Taking into account the dynamics of value perception
The reason why interacting with customers is a major challenge in business is due to the high variability of what customers consider valuable. Customer expectations are nothing more than their evaluation criteria through which they perceive all of a company's activities. Since markets are constantly transforming for reasons of changing preferences, technology, government regulation, policy, etc., the perceived value of products by customers is also constantly changing.

Each person has different preferences. The perception of taste, color and smell is highly individualized, so naturally there exists in many cultures some variation of the phrase "there is no arguing about taste.”. Objective value, or the value of something in and of itself in isolation from everything else, is an abstract and highly impractical concept. For example, until people learned the value of crude oil, they considered it dirt and tried to cleanse their land of it. Later, when the economic potential of oil was redefined, it was transformed from unwanted waste to a profitable resource. While oil remains what it was, the perception of its value has changed dramatically. And there are many such examples.


Looking for the unpredictable variable
The relevance of a product to its target audience has always been a "subtle" point in any business. For example, the same bottle of water has different perceived value to consumers in a desert or a supermarket. Thus, another factor appears in addition to the product and its target audience - the environment in which the interaction with consumers takes place. This factor is most often ignored by entrepreneurs, and for nothing. After all, it is the factor that allows us to "uncover" and "solve" any problems in entrepreneurship.

It is often the factor that determines the quality of a product or service that a consumer needs in a particular circumstance. The very definition of "quality" is the conformance of a product to some standard, regulation, or requirement. For example, the quality of engines that are installed on a truck, a passenger car and a pleasure boat will be determined by different requirements and evaluation criteria. In other words, they will have different quality standards. Thus, the concept of "quality" is a context-dependent factor that changes over time. This is one of the points that is most often overlooked.

We can only talk about the product's characteristics when we know the context in which it will be used. This tells us that without knowing the context in which the product will be used, the concept of "quality" is abstract. The context of use of the product here begins to act as an unpredictable variable. Indeed, if we expected our conditional bottle of water to be sold in the desert, but it ended up on the shelves in a supermarket, we cannot expect this business venture to be successful.

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

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