Translated by: Hayat Hernández
The principles of innovation in the world of entrepreneurship
Imagine receiving an envelope with the following letter: “you have 5 dollars in your account, you are going to use it as an investment (initial capital), how much money can you gain from it in 2 hours?”
Before you start thinking about your options let’s have a look on what American Stanford University students did regarding this experiment in order to draw a lesson from it and determine the significant factors which drive the entrepreneurial innovation.
About the Stanford experiment
This mission was assigned by the American lecturer and coach, Tina Seelig to her students in one of Stanford University classes as part of “Stanford Technology Ventures” program, each team of the 14th participating received an envelope with 5 dollars as an initial venture, and they had been told that they could take a lot of time planning their investment if needed, but as soon as the envelope was open they would have only 2 hours to earn the largest amount of money possible.
What would you do if you accept this challenge?
Professor Tina Seelig describes the most common answers you hear when this kind of questions is asked, answers can be divided into 2 types, the first one can be referred to as gambling “buy a lottery ticket”. And the second one is more traditional, like buying the basic materials for lemon selling business, or washing cars for instance. Selig stated “this plan is suitable for those who seek to gain few extra dollars out of the 5 in a 2 hour period”
Entrepreunial innovation
In contrast with most common answers to this kind of challenge, a few number of participating teams illustrated many nontraditional possibilities of what you can do with 5 dollars in 2 hours, or even without them!. Here’s what these three winning groups accomplished at the end of the experiment, knowing that they gained more than 600$ and never even used the 5$ at all!
The first team: selling restaurants reservations
This group determined the most common obstacles that most students face, such as the endless queues at popular restaurants on Saturday. They decided to solve this problem by making reservations at many restaurants and then selling them to student who don’t want to wait in line for a long time, this group sold each reservation for 20 dollars.
The importance of what this team accomplished doesn’t just shows the creativity in time management to earn a lot of money but also the flexibility in arranging plans and taking all the resources in consideration. As they noticed that female students are more skillful at selling the reservations than males, considering most student normally would trust more a female stranger to buy restaurant reservations from.
So based on this thought, they adjusted the plan so male students would buy the reservations and the females would sell them to student waiting in line.
The second team: inflating bike tires
The second group noticed that the most popular means of transportation at campus are bikes instead of cars, and because bikers always need to check their tiers pressure and fill them up with air, this group built a platform in front of the college campus and offered to check the bikers tires for free, so in case they needed to be filled up then the service would cost one dollar if the biker wanted this service.
Although students can inflate their tires for free at the nearest place outside campus, they accepted the service this group was offering, since it is effortless, worthy, and doesn’t require spending a lot of money on, one dollar for pumping a tire isn’t a high cost, especially that they would check their pressure first, if they didn’t need to be inflated then the checking service was for free.
After an hour had passed the team stopped asking for a dollar for the service, instead they asked the students to donate some money if they were pleased by the service. Interestingly, they made a lot of profit with the donations than when they were asking for the cost of the service.
Similarly to the first group, the benefit comes from the outcomes of the operational process, and harnessing it to learn how to make changes in order to gain more profit.
The third team: releasing a commercial
This team made the biggest profit amongst all participants, making 650$. The surprise was that this group didn’t use the 5$ and neither the 2 hours of the experiment. They looked at their resources from a completely different aspect. They realized that the most valuable resource they had was the first 3 minutes they needed to do their presentation in front the other students. And they found that the best way to harness these three minutes is to sell an advertisement for 650$ to companies that would like to hire college student as interns, they illustrated a preview of the company with its characteristics and requirements for those who would want to join it.
What are the innovation enablers?
The important question now is how did Seelig’s students came up with those ingenious ideas? And if we want to generalize this question, we may ask it in a different way, “what are the significant factors that drive innovation?” Actually there isn’t an only answer for this question, but Seelig presented six internal and external factors that shape creativity and the innovative process.
The internal factors
- Knowledge
Or as Seelig calls it “your special toolbox”. The more you know about something, the more you are capable of creating new aspects of it.
If we want to measure this factor on the winner groups experiment, we will realize that all of them tapped their knowledge of the students and the problems they face constantly, in addition to the value of the university itself, as the team that announced the commercial knew the importance of their presentation in front of the other students in a university as considerable as Stanford.
Furthermore, they acknowledged the companies need to hire their interns, which states that they had a deep acquaintance of the students and the mutual relationship between them and the company.
- Imagination
Everybody owns a lot of ideas on different topics and domains. The ingenuity lies in merging these ideas into creating something completely new and unique. We can see that these groups didn’t sell a new type of service, but what they accomplished is combining the idea of selling it with the conditions that were available then.
- Attitude
There are plenty of entrepreneur ideas we can think of, and a lot of them can remain sealed in one’s mind unless there was a motive for them to be executed.
The three external factors that shape the innovation process
- Resources
Maybe the best thing someone can learn from the Stanford experiment is reconsidering the available resources which are mostly distracting from others that we don’t think of as important but may result very useful to us.
If we go back to the experiment we will see that the winning teams ignored the 5 dollars that were counted as initial capital to make profit. Seeing that the team with the highest profit ignored the 2 hours as well and cared only about the first 3 minutes of the presentation in front of their colleagues.
The merit of reconsidering new resources in this experiment applied on our labor life can help us acknowledge the resources that may prevent us from discovering even more suitable resources, the ones that are “outside the box”.
- Habitat
The place were ground breaking ideas are being created isn’t represented by the square cubes surrounding you, but it’s broadly embodied by the team members, as well as the market, along with the resources and possibilities our habitat offers.
- Culture
Seelig describes a company’s culture or the team workers as “the company’s background music”, which influences the employee’s emotions by its ability to motivate them to do their job perfectly, thus, reflecting them on their production.
Conclusively, it is stated that seelig’s factors are not extracted, in fact they are all related in a way that they interact with each other resulting either a motivational engine for creativity, or a deterrence of the innovation process.
