With the race to roll out autonomous vehicles thick with industry giants in the tech and traditional car-making sectors, why are Silicon Valley’s top venture capital firms even investing in upstart entrepreneurs looking to get in the game?
Bottom line: The market is huge – both in terms of the types of products and services that will be needed in the age of robocars, and more importantly, the opportunity to solve serious problems like traffic collisions, congestion and pollution. Achieving full autonomy has broad implications for land use, car ownership and industrial-scale transport such as cargo shipping.
Sure, the way ahead may seem daunting for the aspiring entrepreneur. Waymo, the company born out of Google’s self-driving car project, has now logged about three million miles on city streets. Meanwhile, Apple has reportedly filed for patents on technology related to driverless-car systems. Rideshare companies and auto manufacturers alike are also inching forward, rolling out features that make their vehicles incrementally more autonomous.
And yet, take just three of many Silicon Valley startups in the autonomous-vehicle space: Together, they have raised a total of $400 million in capital to date. Zoox, which is developing a self-driving car from the ground up, has raised $290 million thus far. Drive.ai, which is building integrated hardware and software retrofit kits that businesses can install on their fleets to make them fully autonomous, has raised over $60 million in funding. Mapbox, which has a division devoted to developing a mapping system for autonomous vehicles, has also raised $60 million.
“It’s a question of when and how, not if,” said Steve Jurvetson, a principal partner at venture capital firm DFJ. “Rest assured that all vehicles will be autonomous eventually.”
Jurvetson is widely known and acclaimed for investing in companies that are at the forefront of technology and are poised to transform major industries. He made early bets on Tesla and SpaceX.
“The entrepreneurs at the helms of the kinds of companies I look for are pursuing a greater mission than profit arbitrage,” Jurvetson told Forbes in 2016. “The companies we invest in are doing things that extend beyond the moment and will have long-term implications for how we live, work and play.”
A Driving Focus
In terms of optics, the emphasis on transforming society may give smaller startups an edge in the autonomous-vehicle space over the titans of Motor City and Silicon Valley. For all the resources that Apple, Google and Detroit’s “big three” have at their disposal, they are first defined by their legacies – namely, high-end devices, Internet search and ads, and gas-guzzling cars. Startups, at their very core, can embody their promises of change from the get go.
“We started Drive.ai because we believe there’s a real opportunity to make our roads, our families, and our communities safer,” the company’s founders professed publicly this summer. “We also believe that self-driving vehicles will be the efficiency engine of the transportation network.”
Saving lives and making us more efficient – those words aren’t exactly in the mission statements of industry incumbents. But they are precisely what autonomous-vehicle entrepreneurs hammer home when they talk about their company.
“The fact is, 40,000 Americans are dying every year in car accidents. More than a million are getting injured, and globally, you have over a million people dying,” Jesse Levinson, co-founder and chief technology officer at Zoox, said recently at Stanford. “When that’s your starting point, there’s a lot of ways to improve the technology.”
In that same talk, for the Entrepreneurial Thought Leaders series, Levinson and fellow co-founder Tim Kentley-Klay described how the fleet of self-driving taxis they are developing will address the extreme inefficiencies of conventional car ownership: from the familiar fact that individually owned autos spend more than 90 percent of the time parked, to the current reality that people spend tens of thousands of dollars on vehicles that will be technologically in the dust in just a few years.
Find a Niche
For Drive.ai, its founders didn’t set out to launch a startup. As students in the Stanford Artificial Intelligence Lab, they were working on “deep learning” – a form of AI that allows a machine to develop an increasingly sophisticated understanding based on examples it is given. They saw how a dynamic decision-making system based on deep learning could fare better than task-specific algorithms in the infinite and unpredictable conditions that human drivers face everyday.
Once they started testing how well their system could perceive different conditions, the engineers began to think they had a better technology solution than those being developed in the industry. The validation of peers in the field, who were “blown away” when the students shared their results, also gave them the confidence to put their Ph.D. studies on hold and start a company, according to Drive.ai Co-Founder Brody Huval.
From a business perspective, they decided to build self-driving vehicle systems – the “brains,” as they like to say – specifically for businesses. Companies represent a larger revenue stream than the consumer market, and importantly, they tend to operate fleets within a fixed area. Such “geo-fencing” allows for a quicker deployment than the more widespread rollouts planned by other autonomous-vehicle makers.
“We felt that this new approach to making self-driving car brains would actually lead to a solution that’s more scalable, safer, and ultimately could be deployed a little bit quicker,” said Drive.ai Co-Founder and CEO Sameep Tandon. “Those two dimensions are also very important to us as we think about what the world will look like in an autonomous-vehicle-driven society.”
Meanwhile, the founders of Zoox are focused on “autonomy as a service,” targeting people in crowded cities who would rather not deal with the hassles and costs of car ownership. In order to not tip off competitors, they have shared few specifics about the all-electric vehicle they’re developing. Also, they are pursuing a “full-stack” strategy, partly to minimize risks and dependencies associated with the use of components and technology made by others.
“We want it to be safe. We want it to be clean. We want people to be able to jog and not be getting tailpipe emissions,” Kentley-Klay explained when he and Levinson spoke at Stanford in May. “And we want it to be accessible for the whole community, low cost, and we want it to be a wonderful product experience.”
For the team at Drive.ai, it also comes back to impact: “It takes about the same amount of time to build something like Facebook for cats as it does to build an autonomous-vehicle company,” Huval said. “They both take pretty much all of your working hours. But if you’re able to focus on something that you think will be a high-impact area, something that’s large and transformative for society, you’re going have a lot more motivation and be able to stick to it through tough times.”
Expanding Ecosystem and Opportunities
As technology futurist Sudha Jamthe says for her Stanford Continuing Studies course The Business of Self-Driving Cars, “We are witnessing a historic moment in car manufacturing and the birth of new business models.” But as attractive as a wide-open market may seem, aspiring entrepreneurs must also understand the industry standards and regulations already in place to ensure they know the landscape and build products that comply.
For instance, carmakers refer to vehicle autonomy along a spectrum of five levels, as defined by the National Highway Traffic Safety Administration. They were first developed by the Society of Automotive Engineers and, in short, are as follows:
Level 1: A specific function, like steering or accelerating, is automated.
Level 2: Multiple automated features can work together, like cruise control and lane centering. Still, the driver must always be ready to take back control.
Level 3: The vehicle can drive itself, but a person is still required to intervene if necessary.
Level 4: The vehicle is fully autonomous but limited to certain conditions like times of day or geographic locations.
Level 5: The vehicle is completely autonomous in any driving scenario, regardless of weather, off-road conditions, etc.
As for the regulatory environment, the U.S. Department of Transportation in September 2016 adopted the Federal Automated Vehicles Policy, a set of guidelines in 15 areas of vehicle performance that driverless carmakers can voluntarily follow. Unlike the Federal Motor Vehicle Safety Standards – which regulate the design, construction, performance and durability for all cars in the country – the automated vehicle policy isn’t mandatory.
“It’s meant to be a nimble and flexible framework as the technology develops,” said Bert Kaufman, head of corporate and regulatory affairs for Zoox. “There’s a ton of opportunity to innovate, and I think the policy is the government’s way of allowing that to happen.”
Different companies are following their own timelines for the launch of their version of fully autonomous vehicles. Estimates seem to be clustered between 2018 and 2020, when Zoox aims to have its cars on the streets. At the Andreessen Horowitz 2016 Summit, partner Frank Chen stated that Uber hopes to have its entire fleet be driverless by 2030. The Institute of Electrical and Electronics Engineers (IEEE) predicts that, by 2040, three out of every four cars on the road will be driverless.
The vast array of business opportunities for different products and services orbiting autonomous vehicles reflects the rapid expansion of the ecosystem. Autonomous-vehicle makers are desperate for cheaper lidar technology – the laser-radar detection system that sits atop many of today’s self-driving cars like a turret. Opportunities are also emerging in software, data tagging and in many downstream areas currently encompassed by today’s automotive sector.
Just last week, Drive.ai announced that it will soon begin piloting self-driving cars in the San Francisco Bay Area through a partnership with the rideshare startup Lyft. The collaboration underscores how startups can create opportunities for each other as they experiment and explore. “One of the advantages we think we have is our speed, both in technology and business development, ” said Drive.ai Co-Founder Tao Wang.
Jamthe says revenue from self-driving cars is estimated to be $42 billion globally by 2021. And given driverless technology’s potential to upend everything from personal mobility to commercial cargo, DFJ’s Steve Jurvetson says the autonomous-vehicle market will actually engulf the traditional transportation sector.
“Every vehicle will be autonomous, eventually, and there are distinct opportunities in personal mobility – cars and drones – as well as cargo on land, sea and air,” Jurvetson explains. “It will transform urban design. And on the labor-market side, consider for a moment that 20 percent of all jobs globally are driving a vehicle. Of those who have an income-paying job, 20 percent of them are drivers.”
The implications, and so the opportunities, seem then to be endless.
Amazon’s $13.7 billion purchase of the Whole Foods Market chain, which is now a done deal, has grocery shoppers salivating at the thought of never having to walk into a supermarket again.
Likewise, entrepreneurs and artisans behind the upscale products that fill Whole Foods’ shelves see the upside of Amazon leveraging its constant growth and ubiquitous brand to bring their goods to a wider audience online at a price that no longer reeks of “whole paycheck.”
But for the rest of us left trying to read the fair-trade tea leaves, Amazon’s latest move is a little confusing. Why Whole Foods? Why now? And why did Amazon CEO Jeff Bezos decide to buy the Washington Post four years ago?
For these questions, we turn to Stanford Professor Kathleen Eisenhardt, a leading scholar on strategy and organization in technology companies and high-velocity industries. While she is on faculty in the university’s engineering school, Eisenhardt says Amazon’s business dealings remind her of experiments in genetic modification.
Organizations can simultaneously be thought of, and act as, monolithic entities and smaller components or genes acting in concert, according to Eisenhardt, who holds the S.W. Ascherman M.D. professorship in Stanford’s Department of Management Science and Engineering. By understanding that there are specific, gene-like areas that can be “mutated,” leaders can think more nimbly about how to innovate and scale without unwinding the helix of an entire organization.
In other words, the 470-store chain that proudly promotes its many non-GMO products now finds itself owned by none other than a Genetically-Modified Organization. The good professor elaborates below …
Stanford eCorner: You say that Amazon’s top business priority is growth, not profit. And the price cuts Amazon has made across Whole Foods products signal that. Why does a strategy focused on growth, rather than profit, make sense here?
Kathleen Eisenhardt:Growth over profit has been the Amazon strategy from day one. More accurately, the Amazon strategy is to sell to customers whatever they want at the best possible price, and however they want to buy it. Practically speaking, this ends up favoring growth over profit. It’s also why Amazon was originally named “Amazon” – for the river – and not something limiting like “Books Now.”
The best and most reliable way to grow a company is to leverage existing resources into new markets. Resource leverage works particularly well for Amazon because low profitability in new markets is not the deterrent that it is for most other firms. Amazon simply enters the markets in which customers want to buy products.
So growth over profit doesn’t make more or less sense in the context of Amazon. Rather, it is what Amazon does!
eCorner: Speculation from industry watchers has ranged from the acquisition being Amazon’s play to beat Walmart in the fresh-foods sector, to it being a move to increase its warehousing capacity to serve existing and new customers. How do you see it?
Eisenhardt:The acquisition is a quick way to build a physical presence, rather than starting from scratch. And from what I know, the goal is, again, serving customers regardless of what they want to buy. So it’s not about beating Walmart, although that might happen. Vertical integration is not key, either. Instead, they are offering what customers want to buy and how they want to buy it!
There’s a lesson here for entrepreneurs whose goal is growth: Don’t waste time worrying about competitors and markets. Focus on knowing and understanding your audience’s needs fully, and evolving with your customers to make your products and services absolutely essential.
eCorner: You describe an interesting way to make sense of Amazon’s moves – by seeing the various components of its business model as genes, and how new initiatives are essentially Amazon “mutating” a given gene so as to produce a different outcome. Could you explain this a little more?
Eisenhardt:Amazon has product, channel, country, customer, and fulfillment “genes” – genes for every core aspect of its business. It is constantly mutating single genes, like at the start when the company started with books and then added music, video and other products – mutating the “product” gene.
But every so often, Amazon mutates many (but not all) genes, like the introduction of marketplaces and web services. They then go back to make lots of small single-gene changes. The strategy is very organic and very smart from an evolutionary biology lens: many small changes and occasionally big ones.
The Whole Foods acquisition is remarkable only in that Amazon seems to be using it to speed its evolutionary progress. But it’s not different from what the company has consistently done before – a major gene change in channel, but same customers, geography and even products as those covered by its existing Amazon Fresh service.
Metaphorically speaking, entrepreneurs may want to look at their venture at microscopic level and unpack its DNA. Adjusting the focus and seeing their organization in more detail can reveal opportunities for change and, ideally, growth.
If Amazon has “genes” for product, channel, customer, and country, what genes does your organization have? Which genes can you tweak for growth, or which are you stuck with? How will you continue to grow? Consider taking a page from Amazon’s evolutionary playbook.
A few months after her failed bid for California governor in 2010, veteran Silicon Valley CEO Meg Whitman found herself on the couch, completely deflated. The team she built for her campaign, the crowds who cheered her on, the 5 million California votes — not to mention the personal fortune she invested — all for naught.
There she was, the graduate of Princeton University and Harvard Business School who went on to head eBay during its most explosive decade of growth, from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in annual revenue in the late 1990s and early 2000s. Now, just her and Ellen DeGeneres on the TV in the family room of her home.
Her husband said this would not do and urged her to figure out what’s next. It didn’t take long.
Later that day, another tech-industry leader, Marc Andreessen, called to ask Whitman to serve on the board of directors for Hewlett-Packard. Less than a year later, the board invited her to be the company’s next president and CEO.
Once word of that got out, though, Whitman’s return to industry hit some turbulence. At the time, she was widely criticized in the press as being unfit to head a company as big as HP. On the day of her appointment, members of HP’s board apologized for once again subjecting her to intense public scrutiny.
But her time in the cutthroat arena of politics prepared her well. “It was a remarkable experience. And frankly, it made me a better CEO,” she said during a recent talk at Stanford as part of the Entrepreneurial Thought Leaders series. “I have a much tougher skin than I did before I ran for governor.”
At HP, she stabilized a company that saw the departure of two CEOs in just two years and headed the restructuring of a legacy high-tech giant into two Fortune 100 companies.
She did that by following several tactics that leaders should hone, regardless of context. In turning around the storied HP, Whitman first returned to the company’s foundational values and existing strengths. She also let actions speak louder than words:
During her talk, Whitman described how government and business require different leadership approaches and skills. And yet, her immersion in politics endowed her with more than just thicker skin when she returned to industry. Engagement with social and economic issues led to a deeper understanding of how business and commerce shape global affairs.
As Whitman describes below, leadership in innovation is still very much up for grabs. It will depend on which country can identify the industries with the most potential, and then realign its economy and education system so that it can foster, keep and sustain innovation in those sectors going forward.
Why are the best ideas often the ones that don’t seem to make sense? Bestselling author Adam Grant, one of the most influential management thinkers in America, recently came to Stanford to give a talk that was chock-full of counterintuitive tips for anyone seeking to be a better business leader — citing scholarly research and case studies from his 2016 book “Originals: How Non-Conformists Move the World.”
1. Bosses Have It Backwards
The saying “don’t bring me problems, bring me solutions” means no one asks the toughest questions. Instead of a culture of advocacy, Grant says managers should foster an environment of inquiry in order to spur innovation.
2. Imagine How to Kill Your Company
Thinking of competitive threats could reveal big business opportunities. Call a meeting and invite everyone to share ideas for how to kill the company. Grant says vulnerabilities may be the seeds of growth.
3. Beat Haters to the Punch
Lead with your flaws and turn skeptics into problem solvers. An entrepreneur begins his pitch to investors by giving three reasons why they shouldn’t give him their money, and then walks away with $3.2 million in funding. Here’s why.
4. Hire for Culture Fit or Culture Add?
It depends on whether you’re a small startup or a big business. The shared values that fuel a venture in the beginning can slow growth once it goes public and requires more diversity of thought, Grant explains.
5. Let Your Mind Drift Before the Meeting
Studies show that bosses might be in a better headspace to evaluate an employee’s idea if they take a few minutes beforehand to think about something completely different. Grant describes how a quick brainstorm can wash away the negativity that often clouds a manager’s judgment.
Watch Grant’s entire talk at the Entrepreneurial Thought Leaders Seminar.
Businesses and entire industries are coping with major uncertainty due to President Donald Trump: from carmakers that fear his next tweet, to health insurers who can’t set coverage rates because of the ongoing fight to repeal the Affordable Care Act.
Rohan Bhobe is the CEO and co-founder of a technology startup that earned its chops by fixing key parts of the HealthCare.gov website after its clunky launch in the fall of 2013. So you’d think he and his fellow co-founders at Nava – a public benefit corporation – would be downright nauseated from following every twist and turn of the healthcare debate.
How could any business move forward if its biggest customer decided it should dismantle the program that gave the business its start in the first place?
Well, the young entrepreneurs at Nava aren’t asking that question, and in fact, are more certain than ever about their work, which is building modern web platforms for government agencies that deliver services to the public. For HealthCare.gov, Nava moved critical systems to the cloud, dramatically streamlined the online-application process, and “hot swapped” the original identity-management system that had caused most of the initial site outages – saving “tens of millions of dollars” in taxpayer costs, according to Bhobe.
In the process, this agile group of go-getters from Silicon Valley gradually found their stride in the stodgy District of Columbia. “We got better at shipping modern product in the context of a government environment,” Bhobe explained, “and as government also became more familiar with our techniques, we were able to work together faster.”
He and his team developed a cadence of learning and a growing confidence that their skills might be better applied in Washington than the West Coast. And the prospect of improving how government serves people aligned strongly with the entrepreneurs’ personal values.
Now, with Trump in office and Republican majorities in both houses of Congress, the effort to dismantle the Affordable Care Act drags on as the party in power struggles to come to a consensus on provisions for a replacement plan.
So again, why aren’t Nava’s founders freaking out?
Simply put, their confidence stems from a complete faith in their team’s unique skills and strengths in engineering the delivery of government services, as well as a clear understanding of who their customers really are: the American people. Neither of those facts bend for a new Commander in Chief or anyone else.
It’s an important lesson for every entrepreneur: Your special talents, and a high-fidelity image of the people you’re serving, should be the steel guardrails for your venture.
“We work with government as our partners to serve, ultimately, the American people,” Bhobe said. “It was great to see our commitment extend beyond any particular authority figure in government; and it sharpened our focus onto people and their needs, and working on their behalf.”
Not that Nava’s founders didn’t voice how they personally felt. In a blog post published a month after the election, Nava’s founders strongly rejected many of Trump’s actions and statements during the 2016 presidential campaign. As a public benefit corporation, Nava wears its values on its sleeve.
“We believe that when our democracy commits to a public service, it should deliver in a way that is equitable and effective,” Nava Co-Founder Sha Hwang stated on Medium. “Our work is a tireless pursuit towards this goal. We believe that the software powering these services can be radically reimagined to improve the quality of people’s lives.”
But now that those in power are trying to figure out how to get out of that commitment, Bhobe says Nava is responding to the uncertainty by increasingly turning to other types of organizations to get a clearer picture and work together toward the outcome they’d like to see. These include healthcare foundations, political institutions, and experts in everything from data ethics to design.
“We’re all in a wait-and-see mode about what the priorities are going to be,” Bhobe said. “The uncertainty is not a positive thing.”
Indeed, recent entrepreneurship research has shown that one way startups respond to market uncertainty is by forming strategic alliances. Specifically in the healthcare space, studies at Stanford University have found that medical-device startups formed ties with different types of stakeholders to hedge unpredictability in both product development and the commercialization process.
In a 2015 study by Stanford entrepreneurship professors Riitta Katila and Kathleen Eisenhardt, along with lead author Emily Cox Pahnke at the University of Washington, they found that network ties with certain partners were especially beneficial when medical-device development was highly ambiguous.
“These startups got different benefits from different partners,” said Katila, a professor in Stanford’s Department of Management Science & Engineering. “Government gave them credibility. Ties to private investors, strategic and managerial advice. Ties to corporations, manufacturing and marketing resources.”
In a subsequent paper by Katila, who studies technology strategy and innovation, she and her co-authors found that med-tech startups handle uncertainties in the environment by forming relationships with doctors and bringing them in as collaborators. “Uncertainty” in this context was around possible changes in FDA standards and whether a drug or device would be approved.
Katila recalled an interview with an orthopedic surgeon, where he explained why a medical-device startup had reached out to him. According to Katila, the doctor described how vagueness in the regulatory landscape meant a trial designed according to standards in place at the time might yield irrelevant results and waste much money, time and effort.
“Even if you do a design like that right now that the FDA approves, when you go back to [the] panel in three to five years, the reviewers are likely to have changed their minds to reflect more current standards of care,” the doctor told the paper’s authors. “If the company had gone without clinical input, they would have been up a creek.”
At Nava, reaching out to other stakeholders predated Trump’s election, according to Bhobe. The company’s goal was never to be the sole builder of all technology for the government, he said. But at a time of great uncertainty, strategic alliances seem to be more important than ever – whatever form they may take.
“We’ve come to realize that success in this environment, independent of any kind of political party, is going to be a messy ecosystem of groups, pushing long term in fits and starts,” Bhobe explained. “It’s not as clean, but I think that’s OK.”
Growing up in India, Saad Bhamla, like many children, routinely played with a traditional spinning whirligig — a simple toy that consists of a disc that rotates rapidly when twine threaded through the center is pulled apart by both hands. Three decades later, that fond memory sparked the idea for a 20-cent paper centrifuge that isolates blood-borne diseases like malaria and HIV.
How did Bhamla and the Manu Prakash bioengineering lab at Stanford University unearth a breakthrough medical innovation for the developing world from a children’s toy?
The epiphany for the so-called “paperfuge” did not come overnight. Bhamla and Prakash, a 2016 MacArthur Fellow known for building low-cost tools for health workers in the field, had brainstormed for weeks.
The requirements were stark. What would it take to design a centrifuge for under a dollar, that had the centrifugal force to separate blood into different components, and required no electricity?
Prakash had seen first-hand how medical inventions are implemented, or not, in the developing world. Visiting a clinic in Uganda, Prakash saw dormant centrifuges that cost hospitals $1,000 to $5,000. The clinic had no electricity and the centrifuge became a doorstop.
Prakash and Bhamla began by viewing the challenge as a physics exercise with clear and rigid parameters from which they could explore. Could they look at the everyday from a different perspective: the eyeglasses you wear or a beloved toy from childhood.
“What is the most efficient way to convert human energy into rotational energy,” Bhamla asked himself. “I actually just started on the back of an envelope.” He soon began looking up gears, examining egg beaters and salad spinners.
There’s a wonderment and optimism in the way Saad talks through his process. He looks to the pen in his hand and the flow of ink due to gravity. He questions and explains in equal parts — a tightrope walk that leans towards “what if,” then back towards the world of established physics.
A visiting scholar who performed as a circus artist in a former life made Bhamla think of trying a yo-yo. High-speed imaging revealed that it spins at about 3,000 RPMs when unfurled, which is about the same as smaller microfuges commonly found in labs. The problem was the learning curve: Bhamla was new to yo-yos, and it took too long to get the hang of it.
“That experience was valuable,” Bhamla said. “If I cannot learn it within a week, how am I going to train a 50-year-old health worker who has 200 patients standing outside with mothers and crying babies?”
They went through a drawer full of toys, scoured Amazon for ideas, and yet, nothing.
“You know when you’re tired and desperate, and you’re having one of those nights when you’re frustrated?” Bhamla explained. “You’re willing to explore anything and everything.” Then, the childhood memory of that whirligig popped into Bhamla’s head. He turned to his girlfriend and asked for a button and some string from her sewing kit and quickly fashioned a makeshift toy.
Back in the Prakash Lab, a high-speed camera showed the button whirligig could reach 15,000 rpms. “I couldn’t believe my eyes,” he recalled.
After two weeks of prototyping, he mounted a capillary of blood on a paper-disc whirligig and was able to centrifuge blood into layers. With proof-of-concept in hand, Bhamla and Prakash proceeded to scientifically explain how a whirligig actually works.
Bhamla recruited three undergraduate engineering students from MIT and Stanford to build a mathematical model. The team created a computer simulation to capture design variables like disc size, string elasticity and pulling force. They also borrowed equations from the physics of supercoiling DNA strands to understand how hand-forces move from the coiling strings to power the spinning disc.
Once the engineers validated their models against real-world prototype performance, they were able to create a version with rotational speeds of up to 125,000 rpm, a magnitude significantly higher than their first prototypes.
And unlike the case of the yo-yo, this so-called “paperfuge” could easily be mastered — and even built with everyday materials — by a villager in Africa.
From Bhamla’s perspective, better to put a simple device in the hands of a field worker who, without any knowledge of physics or education beyond grade school, sees centrifugal force come from what is essentially child’s play — and then thinks, “Hey, this is just twine, paper and wood. I can make one of these! What else can this be used for?”
Bhamla and Prakash’s paperfuge is a powerful example of how extreme constraints and intense curiosity can create innovation from the everyday. Today, community-health collaborators in Madagascar are working with the Prakash Lab to test the paperfuge in the field.
Seeing it in use, the new waves of curiosity it stirs and the potential for future innovations it may inspire, fulfill Bhamla more than anything else.
“That’s empowerment, when a person forgets that they’re not an engineer, but they can see problems and everything around them starts to look like a potential solution,” Bhamla said. “If you can tap into someone’s curiosity, I think you can change somebody’s life.”
Saad Bhamla is a postdoctoral fellow at Stanford University, where he earned a Ph.D. in chemical engineering in 2015. As part of his doctoral studies, he built a device to examine the non-Neutonian flow of liquids (think of the colorful swirls on the surface of a soap bubble). Learning about entrepreneurship through the Accel Innovation Scholars program at the Stanford Technology Ventures Program, Bhamla patented the device and sold it to two companies for contact lens design research. Learn More
The Prakash Lab is “a curiosity driven” research group working in the field of engineering and physical biology. One of the lab’s specialties is in an area pioneered by Manu Prakash known as “frugal science,” where he and his team design science-education and diagnostic tools for extremely resource constrained settings, especially in the field of global health. Learn More
Cities around the world with emerging tech hubs are asking what’s in Silicon Valley’s so-called “secret sauce,” and how they can emulate the famed region’s success.
In order to demystify that secret, Stanford Assistant Professor Chuck Eesley and Daniel Armanios, an assistant professor at Carnegie Mellon University, sometimes visit places far away from Silicon Valley – where entrepreneurial ecosystems are still in their infancy.
They research environmental influences that lead to high-tech ventures, and that are therefore critical for aspiring entrepreneurs. For a recently published study, the two spent time in Beijing’s bustling Haidian district – home to some of China’s most prominent universities and technology companies.
What the district doesn’t have, however, is a critical mass of startup investors like the venture-capital community in Silicon Valley.
Eesley:In my travels in emerging economies, I noticed that there weren’t very many private, early-stage investors. A lot of the resources were still controlled by the government, due to under-developed institutions for antitrust regulations, IP protection and the like. Early-stage entrepreneurs were really struggling to raise funding.
In China, the government’s budget and domestic loans account for over half of the total annual domestic investment, and state-owned banks administer three out of four domestic loans. Overall, about 46 percent of domestic financing in China is controlled by the public sector, whereas private-equity funding represents just 5 percent of that total.
Armanios:The prevailing view is that to access these public resources you need to know someone in the government. What we find is that even without political connections, you can still make yourself competitive for such financing by working through a locally reputable organization like a science park, incubator or accelerator.
China’s science parks were developed to bridge the gap between private-sector entrepreneurs and the public resources they need. As part of their admission process, science parks also assess the potential of the various entrepreneurs who come through the door – in other words, reducing perceived investment risks while at the same time increasing access to startup money.
The researchers found that, in particular, entrepreneurs with business experience gained elsewhere, but with no local ties, benefited from a science park’s ability to lend credibility. The other group in the study that gained the most from science parks were highly educated locals who had strong technical skills but needed additional business training and mentoring.
China’s first science parks were established in the late 1980s, when the government began to embrace entrepreneurship as a profession and play catch-up with other advanced industrialized nations. They typically provide various services in a shared space and essentially serve as business incubators for technology ventures that spin out of nearby research institutions.
This intermediary role is essential for China’s emerging entrepreneurial ecosystem: The state is “ill-equipped” to pick entrepreneurs with the most potential and connect them with the capacity-building training and capital they need.
Armanios:How entrepreneurs acquire public financing depends on their prior experiences, capabilities and network connections. Returning entrepreneurs, or those entrepreneurs who spent time abroad and are now coming back to their home country, have tremendous amounts of technical experience and global business know-how.
However, they’re trying to get financing from local government officials who don’t have business expertise, so the officials have trouble credibly assessing those kinds of skills. What “returnees” do is apply for admission into science parks because those parks are reputable local institutions that are known for credibly-vetting such skills.
“Local elites” on the other hand, who are entrepreneurs educated at prestigious institutions in China – such as Tsinghua University, Peking University, or institutions under the Chinese Academy of Sciences – have tremendous amounts of technical experience but do not have much business experience. They enter science parks to help build up those skills, like business-model development, management training, as well as to learn about marketing and advertising.
The experience in China mirrors those of other countries that are striving to incubate entrepreneurial ecosystems of their own. For instance, Start-Up Chile is a key institutional intermediary linking government funds to support about 1,000 Chilean ventures. And more recently, the Malaysian Global Innovation & Creativity Centre has been launched to support and foster strong communities where entrepreneurs are able to easily connect and share their ideas and solutions with each other.
Eesley:As a scholar of entrepreneurship, I’d love to see the field do more research on how we can help these entrepreneurs who aren’t well-connected and who may not typically have the resources to enable them to be successful in entrepreneurship. What are the most time- and cost-efficient ways to help train them or to help provide resources or services to enable them to create successful ventures?
Armanios:By looking at how science parks in their day-to-day activities actually help support existing government programs – and how that subsequently helps entrepreneurs acquire resources from these programs – really fascinated me. In leveraging intermediaries like science parks, entrepreneurs can improve their access to resources from existing public-policy programs, rather than having to wait or lobby for the creation of new programs.
In the end, understanding what mechanisms must be in place to support entrepreneurs in emerging economies will help governments, institutions and entire nations bring more innovation into the world.
Armanios:Even in the United States, those early-stage ventures that are trying to commercialize basic science also need government financing.
Five years ago, Stanford History of Science Professor Londa Schiebinger was in Madrid and interviewed by some Spanish newspaper reporters. When she returned home, she put the articles through Google Translate and was shocked to see that she was repeatedly referred to as “he.”
