Monday, June 15, 2015

Context Drives Choice (and Vice Versa)

Entrepreneurs are often seen as great examples of free will in action. In a world of people who too often see their situation as unchangeable, entrepreneurs choose to act. We feel the power of free will when we hear stories about the bold actions of entrepreneurs. 

For example:

Martin McVicar took a summer job at an Irish forklift company in the early 1990s. Within a few years, he designed a unique forklift that swivels for moving awkward loads in small spaces – and founded Combilift to take this product to market. As of 2015 the company is shipping these unique forklifts all over the world.

Trained in chemical engineering, Orlando Vargas left Columbia in 2005 to go to Baja California Sur in Mexico. There he developed an industrial soap made from cactus. Now his company, Phanaint, sells biodegradable cactus-based soaps for industrial uses to businesses all over Mexico. His customers rave about the product; hoteliers, for instance, like that they do not need to use bleach when they use Phanaint soap, and that they avoid toxic runoff.

In 1976 a team from Zanini Equipamentos Pesados created a subsidiary called Sermatec in Sertãozinho – deep in agricultural Brazil. There they developed a unique machine that turns sugar cane into food – or fuel – depending on market conditions updated to the minute. The machine is powered by electricity cogenerated from the discarded portions of the cane, and today the machine is sold to customers worldwide.

Inspiring stories. But here is the rub: In each story, the innovator’s choice was driven by their context: an Irishman immersed in the forklift business, operating in small spaces; a Columbian chemist surrounded by cactus in Baja; Brazilian agricultural engineers amidst the sugar cane, in a world hungry for food and fuel.

In each of these cases, context drove choice.

True, it took a bold decision to actually create these businesses, and the innovators should be admired for this reason. But still, there is no way anyone could have started any of these businesses without being in the context that made the innovation possible.

Context drives choice, yet choice is still pivotal to innovation because we often choose our context. The pivotal choice for McVicar was not to start his company; it was his choice to join an Irish forklift company years earlier. For Vargas, the pivotal choice was to move to Mexico. For the team at Zanini, it was when they joined that firm. We choose our context, and then our context determines our possible future choices.

You may think this point is obvious, but unfortunately it is often ignored. Many young people feel they should start their careers as entrepreneurs, and so they try to start a consumer internet company. Why? Because they are without experience in any context, so all they know are their consumer experiences. If instead they were to choose to work in an interesting context, who knows the amazing things they would discover. Similarly, firms differ in how much they pay attention to context. Some firms allow their workforce to stagnate, while others rotate the most promising employees through interesting contexts.
Context drives choice, but we choose our context.

The classic statement of how context drives organizational creation is by Arthur Stinchcombe.