Why Did That Business Begin?

At the roots of many businesses, there is a story of someone who was determined to find a better way - to improve a product, deliver better service, or to change an established order.

At the roots of many businesses, there is a story of someone who was determined to find a better way - to improve a product, deliver better service, or to change an established order.

This desire is the essence of innovation. It is the human spirit at work, puzzling over something and to try to improve the way things are.

The epiphany moment

Sometimes it's accidental. You start out trying to solve a lifestyle problem and you end up with a serious business. In 2009, two Estonians - Taavet Hinrikius and Kristo Kaarmann - met while they were both working in London. Hinrikius was a strategy director for Skype; Kaarmann worked for Deloitte. Hinrikius was being paid by Skype's Estonian office in euros but he needed sterling to live in London; Kaarmann was paid in sterling in London but had to service his mortgage and other bills in Estonia in euros. Between them, they were exchanging up to £6,000 in cash a month - and losing about five per cent of their salaries to bank charges.

So they came up with a solution. Each month, the pair checked that day's mid-market rate to find a fair exchange rate. Kaarmann put pounds into Hinrikius' UK bank account; Hinrikius put euros into Kaarmann's account.

By making domestic local transfers, they weren't paying a margin on the exchange rate or a fee for making it happen. "There must be others like us," the epiphany went. Soon, other friends in London were joining in. The homespun idea became a proprietary algorithm. The savings on bank charges that they were generating pointed to a serious business opportunity. And how. Transferwise launched in 2011 and transferred £10m in its first year of operation. That figure is now more than £3bn.

Querying the status quo

The Kaarmann/Hinrikius generation of business founders is constantly querying the status quo. Simple dislikes of everyday tasks get turned into high-growth ventures. "I started Cornerstone because I despised shaving," says founder Oliver Bridge about his e-commerce business which delivers high-quality razors and shaving supplies to its subscriber-members. "It's uncomfortable, over-priced, and the shopping experience in Boots and Tesco is shocking. There had to be a better way." Cornerstone now has more than 7,000 subscribers.

Better way, better world

Environmental concerns motivate the hunt for a better way. For brothers Chris and Ricky Martin, who were running a surf school in Portrush on the Northern Ireland coast, one aggravating problem was the quality of the surfboards. At the end of one season, 30 of them fell apart. The brothers had to tape them up in their garage - or get rid of them. There had to be a better way.

They learned that the problem was in the glue. With grant money and a pile of persistence, the Martin brothers have been edging closer to creating a surfboard whose manufacture eliminates adhesives and uses 100 per cent recyclable materials. The Skunkworks Surfboard Company is set to revolutionise a global industry.

The hard work behind the genius

We like the idea of the solitary genius tinkering in the shed. We relish the fact that Sir James Dyson made more than 5,000 prototypes over a five year period to create a cyclone-based vacuum cleaner that would suck up dust more effectively. But this is no mysterious genius. It's the result of being relentless, resourceful, quizzical and determined.

Kevin Ashton's book How to fly a horse: the secret history of creation, invention and discovery shows how epiphanies are not the privilege of the few. The "creative solution" - however sudden and seemingly brilliant - is always the result of detailed hard work. No business is built by a magic touch.

His early career was at Procter & Gamble, where he was an assistant brand manager. There he was faced with a lipstick issue.

"I was trying to solve an apparently boring problem that turned out to be interesting," he writes. "I could not keep a popular shade of Procter & Gamble lipstick on store shelves. Half of all stores were out of stock at any given time. After much research, I discovered that the case of the problem was insufficient information. The only way to see what was on a shelf at any moment was to go look...there was no way a computer could see if a lipstick was on a shelf. This was the problem I wanted to solve. I put a tiny radio microchip into a lipstick and an antenna into a shelf; this, under the catchall name 'Storage System,' became my first patented invention. The microchip saved money and memory by connecting to the Internet, newly public in the 1990s, and saving its data there."

Ashton gave his innovation "a short and ungrammatical name:" the Internet of Things. He became an executive director at Massachusetts Institute of Technology (MIT) and started several technology businesses. Today the Internet of Things accounts for more than 1.2bn different devices - a number predicted to rise to 5.4bn by 2020.

The desire to do something better lies within us all. It is at the heart of so many entrepreneurial businesses. The real difficulty is how to retain and encourage that ability to challenge and experiment within a large corporation.

Corporate culture, fear of risk or failure, internal politics, the status quo; all can stifle experimentation. It's hard but not impossible for large companies to do something about it. For nearly 70 years, industrial giant 3M has encouraged its employees to spend 15 per cent of their working time on their own projects. Its commitment to experimentation has been central to its continuing success. It needs to be baked in to the processes and the culture. It's worth noting that Google has a similar approach.

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