Google’s algorithmic fail became fodder for a case study on gender biases in machine learning, with Schiebinger inviting two experts in natural-language processing to a workshop at Harvard University. After listening for about 20 minutes, the one from Google said, “We can fix that!”
“Fixing it is great, but constantly retrofitting for women is not the best road forward,” Schiebinger states in her Gendered Innovations case study. “To avoid such problems in the future, it is crucial that computer scientists design with an awareness of gender from the very beginning.”
Such an issue may amount to no more than a minor bug for a business as big as Google. But a failure to consider diverse users in the design of a product at smaller firms like startups could seriously limit their financial future by overlooking or alienating potential markets and user needs — or even harming the business’s brand reputation.
Take Snapchat. In August, the image-messaging app introduced a filter that puts extremely slanted eyes, rounded cheeks and buckteeth on a face. In a blog post by Katie Zhu, a member of the product and engineering team at the publishing platform Medium, she said Snapchat called the filter “anime-inspired.”
“Anime characters are known for their angled faces, spiky and colorful hair, large eyes and vivid facial expressions,” Zhu wrote in her post “I’m deleting Snapchat, and you should too.” “This is quite literally yellowface, a derogatory and offensive caricature of Asians.”
“Fixing it is great, but constantly retrofitting for women is not the best road forward.”
This wasn’t the only instance in which Snapchat has sparked criticism within industry and from individual users over filters that superimpose racially stereotypical traits onto photos of faces. Four months prior, Wired wrote about how Snapchat released a “Bob Marley filter” on April 20, the day marijuana lovers celebrate their shrub of choice. The headline said it all: “Welp! Snapchat’s 420 Filter Celebrates Bob Marley with Blackface.”
The Venice-based startup issued a statement after the article appeared, explaining that the filter was created “in partnership with the Bob Marley Estate” to give fans a way to show their appreciation of the reggae legend. Snapchat has also spurred comments in mainstream press outlets such as Business Insider, and on sites like Medium and Quora, for a lack of transparency regarding its total number of employees and how many of them are women or minorities.
Yes, Snapchat’s popularity seems to be growing by the day. But it’s uncertain how much the firm can expand its user base beyond those over 25 and into the more lucrative demographic groups that advertisers desire. Moreover, systemic issues around diversity that get ignored early on just might grow into deal-breakers that make a hot, young startup less attractive to potential suitors in the years ahead.
That seems to be playing out at Twitter. On Oct. 27, the San Francisco public radio station KQED reported the startup’s plans to lay off 300 people, and how it may be tied to the company’s unresponsiveness to harassment by “trolls.” For KQED’s California Report, journalist Queena Kim quoted a Bloomberg analyst who described how Twitter’s user growth and advertising dollars are both flattening out, and how that may be a result of all the negative content.
Kim then spoke to a BuzzFeed reporter who said both Disney and Salesforce may have walked away as potential buyers in part because of Twitter’s seeming indifference toward offensive comments. Kim went on to explain how women and minorities who work at Twitter had brought the issue to the attention of senior management as far back as 2008, and how that leadership remains largely white and male.
The report ended with a comment by Kellie McElhaney, an adjunct faculty member at the Haas School of Business at the University of California, Berkeley: “This is an example of how lack of diversity is bad for business.”
(Since that report, Twitter announced several new measures aimed at curbing hate speech — although a New York Times article questions if features such as the ability to hide or report offensive posts will have any lasting impact.)
Data on Diversity … or Lack Thereof
While concerns about the underrepresentation of women and minorities in tech isn’t new, the heightened awareness of the problem can be traced back to October 2013, when Tracy Chou, a young female engineer at Pinterest, blogged about the absence of data on gender diversity in the industry.
Other luminaries of the valley, such as Eric Reis and Vivek Wadhwa, had already pointed out that the local tech community mostly consisted of white men. But Chou did something clever: Alongside her blog post on Medium, she set up an online repository and encouraged tech workers throughout the valley to count the number of female engineers at their companies and share them.
“Systemic issues around diversity that get ignored early on just might grow into deal-breakers that make a hot, young startup less attractive to potential suitors in the years ahead.”
She started by posting Pinterest’s stats: 11 female engineers out of 89 total at the time. Soon after, dozens of other tech firms contributed theirs, including Dropbox, Reddit and Mozilla. A few months later, Google publicly reported its figures on ethnic and gender diversity, and then Apple, Facebook, Twitter and other tech giants followed suit.
“Once all that data was out there, this thing which had been an open secret in Silicon Valley for a long time became known to the rest of the world as well,” Chou said on the Stanford Innovation Lab podcast. “It became a really big topic of conversation when people realized that these companies [that] are producing technology and products that everyone is using were so not representative in their workforces of the people that they were trying to serve.”
Recently, the U.S. Equal Employment Opportunity Commission published a report on diversity in high-tech that summarized data on the race and sex of all employees at the top 75 tech firms in the valley (as ranked by the San Jose Mercury News in 2015). The data was pulled from government-mandated diversity reports, called “EEO-1” filings.
Of the nearly 210,000 employees across 230 work sites throughout the valley belonging to the top-ranked companies, here’s what the commission found: Seven out of 10 employees were men, while the percentages of black and Hispanic workers were 3 and 6 percent, respectively.
“What is striking in this table is the degree of sex and race segregation,” the report states. “Women comprise just 30 percent of total employment and Asian Americans and Whites comprise 88 percent of all employment.”
Study after study has found that more diversity is better for business. Just to cite one report from 2015, the business-consulting giant McKinsey & Co. examined proprietary data sets for 366 public companies and found that more diverse workforces performed better financially.
Specifically, companies in the top quartile for racial and ethnic diversity were 35 percent more likely to have financial returns above their respective national industry medians. Meanwhile, firms in the top quartile for gender diversity were 15 percent more likely to top their industry medians in returns.
“Given the higher returns that diversity is expected to bring,” the report concludes, “we believe it is better to invest now, since winners will pull further ahead and laggards will fall further behind.”
Earlier Interventions Needed
The glitch in Google Translate that converted references to Londa Schiebinger to “he” was based on the fact that phrases such as “he said” are more commonly found online than “she said.” Schiebinger’s case study on this fits into a category she calls “bias in big data,” and she has since discovered newer examples of unintentional bias in algorithms.
She notes, for instance, that Amazon’s same-day delivery service was unavailable for zip codes in predominantly black neighborhoods at one point. She also notes the now well-known example of Google’s photo app, which applies automatic labels to pictures in digital photo albums. Early versions of the app inadvertently identified African-Americans as gorillas. Google apologized, saying it was unintentional.
Specifically in the area of product design, Schiebinger discovered examples of likely gender bias in software at Pinterest and Apple:
At Pinterest, she saw how the failure to consider men as users may have taken a financial toll. Between 2011 and 2015, Pinterest’s valuation rose from $200 million to $11 billion. Yet, only 29 percent of Pinterest users were men in 2014. “It is not only women who are left out, but also men. Pinterest is currently seeking to revamp its search algorithms to reach out to men,” Schiebinger said. “Products that incorporate the smartest aspects of gender and meet the needs of diverse user groups can open new markets and enhance global competitiveness.”
When Apple released its HealthKit app in 2014, it boasted the ability to record blood pressure, daily steps and calories, respiratory rate and even blood-alcohol level. But it left out women’s menstrual cycles. Apple updated it a year later, but Schiebinger questioned the cost in terms of profit, poor publicity and team morale.
Tracy Chou now works on increasing diversity at tech companies through an organization called Project Include, which she co-founded with other influential women in the industry. They describe the project as “an open community working toward providing meaningful diversity and inclusion solutions.” Beyond tactics like anonymizing job-applicant resumés, Chou says Project Include offers comprehensive recommendations and is taking steps to put them into practice.
One is called Startup Include, where companies that participate commit to metrics that they will share with Project Include after three and six months to measure progress. Much like the tech industry itself, the project takes an open source and data-driven approach, with the goal of aggregating metrics across a cohort of firms and developing benchmarks.
“It’s much easier to change the course early on and set the right culture, than trying to steer a really massive ship later.”
“We’re focused specifically on tech startups, where we think there’s just so much opportunity to get things right from the beginning,” said Chou, who earned degrees in electrical engineering and computer science from Stanford. “It’s much easier to change the course early on and set the right culture, than trying to steer a really massive ship later.”
Among the startups working with Project Include are Asana, Clef, Managed by Q, Patreon, Periscope Data, PreK12Plaza, Puppet, Truss and Upserve. But just as success doesn’t happen overnight in the startup world, Chou says the effort to increase diversity in tech will require conviction and patience commensurate with the problem at hand.
“There isn’t a quick fix for diversity and inclusion,” she says. “It has to be prioritized on an ongoing basis and it takes a lot of hard work. But it’s worth the effort.”
Today, the cool factor of entrepreneurship has spread around the world as technology startups have grown from fledgling ventures into global forces that can redefine our times. The founders of Facebook, Google, Tesla and Uber are practically celebrities.
For better or worse, all this entrepreneur worship has given rise to the “wantrapreneur,” someone who seeks to launch a startup just for the money and acclaim. Never mind that they don’t have a great product idea — or more importantly, the business skills to spend capital wisely or responsibly lead a team of hardworking early employees.
So, if there were a step-by-step process that any aspiring entrepreneur could follow, would that be a good or bad thing? In the tech sector, some say such a formula is being taught: the lean-startup methodology, an approach to entrepreneurship that consists of clearly defined steps for discovering customers and developing a product or service.
Over the past five years, the lean movement has spread beyond the traditional tech sector to being taught within the government to publicly funded scientists so they can better translate their research into commercial innovations. At the National Science Foundation and the National Institutes of Health, this entrepreneurship-training program is called I-Corps (Innovation Corps).
Now the Lean LaunchPad is being used to address national-security and foreign-policy concerns. After a successful pilot class at Stanford University last spring, the course “Hacking for Defense” will be taught to college students around the country as a way to develop solutions to critical national security problems for the national-defense and intelligence communities. And this fall, another lean-startup course at Stanford debuts, called “Hacking for Diplomacy,” where students will work on challenges faced by the U.S. State Department.
From tech startups to government-funded research and now national defense and international diplomacy – are there no limits to the lean approach? Devotees say its widespread adoption and track record of success are proof that it works. Others say the methodology doesn’t make sense for certain sectors. So, who’s right?
A ‘lean’ history lesson
In 2005, retired Silicon Valley entrepreneur Steve Blank came out with The Four Steps to the Epiphany, which first stated that startups are not smaller versions of large companies, but nascent ventures in search of a business model. Four years later, a Swiss business theorist, Alexander Osterwalder, introduced the world to a new tool to help startups design their business model, called the “business model canvas.”
By then, Blank had become an educator, teaching entrepreneurship at Stanford. He combined Osterwalder’s business-model canvas with the customer-development process he defined in Four Steps and began teaching what he called the “Lean LaunchPad” methodology in 2011.
Today, countless students and entrepreneurs who have come across his books, including the 2012 bestseller The Startup Owner’s Manual, credit their success to Blank’s insights. The movement was also advanced by the 2011 book The Lean Startup, by Eric Ries, and continues to grow as the federal government now teaches the lean-startup methodology to scientists at its national labs using the curriculum Blank developed.
An eight-time serial entrepreneur, Blank is the first to admit there is no rule book in Silicon Valley. What his Lean LaunchPad approach does is help entrepreneurs avoid some of the most egregious failures, which he explains are often caused by hubris.
“It’s all the attributes of a world-class founder — passion, resilience, velocity, urgency — that make most of them fail because they end up confusing a faith-based enterprise with a fact-based enterprise,” Blank said. “You need faith to start, against all odds. But what you rapidly need to do is replace the faith with facts.”
The cornerstones of the lean methodology include:
proposing a business opportunity in the form of a “hypothesis” about a need in the market
defining the essential building blocks for the proposed business (key partners and resources, customer segments, revenue streams, etc.)
quickly testing the assumptions about the market and customer needs by getting out and talking to lots of people
using “agile development” to adjust the product or service based on all the feedback, and then launching a “minimum viable product” to find product/market fit.
From there, continued feedback intake drives product improvement and, if necessary, any changes in the direction of the business — otherwise known as a “pivot.”
Government goes lean
The approach worked for Jason Oberg, who, in 2013, was working on a Ph.D. in computer science at UC San Diego. Along with a post-doc at UC Santa Barbara and professors from both campuses, Oberg was researching a basic technology that would help computer-chip makers find vulnerabilities that could result in data leaks and other security issues.
That year, they received a research grant from the National Science Foundation and went through NSF’s I-Corps training program. They followed Blank’s core mandate to “get out of the building” and talk to at least 10 people per week — potential customers and other stakeholders. For Oberg’s team, this meant venturing off campus and chatting up chip makers, chip buyers, potential partners and more. By the end of the 10-week I-Corps program, Oberg realized that his team could indeed build software that finds chip vulnerabilities, and that customers would pay good money for it.
Oberg is now CEO of San Diego-based Tortuga Logic, a startup founded by the members of his I-Corps team. They now have nine employees, secured phase two of the NSF grant and are bringing in both early investment money and revenue from clients.
“If we had not gone through I-Corps, it would not have pushed us over the edge to build a product and become entrepreneurs,” Oberg said. “I probably would’ve ended up working at one of the big software companies.”
The NSF offered the first I-Corps training in 2011 and has since grown into a huge success: Over 800 teams from 192 universities in 44 states have completed the NSF training, according to Tom Kalil, deputy director for technology and innovation in the White House Office of Science and Technology Policy. Each I-Corps team includes a university faculty member who is a research scientist and acts as the principal investigator (PI), a graduate student (entrepreneurial lead) working in the PI’s lab, and a mentor from their local area with domain expertise.
More than 320 companies have been created by those I-Corps alumni, Kalil said. “It’s taught scientists and engineers about this similarity between the scientific method and the entrepreneurial process,” Kalil said. “So I see this playing a really important role in providing some entrepreneurial as well as experiential learning that provides a clear and logical framework.”
Limits to lean?
However, some feel that would-be entrepreneurs are becoming overly concerned with following the formula, while losing sight of more practical business matters. Mike Pozmantier, a technology-transfer expert who managed the U.S. Department of Homeland Security’s Transition to Practice program, says he has seen a number of dabblers over the years adhere to the process in lieu of actually solving the issues they encounter.
From his time in government, Pozmantier is well aware of its enormous efforts to understand and adopt the mindset of the private sector. And he acknowledges that I-Corps does a good job of pushing researchers to get out and speak to people — and of teaching one of the few well-defined methodologies for putting people on an entrepreneurial path.
“Process is clearly helpful, but I’ve seen too many people rely on it to the detriment of actually doing what they need to do,” Pozmantier said. “There is a place for lean, but entrepreneurs should look at it as a tool in their toolbox — and not as the toolbox.”
Perhaps the biggest critique skeptics voice about the lean-startup approach is that it threatens to change the entire trajectory of entrepreneurship. No longer is it about developing a profoundly novel and complex technology over several years, remaining focused on a specific idea for a product that can actually live up to a cliché mission statement about “changing lives” or “making the world better.”
Instead, critics say the lean approach is increasingly skewing entrepreneurship toward the creation of products and services that lend themselves to rapid market releases, iterations and exits. Why embark on the daunting journey of developing some heavy technology that could take years and many millions of dollars just to prototype, when you could design the next Pokemon Go? The smartphone and app ecosystems have already been built, and thumbs are literally twitching for that next digital distraction.
“When the technology is deep and new, you do not start with those advantages,” said Mike Lyons, a longtime lecturer on entrepreneurship at Stanford and veteran of the Silicon Valley tech scene. “The companies that drive GDP in the valley, including Facebook and Google, were not built that way.”
One field that seems to defy the lean methodology is med-tech. Setting aside biometric-tracking devices, wellness apps and the like, much more time and capital are needed to build a product or service that will diagnose or treat a medical condition, says Gordon Saul, executive director of the Stanford Byers Center for Biodesign.
He acknowledges the value of the customer-development process’s mandate to walk out of the lab and talk to as many people as possible — especially when it comes to academic research, which Saul says can be “very inward looking.” But in the case of, say, a Class 3 medical device — a category that includes the highest-risk products such as surgical implants — the wide array of stakeholders, regulatory issues and immense development costs don’t fit into rapid iteration and pivot cycles.
“Developing medical technology is enormously expensive,” said Saul, adding that costs to get a Class 3 medical device to market can soar as high as $80 million. He notes that a significant proportion of those costs are spent clearing regulatory hurdles, some of which arise early in the development cycle, such as the documentation of design controls and decisions.
“Many of these very specific regulatory hurdles don’t exist in other industries, especially consumer products where the lean methodology got its start,” Saul continued. “Similarly, with medical devices, there’s not just one end user to target. Patients, doctors, healthcare facilities and insurance companies all have a say in whether a new technology will be adopted.”
The result is that it’s just not that simple to build, test and iterate a minimally viable product in the med-tech field, Saul says.
In fact, the center teaches its own proven, repeatable process for health-technology innovation – a step-by-step approach for identifying and evaluating important unmet healthcare needs, inventing new technologies to address the most compelling ones, and then helping innovators prepare to bring those technologies into patient care.
Since 2001, the center’s trainees have founded 41 health-tech companies from projects originated within the program, and treated over half-a-million patients with technologies invented at Stanford Biodesign. The innovations range from a neonatal resuscitation device to solutions for arrhythmia, enlarged prostate and post-menopausal challenges in women.
“We do adapt some of the lean methodology’s focus on outward discussions and disciplined gathering of input to help drive decisions, but in a more typical framework that we would see in medical-technology development,” Saul said.
A flexible framework
Adaptation has also been key in teaching the lean approach to publicly funded researchers working in the life sciences. Tom Kalil at the White House Office of Science and Technology Policy said the National Institutes of Health have successfully tailored the NSF’s I-Corps program in order to train teams that receive NIH grants to develop therapeutics, diagnostics and medical devices. But it wasn’t a simple copy-paste.
“The FDA is involved. Medicare is involved,” explained Kalil, who also serves as Senior Advisor for Science, Technology and Innovation for the National Economic Council. “In fact, it’s going to be different depending on — within the life sciences — whether you are talking about a diagnostic, a medical device, a drug, a vaccine or a health IT solution.”
Blank blogged about prototyping I-Corps for life-science innovators. The 10-week class was held in 2014 at the University of California, San Francisco, and in his post, Blank includes video of a physician who described how valuable the customer-development process was for his team’s medical-device startup.
But again, Blank says the Lean LaunchPad does not guarantee a successful startup. He points to outliers like Steve Jobs and Elon Musk, whose achievements resulted more from their unique talents than any formal education. What made the lean methodology stand out, Blank explains, is that it wasn’t a better version of something else — but a radical shift in thinking described as never before.
“It’s not the methodology, it’s a methodology,” Blank said, “and like most things, hopefully something better and more efficient will come out of it.”
Today, technology entrepreneurship and the arts are often characterized as clashing forces in society. As tech startups proliferate in a city, we hear the familiar cry that gentrification will sterilize the creative and artistic soul of the community – and that rising housing costs will put artists out on the street.
But both disciplines play a crucial role in shaping our world, so wouldn’t it be better to start from a place of empathy, rather than rivalry? Artists and entrepreneurs have so much in common: Each discipline requires creativity and vision to bring an idea to life, and whether you’re a musician or a technologist, without passion you’ve got nothing. Even the underlying strategies and satisfaction felt from a dream realized are similar.
Take Meow Wolf, a Santa Fe-based art collective and production company. It started as a group of artists with a desire to create a space to host music shows, make art, and be expressive in their community. As their installations started gaining traction, the artists began looking for a way to support the collective financially, which was the beginning of their journey into the world of scalability and entrepreneurship.
“As artists, we emerged as entrepreneurs largely because we were looking for alternatives to the traditional art world model,” said Sean Di Ianni, co-founder and chief operating officer at Meow Wolf. “What fueled our ability to make opportunities for ourselves was both a sense of strength in numbers and also a real enjoyment of the unpredictability of working collaboratively.”
Furthermore, Di Ianni’s experience as an artist helped prepare him for the world of uncertainty that startup founders often face: “As an artist I always seem to be solving strange or unexpected problems to push my work forward. I think the work I’ve done in building a business is an extension of that process of propelling myself into unknown creative territory.”
More similar than not
In one of his blog posts, entrepreneurship educator Steve Blank begins by presenting two kinds of artists: composers and performers, where the former are the ones who create and latter are those who execute that creative vision. “Founders fit the definition of a composer: they see something no one else does. And to help them create it from nothing, they surround themselves with world-class performers,” Blank writes.
“This concept of creating something that few others see – and the reality distortion field necessary to recruit the team to build it – is at the heart of what startup founders do,” he continues. “It is a very different skill than science, engineering, or management.”
Blank’s colleague, Stanford Professor Tom Byers, concurs. The holder of the Entrepreneurship Professorship endowed chair in the university’s engineering school, Byers has taught students the art and science of technology venture formation for over 20 years – drawing from his faith in higher education and experience in the startup world before coming to academia.
When he first graduated, however, Byers was a guitarist for several touring blues bands. He performed in over 100 gigs, all in his 20s, and yet can still easily see the similarities between being a musician and an entrepreneur. “To me, they bring the same sort of joy. When performing, I felt in flow, I felt joy, I felt like I was having impact,” Byers said. “Putting together a band and making a living – the feeling that I was doing something I was born to do, that’s the same feeling I got when I decided to pursue entrepreneurship and academia.”
Beyond these feelings of individual joy and passion, Byers explains that the two biggest components of innovation – creativity and teamwork – are the foundation of both music and entrepreneurship.
“Innovation in both music and technology entrepreneurship is rooted in creativity and teamwork. Finding the harmony between creativity and teamwork, and developing a culture and a mindset that cultivates both of those things, is essential,” said Byers, a faculty director at the Stanford Technology Ventures Program (STVP). “If you have one and not the other, you have no impact. That’s absolutely the case, whether you’re performing with a band or creating a company as a startup team.”
Arts and tech in higher education
Stanford is a familiar theater in this supposed war for relevance, with much ink spilled in the debate over whether the emphasis on a liberal-arts education has been overshadowed by Silicon Valley’s need for technical innovators. The university has launched numerous interdisciplinary initiatives in recent years that have brought arts and humanities departments closer to engineering, but even at the level of individual faculty members, the spirit of mutual respect is obvious.
Rich Cox, a lecturer at Stanford in the engineering school and Graduate School of Business, takes the intersection of art and science to heart in his own venture, a management-design firm he founded.
“We think there is something magical about the intersection of the research and theory from academics, the embodied learning from the arts, and the practical application from business,” Cox said. “Academics organize knowledge into usable frameworks, the arts thrive in giving elegant answers to ambiguous questions, and business grounds theory and expression giving concrete results.”
Art is innovation
Indeed, unique disciplines can literally go hand in hand. In his book The Innovators, Walter Isaacson explains how no less than Leonardo DaVinci, Albert Einstein and many other geniuses engaged deeply with both the arts and sciences at the peak of their inventiveness – themselves citing this interplay as the reason for their success as innovators.
“When Einstein was stymied while working out General Relativity, he would pull out his violin and play Mozart until he could reconnect to what he called the harmony of the spheres,” Isaacson writes.
Perhaps the best example of arts and startup communities coming together is the emergence of incubators outside the high-tech sector. Alice Loy, co-founder of Creative Startups, founded the company in 2007 because she realized the potential for innovation in the often-overlooked creative population.
“For a long time, there’s been this falsehood perpetuated that artists struggle with business,” Loy said. “What I would argue is that artists bring a unique perspective and creativity that allows them to see market opportunities before others see them, and then go after these opportunities in a unique and defensible way.”
Beyond their innate entrepreneurial abilities, “creatives” also have ideas and perspectives that Loy believes benefit society in the long run. She mentions data showing that entrepreneurs make social change happen. This begs the question: Who are the chosen entrepreneurs who get to shape the future? What kind of world do you want to see?
Loy adds that given how creative expression such as art, music and film are the foundation of the communities we all love to live in, we should invest in artistic entrepreneurs to build more of the world that we want to live in.
Back in Santa Fe, Meow Wolf seems to be a positive example of what happens when these types of entrepreneurs do get a chance to shape the world. “People of all ages and many walks of life have reacted with overwhelming positivity to what we’ve done with our first permanent installation,” Di Ianni said. “This is in part because people crave raw, unique, expressive experiences just as much as artists crave a place to be expressive.”
Entrepreneurship may be seen as a key to improving society and economies in America and much of the developed world. But how much faith do other cultures put in it, especially those with vastly different beliefs about gender, authority and openness to change?
There was perhaps no better place to understand how the rest of the world feels about it than at the 2016 Global Entrepreneurship Summit held last month at Stanford University.
On stage with President Barack Obama, three young entrepreneurs shared their stories about founding ventures in countries as distant from Silicon Valley – in miles and mindset – as one could imagine. They included the founders of an Egyptian event-promotion app and platform, a startup in Rwanda that turns waste into renewable energy, and a social startup in Peru that empowers under-educated women by teaching them coding and other professional skills.
Jean Bosco Nzeyimana, founder and CEO of the Rwandan startup, described one of the biggest differences in mindset between investors in the valley and those in his home country: a respect for elders and a dismissiveness of younger people, especially in regards to tackling societal issues such as waste management and energy creation.
“In my culture, it is believed that those great initiatives are started by old people,” Nzeyimana told Obama. “So I tried to disrupt that status quo and created this company. But of course, during this period, no one was even trusting me.”
That was just one of many challenges that entrepreneurs at the summit said they faced back home. And yet, the more than 700 entrepreneurs who flew in from across the globe illustrated how much optimism exists worldwide.
Recent research initiatives support growing enthusiasm around entrepreneurship internationally. For instance, a 2010 report published by the Kauffman Foundation showed that new startups are responsible for all net job creation. And more recently, the 2015-16 Global Entrepreneurial Monitor report, which tracks characteristics, rates and societal attitudes around entrepreneurship, found that the positive perceptions around entrepreneurial careers and opportunities were highest in “factor-driven economies” – defined by the World Economic Forum as economies dominated by businesses with a heavy reliance on (unskilled) labor and natural resources.
In other words, economies with the highest potential for growth recognize the importance of entrepreneurship towards their future development and are eager to capitalize on the opportunities.
With the rise of entrepreneurship-education programs, literary resources and other learning opportunities, gaining access to entrepreneurship training has never been easier. This access to information is incredibly important to the propagation of entrepreneurial ecosystems globally. But being successful as a global entrepreneur means going beyond blanket best practices, learning how to adopt ideas to the specific ecosystem at hand, and developing an entrepreneurial mindset that will serve as an asset in different contexts.
Regional differences at play
In addition, leaders in the field believe that thinking globally is becoming increasingly important for all entrepreneurs. “Remember that entrepreneurship is a way of life, and being globally minded is no longer a choice if you want to be a successful entrepreneur,” said Rebeca Hwang, a Stanford graduate and lecturer who has worked as an entrepreneur on multiple continents.
Noting that entrepreneurs around the world share many personality traits – including a high level of technical or entrepreneurial talent and a hunger to create something amazing – Huang says she sees different entrepreneurial norms and behaviors at play in each region.
In general, Europe has available capital and reliable institutions – though a certain sense of complacency and aversion to risk can exist in areas where a non-entrepreneurial career is believed to provide more stability and security. And yet, there is a growing interest in Europe for entrepreneurship, according to Lena Ramfelt, who teaches entrepreneurship, marketing and innovation at Stanford and the Stockholm School of Economics.
“In many large cities in Europe, you can almost describe the growing interest as a movement, where you might have to explain why you are not an entrepreneur rather than the other way around,” said Ramfelt, adding that excitement has spread beyond the high-tech sector into areas such as social entrepreneurship and ventures focusing on creative markets.
In contrast, Latin America has high potential for fast growth with plenty of young and hungry talent. But the region also faces some institutional challenges, like a lack of venture capital, according to Felipe Jara Schnettler, director of entrepreneurship at the integrated higher-education system INACAP, which is based in Chile.
“The missing link in the region, in spite of growing interest in entrepreneurship, is private funding,” Schnettler said. “Although there are people and families with big amounts of capital, there is still little interest in becoming part of a venture capital or angel network. This is mainly due to risk aversion, which may be driven by limited number of success stories so far.”
Meanwhile, Asia and South East Asia are booming with entrepreneurship and have tremendous market opportunities. But Hwang explains that the horizontal culture of entrepreneurs can clash with the traditionally hierarchical status quo in many countries there.
During a panel on entrepreneurship in China at the Global Entrepreneurship Summit, the founder of a venture-capital firm also commented on how the mix of opportunities and challenges make China’s entrepreneurial landscape quite complex and dynamic.
“Every day we see new companies, we see new opportunities,” remarked Northern Light Venture Capital Founder Feng Deng. “We also see a lot of challenges in terms of not only in the technology side, but a lot of times it’s the whole environment, for example the government regulations.”
As for the Middle East and Africa, political instability and conflicts continue to haunt what are otherwise emerging markets with great potential. The stigma of failure also hinders many potential entrepreneurs, according to Tim Weiss, an academic researcher who studies entrepreneurship in Kenya.
“In Kenya, failure is more sticky to the person,” Weiss said. “The repercussions an individual faces for failing make it much riskier to fail than in an environment where failures are understood as an integral part of becoming an entrepreneur. As a result, many entrepreneurs don’t pursue their boldest ideas, even if they have the potential to be the most rewarding.”
Given the unique cultural, political and business climates in different regions of the world, experts say global entrepreneurs must learn how to navigate varying conditions and diverse entrepreneurial ecosystems. And due to these diverse conditions, entrepreneurial practices that work in one region or ecosystem may not translate directly to another, meaning that global entrepreneurs must learn to be flexible when it comes to applying ideas that have worked in the past.
An “open” question?
This dynamic can trickle all the way down to the offices where work is getting done. Stanford Professor Pamela Hinds, who co-directs the Center for Work, Technology and Organization in the School of Engineering, studies the effect of different cultures on innovation.
In her research, Hinds has found that certain practices that lead to greater innovation within U.S. organizations can actually hinder innovation in other countries. In a study on the effect of open and unfinished space on innovation, Hinds and her team found that employees at U.S.-based companies thrived in open environments, but the open and unfinished “startup garage environment” was quite problematic in India.
“The unfinished nature of the space,” Hinds said, “translated into not feeling very polished. And in India, it was inconceivable to bring customers into this space because it didn’t convey the kind of professionalism that was expected of the organization.”
In other words, the cultural differences around unfinished and open space negatively affected the workers’ ability to innovate, even though that same kind of space had been proven to increase innovation in another cultural context.
In the study, rather than calling the open and unfinished space a failure, the team in India took what they learned from this experiment and adapted the space to suit their own culture and needs. The result, in the end, was an increase in innovation for this company as well.
