How can you innovate more naturally? The hidden art of entrepreneurship

In the winter of 1998, Joel Schatz returned to his apartment in San Francisco’s Haight Ashbury neighborhood with a $250,000 investment in his fledgling startup from the elders of the Oneida Native American tribe. That morning, he had pitched them his supersized vision for solving the world’s problems through software — yet to be designed, coded and sold — that would, he promised, reveal the interconnectedness of all things. Joel, an experienced entrepreneur, predicted his future products would transform how people shared knowledge, discovered innovations, resolved conflicts, improved productivity and protected the environment. Talk about testing the limits of credulity!

But the Tribal Chief took one look at the beautiful poster-size systems diagrams that Joel’s wife, Diane, had designed to illustrate the vision and said, “This is the digital medicine wheel! We’re in for a quarter of a million.” A few weeks later, I met Joel and Diane at their office. He looked like a hippie sage, with long beard, hair pulled back in a ponytail and wire-rim glasses. After relating the story of his newly recruited seed investors, he asked: “What do I do with the money?” I stared at him for a moment, unsure of what he meant. “How do I build a company? That’s what I want you to help me with,” he explained.

Early in the stories of successful entrepreneurs, pluck and luck (the formula popularized by Horatio Alger’s dime-store “rags-to-riches” novels of the latter 19th century) sometimes combine to ignite a catalytic spark. For most entrepreneurs, though, combustion of this sort is only one of the initializing conditions for startup incubation. Crafting a sustainable new venture also demands they learn to apply the right skills and tools at the right times. Over the next two years at Datafusion (later renamed Metacode Technologies and sold for $150 million), I learned how to incubate a startup in an uncertain environment with limited resources. Startup failure rate is highest during this delicate phase as new ventures struggle to progress from vision to proof-of-concept.

Translating Joel’s grand vision into an initial product and winning beta customers — the early proof points so vital to incubation — immediately presented challenges. The number of tasks demanding attention often overwhelmed our small team. We struggled to maintain focus. And, in an emerging market, the broad range of potential target customers, a lack of familiarity with their needs and behaviors, and the complexity of solutions we might design far surpassed our capacity to explore and test them all.

Yet cutting corners and making hurried decisions could have had catastrophic consequences for the yet-fragile venture. The pace could not be rushed. Cadence trumps speed at this stage of a business’ life, commonly known as the seed phase. Startup incubation, it seemed, was more exploration than engineering, more art than science. I call it “venture craft.”

Masterful Exploration

What is a venturer? The term applies to explorers like Marco Polo, the Italian merchant who mapped and chronicled his travels to Central Asia and China in the latter half of the 13th century, as well as to adventurers like Joshua Slocum, the American master mariner who completed the first solo circumnavigation of the world in 1898. They shared an eagerness to undertake risky exploration of unfamiliar markets and regions.

Starting in the late 15th century, advances in shipbuilding, cartography and navigation helped Portuguese and Spanish explorers reach lands previously unknown to Europeans. The so-called Age of Exploration (also known as the Age of Discovery and overlapped by the Commercial Revolution) led to Columbus’ accidental discovery of North America and Magellan’s opening of a westerly route to the Pacific and Asia. Further innovations in technology and finance helped stimulate Europe’s economic expansion and the emergence of a consumer society that enjoyed imported spices, coffee and tobacco at home and in rapidly spreading coffee houses for three centuries prior to the Industrial Revolution.

While governments funded initial expeditions, the emergence of chartered companies like the Dutch East India Company and the British Company of Merchant Adventurers stoked the commercial success of this period. Merchants, navigators and investors partnered via stock-trading ventures. Initially, investors made direct investments in individual expeditions, but given the catastrophic danger of losing cargos to storms or piracy, they subsequently mutualized risk across a portfolio of ventures.

Much later, in the 1960s and 1970s, venturing became associated with activist investors — venture capitalists, or VCs — who assumed considerable financial risk in order to fund new businesses too young or too innovative to qualify for bank loans, hoping to earn returns far in excess of their invested capital. These early VCs, who were almost exclusively successful former entrepreneurs, rolled up their sleeves and worked side-by-side with the startup founders they funded. They shared expertise about incubating and scaling new ventures as well as knowledge and relationships specific to the targeted market opportunity.

