Sunday, May 27, 2012

Constructive Transformation

The article “Three Games of Strategic Thinking,” written by University of Virginia business professors Tim Laseter and Saras Sarasvathy, describes an entrepreneurial strategy that has proven to be highly successful in today’s fast-changing environment.

The authors call this strategy “Constructive Transformation” and compared it to a game in which you pay $1 for a blind draw from a urn, inside which are a wide variety of objects. You can keep whatever you pull out.

Laseter and Sarasvathy contrast this to two other games. In the first, the urn contains only balls of two different colors and the player knows the mix. One of the colors yields a payout.

In the second game, the urn also contains only two colors of balls, and, again, only one of the colors yields a payout. But this time, the player doesn’t know the mix. On the other hand, the player can choose a different color each time.

It’s safe to say, most people would prefer one of these two other games, both of which offer a degree of predictability.

But, frequently, today’s chaotic business environment most closely resembles the urn with the wide variety of objects.

The entrepreneur likes to draw objects and then use the results to build a business. He doesn’t attempt to predict financial returns in an unpredictable environment. Rather, he conducts experiments, using the results to shape the business.

Adding partners and collaborators as new opportunities present themselves is a key element of the Constructive Transformation approach.

Even today, some situations still resemble the two traditional games. But Constructive Transformation, associated with the late Steve Jobs, is a game that entrepreneurs should learn to play.

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