In describing why the team in India eventually found success, Hinds said it was crucial to have someone in the innovation center in India who understood both cultures and was therefore able to advocate for the needs of the team in India.
This research is yet further proof that applying blanket best practices to an organization rarely leads to success. Rather than copying an approach that’s been proven in one country or one environment, Hinds’ work suggests that the most effective entrepreneurs take ideas from other successful companies and adapt them to their own ventures.
Having taught entrepreneurship on multiple continents, Hinds has seen equal entrepreneurial potential in students across the board. It’s when students leave their idyllic academic environments and start working in the “real world” and confront the cultural norms of each region that potential fades into conformity.
At heart, however, Hinds said, “the innovation potential in people in different places is pretty much the same.”
Business classes are not a prerequisite for entrepreneurship, and yes, some of the most storied startup founders were college dropouts. But many others say they benefited from academic courses and experiential learning opportunities that focused on the fundamentals of entrepreneurship.
Kevin Systrom and Mike Krieger, the founders of Instagram, met as students in an entrepreneurship work/study program that combines classes, mentoring and other immersive experiences. They and other entrepreneurs who went through the nine-month Mayfield Fellows Program, also at Stanford, say it was the most insightful experience they had as students.
Other alumni of the program include startup founders like Kit Rodgers of Cryptography Research, Avid Larizadeh of Bottica and Google Ventures, David Merrill of Sifteo and Bobby Lee of BTCC. Each one of them possesses innate talents and drive, that along with insights they gained as students, propelled them to entrepreneurial success.
Elon Musk may embody the notion of a naturally gifted entrepreneur, but the aforementioned founders are proof that the necessary skills and mindset can be learned. The thought-leaders seminar and fellowship program are both offered through the entrepreneurship center in Stanford’s Department of Management Science & Engineering.
The late Peter Drucker, one of the leading management thinkers of the 20th century, said it best: “The entrepreneurial mystique? It’s not magic, it’s not mysterious, and it has nothing to do with the genes. It’s a discipline. And, like any discipline, it can be learned.”
Yes, some will argue that entrepreneurship is still more art than science, at times requiring improvisation in the face of unique and uncertain situations. But there are obvious characteristics that successful entrepreneurs tend to share. Among them are:
a personal passion to solve a problem
a vision for what’s innovative
the skills to build a product or service, and a business around it
the tenacity to constantly seek feedback, iterate and pivot
the ability to empathize with and inspire those around you.
Emergence of entrepreneurship education
Donald Kuratko, a professor of entrepreneurship at Indiana University, Bloomington, traces the history of the academic field back to 1971, when the University of Southern California first launched a concentration in entrepreneurship for MBA students. By the early 1980s, more than 300 universities offered courses in entrepreneurship and small business, and over the next decade, that number grew to 1,050 schools, Kuratko states in his article, “The Emergence of Entrepreneurship Education: Development, Trends, and Challenges.”
When it was published in 2005, entrepreneurship education had exploded to more than 2,200 courses at over 1,600 schools around the country. Kuratko also counted more than 100 established and funded entrepreneurship centers at the time, noting emerging trends in “experiential learning” such as class projects, startup competitions and field trips exposing students to industry.
“Today, the words used to describe the new innovation regime of the 21st century are: dream, create, explore, invent, pioneer, and imagine!” Kuratko wrote. “Entrepreneurship educators must have the same innovative drive that is expected from entrepreneurship students.”
However, Kuratko notes — as do others — that more progressive universities are offering entrepreneurship courses across a wide range of schools and departments. In particular, “it is critical to expand entrepreneurship education to engineering and science departments where most of these technologies originate,” entrepreneurship professors Tom Byers (Stanford) and Andrew Nelson (University of Oregon) state in the Chicago Handbook of University Technology Transfer and Academic Entrepreneurship.
Byers and Nelson, along with Richard Dorf, an engineering professor at the University of California, Davis, wrote the textbook Technology Ventures: From Idea to Enterprise. And in it, they explain why they focus on the tech sector, and on educating science and engineering students as well as those studying business:
“The technology sector represents a significant portion of the economy of every industrialized nation. In the United States, more than one-third of the gross national product and about half of private-sector spending on capital goods are related to technology. It is clear that national and global economic growth depends on the health and contributions of technology businesses.”
At the university that spawned Silicon Valley, Stanford’s engineering school offers courses, fellowships and other learning opportunities to help students develop the knowledge, skills and behaviors to be entrepreneurial in life. And through Stanford’s involvement with the National Center for Engineering Pathways to Innovation – known simply as the Epicenter – students and faculty far beyond the valley have brought entrepreneurship and innovation to their campuses and curriculum.
Funded by a $10 million grant from the National Science Foundation, the Epicenter led initiatives that turned thousands of college students and faculty around the country into inspired advocates for bringing a focus on entrepreneurship and innovation to engineering education — touching about 300 U.S. institutions over the past five years.
The Epicenter’s leaders recently sat down and discussed how far entrepreneurship education has come in the last 20 years, and what the future holds for integrating more of it into engineering curriculum.
Creating innovators, not experts
In one instance, an entire engineering college is devoted to graduating innovators by tearing down the academic silos that have historically kept students narrowly focused on their major. Olin College of Engineering, in Needham, Mass., does this in recognition that the next Steve Jobs won’t be an expert in just one discipline — and that the late CEO of Apple didn’t even major in engineering.
At a recent Entrepreneurial Thought Leaders talk at Stanford, the president of Olin College described how the traditional model of higher learning separates the disciplines and forces like-minded students to stick together. When instead, Richard Miller said, what aspiring innovators need is to be exposed to a diversity of perspectives.
Citing research out of Stanford, Miller explained that innovation happens where three objectives overlap: feasibility, viability and desirability. But at a typical university, most of the students who focus on feasibility (can it be done?) are in the engineering school, while the students concerned with viability (is it financially possible?) are working on MBAs. Meanwhile, the students who care most about desirability (people’s emotions) are usually found in the humanities and social sciences.
“If we’re going to create innovators, we need to do a better job of integrating these in the same head, so that one person can see the whole picture,” said Miller, a leader in the movement to revolutionize and reshape engineering education. “The big message for engineering schools: No amount of doubling down on math and science courses is going to improve the output of innovators.”
The point is that the most important traits in entrepreneurship aren’t necessarily inherited or the result of total luck. While charisma and happenstance certainly play a role, prominent educators agree that people can learn to be entrepreneurs.
Fortunately, there is no shortage of programs, organizations and universities that want to prepare the next generation of innovators – and the need for them has never been greater.
The concept of social entrepreneurship is becoming increasingly popular. People talk about great entrepreneurs like Jessica Jackley, co-founder of the microfunding company Kiva, and Blake Myscokie, who founded TOMS, which donates a pair of shoes to the needy for every pair of shoes sold. But let’s be honest: What if we want to contribute to social causes but are not ready to become the next “great social entrepreneur,” because we also have other things we care about? I have a friend who is really passionate about improving clean water supplies in developing countries, especially Africa. However, he has a job he loves, along with his hiking trips and friends – the fact that he cares does not mean he is ready to abandon his current life to move to Africa and dedicate it to the cause of clean water.
There are a wide range of entrepreneurs today, from Hollywood celebrities championing social causes to those toiling in obscurity on technological advancements. Is there any middle ground for average folks like us, who care deeply but don’t have the bandwidth to devote 100 percent to an immense social mission?
Student organizations are the most common occupants of this middle ground. Since high school and throughout my years at Stanford, I was part of an association called the Southeast Asia Leadership Network (SEALNet). Every year, SEALNet organizes community services trips for U.S. colleges students to Southeast Asian countries. Each trip is tasked with a social mission in a specific developing region, such as mentoring orphans in Vietnam, supporting underprivileged immigrants in the Philippines or improving hygienic measures in Indonesia. The SEALNet leadership board is almost 100 percent students, who spend on average 10 to 20 hours per week recruiting and preparing for SEALNet summer trips, and putting on regular bonding activities to strengthen SEALNet’s fast-expanding global community.
Five years ago, when I was a freshman at Stanford, I thought about bringing parts of the wonderful entrepreneurship education that I, fortunately, have had the opportunity to receive, to my home country, Vietnam. In Spring Quarter, with much-cherished support from Tom Kosnik, a management science and engineering lecturer at the Stanford Technology Ventures Program, Viet Youth Entrepreneurs (VYE) was born out of his course Global Entrepreneurial Marketing. Missioned to promote the entrepreneurship ecosystem in Vietnam, VYE organizes startup-education bootcamps, startup-internship programs, hackathons, business plan-pitching competitions, tech workshops, panel discussions, startup job fairs, and we most recently published a book on entrepreneurship. Now among the most prominent startup-community builders in Vietnam, the organization has thrived in the past five years 100 percent from the contributions of volunteers, most of whom work part time for VYE while carrying on their other jobs and ventures.
Many people ask me why we do not focus on building VYE to become the next big global social venture, powered by a full-time, well-structured team. I do not think everything needs to grow to be the next big thing (and I know this is a particularly strange statement in Silicon Valley, where the ultimate goal of the average startup founder is to make his/her venture the next big unicorn). VYE’s impacts on Vietnam’s youth and on its startup community have been proven. We put on new programs and events all year round, and are continuously modifying our approaches to better fit with the country’s fast-changing startup environment. Different from a traditional startup, where growth and cash flow are often the main focus, VYE is more of a community – a house hosting individuals who wish to spend time on supporting young Vietnam-based startups.
The community factor is key to part-time social ventures like VYE. A strong sense of community is the only way to motivate a group of part-time volunteers to commit to the organization’s overall mission. People voluntarily decide to offer their time because they believe in the mission; they then voluntarily continue to stick with the organization and deepen their commitment because they enjoy the friends they work with and the new friends they will meet through the work. Thus, shaping the right culture and facilitating optimal bonding between the officials have always been the focus of VYE’s leadership team.
Community is also one of the key perks for joining so-called part-time social ventures. Many VYE volunteers have found new ideas, inspiration, trusted friends, co-founders, and even girlfriends/boyfriends through plugging into our network. Apart from the core founding team, all VYE volunteers are assigned on a per-project basis, and thus are not meant to stay after the project ends. The more dedicated ones find time to come back and hold more permanent roles with the organization; some do not take on official responsibilities but keep coming back to support when they can. This model is ultimately laissez-faire – our organization is basically a group of everyday people who wish to contribute but can’t commit full time to VYE, who are nonetheless bound by the sense of community and culture that we have built.
I do not believe we have to wait until we have attained sufficient time, resources and determination to start thinking about “social good” startups. If we can find a channel to contribute as much as we can, when we can, society will benefit hugely from the additional 10 percent time contribution from millions of people – those with good intentions but who are not yet ready to become the next Muhammad Yunus due to other commitments. VYE is one community model for part-time entrepreneurs, and I am sure there are many other viable models out there. You just have to go look until you find one that fits your life.
In the era of the entrepreneur, clever ideas can seem like a dime a dozen. But it’s the committed willingness to act on an idea that turns an epiphany into something much more than an ephemeral intention. To illustrate this, we present insights from the Entrepreneurial Thought Leaders (ETL) Seminar, featuring recent speakers sharing different but equally poignant perspectives on the value and mechanics of taking action.
One of the most notable hotbeds for technological leaps is Alphabet, and in particular, X, its well-known “moonshot factory.” From balloon-enabled Internet to self-driving cars, the division has earned a reputation for conceiving some of the most audacious ideas for improving our lives through technology and seeing them through – at least to the prototype phase.
Astro Teller, “captain of moonshots” at X, spoke a little of the lab’s secret sauce at his ETL talk, saying that its success starts with a culture that sounds contrary to its mission: While crazy ideas are encouraged and celebrated, they are immediately scrutinized for flaws in feasibility. Calling himself a “culture engineer,” Teller emphasizes the importance of fostering workplace norms that encourage the sharing of big ideas, and of creating a space where people feel safe knowing no limits will be imposed on the imagination. Teller notes that adults often feel they have lost their sense of creativity and miss out because of it. The rate-limiting step to innovation, as he sees it, is that we don’t put all our ideas out on the table because of our self-defeating doubts.
Now, once you’ve gotten all those great ideas out in the open and have identified the one with the most potential, it’s time to execute. And while there are many ways to move forward, there’s a tried-and-true formula that works for most teams – whether they are in large corporations or small startups. It’s called product management, and below, entrepreneur Minnie Ingersoll describes its three phases from her time at Google, where she led efforts to create Google Fiber, deploy a citywide WiFi network and improve Google AdWords – all non-trivial tasks for sure. Now the co-founder and chief operating officer of the online used-car marketplace Shift, Ingersoll describes the three phases as 1) defining the vision, 2) deciding what product to build, and 3) execution.
The first phase involves getting to know who you’re building for and what problem you’re solving. After all, what good is a solution if you haven’t taken the time to put yourself in the shoes of the user? The latter two phases are setting up a product roadmap and, perhaps most importantly, holding yourself and your team accountable to the product milestones you established. This is where relentless execution on the vision you crafted in the first step of the process separates the ideas that come to fruition from those that don’t.
But imagine a circumstance where, after much debate and deliberation, your team decides to move forward with an idea you vehemently disagree with. What then? After all, we’re proud of our ideas and often find it difficult to set them aside. According to Bob Sutton, organizational-behavior expert and professor in Stanford’s Department of Management Science & Engineering, that’s precisely when we should forego ego and give 100 percent. Citing the wisdom of late Intel co-founder Andy Grove, Sutton says that by fully committing to the project you initially resisted, you’ll know that, if it fails, the flaw was in the idea itself and not in the execution.
To have a good idea without the ability or drive to bring it to life is like having a dinner table without sturdy legs: It’s nothing more than an illusion of having something valuable. This is not to diminish the value of a good idea, which is half the battle in and of itself. But to discover an opportunity worth pursuing and follow through with committed and thoughtful execution, bolstered by strong team alignment, is the very essence of entrepreneurship.
It’s wonderful that design thinking is now applied to so many different problems: designing better experiences for hospital patients, designing and implementing better client experiences at social-service agencies, starting new companies, teaching leadership, inventing new radio shows, changing organizational structures, and developing new products and services for people at the bottom of economic pyramid – to name just a few. Design thinking focuses on uncovering human needs, and doing so by not just relying on what people say, but by watching what they do as well. It entails developing a point of view about what needs to address, generating quick and rough solutions, prototyping like crazy and testing ideas with the users, customers, patients, employees or whomever the solutions are intended to help – and doing it all very quickly and not being overly attached to ideas.
There is, however, a part of the story that seems to be slipping away – especially in the business press and in business schools, as well as in areas such as education and healthcare where design thinking is being used. Many executives, students and journalists don’t seem to realize that engineers and engineering schools were among the main driving forces behind the start of this movement. David Kelley, the main founder of the innovation firm IDEO and the Stanford d.school, has been teaching mechanical engineering at the university for over 35 years; and Bernie Roth, our academic director at the d.school has been teaching mechanical engineering at Stanford since 1962 (he is a pioneer in the field of robotics).
And consider two of the most revered design thinkers and teachers I know: Diego Rodriguez at IDEO and Perry Klebahn at the d.school (officially, the Hasso Plattner Institute of Design at Stanford). When I first met Diego, some 20 years years ago, he had just graduated from Stanford, where he earned a degree in mechanical engineering and was working at IDEO. Diego did get increasingly interested in business, got a Harvard MBA, and now – back at IDEO for years as a partner – has become one of the most imaginative business thinkers I know (check out his blog and tweets). Yet, when I talk to Diego, listen to his ideas, and watch his masterful teaching and coaching, I can always see how the magnificent engineering designer inside him remains the strongest guiding force. His relentless advice to do things like get out and talk to and watch some real human beings, to develop a sharp point of view, to brainstorm, to “prototype until your puke,” and to view ideas as easy to get, important to throw away, and ultimately best to be judged by users and the market (rather than experts) all go back to his product-design roots. This really struck me when, a few years back, Diego was designing a new organizational structure for a client that, many years before, he had designed a product for when working as a young IDEO designer. He remarked to me, “The end product is a lot different, but the process I am using is remarkably similar.”
I see the same thing in how Perry approaches problems. Perry has always been a product guy, as he invented the modern snowshoe as a Stanford product-design student and then went on to grow a company that sold and spread the product called Atlas, then was COO of Patagonia, and most recently was CEO of Timbuk2. Perry has also taught numerous product-design classes at Stanford over the past 25 years, and in the last decade, taught over a dozen classes for students and executives at the Stanford d.school. In fact, Perry has taught more d.school classes than any other faculty member since the d.school was founded in 2004 (even though he was CEO of Timbuk2 for five of those years, he kept teaching).
Over the years, I have watched Perry move beyond and expand his engineering-design skills to an ever broader set of problems, like helping software executives gain empathy for what millennials want and rethinking the strategy of a Fortune 500 company. Lately, Perry’s students in his d.school classes – which he teaches with others including Kathryn Segovia, Jeremy Utley and me – tackle problems ranging from finding ways for the San Francisco Opera to attract younger customers to improving the experience of buying a bra for women who have had mastectomies.
Yet Perry’s engineering roots are always evident. I remember watching Perry use his product-engineering background to guide a class exercise aimed at improving employee selection, recruitment and socialization practices for our d.school fellows program. He pressed the students to look for unmet needs, to identify the problem they were trying to solve, to brainstorm ideas for prototypes quickly, and then to test the emerging ideas with users – even though those ideas were unfinished and crude approximations of organizational practices. This process, although modified by Perry and many others to fit problems of all kinds, is simply a variation of the design process that Perry used as a Stanford engineering school student years ago to invent the modern snowshoe – and then to grow the company and customer base required to make the product succeed.
Yes, I am a tenured professor in the Stanford School of Engineering, but I am not an engineer. The core of what we do at the d.school, and of much of what they do so well at IDEO, is rooted most strongly in product-design engineering – especially the flavor taught at the engineering school. That is why, frankly, I feel better when I work with “real” engineering product designers like Diego and Perry in the d.school classes I help to teach – even though I recognize that there are master design thinkers from all kinds of backgrounds, including lawyers, journalists, computer scientists and psychologists. The aforementioned Kathryn Segovia has a Ph.D. in communication (she did her thesis on the psychology of avatars), and Jeremy Utley is a Stanford MBA and former management consultant). Both have developed into two of the most skilled design-thinking practitioners, teachers and coaches I know.
Like many people at the d.school, I get in regular arguments about what design thinking is, how it ought to be applied, and the times when it isn’t right to use it. It’s healthy for all of us to question what we do and how to do it better. But one thing we all share at Stanford, whether our students and faculty realize it or not (and some don’t, as the history is fading a bit), is that the brand of design thinking that we teach is a mindset and set of methods that was developed and refined at Stanford’s engineering school for decades – especially by product designers – before design thinking was ever a hot topic in business, entrepreneurship, education, healthcare and so many other places.
For most of us, the reorganization of Google into a network of separate subsidiaries under the holding company Alphabet had zero effect on our lives. In the wake of Larry Page’s announcement in August 2015, we searched the web, mapped our routes, checked our Gmail, and it all felt exactly the same.
That’s because those core products remained within the original blockbuster business, now known to investors as Google, Inc. But over the long run, the restructuring could unleash the full ambition and creativity of the Silicon Valley company — influencing our lives dramatically in the way that it has with search, and could with self-driving cars and the rest.
That’s Kathleen Eisenhardt’s take on it. She is the S.W. Ascherman M.D. Professor in Management Science and Engineering at Stanford University, and a leading scholar on strategy and organization — especially in technology-based companies and high-velocity industries.
In advance of next month’s annual stockholders meeting at the Googleplex, the first in the age of Alphabet, and Page’s promise of increased transparency into finances and operations, Eisenhardt explains how tech companies (and even terrorists) have turned to an agile and modular structure — and what needs to happen to fuel outsized innovation beyond just another corporate re-org.
Stanford eCorner: Alphabet CEO Larry Page says this will allow for cleaner operations, while industry observers say it will soothe shareholder concerns about Google’s increasingly “wild investments.” What do you find most interesting about the restructuring?
Kathleen Eisenhardt: The most interesting aspect of the Google restructuring is that it took so long to do it. Google has an amazing search business — no doubt about it. Many people even call it Google’s “ATM” because it generates so much cash. But at the same time, Google has had a rough time developing successful new businesses. Many (or even all) of Google’s winning innovations and businesses outside of search per se — like YouTube, Google Earth, Nest and so on — came from acquisitions. Even DoubleClick that was pivotal to the search business was an acquisition.
So, like other companies with enormously successful core businesses (like Intel and Microsoft), Google’s management has found replicating its search success difficult to do organically — that is, from inside Google itself and without the boost of acquisitions. In my mind, reorganizing was long overdue.
eCorner: In Competing on the Edge, you and Shona Brown aimed to help organizations find the balance between too much and too little structure. How did this restructuring size up with the concepts from that book?
Eisenhardt: Shona and I wrote about too much and too little organizational structure – and several processes, one of which we called “patching.” Patching simply means frequently reorganizing companies into focused business units that match changing markets. The term patching comes from quilting: the size of the cloth “patches” on a quilt.
A major insight of patching is the critical importance of business size — organizing into a few large businesses favors efficiency and fits in stable markets. In contrast, organizing into lots of small businesses favors agility and goes with changing markets. This size tradeoff is another instance of balance between too much and too little structure. In the case of Google, it’s likely that its management stayed too long in an organization that favored efficiency when agility was the better choice.
Another point of patching is the importance of having businesses that are about the same size. This reduces politics — a huge benefit. But, it will be challenging for Google to achieve the same size across its business, and so keep the search business from suffocating the others. At the same time, Larry Page is right: The new organization will make for a cleaner organization. The “sunshine” of this new organization should be immensely helpful in the C-suite for clarifying the actual performance of different businesses, and assessing whether the right managers are in place.
eCorner: Do you think the separation of Google into subsidiaries — web-based businesses, medicine, investing and assorted technologies (Nest, X, Sidewalk Labs) — will increase the pace of innovation and bring more breakthroughs into the world?
Eisenhardt: Yes, I absolutely think that the separation will turbo-charge innovation. Of course, this somewhat depends on the investment level. But generally speaking, if implemented well, the new organization lets Google’s leaders install top-notch management teams for each business and gives those teams the freedom to run their businesses. The key will be to push decision-making (both tactical and strategic) down to the business level — to those managers in the best position, with the most relevant skills and information — to make quick and informed choices. They are the ones, after all, with the pulse of the market.
There’s another subtler point, too — that is, one of the toughest challenges is to manage businesses that are operating at different speeds, like simultaneously managing some that are moving at Internet time and others that are running at a slower pace for now (like autonomous vehicles). It is difficult to manage to the beat of different market metronomes. So the new structure should help Google managers to stay in rhythm with their markets.
eCorner: You’ve also recently looked at the virtues of simplicity. And if anything, “Google” was the essence of simplicity in corporate identity. Doesn’t the corporation lose something in this restructuring that adds complexity (at least internally)?
Eisenhardt: Google’s identity may have been simple, but its structure was not. The new business-unit organization should be a lot simpler for people inside and outside of the corporation. In fact, this restructuring is an old story.
A classic book in business history is Strategy and Structure, by Alfred Chandler. He studied several corporations from the beginning of the 20th century, including and notably DuPont. DuPont was primarily an explosives manufacturer that emerged from World War I with huge stockpile of cash. DuPont executives used that cash to diversify into a slew of new businesses, but they stayed in the same monolithic structure that had brought success during the War. By the early 1920s, DuPont was losing money in almost every business except explosives. The flood of red ink finally led DuPont’s senior executives to reorganize the corporation into small business units focused on particular products. DuPont and other corporations that followed this same path went on to become the backbone of U.S. industry. They diversified, stagnated and then reorganized, just as Google has done.
Today, companies like Johnson & Johnson, General Electric and 3M have prospered for decades using this same business-unit structure. Even terrorist groups like ISIS successfully use it, unfortunately. In fact, one of Silicon Valley’s most iconic firms, Hewlett-Packard, remained at the top of the tech world for over 30 years. By contrast, Apple and Google are still a long way from this kind of staying power. A major reason for H-P’s success was its very modular business-unit structure. Regrettably, H-P faltered when its corporate executives added complexity and slipped out of this structure.
So yes, Google’s switch to their new structure is an old story and an overdue one. The new “simpler” Google will be a better Google.
If you’re going to lead the lab that launches moonshots like self-driving cars and balloon-powered Internet, you need to be incredibly ambitious and intelligent. But that will only get you so far. It turns out you also need courage and confidence in the people around you.
Those sentiments came up again and again when the director of Alphabet’s moonshot factory, X, spoke at Stanford on April 20 as part of the DFJ Entrepreneurial Thought Leaders Seminar series. The geniuses inside the secretive lab at the Googleplex in Mountain View are encouraged to identify every possible reason why an incredibly ambitious idea won’t fly, as soon as it’s been thought — and certainly before costly brainpower and other resources are committed.
The teams celebrated most fondly at X aren’t the ones that complete their projects, according to Astro Teller, director at X. He says the teams that kill their moonshots before they even see the light of day are the true rockstars. This is how the Silicon Valley mantra “fail fast” is lived, and not just given lip service.
“This is the difference,” said Teller, who earned his bachelor’s and master’s degrees from Stanford University’s computer science department before getting his Ph.D. studying artificial intelligence at Carnegie Mellon University. “Creating the feeling that failing fast would actually get you what you want, instead of getting you the opposite of what you want.”
Teller gave a similar TED talk in February titled “The unexpected benefit of celebrating failure.” But his discussion at Stanford allowed him to go deeper and engage the audience with an insightful question-and-answer session at the end.
More than any of the moonshots that his factory is known for, Teller said he is most excited about “systematizing innovation.” He does this by creating a work environment where employees are encouraged to be audacious, and by giving them the freedom to work on ideas that inspire them and that they want to own — whether they fail or succeed.
In addition to the self-driving car and Google Glass, other well-known innovations out of X include Project Loon, which is providing Internet access through stratospheric balloons, and Project Wing, a fleet of next-generation drones intended to deliver goods ranging from consumer products to emergency medicine. And yet, X also drops ideas by the dozens every year. Some projects that X has famously pulled the plug on include a space elevator, a jet pack and vertical farming.
Those projects were not fruitless, though. Teams within X taking them on meant there was some potential for a breakthrough, because those working on the projects wouldn’t be there in the first place if they didn’t possess both intelligence and integrity. That’s where the confidence in others comes into play.
“I’m not pro-failure. I’m pro-learning,” Teller said. “We mean find incredibly efficient ways to learn.” Calling himself a “culture engineer,” Teller also explained that good ideas can come from anywhere, and that the positivity that results from such optimism must be protected in order to fuel real creativity, audacity and honesty without fear of reproach.
At one point in his talk, Teller described how the audaciousness of an idea for generating electricity once shared in Alphabet’s moonshot factory far outweighed its impracticality in his mind. He then sums up the decision-making process at X for whether or not to put resources behind a project, using the terms “false positives” and “false negatives.”
In this context, a false positive is when an idea is thought to be worth the time and effort, but ends up not going anywhere despite all the trouble. A false negative, Teller explained, is when an idea is considered unworthy of resources and passed up, when in reality it could’ve been a major breakthrough. He said a false positive is much more costly than a false negative for X — or for any innovation factory.
Toward the end, Teller addressed a question from the audience about how other organizations could possibly create a culture that incentivizes bold failures if they don’t have Alphabet’s deep pockets. To that, Teller pointed to all the research showing that salary increases do not lead to long-term worker satisfaction.
“What people want is recognition,” Teller said. “You don’t need cash and you don’t need (job) promotions to do what I’m describing.”
With entrepreneurs all vying to come up with the “next big thing,” it’s easy to see why everyone is putting work first — and the rest of life second. There are, however, some positives that can result from being obsessed, along with the better-known negatives we seek to avoid. So, while it’s important to keep tabs on when our obsession might turn into something destructive, it’s also worth noting that such behavior can play an incredibly empowering role in entrepreneurship.
Take the tale of Blue Bottle Coffee, founded just six years ago in the San Francisco Bay Area, with a mission to deliver coffee in a way that paid special attention to the roasting process. James Freeman, Blue Bottle’s founder and a recent guest at the DFJ Entrepreneurial Thought Leaders (ETL) Seminar, explained how his foray into business paralleled the artistic process of a musician. All too often, we’re told about the “greats” in any field: Mozart in music, Einstein in science and, nowadays, perhaps Elon Musk in engineering. But Freeman notes in the video clip below that, all too often, striving for that level of perfection is both unrealistic and paralyzing.
Freeman makes a good point when he describes his passion for perfecting the process, not the outcome: It’s worth being obsessed with the ritual and practice of an art, as opposed to being driven to achieve a particular end result. This nuanced form of obsession is rare — and remarkable when we find it in a person. A healthy obsession with the product or service is just what entrepreneurs need to cut out all other distractions and get an idea off the ground.
Prominent venture capitalist and author Michael Mortiz echoed this very concept in his conversation with Lisa Sugar, founder and president of Popsugar, who he says embodies this sort of obsession. With a company motto that once read “Insanely Addicted,” the pop-culture website for women highlights what pragmatic obsession and undying focus can empower an entrepreneur to accomplish. It certainly made a believer out of Moritz.
Besides obsessing over a product, entrepreneurs constantly think about the health of the company they founded – at least the good ones do. This internally focused obsession is evident in a 128-slide presentation published by HubSpot Co-Founder Dharmesh Shah, famously known as the Culture Code. In a recent ETL talk by Shah, he emphasizes the importance of talking about something like culture incessantly because it’s the only way to ensure that it continues to evolve and improve over time. Like any good product or idea will show, being obsessed with iteration and growth is the only path to staying relevant.
This sort of focus is indicative of a personal conviction and dedication to the journey that entrepreneurship represents. But the downside of obsession is equally real, and the initial phases of a startup can easily eat up a founder’s every waking hour. You’re busy building your business and your team, iterating on your product and raising capital all at once. For Derek Belch, co-founder and CEO of Striver Labs, his goal was to generate revenue and make his startup profitable.
Strivr Labs uses virtual reality to train athletes, and in order to capitalize on all the current buzz around VR, Belch said he spent an entire summer on the road — away from his pregnant wife — to sign up professional and college sports teams around the country. Fortunately, he returned just in time for the birth, explaining in this segment of his ETL talk that opportunities sometimes present themselves to a fledgling startup … and you simply have to “sprint.”
Putting our personal lives on hold in order to grow a project or idea into something that will outlive us may be worth throwing work-life balance off in the interim. Just realize obsession for what it is, and how it could benefit your endeavors as long as you know how to harness it. And hopefully, those closest to you will understand when you aren’t getting back to them.
Stanford Engineering Professor Bernard Roth, a founding faculty member of the university’s renowned design institute, told audience members attending one of his recent talks at Stanford University how to “stop wishing, start doing and take command of your life.”
