A crack in the dam - opening a new domain.

Rhizoming the plane of emergence 2.0 . .
Originally uploaded by jεƒ saƒı

It's been in the works for awhile and I now think we're really starting to make a connection between web tech (2.0+), venture investing, social innovation. That connection is going to unleash some tremendous innovations and a surge in the activity directly working on the challenges facing our civilization. It feels like the emergence of a new domain that will take some very different approaches to change and influencing the course of civilization. It seems inspired by open source, technology innovation, financial risk taking, a venturing culture, and now a deepening and deeply felt realization that there are more important tasks to tend to.

I've been digging deeply into this for a while (Venturing on the Frontiers, Open Everything <site>, and The Great Remix) and these two posts (Umair Haque and Fred Wilson) have me feeling that something just shifted. What I love is that this isn't just the same old folks getting into this AND that they are coming at it from an understanding of how systems emerge. Umair uses the language of DNA and Fred is living it through his investment approach in web tech companies.

Maybe what it is, is that all the different groups I've been working/having the conversations with (MaRS, SiG, CSI, Renewal Partners, Communicopia, Causeway, Tides Canada, and Good Capital) are using different language to talk about the same things.

I'm not sure. What do you think? Is this just a personal moment are others sensing that some thing has shifted too?

"Bets n' chips" - Implications for investors on the frontiers.

Venturing on the Frontiers - A simple guide.
Originally uploaded by Michael Lewkowitz

There seem to be two types of bets that investors make when doing a deal. A bet on the team. A bet on the plan. The closer to the frontiers (early stages and deep change) the greater the emphasis is on the team. And rightly so. We all know that plans don't last on the frontiers.

So how can we get better at investing on the frontiers? Surely betting on the team alone isn't a sound investment strategy.

From my conversations the current practices seem to be either focused on 'rolling up the sleeves' and getting involved directly (few, high-cost investments) or being a hands-off patron (many small investments). Either that or back off from the frontiers and use conditional investment to achieve specific results (e.g. disadvantaged employment or other enviro-social activities). The limitations in each of those should be fairly self-evident.

So what else could we make bets on? Well if venturing is a process, we could bet on the process they are following. If we know plans are not static, what is the venture doing to continue the process of framing, planning, and connecting?

And what other practices could we employ? Well if one of the biggest chips an investor brings to the game is their social capital, well then how can that capital be better employed in the task of connecting? Going back to the image above, we can see that at minimum it requires a venture to have articulated simple and accessible spaces. I wonder - how many entrepreneurs and their investors would truly describe the primary spaces of their venture in the same way? How about in your venture or your portfolio? My bet is that's strongly correlated to the difference between friction and luck.

Summing up, that leaves us with making bets on:

• a team;
• their venturing process; and
• their spaces (accessible and simply articulated).

And it means bringing our social chips into the game to make the connections the venture truly needs (more in a future post).

Now that's an investment space I'd bet on.

"Gettin' lucky" - implications for ventures on the frontiers.

Venturing on the Frontiers - A simple guide.
Originally uploaded by Michael Lewkowitz

I wrote about the gist of this image here. Now I'm turning to the implications for venturers.

Quite simply the essence of venturing is a process. A process of creating spaces for things to happen (some call it 'luck'). The simpler and more accessible the space, the easier it is to get people engaged and get things done (some would say 'the luckier you get').

Sound simple? It should be, but can you simply articulate the 3 primary spaces for your venture? Do you have a time and place to think about and evolve those spaces? Why are people connecting to you? Do they know what they need to meaningfully contribute in ways you may not have asked or may not be expecting? How often have you been 'lucky'?

So how can ventures get better at "gettin' lucky" on the frontiers?

Step 1: Define your spaces (framing)
Get out you favourite notebook or stash of napkins and start framing each of your primary spaces separately: founding agreement, magic box; and realms of relevance. Keep them separate. Keep them simple. (more on this in a later post)

Step 2: Get your team together and get to it (planning)
Revisit planning as a team - those who control the resources and those who do the work. In the context of your spaces, figure out what your going to do for the next meaningful chunk of time, making the most of what you have, and getting what you need to move you most towards fullfilling your purpose.

