The title of this article refers not to the 2013 book with texts by Augustina Bessa-Luís, but to the notebooks that she and I used in our basic education. I don’t know if the reader is also included in the user group, but they are small pocket notebooks, in A6 format, made of lined paper, characterized by having a vertical line along with the entire page that divides it into two equal halves. Instructions for use were simple. The teacher would give me a text to read at home and my job was to register on the left half of the page the words I didn’t know, leaving the right half for their meaning, which required consulting a dictionary. There were, however, two difficulties. The first was to choose which of the different meanings indicated in the dictionary made sense in the text. The other was that often the dictionary entry itself contained a word that I did not know, that I also had to add to my “caderno de significados” (notebook of meanings).
Later in my engineering education, I was often faced with the difficulty of combining the need for language precision with the need to make it easier for a non-specialist to understand a concept. To show the difference, I have the habit of asking students at the beginning of the semester to define the meaning of the word startup. The answers usually refer to the age of the company, the use of technology, and the need to involve some form of innovation. It is easy to find counterexamples of the first two characteristics, but that of an innovative nature requires one more entry in the “caderno de significados”. How is innovation defined?
A dictionary lookup doesn’t help much, particularly if we want to use the word in the context of business and economics. Even when looking in academic publications, there is a great diversity of definitions depending on the specific area of the study. Since this is an activity where there are enormous advantages in multidisciplinary collaboration, a team of British researchers set out to find a common definition of innovation. For this, they collected 60 articles from 7 different areas, from management to engineering, with definitions of innovation from which they drew descriptors for a set of common attributes. They started by representing the attributes and main descriptors in a diagram from which they produced a textual version that can be translated as “Innovation is the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace” (Baregheh et al. 2009).
To simplify this definition of innovation it is useful to introduce the concept of “business model”. This concept aims to answer Peter Drucker’s questions about who the customer is and what he values, ??and how the company makes money. Alex Osterwalder and other authors define the business model as the set of hypotheses or assumptions that constitute “the rationale for how an organization creates, delivers and captures value” (Osterwalder and Pigneur, 2010). In this perspective, the value does not necessarily have to be income for the owner of the organization and the bases of the model are hypotheses whose validity can be tested. For example, a hotel’s business model is based on offering the traveller a simple way to book and enjoy accommodation at their property. Airbnb removed the need to own the property by resorting to available hosts that are willing to welcome strangers into their homes, offering a more authentic experience to the traveller. Ease of booking and sharing the opinions of travellers and hosts made the difference. Differentiation is also part of the business model.
The business model thus includes, among other things, the products, services or processes that the organization uses to create value. On the other hand, ideas need basic knowledge, and their generation process is part of the innovation process. It is thus possible to simplify the previous definition to form: “Innovation is the multi-stage process whereby organizations transform knowledge into a successful business model”.
Now that we have the definitions of innovation and business model in our “caderno de significados”, we can better understand the way Steve Blank defines a startup, which seems to me to be the most rigorous: “A startup is a temporary organization designed to search for a repeatable and scalable business model”. That’s why we tell students that in the entrepreneurship classes they will experience the challenges of creating a startup. We actually use this analogy to teach them how to design and develop a knowledge-based business model, that is, how to do innovation. And that, like the “caderno de significados”, will be useful to them for the rest of their lives.
Adapted from my column in Jornal i of February 2nd, 2021