That’s the subtitle of Roth’s new book, The Achievement Habit, and he summed it up in terms verging on blasphemous to the science-loving attendees of the April 13 talk. He disputed the wrinkled, green Jedi’s famous line in Star Wars: The Empire Strikes Back: “Do. Or do not. There is no try.”
To that, Roth stated flatly, “Yoda was wrong.”
Risking the wrath of sci-fi fans everywhere, Roth explained that there is indeed a “try” and a “do.” “There’s really nothing wrong with trying to do something, and there’s certainly nothing wrong with doing it,” he said. “The problem is when you think they’re the same thing.”
That assertion is at the heart of Roth’s teaching over the past 40 years, at Stanford and in workshops around the world. Initially offered as classes in creativity, Roth’s teaching has grown to encompass all that goes into “design thinking,” which is rooted in engineering’s focus on building solutions to problems and involves human-centered need finding, prototyping and iterating.
More commonly known on campus as “Bernie,” Roth is a Jedi in his own right. He is the Rodney H. Adams Professor of Engineering at Stanford and is a longtime veteran of the university’s design scene, first joining the faculty in 1962. He has a worldwide reputation as a researcher in kinematics and robotics, and his most recent activities have moved him more strongly into experiences that enhance peoples’ creative potential through the educational process.
Roth currently serves as the academic director of the d.school, known formally as theHasso Plattner Institute of Design at Stanford. It has become a hub for innovators throughout campus, where students and faculty in engineering, medicine, business, law, education and the humanities converge “to take on the world’s messy problems together.”
At his talk for the Entrepreneurial Thought Leaders Seminar (MS&E 472), Roth acknowledged that his current thinking seems to run contrary to the ethos of design thinking, which focuses on the problems of others, not the ones doing the thinking. But let’s face it, we all have problems — and Roth was intent on proving that the tools for unlocking solutions that he has developed would work for everyone in the audience.
In keeping with his emphasis on “doing,” rather than simply talking, Roth showed attendees how to reframe problems in a way that increases what he called the “solution space.” He told audience members to:
Think of a problem in your life.
Ask yourself what solving that problem would do for you.
Turn the solution into the question you need to answer.
For instance, one person told Roth that he is slow to get out of bed in the morning. And when Roth asked him what getting out of bed would do for him, the man said it would allow him to get more work done during the day.
“So the question is how to get more work done. It has nothing to do with getting out of bed,” Roth replied. “I can figure out a way to stay in bed and get more work done, as an example.”
In his book, he calls this “moving to a higher level,” and he applies it to profound problems that everyone faces. He starts with the question “How might I find a spouse?” and then turns it into a declarative sentence that sounds more like a challenge: “Find a spouse.”
He then asks, “What question is ‘Find a spouse’ the answer to?” This unlocks a long list of possibilities, including:
How might I get companionship?
How might I get taken care of?
How might I stop working?
How might I have (more) sex?
“Each of these questions, regarded as a problem, has many possible solutions,” Roth writes inThe Achievement Habit. “Finding a spouse is just one solution to each of these. In actuality, it may not be a very good solution to any of these problems.”
However, Roth also cautions that doing isn’t always a virtue, and in his book, specifically calls out Silicon Valley’s obsession with change. In this high-speed, hyper-competitive business environment, companies are always doing something new out of fear that they will stagnate and fold without constant innovation.
The problem, Roth writes, is when we let that notion rule our personal lives.
“Often the things we strive for only represent more of something we already have: money, fame, appreciation, love,” he explains. “It’s an endless chase; as the saying goes, you can’t get enough from more.”
In the startup world, there may be no such thing as becoming too successful. But for those few ventures that end up growing into a consumer business that reaches massive scale, well, it can get complicated.
In the early days of Airbnb, when its founders were happy to just get out-of-towners into their San Francisco loft in order to make rent, they probably didn’t think they would need to worry about how the entire city felt about their business.
But because of how wildly successful Airbnb is today, they do now. The company raised over $8 million to defeat a measure on last November’s ballot that would have imposed tighter restrictions on short-term rentals in San Francisco. The debate over the measure reached from city hall to the radio airwaves and overshadowed even the mayor’s race.
Opponents included Airbnb and the many hosts who list their properties on the site, while those for the measure were San Francisco residents claiming that the constant stream of Airbnb guests was eroding a sense of community. And that sums up the disruptor’s long-term dilemma: When a startup grows to a point where it is in the public eye, the number of people who feel they have a stake in the venture grows.
In short, it becomes their business, too.
Chuck Eesley, an assistant professor of management science and engineering at Stanford, has studied how different stakeholders protest corporate behavior — from religious groups that file civil lawsuits, to environmental activists who hold rowdy public protests to attract news vans and bad press for the business.
“Innovators and entrepreneurs need to recognize that along with technological disruption, often comes social disruption,” said Eesley, who researches entrepreneurship at the Stanford Technology Ventures Program. “These companies need to be aware of what kinds of regulatory battles might be in their future as a result of their innovation.”
“These companies need to be aware of what kinds of regulatory battles might be in their future as a result of their innovation.”
Eesley’s study, published online in the Strategic Management Journal, looked at more than 1,300 actions brought against firms by social activists over the span of 30 years to pressure more environmentally responsible corporate behavior. The journal article, “Through the Mud or in the Boardroom: Examining Activist Types and their Strategies in Targeting Firms for Social Change,” was co-authored by Katy DeCelles, an associate professor at the University of Toronto’s Rotman School of Management, and Michael Lenox, a business professor at the University of Virginia and academic director of the Batten Institute for Entrepreneurship and Innovation.
Unrest in the valley
While their study focused on protests over environmental concerns, some of the findings bear upon some of the most high-profile social challenges currently facing Silicon Valley — tech titans and upstarts alike.
Specifically, Eesley and his fellow researchers found that different types of stakeholders tend to employ different protest strategies: “Internal” stakeholders such as activist investors often worked within the system to affect change, like calling for shareholder proxy votes or filing a civil lawsuit. Meanwhile, “external” stakeholders such as social-movement organizations (SMOs) like Greenpeace were more likely to adopt openly confrontational tactics meant to shame firms in the eyes of the press and public.
In the tech sector, one such SMO is Silicon Valley Rising, a new labor movement comprising hundreds of janitors, cooks, maintenance workers, receptionists and security guards, all demanding better pay and conditions from the highly successful tech companies that employ them.
As for the analog for internal stakeholders identified in Eesley’s study, an excellent example would be Tracy Chou, a female engineer at Pinterest who sparked a national dialog about the glaring lack of women technologists in the valley via her 2013 blog post about gender imbalance.
Maybe it’s because she was an “insider,” or the fact that she could speak in a way that relates to her fellow programmers. But one thing’s for sure: Chou’s initial commentary has bent the ear of the entire industry — from the CEO and co-founder of Pinterest vowing to lead the way in diversifying its ranks, to the heads of Apple, Intel and other tech giants now publicly reporting their diversity numbers (or lack thereof).
Initially, Chou says public accountability wasn’t part of her plan. But she did want the issue to be discussed industry-wide, and without the blogosphere, she would not have been able to share her thoughts so broadly. “I wasn’t that intentional about it to start, but I think it’s important that these discussions be happening, and the way to provoke them is by being public about the message and the stories,” Chou said.
“I think it’s important that these discussions be happening, and the way to provoke them is by being public about the message and the stories.”
“I think I have a lot more credibility coming from the inside and being someone who has all the ‘right’ credentials,” she added.
As it turns out, Chou has ties to both the Stanford Technology Ventures Program and to Eesley in particular. While at Stanford, Chou belonged to STVP’s 2009 cohort of the Mayfield Fellows Program; and as a research assistant for Eesley, Chou helped analyze large databases for his comprehensive study on the economic impact of entrepreneurship and innovation at Stanford.
“She had this interest in using data and analyzing data in order to shed light on companies,” Eesley said of Chou. “Now, as an employee in one of these companies, she realized that there was variation across the firms, and that perhaps we should start collecting data and tracking it over time.”
Going forward, the measure of a startup’s success may depend not just on how disruptive it is initially, but how responsive it is as the business grows and stirs up the pot of public sentiment.
It’s easy to see why much of America sees Silicon Valley as out of touch, even as we tap and swipe our devices with renewed vigor each time an entrepreneur churns out a new app. Exhibit A: Tech workers in San Francisco make news when they develop an algorithm that does exactly what the startup founders in the HBO comedy series Silicon Valley are pitching to investors.
As you might guess, veterans in the valley have a more nuanced view. Some liken seemingly frivolous apps to baby steps by young entrepreneurs, who could very well go on to launch more important and influential technological innovations as they mature. Others are trying to show the next wave of founders a different path.
The one that longtime entrepreneur and investor Mike Lyons wants them to take is more of an uphill climb. He currently chairs a cybersecurity company doing “converged infrastructure virtualization,” based on technology developed through a tech-transfer partnership with Pacific Northwest National Laboratory (PNNL).
In 2002, he founded SafeView, Inc., which originally licensed the millimeter-wave technology now used around the world in airport security screening systems. The technology was developed with government money at PNNL, and SafeView invented the imaging system for screening individuals.
So, while Lyons is passionate about entrepreneurship, he doesn’t get too excited about the next messaging or mobile-game app. “A lot of that stuff is just polishing the apple,” says Lyons, also a director of an Internet-of-Things company in the valley.
He wants to see technology taking on bigger, more complex challenges. And that’s why, since 1988, Lyons has taught the course Technology Venture Formation in Stanford’s Department of Management Science & Engineering (MS&E). Along with two other experienced entrepreneurial instructors, the class brings together graduate students — mostly from the engineering school and graduate business school — to work in teams on a technology that has “a critical innovative advantage that will provide sustainable differentiation.”
“I don’t mind apps and things like that,” says Lyons, a consulting associate professor in the MS&E department. “I just think people should understand the difference between building companies that leverage a previously built, trillion-dollar infrastructure, and ones that are building technically significant products from the ground up, or that leverage such infrastructures in disruptive ways, like Uber.” Think wireless infrastructure, chip fabs, open-source and operating systems.
In regards to the lean-startup approach, which advocates for the development of a “minimum viable product” (MVP) and iterative product releases based on customer feedback and data, Lyons says it is a method that makes sense for technologically “light” projects. But he adds that the notion that a handful of engineers can build an MVP over a few weekends does not apply across all startups.
“If it’s one of these deep technology products, that’s just nonsense. That’s just not going to happen,” Lyons says. “The MVP could take two years to build.”
And those are exactly the kind of innovations he and the rest of the teaching team see in the version of Technology Venture Formation offered in Stanford’s Department of Civil and Environmental Engineering. Students from that class have launched ventures like PlanGrid, a construction app that digitizes blueprints and allows all team members to collaborate on a project via an intuitive interface.
Another startup, Mango Materials, aims to transform waste into affordable eco-friendly materials that are competitive with oil-based plastics through a microbial process involving the biogas methane.
Mango Materials CEO Molly Morse, who took an earlier version of the civil and environmental engineering course while working toward her Ph.D., says her company is currently getting paid for its products. But to have a meaningful impact in the world of plastics, Morse explains that her operations need to be at the “million-pound-plus scale.”
“When we started Mango Materials, we wanted to change the way people think about methane and the fate of plastics in the environment in a big way,” the biocomposites engineer says. “Impactful entrepreneurship to us, is not just creating a new business, it is critically thinking through how our technology can touch people’s lives and the planet.”
Other projects in the course have addressed housing and energy infrastructure in developing countries, while some teams have proposed ambitious infrastructure projects like sewage-treatment processes that would generate electricity to power a community.
“It’s fantastic because you’re not consuming – you’re net neutral on the grid. You don’t have to buy power to run the sewage-treatment plant,” Lyons said. “Students who really want to make an impact are turning towards this kind of entrepreneurship.”
I was raised to view hierarchy as a bad thing. My late father, an entrepreneur, often ranted about the idiocy he battled in the corporate and government bureaucracies that made life difficult for his little company. He loved the Peter Principle because, to him, it explained why so many organizations were packed with people who had risen to their level of incompetence. Perhaps because of my upbringing, I have always been drawn to arguments — such as management guru Gary Hamel makes — that “bureaucracy must die” and that top-down control is “toxic.”
Given my ingrained biases, I was taken aback by my own answer during an interview with McKinsey partner Rik Kirkland. He was interviewing me about Scaling Up Excellence, the book that Huggy Rao and I came out with in 2014. Rik closed the interview by asking what I learned from our scaling research that surprised me most. I immediately said something like, “I have always despised hierarchies in my heart, but this research taught me that they are good and necessary — of course some are good and others are bad, but spreading and sustaining excellence depends on having an effective pecking order.” As I told Rik once the filming stopped (it was a video interview that appeared on the McKinsey Quarterly site), I was surprised to hear my own answer to his question about surprises!
Huggy and I reached this conclusion for two main reasons. I still feel a bit ambivalent about it, but the evidence is overwhelming:
Hierarchy is inevitable. As our Stanford colleagues Deb Gruenfeld and Lara Tiedens show in a detailed review of research on hierarchy, although the forms it takes vary wildly, it is impossible to find groups or organizations where all members have roughly equal status and power. Whether researchers study people, dogs, or baboons, hierarchies are evident after just minutes of observation. And when strangers meet for the first time, a hierarchy of leaders and followers begins to emerge immediately. This rapid development of pecking orders is seen, for example, in groups of college students who meet in psychology experiments and when strangers start chatting on the street corner — leaders, followers and other signs of status differences nearly always emerge (along with more subtle roles such as “joker,” “hero” and even “scapegoat”).
Gruenfeld and Tiedens conclude: “When scholars attempt to find an organization that is not characterized by hierarchy, they cannot.”
Organizations that are celebrated for their lack of hierarchy may downplay and reduce status differences, but they always have some people with greater formal and informal power than others — and associated pecking orders. And eliminating titles such as “manager” or “supervisor” doesn’t make the hierarchy disappear. For example, there has been a lot of talk lately about Zappos’ ongoing reorganization into something they call a “holacracy.” Some headlines suggest that the company is getting rid of bosses — that isn’t quite right. While more power is being pushed down the hierarchy, it persists under the new structure. More responsibility is being placed as people are moved into “circles” (which sound much like self-managing teams). Yet even though they have stopped using the word “manager” for many roles, there are still people who perform what sounds like middle-management roles to me: They are responsible for staffing teams and dealing with employee performance issues. And, while Zappos is getting rid of a lot of titles, note that Tony Hsieh is still called the CEO.
Hsieh may delegate and empower people more than many CEOs. But Wired’s cute claim that he is “the boss that isn’t” strikes me as somewhat misleading. As I discussed with Jena McGregor when she interviewed me for the Washington Post article she wrote on the change, Hsieh is using his power and position at the top of the pecking order to institute the new structure (which seems like a good idea, at least based on what I learned about it). In fact, this kind of claim that an organization is non-hierarchical because the top dog wields his or her power to push greater responsibility and accountability down to lower levels is also seen in hype about other companies including IDEO and W.L. Gore. Yes, when people are given decision-making power and have the requisite confidence and skills, leaders do not need to monitor or coach them as closely – but there is still a hierarchy and certain people have more decision authority than others.
In short, if you can find a group of people (or dogs or baboons) without a hierarchy, I want to hear about it. Yes, power and status differences are sometimes reduced, but hierarchy is a fact of organizational life.
Organizations and people need hierarchy. While there is no doubt that some hierarchies are better designed than others, an interesting test is what happens when there is little or no consensus about who has more – and less — power. Gruenfeld and Tiedens describe a series of studies showing that when such agreement is absent (so the nature of the formal or informal pecking order is not clear), members become less committed to their groups, less productive and effective, dysfunctional competition for status emerge, and coordination and cooperation suffer.
Another interesting test is what happens when layers of management are removed in a company. Certainly, some organizations have too many layers, but some quite famous founders have discovered that they need intermediate layers — even though they long for the good old days when it was just them and a small team. Google Co-Founder and CEO Larry Page is exhibit one. As we wrote in Scaling Up Excellence:
‘Page has been described as “obsessed with making Google work like a smaller company.” In 2001, when Google grew to about 400 people, Page decided that middle managers were creating complexity and friction — symptoms of John Greathouse’s “Big Dumb Company Disease.” So he got rid of all of them. More than 100 engineers reported to a single overwhelmed executive. Frustration and confusion was rampant. Without those middle managers, it was nearly impossible for people to do their work and for executives to grasp and influence what was happening in the company. Page learned the hard way that a hierarchy can be too flat and that middle managers are often a necessary complexity.’
The upshot is that, as you scale an organization, getting rid of the hierarchy — or even assuming that a flatter one is better — is the wrong goal. Your job is to build the best hierarchy you can.
An earlier version of this article appeared on LinkedIn. Bob Sutton is on Twitter @work_matters.
Nowadays, it seems every budding startup claims its new app, product or service will change the way you live. But before passively accepting hyperbole as the new norm, let’s instead ask the question: What does real impact looks like?
It’s fine if friends want to post “Best. Ever.” with a phone pic of the burger they just ordered down the street, or rave about some new fashion accessory by typing, “How did I ever live without this?” But we all know what it means to truly make a difference in people’s lives, don’t we?
Venture capitalist Mike Maples, Jr. certainly wasn’t exaggerating when he ended his presentation at the DFJ Entrepreneurial Thought Leaders Seminar by daring students at Stanford to “only do things that you think have a chance to be legendary.”
His VC firm Floodgate invested early in Twitter, TaskRabbit and Lyft, all of which have had a deep and ongoing impact on society. And for Maples, they don’t conjure up images of cute birds, bunnies and bright pink moustaches, either. Rather, he regards them as “thunder lizards,” startups so disruptive that they don’t just redefine markets, they demolish them like Godzilla.
Step outside Silicon Valley, and the definition of “impact” can take on new dimensions. Even just beyond the San Francisco Bay Area bubble, community leaders want tech innovation to address more basic social ills born of poverty and inequity. In the town of Stockton, Calif., city councilman and mayoral candidate Michael Tubbs challenges the tech industry to turn its attention to problems such as racism and illiteracy.
The best coders in the world may never develop apps for those issues. But as someone who came from the town once known as the biggest American city in history to declare bankruptcy – and then went on to earn undergraduate and graduate degrees from Stanford on full-ride scholarships – Tubbs draws from both perspectives when he calls for today’s innovators to focus on real-world impact.
That mission is at the center of the world’s greatest institutions, from the United Nations to universities such as Stanford. While Hollywood and humanities majors around the country continue to portray Stanford as being singularly focused on churning out the next Google or Instagram, there’s no denying that the university seeks to solve society’s most intractable problems.
Last month, Stanford announced that it will launch the largest fully endowed scholarship in the world in order “to prepare a new generation of global leaders with the skills to address the increasingly complex challenges facing the world.” With a total endowment of $750 million, the graduate-level scholarship will begin accepting applications in the summer of 2017 from students everywhere who have the passion and potential to solve global challenges affecting the environment, health, education and human rights.
“We will bring together outstanding, courageous scholars to benefit from Stanford’s innovative educational environment, who then go on to lead governments, businesses, nonprofits and other complex organizations and develop creative solutions to effect positive change,” University President John Hennessy said at the time of the announcement.
Also speaking recently at the Entrepreneurial Thought Leaders Seminar, Hennessy reflected on his 16 years leading the university and his achievements in industry as a computer-science pioneer. Perhaps most notably, he said entrepreneurship isn’t just about starting a business. It’s about transforming an idea into something real that can have wide impact:
Hennessy steps down as Stanford’s president this summer, at which point he will serve as the inaugural director of the new scholarship. In honor of his leadership at Stanford, and the generosity of alumnus and Nike Co-Founder Philip Knight, it has been named the Knight-Hennessy Scholars Program.
If you ask, experienced entrepreneurs will make it very clear how difficult their job is, and how slim your chances are of launching the next Uber or Facebook. And yet, around the world, the allure of entrepreneurship grows stronger by the day. It coincides with the mantra that innovation is the answer to all of life’s shortcomings.
So, especially in innovation hubs like Silicon Valley, everyone wants to “do a startup” just to do it. And we’re doing it at a time when books, classes and other resources have all but demystified the art of entrepreneurship and turned it into a step-by-step process. Couple that with readily available startup money from a crowded field of venture capitalists competing to back that next game-changer, and you can go from zero to launch in no time.
The challenge is knowing if what you’re building is exactly what customers want before you’ve blown all that capital on hiring top talent and building the actual product. Traditionally, that was called “market research.” Then in 2008, with the introduction of the “lean startup” approach by Eric Ries, entrepreneurs turned to business-hypothesis-driven experimentation and iterative product releases based on customer needs.
At around the same time, Alberto Savoia, a two-time entrepreneur and early employee of Google, began urging entrepreneurs to “pretotype” before they prototype. Savoia was the search giant’s first engineering director and most recently held the title “Innovation Agitator” at Google before leaving in 2012 to focus on spreading his idea to help you ensure that “you are building the right it before you build it right.”
The premise of Savoia’s approach is that most new ideas fail in the marketplace not because they are poorly built or executed, but because they were the wrong idea to pursue in the first place. In his 2011 book Pretotype It — a 75-page manual that begins with the disclaimer that it is itself a pretotype — Savoia states that 90 percent of mobile apps don’t make any money, and 80 percent of startups lose money for the investors.
To show that even the most proven innovators are likely to fail, he includes slides in his standard presentation that are riddled with the logos of killed initiatives at Google and Microsoft.
“We assume too much, plan too much, hope too much … and test too little,” Savoia says. His approach offers multiple techniques for pretotyping something to determine whether you’re building the “right it.” All are ways to test a product or service with minimal build-out, use of resources or emotional attachment.
For instance, at Stanford, where Savoia is an educator-in-residence, students came up with a potential business idea called “Second-day Sushi.” Would cash-strapped college students buy day-old sushi from a campus eatery if labels said so and offered a 50 percent discount? Would enough of them be persuaded by the catchphrase “Nothin’ fishy about it!” to make Second-day Sushi an idea worth fleshing out further?
Many of Savoia’s pretotyping techniques reflect his clever approach to experimentation and his focus on “time to data”: How quickly can you get real-world data to support or invalidate your idea. For the students, he proposes printing out some simple stickers that say “Second-day Sushi, 1/2 Off” and placing them on half the sushi containers sold at the eatery. Then, he would stand back and count how many students bought sushi that day, and how many of them chose the discounted containers.
From his time at Google, Savoia prefers decisions be backed by numbers. So, he specifies that at least 20 percent of students would have to buy Second-day Sushi to consider it a successful experiment.
Savoia is quick to add that the eatery’s permission might be needed to conduct such a pretotype. But even without it, he says students could be stopped before they bring containers labeled Second-day Sushi to the cash register, told that it was just an experiment, and that they are actually holding fresh fish. And in return for unknowingly participating in this market test, you offer to pay for their lunch.
“Students get a free sushi box and you get real data,” Savoia says, “not just some fuzzy opinion that provides no metric for success.”
This experiment embodies an approach to many of Savoia’s pretotyping techniques, which is, “test before you invest.” And while Savoia acknowledges some overlap between the meaning of pretotype and prototype, he does draw an important distinction:
“A key difference between pretotypes and prototypes is that the cost and timeframe for pretotyping is at the lowest end of the spectrum that is usually covered by prototyping,” he explains in his book. “It’s acceptable for a prototype to take months or years of development and cost millions of dollars. In contrast, it’s definitely not acceptable for a pretotype to take that long or cost that much.”
He adds, “One of my standard challenges is the ‘24/24.’ Can you get me real-world data in 24 hours or less for $24 or less?”
I require my students at Stanford to write a failure résumé. That is, to craft a résumé that summarizes all their biggest screw-ups — personal, professional, and academic. For every failure, each student must describe what he or she learned from that experience. Just imagine the looks of surprise this assignment inspires in students who are so used to showcasing their successes. However, after they finish their résumé, they realize that viewing experiences through the lens of failure forced them to come to terms with their mistakes and to view them as a great source of data about what works and what does not.*
On the most basic level, all learning comes from failure. Think of a baby learning to walk. He or she starts out crawling and falling before finally mastering the skill that as an adult we take for granted. As a child gets older, each new feat, from catching a baseball to doing algebra, is learned the same way, by experimenting until you are finally successful. We don’t expect a child to do everything perfectly the first time, nor should we expect adults who take on complex tasks to get it all right the first time.
So, how do you prepare yourself for inevitable failures? People who spend their time on creative endeavors know that failure is a natural part of the creative process and are ready when it happens. Jeff Hawkins, founder of Palm, Handspring, and Numenta, gets worried when things go too smoothly, knowing that failure must be lurking around the corner. When he was running Handspring, everything was going swimmingly for the release of the original “Visor”, a new personal digital assistant. But Jeff kept warning his team that something would happen. And it did. Within the first few days of the release of their first product they shipped about 100,000 units. This was remarkable. But the entire billing and shipping system broke down. Some customers didn’t receive the products they paid for, and others received three or four times as many units as they ordered. This was a disaster, especially for a new business that was trying to build its reputation. So what did they do? The entire team, including Jeff, buckled down and called each and every customer. They asked each person what he or she had ordered, if they had received it, and whether they had been billed correctly. If anything wasn’t perfect, the company corrected it on the spot. The key point is that Jeff knew something would go wrong. He wasn’t sure what it would be, but was prepared to deal with anything that came their way. His experience has taught him that failure is inevitable, and that the key to success is not dodging every bullet but being able to recover quickly.
Jeff Hawkins, in 2009, sharing this story at the DFJ Entrepreneurial Thought Leaders Seminar.Most individual’s paths are riddled with small and enormous failures. The key is being able to see these experiences as a chance to evaluate valuable data, and to move on. For most successful people, the bottom is lined with rubber as opposed to concrete. When they hit bottom, they sink in for a bit and then bounce back, tapping into the energy of the impact to propel them into another opportunity. A great example is David Neeleman, the founder of JetBlue. David initially started an airline called Morris Air, which grew and prospered, and he sold it to Southwest Airlines for $130 million. He then became an employee of Southwest. After only five months David was fired. He was miserable working for them and, as he says, he was driving them crazy. As part of his contract he had a five-year non-compete agreement that prevented him from starting another airline. That seemed like a lifetime to wait. But after taking time to recover from this blow, David decided to spend that time planning for his next airline venture. He thought through all the details of the company, including the corporate values, the complete customer experience, the type of people they would hire, as well as the details of how they would train and compensate their employees. David says that getting fired and having to wait to start another airline was the best thing that ever happened to him. When the non-compete period was over, he was ready to hit the ground running. He was able to turn what seemed like a terrible situation into a period of extreme productivity and creativity.
David Neeleman, in 2003, shares this story at the DFJ Entrepreneurial Thought Leaders Seminar.Tackling new challenges in all domains requires a willingness to take risks, and a high chance of failure. However, risk taking is not binary. Each of us is comfortable taking some types of risks and find other types quite uncomfortable. You might not even see the risks that are comfortable for you to take, discounting their riskiness, but are likely to amplify the risk of things that make you more anxious. For example, you might love flying down a ski slope at lightning speed or jumping out of airplanes, and don’t view these activities as risky. If so, you’re blind to the fact that you’re taking on significant physical risk. Others, like me, who are not physical risk takers, would rather sip hot chocolate in the ski lodge or buckle themselves tightly into their airplane seats than strap on a pair of ski boots or a parachute. Alternatively, you might feel perfectly comfortable with social risks, such as giving a speech to a large crowd. This don’t seem risky at all to me. But others, who might be perfectly happy jumping out of a plane, would never give a toast at a party.
By my accounts, there are six primary types of risk: physical, social, emotional, financial, intellectual, and ethical. For example, I know that I’m comfortable taking social risks but not physical risks. In short, I will readily start a conversation with a stranger, but please don’t ask me to bungee jump off a bridge. I will also happily take intellectual risks that stretch my analytical abilities, but I’m not a big financial risk taker. On a trip to Las Vegas I would bring only a small amount of cash, to make sure I didn’t lose too much.
I ask my students to map their own risk profile. With only a little bit of reflection, each person knows which types of risks he or she is willing to take. They realize pretty quickly that risk taking isn’t uniform. It’s interesting to note that most entrepreneurs don’t see themselves as big risk takers. After analyzing the landscape, building a great team, and putting together a detailed plan, they feel as though they have squeezed as much risk out of the venture as they can. In fact, they spend most of their efforts working to reduce the risks for their business.
If you do take a risk and happen to fail, remember that failure is a natural part of the learning process. And, most important, if you aren’t failing sometimes, then you probably aren’t taking enough risks.
From humble beginnings known for its fruit orchards, Silicon Valley has transformed into the heartland of entrepreneurship and innovation in the United States. Each year hundreds of budding entrepreneurs from all over the world descend on Silicon Valley in search of the secret sauce. What makes this environment ripe for creativity and innovation? Can the environment be replicated in another country?
Charles Eesley, an assistant professor in the Department of Management Science and Engineering and at the Stanford Technology Ventures Program, has been studying the implications of institutional change for entrepreneurship in the United States, China and Japan. This week, a study by Eesley and collaborators Delin Yang, a professor at Tsinghua University, and Jian Bai “Jamber” Li, a doctoral student at Stanford, was published in Organization Science that analyzes the successes and failures of one of China’s primary efforts to encourage innovation.
The work looks specifically at Project 985, an educational reform program funded and implemented by the government of the People’s Republic of China and launched in 1998. It sought to foster a belief in the importance of innovation among students of 39 partner universities, with Tsinghua University and Peking University each receiving a current value of nearly $276 million. This funding provided new classes and programs on innovation and commercialization, recruitment of accomplished researchers from overseas institutions and corporations to teaching positions, construction of new facilities and acquisition of new equipment needed for advanced research.
Following is a Q&A with Eesley about his research:
What did your research reveal about innovation funding and outcomes in China?
Government funding provided additional resources both in classrooms and in the lab, and students graduating from the Project 985 universities were significantly more likely to create innovative, high-tech firms. However, when they commercialize their technologies in a startup, they find that innovating in a manner advocated by Project 985 negatively impacts firm financial performance.
How does Project 985 negatively impact firm performance?
It turns out that political networking results in better firm performance in the Chinese context. This is a counterintuitive result. From a U.S. perspective, you would expect the additional funding for research and development would lead to more innovative products that would result in better firm performance. The other institutions in the U.S. that are implemented to support startups, such as intellectual property and antitrust laws, are lacking in their enforcement in China. Also, state-owned enterprises are often favored and it often becomes difficult for a startup to compete against a state-owned enterprise no matter how innovative the product.
We found that those students influenced by Project 985 reform were less likely to engage in political networking and more likely to spend time and invest in research and development activities. They thought that the great technology that they developed was enough to succeed and they were actually spending time on activities not linked to better firm performance.
How would you compare entrepreneurship in China to Japan and the United States?
