Self-initiated design businesses: prevalent actions in design entrepreneurship

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elfinitiated design businesses

Prevalent actions in design entrepreneurship

Patricia Naves Pinheiro Master’s Thesis Aalto University School of Arts, Design and Architecture

Self-initiated design businesses Prevalent actions in design entrepreneurship

Patricia Naves Pinheiro Supervisor: Turkka Keinonen Master’s Thesis Aalto University School of Arts, Design and Architecture 2013

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bstract

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Since design has become an academic discipline, innumerous individuals found in the independent practice through the initiation of their own design companies a rewarding professional path.

Nevertheless, frequently, stories of successful names of the design fields are accompanied by stories of financial failure.

This study seeks to investigate prevalent actions, i.e. managerial, operational, marketing actions, with which Helsinkibased designers, who have founded their own companies, conduct their ventures, considering the initiation, maintenance and prospective of their businesses.

In-depth-interviews with the founders of eight highly praised self-initiated design companies were conducted, as method of data collecting, seeking a good comprehension of the state of affairs of part of the design entrepreneurship scene, in Finland. In regards to the handling of the data, a business reasoning - Effectuation - was chosen to structure the research analyses.

The study suggests that designers initiate businesses with the resources they already have available, relying on who they are, what they know and whom they know. Throughout their companies’ existence, design professionals tend to become easily distracted with gains other than money, which are more aligned with their notion of value, e.g. reputation and designing itself. Designers are keen to embrace opportunities emergent from surprises, as long as these opportunities belong to one of the design fields. Collaborations and associations of various sorts are, also, prevalent elements of the average running of a design venture.

Moreover, it is strongly suggested that disconsideration for traditional business thinking, along with the satisfaction provided by alternative gains - other than money – frequently place designers in disadvantage in the achievement of financial prosperity.

Key words: Self-initiated design business, design entrepreneurship, prevalent actions, Effectuation

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cknowledgements

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Above all, I thank my mother, my ultimate hero. Your absence makes everything less meaningful. I love you and miss you, with all my heart.

This study has an empirical spirit and relies on the experience and generosity of others. I am extremely thankful to the designers, who kindly collaborated in this thesis with their precious time and knowledge. Their honesty is the real value of this work. I would like to thank Anna Salonen, Anu Penttinen, Arni Aromaa, Harri Koskinen, Ilkka Suppanen, Mikko Laakkonen, Samu-Jussi Koski, Timo Ripatti and Yuki Abe. This work has been developed in a very difficult time in my life. I am deeply grateful to those who have supported and encouraged me, in any way, to continue. I would like to specially thank: Turkka Keinonen, for his commitment and essential guidance throughout the entire development of this thesis. Peter McGrory, Pekka Korvenmaa, Maarit Mäkelä and Alastair Fuad-Luke for the rich discussions. Aila Laakso and Osse Federley, for kindly keeping the structure running. I am grateful and honoured for being granted this invaluable opportunity to be part of Aalto University.

My Finnish family, Pirkko, Eero, IIris and Otso Kasanen, whose kindness and generosity are responsible for this moment.

Renato, who has respected, supported and encouraged the fulfilment of my crazy dreams. I love you. My brother and best friend, Luís Emílio – it will always be the three of us. Tia Nelinha, for her unconditional love. Tio Tancredo, Tia Ester; Papai, Rose e Ana Luiza, for the love and support.

In Finland, I found nothing but kindness, generosity and respect. To this beautiful country and its people, my deepest love and eternal gratitude.

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edicated to

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mom

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ndex

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1 Introduction

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1.1 Personal motivation 1.2 Research question 1.3 Background 1.3.1 Defining self-initiated design business 1.3.2 A quick look at the historical role of self-initiated design business in Finland 1.3.3 The current context of self-initiated design businesses in Finland

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2 Effectuation

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2.1 Genesis of Effectuation 2.2 The nature of opportunities 2.3 Causation x Effectuation 2.3.1 Causation 2.3.2 Effectuation

29 29 31 31 32

3 Methods

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4 Results

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3.1 Interviews 3.1.1 The choice for interviews 3.1.2 Guideline for interviews 3.1.3 Interviewees 3.2 Diagram for data compilation

4.1 Summary of the research concerns 4.2 The respondents 4.3 Findings sorted by correlation with the principles of Effectuation 4.3.1 Bird in hand 4.3.2 Affordable loss 4.3.3 Lemonade 4.3.4 Crazy quilt

5 Conclusion 5.1 Prevalent actions taken by design entrepreneurs 5.1.1 Designers start as they are 5.1.2 Designers do not estimate financial loss or gain 5.1.3 Designers leverage contingencies 5.14. Designers associate 5.2 Discussion

6 References

39 40 40 44 47

53 53 72 74 94 108 122

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T

ables +

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igures

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Tables: 1.1 Assumptions: differences between traditional and design businesses 2.1 Differences between Causal and Effectual reasoning 4.1 Data sheet: Studio Suppanen 4.2 Data sheet: Nou Nou Design 4.3 Data sheet: Motto Wasabi 4.4 Data sheet: Pentagon Design 4.5 Data sheet: Studio Ripatti 4.6 Data sheet: Studio Mikko Laakkonen 4.7 Data sheet: Samuji 4.8 Data sheet: Friends of Industry 4.9 Findings: Bird in hand 4.10 Findings: Affordable loss 4.11 Findings: Lemonade 4.12 Findings: Crazy quilt

Figures: 3.1 Diagram for data compilation 4.1 Nomad Chair by Ilkka Suppanen. Galerie Maria Wettegren, 1994 4.2 Sukat Makkaralla by Anu Penttinen. Marimekko, 2010 4.3 Vitriini by Anu Pentinen. Iittala, 2010 4.4 Inari by Yuki Abe. Vivero, 2012 4.5 Jars by Pentagon Design. Iittala, 2005 4.6 Kivi by Timo Ripatti. Blond, 2011 4.7 Vege Chair by Mikko Laakkonen. Selki-Asema, 2005 4.8 Fall/Winter by Samu-Jussi Koski. Samuji, 2013 4.9 Block Lamp by Harri Koskinen. Design House Stockholm, 1996

18 33 55 57 59 61 65 67 69 71 74 94 108 122

48 54 56 56 58 60 64 66 68 70

1

introduction

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Since design has become an academic discipline – and even before –, innumerous individuals have found in the independent practice, through the initiation of their own design companies, a rewarding professional path. In Finland, design related entrepreneurial activities have played a distinct role in the establishment of a design tradition. Self-initiated businesses were fundamental in the construction of a Finnish aesthetical identity, in the implementation of design as a relevant part of the Finnish economy and in the development of a design culture in Finland.

These ventures also contributed to the international reputation Finland holds as a country of design expertise. From companies established under brands, e.g. Artek1 and Marimekko2, to companies named after their founders, e.g. Vuokko3 and Tapio Wirkkala4, these enterprises are all fruit of entrepreneurial minds and actions.

Nevertheless, frequently, stories of successful names of the design fields are accompanied by stories of financial failure. The myth of the starving artist5 seems to still have a strong influence in society in general, with the idea that the artistic mind is not forged for business. This view perpetuates the stereotype of designers with a distorted professional self-image, trained to believe that artistic excellence is incompatible with commercial success. It also perpetuates the prejudice due to which many young design-students 1 Artek is a Finnish furniture company founded in 1935 by Aino Aalto, Maire Gullichsen and NilsGustav Hahl and architect Alvar Aalto himself. Artek markets and commercializes Aalto’s furniture, which became classic pieces of modernist design.

2 Marimekko is a Finnish textile and fashion design company founded in 1951, by Armi Ratia.

Marimekko is the most notorious Finnish fashion brand. Its products are sold in over thirty countries .

3 Vuokko is a fashion brand founded by textile designer Vuokko Nurmesniemi, in 1964. Prior to the initiation of Vuokko, Nurmesniemi had a successful carrier at Marimekko, which gave her international recognition.

4 Tapio Wirkkala (1915-1985) was a Finnish ornamental sculpture by education, who extensively worked in several distinct areas of the design - from glass to graphics. Wirkkala designed a great number of the most notorious pieces of Finnish design.

5 The myth of the Starving Artist is a popular view that perceives artists as being unable to maintain a steady financial life, while devoted to art. It was made popular by French writer Henri Murger in the book “The Bohemians of the Latin Quarter: Scenes de la Vie de Boheme” in the mid 19th century.

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and professionals overlook the opportunity to learn fundamental managerial skills for the sake of not being perceived as less artistic.

For the above described, this thesis consists of a research with the objective to investigate the nature of self-initiated design businesses and the prevalent actions taken in their development towards self-sustainability and commercial success. Self-initiated design businesses, in this study, are to be understood as enterprises which 1)had their activities initiated by the effort of their founders 2) have goods or services generated from design training, e.g. industrial design, graphic design, apparel design, interior design, exhibition design, as their deliverables.

This thesis intends to document the approaches different designers have in the management of their businesses and, therefore, will consider the behaviour of Helsinki-based design-entrepreneurs who have achieved an outstanding degree of public professional recognition. The actions of these designers in their role of business managers will be revealed through a series of in-depth-interviews.

A business theoretical reasoning - Effectuation (Sarasvathy, 2001) - comprised of four principles of the entrepreneurial process will be used to guide the research and its analyses. The view of entrepreneurship embraced by Effectuation is inherently creative, for comprising execution in the early stages of the venture, rather than strict planning (Sarasvathy, 2002). In this sense, the Effectual logic seems to narrow the void between the design and the business logic, culturally placed far apart. Planning is important in the design fields, however, prototyping - the testing phase - is which determines the core decisions to be taken. Thus, Effectuation was thought to be conveniently suitable for this research.

Ultimately, this thesis intends to document and analyse prevalent aspects of a relevant part of the design entrepreneurial scene in current Helsinki. As doing so, this study is willing to be able to provide designers, who seek for information on self-initiation of design businesses, with valid and insightful material.

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1.1

Personal motivation

As the author of this thesis, I have nurtured a particular interest in the subject of self-initiated design business due to my own experience in the field. Soon after graduating in architecture, in 2002, I started designing furniture to attend the demand of my own architectural projects. In 2004, I founded Oiti1, a self-initiated design company started with my own resources and personal motivation.

For the past eight years, I have experienced several moments of success and failure, through which I have been placed in a constant process of learning. For four years, I also owned a design shop in Brazil, through which I was put in contact with designers who work independently, managing their own self-initiated companies. The proximity with these independent designers’ professional routines made me aware of their strengths and weaknesses. In 2007, Oiti was opened to the international market, through design competitions and exhibitions. Consequently, I became familiar with the work and routine of self-initiated designers around the world who were following a path similar to my own.

Based only on my professional experience and general observation of design ventures worldwide, I had developed many assumptions concerning the nature of design entrepreneurship.

The main assumptions consist in fundamental differences between conventional startups and design startups. In order to allow the reader to follow the stream of thought that culminated on this dissertation, it is valid to share, at this initial stage of the documentation of the study, the views I had personally developed prior to the start of this academic research. It is important to stress that the table of assumptions presented below does not have the value of research data.

1  Oiti is a products design company founded in 2004, in Belo Horizonte, Brazil, by architect Patricia Naves. (www.oiti.com.br)

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Traditional Startups’ aspects:

Design Startups’ aspects:

An identified market void that can be filled by the new business model

An impulse of artistic individual expression which, at first, cannot find space in the market A work alternative while in between jobs

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Focus on the operational aspect of the business

Focus on the creative aspect of the product

A business know how

A design know how

A real possibility of development being supported by third parties funding/investment

An almost nonexistent initial possibility of getting financial support by a third institution

Based on a supposedly clear definitive idea

Based on a supposed capacity of generating constant ideas

Tend to be formalized before start

Tend to start informally

Table 1.1 Assumptions: differences between traditional and design businesses

The table previously displayed consists only of a structured form to present my understanding of design startups, in comparison to conventional startups, prior to the development of the research whose description and results will unfold in the next chapters.

1.2

Research question

As an attempt to understand the practical reality of part of the design entrepreneurship scene in current Helsinki, this study seeks data supplied by design entrepreneurs themselves, through in-depthinterviews.

The research question of this study is: What are the prevalent actions, i.e. managerial, operational, marketing actions, with which Helsinki-based designers who have founded their own companies conduct their ventures, considering the initiation, maintenance and prospective of their businesses?

The aspects to be touched by the research question are: 1. Searching for actions taken by design entrepreneurs. This search will be done mostly through in-depth-interviews with design companies’ founders.

2. Considering managerial, operational and marketing as the main areas to be covered to identify the prevalent actions taken by design entrepreneurs.

3. Focusing on self-initiated practices, companies whose activities began upon the effort and initiative of their founders.

4. Understanding design companies as ventures whose deliverables result of the practice of any design discipline.

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1.3

Background

1.3.1 Defining self-initiated design business Within the vast business literature touching entrepreneurship written as guidance for self-initiated businesses, scarce material aiming at the structuring of the specific profile of self-initiated design practices is found. To ground this statement, principal academic journals – both of the business and design fields - were consulted in search for articles and papers regarding the nature of self-initiated design businesses. Among the consulted titles were the Design Management Journal1, Design Issues2, Design Studies3, Harvard Business Review4 and Academy of Management Review5.

According to the overview of the researched literature, it is possible to conclude that the definition and attributions of design business are not clear, varying according to the different contexts to which this expression is applied. It is indicative that the term design business is mentioned in regards to sectors responsible for product development in large corporations; to the use of a logic allegedly inherent to design processes applied to managerial processes and, moreover, to the belief that knowledge in the field of design is beneficial to businesses in general. A frequent use of the expression is also seen in literature referencing the design - as in planning - of businesses in general.

1 Design Management Journal is peer reviewed journal, comprising articles and academic research, with focus on the appliance of design to the bottom line and success of organizations. It was established in 2000 and is currently published and distributed by Wiley-Blackwell.

2 Design Issues is a peer reviewed academic journal, established in 1984 and published by MIT – Massachusetts Institute of Technology - press. Design Issues covers design history, theory and criticism.

3 Design Studies is a peer reviewed journal which approaches cross-disciplinary design processes. Design Studies is published by Elsevier Science.

4 Harvard Business Review, established in 1922, is a research based general management magazine published by Harvard Business Publishing.

5 Academy of Management Review is a peer reviewed academic journal, which focuses on management theory development. It is published by the Academy of Management, established in 1936 and currently part of Pace University..

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The rise of theories such as design thinking and design management also contributed to the widening of the use of the term design business. These approaches attempt to add new meanings to design in relation to business and, by doing so, generate new aspects, which are beneficial to design as a professional practice. Among these aspects is the perceiving of design as a potential player in the corporate managerial universe, once it enhances the value of design as a marketable discipline and broadens the scope of the profession as well as its field of operation (Gorb & Dumas, 1987).

Considering the above described, it is necessary to constrain the definition of design business in this work in order to enable an objective development of the research. Therefore, this thesis will base its understanding of design business on the view which defines three activities for design: 1) the development of corporate identity, 2) the design of saleable goods, 3) the design of operative environments. Therefore, here, the term design business is to be understood as companies whose deliverables are derived of any activity belonging to the design fields, e.g. industrial design, graphic design, apparel design, interior design, exhibition design (Cooper & Press, 1995).

Self-initiation is another important aspect of the type of design businesses of which the main subject of this research is consisted. This thesis understands self-initiated businesses as a reflection of entrepreneurship, which is, primarily, the creation of a new organization, despite success or failure. Any person who spends effort to idealize and initiate a business venture with the hope of profit, embracing financial risk is an entrepreneur (Drucker, 1985).

1.3.2 A quick look at the historical role of self-initiated design businesses in Finland Design as it has been perceived since the industrial revolution has played important roles in Finland. The internal production of 21

artefacts, which would become recognizable representatives of the country’s culture and its society, was intelligently codified into means to influence positively the perception the world has of Finland.

In the cold war years, the conceptual and aesthetical identity of Finnish design approximated Finland to its western neighbours of Scandinavia. This view of a Nordic capitalist and democratic region of which Finland would be part prevented undesired external perception of a Finnish association with its eastern communist neighbour, the USSR (Korvenmaa, 2010). A major part of the Finnish design production of this period of history became an inseparable part of Finnish culture and identity. Finnish governments have consecutively used the national production and language of design promote Finland as a country of design expertise.

This phenomenon had its seeds with the repercussion of the Finnish Pavillion at the Paris world fair in 1900, designed by Eero Saarinen, Herman Geselius and Armas Lindgren - partners in an independent architecture office. As the modernist movement started its influence upon Finnish architects and designers, a consistent design production took place in Finland from the 1930s on, even though entrepreneurship in this field was still precarious. In this period, Finland achieved a high level of international recognition made possible by the 1933 Milan Triennial, 1937 World’s Fair in Paris and the New York World’s Fair in 1939 (Korvenmaa, 2010). Alongside with the Finnish educational system, design is the strongest element upon which “brand Finland” has been constructed. It has provided the country with means to develop what contemporary politics call soft power1. This concept of power is associated with the likability/attractiveness of a nation, which would give it many advantages in several areas, e.g. diplomacy, attraction of investments and international trade (Nye, 1990).

The great pride Finns generally take in Finnish design, as 1 Soft power is an expression coined, in 1990, by Joseph S. Nye Jr., a US political scientist and professor at Harvard University. According to Nye (2004), Soft Power is “the ability to get what you want by attraction rather than coercion or payments. It arises from the attractiveness of a country’s culture, political ideals and policies.”

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well as the easy and natural perception of design as being a national institution sets attention on the macro picture, which has been formed by several individual efforts taken by independent design professionals since the beginning of the XX century. The design production, which is commonly visualized as a collective movement, transformed Finnish design in a highly valuable asset of the country.

In reality, this process gained body through the doings of enterprises such as Artek, Marimekko, Keravan Puuteollisuus1 and Vuokko, respectively initiated by Alvar Aalto, Armi Ratia, Ilmari Tapiovaara and Vuokko Nurmesniemi. Acclaimed designers who were permanently employed by companies, also worked as consultant for third firms until ultimately initiating their own enterprises. Tapio Wirkkala is a good example of a designer who maintained a stable job, while working independently for Rosenthal2, before initiating his own firm, Design Tapio Wirkkala, in 1966 (http://www.wirkkala. fi). The entirety of the latter cited companies were fruit of design entrepreneurship. Their founders engaged in the activity of designing products and commercializing either the project or the artefact itself, with the hope of profit, excepting financial risks. Until the present days, the concept of these ventures merge with the understanding of Finnish culture and life style.