Step 3: Connect with purpose (connecting)
Make connections throughout your spaces to better understand and define your spaces, and to get done what you need to get done. Do it with purpose and give it space to let something happen.

Step 4: Repeat (venturing)
Take a look at what you did for steps 1-3 and do it again - but better. This becomes the process of venturing. Find what works for you and your venture. There is no right way. There is no right answer. In fact, there really are no answers... just keep asking questions, keep moving forward, and keep at the process.

You can't know where exactly you'll end up but you've got a much better chance of "gettin' lucky"!

Venturing on the Frontiers - A simple guide.

Venturing on the Frontiers - A simple guide.
Originally uploaded by Michael Lewkowitz

Venturing on the frontiers is about the early stages of taking on big challenges. It's a space where conventional models to planning and management prove ineffective. It's the place where entrepeneurs trust their 'gut' and face the challenges with an unrelenting push forward. And it's the place from which the greatest change can come about.

I've been tapping my own experience, researching into systems science and talking with some of North America's leading venture investors who are themselves pushing the frontiers. Through all of that I've emerged with an understanding that I've tried to capture to the right. Essentially it describes a venture as a set of spaces ('founding agreement' which gives rise to a 'magic box' which operates within certain 'realms of relevance'). Venturing then is the process of 'framing' those spaces, 'planning' immediate action, and 'connecting' to get things done and evolve the spaces. Collectively that led me to the following set of principles for venturing on the frontiers:

• Create spaces for things to happen
• Make it simple and accessible
• Tend to connections and connecting
• Keep venturing

I've published the image under a creative commons license so please feel free to use and build from it accordingly. And as always, this is but a snapshot of understanding and bound to evolve... so please do get in touch with your reflections, experiences, and suggestions.

I'll publish future posts on the implications for ventures and venture investors who are pushing the frontiers. Don't expect magic bullets, but rather a prompting of some productive questions. If anything this has reminded me is that there are no answers, only questions... and asking the right ones can make all the difference.

Venturing and venture investing on the frontiers - in simple terms.

I've been asked a few times about what I'm working on in simple terms. Not always easy for me - but here goes top-of-mind while riding the train...

My focus is on venturing and venture investing 'on the frontiers'.

• venturing is about organizing and directing resources toward a purpose
• venture investing is about improving the capacity of ventures to achieve their purpose (or certain milestones along the way)
• 'on the frontiers' means the places where conventional ways of doing things are least effective

My work is focused on being able to systematically improve ventures and venture investors operating on the frontiers. My belief is that by focusing here, practices can be developed and demonstrated that will themselves become conventional in time and thereby move 'the frontiers' greatly increasing our society's ability and capacity to take on our civilization's greatest challenges.

So how will ventures be different after employing these practices?

• more efficient and effective at getting things done
• better responsiveness to the environments it's operating within
• better anticipation and avoidance of 'crises'
• more flexibility in responding to immediate opportunities and challenges
• more focus on and faster progress toward fulfilling the purpose

And how will venture investors be different?

• better investee governance with less effort
• increased capacity of all portfolio companies (whether they've applied the approaches or not)
• better results from existing portfolio (fewer failures, greater success according to purpose)
• better able to go earlier with less risk
• better able to go deeper into realizing non-financial aims (particularly relevant for 'social' venture funds.
• lower transaction costs

And what's at the root of what's different?

• concerned with systems vs. plans

(Said in different ways - couldn't resist...)

• creating spaces for uncertainty to resolve itself vs. trying to solve uncertainty
• organizing under a purpose vs. organizing around an idea/product/service
• unfolding vs. turning inward
• enabling vs. constraining
• fluid vs. rigid
• framed vs. forced
• ...

The definitive definitions of venturing!