A big part of my research is that environment shapes the type of entrepreneurship for a specific region. China, the U.S. and Japan all have very different cultural and institutional environments. The forms of entrepreneurship that you see are a reflection of the policies at each place.
Each of these markets is at a different stage of their development. In the Chinese market over the past decade, they have been going through a boom in manufacturing that the U.S. and Japan went through a couple of decades ago. The U.S. economy has moved more fully into services and the type of entrepreneurship that you see is focused on e-commerce, health care, financial services – and less about agriculture and manufacturing. The Japanese economy is also advanced. With their aging economy, low-end manufacturing is becoming more commoditized and moving into robotics and high-end manufacturing.
Some of the market struggles that we are seeing in the Chinese economy are a reflection of transitions taking place. The services industry is one of the fastest growing in China and manufacturing is slowing down.
The million-dollar question: Is there a formula for boosting innovation and entrepreneurship that can be replicated?
It is complicated and there are a lot of factors. There are institutional policies and culture, both of which take time. What we learn from this study is that sometimes changing just one policy in isolation is not effective and we need other complementary policies to be enforced as well.
For instance, Taiwan mimics U.S. policies. However there is something about the education system in the U.S. that allows students to be creative and think outside the box and do something different. To purely compete on efficiency and low cost is very difficult over time and you don’t gain the higher profit margin from offering a differentiated product or service.
You have to consider both the policies, and their correct implementation, and the cultural environment. Educational institutions have an important role to play as well both in technical education as well as in entrepreneurship education and informing policymakers. In the end, it’s a bit of copy and adapt depending on the local environment.
These days, organizations across the board claim to be focused on innovation. But when you look at how well different types of entities responsible for bringing new products and services into the world actually do so, some are better than others.
The most obvious type of organization that helps launch new products is a venture capital firm, which funds entrepreneurs and often works with them to bring their concepts to market. Another is corporate venture capitalists, who typically work within a larger corporate structure and seek to acquire innovative startups that can be folded into the parent company. A third entity is government, which supports innovation by issuing grants for groundbreaking research and for early-stage development of entrepreneurial ventures.
Among those three flavors of funding partners, traditional venture capitalists (VCs) fueled the most innovation, according to a recent study by entrepreneurship researchers from the Stanford Technology Ventures Program (STVP), the entrepreneurship center in the university’s Department of Management Science & Engineering (MS&E).
Their study, “Who Takes You to the Dance? How Partners’ Institutional Logics Influence Innovation in Young Firms,” is published in the journal Administrative Science Quarterly. The study’s co-authors include STVP-affiliated faculty Riitta Katila and Kathleen Eisenhardt, both professors in MS&E. The lead author is Emily Cox Pahnke, an assistant professor of management at the University of Washington, and a graduate of STVP’s Ph.D. program.
“We attribute these differences to VCs having a closer advisor relationship with the venture,” said Pahnke, whose dissertation provided the data for this study. She added that traditional venture capitalists are driven by better-paced and more motivating milestones than either corporate VCs or government agencies.
The authors studied almost 200 ventures in the United States, over a 22-year period, that make minimally invasive surgical devices, counting which ones received the highest number of patents and FDA approvals. The ones that worked with VC firms performed the best, primarily because their professional norms and practices made them more nimble and nurturing funding partners than corporate VCs or government agencies.
Regardless of the type of funding partner — venture capitalists, corporate VCs or government agencies — all proved to be good at selecting innovative ventures and having valuable technical and commercial resources on hand. The problem, the researchers concluded, was that the latter two were less involved during the relationship.
Traditional VCs, especially those in boutique firms, are deeply engaged with the entrepreneurs they fund, serve as advisors and sit on the boards of their startups, the co-authors explained.
Corporate VCs, on the other hand, turned out to be less effective partners because the complex division of labor within corporations, and broader strategic goals, seem to hinder progress and slow the decision-making process.
Meanwhile, the entity with perhaps the most altruistic reasons for seeing society advance through scientific and technological innovations proved to be the least effective funding partner. The effort on the part of government agencies to be fair and treat all private ventures equally resulted in particularly passive relationships, cookie-cutter approaches and “one size fits all” resources, according to the study.
In the field of surgical devices, the primary government agency that funds firms is the National Institutes of Health (NIH), which issues grants to support both technical breakthroughs that advance science, and commercial innovations that can improve public health. However, despite the NIH’s immense technical and informational resources, they remain largely out of reach because of the agency’s hands-off approach.
“So, then the question becomes whether it should be the government’s role to support startup innovation,” said Katila, whose research is at the intersection of technology strategy and organizational learning.
Given how important innovation is for society, she admits that she and her co-authors were disappointed to see government not outperform the other types of funding partners. But on a positive note, Katila said that their findings can show the public sector how to be better backers of innovation by identifying what works best in the private industry.
The government is beginning to catch on: The U.S. Patent and Trademark Office recently opened a regional office in Silicon Valley to save entrepreneurs on the West Coast a trip to Washington, D.C. And over the last few years, several government agencies — including the NIH — have trained their scientists and researchers in the “lean startup” methodology that has fueled much of the current tech boom.
“Government and Silicon Valley have much to learn from one another to boost innovation,” Katila said.
If the Fortune 500 had a motto, it could be “go big or go home”. Large companies excel at bold, expensive moves intended to intimidate the competition. After all, they have enough resources to follow through on their aggressive threats. Startups, however, don’t have the luxury of belligerence. With their limited resources, attracting the attention of more powerful rivals too early in the game can be fatal. However, their smallness can also be a distinct advantage, allowing them to make market inroads right under the noses of the giants.
These differences can be exacerbated by the market context. In the newer, less certain markets that many startups enter, a company’s ability to discover untapped opportunities tends to matter more than the size of its assets. Therefore, it stands to reason that entrepreneurial firms need an entirely different strategic mindset from the big boys in order to successfully compete.
As this issue sits at the intersection of competition and innovation, which happens to be my area of concentration, I took part in researching it for the paper “All the Right Moves: How Entrepreneurial Firms Compete Effectively” (co-written by Riitta Katila of Stanford University and Eric L. Chen of Onyx Pharmaceuticals), published in Strategic Entrepreneurship Journal. Our findings indicate that startups can potentially gain competitive advantage even in crowded markets if they keep in mind that their greatest weapon is the element of surprise.
The permutations of competition
For this experiment, we used the INSEAD-developed Markstrat software, widely known for its accuracy in replicating real-world competitive business environments. Player groups form virtual companies and vie with one another in simulated marketing and R&D activities (everything from market research to allocating advertising budgets). The system periodically “grades” the simulated firms’ performance, giving them a share price as well as sales, market share, and customer satisfaction data.
During the years 1999-2006, we assigned a total of 160 teams of MBA students from a major U.S. university to compete in either mature or untested market simulations. In addition, we made two out of every five teams “startups” by granting them fewer financial resources and less market power than the other three. In this way, we were able to observe and learn from the different permutations that unfold when firms of various sizes compete within both new and established markets.
The mature-market Markstrat simulation has well-established customer segments and product features. A new entrant must work hard to outperform the incumbents, but the potential rewards are huge.
The virtual startups that succeeded in the mature-market environment developed a strategy that worked around the large players but ultimately surprised them. In general, they engaged in more exploitative R&D moves, or process-based R&D—introducing low-cost products—and exploratory market moves, i.e. entering new market segments. Essentially, they stayed below the radar while probing for weak spots in their more powerful competitors. In post-game interviews, these teams spoke of “shifting strategy according to our competitors’ moves,” and using cheap products as a “Trojan horse” preparing the way for full-scale market siege. Their success in established markets was based on their ability to seize upon incumbents’ complacency and tactical errors.
The large firms were able to prevail by doing the opposite: constantly innovating within established market segments, introducing new products and refining current ones so as to increase their existing advantage and, over time, cement their supremacy.
MBA teams competing in the new-market simulation had to contend with uncertainty and instability that only increased as the game went on. It was unclear who the competitors would be, how consumers would behave, and whether the market would even be profitable at all (of course, it ultimately was).
Here, the high-performing startup teams were the ones that quickly got a feel for the uncharted terrain through rapid-fire exploratory R&D and market moves—releasing a spate of new products aimed at diverse market segments. This strategy enabled them to scout for opportunities while remaining light-footed enough not to be toppled when the ground shifted beneath them.
A fully exploratory strategy allows startups to exploit their natural agility. Unlike in the mature market, where the winning competitive strategy for startups was heavily reactive, in the new market startups had no choice but to lead. I suspect this is because the pervasive uncertainty of new markets levels the playing field, thus erasing the invisibility advantage entrepreneurial firms enjoy elsewhere. Getting in and out of markets ahead of the established players is the best way for smaller firms to avoid being muscled out of the running.
As the students put it, entrepreneurial firms needed to “be nimble and quick…willing to leap from segment to segment.” By contrast, one startup team that chose a “slow and steady” approach finished last place in their industry.
Large firms are sometimes at a disadvantage in new markets because they are forced to employ both exploratory and exploitative moves simultaneously. In other words, they must innovate like startups without putting existing strongholds at risk. One team illustrated this approach by saying, “Milk current products, but be prepared to have new ones at hand to catch the next wave and gain new advantage.”
Quality vs. quantity
On the whole, our findings suggest that startups can achieve success with fewer competitive moves than their large rivals, but those moves need to be expertly timed. In established markets, entrepreneurial firms can enter late, keep their head down, and strike hard once they spot an exploitable weakness. In less mature markets, they can leverage their agility to structure new markets before large firms have the chance to enter. It appears that when it comes to gaining competitive advantage, entrepreneurial firms play by a different set of rules.
If there’s one thing we know for sure, it’s that entrepreneurship is an uncertain and risky journey where surprising discoveries often lead to breakthrough progress. So, how do we set ourselves up to be open to these “aha” moments and learn from them?
In our daily lives, we tend to have certain expectations about what will happen in any given situation. But it’s when actual results don’t line up with those expectations that we should learn to really pay attention. Let’s take Intuit as an example. In the video below, Scott Cook, co-founder of the accounting software maker, describes how he ignored one bit of customer feedback year after year because it didn’t make sense to him … until it finally did. And once he accepted the unexpected data, it opened the door to a whole new market.
Welcoming cognitive dissonance isn’t trivial. As we’ve now seen, for entrepreneurs, puzzling findings can lead to lucrative opportunities. And this can also hold true for the venture capitalist who invests in them. Here in Silicon Valley, where perhaps the world’s highest concentration of VCs hear pitches from an equally high number of potential founders throughout the year, it’s easy to see how startup investors eventually adopt a “seen it all before” swagger.
But it’s the ones who resist thinking that way, and remain open to letting their beliefs be challenged, that increase their chances of discovering the next big thing. Rebecca Lynn, co-founder and general partner at Canvas Venture Fund, emphasizes the importance of paying particularly close attention when something doesn’t make sense. She explains that her ability to hone in during these moments has opened her up to some of the most interesting ideas she’s ever come across.
Even opportunities for self-development come by way of opening up ourselves to contrarian views. As Mike Rothenberg of Rothenberg Ventures discusses in the video below, growing as an entrepreneur hinges on relentlessly inviting feedback from others. And beyond listening intently when we experience cognitive dissonance, Rothenberg says we should express our gratitude for the new learning.
The truth is, expectations, beliefs and worldviews are uniquely personal and, as a result, are bound to vary from one person to the next. But as entrepreneurs and growing individuals, moments of utter surprise that challenge our deeply held beliefs should be reframed as valuable opportunities to pause, listen and learn. Insights about how to grow our careers, our businesses and, most importantly, ourselves come disguised as experiences that cause cognitive dissonance. The key is to embrace the anomalies, not ignore them.
Too many of us use the terms “going to school” and “getting an education” interchangeably when, in fact, a formal education is just one part of it. The experience of classical schooling is multi-faceted and encompasses a mix of acquiring academic knowledge and softer, more abstract skills. Though fundamental knowledge serves as the foundation for any innovation, being an entrepreneur takes much more than just book smarts alone.
Once, in the midst of his own academic pursuits, Albert Einstein beautifully captured all that an education is: “Education is what remains after one has forgotten what one has learned in school.” That’s not to say school isn’t important — it is. But perhaps the biggest takeaways are retaining the thirst for knowledge beyond graduation, and building upon the life skills that helped get us there. While impressive, graduating from a prestigious college with a slew of classes aced and a degree in hand doesn’t necessarily say anything about a person’s ability to succeed professionally. In the video below, Stewart Butterfield, co-founder and CEO of Slack, dispels the notion that an elite education guarantees excellence.
So what else should we look for in an education? The true test should be that we are able to demonstrate our learning and showcase the skills we acquire. And perhaps grades alone can’t adequately capture this. Then what can? In the following clip, Sal Khan describes a new model for education from his book The One World Schoolhouse. The founder and executive director of the free learning platform Khan Academy highlights that walking out of school with a portfolio of work, projects and accomplishments says more about one’s ability — both as a student and as a member of the workforce — than grades and a degree do alone.
This is already the case at Stanford and campuses across the country, where experiential education is being emphasized just as heavily as traditional learning approaches. There is obvious value in both, but differing opinions abound on the importance of domain-specific expertise versus the development of someone who can just jump in and learn along the way. The debate is particularly fascinating when you pose that question to scholars and practitioners sitting right next to each other – as we see here:
A formal education remains incredibly important for a variety of reasons: It offers a venue for exposure to a wide breadth of topics and offers us the opportunity to make connections across disciplines. For entrepreneurs, school not only provides subject-matter knowledge, but also the frameworks necessary to remain a lifelong learner. Academic institutions are incredible places where curious minds gather to learn for the sake of learning. Ultimately, however, let’s not forget that classes, schooling and degrees are just part of the education equation.
In a place as forward thinking and technology driven as Silicon Valley, what someone said just five years ago can seem ancient. New technologies continue to emerge at an ever-faster rate and our expectations are challenged time and again. To appreciate just how far we’ve come, let’s step back in time and see whether or not what we thought of the future came to pass.
In 2003, Jen-Hsun Huang, the co-founder of visual-computing pioneer NVIDIA, described virtual-reality goggles as if he were holding an Oculus Rift headset in his hands. If anyone would know what would lie ahead in this space, it would’ve been Huang. But when he mentions “extremely lightweight displays that you put on as goggles with head tracking,” it sounds impressively similar to the cardboard ones Google just debuted that use your smartphone’s accelerometer to track head movement.
Much of what we envisioned about the future is already manifesting in the world around us, and the evolution is quite apparent. In fact, the rate at which technology has been able to disrupt and force traditional businesses to evolve and stay relevant is nothing short of unprecedented.
Nearly 20 years ago, Silicon Valley luminary Vinod Khosla predicted that phone companies would have the rug pulled out from under them within a decade, once long-distance calling became free. He recalled this in a 2008 talk as part of the DFJ Entrepreneurial Thought Leaders Seminar series. And yet, beyond free long-distance calling, we’re now at a point where even using the word “Skype” as a verb has become passé.
Khosla was uncanny in predicting how disruptive technology would be. But he also pointed out something else that’s now understood as fact: entrepreneurship shapes our future. The key is in recognizing the opportunities in existing markets and established processes that are ripe for disruption. That’s where innovative change can be brought about.
Steve Ballmer, former CEO of Microsoft, describes a landscape where technology companies of all sizes emerge and fade away with time. In a world where the industry will become increasingly dynamic, our computing devices will become smarter and smarter. This excites Ballmer greatly, as captured in the video below:
The beauty of our time is that technology continues to shape our world at a faster pace than ever before. But the question remains: What else will the future bring about to exceed our expectations?
One way to find out what makes a good entrepreneur is to, well, ask a successful entrepreneur. And if that person has done well in your chosen field, then it’s highly likely what she says will be relevant to you.
But if you want a more basic understanding, in terms of the right mindset and skills needed to succeed, it might make more sense to ask people who observe and invest in entrepreneurs on a regular basis. Through repetition and experience, these people can see patterns emerge in the traits of those who excel and those who don’t.
When you ask these experts, as we do every week in the DFJ Entrepreneurial Thought Leaders (ETL) speaker series, they don’t call an entrepreneur good or bad based solely on their net worth. Rather, they talk about the individual’s work ethic, enthusiasm and intelligence.
Pattern recognition is one sign of intelligence. But beyond the ability to see when something occurs again and again, the flip side of pattern recognition is noticing where things aren’t happening. The business-strategy term “blue ocean” refers to just that: a wide-open market that no one else has yet noticed, and so abounds with opportunities.
And in his recent ETL talk, venture capitalist Mike Rothenberg — whose seed-stage fund identifies, invests in and cultivates tech entrepreneurs — has just two words for those with serious startup aspirations: Start swimming.
As the longtime host of this seminar series, Stanford Professor of the Practice Tina Seelig has spoken to hundreds of entrepreneurs over the years and learned what traits the best ones have in common. She shares these lessons in her new book, Insight Out: How to Get Ideas Out of Your Head and Into the World, and in the classes she teaches in Stanford’s Department of Management Science and Engineering.
She also spoke about it at ETL last fall, presenting a model that lays out the knowledge, attitudes and skills that are crucial for any would-be entrepreneur. In a framework she now calls the “Invention Cycle,” Seelig says the journey from imagination to implementation begins with engagement — noticing opportunities in your everyday environment.
As co-founder and partner of one of the most prominent venture capital firms in Silicon Valley, Ben Horowitz, also knows a thing or two about what makes a good entrepreneur. He, too, wrote a book that sums up his insights, The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. As the title implies, it aims to be a no-nonsense guide for entrepreneurs, explaining brutal truths and dispelling common myths.
It all starts with being able to build a great product, Horowitz said when he spoke at ETL last fall. If you can’t build something that consumers want, Horowitz explained, you’re not going to be able to build a great company. The co-founder of Andreessen Horowitz spent a lot of his talk describing how many of the non-technical skills that entrepreneurs need — people skills, management skills — are not intuitive. But they are absolutely essential to succeed and scale up.
The concept of “entrepreneurship education” still has its skeptics, perhaps because what immediately comes to mind are iconic entrepreneurs like Elon Musk or Oprah Winfrey. How could anyone possibly teach an individual to be remotely as influential or visionary as either of those two?
Educators, however, know that “entrepreneurship” is an umbrella term that embodies many teachable skills — such as creativity, design thinking, leadership and the basics of business and management.
Although entrepreneurship may not be as exact a science as, say, bioengineering, the associated knowledge, skills and mindsets can be taught. Just like a child can be nurtured over time to be a great writer or athlete, a person can learn to be entrepreneurial if given the right guidance and opportunities to internalize important lessons through hands-on, experiential exercises that gradually develop the required tools.
One of the latest entrepreneurship educators to demystify her field is our own Tina Seelig, executive director of the Stanford Technology Ventures Program, the entrepreneurship center in the university’s engineering school. In her new book, Insight Out: How to Get Ideas Out of Your Head and Into the World, Seelig presents a series of steps that anyone can follow to do exactly what the title states.
Time and again, Seelig says the path these entrepreneurs took followed the steps of her Invention Cycle: imagination, creativity, innovation and entrepreneurship. And she recently took to the seminar stage herself to explain how those concepts constitute the cycle, beginning with imagination.
After imagination, the next two steps in the cycle are creativity and innovation. Creativity, as Seelig defines it, is applying imagination to address a challenge or opportunity. Innovation, then, is applying creativity to generate unique solutions. That is, creative ideas are new to you, and innovative ideas are new to the world.
These two concepts are illustrated perfectly in the story shared by entrepreneur Alon Cohen, who, along with his wife, Adi Tatarko, founded the home design and remodeling website Houzz. After several frustrating rounds of trying to remodel their own home — failing at first by going with a friend’s referral, and then later taking the inefficient route of leafing through piles of books and magazines — they decided to build a website that showcases and aggregates the work of architects for the countless others in their situation.
And because it was one of the only websites of its kind at the time, word spread quickly and Houzz started offering content for homeowners in Chicago, New York and other major markets across the country. The site also grew rapidly in scope, attracting interior designers, landscapers and other professionals.
Clearly, Houzz wasn’t just a creation. It was an innovation.
The last step in the Invention Cycle, entrepreneurship, isn’t so much about starting a company, as it is about influencing others to support your innovation in order to magnify its impact and truly get your idea out “into the world.” Hence, Seelig explains, entrepreneurship requires encouraging and empowering others — whether that means they join your team, fund your work, use your products or even just spread the word.
“Great founders are amazing at getting support. They are amazing at getting support from people who can really help them,” says Mike Rothenberg, founder and CEO of Rothenberg Ventures. “That is what entrepreneurship is, is getting support outside of what you can currently control.”
Rothenberg Ventures identifies, invests in, and cultivates technology value and talent at scale, having provided early funding for such startups as Planet Labs, SpaceX and ZenPayroll. Rothenberg himself founded and bootstrapped three companies. So not only can he recognize the traits of a good entrepreneur, he is one, harnessing all the parts of the Invention Cycle — imagination, creativity, innovation and entrepreneurship.
Think back to when you were in high school. How did you do your hair? How did you dress? People generally develop a sense of personal fashion over the ensuing years into adulthood, after a few flings with different styles — and hopefully, some honest feedback from friends and family.
But Susan Koger, co-founder of the independent online retailer of women’s fashion known as ModCloth, says it’s perfectly “OK to look back and cringe.” She wasn’t talking about day-glow tops and friendship bracelets, though. She was speaking at the Entrepreneurial Thought Leaders (ETL) Seminar series, sharing advice on pursuing one’s passion, with students on the cusp of launching their own careers.
Her point: Your first attempt at anything new will likely be crude, and so you should give yourself the permission to just do it. If you stick with it and get better, yes, you will probably look back years later and wince. But next to no one crushes it the first time, anyway.
True, the stakes may seem higher if you’re an entrepreneur debuting your first rev to the world. But Koger, ModCloth’s chief creative officer, insists that getting started is better than waiting till it’s perfect.
Admitting to ourselves that we are bound to err is humbling. But in the business world, where showing confidence and competence are the norm, having humility may be what gives the entrepreneur an edge.
William Marshall, co-founder and CEO of startup satellite maker PlanetLabs, also had some wise words for those interested in entrepreneurship at another recent ETL talk. Actually, he cautioned students at Stanford — all deeply immersed in the Silicon Valley vibe — against “defaulting” to a startup the next time they have an idea that seems to have business potential.
Another non-intuitive bit of advice Marshall shared was to not get an M.B.A. Reflecting on his own career, the former NASA scientist said some of the best physicists he’s known didn’t study physics. “The same is true in business: The best business people didn’t study business,” Marshall says.
But his final bit of advice, in the video below, was to have humility. Rather than promise everyone that you’re going to create a great product, build it first and then show people how amazing it is. Marshall says they will be much more appreciative if you take that approach.
In that clip, Marshall briefly mentions hiring people smarter than you among his tips for future founders. Heidi Roizen, however, shares that same advice, but in much blunter terms. “My goal truly is to be the dumbest person in the room,” Roizen said at her ETL talk last year, titled “Adventures in Entrepreneurship.”
Roizen has spent her life immersed in the Silicon Valley ecosystem, as an entrepreneur, corporate executive, venture capitalist, educator and board member for companies public and private. She is currently is the operations partner at the venture capital firm DFJ and lectures on entrepreneurship in Stanford’s Department of Management Science & Engineering.
In short, she knows what she’s talking about.
Even for those who aim to think “outside the box,” rules and constraints aren’t always bad. They focus our thinking and remind us to be deliberate with our execution by keeping our goal in mind. So in order to thrive in a landscape characterized by unmade decisions, it’s critical to be thoughtful about what rules we create and how they might guide our choices down the road.
At her recent DFJ Entrepreneurial Thought Leaders Seminar talk, Stanford Management Science & Engineering Professor Kathleen Eisenhardt drew on the principles from her new book, Simple Rules, on how heuristics are crafted. In the video below, we see how rule formation guides a multinational company through an uncertain future in a responsible manner:
Not only do rules inform intelligent choices about the way we do business, they also provide us with constraints, which, as David Heinemeier Hansson said in his 2010 ETL talk, “are your friends.” In an overwhelmingly competitive landscape, boundaries bring us face to face with a hard truth: Sometimes, you just can’t outdo your competition. But you can think differently than your rivals and, ultimately, succeed by recognizing and operating within your own zone of expertise.
Amazon Founder and CEO Jeff Bezos once said: “One of the only ways to get out of a tight box is to invent your way out.” Teams and organizations that leverage their own operational limits to think more creatively about how they do business often reap the rewards of differentiation. This sort of creative exercise doesn’t just prompt us to think about how to do things faster, cheaper or better ‐ it makes us question our assumptions and sometimes reinvent ourselves entirely.
Hansson — creator of the popular Ruby on Rails web-development framework and founder of the collaboration program Basecamp (formerly 37signals) — talks us through just how this looks in practice:
Perhaps the most important part of developing constructive constraints in business is to first think about our own work ethic. Why do we make the choices we do? Are our own actions aptly guided by a simple set of rules? What personal limits to place on ourselves? Hemant Shah, CEO of Risk Management Solutions, underscores the seriousness of recognizing this as a means to then realizing when we should seek help from others.
Rules and limitations can seem like irritating constraints on what we can and cannot do. But think for a moment just how powerful they could be if harnessed in the right way: a simple set of guiding covenants that empower us to make informed choices, ask for help when necessary, and ultimately allow us to save our time and energy for the more important matters in our lives.
An entrepreneur, as the quintessential self-starter, naturally looks inward for inspiration when the road gets rockier and the hurdles higher. But no matter how awesome you are, people can’t always be walking nuclear reactors that generate a constant supply of motivation in a contained, self-sustaining way.
And you don’t necessarily need to max out the memory of your tablet with a bunch of the latest books by big-name motivational speakers. You need only look around you to replenish your emotional reserves when the entrepreneurial journey begins to wear you down.
Perhaps the most obvious source of motivation outside yourself are the people around you. Imagine you’re the head of a fast-growing startup, confident you’re about to receive a $50 million infusion from several large investors. Then, all of a sudden, you get a call that they’re backing out. Visions of laying off all your loyal and hardworking employees – who laid everything on the line up to this point — cause you to break out in a cold sweat.
This is precisely what happened at the biotech startup Invitae at a critical point in their pre-IPO days. But the shared determination of everyone on the team, from the founders to the bankers representing them on the phone, pulled them through, Invitae President and Chief Operating Officer Sean George says in this video clip:
Motivation can also be found in the mission of your venture — that is, if it’s lofty enough. Again, the path of entrepreneurship is riddled with adversity, and day after day, people will want to dismiss your idea and say you can’t do it. Sooner or later, you’ll wake up one day and ask yourself whether it even makes sense to keep going.
For Ron Gutman, founder and CEO of HealthTap, his startup’s mission is “to help people live healthier, longer and happier lives” through on-demand patient treatment services made possible through an app that connects paying members with a network of over 67,000 doctors. A mission as important as that, Gutman says with a smile, “never gets old.”
A less obvious, but very valuable source of inspiration is the challenge itself — but not so much in the sense of someone simply rising to the occasion. As personal-brand expert Tristan Walker described when he came to speak at Stanford last year, an obstacle is simultaneously “a blessing.”
The founder and CEO of Walker and Company Brands learned this after speaking with filmmaker Tyler Perry, and he shared the advice with Stanford Professor of the Practice Tina Seelig at the DFJ Entrepreneurial Thought Leaders Seminar series: that every challenge an entrepreneur faces yields a lesson on how to deal with it next time.
In that sense, the lesson is simply a gift, Walker goes on to explain in this final clip. And once you understand that challenges are just gifts in disguise, you’ll always be able to find motivation in the face of adversity.
Taking time to reflect and understand what matters most to us, both professionally and personally, provides us with a strong framework for making decisions. In addition, staying clear on what matters to us often leads to a greater sense of fulfillment in life altogether. Whether implicitly or explicitly, some of our most recent speakers in the DFJ Entrepreneurial Thought Leaders Seminar series discuss how introspection keeps their efforts in line with their values.
Joshua Reeves, CEO and co-founder of ZenPayroll, raises the familiar point that professional success does not equal personal happiness, and hence, how crucial it is to choose our path carefully. In other words, take the time to understand what gives you a genuine sense of purpose and, yes, “mission.”
In college, Reeves says the academic quarter system provided built-in breaks from work to reflect on where studies were leading you. But even after launching into a career, he insists that we can structure our lives in a way that allows for periodic reflection and soul searching. That’s how Reeves realized his passion for developing technology that empowers others to do what they love.
Be it during a stroll through a neighborhood park or while commuting to work, taking the time to ask ourselves questions about why we do what we do can get us back in touch with what we consider meaningful and what our real priorities are.
Again, it comes down to choice, according to longtime venture capitalist Kathryn Gould. We can spend our time responding to the many opportunities that come to us, or we can choose to actively seek out the opportunities that truly excite us. For Gould, one of the first women venture capitalists in Silicon Valley, the choice was clearly the latter.
However, it is also important to distinguish between what we desire most deeply and when we can compromise. For John Collison, co-founder of the online payment system Stripe, it was always about creating a way for commerce to be seamless across different countries and currencies. Everything else, such as app features and design elements, become bendable means to a steadfast end.
This is especially relevant in entrepreneurship, where success depends largely on constant iteration based on customer feedback. But as Collison explains, understanding when to heed others and make adjustments, and knowing when not to budge, only comes after much self-reflection.
There are a few principles in life that keep us on track: a strong sense of what matters, our personal values and our vision. Adopting a ritual that allows for routine reflection keeps us asking the right questions of ourselves and, ultimately, allows us to lead a more fulfilling life. So think for a moment – are your actions in line with what matters to you?
If you’re leading an entrepreneurial venture, the new year can be an ideal time for redefining and rejuvenating. In a startup’s early days, founders can code all night, talk to customers all day, while keeping a small and devoted team on track the rest of the time. But once a business grows and becomes more complex, those sleep-deprived entrepreneurs will have to let go of some of those responsibilities to focus full time on leading the company and charting its path forward.
In other words, it becomes a matter of redefining the leadership role. For the final DFJ Entrepreneurial Thought Leaders talk of 2014, Ben Horowitz, of the Silicon Valley-based venture capital firm Andreessen Horowitz, pointed to Google Co-Founder Larry Page as a poignant example of someone who simply cannot take on everyday technical tasks anymore.
“He cannot work on production products. It’s a full-time job – even for somebody who can do as many things as Larry,” said Horowitz, author of The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. “If Larry can’t do it, you can’t, either. I guarantee you.”
A new year can also be a great time to start seeing things with fresh eyes. As she discovered while researching for her book Rookie Smarts: Why Learning Beats Knowing in the New Game of Work, leadership educator and author Liz Wiseman found that experience had the ironic effect of limiting people’s ability to see things clearly – because they often made assumptions based on previous experiences instead of being open to new data points, perspectives and possibilities.