Currently, Finland witnesses an expansion of its design entrepreneurship scene. The word expansion is preferable than renovation, once its classic labels have defeated the passage of time, even after the death of some of their founders. It proves the consistency of these businesses’ concepts and the longevity of their design values. Nevertheless, it is important to also recognize that becoming representatives of a national culture provided design businesses with a much higher task than designing functional or beautiful products. These intangible aspect gives Finnish design 1  Keravan Puuteollisuus Oy was a furniture company founded by interior architect Ilmari Tapiovaara and his wife Annikki, in 1941. Keravan Puuteollisuus Oy was the first manufactured of the notorious Domus chair, also designed by the couple.

2  Rosenthal is a prestigious porcelain manufacturer founded in Germany, in 1879.

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and consequently, self-initiated design businesses, a very important role in Finnish history as an active player in the construction and affirmation of Finnish cultural identity.

In the past decades, new designers have embraced the challenges of self-initiating design businesses in Finland. Those entrepreneurs and their reasoning of starting and running their businesses will be the main subject of this study.

1.3.3 The current context of self-initiated design businesses in Finland Entrepreneurship has long been considered one of the engines of economy, regardless of the activity behind a venture.

The understanding that entrepreneurship is not only beneficial, but also indispensable for a country to reach economic growth justifies the importance of exploring the theme in connection to any field in which entrepreneurship may occur. Design should not be an exception. Classic economics’ understanding of the mechanism of wealth-creation sees entrepreneurship as the way to innovation, which would increase division of labour and, consequently, increase productivity (Smith, 1776) – keys for economic growth.

This discussion finds special space in the present Finnish context, where economy has contracted by 10% peak-to-through, dragged by the global economy slowing, due to the still felt effects of the 2008-09 recession. In 2010, unemployment reached 9%, it has slowly decreased, but may rise again. Moreover, GDP - Gross Domestic Product - is still about 3% bellow its prior recession level of 2008 (OECD, 2012). Among many policies in diverse areas to promote a stronger economy and soften the impact of the international crises, the Finnish government is trying to support and foment entrepreneurship: “Due to the age structure, it is crucial that young people with 24

an entrepreneurial spirit grow into new entrepreneurs or successors for the present entrepreneurial activity. Encouragement for growth entrepreneurship is also necessary, since growth enterprises are essential for innovation dissemination, the renewal of the economy, and employment (Nordic Entrepreneurship, 2011).”

A few examples of the effort the Finnish public sector is devoting to support growth enterprises are Finpro1 and Vigo2 providing accelerator services to support entry into international markets; ELY Centres3 providing advice at the establishment of businesses; Tekes4 offering funding for companies, while Finnvera5 finances small and medium-sized enterprises’ working capital, exports and investments.

Considering the initiatives above described with which the Finnish government is supporting entrepreneurship, it is crucial to stress that most of these initiatives are aimed at growth enterprises only, i.e. companies which initially employ at least ten people and have this number growing 10% yearly. Nevertheless, the majority of companies initiated by designers who work independently would not meet this requirement. The average size and growth of design enterprises in Finland are modest compared to those of growth ventures.

Commonly, designers initiate their businesses relying only 1 Finpro is a public-private owned organization and part of the Ministry of Employment and the Economy Group dedicated to the internationalization of Finnish companies (http://www.finpro.fi).

2 Vigo is a programme launched in 2009 by the Finnish Ministry of Employment and the Economy with the aim at accelerating the growth of Finnish technology firms by connecting them with international venture funding (http://www.vigo.fi).

3 ELY Centres - Centres for Economic Development, Transport and the Environment - are responsible for guiding and supervising tasks and implementation of policies of the Employment and Economic Development offices. The ELY Centres are administratively part of the Ministry of Employment and the Economy (http://www.ely-keskus.fi/en).

4 Tekes - the Finnish Funding Agency for Technology and Innovation - is a publicly funded expert organization for financing research and development in innovation in Finland (http://www.tekes.fi).

5 Finnvera – the official Export credit Agency of Finland - is a financing company owned by the State of Finland. It has the objective to prove loans, guarantees, venture capital investments and export credit guarantees for Finnish companies (http://www.finnvera.fi/eng).

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on their own work force. This scenario of working alone or with a very small number of employees can endure for years and, in many cases, can be permanent. Therefore, averagely, the Finnish design startup falls into the category of micro enterprises and rarely into the SMEs - small and medium-sized enterprises (Tötterman, 2008).

The Business Finance Survey 2012 showed that micro enterprises of less than ten employees face three times more financing difficulties compared to large businesses. SMEs’ financing problems are also pronouncedly more severe than those of large businesses. About 50% of micro enterprises and 40% of small enterprises in financial jeopardy did not receive any external funding at all. More than 80% of these businesses had either its continuity threatened or business gain expectations have been severely lowered, as estimated by the Business Finance Survey 20121.

Considering the context described above, design companies, which are, in many cases, micro enterprises, frequently turn to institutions under the umbrella of the cultural fields for financial support. Since the definition of design is elastic and its activities are generally understood as part of the art fields, design enterprises are, then, eligible to receive grants destined to the maintenance of artistic activities.

The Art Council of Finland2 is one major institution responsible for granting professionals in the art fields with financial support. The amount of the average subsidies for design is 1626,99 Euros - One thousand six hundred twenty six Euros and ninety nine Cents -, monthly, and the artistic merit of the applicant is one of the crucial criteria of the selection of recipients. The main objective of this particular support is to promote design in general. According to 1 The Business Finance Survey 2012 is a review of the corporate sector’s financing situation.

The survey was concluded in April 2012, considering data from 3,531 enterprises. It was commissioned by the Confederation of Finnish Industries EK, the Federation of Finnish Financial Services, Finnvera, the Federation of Finnish Enterprises, the Bank of Finland and the Ministry of Employment and the Economy; and conducted by IROResearch Oy. 2 The Arts Council of Finland promotes and funds the arts. It operates under the Ministry of Education and Culture sphere, working also as an adviser on art policy. The funds managed and distributed by the Council are granted by the state arts budget (http://www.taike.fi/en).

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the Council, the awarded money is destined to cover exhibition costs, marketing, events or high-quality projects costs. Another institution working in a similar fashion, with similar objectives to promote cultural activities, is The Finnish Cultural Foundation1. Their grants are mainly awarded to private persons seeking support for a project.

As part of its restriction policy, The Finnish Cultural Foundation does not consider profit-making business operations eligible for its benefits.

At this stage, it is important to briefly point out the different nature of the benefits addressed to growth enterprises in opposition to micro enterprises. The first intend to foment the business’ growth, while the latter focus on promoting the cultural field to which the business activity belongs. These differences will be further discussed in the chapter concerning the results of the research.

1  The Finnish Cultural Foundation is a private trust. Its objective is to promote cultural and intellectual endeavours, ranging from art to science (http://www.skr.fi).

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2

effectuation

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2.1

Genesis of Effectuation

The Effectuation reasoning took body, firstly, as fruit of a study conducted by its principal theorist, Saras Sarasvathy, in 1997, involving 27 founders of North American companies. The size of the companies ranged from $200 million to $6.5 billion and their fields of activity varied from steel to teddy bears. The researcher’s intention was to deeply understand how these entrepreneurs reason about the specific problems inherent to the transformation of an idea, a feeling or a desire into a longevous firm. The results showed that the entrepreneurs shared similar reasoning regarding fundamental actions taken in the initiation and running of their businesses.

Moreover, Sarasvathy (2001) observed that the characteristics of this common reasoning are identifiable and, more importantly, teachable. The idea of one being able to learn entrepreneurship through methodical teaching is a relatively recent concept, for the general belief that an entrepreneur possesses a special unexplainable, individual talent - a gift - is the view which still dominates business as a field of study. Within educational institutions, time is spent in teaching business management, however, entrepreneurship is commonly taught in a motivational fashion as to awaken the entrepreneurial spirit asleep within people.

Departing from the analyses, which culminated in identifiable fundamental actions observed in Sarasvathy research, five elements of the entrepreneurial process were documented: four principles and a world view. The elements of Effectuation were developed as a desired method of entrepreneurship.

2.2

The nature of opportunities

In the literature of entrepreneurship, two different perspectives on the nature of the initiation of businesses can be found. The very concept of opportunity itself, or how it should 29

be perceived, is a fundamental divergence point between the two theoretical perspectives concerning the entrepreneurial attitude.

Opportunities upon which to build businesses have primordial importance in the first steps of a newborn venture. Therefore, choosing appropriate opportunities is among the most important abilities a successful entrepreneur should have (Stevenson, Roberts & Grousbeck, 1985). Thus, the attempt to understand how these opportunities come to existence is one of the most considered subjects of study in the field of entrepreneurship (Venkataraman, 1997).

The first opinion lies among the conservative way of perceiving and teaching entrepreneurship. It supports the view that opportunities exist independently of people’s awareness of them and lie to be discovered and exploited. Alert individuals are able to spot them and only from this point the entrepreneurial process can start, i.e. the entrepreneurial activity does not exist prior to the finding of the opportunity. Based on this perspective the act of initiating a business with potential success would have to be associated with the discovery of a clear opportunity by the entrepreneur (Kirzner, 1973, Drucker, 1985, Shane &Venkataraman, 2000).

The second perspective, however, endorses the understanding that opportunities are to be created on a constant pace. People who are motivated by a goal or various goals create the opportunities with the initial objective to fulfil these goals, which do not have to be necessarily clear from the beginning, nor stay unaltered in its conceiving or in its development. These goals emerge over time from imagination and varied aspirations of the entrepreneur (Shackle, 1979, Gartner, Bird & Starr, 1992, Sarasvathy, Wiltbank, Dew & Read, 2006).

Departing from the fundamental divergent understanding of opportunities as being either preexistent to its finding or created, these two views gain a number of other aspects, which will be further explored here. In this thesis, the terminologies Causation and Effectuation (Sarasvathy, 2001) will be embraced as reference to the 30

two above mentioned perspectives. The view departing from the idea that opportunities are found will be referred to as Causation and the one departing from the endorsement that opportunities are created will be referred to as Effectuation.

Although both perspectives and their other aspects will be further explained in the following section, a greater emphasis will be placed upon Effectuation. As it will be seen in detail further on, Effectuation reasoning is inherently creative, for comprising execution in the early stages of the venture, rather than strict planning (Sarasvathy, 2002), which seems to narrow the void between the logics of design and business. Therefore, the Effectuation principles were chosen to be the means used to assist in structuring the data of this study.

However, it is important to stress that this research does not see either Causation or Effectuation as hypotheses to be proved or disproved by the analyses of the data.

2.3

Causation x Effectuation

2.3.1 Causation Causation is the perspective more frequently used in the teaching of entrepreneurship, especially in MBA – Master of Business Administration – courses. It presents a more traditional approach. This view, along with the idea of discovery of opportunities, also embraces the understanding of a clear visualization of the goal of the venture as well as an indispensable clear concept of the business in order to achieve success (Sarasvathy, 2001). For that, it is most likely, at this stage, that the causal entrepreneur would base the idealization of his/her business upon market research and select target clients based on estimates of potential return to make a concrete business plan. The entrepreneurial actions are expected to strictly follow the plan, which should be the 31

undeviating guideline for the development of the venture.

Once the goal and business profiling is clearly established, the next aspect defended by the Causation reasoning is the necessity of a set of means to achieve the goal. At this stage the feasibility of the business depends on raising resources to reach the expected objectives. Frequently, the available resources are insufficient to fund the ideal sequel of affairs required to build the ideally planned business. Great part of the acts related to the Causation reasoning lies on predicting the future, extensively studding the present to assume what is next to come (Sarasvathy, 2001). There is a long planning journey before the “hands on� part of the business starts.

The analysis of the competitiveness of the new venture is also an important part of the Causal reasoning. Therefore, the competitors belonging to the same segment, the aspects and the performances of their businesses are taken into consideration as constant metrics to be defeated by the development of the new venture.

As part of the constant attitude of relying on future prediction, Causation also focuses on an expected estimated return.

As previously mentioned, estimates of potential return should be carefully done in order to top the investments, which usually exceed the originally available resources. The planning of the business is tailor made to achieve the hoped projections of the intended future reward.

2.3.2 Effectuation In opposition to Causation, Effectuation logic has its roots on the view that opportunities are created. This reasoning presents its specific aspects of initiating and conducting a business. Instead of departing from a clear goal to be achieved, the means available at the startup phase are determinant to forge the characteristics of the new business and to format its goals. Not having an ideal set of means should not stop the entrepreneur. Instead, it should activate his/her 32

creativity to extract the best from the limited resources available.

The means are also in constant change according to the evolving objectives and/or contexts of the enterprise, since Effectuation does not endorse the idea of a fixed goal. Therefore, the startup is not shaped by predetermined goals to be met in the future, but by the available resources the entrepreneur already has (Sarasvathy, 2001).

Another difference is found in the way Effectuation deals with the prospective of gain. Instead of concentrating in producing estimates of future gains, this perspective proposes estimating the loss resulting of the worst case-scenario the new venture could possibly go through. If after the analysis of what there is to lose, the entrepreneur is still willing to engage in the venture, there is an ideal risk acceptance and good ground to start the business.

Competitors are not it the main focus of Effectuation, instead, the awareness of potential associations are more important to lay the bases of the company, as well as expanding its domains and developing diverse business possibilities for the venture.

A table contrasting the two perspectives, according to Sarasvathy (2001), on the business creation process is displayed below.

Causal reasoning:

Effectual reasoning:

•

An identified market opportunity • that can be filled by the new business model

An individual impulse which, at first, cannot find space in the market

•

A clear goal

•

Changing/evolving goals

•

A set of giving means

•

The means which are available

•

Focus on expected return

•

Focus on affordable loss

•

A clear definitive idea

•

Ability to generating constant ideas and solutions

•

Competitive analyses

•

Strategic partnership

•

Exploitation of preexisting knowledge and prediction

•

Leveraging of contingencies

Table 2.1 Differences between Causal and Effectual reasoning

33

The creative and practice-based process of the Effectual thinking is the reason this view was chosen to structure this research.

Effectuation will be used to guide the interviews and its analyses of which the main body of this study will be consisted. The data of this research will be organized according to the principles of Effectuation, which will provide this work with a language for analyses as will be further explained in the chapters concerning the methods.

Effectuation is contrived of five elements: four main principles - within one conjoint worldview - of a logic of entrepreneurial action as an attempt to develop methodological application for both entrepreneurial research and practice.

The principles of Effectuation share the Non-Predictive Control worldview of not trying to predict the future with the objective to control it. Instead, it accepts the view that the future is inarguably unpredictable, therefore one should focus on controllable aspects with the objective to shape the future. If the future results of the consequences of one’s doings, it means the future is controllable, to a certain extent, which makes predicting rather unnecessary (Sarasvathy, 2008).

The four principles of Effectuation logic of entrepreneurial expertise, under the worldview of Non-Predictive Control are presented below.

1. Bird in hand principle: This principle was named after the English saying a bird in the hand is worth two in the bush. The proverb expresses the idea that what one already possesses is better than pursuing something else apparently more valuable, because there is always the risk of one not conquering the task. In other words, it is better to stick to what is certain than trading it for the uncertain. In Effectuation reasoning, this logic is applied to the means the entrepreneur should have to actually start his/her enterprise. They should wait neither 34

for the perfect opportunity, nor for the perfect scenario, nor for the ideal resources. Action should precede the conquering of ideal situations and should be based on the resources the entrepreneur has readily available. Effectual reasoning does not consider the resources to be only financial means. Other aspects are also taken as currency into the equipment of a broader set of means to launch a venture: who the entrepreneurs are, what they know and whom they know. The personal characteristics of the entrepreneur, his/her personality is to be considered a valuable instrument for the building of a business, as well as his/her abilities. Previous knowledge originated both from personal or educational experience is also welcome in the forging of the entrepreneur’s assets. Last, but not least, are the people entrepreneurs are connected with.

Family, friends, acquaintances, colleagues, i.e. everyone whom the entrepreneur knows, becomes a potential contributor, or a connection to a contributor, in a larger or smaller degree.

2. Affordable loss principle: The second Effectuation principle the entrepreneur should bear in mind concerns the estimates that commonly anticipate the initiation of a business. Nevertheless, instead of focusing attention on estimating possible gains based on a predicted ideal success, the entrepreneur should estimate the possible losses. Primordially, the most extreme scenario of failure should be considered. The consequences of the unsuccessful enterprise should be analysed and these results are the relevant ones to be taken into account by the entrepreneur. The attractiveness of a predicted success can be blinding due to the attachment to the dreamed result, whereas the acceptability of the loss generated by failure puts the entrepreneur into a more realistic path and 35

can provide more freedom to the way he/she conducts the enterprise. If the entrepreneur is willing to afford the loss of a downside, he/she is more likely to embrace the challenges of a potential desired upside.

3. Lemonade principle: The Lemonade principle is also named after a popular English proverb: when life gives you lemons, make lemonade. This saying expresses the idea that not always one is given what one expects. Lemons are tart tasting fruits that require an action from the person who have the lemons to transform them into something sweet, lemonade. The result of the action of interfering in the given situation by squeezing the lemon into water, adding sugar and mixing it all together is a tasteful drink. The actor should be able to transform something unpleasant into something pleasant. The analogy with an Effectuation principle for entrepreneurship lays in the wilful attitude entrepreneurs should maintain towards unpredicted situations. Unplanned scenarios should be seen as options to be taken into consideration, instead of a threat to the plans previously idealized.

The ability to leverage contingencies raises the chances of good opportunities being taken instead of discarded because they appeared unexpectedly. Surprises should be embraced. A flexible attitude to welcome uncertain situations, instead of remaining attached to existing plans, has the potential to transform tart lemons the entrepreneur is constant faced with into sweet lemonade.

4. Crazy quilt principle: A quilt is a type of bed cover.

Quilts have a unique aesthetical characteristic acquired by its construction, which is developed by assembling small patches, carefully one by one, to form a final entire piece.

By calling the fourth principle of Effectuation Crazy quilt, 36

Sarasvathy analogously refers to the type of associations that should be made in an enterprise. Collaborations with stakeholders and organizations who are willing to commit with the venture should be form from the initial stage. This commitments tend to result in co-creational processes, which, jointly, shape the future venture, its possible branches, products and markets. Making alliances with experts from an early stage in the venture also reduces uncertainty. Therefore, the focus should be placed on analysing and selecting potential partners, instead of focusing excessively on competitors and strategic planning. Potential ssociates are not, necessarily, the ones whose segments are obviously related to the new venture’s segment. Diversity of segments, expertise and knowledge are welcome. The possibility of extreme diverse, although successful, associations is the reason this principle is called crazy quilt and not basic quilt or, simply, quilt.

