Does complexity freedom make any difference in entrepreneurial ideation?

The Firm and the Product is based on a project part of a PhD research at Auckland University of Technology in New Zealand in 2016. The main objective of the research project was to confirm what many technologists suggest is obvious: that the presence of 3Dprinting benefits the creation of better businesses. The research project consisted of two studies implemented during three years. The focus of the research was the creative processes where entrepreneurs engage when starting a business. These studies used frameworks from the study of product design, to look for benefits in idea creation that come from the flexibility that 3Dprinters provide. In the following paragraphs we will describe the research project: the frameworks used, methods, results, insights, and some ideas to apply them.

How are entrepreneurship and 3Dprinting related?

Entrepreneurship is a phenomenon where individuals introduce new means to the marketplace in the form of new products, or processes. Introducing means requires novelty to differentiate our product from others already known in the market. Therefore, entrepreneurship often uses technology to create this differentiation and capture more value. Surprisingly, in theory and practice, when we talk about the process of building a business we describe it without paying attention to the used technology. One example is the way we talk about stating businesses with Additive Manufacturing (3Dprinting).

In the last 10 years academic and popular literature have promoted the use of 3Dprinting as an innovative manufacturing method for business creation.  Researches agree that using 3Dprinting provides new businesses with the flexibility to produce products that incorporate a great number of parts and functions without the need for more machinery and tools (as in traditional manufacturing).  This is called complexity freedom. Yet, despite mentioning all the benefits that 3Dprinting provides, it is difficult to find information about the way its implementation affects the creation process of the business. Nevertheless, a review of the literature that describes the relationship of products with firms and businesses suggests that the flexibility of 3Dprinting could be used to design the structure of businesses and industries.

The research project looked at the relationship between the product and the firm from three different perspectives: entrepreneurship, industrial dynamics, and additive manufacturing research. 

Within the field of entrepreneurship, the relationship between the product and the firm is viewed differently from two groups of researchers. The first, and the most famous one, considers that the creation of businesses is a search process. This means that social, technological, and economic forces create opportunities in markets and entrepreneurs create businesses with the purpose of finding them and exploiting their value. Researchers Sharon Alvarez and Jay Barney  compare this to mountain climbing, where if one wants to become the most famous climber, we first need to find the highest mountain and start climbing. Under this view of entrepreneurship, the product is a probe that entrepreneurs use to find the business opportunity. Accordingly, the product must be monitored, adjusted, and reintroduced to the market until it finds its target.

The second group of researchers sees business opportunities as something that is not out there, but is constructed by the entrepreneur. In these theories of entrepreneurial creation, entrepreneurs use their context, their knowledge, their networks, and their resources to build a market opportunity. The researchers that support creation theories point out that the theories of discovery have a problem because one cannot aim to discover something that can only proof its existence once it is already discovered. In the words of Alvarez and Barney, creation theories of entrepreneurship are more like “mountain making” instead of mountain climbing. In creation theories, entrepreneurs do not look for mountains but instead collect resources to build a mountain of their own.

The most famous of the creation theories, the effectuation theory, suggests that expert entrepreneurs use cycles for the creation of market opportunities. First, they scramble all their resources to create an idea that brings them a step closer to their means and goals. Next, they use their networks to interact with people whose goals could also benefit from the business idea. Finally, they negotiate contracts modifying the idea in a way that benefits all the involved partners. The contracts provide the business venture with new means or goals that the entrepreneur can use to start the cycle again. The accumulation of contracts is what builds the business and the market. From the perspective of effectuation theory, the product is not a probe but a token that is used for the negotiation of the contracts. This means that if an entrepreneur wants to convince a retailer to join his business venture, she can negotiate the features of the product (size, color, material, performance, etc.) to suit the retailers goals.

Both entrepreneurship perspectives can use the flexibility in 3D printing to adjust the product for the purposes of finding or creating a business venture. Though, there is literature in the field of industrial dynamics that supports the role of the product in the theories of creation. These theories indicate that the configuration of a product shapes the relationships between individuals, teams, and organizations that produce and commercialize them. This large list of studies show that the relationships between components of new products reflect the communication channels of the people who handle them. Accordingly, a person who is in charge of the fabrication of a bicycle pedal will be in contact with the person who fabricates the frame and the chain, but not with the ones who fabricate the seat and the handlebar.

The research shows, that as new businesses grow, the knowledge for the fabrication is transferred from the initial firm to the business partners. When a market is mature, the relationships between the actors in the industry resemble the first relationships in the configuration of the product. This is called “the mirroring process”. Therefore, if we combine both bodies of research, we could say that the negotiation of the first effectual contracts settles specific configuration of products that can shape the structure of organizations and industries in the future.

