Pattern Recognition in Entrepreneurship

Steve Blank

Steve Blank

Steve Blank, serial entrepreneur (E.piphany, Zilog, and more) and Stanford consulting associate professor, argues that entrepreneurs need two types of “wisdom” or cognitive processing:

  • Pattern recognition based on a “constrain stream of data processing in the background”
  • Epiphanies that “serendipitously snap together”, outlined in Four Steps to the Epiphany.

He provides examples of pattern recognition in each of the four phases toward “epiphany” in building a business:The Four Steps to the Epiphany

  • Customer Discovery, which assesses market potential and customer preferences
  • Customer Validation, in early sales
  • Customer Creation, including strategy definition, startup launch, and iterative product  experimentation
  • Company Building, which prepares to “Cross the Chasm” in Geoffrey Moore’s model.
    Robert Baron

    Robert Baron

    Crossing the Chasm

Robert Baron of Renssalaer Polytechnic Institute echoed Blanks emphasis on pattern recognition in his Academy of Management Perspectives article,

Opportunity Recognition as Pattern Recognition: How Entrepreneurs “Connect the Dots” to Identify New Business Opportunities” which he said enables entrepreneurs to evaluate:

  • Economic value
  • Newness
  • Desirability

by comparing existing “mental models” or cognitive prototypes and real-world exemplars to new offerings.

Soren Kierkegaard

Soren Kierkegaard

He quoted Danish philosopher Soren Kierkegaard, “…I should …wish…for the passionate sense of the potential, for the eye which. . .sees the possible…”

Venessa Miemis

Venessa Miemis

Venessa Miemis says that pattern recognition is a critical skill for in intelligent decision making, and cites Tor Nørretranders’s The User Illusion-Cutting Consciousness Down to Size to point out that most cognitive processing is outside of normal awareness.

In fact, his research suggests that over 99.99% of the processing in the brain happens at a subconscious level, and is therefore beyond our “control.”

Tor Nørretranders

Tor Nørretranders

She added to Blank’s description of “processing in the background” that synthesizing past
experience, intuition, and common sense and sorting out the “noise” can equip people with relative accurate “best guesses” about future occurrences.

The User Illusion-Cutting Consciousness Down to Size-Tor NørretrandersHowever, if the filter is overzealous, individuals may overlook opportunities because “cognitive dissonance” makes it uncomfortable to integrate information that doesn’t fit with an existing mental model.

Another cognitive bias is overlooking the potential impact of “wild cards” refer to low-probability, high-impact events.

Nassim Nicholas Taleb

Nassim Nicholas Taleb

Nassim Nicholas Taleb introduced the related idea of black swans: unforeseen rare, difficult-to-predict, high-impact, rare events – such as financial crises, natural disasters.

He observed that these occurrences are often explained away when hindsight reveals individual and collective “blindness” to uncertainty and its large role in these rare historical events.
His book recent book, Antifragile: Things that Gain from Disorder, posits that randomness  enables strengthening processes under pressure and can catalyze positive change.

AntifragileHe celebrates volatility as a sign that recalibration may be more achievable than after long periods of stability enable risks to accumulate until a catastrophe.

Applied to career choices, he argues that a seemingly “secure” corporate job disguises dependency on a single employer – often an “at-will” employer, though he discounts the value of “economies of scale” in this work arrangement.

As a result, the unlikely possibility of unemployment leads to cataclysmic reduction in income.
In contrast, occupations with variable earnings, like sales or professional services, acclimates the individual to cyclic or unpredicted income reductions, and practice enables mitigation planning.

This perceptual bias impairs people’s accurate anticipation adaptation to changing.

Pattern recognition can be increased by mindful attention to thinking processes, and frequent self-reminders to scan for perceptual bias and unconscious cognitive processing.
However, other people’s unconscious cognitive processing can be an advantage for marketers, according to Douglas Van Praet, who suggests taking advantage of these via six steps to robust marketing in Unconscious Branding: How Neuroscience Can Empower (and Inspire) MarketingUnconscious Branding

  1. Interrupt the Recognized Pattern
  2. Create Comfort
  3. Lead the Imagination
  4. Shift the Feeling
  5. Satisfy the Critical Mind
  6. Change the Associations
  7. Take Action.

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3 thoughts on “Pattern Recognition in Entrepreneurship

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