The four principles presented above contrive the parameter to be used in the analyses of the data collected in the interviews with design entrepreneurs. The following chapter will explain how it will be done.

37

3

methods

:

3.1

Interviews

Semi-structured in-depth-interviews were the chosen method to collect the main data presented in this thesis. This particular type of interview is conducted by an interviewer guided by a planned structure composed by key themes, issues and questions, which should be invariably covered in every interview. A particular order in which the questions are asked does not have to be strictly followed.

The interviewer is free to phrase the questions in a manner that he/she feels appropriate. Further explanations of topics, eventual justifications for questions can be added to the conversation. A semi-structured interview consists in a more fluid dialogue, which embraces extra questions and topics not previously belonging to the original questionnaire. Within the course of the interview, considering the content of the answers, as well as the disposition of the interviewee, the researcher is free to ask for clarification and further elaboration of the responses, with the objective to collect the highest amount of relevant data for the research (Corbetta, 2003).

In this study, a series of semi-structured interviews was conducted with the founders of eight companies, which were chosen based on a high level of professional recognition. The meetings were arranged in advance through an email invitation, which stated, briefly, the subject of the research. The majority of the interviewed designers expressed curiosity towards the topic of entrepreneurship specifically applied to the context of design, which seemed to facilitate their interest in contributing to the research. The reasons behind this special interest will be better comprehended in the major body of this study, when the dynamics between the double role of designer and entrepreneur will be described and analysed. The interviews were planed to have approximately one hour of length, though their actual duration ranged from fifty minutes to two hours.

The conversations were carried in English, were entirely recorded and their literal content was integrally transcribed, soon after the interview. In the course of the interviews, field notes were also taken 39

by the researcher, who registered impressions about reactions of the designers concerning the addressed topics, as well as not sound recordable particularities, such as work environment and physical premises. The locations in which the meetings took place were chosen by the respondents and were, in their totality, work facilities.

The eight interviews were conducted throughout May and June of 2012.

3.1.1 The choice for interviews The choice of the research method used to collect data for this thesis is justifiable for the objective to investigate the behaviour of a particular group of professionals in conducting their businesses falls into a qualitative, not quantitative, analyses. In qualitative research, the subjects of study are taken in their natural settings, leaving to the researcher the task to understand or/and interpret the meaning others bring to their own experience (Denzin & Lincoln, 1994). The complexity of the entrepreneurship phenomenon - which this dissertation intends to touch - is formed by various behavioural and social layers and, therefore, shall be explored by qualitative approaches. Several fundamental issues in entrepreneurship can only be addresses by qualitative methods (Gartner & Birley, 2002).

This thesis does not aim at stating facts revealed by numbers based on commonalities of a vast sample - characteristic of quantitative methods. Instead, it intends to find particularities of entrepreneurial behaviour of a limited and specific group. Therefore, semi-structured interviews were the main instrument of research used in this work.

3.1.2 Guideline for interviews The interviews conducted in this study were planned to cover the vastest possible topics, within a time-window of one hour, 40

addressing the managerial, operational and entrepreneurial sides of the design venture initiated by the interviewees. A list of key themes, to which correspondent questions were linked, was used to guide the interviews and prevent extreme deviations from the interest of this research.

The questions were elaborated in order to 1) understand if the actions taken by the interviewees while initiating and maintaining their business were aligned, or not, with the four principles of Effectuation; 2) understand the context in which the designers and their ventures operate. The researcher’s professional background as a design entrepreneur, combined with a deep understanding of the Effectuation reasoning were significant in the elaboration of questions with the potential to achieve the objectives presented above.

The guideline containing the core subjects addressed in the interviews is presented below: 1. Designers’ background and profile: What is your formal training?

When did you graduate?

In which institution did you graduate?

What was your main orientation within your educational programme?

2. Description of the business: Can you describe your business?

When did you start the business?

Do you have partners? Who are your partners?

Who are your main clients?

What’s the percentage of international x domestic assignments?

3. Motives to initiate the business: What facts drove you to the initiation of the business?

41

How did you conclude there was enough demand for your work in the market?

Did you consider demand at all?

4. Demands and initiatives of the startup phase: What were the main actions taken to initiate the business?

How was the legal process?

How was the physical space in which the company was initially accommodated? Office size? How did the space influence the business?

Did you initially have partners? Who were your partners?

Did you look for partners?

How many people was your staff consisted of, when the company was initiated?

What were the first actions taken to promote the business?

How did you get your first clients?

Who were your main clients when you started?

5. Initial difficulties: What were the most remarkable difficulties you encountered to initiate the business?

How did you overcome them?

6. Financial investments and resources: Was there an initial investment made in the business?

How much was initially invested?

What was the origin of the resources?

Were there investments made throughout the existence of the company?

7. Diversity and complexity of the business: How diverse are the activities from which your income is generated?

42

What is the percentage of your income referent to each business activity? Royalties? Commissioned projects?

Teaching? Private funding? Public funding?

How is your time divided between these activities?

What is a dream project for you?

What is a “bread and butter� project?

Do you reject work sometimes? Based on what criteria?

8. Maintenance difficulties and solutions: What were the most remarkable difficulties you encountered to maintain the business?

How did you overcome them?

Have you ever considered quitting?

Have you taken breaks of your role as an entrepreneur?

Who has been the most important person to help in difficulties?

What crises management means do you have?

What would be your advice for designers to avoid dead ends in design business?

9. Brakethrough and business development: Are there any particular event, which you consider your brakethrough?

Were there more than one?

Why? When? Where What? Who? 10. Human-resources and business structure: Your staff is consisted of how many persons?

When exactly did you start employing?

Why did you decide to employ?

Are these employees distributed in different areas of expertise within the company?

What are these different areas?

How many persons are correspondent to each area?

43

After the interviews were integrally transcribed, the data were organized by affinity, considering the four principles of the Effectuation reasoning. This systematization was done using a diagram, one correspondent to each interviewee. Aspects of the running of the businesses were placed in quadrants, which symbolized more, or less, affinity between the characteristics of the designers’ businesses and the Effectuation principles. The logic of the diagram will be more meticulously explained further in this chapter. The findings organized in the diagrams will be found in the chapter containing the results of this research.

3.1.3 Interviewees Self-initiated design businesses, in this study, are to be understood as enterprises which 1)were founded by designers, 2) have as commercial products, consumer goods or services generated from design training, e.g. industrial design, graphic design, apparel design, interior design, exhibition design.

Besides the two fundamental requirements cited above, in order to perform a coherent research, the invited interviewees were chosen also based on other commonalities, which go beyond their coinciding role as owners of self-initiated design businesses: 1. They have initiated their own businesses, become entrepreneurs, within the past twenty years. After 1989, Europe went through major changes, with the dismantle of the strongly operating concept of centrally planned economies. Since then, a market environment replaced the obsolete centralized economies environment, which transformed Europe culturally, socially and, especially, economically. As part of the European Economic Area (EEA), since 1993, and officially part of European Union 44

in 1995, Finland was equally affected (Arter, 1995).

Taking this scenario in consideration, it seems logic to constrain the sample of respondents to those who have started their businesses already in this new context. It is assumed that the demands and strategies, previous to the beginning of the 1990s were very distinct from the ones entrepreneurs have been facing in the past two decades.

Once this research seeks the understanding of designers’ entrepreneurial reasoning, aiming at insightful results, the possibility of finding information that cannot be applied to the current economic and political state of affairs is not desirable in this work.

2. Their companies’ operational structure is located in Helsinki. The choice to focus in Finland, more specifically in Helsinki, is an attempt to benefit from the rare manageability, as well as availability, of the set of resources offered by such small stable community.

It is believed that working within the Helsinki area would provide the researcher with the opportunity to deeply explore the theme, considering the time frame and the resources of a Master’s thesis work. Helsinki is a relatively small capital city, compared to other capital cities in Europe, however, it has an active, worldly renowned design scene. The lack of financial funds is not likely to harm the quality of the research process, once the required mobility to sustain the work activities is of a minor scale, while geographically limited to Helsinki. The unwillingness of acclaimed designers, the core source of information, to collaborate in the study is also unlikely, due to the small size of the Finnish design community, which place, even the most successful professional in an unusual approachable position.

45

3. They display a high degree of professional recognition in Finland and abroad. Differently from the criteria of sample selection used by Sarasvathy in her original research, in 1997, i.e. high revenue, financial success, which originated the principles of Effectuation, this thesis embraces a more realistic criteria regarding the design context: recognition. The immediate assumption that professional recognition would be necessarily associated with financial success does not apply to the fields of design - a phenomenon this study will not ignore. Therefore, the founders interviewed for this research were chosen based on accomplishments that generate visibility and prestige. Usually, a designer is not devoted special reverence for receiving a particularly high payment on royalties or closing a great order. Their success is commonly measured by the associations they make, i.e. the reputation of companies by which they are commissioned; by being frequently featured in specialized magazines and books; by the visibility of exhibitions in which they engage; and also, by the prizes and special honours they are conceded. Naturally, the degree of recognition of the companies studied here varies from one another. Nevertheless they have, without exception, been commissioned by high-reputation companies, been granted important prizes and also been largely covered by the specialized press. The majority of the respondents have received the “Young Designer of the Year� prize - a very prestigious honour conceded by Design Forum Finland -, among other national and international prizes. They have also collaborated with leading design companies in Finland, e.g. Marimekko, Artek, Iittala, as well as with international companies. Their works have also been largely exhibited in Finland and abroad. The achievements of the interviewees will be further and specifically pointed 46

in the chapter related to the results of the research, in which the founders’ contribution to this research will be presented.

3.2

Diagram for data compilation

Concerning the handling of the gathered data, a business theoretical core – Effectuation - was chosen to structure the research analysis in order to prevent the results from being biased, due to the partiality of the author with the topic, being herself a design entrepreneur. This research does not see the Effectuation reasoning as hypotheses to be proved or disproved by the analysis of the data. Instead, the Effectuation principles will be used as means for structuring and analysing the data. The affinity between the data and the principles is the point to be considered.

The data collected from the interviews were organized and analysed taking into consideration the Effectuation principles, which were distributed in a longitudinal, central axis conforming a diagram of two quadrants.

Four transversal axis crosses, perpendicularly, each principle point, previously disposed in the longitudinal axis. The data correspondent to each principle is placed along the transversal axis, which represents each principle. The positive quadrant, conformed above the longitudinal axis corresponds to the aspects of the data, which are aligned with the principles. The quadrant conformed below the longitudinal axis corresponds to the aspects of the data, which are unaligned with the principles or either equals absence of use of the principles.

The intention is not to prove Effectuation wrong or right as a theory, instead, it is to use it as a parameter to identify, with clarity and structure, which measures are taken by design entrepreneurs in the management of their businesses.

The main body of this research will contain the description 47

of the acts taken by the interviewees in conducting their ventures, as well as the description of how the designers believe these acts affected their businesses.

It is intended that the information shared by the entrepreneurs about their business actions arranged and displayed in a methodical form, followed by the analyses of the consequences of these actions will generate an insightful material about self-initiated design businesses and their ways towards self-sustainability and profitability.

Diagram

48

Fig 3.1 Diagram for data compilation

Diagram

49

Diagram

50

Diagram

51

4

results

:

4.1

Summary of the research concerns

Prevalent actions, i.e. managerial, operational, marketing aspects, with which the designers who collaborated in this study conduct their self-initiated ventures consist of the main interest of this thesis. The selection of the themes to be discussed in the interviews took into consideration 1) the objective of this research to identify the actions taken by Helsinki-based designers in the initiation and conducting of their design ventures, 2) the four principles of the Effectuation reasoning elaborated by Saravasthy (2001).

4.2

The respondents

Nine designers – founders of eight distinct ventures, which have as commercial products, consumer goods or services generated from design knowledge, e.g. industrial design, graphic design, apparel design, interior design, exhibition design - were invited to take part in this research as interviewees. A few specific professional commonalities, 1) the initiation of their own design companies within the past twenty years, 2) Helsinki as the geographical location of the operational structure of their companies, 3) a high degree of professional recognition among their peers, specialized press and the general public, were used as selection criteria.

Full permission to disclose names and information shared in the interviews was granted by the founders of the companies which were the main subject of this study. The identity of the entrepreneurs, their educational background, their most relevant professional achievements and the main activities carried out by their companies are presented below. The respondents are presented in the order in which their respective interviews were chronologically conducted.

53

Company #1: Studio Suppanen

54

Fig. 4.1 Nomad Chair by Ilkka Suppanen Galerie Maria Wettegren, 1994

•

Founder:

•

Ilkka Suppanen

•

Interviewee:

•

Ilkka Suppanen

•

Founder’s educational background, educational institution of attendance and year of conclusion of studies:

•

Bachelor’ degree in Architecture, Helsinki University of Technology – unconcluded Bachelor’s degree in Interior Architecture, University of Art and Design Helsinki - 1993 Master’s degree in Furniture Design, University of Art and Design Helsinki – 1995 Exchange programme, Gerrit Rietveld Academy, Amsterdam - 1992

• • •

•

Year of the founding of the company:

•

1995

•

Services provided by the company, according to the founder:

•

Product Design (furniture, house-ware, jewellery, i.e. objects in general) Service Design Strategic Design Interior Architecture Architecture

Awards:

•

•

• • • •

•

Young designer of the year, Germany, 1997.

Young designer of the year, Finland, 2000.

Mathsson Prize, Sweden, 2006

• • • • •

Artek Cappellini Muuto Nokia Iittala

• •

Clients:

Table 4.1 Data sheet: Studio Suppanen

55

Company #2: Nou Nou Design

56

Fig. 4.2 Sukat Makkaralla by Anu Penttinen Marimekko, 2010 Fig. 4.3 Vitriini by Anu Pentinen Iittala, 2010

•

Founder:

•

Anu Penttinen

•

Interviewee:

•

Anu Penttinen

•

Founder’s educational background, educational institution of attendance and year of conclusion of studies:

•

Bachelor’s degree in Studio Glass, Canberra’s School of Art of Australian National University - 2000 Master’s degree in Glass Design, University of Art and Design Helsinki - 2002

•

Year of the founding of the company:

•

2003

•

Services provided by the company, according to the founder:

•

Studio Glass (hand made unique pieces) Glass design Wholesale and retail of own products

Awards:

•

•

•

• •

• •

Clients:

Table 4.2 Data sheet: Nou Nou Design

• • •

IF Golden Design, Germany, 2012 Fennia Prize, honorary mention, Finland, 2012 Iittala Marimekko Stockmann

57

Company #3: MottoWasabi

58

Fig. 4.4 Inari by Yuki Abe Vivero, 2012

•

Founder:

• •

Yuki Abe Anna Salonen

•

Interviewee:

• •

Yuki Abe Anna Salonen

•

Founder’s educational background, educational institution of attendance and year of conclusion of studies:

Yuki Abe: • Bachelor’s degree in Interior Design, Institute of Design and Fine Arts of Lahti University of Applied Sciences - 2003 • Master’s degree in Furniture Design, University of Art and Design Helsinki – 2005 Anna Salonen: • Bachelor’s degree in Interior Design, University of Art and Design Helsinki – 2003 • Master’s degree in Furniture Design, University of Art and Design Helsinki – unconcluded • Six months exchange programme, Escuela Superior de Diseño e Ingeniería de Barcelona (Elisava), Spain 2003

•

Year of the founding of the company:

•

2009

•

Services provided by the company, according to the founder:

• • • • •

Graphic Design Concept Design Interior Design Exhibition Design Furniture Design

•

Awards:

•

Paulig Interior Design Competition (Yuki Abbe)

•

Clients:

• •

Vivero Finnish Public Sector

Table 4.3 Data sheet: Motto Wasabi

59

Company #4: Pentagon Design

60

Fig. 4.5 Jars by Pentagon Design Iittala, 2005

•

Founder:

• •

Arni Aromaa Sauli Suomela

•

Interviewee:

•

Arni Aromaa

•

Founder’s educational background, educational institution of attendance and year of conclusion of studies:

Arni Aromaa: • Bachelor’s degree in Industrial Design, University of Art and Design Helsinki – 1995 • Master’s degree in International Design Business Management, University of Art and Design Helsinki – 1998 Sauli Suomela: • Bachelor’s degree in Industrial Design, University of Art and Design Helsinki – 1995 • Master’s degree in Industrial Design, University of Art and Design Helsinki – 1998

•

Year of the founding of the company:

•

1996

•

Services provided by the company, according to the founder:

•

Product Design (furniture, house-ware, jewellery, i.e, objects in general) Graphic Design Concept Design Interior Design Service Design Exhibition Design Branding

Awards:

•

•

• • • • • •

• •

Table 4.4 Data sheet: Pentagon Design

Grafia and Ornamo’s Finnish Designer of the year Award, Finland, 2010 Red Dot award, international, 2010 IF Golden Design, Germany, 2010

61

•

Awards:

• •

•

62

Clients:

• • • • •

Fennia Prize, honorary mention, Finland, 2012 State Prize for Design, Finland, 2012 Kone Iittala Hackman Absolut Vodka Stockmann

Company #5: Studio Ripatti

64

Fig. 4.6 Kivi by Timo Ripatti Blond, 2011

•

Founder:

•

Timo Ripatti

•

Interviewee:

•

Timo Ripatti

•

Founder’s educational background, educational institution of attendance and year of conclusion of studies:

•

Bachelor’s degree in Architecture, Tampere University of Technology – 1996 Master’s degree in Furniture Design, University of Art and Design Helsinki – 2002

•

Year of the founding of the company:

•

2003

•

Services provided by the company, according to the founder:

•

Product Design (furniture, house-ware, i.e, objects in general) Interior Design Exhibition Design

Awards:

•

•

•

• •

• •

Clients:

Table 4.5 Data sheet: Studio Ripatti

• • • • •

Grafia and Ornamo’s Finnish Designer of the year Award, Finland, 2010 Fennia Prize, honorary mention, Finland, 2009 Vivero Kone Alvar Aalto Museum Microsoft Finland Blond

65

Company #6: Studio Mikko Laakkonen

66

Fig. 4.7 Vege Chair by Mikko Laakkonen Selki-Asema, 2005

•

Founder:

•

Mikko Laakkonen

•

Interviewee:

•

Mikko Laakkonen

•

Founder’s educational background, educational institution of attendance and year of conclusion of studies:

•

Bachelor’s degree in Furniture Design, Kymenlaakso University of Applied Sciences – 2000 Master’s degree in Applied Art and Design, University of Art and Design Helsinki – 2006

•

Year of the founding of the company:

•

2004

•

Services provided by the company, according to the founder:

•

Product Design (furniture and house-ware)

•

Awards:

•

Young designer of the year, Finland, 2009.