But as trillions of dollars flowed into venture capital from the 1970s until today, the activity became professionalized by the arrival of lawyers and bankers. The new VCs transferred risk to limited partners — often large institutions like pension funds but also wealthy individuals — who provide most of the financial capital. The VCs, receiving rich management fees and benefiting from favorable tax treatment of capital gains, reduced their personal exposure to almost zero.

Today, the label “venturer” seems more suited to startup founders setting out to realize their dreams than to professional investors. Though often poor in cash, they dare attempt to create new markets or transform existing ones. Contrary to often-heard hype about young innovators making millions in a flash, these entrepreneurs learn to cope with the likelihood that the journey to success will take a decade or longer and that most days will be colored by the ever-present threat of imminent failure.

Masterful Craftsmanship

What is a craftsman? Today, the term refers to both hobbyists using their leisure time to make handmade objects and to a dwindling number of artisans dedicated to sustaining disappearing trades. But from medieval to pre-industrial eras, craftsmen were entrepreneurs applying vocational or artistic knowledge and innovations to professions as disparate as papermaking and the merchant marine.

Etienne Boileau, French royal provost and trusted advisor to King Louis IX, was the first person to catalogue the trades of his time when he published Le Livre des Métiers early in the 13th century. Furriers, milliners, jewelers, tanners, winemakers and 96 other distinct crafts are inventoried in Boileau’s medieval precursor to the Standard Industry Classification used by economists today. Practitioners in each discipline organized into guilds that codified the path to advancement. Apprentices sought initiation and, once trained, became journeymen, selling their services or products for a living. Journeymen often travelled widely to learn from various masters and to ply their trades. Local guild members sometimes offered a bed and a warm meal. They shared stories of their travels and their craft.

Christophe Plantin, founder of what would become the biggest publishing business in 16th century Europe, overcame setbacks greater than most modern entrepreneurs could imagine. A master printer and typographer respected for both his artistry and business savvy, Plantin survived a crippling sword attack that obliged him to change careers, accusations of heresy that forced him to briefly abandon his growing printing business, and the terror of marauding Spanish troops in Antwerp, Belgium, the Frenchman’s adopted home.

Plantin began his career as a respected hand bookbinder but switched to printing and publishing after the sword attack, perpetrated by drunkards who mistook him for someone else. The timing of the unfortunate event turned out to be fortuitous. The market for mass-produced books grew tenfold during Plantin’s lifetime thanks to the moveable-type printing press, one of the most impactful innovations of all time. Much of his commercial success came in his next career, printing emblem books, which were collections of aphorisms paired by the publisher with illustrative engravings. By 1575, his firm operated at least 16 presses and counted 56 employees.

His handwritten financial accounts, meticulously detailed for financial backers, suggest a perfectionist attention to detail in all matters of his endeavor. The printer’s mark appearing in books published by Plantin featured the image of a hand holding a compass drawing tool and a Latin motto meaning “By Labor and Constancy.” The Plantin Press, which the craftsman restarted at least twice, ultimately survived nearly 300 years after his death.

The Return of Artisanal Entrepreneurship

For craftsmen like Plantin, the artistry of their designs and the quality of their execution, combined with a large dose of patience, eventually earned them the title of “master.” Masters defined standards of excellence and controlled membership in the guilds. Every craftsman aspired to mastery, but the path from apprentice to master, typically lasting seven to ten or more years, demanded an intensity of commitment and discipline that few could sustain. Whether bookbinders, cabinetmakers, coppersmiths or glass blowers, most artisans remained journeymen, keepers of the craft eking out a modest living. Their hourly wages or prices buyers paid for the objects created by journeymen barely reflected the value of the craftsmen’s time and the cost of materials. Their creations never achieved the notoriety — nor the lofty prices — of those fashioned by true masters. Prices commanded by masters reflected the much richer value buyers placed on the innovative products and renown of their makers. And in each guild, masters attracted hard-working apprentices and journeymen as well as loyal clients through whom they could extend their influence and scale output.

