Henrik Berglund: Entrepreneurship As Design

Economics For Business

For entrepreneurs, design is not just lines and shapes and colors and decoration, and it’s not just the look and functioning of a website or a building or another object. It’s a process of advancing from an idea or concept to marketplace realization as a customer-desired new service PR product. In fact, according to Professor Henrik Berglund, entrepreneurship is design.

Key Takeaways and Actionable Insights Entrepreneurs advance from idea to implementation via a process of design.

How do entrepreneurs exercise judgment? How do they advance from an imagined idea or business concept or anticipated value to implementing their project in the marketplace and making sales to customers?

It’s a creative process. Some call the domain design science, although we Austrians would think of it in a more subjective framework as human design. In general terms, design provides the bridge from the internal environment of the firm (its capital, its capacity, its skills, its resources, etc.) to the external world of customers and the marketplace. Design facilitates the fit between the two. It’s a goal-driven process of getting to the right design: a value proposition design that attracts customers, an effective value network design for assembling all the components, a business model designed to deliver the value, and pricing and cost choices that result in profit.

The steps in the design process take the form of design artifacts.

Design is not abstract. It’s action. The action takes the form of constructing design artifacts: things like sketches and flow chart diagrams and network maps and templated value propositions and business model designs and business plan spreadsheets, prototypes, landing pages and A/B tests.

There is a design pathway from more abstract and conceptual to more substantial and closer and closer to a marketable product, service, or business. The artifacts are not arranged in any specific order, but they are characterized by the progress from abstract to functional and detailed.

Most importantly, the design artifacts are measurable and testable, so that entrepreneurs can get more and more information about how well the design fits with the real world — customer assessments and feedback, simulations, beta tests and other feedback loops serve to make the design more substantial and the entrepreneur’s level of confidence higher.

Experimentation is one kind of design pathway.

Professor Berglund described experimentation as a design interaction with an existing real-world situation, where the testing process is to assess how well the entrepreneurial vision works in that world. Is there demand? Will customers find the proposition useful, and will they buy? Through repeated and experimental testing, entrepreneurs measure their way to the best-fit adaptation of their concept to the market.

He used as an example of experimentation an early step in the development of Dropbox, in the form of a video that carefully described its function and benefits, and sought feedback from the market in the form of requests to join a beta test. The video was successful in attracting a beta test audience, reassuring the designers of the potential use case.

Transformation requires a different kind of design approach.

Transformative ideas do not have an existing market — a “real world” — in which to experiment. There is no identifiable demand at the outset. The process is co-creation, with potential users and customers, of a new world or a transformed world. The design path is not the use of carefully constructed measurable artifacts, but of another kind, which Prof Berglund describes as mutable and transformable.

He used the example of the iPhone, transforming from the functionality of a phone — with a use case of intermittent 2-way communication events - to the concept of a handheld device with continuous use for a multiplicity of purposes aided by integration with software apps and internet connectivity. The vision was never precise, as it can be with experimentation. Apple outlined a more vague vision of possibilities and soft boundaries, and invited individuals and communities of software developers to join, collaborate, make specialized local contributions, and synthesize a new, emergent system over time.

Firms will typically employ a mixture of experimentation and transformation in a portfolio of projects.

Experimentation and transformation are “ideal types” of design, not always as clearly differentiated in the real world as they are in theory. Nevertheless, it’s important for entrepreneurs to differentiate between them, and to maintain a portfolio of projects that instantiates both types.

Professor Berglund and Chalmers are engaged in a new synthesis of entrepreneurial theory and practice.

Prof Berglund observes in a book chapter called "The Artifacts of Entrepreneurial Practice," that entrepreneurship scholarship has not always been very useful or helpful to practicing entrepreneurs. Now this is changing as researchers move closer to "the real time doings and sayings of practitioners involved in entrepreneurship". In the spirit of transformation, there’s a new synthesis of theory and practice that is being co-created. That synthesis is one of our guides at Economics For Business; we hope to gather from business entrepreneurs their evaluations about which elements of theory and research are of most use in practice.

Additional Resources

"Opportunities as Artifacts and Entrepreneurship as Design" by Henrik Berglund, Marouane Bousfiha, and Yashar Mansoori (PDF): Mises.org/E4B_154_Paper1

"The Artifacts of Entrepreneurial Practice" by Henrik Berglund and Vern L. Glaser (PDF): Mises.org/E4B_154_Paper2

HenrikBerglund.com

Chalmers.se