The solution, Wiseman says, is to maintain a “rookie” mindset. But what if you’re a grizzled veteran in your field who has seen and done it all before? Here, Wiseman shares how a surfer-turned-CEO, French filmmaker and accomplished scholar all found ways to return to their rookie roots and reinvigorate themselves.
Once rejuvenated, however, it’s also important to maintain perspective. A new year and a new outlook may inspire you to begin the next chapter in your venture. The challenge of building on success, whether it’s refining a product or reinventing a business altogether, is one that few in the tech sector have pulled off at scale:
In the clip above, Lewis Cirne, founder and CEO of New Relic, shows cautious optimism that his software-analytics company will be able to pull it off. And yet, entrepreneurs have always been known to fixate on that next big thing. So, if the only alternative is complacency, is there really any other choice?
It can be tempting around the holidays to tune out all the consumerism. But entrepreneurs would do well to heed customer sentiment. Whether the product being built is a free app or fresh apparel, the bottom line is that, if consumers don’t want it, you’re out of business.
Usually, a successful venture begins with identifying an unseen opportunity or a widely shared pain point that no one else has addressed yet. But once you figure out your solution to that problem, or your unique product, building it out before seeing what potential customers think of your idea would be folly.
The financial loss from a flop is the most obvious risk. But nowadays, with the average consumer wielding the megaphone of the Internet, if a company gets it wrong, that individual can — and will — let the business and the rest of the world know about it in an instant.
Especially in retail, brands no longer have the one-way advantage of dictating tastes to customers. As Tina Wells of Buzz Marketing Group says in this video clip, today, consumers dictate their desires to brands:
At the same time, it’s wise to look closely at cases where others got it wrong – because they can guide you toward success. This was how Method Products, the maker of hip and healthy household cleaners, managed to compete against established giants in the industry: by studying their missteps.
Given Method’s niche of making only non-toxic cleaning products, the company asking customers to bring their empty containers to the store for refills would be in line with its Earth-friendly stance. But Method Co-Founder and “Chief Greenskeeper” Adam Lowry saw how others failed with that approach, and in fact, inconvenienced customers more.
“You can create the most beautiful, the most sustainable product in the world,” Lowry explains. “But if nobody wants to buy it, if you don’t get a lot of people to buy it, then I would argue that it’s actually not innovative.”
And by the way, if you can’t build a great product, how can you expect to build a great company. That had a lot to do with the tremendous bust that followed the dot-com boom of the 1990s, according to Silicon Valley luminary Ben Horowitz. Investors turned to “professional CEOs” who knew nothing about building a product that customers would want and relied on these leaders to rapidly grow a company — except that it would fold just as fast because no revenue came in.
Again, it all comes back to the consumer — empowered by the digital age, and as ever, holding the power of the purse strings. So take heed:
November is National Entrepreneurship Month in the United States. But if you have an entrepreneurial mindset, opportunities present themselves every day – whether for a new business, or even just learning something new.
The first step is noticing these opportunities. And while it may seem obvious that this requires paying attention to what’s going on around you, it is worth noting because we can all be blinded at times by our own beliefs. Inexperienced entrepreneurs can be especially prone to thinking that a personal epiphany is an opportunity, and unfortunately, pursue it without first verifying whether what they perceive is the reality.
Stanford Engineering Professor of the Practice Tina Seelig, a thought leader in the area of creativity and innovation, presented a new model that maps out the process for how ideas are brought to life and what is required at each stage. Called the “Inventure Cycle,” Seelig explains here how one must observe their surroundings before envisioning an opportunity:
Opportunities can also be found in places that others overlook or simply don’t care about. This doesn’t mean pursuing things that aren’t important, though. If you can bring passion and optimism to the table, you really can make an impact and even address one of the world’s great problems.
Take home heating and cooling. In the United States, the amount of energy needed to keep every house comfy and cozy is greater than the total amount of electricity generated by all the solar or nuclear plants in the nation. The letters H-V-A-C don’t signal sexiness, but clearly, attention is needed here.
That’s where Matt Rogers, co-founder and vice president of engineering of the smart-thermostat maker Nest, saw an entrepreneurial opportunity. And before that, when he was a new employee at Apple in 2005, he enthusiastically took on what was then considered just a side project: prototyping the iPhone.
Sticking with it at Apple showed how “intrapreneurial” he could be, and this video clip shows how well that experience prepared him to be an entrepreneur in the next chapter of his career. “I think I’ve built my entire career – actually, probably my entire life’s work – on things that no one cares about,” Rogers says. “And I’ve actually done really well doing it.”
Even for the entrepreneur who has already launched a startup, day-to-day activities can lead to new opportunities if you’re observant and take action. That was certainly the case for the founders of the ticketing service Eventbrite.
When they spoke last month at the DFJ Entrepreneurial Thought Leaders Seminar Series, the wife-and-husband team Julia and Kevin Hartz recounted how their business goal evolved. Initially set on taking down market leader Ticketmaster, they soon realized the opportunity lying just beneath the tip of the iceberg: all the everyday events that need ticketing.
“It’s everything you do in your everyday life where you gain access … cooking classes, yoga seminars, obstacle races,” Julia Hartz says in the clip below. “Capturing this opportunity that wasn’t from the get-go very attractive is why Eventbrite is here today, and why we’re seeing the growth that we’re seeing.”
Whether it’s Yahoo! buying Alibaba, or Google gobbling up Nest and Skybox Imaging, the acquisition of startups by tech giants are no longer just fodder for the business section. In today’s screen-lived age, they are increasingly the top news stories of the day.
But while entrepreneurship in the tech sector can sometimes seem like a race to cash in from the moment a startup is founded — OK, for some, that’s exactly what it is — acquisition isn’t always the goal. When corporate giants snatch up smaller competitors just to show growth, it hasn’t always worked out well. And when founders allow their startup to get acquired simply for a profit, it can mean the end of a venture that might have otherwise been able to make a truly lasting impact on the world.
In short, acquisitions have to be strategic for parties on both sides of the negotiations. Here, Padmasree Warrior, chief technology and strategy officer for Cisco, lays out her company’s rigorous and structured approach to mergers and acquisitions. According to Warrior, Cisco’s acquisitions fall into one of three categories: tech and talent purchases, acquisitions that fill strategic gaps with growth potential, and large, complex platform acquisitions that immediately raise revenue.
For the startup being courted, the entrepreneurs behind it also face some tough questions. Although it may be hard to imagine it now, Yelp was once a scrappy upstart — rather than the modern-day Better Business Bureau it has essentially become. In the following clip, Geoff Donaker, the increasingly popular review site’s chief operating officer, talks about the company’s early decisions to turn down lucrative acquisition offers pre-IPO.
While selling would’ve benefited Yelp’s founders and early investors, Donaker says it was unclear at the time what the effect would have been for the rest of Yelp’s employees and growing user community. What is clear now is that the company made the right choice.
What still has some people scratching their heads is the bold decision by Snapchat’s founders to walk away from Facebook’s $3 billion all-cash offer in late 2013. In the ensuing weeks, mashablepublished an article in which the messaging service’s CEO Evan Spiegel explained that he and his fellow cofounders sensed desperation when Facebook CEO Mark Zuckerberg flew out out for repeated face-to-face meetings to convince them to sell out.
“There are very few people in the world who get to build a business like this,” Evan Spiegel told Forbes for its cover story on him. “I think trading that for some short-term gain isn’t very interesting.”
While some may still question Snapchat’s move, a startup assessing its own market value by seeing how much others would be willing to acquire it is not new. Here, Ed Catmull, president and cofounder of Pixar Animation Studios, recalls how the late Steve Jobs would enter into talks with other companies about selling Pixar as a tactic to determine its market worth.
And Jobs, who also co-founded Pixar and was its chief executive officer, was testing the waters at a time when the movie studio was still in startup mode and struggling financially, according to Catmull.
This month, we decided to turn to our own faculty and staff for their favorite eCorner video clip from the past school year. With so many to choose from, it was interesting to discover that all the picks contained profound observations on the importance of emotional connections and focusing on what really matters in life.
There is no more basic a need than clean drinking water, and yet, diseases from unsafe water and a lack of sanitation kill more people every year than all forms of violence — including war. That’s why Scott Harrison founded the nonprofit charity: water, which has funded over 13,000 water projects in 22 countries since 2006.
Here, Harrison explains how leveraging the strengths of technological tools such as web-based templates, Google Maps and Twitter have allowed his organization to emotionally engage supporters in a way that few nonprofits have traditionally done.
For Matthew Rabinowitz, technological fixes are all well and good. But the most important thing for an entrepreneur to focus on first is a problem that needs to be solved, not some technology invented in the vacuum of a research institution.
Rabinowitz can certainly appreciate this academic lure. He completed his undergraduate, master’s and doctoral degrees at Stanford, receiving the university’s highest student honors in engineering and physics. While completing his dissertation, he co-founded an intelligent online merchandizing company, Panop.com, which later sold for $100 million.
Then in 2003, when a family member had a child born with a genetic disease who later died, Rabinowitz began to see entrepreneurship as a way to address more fundamental problems. Drawing on expertise from his seemingly unrelated background, Rabinowitz embarked on a journey with the goal of ensuring that other families need not experience similar pain wrought by the inability to have a healthy child.
He brought together a team of experts in medicine, engineering, statistics and genetics – and along with his own skills in optimization, signal processing, informatics and entrepreneurship — he founded Natera.
For entrepreneurial thought leadership, you might not think to turn to a Hollywood legend. But during Heidi Roizen’s talk at Stanford last spring, the operating partner at venture capital firm DFJ did just that — evoking the wisdom of longtime entertainer Shirley MacLaine.
Roizen, who teaches a management science and engineering course at Stanford titled “The Spirit of Entrepreneurship,” credited MacLaine with coming up with a so-called “20-40-60 rule,” which sounds like it might relate to ownership splits or stocks.
What the rule actually captures is a far more important insight that is both empowering and liberating for anyone, whether you’re an entrepreneur or not: “At 20, you are constantly worrying about what other people think of you,” Roizen explains. “At 40, you wake up and you say, ‘I’m not going to give a damn what other people think of me anymore.’”
Completing the thought, Roizen then finishes by saying, “At 60, you come to realize that no one is actually thinking of you.”
What’s bad about mentorship? Nothing really. But exploring the nuances can actually reveal some less-than-obvious benefits — especially for entrepreneurs. Isolation is a reality for startup founders passionate about their venture, who commonly find themselves working day and night in the pursuit of perfection.
That sort of dedication can morph over time into an obsession that possesses a founder to hold onto control of every aspect of the business, even when help from others could take it to the next level. In his recent DFJ Entrepreneurial Thought Leaders talk, Hemant Shah of Risk Management Solutions (RMS) provided a real-life example of just this scenario.
Having successfully launched a software company in the unique space of earthquake-risk modeling, and securing about $3 million in venture funding based on early evidence of worth to customers, around that time, Shah said he was introduced to someone being considered as the company’s next CEO.
In this video clip, Shah first refers to the person as a “colleague.” But Shah said, over the years, this colleague became a mentor who showed him how to grow the company out of its “experimentation phase” into a truly strategic and scalable business.
Another wrinkle in the mentorship dynamic is that the relationship need not always take the form of a fatherly figure passing on pearls of wisdom to a wide-eyed newbie. During her Entrepreneurial Thought Leaders talk last May, Kate Mitchell of Scale Venture Partners said she had mentors who were peers, as well as those more senior and junior.
Additionally, Mitchell talked about having mentors who worked in the same field as her, and some outside of it. Hearing all those perspectives, Mitchell said, gave her a well-rounded picture of what she was doing well, and what she wasn’t.
In this video clip, Mitchell also makes a point that often goes unsaid but that is a vital element in ensuring effective chemistry between a mentor and mentee: the latter must make it easy for the mentor to share brutally honest feedback. Check out her excellent advice on how to do that:
One last distinction about mentorship is that the rewards aren’t just reaped by the one receiving advice. The benefits — emotional and physical — of helping others out of the goodness of your own heart are well known by now. And it’s no different in the particular instance of an entrepreneur helping out another.
That’s one of the main strengths of StartX, the 5-year-old nonprofit that runs an accelerator program for Stanford-affiliated entrepreneurs. In the video clip below, alumni of the program talk about its “code” — that if you can assist a fellow founder, “you stop what you’re doing and help them.”
And back to the benefits of being a mentor: For those who listen as keenly as they speak, they may just glean something that helps them with a problem they’re working through. Otherwise, simply by interacting with someone who reminds you of your younger, hope-filled self, being a mentor could very well rekindle your own passion.
Over the past academic year, the DFJ Entrepreneurial Thought Leaders Seminar has brought some of the sharpest innovators to Stanford for weekly talks. And even though school is now out, viewers around the world can still soak up all the great insights online, archived on Stanford’s eCorner, and on YouTube.
Summer is also a time to be entertained, of course. And while we can’t compete with blade-knuckled mutants or celebrities in futuristic exoskeletons, we can promise some deep perspectives from the people behind the box-office blockbusters, top-rated TV shows and chart-topping songs we just can’t get enough of.
A rat with a gourmet streak that sneaks around in a restaurant kitchen. A nonverbal, trash-picking robot roaming a junkyard planet. Neither of these sound very promising as a premise for a movie. However, Ratatouille and WALL-E both went on to achieve critical and commercial success for Pixar Animation Studios. The secret, as described by Pixar President Ed Catmull, lies in the studio’s “braintrust” of expert storytellers, along with a deep understanding of the creative process.
An important part of that process at Pixar, and in other organizations, involves protecting the “ugly baby” from the “hungry beast,” according to Catmull. This clip from his April 30 Entrepreneurial Thought Leaders (ETL) talk explains the concept:
Yes, Catmull runs a studio that consistently cranks out Oscar-winning films. But that doesn’t mean a less-proven filmmaker can’t break into the business as well. Gale Anne Hurd, one of Hollywood’s most respected film and television producers, gave an ETL talk the year before, saying that the entertainment industry today is ripe with opportunities in the age of YouTube.
It wasn’t so easy for Hurd, who rose through the ranks more traditionally: starting as an executive assistant to acclaimed film producer Roger Corman, ascending to head of marketing, and eventually going on to launch The Terminator saga and produce many of today’s comic-book blockbusters and sci-fi thrillers. Currently, she is among the executive producers of the AMC series The Walking Dead.
“There are at least 16 directors,” Hurd said, “who made films for under $15,000 — some of them for $400 — uploaded them on YouTube and are working in the business today, after one film.”
But before you dismiss the insights of pop-culture captains such as Catmull and Hurd, listen to pop-music singer and songwriter Nate Ruess, founder of the band fun. It is his distinctive voice that carries the pop anthems “We Are Young,” “Some Nights” and “Carry On.”
With a name like “fun,” you might expect the band to run with whatever sound is trending with tweens. But when Ruess came to Stanford in February, he spoke maturely about the influence of trends on his work, and how ignoring them can lead to irrelevance.
“I’ve become better — a better songwriter, just a better person — by acknowledging what’s happening right now,” Ruess said. “It’s been one of the biggest reasons for my success, is to acknowledge that there’s something in front of me and it’s happening.”
Wise words, whether you yearn to be a hit maker or an entrepreneur.
In a tech-driven society that often fixates on the “next big thing,” it’s comforting to know that truth can trump trend. Rather than launching a venture that seeks to profit off whatever is popular at the moment, the message from those who have succeeded in Silicon Valley — who also speak of true fulfillment in their lives — are innovators who honor authenticity.
Below are three recent video clips from our DFJ Entrepreneurial Thought Leaders Seminar series on how authenticity keeps an immensely popular startup focused on its mission, how it remains vital even within large corporations, and most importantly, how it is the single-best guide in your own entrepreneurial pursuits.
As many already know, the free, online education platform Khan Academy began as one man’s hobby of making a math video for his 12-year-old cousin after she bombed a placement test. Ten years later, Khan Academy boasts 5,500 instructional videos, with 4 million exercises solved daily over approximately 200 countries.
That well-meaning man, Sal Khan, spoke at Stanford on April 16 and ended his talk by acknowledging the pressure to measure progress by the metrics those around him use. In Silicon Valley, that’s often data points like “unique users,” “click-through rates” and “sales conversions.”
Khan Academy’s stated mission is “to provide a free world-class education for anyone, anywhere.” And Khan, the academy’s founder and executive director, concluded his talk by saying that his not-for-profit organization’s biggest challenge is “staying true to our mission.”
Authenticity also has its place in the largest of enterprises. Corporate guideposts such as mission and identity can get complicated and evolve over time as a company grows and shifts focus, which puts the onus on its people to preserve authenticity.
In her Entrepreneurial Thought Leaders talk last October, Cisco’s chief technology and strategy officer, Padmasree Warrior, talked about how authenticity makes a “huge difference,” whether you’re trying to attract talented people, or create a work environment where people feel empowered to contribute.
But if you do plan to launch your own venture, whether tech-related or not, authenticity is critical to ingrain at the start. Entrepreneur Tristan Walker, who spoke in April, found his calling in the “ethnic aisle” at the local drugstore.
Walker is African American, and so truly knows the frustration that black men feel throughout their lives when it comes to shaving. So when it came time to launch his own product, he decided on the first end-to-end shaving system specifically designed for men of color.
“If I was going to dedicate the next 10-plus years of my life to anything,” Walker said, “I wanted to fundamentally feel like I was the best person in the world to solve that problem.”
Students, entrepreneurs and investors filled the sleek, top-floor conference room of Stanford’s Huang Engineering Center. It wasn’t another startup competition with everyone on the lookout for the next game-changing technology. However, all there did agree that there needs to be major disruption.
The event was a noontime panel featuring women in senior positions in venture capital. They represent a growing segment of the overwhelmingly male field, where just 11 percent of investing venture partners are women, and only an estimated 4 percent of senior venture partners are female.
The firms where the panelists work ranged from a newly launched fund to corporations known worldwide. The April 28 event was hosted by the Stanford Technology Ventures Program — the entrepreneurship center in the university’s School of Engineering — and moderated by STVP Executive Director Tina Seelig.
All of the panelists have achieved exceptional success in Silicon Valley and voiced strong opinions about increasing the percentage of women in senior VC partner roles. But instead of solely proposing systemic changes, much of what the panelists had to say focused on what women could do at the individual level.
The first panelist to speak was Deborah Hopkins, who chairs venture-capital initiatives for the global financial services firm Citi, which provided generous support for the event. She urged women to, above all, remain authentic.
In the business world, Hopkins explained, women have witnessed how traits such as being bossy or cruel to colleagues signaled to superiors that they have leadership potential. For the women who follow suit, however, the price they pay is losing a sense of their feminine strengths, Hopkins said.
“They’re really being put into some other kind of way of thinking about themselves,” said Hopkins, who also serves as Citi’s chief innovation officer. “At the core of this is authenticity, and it really is the secret of success.”
She added that women who rise through the ranks are obliged to support their sisters in industry achieve similar success. Fellow panelist Lisa Lambert picked up on Hopkins’ point and urged women in venture capital to get coaching, seek out mentors and focus on building a vast network of colleagues.
Lambert said having a large network ensures you’ll have others who will vouch for you when the inevitable naysayer gets in the way; and having an abundance of connections means more inroads when opportunities open up around you. It’s what helped Lambert go from being a product-marketing engineer when she first came to Intel, to her current role as vice president and managing director of Intel Capital.
“This world, especially here in Silicon Valley, operates by informal networks,” said Lambert, founder of UPWARD, a nonprofit that aims to accelerate the careers of professional women. “The reason I’m still here is because I didn’t quit.”
Meanwhile, Ann Miura-Ko, co-founding partner of the venture-capital firm Floodgate and a lecturer in Stanford’s Department of Management Science & Engineering, talked about the luck she encountered throughout her career: from a life-changing mentor relationship with a former CEO of Hewlett-Packard that began with a chance encounter when she was an undergraduate student at Yale, to being offered a founding-partner position at a new venture-capital fund while she was working on her Ph.D. at Stanford — and caring for her first child.
Members of the audience and fellow panelists pressed Miura-Ko a bit on her message that all of her success was based on pure luck. The daughter of a NASA scientist and holder of a Stanford doctoral degree in mathematical modeling of computer security, Miura-Ko acknowledged her own innate drive and strengths.
But the moral of her story returned to – once again – a message of individual action: “I maximized the opportunity I had to get lucky,” Miura-Ko said. “That’s the thing that people need to understand, is that even though it’s built on luck, you need to create that opportunity.”
The final panelists to speak were Theresia Gouw and Jennifer Fonstad, who recently made national news when both left coveted partner positions at top-tier venture-capital firms to co-found their own, Aspect Ventures. When they first made their announcement in February, the longtime colleagues said they wanted to set an example for other women who want to follow the same path.
They also said their new fund would emphasize the value that diversity brings to companies. “We need to create a welcoming environment because we know there are bright, talented young women like yourselves — and elsewhere — who want to start companies,” said Gouw, formerly a partner at Accel Partners for 15 years.
Fonstad spent 17 years as a partner and managing director at DFJ. She also co-founded Broadway Angels, a San Francisco-based angel investment group made up entirely of women. Its portfolio includes 20 startups founded by female, and male, entrepreneurs.
“We now have a community of women entrepreneurs who have been successful who can write their own checks, and are writing their own checks, and making investments in fellow entrepreneurs in their own networks,” Fonstad said. “That’s a very new trend, and it’s an important trend.”
It’s been called “20-20 hindsight,” and sometimes, “Monday morning quarterbacking” — essentially, the after-the-fact analysis of what should’ve or could’ve been done better. And it tends to contain some valid insights.
So, if you’re about to launch into a project or initiative that has some uncertainty around success or failure, why not just go ahead and imagine that it flopped, and then, figure out how that happened. In other words, put yourself in the future, visualize the failure and use that trusty 20-20 hindsight to help you anticipate and avoid the pitfalls before you even start.
They call it performing a “premortem,” and they write that teams on the cusp of making a major decision — including launching a growth initiative, the topic of the new book — should make this visualization exercise one of the final steps before proceeding with the plan.
“It is just a way of switching perspective when you are on the verge of rolling out something from the few to the many,” said Sutton, a professor in Stanford’s Department of Management Science & Engineering. “And there is pretty good evidence that simply shifting perspective from ‘what do I need to do to succeed?’ to ‘I have succeeded, what steps have I taken?’ leads to more nuanced and useful plans — and is especially useful for identifying risks.”
True to their academic credentials, Sutton and Rao back their position with sound citations. They say the premortem builds on Nobel Prize-winning psychologist Daniel Kahneman’s favorite approach for making better decisions. Kahneman, meanwhile, credited another psychologist, Gary Klein, with inventing the technique.
Here’s how it would work at a company that’s about to scale up: Before implementing the plan, team leaders would split those working on the project into two groups and assign one to imagine that the effort failed miserably, and the other to imagine that it was a spectacular success.
Then, each person would be asked to work independently and generate reasons — or even better, write a story — about why the plan succeeded or failed. People should be as detailed as possible in identifying the reasons things occurred, especially those causes they wouldn’t normally mention “for fear of being impolitic.”
Next, as the professors outline in the book, each person in the “failure” group would read his or her list or story aloud, while the reasons are recorded and collated. This process is repeated for the “success” group. Then finally, use the reasons from both groups to strengthen the original plan.
Sutton stresses that premortems are helpful for organizations, regardless of size. For instance, an individual entrepreneur might approach it this way: “If one year from now, I will have three key customers, $1 million in sales and 10 employees, what steps will I have taken?”
Conversely, for a big company, Sutton says a premortem might sound more like this: “If, three weeks from now, the rollout of this new pay policy will be a total disaster — my best people are leaving, and everyone wants me fired — what will have happened?”
The exercise is most effective when all the details are fleshed out, actual feasibility is assessed and resources are accounted for — even if the scenarios are entirely made up in the first place. And yet, Sutton says premortems are doable, and moreover, beneficial.
“We just did this for a group of 12 senior executives from a Fortune 50 company,” Sutton said recently. “They got quite detailed and the conversation shifted their attention to a pair of risks that, in essence, all seemed to know about but none felt comfortable raising.”
Since the book’s debut last month, Scaling Up Excellence has been received well in the business community, especially among entrepreneurs. In the startup space, the challenge of building and uncovering pockets of exemplary performance, and cascading that throughout an organization as it grows, is a real worry.
Put simply, Sutton says scaling is spreading more of a good thing to more people and places. But he is quick to add that no guaranteed formula for scaling up was ever identified by himself or Rao in their nearly 10 years of research for the book.
And whether you undergo a premortem or any other strategic exercise prior to implementation, Sutton stressed that nothing will make scaling easy or instant.
“Anyone who implies they have a sure-fire method or recipe is misguided, dishonest, or both,” Sutton said. “There is a lot of snake oil out there — if someone tries to sell you a scaling cure that sounds too good to be true, it probably is.”
It seems self-evident that any innovative venture or idea begins with an entrepreneurial mindset — especially here in Silicon Valley. But innovation isn’t isolated to any one region, and the concept of an “entrepreneurial mindset” deserves to be defined.
It may be helpful, though, to let veterans of the valley explain things from their perspective. For instance, Susan Siegel, a corporate officer at General Electric based in the region, identifies two components that together make up a mindset: attitude and approach.
Beyond being a top executive in one of America’s largest and most established corporations, Siegel is also CEO of healthymagination — GE’s $6 billion initiative to improve the quality, access and affordability of healthcare around the world.
Here’s what Siegel — recognized as one of “the 100 Most Influential Women in Silicon Valley” — had to say about fostering an innovative mindset at her DFJ Entrepreneurial Thought Leaders (ETL) talk in 2012.
Once you have the proper mindset, of course, the next step is putting those good intentions into action. A recent ETL talk illustrates this perfectly: Stanford math Prof. Gunnar Carlsson appeared on stage last month with Gurjeet Singh, who first stood out to the renowned mathematician while Singh was working on his doctoral degree.
But it wasn’t simply Singh’s intelligence that caught Carlsson’s eye, it was the student’s bias towards action. Singh wasn’t just a methodical mathematician, he was a maker in the truest sense. During their talk Carlsson repeatedly mentioned Singh’s penchant for “prototyping” ideas and concepts – a term normally associated with the building of more tangible objects.
“Not only do you need to be smart,” Carlsson explained, “but you need to want to do something and to carry something out and to actually solve a problem — as opposed to writing a paper or finding a pretty piece of theory.”
The professor and student went on to co-found Ayasdi, a big-data analysis startup focused on major societal problems in need of innovative solutions.
In so many words, that’s also how Stanford Prof. Bob Sutton put it during his Feb. 12 ETL talk on his new book, Scaling Up Excellence: Getting to More Without Settling for Less. Co-written with a colleague at Stanford’s Graduate School of Business, Prof. Huggy Rao, Scaling Up Excellence discusses what it takes to build and uncover pockets of exemplary performance and spread a mindset of constructive beliefs and practices as an organization grows.
A professor in the Stanford School of Engineering’s Department of Management Science & Engineering, Sutton’s actual words were, “Live a mindset, don’t just talk about it.”
With Superbowl XLVIII just around the corner, expect plenty of talk in the days ahead about what makes a great team. And if our Entrepreneurial Thought Leaders (ETL) seminar series is any indication, the topic of team building is at top of mind in the high-tech field as well.
Many of our recent ETL speakers emphasized that, above all else, a business’s success begins with a great team. Cyriac Roeding, co-founder and CEO of the retail-rewards app shopkick, actually identified four distinct characteristics that lead to a great team: each member possessing “individual brilliance,” shared and inflexible values, extreme diversity and a vision that they all believe in.
Roeding, who spoke at Stanford in October 2013, explains why these are the essential ingredients for a great team, and how they fit together.
Of course, discussion around a given topic wouldn’t be very robust without some difference of opinion. In her ETL talk on Nov. 20, 2013, Sharon Vosmek cited research by Thomas Malone — a renowned professor of management at MIT — who found that the I.Q. of individual members of a group had no correlation to the group’s collective intelligence.
“So it didn’t matter how smart the people you put together, it did not then result in a smarter team,” said Vosmek, CEO of Astia, an organization that supports entrepreneurs through a global network of investors, innovators and industry leaders.
Instead, the research that Vosmek praised concluded that the factors that really increase group intelligence on teams were 1) the social perceptiveness of the team members, 2) the evenness of conversation among them and 3) the proportion of women on the team.
In his ETL talk, also last November, Mike Olson mentioned diversity and intelligence as traits that he looks for when hiring new employees at Cloudera — a powerful and integrated “big data” platform that allows customers to store, process and analyze various types and formats of data.
Olson co-founded and serves as chief strategy officer for Cloudera. And as bluntly as he could, he said all that really matters is the quality of the people in the organization. “Everything that we can claim as a success ties to the fact that we have recruited the world’s best team,” he said.
It’s also vital for companies to bring on the best and the brightest right at the start, according to Olson, because it perpetuates excellence. “If you don’t do that early, it’s impossible to change it,” he said. “The reason is, really great people gravitationally attract really great people.”
The arrival of a new year gives us a chance to think about what we want to accomplish in the months ahead. But where to start? When a student at a recent Entrepreneurial Thought Leaders (ETL) seminar asked this very question — “When is the right time to start a company?” — it sounded so basic and blunt that it made the guest speaker chuckle at first.
But the speaker then paused, collected himself and responded, “It’s a good question, and I’ll give it a serious answer.” Serial entrepreneur Steve Teig, co-founder of venture-backed semiconductor firm Tabula (and co-founder of two successful biotech companies before that) came to Stanford to talk about embracing the mysteries of entrepreneurship.
Teig, the holder of more than 260 patents, also urged students to identify opportunities by taking action, rather than be paralyzed by indecision. And here was his rather decisive answer to the student’s simple question:
In her February 2012 ETL talk, Sukhinder Singh Cassidy, founder and chair of Joyus — the Web’s first video-shopping platform — also put it simply: The act of getting started is “taking the first step.” To her, that involves telling someone and getting that person to take that first step with you, whether it’s sketching out a logo or just sitting down and to brainstorm some ideas.
“The simple act of involving someone else in something that’s inside your head is the point at which you start being an entrepreneur,” Cassidy said. “And what is such a mysterious art will become known to you very quickly.”
And if you’re afraid to start because you haven’t yet perfected every single detail in your head, Warren Packard, who spoke at ETL the week before Cassidy, believes that shouldn’t stop you. In fact, he says, “Imperfection is a great tool to have.”
Packard, CEO of the sports-programming app Thuuz, likened it to the classroom concept of getting partial credit for solving part of a test question — even if you didn’t get it 100 percent right.
“The god of partial credit works for you in spades as an entrepreneur,” Packard said. “And you have to use that as a tool to get out, get your product launched, get customer feedback, learn from your mistakes, pivot and do it again.”
With that, we hope you launch into 2014 by taking that first step.