Similar dynamics are emerging today. Founders and inventors are forming guild-like support networks both on and off the Web. Hackers/Founders, started as a cooperative in Silicon Valley in 2008, now counts more than 300,000 members spread across 51 countries. The maker movement of the past decade and growing interest among US entrepreneurs and investors in “artisanal” small-batch ventures signals a return to startups that value quality and patience over scale and speed.

Makers — inventors, artists and entrepreneurs — design and build physical things. Mark Hatch, author of the Maker Movement Manifesto: Rules for Innovation in the New World of Crafters, Hackers, and Tinkerers, wrote that makers value collaborating and sharing as much as making money. Hatch, currently general partner at NY-based Network Society Ventures, was CEO of TechShop, a national franchise of incubation spaces founded by Jim Newton in 2006, where makers have access to tools and machinery, especially for rapid three-dimensional prototyping.

Former entrepreneur Randy Komisar, of US venture capital firm Kleiner Perkins Caufield & Byers, wrote admiringly about the emergence of a new age of artisanal manufacturing enabled by Internet and related technologies. Quality replaces scale as the paramount objective of ventures targeting consumers of everything from beer, yogurt and apparel to furniture and housewares. Surprisingly for a professional investor, he rails against the tyranny of profit margins and even writes, “Placing customer needs ahead of capital motivations is central to the artisanal manufacturing model.”

Timeless Venture Craftsmanship

So what is a venture craftsman? Like venturers, they wander, exploring uncharted markets and bringing back precious discoveries in the hope of generating riches for themselves and their backers. Similarly to early VCs, they take principal risk: While incubating the venture, they invest their own time and money by depleting family savings accounts, loading up credit cards and sometimes even mortgaging their homes.

And like artisans, venture craftsmen take time to tinker, shaping each element of their startup business with exacting attention to detail and excellence. They fashion skills, tools and other specialized assets that help them create businesses of enduring value. Like the master artisan who churns through countless designs and prototypes before delivering a masterpiece, every business decision and technology innovation of the venture craftsman is subject to perfectionist revision.

Steve Wozniak, co-founder and first technology leader of Apple Computer, already loved electronics as a teenager growing up in California in the 1970s. A tinkerer and prankster, he later commented: “I think randomness and even a little misbehavior is really essential to creative people.” Early on he honed his skills designing Hewlett-Packard electronic calculators and the first generation of video games for Atari.

Even after Apple became a major corporation and he a millionaire, Wozniak remained a craftsman at heart. “My whole life was basically trying to optimize things,” he said years later. “Every time you save parts you save on complexity and reliability, the amount of time it takes to understand something. And how good you can build it without errors and bugs and flaws.”

The application of artisanal approaches like repetition and tinkering to incubation made him more dexterous. “I would design one [computer] and design it over and over and over,” explained Wozniak. “I was competing with myself. But that’s just the story of how my skill got so good.”

The Three Arts of Startup Incubation

I believe that three venture craft skills detailed in my book, Spinning Into Control: Improvising the sustainable startup (Palgrave Macmillan, 2018), collectively define the art of entrepreneurship, without which no amount of management science can deliver startup success. And at the heart of each core skill lies improvisation, the real-time fusion of thought and action, design and execution. Improvisation — by embracing chance events and uncertainty — steadies and accelerates hypothesis-based methods relying on adaptive, so-called “lean” planning.

Venture craftsmen like Plantin and Wozniak share certain core skills:

1) Explorers at heart, they recognize the sense-making power of wandering. Letting go of assumptions and unlearning past notions and skills frees these entrepreneurs of the tyranny of legacy. Questioning their own biases and inviting critique from collaborators helps them avoid cognitive traps. By giving free rein to their wanderlust, they actually gain control over what counts the most, namely, their destiny, while giving up control over the path that will eventually lead them there.