One of the surprising things that I came out of my latest exploration into the frontiers of venturing and venture investing is a set of definitions. I'm actually not one that likes to debate definitions ad infinitum but I found I needed to clarify things to be able to have meaningful conversations going forward. So here, is what I've come up with... for now (I'll keep updating this definitions as the evolve so feel free to check-back or link here for reference).

• Venture: An agreement among people to do things in service of a purpose and according to a set of values.
• Venturing: The process of creating and evolving a venture.
• Venturer: A person primarily involved in or responsible for venturing.
• Operator: A person primarily involved in or responsible for operating a venture.
  
• Entrepreneur: A venturer that also carries primary responsibility for operating a venture.
  
• Frontiers of venturing: The effective limit of conventional approaches to venturing.
  
• Frontiers of venture investing: Investing in ventures that are on the frontiers.
  

Giddy-up: getting better on the frontier.

Coming out of this first inquiry I'm left with new definitions for venture, venturing, and venturer and also a simplistic grouping that the process of venturing essentially requires agreement, action, and governance. It is important to note that these are a set of observations and interpretations that will continue to be evolved in practice. As such they represent a starting point for a concerted effort to 'get better at venturing and investing on the frontiers'.

DEFINITIONS

• Venture: An agreement among people to do things in service of a purpose and according to a set of values.
• Venturing: The process of creating and evolving a venture.
• Venturer: A person primarily involved in venturing.

AGREEMENT: The venture profile
In getting better at venturing on the frontiers, it becomes apparent that the first things required in a venture are an articulation of:

• purpose;
• values; and
• agreement, followed by action.

This is particularly so in an effort to address complex ambiguity and so also must include the foundational foci that are effective amidst complex ambiguity, namely distinct, discreet attention on:

• core viability (CV); and
• the process of productive, iterative exploration (PIE).

These items become the core components of a 'venture profile' which is an articulation of the collective agreement on what the venture is.

Another interesting realization through these conversations and above definitions is that a venture, at it's core, is an agreement. It starts with the first agreement between 2 or more people and grows with the deepening and addition of new relationships. Essentially a venture is 'simply' a bundle of relationships. Accordingly the individual relationships should also receive special attention through consideration and articulation of the essential process for evolution or termination of the agreement, and of each party's:

• acknowledgment of the other party's venture profile;
• their contribution;
• the manner of contribution;
• their compensation for their contribution; and
  
• any other explicit responsibilities and expectations.

Collectively, the bundle of individual relationships along with each associated agreement form the essence of the collective agreement articulated in the venture profile and could be visualized through multidimensional maps which naturally will evolve as does the collection of individual relationships. Here there is a significant opportunity for new and improved practices in venturing. The collection of individual agreements also forms the basis for financial model. This is not the same as financial projections which are often an exercise in justifying an anticipated outcome but rather they are the basis for being meaningfully able to anticipate the results of the existing and anticipated agreements under certain conditions.

ACTION: A planning process
With the core profile in place we move into the activity of the venture itself which is best determined by those that have the authority to complete the action being determined. This follows from observations in systems science that planning only happens when action is the result and so can only be carried out by those with the authority to act. The most effective planning approaches will be recognized as intentional, co-creative, and iterative action planning. Established approaches from community and software development could be well applied here. For example, the methodology from the Institute for Cultural Affairs Technology of Participation are particularly effective when conducted with short time horizons (e.g. monthly and/or quarterly) within the context of the venture profile which itself is reviewed periodically (e.g. annually with the inclusion of strategic direction planning). Similarly the agile development process is particularly relevant for venturing on the frontiers.