Chicago Athenaeum’s Good Design Award, USA, 2010 Fennia Prize, honorary mention, Finland, 2012 Red Dot award, international, 2012

•

• • • •

Clients:

Table 4.6 Data sheet: Studio Mikko Laakkonen

• • • • • •

Marimekko Martela Covo Inno Selki-Asema Casamania

67

Company #7: Samuji

68

Fig. 4.8 Fall/Winter by Samu-Jussi Koski Samuji, 2013

•

Founder:

•

Samu-Jussi Koski

•

Interviewee:

•

Samu-Jussi Koski

•

Founder’s educational background, educational institution of attendance and year of conclusion of studies:

•

•

Bachelor’s degree in Clothing Design, Institute of Design and Fine Arts of Lahti University of Applied Sciences - 2001 Master’s Degree in Fashion Design, Firenze’s Polimoda International Institute of Fashion Design and Marketing, Italy – 2005

•

Year of the founding of the company:

•

2009

•

Services provided by the company, according to the founder:

• • •

Clothing Design Accessories Design Wholesale and retail of own products

•

Awards:

•

Golden Hanger fashion design Award, Finland, 2012

•

Clients:

• • •

Artek Iittala Stockmann

Table 4.7 Data sheet: Samuji

69

Company #8: Friends of Industry

70

Fig. 4.9 Block Lamp by Harri Koskinen Design House Stockholm, 1996

•

Founder:

•

Harri Koskinen

•

Interviewee:

•

Harri Koskinen

•

Founder’s educational background, educational institution of attendance and year of conclusion of studies:

•

Bachelor’s degree in Industrial Design, Institute of Design and Fine Arts of Lahti University of Applied Sciences - 1993 Master’s degree in Industrial Design, University of Art and Design Helsinki – unconcluded

•

Year of the founding of the company:

•

2000

•

Services provided by the company, according to the founder:

•

Product Design (furniture, house-ware, accessories, i.e. objects in general)

•

Awards:

•

Young designer of the year, Finland, 2000.

Compasso d’Oro, Italy, 2004 Torsten and Wanja Söderberg Prize, Sweden, 2009

•

• • •

Clients:

Table 4.8 Data sheet: Friends of Industry

• • • • • •

Alessi Artek Magis Marimekko Muji Muuto

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4.3 Findings sorted by correlation with the principles of Effectuation In order to structure the analysis of the research and facilitate visualization, the data collected in each interview were first organized by affinity with the principles of Effectuation, using the previously presented diagram. To each venture corresponds one individual diagram. Following the completion of the companies’ diagrams, the data were combined and separated in accordance to the principles of Effectuation, whose core views will be used as parameter for analysis. Each principle of Effectuation will be addressed separately in an independent section. Each section will be initiated with a table containing the most relevant findings about actions taken by designers to initiate and maintain their ventures, in correlation with the principle to which the section is dedicated.

The information placed on the left side of the table, preceded by a plus sign, corresponds to the findings that exemplify the use of the addressed principle. The information placed on the right side of the table, preceded by a minus sign, corresponds to the findings which do not fit the views of the cited principle, regarding actions taken by the studied entrepreneurs.

The tables will introduce each section dedicated to the description of the results concerning each particular principle, in an effort to enable a quick visualization of the results, providing the reader with a preview of the thick, discursive description. In the tables, the results will be displayed collectively, without distinction of the source of the information, for the focus of this thesis is the range of actions and, not specifically, exposing the designers individually.

From the collected data, it was possible to recognize, under each principle’s umbrella, specific aspects frequently addressed and dealt with by the designers, as well as actions whose results are either beneficial or harmful to the businesses. Therefore, in the discursive parts, which will follow each table, the designers’ actions 72

will be arranged in main categories. These categories represent the main aspects found in the list of actions, which are based on either frequent appliance or/and significant consequence. Each aspect will be organized, described and analysed considering the subjects of a particular principle of Effectuation, either exemplifying its use or its absence.

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4.3.1 Bird in Hand The Bird in hand principle supports the view that a venture should be initiated with the means already owned by the entrepreneur, independently of the resources being abundant or scarce.

Findings aligned with the principle

Findings unaligned with the principle

Workspace enabled with modest resources ++ ++

First installed the business in small offices shared with other professionals.

Initially used the school workshops.

Very limited workforce ++ ++

Initially relied only on own workforce.

Had good personal financial situation, so could employ.

Absence of basic business knowledge ++ ++

Did not have previous business knowledge.

Did not develop a business strategy.

An artistic impulse ++ ++

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Wanted freedom for selfexpression.

Ignored demand

Table 4.9 Findings: Bird in hand principle

An alternative for unemployment ++ ++

Initiated the business during a severe recession.

Perceive the employment perspectives for designers to be very poor.

A degree of professional reputation ++ ++ ++ ++

Had a previous good professional reputation conquered by commissions.

Already had clients from previous small assignments.

Had attracted early interest from the media.

Had demand for work, although not work preferable by the designer.

Contacts ++ ++

Already had good professional connections.

Had support and help from parents and friends.

The data categorized under the Bird in hand principle - either by applying the principle’s reasoning or its opposite logic -, showed a very consistent tendency of design entrepreneurs to intuitively follow the principle.

All nine interviewees, without exception, initiated their businesses in a non-ideal situation. A concern about the concept of an ideal context to initiate their businesses was not shown by the designers. Particularly in the initial phase of their companies, their focus was on assembling the assets they already had to create a context in which they would be able to work. Their goal in the 75

startup phase was to make their work activities viable, instead of great.

The most relevant aspects found in the designers’ actions will be described below and their consequences will be analysed, considering the reasoning of the Bird in hand principle.

Bird in hand: Workspace enabled with modest resources To enable physical working premises was a common concern expressed by the entirety of the interviewees in regards to the initial phase of their businesses. Finding a way to afford an office was one of the first steps taken by the founders to start their companies.

Five of the interviewees started their companies in offices shared with peers, fellow independent designers, as a form to have the benefits of a working space, i.e. constructing a working routine, having a place to welcome clients and conduct meetings, for a low cost. The initial phase of Pentagon Design, for example, had its activities held in an office shared with colleagues. Arni Aromaa, one of the founders of Pentagon alongside with Sauli Suomela, described the enabling of the physical premises of their company and the consequences he believes this action generated: “We first started in a student collective, in a space shared with seven other students, in Vallila. A space not very far from where we are now, but we moved several times, mostly sharing workspaces, before lending in our current office. By sharing a space, we did have some cooperation with the other professionals, but it was more the social aspect that was important there.”

Currently, Pentagon occupies, alone, two floors of large space in an old industrial building between Kalasatama and Sörneinen, in Helsinki. The office has been completely renovated and it seems clear that the space has been thought to deliver a statement of the company’s concept. The entrance floor is composed by a large, high ceiling open space. In this floor there is a reception, a working 76

section comprised of parallel working stations. An open kitchen faces the reception and a long table marks the transitional space from the entrance, alongside the working section, toward the kitchen and a small private meeting room, where the interview took place. The lower floor displays a space dedicated to a type of exhibition area, where exhibition layouts can be tested, and also a large meeting room. Aromaa, now, considers this space to be ideal.

Motto Wasabi, a design studio headed by two furniture designers also, initially, shared their workspace as a way to afford the maintenance of an office. Currently, they work in a small, though functional, exclusive space in Punavuori, a noble neighbourhood of Helsinki. The place, on the level of the street, is basically comprised of one large white table and a sofa. Below is what Yuki Abe and Anna Salonen, partners at Motto Wasabi, say about the experience of initiating their company in a space shared with other professionals: “We had our first office in Uudemankatu and then we moved here. But in Uudemankatu, we were in a shared space with ten different small offices of one or two people. Sharing a space does affect the business, although we were not really collaborating with the other people that much. But it is always easier to ask questions and opinions. But we are still two, so it is easier. There, it was more social, but I also like it in here. Our first office was in the third floor with an inner courtyard. Here we have windows to the street and there are interesting people walking by everyday. So they can just walk in and say hi. I think it is more interactive.�

As seen in the testimonies placed above, the alternative solution of working in a shared space has positive consequences, which goes beyond the initial desired cut in costs. These advantages can explain the fact that out of the five initial office-sharing designers, three continue to work in a space shared with other professionals, by choice. In general, these professionals value the possibility of exchanging knowledge in a daily bases, as well as 77

a sense of community. The possibility of conveniently forming eventual partnerships with their office-mates was also pointed out as an advantage by some of the designers, as will be shown below.

An interior architect by training, Ilkka Suppanen currently shares the physical premises of his company, Studio Suppanen, with an architect. The space comprises several rooms with different functions, which can clearly serve both professionals’ needs. A large room with working stations for employees and interns forms the entry space. This room is on the street level, framed by large shopwindows, which attracts attention from passers-by. A multifunctional room carries a long table for meetings, but the sample material and prototypes lying around the space show that the room is also used as a prototyping room. Attached to the multifunctional room is a very small space, which is used as a photography studio. There is still a lower level with a kitchen and some residual space. When asked about the main actions taken to initiate his business, Suppanen mentioned the search for a working space as a significant aspect: “I needed a place to work, so I shared a space with friends.

The place was as small as our current photography room. It was what I needed for the time. It was good enough. Now I am in this office in Helsinki, which I share with an architect, who is also a good friend.

It is good to share the space because it is good to have someone to give an opinion when you need one. Someone to say: I like this or I don’t like that.”

Potential collaborations also motivate Timo Ripatti to work in a shared space. When the founder of Studio Ripatti initiated his business, in 2003, his working physical premises were an officeroom at his own house - a clear example of working with the means the entrepreneur already has available, as the view of the Bird in hand principle. Ripatti started from where he already stood: “When I started the company, I was working from home. I 78

had a bigger house and a room for the office.”

Currently, Ripatti shares a space with a textile designer and an interior designer. His studio is a typical shop space on the street level with wide windows alongside the space. It is situated in Kruununhaka, one block away from the seashore, in Helsinki. The interior comprises three large desks and a meeting table in a common space, with no acoustical or visual partitions. Sharing makes the comfortable, well-located space the three designers occupy affordable. However, Ripatti evaluates the space as still not being ideal.

“Working with people around gives you an opinion, a reference, which is good. But, sometimes, you also need the time to be alone. So, it depends. It can be good and bad at the same time.

But, here in the studio, I miss having some kind of workshop to play a little. The really sad part of graduating was to lose the workshops.

It was so easy to think of something and just go there and try it out.”

Ripatti’s view introduces another aspect concerning physical premises in the initial phase of a design enterprise, which, quite frequently, coincides with the beginning of the designer’s career.

As clearly pointed by Ripatti, who had his Master’s graduation work produced and marketed by Vivero1, the use of the university’s facilities, particularly of the workshops, was an important element of the birth of his company. This element was also mentioned by five of the other respondents. To have a well equipped workshop in the reach of their hands, in an early stage of their professional lives, seems to be of great importance and the access to this infrastructure is usually given by the educational institution to which the designers attended. The role school facilities can play in new design ventures 1 Vivero is a Finnish furniture design manufacturer company with thirty years of existence.

Throughout its history, Vivero has commissioned many independent designers to design the furniture of its collections.

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can be demonstrated by some of the respondents’ achievements.

Harri Koskinen developed his first and most notorious product, the Block lamp (Fig. 4.9), while still attending the former University of Art and Design Helsinki as a Master’s student, in 1996.

The Block lamp was developed in the school’s glass workshop for a course sponsored by Iittala1, as Koskinen describes: “I took a course at school, in the glass department. The brief was given by Iittala, which had the idea to employ one of the students as a kind of scholarship. For the course I made the Block lamp, which I started producing by myself and, then, Design House Stockholm2 contacted me because they were interested in commercializing it.”

The Block lamp, by Koskinen, has been awarded many prizes and in 2000 it became part of MoMA – the Museum of Modern Art of New York City – permanent collection. This piece developed inside the university’s facilities has its share in promoting Harri Koskinen as an international acclaimed designer.

The Nomad chair (Fig. 4.1), designed by Ilkka Suppanen in 1994, was also developed in the former University of Art and Design Helsinki’s workshops, as specified in the chair’s technical information exhibited at Helsinki’s Design Museum, whose permanent collection carries the Nomad chair as an item. This particular piece was developed in the year previously to Suppanen’s graduation as a Master of Arts. In 1995, Suppanen initiated his business activities and also graduated.

1 Iittala is a Finnish design brand specialized and home, kitchen and tableware. It was originally founded in 1881 as a glasswork based company. Currently Iittala’s products carry varied materials, such as ceramics and metal. Within the company’s design line are pieces by the most important names of the Finnish design history, e.g. Kaj Franck, Alvar Aalto, Tapio Wirkkala, Timo Sarpaneva, Oiva Toikka.

2 Design House Stockholm is a Swedish brand founded in 1992. The company has the Scandinavian Design notoriety for timeless aesthetics and functionality as its primordial discourse.

Design House Stockholm selection of products is made by commissioning contemporary independent designers.

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Anu Penttinen, a glass designer, occasionally rented the school workshop after she graduated as a Master, from the former University of Art and Design Helsinki, for it was the only place in Helsinki with proper equipment for glass blowing. After the school initiated a policy of not subletting its space for third parties, Penttinen moved to Nuutajärvi1, where she could rely on a community of glass designers, glassblowers as well as on glass workshops. The theme of collaborations will be further explored in the section dedicated to the Crazy quilt principle.

Mikko Laakkonen currently has a small prototype workshop in his studio shared with six designers. When he started his business, in 2004, the seven designers shared a small space, from which they moved, in 2005, to the one they occupy today. Having his private prototype workshop was possible by sharing the costs of the workspace.

Bird in hand: Very limited workforce A commonality identified in 100% of the companies participating in this research is the very limited workforce with which they initiate their businesses. The number of persons employed by them in the initial phase of their ventures is very low and, most frequently, inexistent. Out of the nine interviewed designers, only one had the hiring of employees considered among the first actions taken to initiate a business. The great majority of the respondents, eight out of nine, by the time their businesses were initiated, relied only on their own workforce. The most common justification for this particularity expressed by the interviewees is the high social fare paid by employers in Finland, as Anna Salonen, founder of Motto Wasabi explains: “There is one thing that I find really difficult here in Finland: 1 Located in western Finland, Nuutajärvi is a village whose life is basically centered in activities related to glass blowing. Finland’s oldest glass factory is situated in Nuutajärvi, dated from over 200 years.

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it is very expensive to hire people. The social expenses are really high. This is why we, as a small company, can’t really hire anyone full time. We wanted to hire someone per hour, but then we have to pay more, proportionally, or hire another company to do it. We don’t gain anything from that.”

It is relevant to observe that the totality of the companies initiated their activities without aid of external funding. This fact represents another reason why hiring is rarely considered in the initiation of deign businesses: there are not enough available financial resources to add extra work capacity to the business.

Therefore, it is understandable that the only venture to hire in the initial phase was the one whose entrepreneur had a parallel source of income. By the time Harri Koskinen started his company, he was already employed by Iittala, from which he received a steady salary. Consequently, the designer did not financially depend on his venture. Seemingly, his parallel job provided him with a context in which he was able to invest more in his company, in comparison to the entrepreneurs who relied solely on their ventures’ performances.

Nevertheless, it is important to point out that this scenario of maintaining a very small staff does not present significant changes for a high number of design companies throughout their years of activity. Four of the studied companies still count solely on their founders’ workforce, after several years of existence. Koskinen’s company - Friends of Industry - which employed from its beginning, still employs the same amount as it did in its initial stage.

Studio Suppanen moved from being a one-person company to a venture currently employing three full time designers. Ilkka Suppanen says he does not have the intention to expand beyond this number, but, instead, find alternative ways to enhance the company’s profitability. The notion and expectations concerning growth for this sort of businesses will be addressed in the section regarding the Affordable loss principle.

Among the eight companies whose founders collaborated in 82

this research, two businesses showed significant growth in the size of their staff. Throughout eighteen years of existence, Pentagon went from not having any employees in the initial stage of the company to having a staff comprised of sixteen persons. It is worth to point out the particular view shared by the founders of Pentagon concerning employment. According to Aromaa, they saw in hiring experts from other fields of design an opportunity to widen the company’s area of action. This issue will be discussed in more detail in the Lemonade principle section, due to its particular nature of leveraging contingences.

Samuji, a fashion design company founded by Samu-Jussi Koski, is the other venture which also experienced significant growth in its payroll. In only two years, Samuji increased its workforce initially consisting of its founder and the informal friendly help of a graphic designer to a staff of seven workers.

Bird in hand: Absence of basic business knowledge The great majority of the entrepreneurs interviewed for this research did not have any type of business training prior to the initiation of their ventures. The absence of business knowledge, i.e. managerial basic notion, was the particular aspect pointed out by eight, out of nine respondents, as being the greatest difficulty to be overcome in both the startup and maintenance phases of their businesses. Yet, the lack of business education and training did not stop the designers from embracing the entrepreneurial role. Moreover, the inexperience in business management did not discourage the founders from handling unfamiliar problems of administration, as they would emerge.

Initially, the designers relied solely on the knowledge they already had of their own fields, i.e. designing graphics, products, interiors, hoping it would be sufficient to sustain their businesses in the startup phase. Ilkka Suppanen summarizes this initial reasoning: “In the beginning, I did not understand I was an entrepreneur.

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I thought I was just a designer working. I did not realize that to be an entrepreneur would require different skills than being a designer.”

Having familiarity with managerial knowledge seems to make a significant difference in a design company’s performance.

Apparently, the degree of managerial ability does not affect the startup phase in a damaging way. However, the use of traditional managerial actions, Causation, seems to affect the companies’ growth positively, according to the distinct performances observed.

Out of the eight studied companies, only Pentagon grew to the point of, now, fitting in the category of growth venture and Samuji is, seemingly, in its way to achieve this status. The other six companies grew modestly, considering the number of employees as parameter.

