Bottom Up Strategies in Business, Part 1

Failures are inevitable when a product is designed by experimentation, but Peter Sims argues that a process of Little Bets and failures can produce useful products. Photo courtesy of Wikipedia.

Do exceptional leaders that plan new products grow faster than those using bottom up strategies, experimenting and failing often? Authors Peter Sims (Little Bets), Tim Harford (Adapt: Why Success Always Starts With Failure), and Michael Shermer (The Mind of the Market) believe that winning products emerge most often without detailed planning, and offer case studies to illustrate their theories.

Venture capitalist Peter Sims learned that most successful entrepreneurs discover profitable ideas rather than implementing a fixed business plan. He reckons that they perceive a series of small successes and failures of little bets as a learning process, using examples such as comedian Chris Rock and Hewlett-Packard in the epoch when it was managed by the founders. I discuss Shermer and Harford in parts 2 and 3 of this series.

Sims describes Rock’s approach to developing a comedy routine using bottom up strategies:

When beginning to work on a new show, Rock picks venues where he can experiment with new material in very rough fashion. In gearing up for his latest global tour, he made between forty and fifty appearances at a small comedy club, called Stress Factory, in New Brunswick, New Jersey, not far from where he lives. In front of audiences of, say, fifty people, he will show up unannounced, carrying a yellow legal note pad with ideas scribbled on it.

Like a blogger discarding the vast majority of pictures taken by his photographer, Rock winnows his original ideas down to a select few. Similarly, Hewlett-Packard in 1971 distributed a large catalog of products, almost all selling few units, along with a few smash hits, such as the original calculators that generated enormous profits for many years.

Sims indicts traditional schools for killing creativity:

Great emphasis gets placed in our education system on teaching facts, such as historical information or scientific tables, then testing us in order to measure how much we’ve retained about that body of knowledge. Memorization and learning to follow established procedures are the key methods for success. Even when we are taught problem solving, such as solving math problems, the focus is generally either on using established methods or logical inference or deduction, both highly procedural in the way they require us to think. There is much less emphasis on developing our creative thinking abilities, our abilities to let our minds run imaginatively and to discover things on our own.

Researchers and commentators have described the problem as an overemphasis on memorization and on left-brain analytical skills. The consequence is, they argue, that our right-brain capacities to create and discover get suffocated. As education and creativity researcher and author Sir Ken Robinson puts it, “We are educating people out of their creativity.”

Generating creative ideas using bottom up strategies helps to discover the opportunities and obstacles to building profitable products.

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