Using 3Dprinting in the design of these firms and markets needs to consider how this technology has changed the way products are designed. One of the most important implications of using 3Dprinting is the merge between the design and manufacturing stages of the development process. Additive manufacturing provides the designer with an immediate fabrication of the product, meaning that the design of every product can be changed every time it is fabricated. Consequently, the use of 3Dprinting requires a global approach to design. Connecting the global approach for the design with 3Dprinting to the design of firms and organizations implies that entrepreneurs that use 3Dprinting can interact with the technology and manipulate the product to create contracts that benefit the creation of the business venture. Hence, the research project asked the following questions:

1. Does 3Dprinting affect the creation of new business ideas?
2. Does 3Dprinting affect the ideation of product structures?
3. How does 3D prinitng affect the structures of the ideated businesses?

Which research methods were used?

Understanding the effects of using 3D printing for the creation of new businesses requires multidisciplinary research methods. Since there are few examples to guide the study of the interaction of entrepreneurs with 3Dprinting, the research project adopted an inductive and grounded approach for the development of these multidisciplinary  tools. An inductive approach indicates that contrary to other research methodologies, the frameworks used will be formed by creating categories from the patterns that arise from the data. On the other hand, a grounded approach refers to the creation of the research tools in cycles that develop a framework based on the same gathered data. The research project used these approaches to adapt methods that are used to study the interaction between designers and their tools, to a context of creativity in entrepreneurship.

The establishment of a business venture is a complex phenomenon where activities can be individual and creative, or social and strategic. Within this process, we call the creation of business ideas “entrepreneurial ideation”.  Though similar to other creative processes, the creation of business ideas is different because the ideated artefact is a business opportunity. Contrary to other creative results a business opportunity is not only a product but a situation that the entrepreneur works out through the creation of contracts. Thus, this research project adapted methods used for the study of other creative processes to the entrepreneurial ideation of business opportunities.

Study 1

The first study was designed based on existing methods used to analyse the effects of using tools, such as sketches or CAD software, in the result of design processes. The study created a building kit made of two different kinds of building blocks: sticks that represented the amount of material, and connections that represented the complexity of the product. The cost of using each block was presented differently for two groups of participants based on the real costs of fabricating with or without 3Dprinting. Each team of participants received a budget. For participants in the control group, the costs of material blocks was low. The cost of connections has high and increased for more complex connections. For the experimental group the costs of material blocks was high while the cost of complexity blocks was zero to represent complexity freedom. The size, complexity, and cost of the results was compared.

Study 2

In the second study the main objective was to analyse the effects of complexity in a much larger group. This study changed the building kit for an image of a an abstract product-like body. Images with bodies of different complexity were created. The study gave each participant one image randomly selected from the group and asked them to imagine a business idea with it. Later it asked participants to fill out 13 statements that described their business opportunity. Answers were compared using a Natural Language Processing tool to see the relationships between the named categories in each business idea. The study analysed the size and complexity of the networks.

Results

Contrary to the literature that promotes the benefits of using 3Dprinting,  the results of the first study does not show a difference in the size and complexity of the results of entrepreneurial ideation between the two groups. Moreover, the results of the second study show, that the complexity of the categories in business ideas is not affected by the complexity of the tools used to imagine new businesses. Yet, a different effect was found across all the business ideas. The data of both studies suggests that the morphology, or the shape, of the tools is more influential in entrepreneurial ideation than their complexity.

What do these results mean?

The lack of influence of technological complexity in the way entrepreneurs create business opportunities questions the way the benefits of using 3Dprinting are presented. This does not reject the already proven benefits of using this technology for the fabrication of a product, but rather show that the presence of a 3Dprinter does not affect the way entrepreneurs create ideas by itself. This is a problem because it shows that these benefits are availiable only if the entrepreneur is capable of developing a complex enough idea in the first place. Additionally, this restricts the design of firms and organizations as research suggests. The process of creating the structure of the firm and other organizations relies on the ability of the entrepreneur to be aware of the technological complexity of the product design. Thus, it does not matter if we have a 3Dprinter to modify our product with the purpose of including different partners if the idea that gave birth to the business is not complex enough.

Evidence in this studies reveals that people who engage in entrepreneurial ideation do not pay attention to the technological complexity but instead look for affordances. Affordances are relationships between themselves and the properties of the technologies used. It seems that these affordances create a pool of possible activities that is combined and recombined to generate business opportunities in the same way that other creative processes do. Consequently, this pool of affordances influences the creation of business ideas, which later will influence the configuration of the product, which later will also influence the configuration of the organizations that work with it. Unfortunately, if the technology does not afford ideas to entrepreneurial ideation, the available creative combinations are less, and as a result, the possibilities to exploit the flexibility of 3Dprinting become even more restricted.

The way entrepreneurs structured ideas in these studies indicates that creating business opportunities might be easier with traditional manufacturing than with 3Dprinting. Traditional manufacturing usually consists of many technologies (tools, machines, and processes) that may show affordances for entrepreneurial ideation. That is the case of processes like metal forging, casting, or stamping that have even been done by hand for centuries. The cues in the technology give us affordances in the tools and processes telling us what is possible and what is not. In the other hand, 3Dprinting has compressed many other technologies inside the 3Dprinter. The way entrepreneurs interact with the printer happens mainly through the interface of a CAD software. It is possible that the lack of cues in 3Dprinting also restricts the creation of new business ideas. Whereas this research has not enough evidence to confirm it, this is a question that should be adressed by further studies.