I have been very fortunate throughout my formative years and still today to be surrounded by inspiring men and women. At the age of 34, I feel I have only scraped the surface of everything I am yet to experience and achieve both professionally and personally. My resume so far is the result of a lot of hard work, but also and mostly of the belief that only the sky is the limit.
I started no differently than any other little girl, with perhaps one major exception: I was always told by family, friends, and mentors that I could achieve anything I wanted as long as I was open, worked hard and remained helpful to others. My gender was never part of the discussion, but it seems my experience was rare.
It has become clear that we need to do more to shine a light on the ambitious, successful women who dream big and achieve their personal and professional goals while staying true to themselves. Men seem to have these kinds of role models in abundance and perhaps as a result do not struggle to imagine that they can affect change and become leaders. But many girls and young women struggle to find similarly successful, relatable role models who can inspire them to imagine everything they could achieve and believe that each of those possibilities could become a reality. Learning about the stories of these role models can help young women make educated choices about what suits them and then pursue their goals with all their energy.
At Boticca, we try to share the stories of inspiring women organically through our business. Eighty percent of our brands are led by women, all entrepreneurs fighting to build sustainable businesses. We love being their partners as they expand their businesses globally and realize what the possibilities truly are. Recently we have partnered with Women for Women International, an organization founded by a formidable woman, Zainab Salbi, one that is committed to giving women in war-torn countries the tools to rebuild their lives while sharing their stories of resilience with the world. It is critical to tell the stories in as many contexts as we can in order to help and celebrate those women who are making a difference.
Beyond “Lean In”: More Women Who Help Us Dream Big
The key is the awareness that we can design our unique path and as long as we are confident, hard working and willing to give it our all, we can make that path work.
Sheryl Sandberg, Facebook’s COO, has shined a lot of light on this subject with her book Lean In. Her arguments make a lot of sense, but to many, she may seem difficult to relate to because of her “one fourth of one percent upper class status,” as Gayle Tzemach Lemmon points out. However, she has emphasized something that applies to all of us regardless of status: we should embrace the theory of the “and.” Why limit ourselves to being either career driven or family oriented? Why not do both, if that’s what we want? Little girls will only figure out what they want by being aware of and evaluating all of the available options. There is no “one path” that works for everyone. Each person is unique and each stage of life is different. The key is the awareness that we can design our unique path and as long as we are confident, hard working and willing to give it our all, we can make that path work.
There is only one Sheryl Sandberg, but there are numerous women who gracefully embody the possibility of the “and.” All of their stories should be shared, so that girls and young women can find inspiration in their examples. That’s why I’m sharing the stories of five of the most open, giving, impressive women I know. Each is very unique in her path and identity, however they all share a few very important traits: They are passionate, positive, hard working, confident and most importantly, they are constantly learning and teaching. They promote others and are great leaders with loyal followers. And if you ask each and every one of them, they will tell you that they are no better than you. If they can design their own paths and stay true to themselves, you can, too.
Shripriya Mahesh is an incredible woman: A wife, a mother, an award-winning filmmaker and a successful Silicon Valley executive. She owes all of it to her passion, openness and determination. When I first started at eBay, she was assigned to me as my mentor and then became my boss and my friend. I’m now lucky enough to be godmother to her twins, so I know first hand how open, passionate and strong she is. Shri leads by example: She taught me how to create solutions for any problem and above all, that you can pursue your passion at any stage. She reinvented herself as a filmmaker after 15 successful years in technology while having twins and supporting her parents who were struggling with illnesses. Shri has now found a way to fulfil both passions by leading the product launch for a startup and working on her first feature. She proves that it is possible to handle any personal and professional challenge with determination and positive energy.
Gayle Tzemach Lemmon, who I mentioned above, is one of the formidable women I am lucky to call a friend. One of my business school classmates, this independent thinker doesn’t take anything for granted. A successful journalist, the New York Times best-selling author of The Dressmaker of Khair Khana and a Senior Fellow with the Council on Foreign Relations’ Women and Foreign Policy program, Gayle went to business school when she was already quite senior in her career. She simply wanted to learn more about business, knowing that the experience would help her achieve her goals. Gayle and her husband both believe nothing is impossible and Gayle manages every challenge with grace. She spent a lot of time in Afghanistan reporting on women’s efforts to be heard by their own government. It was on one of these trips when she found out she was pregnant and due just days before her book’s publishing date. Gayle is from a humble background, but was inspired by hardworking women who showed her that “only our imaginations could determine our limitations.” As a result, she constantly works to inspire and share stories of other women with the world.
Nisa Godrej, one of my dearest friends, is another inspiring woman I met at business school. Nisa is a force of nature who inspires others through her vision and drive. She could have chosen a life of leisure, but instead chose to fight to create a performance-oriented culture in the 117-year-old Godrej Group, allowing the company to excel on a global scale. Motivated by a force within, Nisa’s imagination has no limits and she will push herself and those she cares about to achieve their full potential. She is as dedicated to her professional growth as she is to her personal one. We celebrated her birthday climbing Kilimanjaro, trekked in Bhutan and Iceland on what she considers holidays relaxing for the soul and discovered the ruins of Petra in lieu of a hen party. A dedicated daughter, Nisa’s loyalty is boundless. Now, she is married to a wonderful man who shares her passion for life, they are expecting a child, and she continues to lead her company forward.
Judy Gibbons, another mentor of mine, is a truly extraordinary woman. Ranked among the top 20 most influential European businesswomen, she has held senior positions at Apple, HP and Microsoft and is now on the board of the Guardian, Michael Kors and more. The list goes on and on. Again, she owes it all to her hard work, openness and dedication. Judy took me under her wing when I started at Accel Partners and has been a guiding force ever since. She was one of the first people to believe in me when Boticca was only an idea. She has always gently pushed me and others to dream big and believe that we can make anything happen, both in our professional and personal lives, if we put our minds to it. She has been an incredible force for young people in her life including her own nieces to whom she is a surrogate mother. She is multidimensional and will not let anyone be otherwise. There is no either/or for her, it is all about the possibility of the “and.”
Sherry Coutu is yet another woman who embodies the possibility of the “and.” I met Sherry a number of years ago when I first moved to London. I remember having lunch with her and finding out that she had just climbed Kilimanjaro, which I planned to climb a few months later. I knew from that moment that she was a force to be reckoned with. A former CEO and angel investor who now serves on the boards of LinkedIn, Cancer Research UK and the University of Cambridge among others, she is a staunch promoter of entrepreneurship, for which she was awarded a CBE in 2013 from Her Majesty the Queen. She is also the founder of Founders4schools an organization that inspires young students to believe in themselves and in their ability to be entrepreneurs.
All of these women are great examples because they are not simply hard workers, but are open and looking to share their experiences and learn from others. They are the kind of people you want to work for and be friends with. I don’t believe that there is a particular way a woman should be, or that there is only one way she should be. But I believe that each woman should have the option to choose what she wants, knowing at the beginning all of the possible permutations of her dreams so that she can design her own path. Join me in sharing the stories of women like these.
With the holidays underway and our thoughts attuned to peace and goodwill, now is the perfect time to explore how entrepreneurship can fuel humanitarian efforts. For our weekly Entrepreneurial Thought Leaders (ETL) seminars, we of course focus on topics central to technology startups. But throughout the academic year, we also invite speakers who bring the entrepreneurial mindset to the nonprofit sector.
During a season when there’s no shortage of soirees, and charitable instincts are at front of mind, ETL speaker Scott Harrison offers up a strategy for turning a personal celebration into a splashy charity event that can send ripples around the world.
Founder of charity: water, a New York City-based nonprofit that brings clean water to poor villages in Africa and other parts of the world, Harrison describes in this video clip how he tapped his social network from his days as a hotshot nightclub promoter in the Big Apple to bring in big money for the cause closest to his heart.
Ashoka, another entrepreneurial nonprofit in New York City, places its social mission front and center. “Ashoka believes that there is nothing more powerful than a new idea in the hands of a social entrepreneur,” the organization’s webpage states about its approach. “Ashoka finds and fosters the most powerful emergent ideas being led by the most effective social entrepreneurs.”
Founder and CEO Bill Drayton also spoke recently at ETL, and described how Ashoka maximizes impact by selecting highly potential “changemakers” and building networks of social innovators. But in order for any solution to spread, Drayton said it must first be seen as simple, safe and easy to understand.
In terms of private entities, the humanitarian organization bringing the most resources to bear is none other than the Bill & Melinda Gates Foundation. Its massive assets, now at about $40 billion, support initiatives in education, world health and population. That the co-founder of Microsoft has dedicated his fortune to philanthropy has, in the minds of some, vaulted him past even Steve Jobs as the technology leader they’d most like to emulate.
But for all the grandness of the foundation’s aims, it is comforting to hear from Melinda Gates that she wants us to start locally, supporting causes in our own community that we’re passionate about. Most importantly, she wants us to get involved now:
Happy holidays and all the best for your entrepreneurial endeavors in 2014.
New research on entrepreneurship shows that diverse business skills are not always the secret to success in the world of tech start-ups. While different strengths matter sometimes, researchers found that a tech-focused founding team is almost always best.
The research, led by assistant professor Chuck Eesley in Stanford University’s Department of Management Science and Engineering, has been published online by the journal Strategic Management. Two other management professors, from the University of Pennsylvania and Massachusetts Institute of Technology (M.I.T.), co-authored the study.
The research revealed that a technically focused team can more quickly reach market milestones, from design and prototype completion — all the way to product launch.
The research revealed that a technically focused team can more quickly reach market milestones, from design and prototype completion — all the way to product launch. On the other hand, more diverse founding teams are better prepared to compete against mature companies, which similarly have well-established diverse skills in areas like marketing, operations, sales, engineering and other skills.
The findings are based on a survey of 2,067 ventures founded by MIT alumni across multiple industries. The professors examined each firm’s founding team, how well the venture performed, and the business environment that surrounded it. They took into account traits such as age, experience and education, but in this case, did not include traits such as gender or ethnicity.
Lead author Eesley, whose department is in the School of Engineering, researches the influence of external environments on entrepreneurship – specifically, the types of environments that encourage the founding of high-growth, technology-based firms.
“If your venture is focused on technological innovation as a key competitive edge or is operating in an industry where it is common for startups to focus on innovating — and then partner with large firms to commercialization those innovations — then it is better to have an all-technical founding team,” he said.
Two business environments that startups commonly enter can be characterized as either cooperative or competitive. In a cooperative environment, startups form partnerships with established firms in the industry to bring products and services to market — like when smaller biotech ventures get acquired by larger pharmaceutical companies. In a competitive environment, startups go head to head with established firms instead of relying on them to get to market — like in the software industry.
“If your venture is focused on technological innovation as a key competitive edge… and then partnering with large firms to commercialization those innovations — then it is better to have an all-technical founding team.”
However, if a venture’s competitive edge comes from factors other than technological innovation — serving a new market segment, for instance — and it’s more common for startups to compete with established players, Eesley says a founding team with diverse skills makes more sense.
The study’s authors gauged the success of firms in their survey by whether they reached a “favorable exit,” such as an acquisition or IPO. One of their findings was that, in a “cooperative environment,” a technically focused founding team had a 12.8 percent greater likelihood of a favorable exit.
At Stanford, Eesley teaches about technology entrepreneurship to undergraduates on campus and to students around the world via open online courses. He also lectures internationally, and is often asked by current and would-be entrepreneurs about who they should look for as co-founders. He usually advises them to build a balanced team of founders.
“However, I began to wonder if this advice was universally true for all types of startups. I suspected and worried that, in some cases, such advice may actually be harming some founders,” Eesley said. “We should be trying to help them, rather than unintentionally leading them astray.”
Eesley is also on faculty at the Stanford Technology Ventures Program, which serves as the engineering school’s entrepreneurship center, helps students develop entrepreneurial skills, and sponsors courses and research related to tech-venture formation.
He says the study’s findings are practical for those looking to launch a company now — whether in Silicon Valley or wherever.
“For prospective or current entrepreneurs,” Eesley explained, “you want to think carefully about matching the skills and backgrounds of the people you recruit as co-founders with the strategy and industry of the startup you’re passionate about pursuing.”
His co-authors include David Hsu, an associate professor of management at the University of Pennsylvania’s Wharton School, and Edward B. Roberts, a professor of management of technology at M.I.T.’s Sloan School of Management.
Boticca, the world’s luxury bazaar of fashion accessories, just raised $4 million in a series A round from a number of high net worth individuals around the world and UK-based fund, MMC Ventures. Back in 2011, it took us just three months to raise our $2.3 million seed round, at a stage where the company was barely making any revenue.
Roughly two years on, it took us nine months to raise our series A, at a stage where unlike most e-commerce startups we had profitable user economics with a cost of acquisition recouped on the first purchase and more than four times lower than our Customer Lifetime Value. The fundamentals of our business were and still are very strong, yet the path to series A presented an array of unexpected challenges.
This sounds counterintuitive, doesn’t it? It certainly did to us. However, looking back, we’ve learned more about what happened, what we did wrong, how the environment affected us and how other companies can avoid making the same mistakes.
Don’t Waste Your Time: Engage With the Right People
When we started thinking about fundraising in December 2012, we were told by many around us, including our own investors, how terrible the fundraising climate was in the US and even more so in Europe. Thus, we decided to reach out to a lot of potential investors. Both my co-founder and I come from a venture capital and a private equity background so we have always had access to many investors. This coupled with the introductions from our existing seed investors gave us a full list of potential people to talk to.
Had we done more research prior to these meetings, we could have saved ourselves countless useless conversations.
However, we began reaching out to investors without properly considering their fit (surprising, considering how much fit comes into our hiring process). For countless reasons, our list included the wrong people: some no longer invested in series A rounds, preferring to invest either in seed rounds or later rounds (the series A crunch effect). Some were at the end of their funds while others were too long on e-commerce investments that hadn’t yet had any good outcomes. Had we done more research prior to these meetings, we could have saved ourselves countless useless conversations. It is not just about the number of investors you engage with — you need to get face time with a lot of investors — but more importantly, you need to find the right ones for your business.
Don’t Put All Your Eggs In One Basket
We made three big mistakes: we trusted too quickly, became too confident and let ourselves be wooed by one main investor. As we were sifting through the large funnel of potential investors, we opened serious discussions with one main European fund, which will remain unnamed. They started doing in depth due diligence before any signed term sheet. This required an incredible amount of time on our end and because of it we stopped or stalled conversations with most other investors. We were confident this would be a success: Our interaction with the fund was extremely positive, we were transparent about our operations and our economics were (and still are) solid.
However, we did not realize that this fund had internal operational constraints, which led them to pull out at the 11th hour. We were left with hardly anyone else to fall back on and only three months of cash left in the bank. Learn from our mistake: No matter how well things are going, keep your options open until a term sheet is signed.
The following two months were incredibly difficult. They were filled with sleepless nights and stress. However at no point in time did my co-founder or I give up. We had a very healthy business on our hands, a great team, and a huge opportunity. Knowing at all times that we were both in it together and neither one of us would rest until we made it right was a huge factor in our ultimate success.
Set Your Ego Aside
Many extremely successful entrepreneurs have had near-death experiences, though these experiences rarely come to light. What makes the papers is the final outcome, the end success. But often, the road to success is a rocky one for entrepreneurs.
When my co-founder and I were faced with three months of cash left in the bank and no tangible fallback option, one of my close friends, Rupert Shaw, co-founder of Pioneer Point Partners, impressed on me the fact that this was the time to set egos aside and reach out to as many people as possible. So that’s exactly what we did.
The amount of support that we received and the number of advocates and evangelists we discovered in them was humbling.
We started reaching out to our network of friends, family, mentors, and former colleagues, which includes successful entrepreneurs, business men and women, and investors. We shared the hard facts and were very candid about our dire funding situation. The amount of support that we received and the number of advocates and evangelists we discovered in them was humbling.
To my surprise, we weren’t alone. I sat down with numerous successful entrepreneurs who had experienced similar situations multiple times and openly shared them with me. These ended up being the people who either invested in our series A or made the introductions to our series A investors. Each of these candid conversations led to as many as three immediate introductions to great potential investors. In no time, we went from near-death to being oversubscribed in our series A.
Do Not Give Up: Create Options For Yourself
If you have a strong business, with the right fundamentals, do not give up. My co-founder and I created multiple options and also envisaged the worst. We covered all sorts of actionable scenarios to allow us to keep the team intact (some were more attractive than others). Believing in the possibilities of these alternatives is what kept us going.
One scenario involved creating a last-resort plan with our existing lead seed investor, ISAI, who was and continues to be supportive. They believed in the business, however, because of the smaller size of their fund and the amount they had already committed to the business, they could not justify bank rolling our series A with an up round. The terms we discussed with them were only ones we were going to agree to as a last resort. Another involved forgoing our own salaries and taking out personal loans to buy time. We also crafted two different plans for the business, one in which we raised $2 million, half of what we had originally planned but enough to get us to profitability with slower growth and a smaller business, and one in which we raised the original $4 million. We envisaged only raising from angels, though that would have meant a lot of coordination and would not have been the best signal for our next round.
We realized we had far more options than we’d originally considered. This enabled us to go into meetings with confidence without allowing investors to smell blood.
Make Them Dream and Call The Shots
One of my closest friends and a very successful entrepreneur, Alexander Asseily, (co-founder of Jawbone and now State.com) sat down with me early on through this process and gave me two extremely valuable pieces of advice:
Make the investors dream. Every investor wants to believe that the business they are investing in will change its industry if not the world, and will make them very rich. Therefore do not play down your dream. Share your passion and vision.
Call the shots. You have a good business, you know the environment, so don’t ask for terms and a valuation. Put a deal together and let the investors know that this is it. If they are serious you will know immediately, if they want to negotiate that’s fine. At that point they will have shown real interest.
We did both things. We changed our pitch, the deck, and how we delivered it to make it more passionate and true to our vision, explaining how Boticca is disrupting its industry and enabling brands that didn’t have access to distribution before develop very successful businesses.
As a result, we were determined, transparent about the situation and confident in the meetings we had.
We also put a term sheet together that we felt comfortable with. We priced it attractively, where we knew that anyone who believed in us or understood the industry and the growth of our business would seriously consider the investment. We could easily justify the pricing with comparable examples, while being comfortable with its valuation. As a result, we were determined, transparent about the situation and confident in the meetings we had.
It must be said that none of this would have been possible without a sound underlying business. But if your business is built on solid fundamentals, you will be able to cope with adversity. If you’ve built a strong business, yet still find yourself on the brink of near-death, know that with preparation and perseverance, you will be able to overcome even the most daunting challenges. I’ve written this post as candidly as possible in order to allow others who may find themselves in similar situations to learn from my experiences and realize that it is all part of the journey.
In some sense, the concept of “open innovation” has been with us all along. Yes, this Forbes article claims the term originated just a few years ago with a professor from the University of California, at Berkeley, who once worked as a computer-industry manager in Silicon Valley. And according to Wikipedia, the word “crowdsourcing” was coined in 2006.
But before all the business speak, the basic concept existed as the “wisdom of the masses.” Nonetheless, it is insightful to hear from those currently at the forefront of innovation how this creative process has evolved over the years, how it will look in the years ahead, and how it can deepen customer engagement in real time.
How It Used to Be
In her Entrepreneurial Thought Leaders (ETL) talk at Stanford last year, Deborah Hopkins, chief innovation officer at Citi Ventures, talked about transparency, openness and idea sharing as the pillars of her operation. But she also acknowledged that, traditionally, it was quite the opposite in the business world.
Those with the bright ideas felt like they should keep it to themselves, Hopkins explained, because business professionals back then were taught that “knowledge is power” — and that their secret insights would secure them that corner office with the view.
Where We’re Headed
Another ETL speaker deeply immersed in innovation, Padmasree Warrior, talked about how, over the past few centuries, we have gone from “the era of the solitary genius” (think Thomas Edison) through the rise of corporate labs such as Bell Labs and Xerox Parc, to more open models of innovation such as, yes, crowdsourcing.
But as she sees it, Warrior — the chief technology and strategy officer for Cisco Systems — says the next stage in innovation will deliver products that improve experience across multiple domains: hardware, software, user interface and design.
How Else It Helps
Besides allowing companies to harvest the best ideas from a broad pool of minds, allowing others to participate in the innovation process can also help a business by deepening customer engagement — especially in the startup phase.
As serial entrepreneur Matthew Rabinowitz said in another recent ETL talk, “If your customers feel they are part of that process, and they take a certain ownership, that can really lock them in emotionally.”
A Ph.D. candidate in the Stanford Technology Ventures Program recently published a new study related to open innovation — on how organizations elicit suggestions from the public. Read about it here.
A new study co-authored by a researcher in the Stanford Technology Ventures Program (STVP) finds that organizations that display a feedback button on their website to invite suggestions from customers frequently struggle to foster thriving online forums for new ideas.
The study looked at just over 23,800 organizations and found that success with the online feedback mechanism varied widely, according to co-author Henning Piezunka, a Ph.D. candidate in management science and engineering at Stanford. His research, conducted with a colleague at the European School of Management and Technology, in Berlin, has been published online by the journal Research Policy.
The types of organizations included in the study represent nearly every sector: public entities ranging from rural towns to national governments, and private companies ranging from small startups to multinational corporations. Whereas prior studies on suggestion solicitation looked at just a handful of organizations, Piezunka said that working with one of the leading software firms in the field of online feedback allowed he and his colleague to conduct a much more comprehensive study.
Why Study Suggestions
The findings have broad implications since businesses and other organizations increasingly turn to the Internet to engage customers and innovate through “crowdsourcing.”
Emboldened by the ability to tap into a global community, organizations are increasingly adopting so-called “open innovation” strategies to harvest ideas. In the first weeks of September alone, organizations ranging from NASA to the National Football League have announced ambitious open-innovation initiatives.
“… the whole topic is important because it has been shown that organizations can innovate if they interact with their customers. But we actually wanted to see how to do it successfully.”
More specifically, the study is in line with STVP’s mission of accelerating entrepreneurship education at Stanford and around the world. “When we study entrepreneurship, we are essentially examining how individuals and organizations identify and explore new ideas,” Piezunka said. “Now, how do you actually get new ideas? One crucial avenue is: You engage with customers.”
He also pointed out that “the whole topic is important because it has been shown that organizations can innovate if they interact with their customers. But we actually wanted to see how to do it successfully.”
But not all organizations have the legions of customers or instant name recognition of a company like Microsoft. And yet, smaller entrepreneurial organizations can also succeed in eliciting suggestions: Swiftkey, a London-based startup behind the popular screen-based keyboard, was successful in eliciting numerous suggestions from its customers, which ultimately guided its innovation process.
Piezunka says that one of the biggest reasons why most organizations fail to replicate those successes is that outsiders don’t see how much effort actually goes on behind the scenes to make those external-engagement campaigns take off.
“People actually fall victim to the general success of open innovation,” Piezunka said. “Organizations often feel like all they need to do is launch their campaign, and it will just take off. But that is absolutely not how it typically goes.”
Hence, in addition to pointing out the shortcomings of organizations’ outreach efforts, the researchers also present what they found to be the most effective strategies for encouraging suggestions from the public and nurturing engagement. Through their analysis, they identified several actions that organizations must take if they want external contributors to send in their suggestions:
Proactive attention:Instead of waiting for suggestions, the organization should initiate the conversation with an internally developed suggestion to stimulate debate.
Reactive attention: Organizations should actively respond to suggestions from external contributors to signal that their thoughts are being heard. The study found this was especially important for newcomers to the discussion.
Catalyzation: Organizations should focus their efforts on new users and the early stage of their open-innovation effort. In particular, organizations need to be aware of the time, effort and commitment required to nurture a fledgling forum into a thriving discussion. This includes establishing a process for retrieving, reviewing and responding to suggestions — especially those offered up at the outset.
Those may seem like common-sense rules for successful communications. But the reality is that organizations frequently underestimate the investment needed, and often fail to apply such widely understood best practices when it comes to corporate engagement, Piezunka said.
For instance, he paints this scenario: Imagine that you’re sitting in a company meeting and saying, “You know what? We just had five customers send in suggestions, and we want to act on that.”
“But the critical moment to engage is actually when you hear from those first five customers.”
“That’s kind of a hard case to make in a business meeting if you have, say, 100,000 customers. It’s much easier if you can say that all 100,000 customers want something,” Piezunka explained. “But the critical moment to engage is actually when you hear from those first five customers.”
Piezunka knows this first hand. Years ago, he founded a web-design company in his native Germany, which is still in business today. He admits that he wasn’t much of a computer programmer back in those days, but that even then he was a “very, very strong believer that you really need early customer input.”
“Most organizations don’t do enough. They tend to be product-focused when it comes to innovating, but not customer-centric,” said Piezunka, who figures he was on the road 60 to 70 percent of the time for his company. “If organizations actually adopt the strategies of proactive and reaction attention, they can unlock the enormous potential of open innovation.”
Challenging the status quo is a fight entrepreneurs often like to pick. And with tech startups successfully changing the game practically overnight across industries — Airbnb in travel, Spotify in music, Square in the retail space, Uber and Lyft in the transportation business — an entrepreneur might think it’s as easy as, “Code it, and they will come.”
But in reality, bucking the trend is no trivial matter. When you see a business opportunity no one else does, your big idea is inevitably for a product or service that no one is demanding. Knowing what people will want before they actually do is a sweet spot to be in, and realizing how difficult it will be in the beginning will only brace you for the tough — but worthwhile — road ahead.
Changing the World is Hard
In this eCorner video clip, venture capitalist John Lilly of Greylock Partners quotes longtime STVP faculty member Tom Kosnik in urging aspiring entrepreneurs to “do what makes your soul sing.” That, Lilly says, will give you the strength to persevere in the constant struggle against the status quo.
“Because it’s hard, and because it’s constantly hard, and because people are telling you ‘you’re a moron’ and why things won’t work — over and over and over again,” Lilly explained, “it’s important to do things that speak to you and really feed your soul and help you grow over time.”
The Rock Star Myth
But if you’re an entrepreneur in Silicon Valley, a statistic presented by Entrepreneurial Thought Leaders (ETL) speaker David Friedberg serves as a sobering status quo for anyone with dreams of becoming the next Jack Dorsey. According to Friedberg – who launched his own entrepreneurial journey after earning a degree in astrophysics and leading several projects as a mathematical programmer at Lawrence Berkeley National Laboratory — the odds of starting a company and it being worth over $1 billion is .0006 percent.
“There’s a culture of taking leaps and doing big, exciting things here. And you’re an important person if you do that,” said Friedberg, founder of The Climate Corporation. “But just being an entrepreneur does not make one a rock star.”
The Danger of Protecting the Status Quo
Some say the status quo is upheld at the highest levels. In his ETL talk last spring, author Nassim Taleb mentioned how U.S. monetary policy aimed to preserve the fragile and dysfunctional parts of our economy in the wake of the most recent financial crisis. To Taleb, that sort of intervention runs contrary to the premise of his book Antifragile.
Luckily, today’s entrepreneurial culture recognizes the constructive value of failure and embraces the forces of creative destruction — especially in Silicon Valley, where reinvention is a constant.
Branding is often seen as a fluffy subject. It’s de-prioritized because it is neither tangible, nor easily measurable and belongs more to the creative types than left-brain entrepreneurs. But dismissing the importance of branding is a big mistake, especially for consumer facing companies. Branding is critical to the success of any business, both externally and internally and creating a solid brand platform will make it easier to execute all your other tasks with clarity.
Understanding Branding Is Vital
Last summer, my cofounder and I realized we had to do a proper brand review. At two years old we had evolved in our direction, in the understanding of who we were and we had doubled the size of our team. Everything had happened organically, but we had never taken a step back to communicate the changes to the team or even between each other. We were lacking a clearly defined vision, a common language and an authentic identity. Though we knew branding mattered, we didn’t fully grasp the importance of developing a strong brand platform.
What We Did Wrong
“What we hadn’t realized is that real branding also requires a certain set of tools, a framework to work with and a third party to act as the conductor.”
We de-prioritized our branding review. We thought we did not have the time or resources and ultimately, it took us a year to complete. We then had a failed attempt when we thought we could do it ourselves without any proper tools and outside help. We gathered the team together and did two sessions, one full day and one half day. Though these sessions sparked great discussions, we’ve since learned that we didn’t know which questions and exercises could help us reach a successful conclusion. Furthermore, we didn’t know how to proceed with the results of these sessions. What we hadn’t realized is that real branding also requires a certain set of tools, a framework to work with and a third party to act as the conductor.
Getting It Right
This summer, we finally did it correctly. We enlisted the help of Alexandra Sprung and Kevin Meade, two of the founders of a great European branding agency, L’Agence Simone. They’ve worked with clients like Diptyque, Champagne Perrier-Jouet and more, and provided invaluable guidance throughout this process. Here, I’ve detailed what we learned from this experience, including some of the process and tools we used, to give you an idea of what needs to be done.
Conduct a customer survey to make sure you understand your customer.
Spend time upfront with the agency to walk them through the internal and external questions as well as challenges to address.
Ask your team to send you specific questions they want to discuss.
Buy multiple copies of magazines in your industry or aimed at your target audience.
Dedicate one full day to the brand discussion — all calendars must be cleared (no exceptions!)
During the branding session:
Share the results of the customer survey.
The agency introduces itself and its expertise.
The agency then walks the team through their framework. In the case of Simone, it is what they call their Global Mindscape, which is a two-by-two matrix of the world of brands split into brands whose essence is based in recognition, progress, status and entertainment.
Each of the quadrants is explained with examples of brands. The team is asked to give examples of competitors and indicate where they would fall on that matrix.
The team must then discuss where the brand is today and where it wants to be tomorrow and place it on the matrix. This is a challenging and enlightening discussion.
Once this is decided, the teams split into groups of roughly five to six people who are given the task to illustrate, through a collage of images taken from magazines, what they think the brand is today and what they want it to be tomorrow.
The completed collages are taped to a wall, side by side. Each team then presents their two collages. This is a great way to visualize the team’s ideas and their common trends.
Finally, the agency records the words expressed when discussing the collages that illustrate Boticca’s future.
After the branding session:
The agency sends its summary and recommendations.
Based on these documented recommendations, the founders must work with the agency to translate the results into the brand platform, which should include: vision, mission, brand statement, values, style/aesthetics, and a lifestyle statement. Limit the number of people in this session to no more than four. This session should unify all opinions.
Share the brand platform with a few additional people on the team (perhaps one person in each department) for any final inputs. If you have an editor or writer on your team, have this person work with your platform to make it more engaging.
In addition to the brand platform, for each department, create a second document (we called this the brand springboard) that indicates how they can apply the recommendations to their daily execution. Include some ideas, but the main purpose is for each sub team to use it as a springboard to develop their own strategy.