Three companies are still registered as Sole Traders, which means that the founders are not in title to withdraw a fixed salary from their companies and do not have permission to employ (Finnish Enterprise Agencies, 2011). The other three ventures are Limited Companies, out of which two have kept the same size as when they were initiated. Although the third company, Studio Suppanen presents a modest growth in size, its founder states that its growth has been consciously controlled in accordance with his intention, as previously mentioned.

Aromaa, from Pentagon, was the only founder who expressed having an interest in the managerial side of business prior to the start of his own company. He did not show a degree of rejection toward the subject of management and the obligation to deal with it. About his role as the CEO of Pentagon, Aromaa says: “Personally I have been always interested in the business side of design. I have always been interested in business on a pragmatic level, in numbers to a certain extent, but more in the holistic understanding of the business, in where the designer should do his job. This is why I took part in IDBM - International Design Business Manage - Master’s course.

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It is observable that founders who have either familiarity with the Causation reasoning of entrepreneurship to some degree, or seek collaboration with an expert in business, or are able to empirically educate themselves in the understanding of most usual managerial activities, seem to be more likely to have their business become not only self-sustainable, but profitable.

Ilkka Suppanen estimates to have spent approximately the first five years of his business to learn to efficiently manage his company in order to achieve financial stability, sustainability and profitability. Suppanen is responsible for the entire management of his company. He says he learnt to manage his business “the hard way”, by failing. Although he considers the managerial tasks of his business to be extremely unpleasant, he states to be very aware of the importance to have them well executed in order to succeed. Below is his description of one of the lessons of his learning process: “The hardest part was to learn how to balance times when there is money and times when there is not. So, I realized that I had to put some money aside. A percentage of every payment I received, so I could build a capital for the company and not be constantly worried about money and the next-month bills.”

It is important to mention that business knowledge, here, refers not only to the traditional management routine of business, but also to the capacity to commercially enable the venture. Samu-Jussi Koski, the founder of Samuji, pointed out the existence of a culture supposedly present in design education institutions in Finland, where he sees business administration as being an overlooked matter, but also where conceptual work is preferable in detriment of work with commercial potential. Assuming it to be a fact, there would be a risk that designers would be trained to be commercially unsuccessful and, consequently, entrepreneurially unsuccessful. Koski also held a very categorical position, when asked about a main advice to designers in order to avoid dead ends: 85

“Find someone who would have experience in running a business to be part of your team. Or study business, if you can, a lot.”

Samu-Jussi Koski has experienced both situations of running his business without having the substantial business knowledge and having the constant guidance of an expert as the fruit of a collaboration with a former investment banking professional.

Collaborations, once they consist on a core element of the Crazy quilt principle will be further explored in the section of this chapter dedicated to this respective principle.

Bird in hand: An artistic impulse Another relevant aspect in alignment with Effectuation, particularly with the Bird in hand principle, is the reason for which the respondents said to have initiated their businesses. Neither they spent any time studding their particular markets, nor generating estimates about a demographic target group, nor analysing the demands for their products; actions which could have given them the impression of having found an opportunity of financial success.

The common justification from the designers for the founding of their companies is the desire they nurtured to create their own material. Eight out of nine interviewees mentioned the term selfexpression, or a word of similar meaning, to explain their choice of independently work as entrepreneurs. An impulse to start “doing”, regardless of an ideal context into which the business would be implemented, was frequently observed in the description given by the respondents of their drivers to initiate their companies. Designers are frequently motivated by the desire to create means to express themselves. These means, in the views of the totality of the founders interviewed for this research, are the tangible outcomes, which can be created by designers, e.g. graphics, products, apparel, spaces.

Samu-Jussi Koski, for example, left what can be perceived as the highest position in the Finnish fashion hierarchy, the creative direction of Marimekko, to pursue an independent career as an 86

entrepreneur. Koski’s explanation of his motives to start Samuji, particularly given his previous professional success, exemplifies the above-mentioned desire for self-expression and, subsequently, freedom to practice it: “Of course, always when you are working for someone, you need to make a lot of compromises because you are working for them and not on your own thing. I think for a designer it is natural to want to make things, considering your own perspective and from your own heart. This desire was one of the biggest reasons to start something, which would be more me.”

Aromaa also explained the genesis of Pentagon as being a consequence of its founders’ desire to enable a greater degree of creative freedom, which would allow artistic expression: “At first, the motivation to start a business of your own comes primarily from the freedom to work with what you want, with what you are most interested in and with your own artistic expression. I had a very strong feeling that I did not want to be in an ordinary company. All that would be very difficult to bear, instead of maintaining the freedom of your own and being responsible for what you do. When you compare industrial designers to furniture designers, I think furniture designers emphasize much more the tradition and the artistic expression, whereas industrial designers are quite rhetorical in their work and tend to work in a way that engineers work. Sometimes, I feel that there is very little innovation because we have been balancing between these two roles all the time and it has to do with our choice. So I felt very strongly that we had to work in conditions where we could also artistically express ourselves and it is impossible in traditional industrial design.”

Bird in hand: An alternative for unemployment Another relevant finding aligned with the Bird in hand 87

principle is the necessity designers often encounter to create work for themselves, in face of an adverse employment environment.

Such necessity frequently leads designers to the entrepreneurial spot as a form of scape from either unemployment or unpromising professional perspective. The totality of the interviewees stated that the Finnish market offers limited possibilities for consistent enduring careers within the design-related industry. The predominance of furniture, product and fashion small-scale design firms in Finland is one of the explanations designers find for a difficult employment context, in which companies run on a low number of employees, who, consequently, face a slow mobility within the career hierarchy.

In this scenario, designers encounter difficulties to ascend professionally. Thus, taking the challenges into consideration, many design professionals try to build a successful career on their own, through self-initiated businesses.

Although Samu-Jussi Koski had not dealt with the described difficulty prior to the initiation of Samuji, he states to have felt the lack of job options, once the position he previously held as creative director of Marimekko is the highest level a fashion designer can reach in Finland: “In Finland, where can you go, after Marimekko?”

He explained his view on the current employment possibilities in the fashion design industry in Finland and how he believes the present state of the market tends to drive designer toward the entrepreneurial path: “If you think about my field, fashion, in Finland, basically there are only very few companies for whom you could work. I really don’t know what is happening with the other ones. So the options are that you can either go abroad, or work for yourself.”

The founders of Motto Wasabi admit to have seen in a self88

initiated business an option of employment. They see opportunities for furniture designers, in particular, as being very limited in Finland.

On this subject, Yuki Abe says: “There are not many companies where you can have a carrier as a designer if you are not a co-owner. The companies are quite small. There is no way to get into a higher level if you work in a five people company.”

Anna Salonen, co-founder of Motto Wasabi, further elaborates on Abe’s arguments and expresses her view towards employment opportunities for designers in Finland: “There are practically no furniture design companies. There are manufactures, but not design companies. It also applies for interior design. They are very small and they have a lot of interns.

After working for a couple of years in those companies, you have to start your own. Also the salaries are really low. However, if you compare it with industrial designers, they have many more opportunities here.”

Naturally, employment opportunities within the industry vary accordingly to the field of design to which the professional is dedicated, as well as with the political, economical and social context of the time.

The initiation of Studio Suppanen is an example of entrepreneurship as an alternative to unemployment. Suppanen, a bachelor in interior architecture, concluded his Master’s degree in furniture design during the severe recession that hit Finland in the 1990s. Then, job opportunities were scarce and self-employment was the bird Suppanen had in his hand in 1995, when he decided for the initiation of his own company. He describes the context in which he became an entrepreneur and how it influenced his decision: 89

“The nineties were an unique time in Finland because there was a recession in the beginning of the decade. Unemployment rates went up to 20%. Nobody had a job, which kind of killed the hierarchy between established designers and young designers newcomers. I did not have work and neither did well-established design companies. It was not even the best time to start a company because there was no work, but I wanted to work. I started doing it even before graduating. I started doing things and needed to have a company to be able to work. So, I kept on doing what I was already doing. I never considered, let alone concluded, that there was enough demand for my work.”

Bird in hand: A degree of professional reputation The totality of the designers interviewed for this thesis had some level of professional recognition, as fruit of work they had developed prior to the initiation of their companies. These early work activities were capable to generate recognition, whose level naturally varies for each professional. However, it is observed in 100% of the biographies of the designers, that having prior recognition unfolded into demand for their work, which encouraged the designers to register a company in order to be able to issue invoices and receive payments.

Mikko Laakkonen, Ilkka Suppanen and Timo Ripatti, each, had a product licensed, put into production and distributed by a manufacturer before concluding their Master’s studies. Concerning this particular context, Ripatti says: “The product that I made as my Master thesis went into production. That was, alone, a great reason to initiate the business.”

This early opportunities of work were the reason for two of the respondents to have their academic studies postponed indefinitely. Harri Koskinen has not yet concluded his Master’s studies, due to the early receptiveness of his work by the market, 90

which turned his effort from studies to a professional life in the industry. Koskinen was offered a work position at Iittala, while still a Master’s student, which gave him the possibility to have his name promoted worldwide. Also fully dedicated to Motto Wasabi’s activities, Anna Salonen has not yet finished her Master’s studies, once she has been constantly offered assignments, since prior to her graduation. Being in contact with professional opportunities drove Salonen’s focus away from studies and lead her to initiating, firstly a Sole Company and, later, Motto Wasabi – a Limited Company - in partnership with Yuki Abe. Anu Penttinen, who studied Studio Glass1 in Canberra, had a clientele in Australia, while still a bachelor’s student prior to her return to Finland to engage in a Master’s course: “When I started my business in 2003, I had already been doing what I do for at least four years. I sort of came to the Finnish market through the Australian market.”

The trajectory of Samuji is an example of an already existent professional reputation as a bird in hand. Former creative director of Marimekko, Koski embraced the entrepreneurial challenge having the reputation earned with the work he developed at his former job as a fundamental asset upon which he could build his company.

Although through Samuji Koski has been seeking to build his own professional identity detached from the one he had as Marimekko’s designer, it is easy to identify the natural interest and curiosity his new company generates – from the press to the general public.

Bird in hand: Contacts It seems that personal contacts played a major role in helping the designers to take the first entrepreneurial step. This 1 Studio Glass is a term used for an art-oriented Glass production. It refers to unique or limited edition pieces made in a studio by the own artist. This term became popular in the 1960s with the initiation of the Studio Glass movement in the USA.

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particular finding confirms one of the basic elements contained in the Bird in hand principle: whom you know. Here, contacts do not, necessarily, mean a business network, but instead, people who are part of the designers’ personal life and are able to contribute in the establishment of the new venture, in a vast range of fashions. Among these collaborators are friends, acquaintances and relatives of the designers. For example, as previously mentioned, peers, with whom designers share a workspace, make an office rent affordable and also consist on one of the primordial connections upon which designers tend to rely.

Nevertheless, designers frequently mentioned friends from different work fields as a valuable source of knowledge in the initial phase of their ventures. As seen, designers seem to commonly lack managerial business knowledge prior to becoming entrepreneurs. In many cases, a friend whose field of expertise is related to business management is the first source of guidance designers seek to develop the embryonic stage of their companies.

Motto Wasabi’s founders relied on a friend, who is an economist, to assist them through the planning stage of their business. From this informal consultant, they received the instruction to opt for the registering of a Limited Company, instead of a Sole Trader, in order to protect their personal belongings in case of debt.

The Bird in hand principle acknowledges the potential value of trivial association. Anu Penttinen, for example, has built a business comprised of quite diverse elements, considering she has never had formal assistance, as she has never employed. She observes that the support she has received from her parents has been of major importance to the maintenance of her business structure, which comprises a studio, a shared workshop in Nuutajärvi and a shop in Helsinki: “My dad, who is retired, is my personal janitor in the studio.

He comes in, checks the heater and do those things that I am not interested in, don’t have money for or knowledge to get fixed. Or if 92

I need some special material to my work, he would come over and bring them. My mom helps me in the shop as an attendant.”

Samu-Jussi Koski, before starting a formal professional collaboration with a business expert, also reached out to his circle of personal contacts for guidance on management: “In the beginning, I was just calling friends who are more talented than myself in the business side and they gave me advices.”

In fact, the partnership, which is currently behind Samuji’s operational actions, an association between Koski and a former bank investor, was also made possible by a common personal contact of both parties. Collaborations of a more corporate nature will be particularly addressed in the section dedicated to the Crazy quilt principle.

The contribution from people, whom the designers might know and, consequently, whose connection founders might benefit from, should be considered in its full potential, may they be of trivial personal origin or of a powerful player in the industry. An example of the latter is seen in the way Harri Koskinen initiated his business relying on a network made possible by Iittala: “At university, I wanted to establish an industrial design company with my colleagues. A proper company with many people with different skills working there. A design agency, if you will. But then, when Iittala booked me, they started to promote things under my name. So, suddenly, there was this Harri Koskinen designs, since Iittala works using the designers names in the front. Many features and interviews in international magazines about the work I had been doing so far started to appear, and also constant requests from new clients. Then, I thought: why not to start a company of my own?”

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4.3.2 Affordable Loss The Affordable loss principle endorses the view that evaluation of opportunities should be based on the acceptability of the possible loss, instead of on the attractiveness of the possible gain.

Findings aligned with the principle

Findings unaligned with the principle

Estimate loss of subjective values

Subjective values distract from estimates of financial loss

++

̛​̛

++

++

++

++

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Place value on reputation: estimate risk of losing reputation, before embarking a project.

Place value on time dedicated to design itself: estimate risk of losing creative designing time, before embarking a project.

Place value on pleasure: estimate risk of losing pleasure in working, before embarking on a project.

Place value on self-expression: estimates risk of losing artistic freedom, before embarking on a project.

Estimate the drop in quality of the work developed.

̛​̛

Consider neither financial loss, nor gain at any stage, due to the extreme pleasure gained from practicing design.

Invested hundreds of thousand of Euros of personal resources, in the first year, without realizing it, for being completely involved with the creative tasks.

Table 4.10 Findings: Affordable loss principle

Estimated and concluded: nothing to lose

Do not estimate, based on an a feeling of nothing to lose

++

Concluded that had nothing to lose in the initial stage of the venture.

Have the view of “no financial investment, no loss.”

Accepts the idea of failure, supported by the hope of always having a work alternative.

Started estimating loss, after the company grew: the “nothing to lose” stage was over.

Transitioned from being a Sole Trader to a Limited Company, due to the risk of loss of personal belongings.

̛​̛

Blind devotion, but estimated a deadline to succeed

Blind devotion prevents rational estimates

++

In the initial phase of the venture, estimated the loss of work effort: gave the business five years to be successful.

̛​̛

++ ++

++ ++

̛​̛

̛​̛

Considered neither financial loss, nor gain in the initial stage of the venture. Just started.

Are too busy designing products. Believe “do not have time to think about those things” – neither loss, nor gain.

The financial support provided by artist grants softens the estimate of loss.

Blindly fearless to the point of ignoring loss and gain.

As findings of this research, many aspects which concern the principle of Affordable loss were identified as part of the implementation and running of self-initiated design businesses. The results show actions, which can be either considered an appliance of the principle or unawareness of its concept.

Generally, it would be accurate to say that the idea of estimating the consequences of an ultimate financial failure, a worstcase scenario, as implied by the Affordable loss principle with the objective to evaluate the willingness by the founder to embrace risk, is rarely considered by designers prior to the initiation of their companies. Designers, commonly, visualize neither an ultimate 95

situation of peak, nor one of bottom for their companies. Business is mostly developed through small steps, dealing with challenges as they emerge, on a daily bases. When considered, however, loss is estimated case by case, as consequence of the failure of a particular decision, but, rarely, from the failure of the venture as a whole. The most emblematic aspects, which can be placed under the subject of Affordable loss - some aligned and some unaligned with the principle - are shown below.

Affordable loss: Subjective values It would not be possible to understand the actions taken by designers, in relation to the Affordable loss principle, by solely considering the financial aspect. It is of fundamental importance for the comprehension of the subject of this thesis, to call attention to the founders’ distinct notion of value. Commonly, the term loss is found in business literature in reference to financial loss and the Effectuation principle of Affordable loss represents no exception.

If this definition were to be considered here, in its strict financial sense, it would be fair to state that design entrepreneurs, in general, do not estimate the affordability of monetary loss in neither the initiation, nor in the maintenance of their businesses. However, it can be clearly observed in the data collected from the interviews that designers have a distinct and wide notion of value, which goes far beyond financial gain, in regard to the expected generated by their businesses. In the common context of self-initiated design businesses, there are a few subjective assets that are frequently perceived, by design entrepreneurs, as being much more valuable than money. These subjective assets - reputation, pleasure, designing and knowledge - have their potential loss more frequently taken into consideration, than money and material possessions.

Ilkka Suppanen’s criteria for selecting work represent a good example of the distinct notion of value and how it influences the founders’ process of decision making. In this particular case, knowledge was the subjective asset being considered: 96

“I am happy that different kinds of people approach me, but my criteria are that I have to gain something out of the project.

Maybe it is money, maybe reputation, maybe knowledge. I work for free if I think it would be interesting to me. For example, once a company asked me to rethink their colour range, it was a well-paid job, but I thought it was not interesting to me. I would not learn anything.”

Reputation was also found to be a valuable subjective asset to the majority of the respondents. Many decisions are made either to gain reputation, or to prevent loss of reputation. Suppanen demonstrates high awareness of measures to build a good reputation, which can be exemplified by his view about the design industry: “If I designed a tray it would bring me probably twice more money as if I designed a glass. But nobody is interested in the guy who made the tray. Everybody wants to work with the guy who made the glass. So, probably, it is cleverer to design the glass, because from that, they would ask you to do the mobile phone. But the tray guy is not asked to do anything. So it is better not to start doing trays because from the tray you will not jump to the glass business. It is very difficult, in design, to transit from one segment to another.”

Suppanen shows a very rational reasoning behind his choice.

He declines certain assignments, although they would result in good financial return. In this case, the designer considers the loss of money to be affordable, while the potential loss of reputation is considered to be not. The founder believes that creating and maintaining a well-defined professional image secures an enduring career.

Seemingly, time is another important subjective asset for designers, particularly time dedicated to the professional activities to which they feel more connected. In most cases, such activities concern designing in the traditional sense of working on the 97

development of a tangible, material outcome. Most frequently, designers do not consider the loss of their availability for the process of design itself as being affordable and, therefore are willing to compromise other aspects of their businesses to secure time for their activity of preference. The majority of the founders expressed the conscious decision to trade what could be managerial and/or marketing time to improve their businesses’ performances for the development of tangible products, favourite activity of nine out of nine interviewed designers. Harri Koskinen gives a good example of the context described above, when he talks about projecting in his company: “I have never made any kind of estimation for my company.