2) The art of conversing underpins what Professor Richard Sennett, sociologist and New York-based author of The Craftsman, calls the “craft of cooperation.” It mobilizes resources and talent. While estimates vary, surely less than 1% of startups are accepted into venture accelerators or receive funding from professional investors. The bootstrapping majority must master active listening and open dialogue to accumulate and fully leverage social capital. Achieving productive relationships with early customers, partners, employees and other stakeholders ensures that founders maximize the return on sweat equity invested during incubation. Whereas storytelling, very fashionable these days among marketers and management coaches, is about advocacy and persuasion, the art of conversing requires above all a refined ability to listen to and dialogue with others.

3) Finally, the under-appreciated art of tinkering helps handcraft products of enduring value as well as the programs needed to market and sell those products effectively. Through tinkering, entrepreneurs engage in a dialogue, not with people but with resources, tools and prototypes. They prize proficiency in learning as much as furthering their startup’s mission. They accumulate resources without clear plans for their deployment; ceaselessly disassemble and study competing products and joyfully recombine product components — whether their own or those of others — into a menagerie of exotic prototypes. Tinkerers spin towards excellence by hacking a succession of rough prototypes that embody individual elements of form and function. They break “out of the box” of the past by challenging themselves and their teams to bust constraints and orthodoxies viewed by others in their businesses and industries as ineluctable.

Mastering these loose, on-the-fly improvisational arts — wandering, conversing and tinkering — requires practice and discipline. But investing in their development will provide guard rails against chaos in fast-changing environments rife with inchoate ideas, ill-defined products and projects destined for failure more often than success. Perfecting improvisational skills will not guarantee venture craftsmen a one-in-a-million blockbuster, but it will move more startups from the loser to the winner side of the economy’s scorecard.

Patient and Persistent Spinning

Shaping the founder’s dreams into an enduring product and a sustainable business demands an obsessive attention to the startup’s skills, resources and market environment as well as a readiness to go slow, if needed. In a business world defined by the acceleration of everything, entrepreneurs are exhorted to hustle. Speed is considered critical to seize emerging market opportunities, maintain a “first-mover advantage” and triumph over competitors.

What’s more, a willingness to slow down, shift direction or abandon a project runs contrary to the psychology of many people who undertake new ventures. They refuse to view the path already traveled as a “sunk cost.” They feel compelled to press on. This may make sense for a well-resourced venture needing to satisfy customers and deliver financial returns to impatient investors. But for the seed-stage venture still winding its way through the fog of yet-to-be-charted markets and business models, rushing ahead may be a recipe for disaster. “It’s close to impossible to scale fast successfully,” according to entrepreneur Jeff Haynie. “The funny thing is, sometimes you’ll actually go a lot faster in the end, by going a little slower in the beginning,” he adds. “Rarely do markets and opportunities change so fast that you can’t catch up.”

Improvising the Sustainable Startup

Many first-time entrepreneurs don’t realize that the incubation period may last years. And during that time, survival is the prime directive. Sir James Dyson, founder and CEO of the eponymous $3.25 billion-a-year company that invented the first bagless vacuum cleaner, spent fifteen years designing 5127 prototypes and another seven marketing early models before nailing a profitable business model. It would take a decade more before it became a blockbuster product sold worldwide.

Sustainability depends on relentless improvisation in deploying cash, talent and key relationships, exploring market opportunities and inventing products. At Datafusion, Joel applied a love of improvisation to all aspects of Datafusion’s incubation. A systems thinker and former student of renowned psychologist Abraham Maslow at Brandeis University, he regularly set our developers’ heads spinning by moving the boundaries of the project. “I loved challenging our engineers to go outside of their current assignments for ideas about what might drive usage into promising directions. We were always in flux,” Joel told me recently.

But as a result, I reminded him, our direction often seemed maddeningly haphazard. “We had general plans but had to keep adjusting,” he responded. “We were always very flexible. It was completely necessary to take advantage of opportunities that came out of the blue.”

Didn’t you ever worry about losing control and causing chaos? I asked, recollecting some of the anxious moments I had experienced as the startup’s chief operating officer. “It’s life,” Joel said. “You just pay attention to daily signals and you make choices.”

(To learn more about venture craft, follow me on Twitter, visit venturecraftstudio.com and read my book, Spinning Into Control: Improvising the sustainable startup.)