E-Novation and Start-Up Companies

Introduction; The Startup Defined And Complex Systems

Startup company categories (Luczkiw 2005) include self- employed independent consultants, small business owners (franchisees and mom & pop operations) and entrepreneurs. The entrepreneurs see themselves as “dream merchants” (Purewal 2001), formulating plans intuitively (Mintzberg 1983), building emerging businesses rather than extending and defending existing businesses (Baghai and Coley 2000). Most importantly, the entrepreneur capitalizes on opportunities arising from “market transitions and business model shifts” (Fryer and Stewart 2008) in advance of the overall marketplace. The primary focus of this chapter is the entrepreneurial driven company (startup).

Central to the fabric of the startup is the notion of a startup as a complex system and a key property of the entire system, “emergence”. A startup behaves as a complex system composed of numerous agents (parts), which can each interact with each other through artifacts including home offices, laptops and mobile phones. The system complexity relates to the unexpected or surprise behavior of the overall system stemming from the interaction between agents arising from connectivity. This system characteristic otherwise known as “emergence” can never be predicted from the individual agent behavior nor understood by decomposition of the system. Therefore, in a complex system cause and effect follow a non-linear relationship with small changes potentially having a big impact and large changes having minimal impact. To this end, complexity has been dubbed the “science of surprise” (Casti 1994) and startups on numerous occasions demonstrate surprises in a variety of markets leading to leadership positions in markets where established players have been operating for decades including the Apple iPhone and the incumbent mobile phone players or Google and advertising agencies.

Arising from author experiences working within and interacting with startups, the key concepts and tools of a startup as a complex system are illustrated in Figure 1. These concepts and tools are now discussed in more depth.

Figure 1.

Startup as complex system

Complex Systems, Surprise And Entrepreneurship

Through the startup stage of a company, entrepreneurs are driven beyond the pursuit of self-interest and are not beholden to traditional macro economic decision-making but a higher calling moving a founding vision to reality. Against this backdrop, complex systems theory offers bystanders a lens to better understand entrepreneurial interactions with employees, learning and processes. Complexity regards the actors (e.g. employees or mobiles) less important than the actual interactions themselves. The interactions between employees provide the organization with the structural capability to achieve resilience in turbulent environments or sustain competitive threats. The interactions represent a feedback loop fueling the complex system or organization. Given the agents are intelligent human beings double loop feedback takes place with agents learning from the results of actions and altering behavior together with other agents to get closer to achieving business objectives. In this manner the startup can be seen as a complex adaptive system (CAS).

Startups when commencing operations are reliant on customer feedback from the outside to provide the voice of the customer and guide product designs. Web forums and email are no longer the only mechanisms for customer feedback a plethora of social tools including Twitter, Forum, Wufoo.com, GetSatisfaction and CrowdSound (a social feedback widget) allow startups like Bump Inc to participate in customer conversations with these tools requiring minutes to setup and ensure “a startup feeds off feedback” (Mckay 2008).