I have never made a business plan and I will never make one. My business is rather small and having only two employees make it not that big of a deal. I am a designer. I design products. That’s what I do.”

Pleasure - fulfilment - generated by the founders’ routines of design activities is another identified high-valued aspect. The contentment, which seems to fulfil an important part of designers’ professional aspirations, is a subjective asset highly regarded by the respondents who seem, in their entirety, to practice design as a “labour of love”. According to the respondents, the pleasure in working is put in risk by various factors, among which were mentioned a troublesome relationship with a client, uninteresting assignments, as well as work overload. For the above described, designers often reject opportunities that could, potentially, jeopardize the enjoyment they have in working, an asset whose loss designers find difficult to afford. The same logic drives designers to embrace financially unpromising tasks, based solely upon the potential pleasure the work itself might generate.

Therefore, it seems to be challenging for designers to maintain an impartial judgment upon professional opportunities, due 98

to the weight the satisfaction they frequently extract from work has in their decision. While describing the current different activities from which his income is generated, Mikko Laakkonen explained how the scope of his work is based on the type of artefacts he enjoys to design: “My income is generated from royalties, teaching and commissions. I used to do exhibition, interior and graphic, but not anymore. Those are not my cup of tea. I don’t like them. Now my focus is on everyday objects. I am neither interested in bikes, nor in cars, nor in washing machines. But, of course, if Ferrari called me, I would not say no.”

Considering the attachment and dedication designers usually have to traditional design activities, it is relevant to point out that the totality of the founders consider some degree of loss of quality in their products to be inevitable, with increase in work demand.

Loss of quality of outcomes seems to be more affordable, than loss of time for design activities and loss of pleasure gained from them.

Designers are aware that the tasks inherent to the entrepreneurial role tend to divide their effort, also resulting in a decline in quality of the final products in which the companies’ deliverables consist. The quality loss in work, due to designers’ double role as entrepreneurs, seems to be less affordable and, in many cases, they try to attenuate this problem by overlooking managerial and marketing tasks to be able to focus on the design processes.

The results show that subjective assets have great weight in the process of decision making in the studied companies. The loss of resources such as contentment, designing time, self-expression, reputation are unlikely to be afforded by designers in a routinely conduction of their businesses. The activities they engage in are highly likely to be chosen to maintain these subjective assets, despite either potential financial gain or loss. The founders interviewed for this study do not tend to estimate the consequences in case of 99

complete failure of their ventures and, therefore do not reach the stage where they consciously accept the risk. The fact that designers do not estimate the loss they would be willing to afford, does not mean that they devote time estimating gain, either, as it would be expected from traditional business managements principles.

The respondents did not calculate the gain for which they would be signing up by owning a business. Generally, the estimate of gain is one of the core drivers of entrepreneurship, however, as explained in the Bird in hand section of this chapter, self-expression appears to be the main driver behind designers’ decisions to become entrepreneurs, instead of money. Since the focus of design enterprises is not placed on financial aspects, it is understandable that designers lack the habit of dedicating time and effort to estimating either monetary loss or gain.

Nevertheless, it is important to mention the contradiction found in the perceiving of subjective values by designers. Despite the great importance placed on those values, they are rarely seen as an investment worth of being considered in an ultimate worst-case scenario loss, i.e. bankruptcy. When designers frequently express a feeling of having nothing to lose, they are referring to the inexistence of monetary investment. They rarely consider their invested hard work, valuable time, quality of life or talent, when they state to have nothing to lose, in case of ultimate failure, as the following section will further discuss.

Affordable loss: A sense of having nothing to lose Commonly, design companies, as the ones being studied in this research, initiate their activities neither upon great personal financial investments, nor loans, nor third party funding. Since design enterprises frequently rely solely on their founders’ workforce in the initial phase – and not uncommonly for longer time -, designers tend to believe that if their ventures come to termination, nothing substantial would be lost, considering that, financially, very little has been invested.

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However, the impression of having nothing to lose is shared, particularly, by founders whose enterprises have not yet, grown significantly. The description of the current perception Arni Aromaa has of loss, in comparison to the one he had when his company, Pentagon, was initiated, in 1998, presents well this dichotomy and explains one of its probable origins: “I believe I started to think about loss later on. I think that when we, the entrepreneurs, were the ones risking our own time and money, we did not think about it. Because we could always do something else and sort it out somehow. But when we start to understand that there are other 14 people, whose income depend on us, it becomes a big commitment. It was only later on, that I started to stress about this things and not in the early phases. I think the possible losses come with the responsibility that comes along when the company grows.”

Seemingly, subjective assets alone, when regarded as investment, are not carefully considered, once the spending of designers’s personal and professional effort, throughout years of hard work, does not discourage founders to either start or continue their businesses. Designers do not see financial value of investments in form of subjective assets and, for that, tend to run their businesses with the feeling of having nothing to lose. In this case, nothing means money. The investment of their time and energy, if aimed at designing, is more likely to be perceived as gain, than loss, as previously mentioned.

However, the way respondents apparently perceive loss and gain of subjective resources, either in a daily bases or in a ultimatefailure scenario, seemed insufficient to deeply understand the feeling of having nothing to lose. Once these companies’ activities are, supposedly, designers’ bread winning source, a need of a better comprehension of this phenomenon of alleged detachment drove this research to a further examination of the economic aspects in which 101

design companies are involved.

The majority of the interviewed founders, only when directly asked, mentioned receiving artist grants, at some stage or repeatedly, from the Finnish government or other source, e.g. cultural foundations. This occurrence has to be considered in the analysis of the reasons designers should or should not believe that there is nothing to be lost from a financial perspective in case of business failure.

Although grants seem to represent, or have represented, a relevant share of designers’ overall income, they are poorly taken into consideration, to the extant the founders forgot to mention it when asked about the diversity of the sources from which their income are originated. Only when the respondents were directly asked about the existence of financial aid, grants were mentioned.

Harri Koskinen explains his experience with the grants system: “I have been applying for these personal artist grants first for three years and then for five years in a role. I got them every time.

Then, I forgot to apply for two years in a role, because I was two or three days late for the deadline. But then, I received this great award from Sweden and thought it would not be fair to keep applying, because I no longer needed the money. And I, also, got this position at Iittala, as a design director, which takes two days per week. So, if I continue working for Iittala, I believe I will not apply for the government grants anymore.”

Mikko Laakkonen explained the role artist grants have in the financial aspect of his company and his view on this system: “I have been given grants from the Finnish government for three times. Most of the money I earn with the company’s activities I save in the bank and I can live on the grants for a year. If you get them, you don’t have to pay them back. They are artist grants, 102

awards. Last year, probably 50% of my income came from that, because the rest went to the bank. To earn it, you have to prove that you are good enough. It is based on merit. But it is important to mention that here there are no industries as there are in Italy. So, Italians don’t need this kind of system.”

Artist grants constitute an alternative source of income.

External sources of money may contribute to the feeling of having nothing to lose, since they, potentially, can soften the pressure on the companies to perform well enough, at least to provide the founders with an income out of which they could make a living.

Two designers expressed satisfaction with what they called “even” performance of their companies. By even they meant an operational margin equal to zero.

Jobs taken in parallel to the entrepreneurial role also constitute an external source of salary frequently taken by designers.

The stability of being employed by a third company can also put the designer in the position to judge that, in case of total failure, not much would be lost. Nevertheless, it is also found that alternative sources of income are a way to maintain the enterprise throughout unprofitable times. This issue will be further explored in the section dedicated to the Lemonade principle.

This view of having nothing in risk is also frequently associated with an optimistic attitude shared by the respondents.

They frequently contemplate the idea of always having options, in case of failure. This view was generated by different beliefs varying among the designers.

Anu Penttinen, for example, claims to have only superficially contemplated the possibility of a worst-case scenario and seems to be quite detached from a potential material loss it could generate.

Penttinen feels protected by the fact that she has an important asset, which cannot be lost: her technical ability. Therefore, she believes to always be able to start over in a different context, which gave her the confidence to start and manage her own company: 103

“I never thought it was a big deal to have my own company. I can always stop it. This is why I always encourage students to learn technics. Go really on the technical side, do stuff, cause that means a high survival tool when the times are bad, instead of sitting in you shop and cry. I do my own thing, so if I have to do something else to survive, I can teach or sell my own work directly to companies.”

Penttinen’s confidence and willingness to afford any material loss, for perceiving her technical skills as a safety net, also exemplifies the focus designers have on their own professional activities over the revenue these activities are supposed to generate.

Of the data collected in the eight interviews, a literal use of the Affordable loss principle was seen only once, in a very conscious choice taken by Motto Wasabi of registering their venture as a Limited Company, instead of a Sole Trader. In the process of initiation, Abe and Salonen opted to open a Limited Company in order to legally separate their personal belongings from the companies, in case of debt. Thus, if they would come to face ultimate failure, they personal belongings would be protected from confiscation and they unemployment rights would be maintained. A very pragmatic action summarized by Salonen: “If something really goes wrong, you won’t have to sell your house.”

Affordable loss: Blind devotion Concerning both loss and gain, one commonality in all the respondents’ behaviour is an apparent fearless courage in the initiation, but also in the conduction of their businesses. The courage mentioned here is not, necessarily, the one stereotypically credited to entrepreneurs for taking financial risks, once the majority of the respondents tend to act within a comfort zone, when it comes to managing financial risk in their companies. This choice of path for low financial risk can be understood due to the common 104

unfamiliarity with basic managerial knowledge associated with a strong desire to dedicate time to activities related to developing products, instead of commercial strategies. On the other hand, the founders show a remarkable courage to commit to hard work for long lasting periods of time – both as a daily bases effort, as well as a lifelong commitment. Considering the already stated finding in the Bird in hand section, that designers perceive their work as a “labour of love”, it is possible to understand the devotion with which designers embrace their work, which is unfolded into a fearless courage to start and run a business.

Aromaa thoughts on the years of struggle, before succeeding with Pentagon, can exemplify the unquestionable and unstoppable work-mode in which designers frequently find themselves: “It was quite difficult for several years. I don’t know what kept us going. I think many other people would have made the conclusion, after the fourth year, if this is not successful, maybe we should try something else.”

This remarkable courage carries the potential to become unbeneficial to business, when entrepreneurs lose their capacity to impartially evaluate certain aspects of their companies, for being deeply devoted to caring their design activities. Half of the interviewees, for example, admit not closely following the financial statements of their companies. In such context, designers may lose perspective of either loss or gain of money, time and effort. The brief description Timo Ripatti gives of his business can exemplify how dedicating to a “labour of love” seems sufficient as a business goal, which carries the risk of affecting designer’s evaluation of their enterprises as profitable companies: “This is not exactly a business. I don’t know if I can call it a business because it is only something I like to do. How good of a business this is or is not, I am not sure.”

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This position of extreme devotion and blind courage, where designers are fulfilled solely by designing, can lead them to overlooking great losses occurring right before their eyes.

Anu Penttinen honestly expressed her aversion for keeping track of her company’s numbers and admitted leaving this responsibility entirely to her accountant: “That’s the part I don’t really like and I want my accountant to do everything for me. I don’t even want to hear about it. I just look under the line at the end of the year. I am not very money oriented.

Sometimes, I question if I just have this very expensive hobby and if I should carry on. I am not rolling in money, as some people might think. I am able to buy the materials and that is the most important thing to me.”

Although she expresses awareness of the fact that her company does not have a high financial performance, she continues devoted to her work as a glass designer and disinterested in managing closely the finances of her company.

Harri Koskinen also expressed his devotion to continue working, in despite of his company’s perspectives of either loss or gain: “Every year, just before the summer holidays starts, I realize I have no idea, no perspective of what the company will be doing in August, because we have no perspective of work for that period, yet.

But I think this is quite normal. Until today, it is summer holidays already and I don’t know what I will be doing.”

Only one designer expressed caution in trying to avoid fearless devotion that can result in the continuation of an unprofitable business. In the initial phase of his company, Mikko Laakkonen, although not in a formal business plan, gave his business a five-year window to become profitable. In 2010 he evaluated the reality of his 106

business and concluded it was a self-sustainable, profitable company with an expectation of growth. He says he would have tried another path and placed his effort into being employed, in case he would find himself gaining solely pleasure out of his venture: “I have made a plan, in 2005, that I would give myself five years to evaluate if the business would be viable or not. And, in 2010, I concluded that it was. Yes, this is a business.

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4.3.3 Lemonade The Lemonade principle shares the view that surprises should be embraced by the entrepreneur, who should be detached from previous goals in order to be open to opportunities.

Findings aligned with the principle

Findings unaligned with the principle

Versatility helps to embrace surprises

Lack of Versatility

++

̛​̛

++

++

++ ++ ++ ++

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Tend to accept challenges, even without previous experience on the particular design field.

Changed the initial plans of founding a design agency, because own name became famous.

When sent to a bad product design school, during an exchange, took graphic design courses.

Tried different business formats.

Claim to be always open for the possibility of new businesses.

Embraced the managerial aspect of the business, once could not afford a manager.

Accept less creatively challenging projects as a stable source of income, but execute them anonymously.

̛​̛ ̛​̛

Regarding design, work strictly on own field of expertise.

Overlooks the managerial side.

Have a very strict strategy of how to succeed, that may lose opportunities.

Table 4.11 Findings: Lemonade principle

Alternative sources of income ++ ++ ++

Teach, as a work alternative for money, which results in gain of reputation.

Apply for artist grants from the Finnish government.

Negotiated with employer to have own business, as long as would not compete with employer’s products.

Go beyond geographic borders ++ ++ ++

There is no infrastructure in Helsinki, moved to where there was.

Considered Finland to be a small market, so started pursuing work abroad.

Personally went after clients in Italy, after approaching companies in Finland.

Benefit from delegating/employing

Do not enable delegating/ employing

++

̛​̛

Hired an expert employee in a different field, as soon as there was demand for the particular field and kept this practice.

̛​̛

Needs to hire work force, but does not take the risk.

Not good at delegating.

Focus on short-term gain ̛​̛

̛​̛

Extremely focused on immediate work for shortterm payment, that may lose opportunity.

Waste time developing longterm strategies, but drop them as soon as any work comes in.

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From the information shared by the designers in the interviews, it is possible to observe that the appliance of the Lemonade principal is quite present in the way designers conduct their businesses. However, actions which could be considered opposed to the principle are also observed, in the designers’ behaviour and choices. The aspects of the Lemonade principle in regards to how designers leverage contingencies as well as the description of the most frequent contexts where they act with opposite reasoning are presented below.

Lemonade: Versatility The designers interviewed in this research are, mostly, notorious for their work in one of the particular fields of design.

However, the data collected showed that the vast majority of the founders, in reality, embrace a work scope much wider than the one for which they are known. Designers tend to be very versatile in the embracing of work from different areas of design. The Finnish market, limited by its small size, is a frequent justification given by designer for this phenomenon. To be able to maintain their businesses, designers tend to engage in distinct areas of design and, by doing so, become able to attend a wide range of market demand.

However, it is important to point out that such disposition to embrace new challenges is more likely to occur regarding activities within the spectrum of the design of tangible outcomes, e.g. graphics, products, space. For example, it is not uncommon to see furniture designers working in interior design projects, interior designers adventuring into fashion design and everyone taking steps on the graphic design path.

Salonen believes that Motto Wasabi’s versatility is an important asset, which enhances their capability of leveraging contingencies: ” “I have always thought that our versatility is one of our advantages. For example, in the beginning of this year, all the interior 110

designers said that their clients had disappeared and that nothing was happening. But, since we are also doing graphic design and other things, we had projects to go on with. And now we have big interior projects, also.�

It is worth pointing out that the ability to work with graphic design, described by Salonen, was also developed by embracing an adverse, unexpected situation. While in Spain for an exchange student programme, she became aware that the furniture design department of the school to where she was sent had a reputation of being weak, whereas the graphic department was highly regarded as being one of the best in Europe. She saw it as an opportunity and dedicated six months to learning graphic design.

Considering the data already displayed, it is accurate to say that the disposition designers have to embrace diverse work within the design fields is much higher than the willingness to engage in business management activities. However, the latter does occur, despite the displeasure the activity itself may generate, or of the superficiality with which the matter might be dealt.

Another sign of versatility is found in the way some of the respondents were willing to experiment with business formats to adjust to the contingency of the time. Arni Aromaa describes the initial phase of Pentagon and how its current format, as a design agency, was forged with time, based on enhancing versatility: “A couple of years after we initiated the company, we started to visualize what it should be or what it could be about.

Until this point, it was like testing and trying out to see what the company could be. It was more a practical way to carry out the small assignments we were getting, anyway, as freelances. In the beginning, we did a lot of graphic design work and some exhibition design. Maybe some strange product design as well, some fussy ones that I am not sure we would take today.�

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Willingness to adapt to taking opportunities as they occur is also seen in Harri Koskinen’s evolving plans. Initially, Koskinen intended to build a design agency, but, instead, embraced the opportunities which emerged with Iittala’s work offer and with the network that came along.

Lemonade: Alternative sources of income The financial success of design enterprises does not frequently match the success in recognition and acclamation. To be able to provide for themselves and to sustain their businesses, designers seek alternative sources of income. Most commonly, these sources are positions in a third company, teaching jobs and artist grants provided by the Finnish government or private foundations with the goal to promote culture.

Two out of nine respondents have permanently maintained job positions in third companies, while simultaneously conducting their own enterprises. This situation can benefit entrepreneurs, once a steady income can relief the pressure for short-term gain, providing designers with peace of mind to have a strategic view of their company’s potential. However, it can also consume the time entrepreneurs dedicate to their own businesses. Another relevant consideration arose from the observed low expectation designers, who carried a double role of being an employee and an entrepreneur, had on their companies’ financial return.

Harri Koskinen, for example, expressed contentment with the fact that his company, most commonly, does not pass the break-even point, i.e. the company is neither profitable, nor is losing money.

Koskinen satisfaction with his company’s financial performance is understandable considering his employment status at Iittla, which places him in a privileged position: he does not, necessarily, have to rely on his company’s profits for personal provision. About his company’s financial performance, he says: “I had some slow years, like 2006, when I had no profit and 112

had a negative margin. But otherwise it has been even and, for the past three years, things have been going well with my company.”

The above described also suggests that the pleasure of practicing, with creative freedom, the activities designers mostly love justifies working for an even result, without the particular aim at growing their businesses.

