Future Here Now: Entrepreneurship programs usually don’t measure up. Why do we suck at this?

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Hi, all. Today’s newsletter is a selection from a book that I wrote in 2019 but didn’t promote much at that time because of other issues going on in my life. I’m revisiting it right now, and I thought this was an important share for you all. I’d also like your feedback, though — if you’re seeing something different, I’d appreciate the perspective.

The book this is taken from is called Everybody Innovates Here, and it’s a fairly rigorous structural analysis of typical entrepreneurship / innovation ecosystems. It also includes a guide to making these initiatives more inclusive — that’s the part that I feel I really need to bulk up at this point. The current book is only on Amazon, Lulu and Gumroad, but I’ll get it into Bookshop and other bookstores as soon as I can get in and mess around with the permissions.

This is a little longer than what I’ve been trying to send you lately, but I didn’t want to give you something more out of context than pulling one chapter already is. There are some footnotes with some of the claims I make that can’t apparently show in this platform. Let me know what citations you want and I’ll paste them into the comments.

Hopefully it’s useful, or at least interesting. Let me know what you think.

So what happens to innovation and entrepreneurship programs, districts and ecosystems?

Given the last chapter and everything so far in this one, it’s no surprise that the way the Industrial / Fusion Economy clash plays out has a big impact on the programs and systems we develop to try to advance innovation. From various perspectives, you can see the structural challenges inherited from each of the previous sectors playing out in your favorite innovation initiative. Here’s a few common ones:

• Limited and ineffective strategies for picking “winners.” A large number of programs for innovators and entrepreneurs give out a most-likely-to-succeed award, whether through a prize at completion, a demanding selection process, a project contract or another means of designating the top of the top. However, we have little evidence to indicate whether we are actually picking the most likely to succeed or not, and much anecdotal evidence to indicate that in a lot of cases, we are probably far off the mark. We assume, in other words, that we can command-and-control the innovation process, and there are significant questions as to whether that’s actually the case..

One of the metrics often used to judge the viability of startup or innovation program participants are the opinions of venture capital investors — even though less than 1% of all startups see venture capital funding and there is substantial evidence to indicate that most venture capitalist don’t actually make such great choices. But we defer to the presumed experts because that is the Industrial Era way.

• Utility agnosticism. For most accelerators, incubators and similar programs, questioning an applicant regarding the conventional market potential of their product is de rigueur. Questioning whether the offering will create significant new value in the market doesn’t happen as often as it should (the likelihood that your neighborhood needs a new cupcake shop is pretty slim.)

And questioning whether the product will actually improve the world — allow people to do something substantially new, address a significant barrier to quality of life, tackle one of the significant challenges facing a community — we don’t ask that much.

As a result, pitch nights end up laced with businesses that promise great money-making opportunities from applying a new technology to…sell more stuff to people who don’t need it or want it. Or address a minor need of some highly privileged market segment.

• There’s no reason why people shouldn’t be able to start whatever business they want to, whether grand or incremental in scope. But the fact that we don’t make that distinction, even when scarce public or charitable funds are being spent, indicates that we are thinking in conventional Industrial Era terms. Benefits that fall outside of a profit/loss sheet have no value — they are externalities — and that means that they cannot be accounted as part of “rational” or “responsible” decision-making around the viability of a new businesses.

So, Industrial Era-wise, we cannot differentiate between a business that will have a needed Fusion Era network impact, and those that won’t. Even though, as we will discuss shortly, when the stakes of not impacting those externalities are higher than ever.

• Lack of systemic critical analysis and adjustment. In dealing with new businesses and innovators, most programs coach people to take some variant of a lean or agile approach — make prototypes, test, study the results, make revisions, test again. But few programs truly do the same: they may do a “strategic plan” every two or three years, but that looks more like a conventional nonprofit task than an agile discovery process. As a result, few startup or innovation organizations actually operate like startups or innovators themselves.

One of the biggest risks of not following a lean process is that unexamined assumptions, or unspoken expectations, are allowed to perpetuate unchallenged. The magical thinking behind the “Collision” theory of innovation — that innovation will occur in places where bright people somehow bump into each other and discover what the other is interested in — is a good example of how an untested hypothesis becomes accepted as an article of faith and a basis for investing in real estate.

To my knowledge, no one has verified that the presence of collision-friendly spaces increases innovation, but entire districts have been built around this assumption. Meanwhile, the research that has been conducted seems to indicate that people seldom spontaneously “collide” with people that they don’t already know or don’t already have strong similarities. The collision effect turns out to be much weaker than expected, and the potentially transformative impacts of rich diversity of thought, perspective, insight, continue to go untapped.

The result? Similar to what we described with BigCos: too much of the system’s innovative potential is squandered. We are essentially limiting our innovators to the model of work and problem-solving that defined the last era, not the one into which we are moving.