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C. PERSISTENCE
By now it may have occurred to you that if the answer to the question "Is it innovative?" is yes, and the answer to the question "Is it valuable?" is also yes, that a venture is a worthwhile endeavor. Ventures that have a positive answer to these first two questions and related sub-questions, have economic worth -- but they still may lack the key venture characteristic: persistence over time. In this case, these ventures are fads.
How can you distinguish between a venture that is a fad, and one that has the potential to last? There are three sub-questions that must be asked to accomplish this. They are:
SUMMARY NOTE: Strength of Persistence--Commitment Between Market and Venture
Understanding the persistence over time (sustainability) of a product or service is a complex undertaking. Not only must the venturer understand repetitive, long term and resource aspects of the position that is taken in the marketplace, but the strength of the linkage between market and venture must also be assessed. What we are really trying to ascertain is the level of commitment that exists between market (customer) and venture. These reciprocal commitments reduce liabilities of newness (Stinchcombe, 1965) which in turn enhance the sustainability of the venture. However, where commitment (which must be made in any event) is made to an unsound position, sustainability is in doubt.
A sound position has previously been defined as repetitive purchases, long term need, and sufficient resources to sustain the venture. The conditions that affect the strength of the commitment, and thereby moderate the persistence of the venture, thus become important.
At least 4 conditions influence the commitment level between market and venture: lock-in, lock-out, lags, and inertia (Ghemawat, 1991). In some of these conditions, the market extracts a commitment from the venture from which it is very difficult to withdraw--therefore enhancing persistence. This is the case with lock-in. Lock-in occurs as a result of sunk costs that arise in connection with durable, specialized, or untradable (sticky) assets (Ghemawat, 1991); or from non replicable assets (Grant, 1991). For example, once the market locks Boeing into the production of the 747 with purchase orders, Boeing has such high exit costs that delivering the orders has the lowest cost of all alternatives.
Lock-out, also extracts a commitment from the venture that benefits the customer. Lock-out commits the venture because opportunity costs are incurred when a course of action is taken, that commit and restrict the company in future choices (Ghemawat, 1991).
Lags, on the other hand, extract commitments from customers that benefit the venture. Lags caused by the lead times inherent in the acquisition and deployment of specific strategic assets (Williamson, 1985; Ghemawat, 1991) contribute to the commitment and therefore sustainability of a venture, since first mover advantages accrue to leaders (Rumelt, 1987).
Lastly, inertia which arises as a result of the infrastructure within an organization (e.g. structure, attitudes, and culture) also contributes to the persistence of a venture over time (Ghemawat, 1991). Here the venture benefits (or suffers) from the organizational decisions and understandings that occur at or near the time of founding. Where inertial aspects of an organization "fit" the market--the venture is "selected for." Where they do not--the venture is "selected against." Either way, commitment is high, and the only way to persist over time is to be "selected for." Hence, in addition to determining that an entrepreneurial discovery is repetitive, long term, and has sufficient resources, venturers may assess each of these factors to determine the level of mutual commitment present.