GOVERNANCE: Cohesion and instability preemption
Governance of a venture (collective agreement and the action that unfolds from it) is best fulfilled through attention on the cohesion of the venture and on signals of incipient instability. Going back to the definition of a venture, this is about monitoring the changing trends in relationship status and agreements. This is perhaps the most unique discovery in these conversations. Changes in the tone of relationships is often one of the biggest and most consistent indicators of incipient instability. This by no means implies that relationships should remain static or that relationships should not be allowed to decline, that's simply a part of evolution. What it does imply is that changes in the trends of relationships status are particularly powerful indicators of change including growth and incipient instability. For example what's often described as 'momentum' is an upward trend in the strengthening and addition of relationships. Or a founder of an organization challenging the direction the venture is taking may be an indicator of a change in the collective agreement, particularly if it was well articulated at the outset (which is rarely the case). Of course, monitoring financial metrics and changes in budget/plans can also signal incipient instability and by no means should be excluded. Rather disciplined attention should be focused on the metrics that indicate potential instability. If the management system is attentive to incipient instability it will be able to minimize its effects or avoid it all together. The other dynamic of effective governance is attention to the cohesion of the venture itself. This means that ensuring that both PIE and CV are being attended to and that the dynamic between them is constructive.

There are of course more detailed design aspects to organizing and operating a venture, several key ones of which are described in Heart of Enterprise, but from my experience, research, and through the recent conversations I believe venturing effectively on the frontiers requires the essence of:

• agreement and articulation of the venture (venture profile, relationship map, financial model);
• action through intentional co-creative, iterative action planning (process, budgets, time lines); and
• governance attentive to cohesion and able to anticipate and preempt incipient instability (future indicating metrics, report card, ability to respond constructively).

Practically, there is significant opportunity in improving upon each of these areas and particularly in the area of relationships with the emergence of new ways and styles of connecting brought forth by virtual communications developments such as social networking technologies. And with that now begins the process of putting this into practice and an open invitation to those who want to embark on this with me.

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Gettin' it goin' without goin' under: cohesion and incipient instability.

With requisite attention being held a natural propulsion will emerge.  The act of managing and nurturing that propulsion is attended to with a focus on cohesion and being proactively aware of the emergence of incipient instability.

These concepts are addressed in depth in Stafford Beer's viable system model (my reflections here on reading Heart of Enterprise) and are really about holding the tension between future (vision), and here and now (operations) [see last post for more on requisite attention]. Cohesion has a lot to do with articulating purpose as so well described by Collins and Porras in Building Your Company's Vision. And incipient instability is about monitoring trends in financials, plan performance, and relationship status (after all, ventures are systems, concentrated bundles of relationships), and then spotting changes that indicate that something is becoming instable in a way that could harm the cohesion of the system as a whole. 

Again, both of these concepts seem relatively straight forward, and in fact are things that play out automatically in any natural system including ourselves. But as ventures are intentional human constructs we need to be intentional about them for the system to remain viable. On the frontiers, the pressure to focus on 'getting things done' leaves little space for this to happen, and unfortunately the models of doing this tend to come from linear management theory that takes more of an audit and control function which is of little interest to the venturer and begins the dance of storytelling through massaged metrics. Accordingly bringing this into practice needs approaches that are lightweight and constructive - some concepts for which will come in the next post.

(special note: this has been a difficult post to keep short, there are many offshoots and explanations possible in every sentence --- something best explored in conversation and specific context)

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Venturing on the frontier: requisite attention

Venturing on the frontiers requires distinctly holding attention on two discrete aspects of any venture:
- Productive, iterative, exploration of the complexity dynamic
- Core venture viability

Simple to say but in practice, venturers who aren't stuck in perpetual analysis and thought, are pulled toward focusing on linear, or hopefully exponential, growth of the most promising aspect at hand particularly after attracting professional investment capital. Stop thinking and just do it right?

Well, avoiding the trap of perpetual analysis does not have to mean stop thinking and exploring, it simply means actively cycling through observation, reflection, interpretation, and decision that moves the venture forward. It means not getting stuck.  There are many models for doing this with the key aspect being that the focus of the exploration tends toward the deeper purpose, that the cycles are measured in weeks and months as opposed to quarters and years, and that the results change the venture in some way.  Explicit attention on this process will ensure that the venture continues to innovate and work toward it's purpose including continually improving upon it's ability to achieve that purpose.  Another important consideration in this exploration is that the greater the chasm between the purpose and the daily activity of the organization (as is the case with ventures on the frontiers), the greater the flexibility the venture needs to be able accept and meaningfully enact the outputs of the process. This flexbilty is informative in understanding what is meant by 'core' venture viability.