What can be done to improve entrepreneurship with 3Dprinting?

The problems evidenced by this research do not dismiss the capability that 3Dprinting has for the creation of new market opportunities but instead gives us some clues for improvement. As mentioned above, the biggest challenge in the process of creating businesses with this technology are the restrictions that ideas can create for the exploitation of complexity freedom. Contexts with few affordances for the ideation of business ideas have very low chances of inspiring categories of activities, capabilities, and identities that can be combined in novel business opportunities. Thus, in order to improve the entrepreneurship with 3Dprinting, it is necessary to increase the input of affordances in the creative process. While more research has to be done and new methods have to be developed, there are a couple of recommendations to improve entrepreneurial ideation:

Cross-pollination of ideas:

Having complexity freedom permits the incorporation of an unlimited number of elements, components, and functions, as long as they fit in the printing volume. Research suggests that a global approach to product design with 3Dprinting needs to let the software and the printer collaborate in the design process. Accordingly, an entrepreneur/designer can collaborate with the printer by bringing components and functions to the printing volume, and let the software and printer merge them in a material optimization process.

The results of these studies suggest that entrepreneurs can use this collaborative design process to merge completely unrelated products, components, or functions and let the computer do the rest. Creative techniques such as forced association are traditionally used to create innovative concepts. The idea is to associate concepts that are wildly unrelated to our core ideas with the purpose of creating innovative combinations. Often, the forced association between two concepts is metaphorical and must be adapted to the restrictions of the manufacturing processes available. However, a collaborative process of design between designer and 3Dprinter can incorporate absurdly disconnected ideas and still make them work. In such way, the entrepreneur can increase the input of creative affordances by selecting them from strange domains, environments, or situations.

An example of this process is the fabrication of the “cyggle” we did in january 2018 as part of an exercise in the Fablab located at Ballerup Bibliotek in Denmark. You can read about the project here and here.

Out of the box printer :

The effectuation process proposed by Saras Sarasvathy and Nicholas Dew suggests that expert entrepreneurs initiate the effectuation cycle by asking themselves three main questions: Who am I? What I know? and Who I know? Based on this question, the entrepreneur imagines a set of possible actions that will take her towards her goals. Yet, during this studies we observed the influence of the morphology of the tools given to participants which means that the shapes in the technologies we use influence the kind of ideas get. Therefore, in addition to the three effectuation questions, we would add a fourth one: What can I do with the technologies inside my network?

By looking at the technologies outside 3D printing but inside the environment we experience as entrepreneurs, we are able to increase the input of affordances for entrepreneurial ideation. Given the flexibility of 3Dprinting, we can incorporate the affordances of other technologies by imitating or blending them. Entrepreneurs can open the process by looking for the technologies that potential customers, partners, retailers, distributors, or regulators have.

For now this is a short summary of the research project that gave birth to this blogpost. If you are interested in the academic literature that came out of this research click on docs.

References:

Alvarez, Sharon A., and Jay B. Barney. “Discovery and Creation: Alternative Theories of Entrepreneurial Action.” Strategic Entrepreneurship Journal 1, no. 1–2 (November 1, 2007): 11–26. https://doi.org/10.1002/sej.4.

Colfer, Lyra J., and Carliss Y. Baldwin. “The Mirroring Hypothesis: Theory, Evidence, and Exceptions.” Industrial and Corporate Change 25, no. 5 (October 2016): 709–38. https://doi.org/10.1093/icc/dtw027.

Esparza, A., Ricardo Sosa, and A. M. Connor. “The Shape of Firms: Opportunities from Rapid Manufacturing.” European Alliance for Innovatoin (EAI), 2017. http://aut.researchgateway.ac.nz/handle/10292/10848.

Esparza, Antonio, Ricardo Sosa, and Andrew Connor. “Entrepreneurial Ideation: Mirroring Effects of Morphology and Complexity,” In press.

Sarasvathy, Saras D. “Causation and Effectuation: Toward a Theoretical Shift from Economic Inevitability to Entrepreneurial Contingency.” Academy of Management Review 26, no. 2 (April 1, 2001): 243–63. https://doi.org/10.5465/AMR.2001.4378020.

Sarasvathy, Saras D., Nicholas Dew, Stuart Read, and Robert Wiltbank. “Designing Organizations That Design Environments: Lessons from Entrepreneurial Expertise.” Organization Studies 29, no. 3 (March 1, 2008): 331–50. https://doi.org/10.1177/0170840607088017.

Sarasvathy, Saras D., and Nicholas Dew. “New Market Creation through Transformation.” Journal of Evolutionary Economics 15, no. 5 (November 2005): 533–65. https://doi.org/10.1007/s00191-005-0264-x.

Ponche, R., J. Y. Hascoet, O. Kerbrat, and P. Mognol. “A New Global Approach to Design for Additive Manufacturing.” Virtual and Physical Prototyping 7, no. 2 (June 1, 2012): 93–105. https://doi.org/10.1080/17452759.2012.679499.