Another alternative source of income chosen by half of the interviewees is a teaching position. Two of the designers held a teaching position only during the initial phase of their businesses, in order to support themselves while their companies were still functioning under a negative operational margin. About this alternative for the initial phase of Studio Suppanen, its founder says: “I spent a few years teaching at Taik, which was what I was making money from, not exactly from the studio. The business was not profitable in the beginning.”

Two of the respondents still hold a teaching position as a second source of income, after the first five years of the initiation of their business. Both stated to have maintained the teaching activities for both money and pleasure. About his parallel job as a lecturer, Mikko Laakkonen says: “I used to teach a lot, but now I don’t teach that much anymore, because I don’t have time. I used to teach in Taik and Lahti. I still teach in Lahti. It is really good because the students are very motivated. I teach both because I need the money and I also like it. But I believe that if one day I would not have to do that, I would still do it.”

This option has the potential to affect design businesses both negatively and positively. A teaching position in a respectful institution, for the public eye, can be perceived as an endorsement of 113

the quality of the designers’ work. It can also be a good way to stay in contact with research, new materials and technology. However, it can be also time consuming and drive the founders’ attention away from their companies, as Anu Penttinen suggests: “I was teaching glass for two years at Polytechnic in Hämeenlinna, right after I graduated. I was a full time teacher and also a full time entrepreneur. It was tough. I just did it because I got the job and not really because I wanted it. I ended up resigning, because I wanted to concentrate in my work and in developing the company.”

As previously introduced in the section addressing the Affordable loss principle, the respondents also appeal to artist grants as an alternative source of income. The responses shared by the entrepreneurs, in the interviews, suggest that grants received by designers do raise positive consequences, but, also, a seemingly unproductive behaviour.

The artist grants system provides designers with a certain amount of money, which the founders are not required to return, once grants are neither a loan, nor funds. Nevertheless, it is assumed that these grants will enable some form of cultural contribution to society from the grantee. The benefits of receiving the grants are of obvious nature: this extra income gives the founders a degree of tranquillity to dedicate to their companies, relieving the pressure upon the companies’ financial performance.

The grants system awards designers based on the artistic relevance of their work, but not on the potential of their companies, as businesses. It has been already shown here that an impulse for artistic self-expression is the main driver of designers to become entrepreneurs. The grant system seems to reinforce the artistic aspect, praising it alone, in detriment of the designers’ ability to transform their artistic achievements into commercial achievements.

It is relevant to devote attention to this subject, since the enterprises 114

collaborating in this research are caught in a void. For void, this work refers to an intermediate stage, where ventures with the profile similar to the ones studied in this research stand. These companies do not frequently have their particularities - size, structure and objectives - taken into consideration by the tradition granting systems, as the next paragraph attempts to explain.

The interviewed designers are not typical artists, who have as only goal to express themselves freely. As entrepreneurs, they engage in a much more complex system than the one of sole self-expression.

Seven out of eight companies work by commission, meaning that there is a client to be pleased and a payment to be received, by which the enterprise is to be sustained. Therefore, design entrepreneurship, frequently, is found in a middle ground, between the artistic tradition, which implies that the main goal is to be artistically great and the market, demanding from enterprises to grow, to be profitable and to contribute to the economy.

Usually, design companies are not big enough to be categorized as growth enterprises, therefore, they are not eligible for most of the government funds destined to support and foment entrepreneurship. Such funds have strict requirements concerning the beneficiary’s business performance. On the other hand, to be awarded artist grants, designer do not have to defend their companies’ excellence and potential as businesses, for this financial aid is meant to help design entrepreneurs to personally support themselves.

It is possible to observe that designers themselves encounter difficulties balancing the reasoning of being in this middle zone, as can be exemplified by Timo Ripatti’s view: “I am a lousy businessman in a sense that I don’t want to design what people need or want. I want to design what I want to design. It has something to do with an artistic side, but I don’t think furniture design is art, but it has something to do with sculpture.”

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Lemonade: Beyond geographical borders One of the premises of this research is the selection of designers whose companies are based in Finland. This choice intends to feature the common context in which these enterprises are inserted and, therefore, to enable a fair analysis of the founders’ behaviours, once the common environment exposes them to similar challenges. A fundamental action, coincident to the nine designers, is the intention, from the moment the company was founded, not to limit their work to the Finnish market.

The attempt to create a business of international profile is commonly justified by the founders, due to the small size of Finland, consequently, the small size of its market. Therefore, in face of constraints, which would make the existence of their businesses unviable, design entrepreneurs in Finland seek to reach markets beyond Finnish borders. Mikko Laakkonen explained his reasoning on this matter: “My plan was to make a living out of design and Finland is a small country. We basically don’t have industry. We have only two companies who make furniture in big scale, so I thought it would be better to go somewhere else for clients.”

Arni Aromaa shares a similar view as Laakkonen. Below, he explains how he perceives the context of a design enterprise in Finland: “The combination of the small market and trying to find a focus is very difficult, because, at least in our case, where we say we focus on consumer goods and services, the client base is quite limited from the beginning. And it is also difficult to work with competing clients from the same field. This situation forces you to look for clients outside.”

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Lemonade: Delegating/employing Employing is one of the signs of growth of a company, but, also, a proponent in the engine of a business. Therefore, how to employ, in the right measure, is a constant dilemma in business administration in general. That said, it is possible to identify that employing seems to be an even bigger dilemma in the conducting of design businesses. As previously addressed in the section of this chapter dedicated to the Bird in hand principle, designers tend to rely solely on their own workforce to initiate their businesses, and, frequently, face great difficulties in making the decision to hire employees on a further stage.

Being overloaded by work frequently makes it very challenging for designers to be opened to embrace surprises in their full potential. To be immersed in automatic work has the potential to drive designers away from strategic thinking, which puts them in a position of constant worry about solving the next small problem, preventing them from visualizing the bigger picture. The research suggests that, when every activity is centralized and depending on the founders, it becomes difficult to identify, accept and execute activities that would emerge externally from the quotidian routine of their companies. In this particular situation, there is no available time, attention or workforce to be redirect to potential opportunities.

Timo Ripatti describes the challenge of running a one-person company, where every activity – from strategy to technical drawing – relies on his own work force and time: “If you are a one-person company in the design field, the nature of the project you have, even if they come to you and you don’t have to waste time seeking, is small projects. If you have many of these projects going on at the same time, it means that all of them will require the same amount of time for meetings and things of this sort. So, it is hard to have enough time to even do the design work itself.”

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The description by Motto Wasabi’s founders of not being able to reach the growth estimated in their business plan, illustrates the dilemma of employing, as Anna Salonen starts explaining: “Our business plan is from 2008. There has been four years.

The focus has still been the same. The problem has been that we have not had the time to market ourselves, because we are too busy all the time. So, we have not been expanding as much as we thought we would be.”

Yuki Abe, Salonen’s partner at Motto Wasabi, continues: “At this point in the business plan, the company included around six people. Maybe not all six at this point, but it would be the working concept for this company to have at least five by now.”

When asked about the initiatives taken to promote her business, Salonen justified the lack of strong marketing effort by being constantly overloaded by work and, therefore, not having time to dedicate to the marketing demands of Motto Wasabi: “We did not really promote our business. We did our webpage, but that went quite slowly. We have been sending this emails updating people on what we are doing. We try to keep in touch with our old clients that way, as well as with the people we have met during the year. But it is always a problem, because there are only the two of us and we don’t find the time to do anything.”

Unexpected situations can indicate potential new directions for the business, for it might contain surprisingly beneficial prospects. Hiring can be an efficient way to create means for the enterprise to be capable of leveraging contingencies and, therefore, to avoid wasting opportunities brought by surprises. Besides the obvious relief in the owners’ tight schedule, an employee can also 118

provide the company with a particular expertise that the founders might lack.

Pentagon took the risk of hiring soon after initiating the business, in the year that followed it’s founding. About the decision of hiring, Aromaa says: “That is also a lesson that you need to learn when you run a company, that there is no point on trying to do everything, yourself, that is out of your professional scope. There are tones of people that are more capable. This is something that we try to keep in mind all the time. We first hired a part time employee, in 1999, who later became a full time employee. But, then, we hired the second one only in 2003. In the first hiring, it was clear that we wanted an interior designer. The second one was to hire more industrial design capacity. Another issue starts when the size of the company grows and the problem to be overcome starts to be the routinely work, which has to do with running the company. I think it was a very smart decision to hire a person to take care of that. And, later on, we realized that in order to get into bigger and more strategic projects, we had also to have other expertise than design and we hired people from different backgrounds.”

Deciding the time for hiring might be a crucial aspect to be considered by design entrepreneurs. The example given by Pentagon’s founder showed that the decision to employ is connected to the leveraging of emerging opportunities, specially for companies which have growth among theirs objectives. It is also relevant to point out that Pentagon’s owners were, from the initial phase, willing to expand their range of services, beyond their own original expertise. Arni Aromaa and Sauli Suomela are industrial designers by education, however, they found, in the hiring of experts from other fields, a good solution to leverage contingencies.

Sumuji also increased its payroll significantly. Throughout its first three years of existence, between it’s founding and the 119

conclusion of this research, the company went from having only his founder and a graphic designers, as workforce, to having seven employees. Differently from Pentagon’s willingness to incorporate new fields of design to the company’s scope, Samuji’s founder, Samu-Jussi Koski, intended to stay committed to fashion design, although Koski has been willing to step into other areas through collaborations, which will be addressed in the section of this chapter dedicated to the Crazy quilt principle.

By not relying, solely, on his own workforce and time, Koski was able to benefit from opportunities, which would not be possible to embrace otherwise. According to the founder, Samuiji’s first big opportunity came with the combination of selling its first collection to the Japanese market, of winning a key New York retailer as client and also with the company’s participation in the New York City trade fair. Those achievements were only made possible by hiring a manager, who became responsible for presenting the company’s concept and selling its first collection.

Lemonade: Focus on short-term gain One can understand as a natural consequence of designers being absorbed by small issues and tasks of everyday work, a tendency to overly focus on short-term gain. This situation can become a vicious circle. The maintenance of the company depends on short-term gain, once the business does not have enough capital upon which to rely. In order to secure the basic survival of their companies, it has been observed that designers can compromise opportunities that would bring financial gain in the long run. Often, design enterprises remain dependent on short-term gain, because their founders are not able to spot long-term opportunities, for being too occupied with securing their bread and butter.

Ilkka Suppanen states this view of short-term gain and also cites reputation, as previously mentioned in this study, as being a source of long-term gain: 120

“This is the problem with young designers and it was the problem with me, too: because you are looking for money so closely – for short-term gain – you don’t see the long-term big picture. In Italy, people are much more aware of this. Long-term opportunities are why many big companies ask designers to work for free. These companies understand the reputation and status the professional gain by simply working for them.”

Designers expressed awareness of potential long-term positive consequences of taking particular measures, e.g. entering competitions, networking, promoting themselves. However, half of the respondents does not devote time to these activities for having their focus on, what they considered to be their “bread and butter” projects.

It is relevant to point out that, apparently, the founders who, from the beginning of their entrepreneurial role, managed to dedicate to those activities are the ones whose companies experienced more significant growth. Although taking such actions does not, necessarily, translate into an immediate gain, it seems to have the potential to build a strong career foundation.

Therefore, to be strictly focused on short-term gain can also become an impediment to embrace opportunities, which might unfold from an unexpected situation.

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4.3.4 Crazy Quilt The Crazy quilt principle endorses the view that the entrepreneur should focus on making alliances of various natures, instead of depositing extreme effort in analysing the competition and following a straight, rigid strategic path.

Findings aligned with the principle

Findings unaligned with the principle

Seek collaboration with companies

Reluctant collaboration with companies

++

̛​̛

++ ++ ++ ++ ++ ++ ++

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Aware of the companies with which associate in order to build a good reputation.

Have collaborated for free in projects, for their return in prestige.

Approached companies in Italy, after contacting major companies in Finland.

Maintain a great network of retailers.

Associated with an established company early in the carrier.

Sell a “combo” to the client in association with other practice.

Associated with an advertising agency for cross-selling.

Have been conscious of PR since the initial phase of the venture.

̛​̛ ̛​̛ ̛​̛

Dislike to have name associated with well-known brands.

Very reluctant regarding outsourcing any kind of work.

Do not have a PR strategy of any kind.

Avoid the promotion of own name, even though have great reputation.

Table 4.12 Findings: Lemonade principle

Help from experts to cope with the lack of business knowledge ++ ++ ++

Does not have any help from experts

Employ people of diverse fields. ̛​̛ Have international investors.

Divulged the desire of being funded and soon found an investor and business expert.

Does not have any specialized guidance in business.

Association for exhibitions and collectives

Do exhibitions and collectives alone

++

̛​̛

++ ++

Associate with colleagues for eventual exhibits and projects.

Exhibit and fairs have a main importance in obtaining visibility.

Take part in events, even being short noticed.

Networking in Finland ++ ++ ++ ++

Does not collaborate with colleagues.

Overlook Networking in Finland

Have a favours policy: connects ̛​̛ colleagues with potential clients.

Live in a community composed of experts.

Very careful with the selection of clients.

Consider teaching a type of networking.

Underestimate networking in Finland, because of its limited size.

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Alliances of diverse sorts are intrinsic to design activities upon which any expectation of profitability would be laid. There are multiple relationships in which designers are necessarily involved in order to initiate and maintain a business. Connections with service providers, clients, suppliers, retailers, manufacturers, accountants are only the most frequent ones among the vast range of potential associations design enterprises make with other professionals and companies. Very seldom designers would afford not to engage in any of the alliances cited above.

According to the Crazy quilt principle, being able to identify promising alliances of various natures is a crucial aspect found in successful enterprises. This research suggests that designers are involved in a high number of associations in a fashion aligned with the view contained in the Crazy quilt principle. Nevertheless, aspects preventing fruitful alliances from taking place were also found in the founders’ conduction of their businesses. The primordial aspects, which touch the elements of the Crazy quilt principle, within the design entrepreneurship context studied in this research, are explored below.

Crazy quilt: Collaboration with companies Collaboration and association with other companies are not only constantly seen in the routine of the studied ventures, but are also a very desirable activity, from an early stage of the businesses.

Associations of many different types take place according to convenience and various objectives.

It seems to be very desirable by design entrepreneurs to associate, from the earliest stage possible, with brands of great reputation, i.e. internationally acclaimed labels of the design field. Four of the respondents expressed, as their prime objective, to collaborate with big labels, due to the potential return this opportunities might bring. A big famous company, supposedly, has high sales ratings and licensing a product to one of them might mean proportional high payment through a royalty agreement.

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Although licensing is not the main focus of Samujis, considering they commercialize their own line of products, SamuJussi Koski has a very positive view about collaborating with companies based on royalties’ payment, as can be seen below: “I think the royalty system is very good for designers, for many reasons. It is a good creative exercise, because you need to focus in a more commercial logic and, afterwards, you can live out of that payment, if it is a good product.�

By the time the interview was conducted, Koski was working in collaborations, with both Artek and Iittala, on the development of products for licensing.

Another great advantage seen in collaborations between design enterprises and big acclaimed companies is the gain of reputation by being associated with prestigious names. As seen previously, notoriety is an asset frequently very valued by designers.

It is not inaccurate to say that some designers put building a reputation first, in detriment of any other objective, including financial success. For that, associating with an already powerful brand seems to be a very efficient form to achieve recognition. It is seen as a validation of work excellency.

As an example of how strong the valorization of reputation brought by associations is, two of the respondents revealed that if they judge the company with which they are associated does not have a strong enough name to be able to give their design enterprises the desired reputation in return, they would not allow their names to be linked to the work outcome. Therefore, it is not only about building a good reputation through association, but it is also about protecting the already built reputation from being harmed by connections.

Behind collaboration with big companies, there is also the intention to benefit from an infrastructure much stronger than the one small companies would be able to afford. Ilkka Suppanen claims to have dedicated deliberate effort to promote his business, i.e. sending 125

press releases, organizing exhibitions or approaching potential clients, only for the occasion of the exhibition he organized in 1997, which he considers to be his company breakthrough. Since then, he claims to have been relying solely in the marketing strategies and efforts of the famous brands with which he has collaborated: “I’ve never sent a single email to journalists. I do projects with good companies and my reputation is built by these companies, which is much better for me. These companies promote my name. I, myself, am not connected to any marketing agency or PR agency. My marketing is all done by the companies which commission me. Of course, I try to be out there. I try to go to places where people are. In case somebody wants to talk to me, I make myself available.”

When Samu-Jussi Koski had the first idea of Samuji, he approached a big Finnish company to present the still rough concept of the business. According to Koski, it was only a visual presentation of a concept, nothing of the sort of a business plan. His objective was to explore possibilities of collaboration, even before analysing or estimating market demand or target consumer groups. As a matter of fact, these cited estimates, typical of traditional business plans, had never been considered, until Koski started collaborating with a business expert, as it will be described in the next section.

Below, Harri Koskinen gives a great example of how an association with a big player can unfold into many other opportunities, as well as into the previously cited privileges of an already established infrastructure: “I happened to meet a lot of people, in the beginning of my carrier, by working for Iittala. Iittala sent me abroad, where we took part in many fairs and launches, which gave me the opportunity to meet all the important international designers of that time. Some of them were actually working for Iittala, too. Then, I also happened to get an email from Issey Miyake in 1999. They said they had been 126

following my career, so far, and inviting me to go to Japan some day, in case I wanted to have an exhibition in their gallery. So, I made a deal with Issey Miyake to have this exhibition sponsored by them in 2000. In Tokyo, I also happened to meet many new clients from the Japanese market. I did not contact any company or made any market effort. My beginning has been very natural and fluent.”

It is possible to identify the great effort designers dedicate to be assigned by big design companies. Below, Mikko Laakkonen explains his actions towards achieving this goal: “Since the beginning, I have tried to book appointments with some companies. Actually, I have flown to Italy a few times, rented a car just to try to book meetings with the companies representatives.

I would call or send an email previously, make the appointment and go there. I would just say: I am Mikko and I want to collaborate with you.”

There is a particular aspect worth mentioning in the behaviour of two of the interviewed founders, which can represent a limitation concerning the potential benefits of the Crazy quilt principle.

Two of the interviewees expressed discontentment in divulging their association with high-profile companies, although having legitimately and successfully collaborated with them. In both cases, the designers perceived the promotion of these collaborations as a fact with the potential to distract attention from their current work, from their own companies, instead of an opportunity of inheriting the attention dedicated to the big companies.