Core venture viability at its essence is the ability for the venture to maintain its existence in service of its purpose.  Commonly, and importantly, a key aspect is financial viability. Early-stage ventures tend to be perpetually resource constrained making the flexibility required of the outputs of the exploration process described above, very difficult.  This is where 'core' viability comes in.  The core viability does not have to do with maintaining the venture as it is but rather maintaining the ventures ability to continue to serve its purpose which often does not require doing everything that is currently being done. It could be a subset of what is being done, it could be something entirely new. Usually it boils down to concentrated set of people and relationships and the synergistic activity/supports among operations. Taking this perspective can often illuminate the amount of activity that could be done with out.  It also will enter into decisions about growing operations and help to clarify what actual purposes of growth related activities are.  Another way to look at it might be refined bootstrapping. 

The tension created by these two attentions inherently have the potential to compel the venture toward being more efficient and focused with less risk of failure and higher probability of meaningful achievement of its purpose. And like everything else, easier said than done right? Yup.

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The dynamics of the frontier: complex ambiguity

The frontiers of venturing are the places where conventional venturing and planning approaches become least effective. It is the effective limit of conventional approaches to venturing that define the edge of the frontier with the deepest depths of the frontier being the pre-concept stage of a systemically focused venture.

Conventional approaches loose effectiveness the earlier a venture is in the development phase because of increasing ambiguity.  The less that is known the harder it is to do linear modeling and planning.  Choices made continually reduce ambiguity as the venture moves along the development and into the realm where conventional planning approaches can be effectively used.

On the depth axis, the more systemic the purpose, the greater the complexity. As the system changes, so will the problems and opportunities being addressed as will the community addressing those challenges and opportunities. The interrelatedness of planning decisions and planning context can be an all consuming black-hole. The more you are trying to shake things up, the less you know how things are going to shake out.

While all ventures face a degree of ambiguity, the depth of your foray into the frontiers depends on the depth of complex ambiguity being taken on - a function of complexity and abmiguity.  Conventionally, managing this is accomplished either through blind faith in the entrepreneur and management team or by reducing the complex ambiguity by advancing the planning horizon and responding to situational opportunities and problems. Taking the latter approach often serves to reduce near-term operational risk but also severely limits or eliminates the potential for achieving systemic level impacts, while the former approach is limited by the abilities of the entrepreneur/management team in the unique situation of this specific venture. Neither option suggest even modest probabilities of success particularly at the depths of the frontier... which describes the venturing and venture investing community as it currently operates.

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Venturing on the frontiers - Inquiry #1wrap-up

A little over a year-ago I began considering what's next in my journey and exactly 3 months ago I initiated my first inquiry into what's needed on the frontiers of venturing and venture investing. It hasn't been a linear journey of course, with a good deal of my attention going towards getting Causeway going over the last year.

While that was ongoing, I had about a dozen conversations over November and December with some extraordinary social venture investors and funds in North America (including Renewal Partners, Social Capital Partners, Kellogg Foundation, RSF Social Finance, Good Capital and others). To all of you I am tremendously grateful for the generosity of your time, the candor with which you shared your experiences and the enthusiasm with which you've approached this exploration. Each conversation integrated into my own experiences and readings, and into every other conversation. What has emerged for me is a point of summary from which I feel ready to attempt some active experiments into how do we get better on the frontiers as venturers and venture investors.

What follows now is a series of posts on:

• The dynamics of the frontier: complex ambiguity
• Venturing on the frontier: requisite attention
  
• Gettin' it done without goin' under: cohesion and incipient instability
  
• Giddy-up: getting better on the frontier

Onward...

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