Collaboration in a horizontal hierarchy was also seen in the actions taken by design entrepreneurs. Aromaa explains one of the attempts to adjust Pentagon’s format as an attempt to leverage the benefits of an association with an advertising agency: “From 2000 to 2005, because of our slow start, we had a 127

cooperation with an advertising agency. We moved into the same premises with them, with the idea of cross-selling services and, mostly, getting assignments through the advertising agency.”

Aromaa also attributes part of what he considers to be Pentagon’s breakthrough to starting a new phase, after ending the collaboration with the advertising agency and starting a new collaboration with the Fiskars1 group: “In 2005, we quit the collaboration we had with the advertising agency, which had become a little bit of a burden. The reason could be that we, somehow, mentally, gained more freedom.

At the same time, we also started the cooperation with the Fiskars group and, consequently, moved our office to be near Fiskars. So, I think that having gotten such a big client associated with the new freedom and, also, the prize in a competition of a sauna concept were the main reason for our breakthrough.”

Crazy quilt: Help from experts as a way to cope with lack of business knowledge As mentioned previously in the section covering the Bird in hand principle, designers who become entrepreneurs frequently do not have any prior training in business management. Different measures to cope with this absence of business knowledge are observed in the designers’ work routines.

Reaching out for a collaborator who would bring traditional business knowledge to theirs companies is a common alternative found by designers. In different levels, half of the respondents sought external help to improve the management of their ventures. The totality of the respondents outsource the service of an accountant and, in a couple of cases, the accountant is also a business advisor.

1 Fiskars was founded in 1649, originally, as an ironworks in Finland. Currently, Fiskars Corporation consists of several companies acquired over the years. The group’s core brands are Fiskars, Iittala, Gerber and Buster. Their range of consumer products destined for the home, garden and outdoors are notorious for quality design.

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In fewer circumstances, collaboration with a business expert plays a much more significant role in the structuring of the design company.

An example can be seen in the association between Samu-Jussi Koski and a former investment banking professional, who embraced Samuji as his summer project of 2011. The collaboration succeeded to the point it became permanent and the business advisor became a partner, as he explains: “I wanted to take a summer off, but I always need something to do, so I decided to invest and make Samuji my summer project, my hobby. This is already my second summer with Samuji. So I told Samu-Jussi: I’ll help you make a business plan, I put money in so you can run till the end of the year and I did that. Basically, the company grew faster than I thought and I ended up putting a lot more money in than I thought. Well, so we discussed and decided that it maybe needed me for another three months and then I decided to be with them until we sold our next collection. It took me from Christmas to the end of March. And here I am and it is summer again. I’m a partner, now. I enjoy it.”

Samu-Jussi Koski explains his experience on starting a business without business management knowledge and gives an example of a practical implication this lack had in Samuji’s beginning: I had an accountant from the start, but I didn’t understand a word he said. That was the most difficult part for me. Everything else was ok. I think you can do almost 90% with your intuition. It is the same when I am designing, I use my intuition a lot to do things.

You can do business as well using your intuition, but these business things are something else.

If you choose to be an entrepreneur, you would need a lot of business help because it is a totally different world. I did not think about it at all. I did not think if it was being done well or not. I did 129

not give up, but I had great limitations. For example, my biggest problem was that I wanted to do two big collections all the time.

Now it would be ok because we are selling to many places, but at that time it was a little bit stupid to start from a very big collection. A big sum is required for that.�

An important finding worth stressing is that half of the designers interviewed for this research are seemingly not taking any action regarding the business management of their companies, besides very basic maintenance activities, e.g. paying bills, filling in taxation forms. Four out of eight respondents expressed a high degree of disinterest for the business managerial demands of their companies, being completely absorbed by designing and developing products, graphics or interiors. These designers are not willing to trade a slot of their time, usually dedicated to their work activities of preference, to either learning or applying business managerial action themselves. It is also important to point out that these professionals are neither trying to find an alternative solution to compensate the poor business management in their ventures.

However, awareness of the possibility that the performance of their companies might be compromised by the absence of a systematic managerial routine was expressed by the totality of designers. They often justify the overlooking of the managerial activities by lack of time, displeasure to be involved in such tasks or by the misperception that a small design business does not require managerial effort. Four of the respondents stated they do not keep track of the amount of money being generated by their companies.

This crucial information is only visualized when the delivery of taxation forms is legally required. The frequency, with which a company is required to declare its revenue in order to pay taxes in Finland, varies in accordance to the size of the company.

Crazy quilt: Associating for exhibitions and collectives Exhibitions organized to showcase designers’ work are 130

generally of major importance to start and enhance the actual commercial activities of design ventures. These exhibitions are mostly organized as collectives. Designers, with work affinity, associate with one another, combining personal effort, financial resources and professional contacts to enable an efficient platform to display their work for a specialized audience comprised of press, peers and retailers. Three of the respondents considered a collective exhibition in which they took part as being the breakthrough of their companies. Ilkka Suppanen explains how the Snow Crash1 exhibition organized by him, in collaboration with three other designers, affected his business: “The first and only action to promote my business was the Snow Crash exhibition organized in 1997. It was a Finnish design exhibition, which took place at the Milan Fair. The significant clients came after the “Snow Crash”. Before that, I had very few clients, not all of them were paying clients.”

Anu Penttinen is highly protective of the reputation her work has achieved, which makes her very selective about the clients to whom she would sell her pieces and about the companies with which she would collaborate. This protectiveness, of what she refers to as her brand, motivates her to maintain her own permanent design shop in Helsinki. Nou Nou design shop only commercializes pieces developed and produced by Penttinen herself.

However, despite being very concerned about the integrity of her brand, Penttinen sees exhibitions in a much more welcoming and flexible fashion: “I have always been very active with shows. I am always 1 Snow Crash was a Finnish design collective formed by four Finnish designers, Teppo Asikainen, Timo Salli, Ilkka Suppanen, and Ilkka Terho in 1997. Snow crash’s work was launched in an exhibition as part of the Milan Salone del Mobile Fair. The exhibition was largely praised by international media, which draw attention to the Finnish design production being developed in the late 90s. Snow Crash was dismantled in 2002.

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participating in several exhibitions. I don’t believe I have ever said no to any exhibition because there is always a possibility to find something else through them.”

When asked about the starting phase of his company, Harri Koskinen credited the initial access he had to high profile clients to two collective exhibition in which he participated consecutively. The first event took place in Artek, which was followed by another one in Milan Salone Satelite1. Koskinen explains the dynamics of these events and how they can unfold into opportunities: “New clients I believe started to come in 1997, after we had an exhibition at Artek, along with two colleagues, where we exhibited things we had done in school, such as the containers, which are supposed to be my thesis work, someday.

From the Artek exhibit, we got an invitation to participate in the Salone Satelite in Milan in, 1998. The space was offered for free, because it was by invitation and we got some sponsorship for the shipping. The three of us continued as a group but also as independent designers. We got many new clients from the exhibition at the Salone Satelite.”

Crazy quilt: Networking in Finland Finland is a small country of five million inhabitants and of about one million people living in its capital city’s metropolitan area. In this scenario, a small design community is an expected consequence of the country’s small population.

The reality of belonging to a very small group, where everybody knows one another, was mentioned several times by the designers, throughout their interviews. They expressed feeling as if 1 Milan Salone Satellite, created in 1998, is a curated exhibition of young designers’ work, which occurs simultaneously to the Milan Salone Internazionale del Mobile, as a branch of the main event. The Milan Salone Internazionale de Mobile itself had its initiation in 1961 with the objective to promote the Italian furniture industry. It presently consists on the biggest and most prestigious furniture fair in the world.

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they were naturally, effortlessly, connected to the other members of the creative industry chain, e.g. fellow designers, specialized press, manufactures and design stores in Finland. It is possible to identify, in the responses, that the cense of extreme integration influences designers’ actions concerning their marketing strategies, i.e. the ability with which they promote their work.

The interviews suggest that the Finnish market is frequently taken for granted, once it is assumed by designers that potential collaborators are already aware of each others’ work and, therefore, internal marketing becomes redundant. This assumption and how it affects the marketing actions of some of the interviewed designers can be exemplified by the response given by Motto Wasabi’s founders. When enquired about their marketing strategy, regarding the Finnish market, Anna Salonen says: “I don’t think we have ever contacted any Finnish magazine.

We have just been sending emails about our work for our contacts and not really to the press. The funny thing is that they don’t really write about us in Finland. But the international publications have given us more attention. I don’t know why.”

Abe continues: “I don’t think we even need this kind of attention in Finland.

If the Finnish companies know about us, it is fine. I am more interested in international companies. We are not doing furniture for the Finnish market. So, it is ok.”

On the other hand, Anu Penttinen showed a different attitude towards the Finnish market, which seems to be successful, once she pointed out that her income, in almost its totality, is generated by commercial activities within Finland. Penttinen says that, even though she spends long hours in the glass workshop, she makes a great effort to promote her work with the limited means and time 133

she has available. She claims to have a grate relationship with the Finnish press, which she tries to constantly nurture. Penttinen’s interview took place only a few days prior to the opening of a solo exhibition of her work, at the Finnish Glass Museum. She expressed great contentment for being able to promote the event herself: “At the moment I have an exhibition coming and had plans to send press releases, which I did, actually, to all the magazines in Finland. I try to do these things as often as I can. But, I rarely can, though. I keep those tasks in mind and keep trying.”

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5

conclusion

:

The selection of the respondents combined with the chosen methods proved to be very efficient in providing the research with elucidative data concerning prevalent actions with which Helsinkibased designers conduct their self-initiated companies.

Constraining the geographic location of the companies to Helsinki enabled an ideal condition of accessibility to highly successful professionals, which would have been difficult to achieve in the context of a bigger city and country. Being a Master’s student in the School of Arts, Design and Architecture of Aalto University placed the researcher in a strategic position to contact the designers, since eight out of nine attended the same school. The totality of the contacted designers were willing to collaborate with the research, therefore, this work counts with the sample of interviewees that was originally idealized to obtain the best results as possible.

The structuring of the interviews, taking into consideration the principles of Effectuation, made possible to address the core issues of the entrepreneurial routine. The combination of aspects related to each principle worked as an efficient guide to conduct the respondents’ reasoning. Through in-depth, semi-structured interviews the designers were able to reflect upon their entrepreneurial role, as some of the respondents spontaneously stated, in a way they have not done before. Designers tend to be absorbed in their design activities and rarely dedicate time to either evaluate their position as business owners, or the performance of their companies. Touching core issues and leaving space for the respondents to elaborate on the topic generated extremely honest answers and relevant information.

The choice to use the principles of Effectuation to structure the sorting of the data facilitated the analysis, providing the writing of the results with order, as well as the researcher, with focus on the most relevant issues.

The prevalent actions taken by Helsinki-based designers to initiate and conduct their ventures can be summarized under the four emblematic aspects presented next.

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5.1

Prevalent actions taken by design entrepreneurs

5.1.1 Designers start as they are The companies studied in this thesis were initiated with the resources their founders already had available. The traditional sequence of having a business idea, planning it carefully, pitching it to bigger players, in hope to find external investments for the startup, does not frequently apply to self-initiated design companies.

Differently from the traditional business management reasoning, independent designers start their businesses relying on who they are, what they know and whom they know.

The most likely sequence of affairs in the initiation of businesses by designers is to register the company, enable a workspace and continue with the design activities that are the main motivation for these professionals to start a business in the first place.

For the entrepreneurial drive, in the design context, is to create room for self-expression, to enable a situation where the designer will be able to create artefacts, graphics or spaces based on a personal view. Measures are taken without previous business management knowledge, which is not traditionally taught in design academic training, neither a common part of the design culture. Designers initially rely on their immediate personal acquaintances, relatives, friends and peers to help establish, promote and maintain their businesses. A degree of professional reputation conquered while a student, an employee of a third company or a freelancer frequently motivates the first steps of the designer as a company owner.

Frequently, self-initiated design ventures are one-person businesses in the initial phase and even far into the existence of the companies. Growth, considering the number of employees as parameter, remains modest in most cases.

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5.1.2 Designers do not estimate financial loss or gain When starting a business, designers hope to be able to make a living out of the activities of their companies, however, they do not focus on transforming this hope in reality. These professionals become easily distracted with gains, other than money, which are more aligned with their notion of value. Frequently, the value designers place upon these gains is much higher than the value placed on money making. Pleasure to practice design, designing time, reputation, self-expression are subjective assets primarily taken into consideration in the decision-making process of founders of self-initiated design companies. Designers are devoted to their design practice to a degree they are driven by a blind courage, which frequently prevent them from identifying either concrete or potential financial loss or gain, once they are mostly absorbed by their activities of preference.

The stereotypical view of the main objective of entrepreneurship itself – to profit upon an either found or created opportunity – is not present in self-initiated design ventures, once designer do not prioritize financial return as a business goal.

Therefore, careful estimates of either financial loss or gain are rarely seen.

Since designers do not invest great amount of money in their ventures, they are left with a sense of having nothing to lose, if in face of failure, rarely taking into consideration the time and effort invested as important loss. The system of artist grants in Finland is found to reinforce the unawareness of the financial performances of the companies by their founders, once they provide these professionals with an alternative source of income, which is not associated with an obligation of commercial success. These grants are attached solely to the cultural relevance of the enterprise.

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5.1.3 Designers leverage contingencies Designers are keen to embrace opportunities emergent from surprises, if opportunities belong under the umbrella of the design fields. These professionals are receptive to jump from one design activity to another, with remarkable comfort. In design entrepreneurship, chances for a fashion designer to develop a project as a graphic designer, or a furniture designer to accept an invitation to design an exhibition space, are commonly taken.

Finding an alternative source of income, as being part-time employed in a bigger design company, is a common move seen among founders to enable the existence of their companies while they remain unprofitable. Maintaining a second job can also delay the development of the designers’ own enterprise, once the founders’ attention is deviated. However, if planed well, it can provide the venture with the capital the company would not be able to have otherwise.

Designers tend to take small steps in the development of their businesses and are very careful with the decision of hiring.

Being a one-person company limits the possibilities of embracing opportunities, since the founders find themselves overloaded with work and unable to clearly identify chances. Their companies are frequently incapable to embrace bigger or long-term opportunities, due to the modest workforce to handle demand.

Business strategies elaborated by these founders are usually short-term plans. The lack of financial strategies places the design entrepreneurs in the position of thinking short-term, due to the constant necessity of quick money and to little time dedicated to basic operational issues, which also affects their availability for longterm promising opportunities.

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5.1.4 Designers associate Collaborations and associations of various sorts are keen elements of the average running of a design venture, throughout the different stages of the companies’ existence. The totality of the designers interviewed for this study do not concentrate on analysing competition and do not follow a straight, rigid strategic path. Instead, they show clear disposition to engage in alliances, which consist on a great source of professional opportunities.

Collaboration with other companies frequently occurs in design ventures. A particular type of alliance between design companies and internationally acclaimed design manufacturers seems to be highly desirable by designers. The founders see in this association an opportunity to gain notoriety, which has the potential to widen future work prospects and also a possibility to enhance the regular income through a royalty agreement.

Design ventures frequently associate with business experts as a form of compensating, to some extent, the absence of business knowledge designers have to deal with, due to the traditional education in design, which tends to overlook this issue. A general belief that business abilities are incompatible with artistic skills dominates the design community, which also contributes to perpetuate a week foundation in the managerial side of design businesses. The needed specialized business assistance, in this research, was shown to come from a friend of the founders, an accountant who doubles as business consultant or an external investor.

Participating in exhibitions and collectives consists on a very important strategic action taken by founders of design companies to enhance the commercial capacity of products and services sold by design ventures. This association with peers, uniting knowledge, financial resources and contacts, showcasing their work in fairs, galleries and museums seems to be an efficient way designers find to reach specialized press and potential clients.

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Although a very diverse range of collaboration is found in Finnish design ventures, a disbelief in the potential of networking in Finland is also found. The small size of the country and limited market discourage some founders from investing time and effort to make alliances in Finland. Nevertheless results obtained by companies through associating with Finnish press, peers, institutions and companies indicate that Finland is, indeed, a source of fruitful collaborations.

5.2

Discussion

This thesis departed from the preconceived perceiving of designers as stereotypical “starving artists�, who are creative – many times, professionally acclaimed -, although unsuccessful entrepreneurs and unskilled business managers. The analyses of the eight studied design companies suggest that designers intuitively behave in a manner closer to the Effectuation logic.

Taking Effectuation as a valid parameter for entrepreneurial attitude, designers would be operating their business with reasonable and potentially effective logic, specially, in the startup phase. This affirmation could only be entirely accurate if 1) Causation/traditional business thinking would be considered completely unnecessary and 2) alternative values, e.g. reputation and designing itself are considered as sufficient achievements for a successful business performance.

The study does suggest that these two crucial conditions frequently prevail in design businesses, which place designers in disadvantage in the achievement of financial prosperity. The distinct gains designers obtain are of personal spheres of gratification and not of strong business performance. What has to be faced in the conclusion of this thesis is that neither designers, nor any other entrepreneur can afford to ignore the financial health of their businesses, if there is a real intention of economic self-sustainability.

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Thus, according to Effectuation, designers behave in a reasonable manner, particularly if the alternative assets they tend to strongly perceive as currency are considered. However, their lack of traditional/causal reasoning puts the economic maintenance, prospect of growth and prosperity of their business in constant jeopardy. The research showed that the design entrepreneurs who made the decision to deal with the traditional managerial side of business - alone or through collaboration - were financially more successful. The principles of Effectuation seem intuitive to designers, although the choices they make within these principles are not aimed at financial reward and do not consider causal thinking. Prejudice against mathematical thinking, unawareness of the matter and displeasure are among the principal causes of the described attitude. Therefore, it would be inaccurate to state that designers rationally choose to act strictly within the Effectuation reasoning sphere, once they are unfamiliar with managerial technics and unaware of the potential gain, which comes with an expanded combination of Effectual and Causal logic.

Designers tend to have their business actions aligned with the Effectuation due to the free nature of its principles based on the inclination for the entrepreneurship lifestyle, on social relations and on a rather willing attitude toward leveraging contingencies.

Those characteristics can be easily associated with creative, artistic minds. However, in the light of business practices, the principles of Effectuation are only able to go beyond the Causal reasoning, for the latter is considered a given. Nevertheless, in design, basic managerial practices, financial operations cannot be considered a given, which leaves designers, who have the impulse and courage to engage in businesses of their own, with the absence of necessary methodical knowledge to maintain them.

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