Call a meeting to share the agency’s recommendations, the new brand platform and the brand springboard with the entire team. Be open to any comments where the team feels strongly. It is important for everyone to be aligned and believe in the common vision at the end of this session.
Ask the sub teams to work on the springboard documents and give them a week to develop their new strategies.
“The process allowed the various team members to better understand each other and move forward with a common understanding and willingness.”
Though we are still implementing our findings, the results of this process have already been tremendously beneficial. The process allowed the various team members to better understand each other and move forward with a common understanding and willingness. This team dynamic and buy-in is invaluable. We now all know what we want Boticca to be. Therefore, each team can take the results of this branding exercise and incorporate them into their own daily work. Because we all share the same vision, mission and values, we are also able to communicate externally in a stronger way, thus making our USP much stronger and differentiating ourselves to our audience.
Yes, it took some time, effort, resources and coordination, but the results are already worth it. All that remains to be done is what we do every day, to execute, but this time we can do it with clarity and in unison.
Entrepreneurs eager to win funding for their big idea might be tempted to spend most of their initial presentation to investors discussing their new product, service or feature. But ask any seasoned venture capitalist, and you’ll start to hear a pattern in regards to what else they want to hear: How will the money be spent? What’s the market opportunity and your competitive edge? And perhaps most importantly, why they should believe in your core team members.
Covering the Basics
In the video clip below, Kate Mitchell, co-founder of Scale Venture Partners, puts it bluntly: She wants to hear if the market opportunity is big enough, and whether the team is “relevant” — do its members bring the right skills, experiences and passions.
Her firm sees about 5,000 business plans come in annually. But its partners only spend time on about 150 of them, and in the end, fund somewhere between six to 10, Mitchell said during her Entrepreneurial Thought Leaders talk last May. So her advice speaks volumes.
Heidi Roizen, a venture partner at DFJ, says the pitch needs to get right to the “value proposition.” And when introducing key team members, Roizen says that specifying past successes — particularly on projects with brand-name recognition — establishes credibility.
And while this video is from 2002, it offers a timeless tip. Roizen says that the most important goal of any first meeting with investors is not to convince them to fund your venture, but solely to secure that next meeting.
From the Heart
This final clip captures a one-minute pitch by a speaker with a unique history: Heracio Harts developed a plan for bringing healthier foods and activities to underserved communities while he was in prison.
Harts is a recent graduate of The Last Mile, a program that teaches incarcerated men and women fundamental business and entrepreneurship skills.The program was co-founded by Chris Redlitz and his wife, Beverly Parenti, both of whom also spoke last May as part of the ETL seminar series.
Summer is perfect for catching up on the many things we miss out on from day to day, especially in the world of academia. Yes, it’s true we’re busy preparing for the 2013-14 Entrepreneurial Thought Leaders (ETL) seminar series. But we also think now would be an ideal time to present some of the most popular video clips from the past academic year.
First up is acclaimed charisma coach and author Olivia Fox Cabane, who delivered the most-viewed ETL talk of the fall quarter. Here, she describes how being present plays a crucial role in exuding charisma and explains how humans can perceive a facial expression even over a fraction of a second that signals non-presence — such as your eyes glazing over.
“Presence is the single most requested aspect of charisma when I’m coaching executives,” Fox Cabane said. “They want to increase their boardroom presence or their executive presence, and they’re right to focus on it.”
Now, when technology sage Tim O’Reilly told his audience to think about doing less, he wasn’t suggesting they go out to the backyard and nod off in a hammock. The phrase “do less” summed up a trend he sees in technology whereby we no longer need to actively input data — like location — into our devices because so much “implicit context” is already contained in them.
In this clip from his March 2013 talk, the renowned technology investor conveys this concept through the app Square, which lets businesses using the app know when someone who also has it running on their smartphone is in the vicinity. No introductions needed (although, as O’Reilly points out, some sort of greeting would still be nice).
Solutions Over Ideas
When the co-founders of the news app Pulse spoke at Stanford last spring, a pearl of wisdom they imparted was that entrepreneurs should first focus on solving a problem that matters to users. Ankit Gupta, who earned a master’s degree in computer science from Stanford, speaks from experience in the clip below about how pursuing one’s own idea just because it’s clever — but devoid of any real-world demand — may be all for naught.
The Stanford Technology Ventures Program thanks DFJ for supporting the Entrepreneurial Thought Leaders seminar series. ETL talks will resume in the fall, with the first one scheduled on Oct. 2.
Researchers at Stanford have found that making bankruptcy laws less punitive motivates the most promising entrepreneurs to start successful businesses. The new study introduces the concept of a “failure barrier” and how lowering it can yield powerful and positive economic results.
Experts in Stanford’s Department of Management Science and Engineering (MS&E) studied entrepreneurial activity in Japan before and after the nation reformed its bankruptcy laws in 2003. The laws went from being a mechanism for punishing poor managers and forcing debt recovery, to a more forgiving set of policies that allowed executives to keep their jobs and reorganize their failed firms.
The study’s authors found that the rate of firms launched by “elite” entrepreneurs more than doubled after the overhaul. They also reported that firms launched a year after the policy change grew 44 percent faster than similarly aged firms founded prior to the overhaul — and that the highest-performing firms were founded post-reform.
The study’s insights into the mechanisms of new-firm growth represent a unique contribution in the area of entrepreneurship research. The findings also have implications for government policy: showing that bankruptcy reform can spur economic activity, as well as motivate the “best” — not just the most — individuals to become entrepreneurs.
“We found that the regulations and beliefs that only directly affect firms at the end of their lives, profoundly affect how new companies form, who forms them, and increased their early performance,” said Robert Eberhart, a research scholar in MS&E, a department in Stanford’s School of Engineering.
Co-authors of the study include Chuck Eesley, an assistant professor in MS&E, and Kathleen Eisenhardt, the Stanford Warren Ascherman M.D. Professor in MS&E. Both Eesley and Eisenhardt are on faculty at the Stanford Technology Ventures Program (STVP).
Eberhart leads the Stanford Project on Japanese Entrepreneurship, which aims to better understand the global implications of a new entrepreneurial dynamic in the world’s third largest economy. The project is based at STVP and Stanford’s Graduate School of Business.
“We found that the regulations and beliefs that only directly affect firms at the end of their lives, profoundly affect how new companies form, who forms them, and increased their early performance.”
Previous studies have shown how lowering the barriers to entry for entrepreneurs — providing subsidies and streamlining procedures, for instance — results in more people across the board starting their own businesses. This latest research looks at a different aspect by focusing on “failure barriers,” such as making bankruptcy laws less punitive.
The Stanford researchers say that lowering such barriers can be particularly effective for motivating more educated and experienced individuals to start their own companies. As other studies have shown, this group of entrepreneurs is more likely to launch high-performing ventures — and so, policies that support those entrepreneurs should be a high priority.
In their study, the authors say the rate of firms formed by elite entrepreneurs — those who graduated from one of Japan’s top universities and were over the age of 40 — more than doubled after bankruptcy laws were reformed.
The study is also unique in that it encompasses the more complex and realistic ecosystem that encompasses business failures, the founding of new firms, types of entrepreneurs and other factors. For instance, making bankruptcy less punishing can prompt elite entrepreneurs to leave marginal firms and start new ones — even leveraging the assets of failed businesses to strengthen theirs.
“… bankruptcy law is a powerful policy lever available to governments because it motivates the best qualified individuals who are most likely to succeed to become entrepreneurs.”
Indeed, the study’s authors say that lawmakers looking to spur entrepreneurial activity would do well to make failure less daunting for elite individuals — as they risk the most, and are the ones more likely to launch successful, job-creating companies that are the darlings of public policy.
“We found that bankruptcy law is a powerful policy lever available to governments because it motivates the best qualified individuals who are most likely to succeed to become entrepreneurs,” the authors conclude. “Lowering failure barriers is thus the ‘other side of the coin’ from lowering the growth barriers that ‘pull’ elite individuals into starting firms.”
Understandably, just as the rate of companies founded by elite entrepreneurs increased after Japan reformed its bankruptcy laws, the likelihood of them declaring bankruptcy also rose, the authors reported.
But they also assert that, if entrepreneurship is part of the “perennial gale of creative destruction” that propels an economy forward, governments can “strengthen” that gale by adopting laws that reasonably minimize penalties when entrepreneurs fail.
The study was funded and supported by The Miner Foundation, Michael Alfant, Cisco Systems, and Best Buy, Inc.
“Regardless of whether it’s a classroom or the offices of a billion-dollar company, space is something to think of as an instrument for innovation and collaboration,” Stanford d.school founder David Kelley says in the foreword for make space. “Space is a valuable tool that can help you create deep and meaningful collaborations in your work and life.”
The d.school — formally, the Hasso Plattner Institute of Design at Stanford — teaches design thinking to graduate students in what many would consider a maker’s paradise in the middle of campus. The book make space chronicles the d.school’s experiences in designing its interior features, instructing readers how to replicate its unconventional furnishings and, just maybe, its extremely creative atmosphere.
We at STVP think a lot about space, too. Currently, our office is quite open, and everything in it — from the desks and chairs to the storage shelves — are movable. Over the summer, we plan to reconfigure our space in a way that will both continue to foster staff interaction and designate areas for the various activities that take place throughout the year.
We’ll share before-and-after photos later this summer on Facebook and Twitter. So be sure to follow us!
Staying Hungry and Humble
In the video clip below, Facebook’s engineering director, Jocelyn Goldfein, tells STVP Executive Director Tina Seelig about the unfinished ceilings, bare concrete floors and bold phrases — such as “Move Fast and Break Things” and “Fail Harder” — written all over the walls of the company’s headquarters.
“The entire environment is meant to keep you from feeling complacent, or comfortable, or like we’ve won,” Goldfein explained during her May 22 Entrepreneurial Thought Leaders talk. “We never want to feel like we’ve won. We always want to feel pretty hungry.”
Being Out in the Open
In this clip, Spotify Co-Founder Daniel Ek shares how he manages to lead a growing company with a workforce distributed on multiple continents. “I don’t think the physical experience can be replaced yet,” says Ek, who admits to traveling extensively and sitting out in the open to encourage conversations in his company’s offices.
In this conversation with entrepreneur Steve Blank, inDinero Co-Founder Jessica Mah offers a humorous story about the dangers of young startups moving into fancy office spaces. She described how one of the luxuries in hers included a hot tub — a particularly amusing admission to Blank, who invested in inDinero.
But Mah went on to say how inDinero then moved much closer to home: into an apartment down the hall from her own unit. “It’s cheaper,” she said. “Everyone’s in a small room together. So you really feel like you’re in it together.”
Just as personal relationships can be a juicy topic of conversation, a rich area to explore in entrepreneurship is the dynamics between co-founders. Indeed, a recent article on Mashable compared the quest for a business co-founder to “choosing who you want to marry.”
What holds true for both types of partnerships is the advice — often, wearily given — “It isn’t for everyone.” On that note, here are three videos that feature varying perspectives on the perception and value of working with co-founders.
In the video clip below, Instagram Co-Founders Kevin Systrom and Mike Krieger describe their working relationship. Both Systrom and Krieger explain the stages of their relationship, and how the partnership respects each other’s areas of specialty, while also providing a tremendous opportunity to sound out ideas.
Because of this benefit, Systrom explains the co-founder relationship needs to be cherished. Krieger also believes honest and direct communication of expectations can prevent the relationship from wearing down over time.
Real-time Sanity Check
In this clip, entrepreneur Steve Blank asks inDinero Co-founder Jessica Mah about the value of having a co-founder. Mah explains that fellow co-founder Andy Su provides a contrarian opinion to her own, which serves as an invaluable “real-time sanity check” when it comes to making critical decisions.
Yet, while many legendary Silicon Valley companies were founded by teams of two, partnerships aren’t without their problems, venture capitalist Mark Suster asserts in the clip below. Disagreements arise based on personal life changes, business strategies and roles within the company.
And yes, the marriage metaphor comes up again: Suster prefers to avoid playing the role of “marriage counselor” between drifting co-founders by instead working with a strong, individual entrepreneur.
What is the sum of 5 plus 5?
What two numbers add up to 10?
The first question has only one right answer, while the second has an infinite number of solutions, including negative numbers and fractions. These two problems, which rely on simple addition, differ only in the way they are framed. In fact, all questions are the frame into which the answers fall. And as you can see, by changing the frame, you dramatically change the range of possible solutions.
“If I had an hour to solve a problem and my life depended on the solution, I would spend the first fifty-five minutes determining the proper question to ask, for once I know the proper question, I could solve the problem in less than five minutes.”
Albert Einstein once said, “If I had an hour to solve a problem and my life depended on the solution, I would spend the first fifty-five minutes determining the proper question to ask, for once I know the proper question, I could solve the problem in less than five minutes.”
Taking photos is a great way to practice this skill. When Forrest Glick, an avid photographer, ran a photography workshop near Fallen Leaf Lake in California, he showed the participants how to see the scene from many different points of view, framing and reframing their shots each time. He asked them to take a wide-angle picture to capture the entire scene, then to take a photo of the trees close to shore. He then asked them to bring the focus closer and closer, taking pictures of a single wildflower, or a ladybug on that flower. He pointed out that you can change your perspective without even moving your feet. By just shifting your field of view up or down, or panning left or right, you can completely change the image. Of course, if you walk to the other side of the lake, climb up to the top of one of the peaks, or take a boat onto the water, you shift the frame even more.
A classic example of this type of reframing comes from the stunning 1968 documentary film Powers of Ten, written and directed by Ray and Charles Eames. The film, which can be viewed online, depicts the known universe in factors of ten. Starting at a picnic by the lakeside in Chicago, the film transports us to the outer edges of the universe. Every ten seconds we view the starting point from ten times farther out, until our own galaxy is visible only as a speck of light among many others. Returning to earth with breathtaking speed, we move inward — into the hand of the sleeping picnicker — with ten times more magnification every ten seconds. Our journey ends inside a proton of a carbon atom within a DNA molecule in a white blood cell.
This magnificent example reinforces the fact that you can look at every situation in the world from different angles, from close up, from far away, from upside down, and from behind. All day long, we are creating frames for what we see, hear, and experience, and those frames both inform and limit the way we think. In most cases, we don’t even consider the frames — we just assume we are looking at the world with the proper set of lenses.
Being able to question and shift your frame of reference is an important key to enhancing your imagination, because it reveals completely different insights. This can also be accomplished by looking at each situation from different individuals’ points of view. For example, how would a child or a senior see the situation? What about an expert or a novice, or a local inhabitant versus a visitor? A wealthy person or a poor one? A tall person or a short one? Each angle provides a different perspective and unleashes new insights and ideas.
At Stanford’s Hasso Plattner School of Design, or ‘d.school’, students are taught how to empathize with very different types of people, so that they can design products and experiences that match their specific needs. When you empathize, you are, essentially, changing your frame of reference by shifting your perspective to that of the other person. Instead of looking at a problem from your own point of view, you look at it from the point of view of your user.
Another valuable way to open the frame when you are solving a problem is to ask questions that start with, Why?
For example, if you are designing anything — from a lunch box to a lunar landing module — you soon discover that different people have very diverse desires and requirements. Students are taught how to uncover these needs by observing, listening, and interviewing and then pulling their insights together to paint a detailed picture from each user’s point of view.
Another valuable way to open the frame when you are solving a problem is to ask questions that start with, Why? In his need-finding class, Stanford d.school Professor Michael Barry uses the following example:
If I asked you to build a bridge for me, you could go off and build a bridge. Or you could come back to me with another question: “Why do you need a bridge?” I would likely tell you that I need a bridge to get to the other side of a river. Aha! This response opens up the frame of possible solutions. There are clearly many ways to get across a river besides using a bridge. You could dig a tunnel, take a ferry, paddle a canoe, use a zip line, or fly a hot-air balloon, to name a few.
You can open the frame even farther by asking why I want to get to the other side of the river. Imagine I told you that I work on the other side. This, again, provides valuable infor- mation and broadens the range of possible solutions even more. There are probably viable ways for me to earn a living without ever going across the river.
The simple process of asking ‘why’ questions provides an incredibly useful tool for expanding the landscape of solutions for a problem.
This type of thinking can be applied to any industry. For example, the directors of the Tesco food-marketing business in South Korea set a goal to increase market share substantially and needed to find a creative way to do so. They looked at their customers and realized that their lives are so busy that it is actually quite stressful to find time to go to the store. So they decided to bring their store to the shoppers.
They completely reframed the shopping experience by taking photos of the food aisles and putting up full-sized images in the subway stations. People can literally shop while they wait for the train, using their smartphones to buy items via photos of the QR codes and paying by credit card. The items are then delivered to them when they get home. This new approach to shopping has boosted Tesco’s sales significantly.
Companies need to continually reframe their businesses in order to survive as markets and technology change.
Reframing problems is not a luxury. On the contrary, all companies need to continually reframe their businesses in order to survive as markets and technology change. For example, Kodak defined its business as ‘making cameras and film.’ When digital cameras made film photography obsolete, the company lost out badly, because it wasn’t able to open its frame early enough to see its business as including this new technology. On the other hand, Netflix began delivering DVDs of movies by mail. It framed its goals much more broadly, however, seeing itself as being in the movie-delivery business, not just the DVD-delivery business.
Framing and reframing of problems also opens up the door to innovative new ventures. Scott Summit, the founder of Bespoke, created a brand-new way to envision prosthetics for people who have lost a limb. The word ‘bespoke’ comes from Old English and means “custom-tailored” — and that is exactly what his company does: it makes custom-tailored limbs for those who have lost them.
Scott’s biggest insight was that some people with artificial limbs are embarrassed by their disability and want to hide their unsightly artificial limbs as much as possible. He reframed the problem by looking at an artificial limb not just as a functional medical device, but as a fashion accessory. Essentially, he decided to make prosthetics that are cooler than normal limbs.
Bespoke makes its customized limbs using a brand-new technique for 3D printing. Its designers first do a 3D scan of the surviving limb to make sure that the new limb is completely symmetrical with the surviving one. After they print the new limb, they cover it with materials that match the user’s lifestyle. For example, a new leg can be designed to look like a leather cowboy boot, or it can be covered in brushed chrome to match the user’s motorcycle, or it can be cut out to look like lace to match a fashionable dress. Not only is the leg functional, but the wearer is actually proud to display it publicly. Essentially, the prosthetic was transformed from a medical device into a fashion statement.
Reframing problems takes effort, attention and practice, but it enables you to see the world around you in a brand-new light. As indicated, you can practice reframing by physically or mentally changing your point of view, by seeing the world from others’ perspectives, and by asking questions that begin with Why? Together, these approaches will enhance your ability to generate imaginative responses to the problems that come your way.
The power of entrepreneurial thinking not only serves to launch products and organizations. In the actions of individuals and groups, who are passionate about solving problems, entrepreneurial activity can be a catalyst for creating great change. By seeing problems as opportunities just waiting to be seized, we can go a long way in addressing many of the most pressing problems on Earth. To inspire all of us to be change-makers in 2013, here are three inspirational videos featuring passionate leaders who are making change in the world.
Making Change Through Cultural Lines
Using a illustrative example from her experiences in Niger, Melinda Gates, co-chair and trustee of the Bill & Melinda Gates Foundation, talks about developing approaches to increasing contraception access and use, by tapping into the cultural realities and interactions between groups of men and women.
Can Products Save the World?
Serial entrepreneur Jeff Church discusses whether social enterprises can sell products to affect change in the world. As the co-founder of social enterprise Nika Water, Church believes social entrepreneurs can only have lasting success if they start their enterprises as “nine parts business, one part cause.”
Using Serial Innovation to Create Change
Method Products Co-Founder Adam Lowry loves it when competitors copy his company’s products because it means they are changing the rules of the game in their sector. Lowry also explains why this allows his company to innovate in the cleaning products category and pushes their industry to create desired social change.
Check out more entrepreneurial insights on Stanford eCorner.
It’s easy to fall in love with a cool technology or an amazing idea, but can these actually be turned into useful products that customers desire. While visions of huge profits and market domination can begin to dance in the mind of aspiring entrepreneurs, it is a commitment to building valuable products and deeply understanding the problems you are solving for customers that provide the true foundation for success. Here are three videos examining the importance of keeping laser focus on creating products that connect with audiences.
What is a Product?
“Product is everything,” says Smule Co-Founder and CEO Jeff Smith. While his previous (and successful) entrepreneurial experiences taught him the impact of sales, marketing and finance, Smith sees nothing being more important than product. Here he discusses why it’s important to consider what the first demonstratable use case of the product will be, and to work creatively to communicate this to customers.
Are You Building Products Customers Want?
“What customers want isn’t necessarily what you or your engineering team wants to build,” says Jessica Mah, co-founder of inDinero. Here Mah describes the debates that went on inside her company when aligning the desires of the engineering team with new requests for product features. Eventually a strict weekly schedule was implemented at inDinero to provide more insightful customer feedback, says Mah, which provided new insights that would shape the future of the product roadmap.
Show Investors a Working Product
To inspire a vision about the possibilities of a product, entrepreneurs should show investors a working version of their product, says serial entrepreneur Jack Dorsey. In the video below, the co-founder of Square and Twitter explains how this approach also makes the telling of the product’s story easier. Dorsey also shares the amusing (and money-making) technique he used when presenting Square to investors.
Check out more entrepreneurial insights on Stanford eCorner.
Skill building should be a lifelong pursuit, as there is something revitalizing about the process of learning and striving to master an endeavor or practice. Within business organizations, professional development opportunities are clearly valued by rank-and-file employees, who often pursue skill building or training as a stepping-stone toward career advancement.
But what about the leaders of startups, mid-size companies, and enterprise organizations; what types of skills should they focus on building? For some leaders, it may mean learning new ways to understand the business, right down to the proverbial nuts and bolts of the operation. This is of particular value to those who “fancy themselves as grand strategists and visionaries.”
While leaders often act as if they have all the right answers, perhaps a more authentic approach is admitting when you could use the advice of others.
Another valuable skill is the ability to communicate authentically with colleagues and employees. While leaders often act as if they have all the right answers, perhaps a more authentic approach is admitting when you could use the advice of others, and by doing so, encourage employees to openly bring their best ideas and efforts to bear on the products and culture of a business.
Here are three videos exploring ways entrepreneurially-minded leaders can cultivate these types of skills in themselves — and then reap the benefits of doing so.
See Your Business at Each Level
Entrepreneur Sukhinder Singh Cassidy argues that the judgment to know at what level to examine your business at any given moment is a vital leadership quality. Using a short anecdote from her time at Google, Singh Cassidy explains successful founders and executives must understand the tactical drivers of a business to effectively manage from the top of an organization.
Listen Carefully to Tough Advice
“You must decide how you receive advice,” says Mårten Mickos, CEO of Eucalyptus Systems. Mickos believes this simple, but important, concept is critical for leaders and entrepreneurs who are bombarded by input and challenges from all sides.
Using a story from his experience at MySQL AB, Mickos illuminates the need to re-evaluate positions based on new information and adversities.
The Value of Being Vulnerable
“Leaders who are vulnerable are far more trusted by their employees,” says Ori Brafman, bestselling author of Click: The Magic of Instant Connections. Brafman explains that vulnerability, while often seen as a weakness in business, is a valuable skill that can play a critical role in binding deep, immediate relationships in the workplace.
To illustrate this point, Brafman shares the unique story of a hostage negotiator’s willingness to reveal vulnerability to help form an intense, but unorthodox, business relationship.
The industrial revolution transformed the business landscape, just as the managerial revolution transformed how we manage large firms. Today, a third revolution, an entrepreneurial revolution, is underway, shaking the very foundations of what we believe about entrepreneurship. What does this mean for entrepreneurs?
As an entrepreneur, Greg was doing everything right according to traditional wisdom and it was killing his business.
Take the example of Greg Whisenant at CrimeReports.com. As an entrepreneur, Greg was doing everything right according to traditional wisdom and it was killing his business. It started several years earlier when Greg’s apartment building had been robbed. Frustrated and feeling a need to do something about it, he joined a neighborhood watch group and offered to map crimes happening in the area.
As Greg continued, he came to believe that mapping the locations of crimes would align and empower the efforts of citizens and police to reduce overall crime in each neighborhood. So then he did everything right according to standard entrepreneurial wisdom: he had a big vision, built a product, landed a customer, raised venture financing and hired a team.
But despite his best efforts, doing everything right was leading nowhere quickly. In fact, after several years, Greg had still landed only one customer. But once Greg changed his process, in the next three years he landed over 2,000 paying customers. So what was the difference?
Several years ago, my co-author Paul Ahlstrom, a serial entrepreneur and experienced venture capitalist, set out to write a book, Nail It Then Scale It. Based on my research and his experience, we worked to describe a new entrepreneurial process. The process we articulated involved nailing your business and, for Greg and all entrepreneurs, the journey should begin by nailing a pain.
…we argued to Greg that he needed to stop building, get into the field and uncover the Monetizable Market Pain—a pain so significant that customers will return your cold calls.
Unfortunately, most entrepreneurs begin with their idea and build a product. Instead we argued to Greg that he needed to stop building, get into the field and uncover the Monetizable Market Pain—a pain so significant that customers will return your cold calls. If you don’t uncover a Monetizable Pain (and we measure that by 50% of your potential customers being willing to return your call), then you probably don’t have a sustainable business worth your blood, sweat and tears.
So how did Greg do this?
He stopped building and started talking to everyday people and police departments. He quickly discovered that everyday consumers wouldn’t pay for his service and that police departments hated his advertising-based business model. At this point, Greg and his fellow founders began to despair, but as they continued to listen (rather than sell), they discovered some crucial pieces of information.
For one, police officers were fascinated by the data possibilities of the website and were excited about leveraging the Internet to increase the quality of their communication with citizens. Police chiefs and officers could now use a data “dashboard” to track trends and daily activity.
As the enthusiasm built in each conversation, the CrimeReports founders learned that police would actually pay them to post their data — advertising wasn’t necessary. As they continued to learn and refine their prototype, the feedback from customers was astonishing. Their customers said things like:
“This blows other choices out of the water.”
“We’ve been trying to do this for years.”
“It used to take us six months to get this kind of data. Now we can get it the next day.”
The number of police departments purchasing the product went from one customer to over 2,000 paying customers in three years. And not only did customers clamor to sign up, but the CrimeReports website jumped in popularity with everyday citizens. Applying the process was nothing short of transformational.
During my first year as a teaching assistant for the DFJ Entrepreneurial Thought Leaders (ETL) seminar, I was as a green as could be. I wanted to go in every direction at once (and I still do). One night, the lead teaching assistant at the time, George Tang, took me aside. “You need to focus,” he said. “You should meet Phil. Phil Libin at Evernote. Phil is a really good guy.” A year later, I found myself in front of that very man.
During his fall quarter ETL lecture, Libin joked, “I was so nerdy the high school chess team wouldn’t hang out with me!” While this may be a joke, you can see he really means it. Along with his enjoyment in entertaining an audience, two other things immediately standout when meeting Phil Libin.
First, Libin excludes an interminable passion about everything he does. You can see his eyes light up when he talks about his early obsession with “transcending the end of the world,” as a youth growing up in Soviet Russia. And a smile always creeps across his face when he mentions an interesting technology he played a part in building.
To Libin, Evernote is a company for the long term, with no exit strategy.
Most of all, Libin is unabashedly in love with his own product, Evernote, an idea and inspiration capturing application. He began his talk by taking a picture of the audience and uploading it to his Evernote account. To Libin, Evernote is a company for the long term, with no exit strategy. Libin is one to choose his passions and go all in. The feeling is infectious.
Second, as George Tang told me a year ago, Libin is a really good guy. He is driven by goals of having a positive impact that are larger than him. His childhood desire of helping humanity preclude the end of the word is just one example.
When merging his startup with another to form Evernote, Libin talked of focusing on the best interests of all the individuals involved. He also applies this principle when Evernote acquires other startups. He stresses working with the cofounders of companies that Evernote acquires to take their product further than they could without it.
This focus on a better product exemplifies Libin’s vision of Evernote as an extension of humanity’s collective mind being used to combat what he sees as a plague of commonplace “stupidity” that threatens apocalypse. He is always thinking about creating products that support the goodness of the world.
Libin’s intense geek-passion for his product and his genuine mindfulness for the common good are qualities that I feel are sometimes overlooked in Silicon Valley. At Stanford, it often feels like startups are popping up everywhere. It is easy to believe that they also happened over night. Listening to the story of an entrepreneur like Libin puts things back in perspective.
Many of the greatest and longest lasting companies were decades in the making. Libin’s experience reminds me of something that a venture capitalist once told me — the best founders are those whose motivations for their company lie in their childhoods. The 100-year companies come from the ideas that inspire founders from their earliest ages. It is a matter of finding what those noble passions are and latching onto them with geek-like intensity.
Enjoy Evernote CEO Phil Libin’s DFJ ETL seminar.
How will you live a more entrepreneurial life in the new year? If you’re planning a new venture or working hard to develop a new technology, a little extra inspiration couldn’t hurt.
The 2011 DFJ Entrepreneurial Thought Leader seminar offered a dynamic group of leaders with different views on the meaning and value of entrepreneurship. However, the impact entrepreneurship plays in changing lives was a similar thread for many of speakers. Here are a few of the most inspirational videos clips from 2011 to help you start the new year off right. And don’t forget to check out the Winter 2012 DFJ ETL line-up.
Entrepreneurship is a Belief System
“You have to believe in something bigger than the business you are trying to address.”
“You have to believe in something bigger than the business you are trying to address,” says Eucalyptus CEO Mårten Mickos.
In this video, Mickos explains why the foundation of an entrepreneurial mindset is a belief system that not only requires a belief in big ideas, but includes believing in oneself and working with others that believe in you.
The Best Time to Start is Right Now
Serial entrepreneur Phil Libin believes now is ‘the best time in the history of the universe” to start a new company. The CEO of Evernote, Inc. magazine’s 2011 Company of the Year, argues that today we live in a geek meritocracy where great products are king.
He encourages entrepreneurs to take advantage of modern distribution tools such as app stores, social conversations, free-mium economics, and smart phone technology.
Why are You Doing This?
“The essence of what you’re trying to do… is to create amazing things that impact all of us.”
Investor Brad Feld challenges entrepreneurs to question why they are pursuing this path. According to Feld, “The essence of what you’re trying to do… is to create amazing things that impact all of us.”
The tactics around entrepreneurial success probably don’t matter very much, says Feld, if you are not working on something you are passionate about.
Participating in an innovation tournament is a fun and effective way for aspiring entrepreneurs to practice how to leverage resources and take actions to create value.
Based on STVP’s successful Global Innovation Tournament (GIT), this fast-paced, multi-day competition offers teams a chance to solve a mystery challenge to create as much value and impact as possible.
Help students learn skills for idea generation, teamwork, problem solving and value creation, all in an environment of ambiguity and resource constraints.
The educational purpose of the competition is to simulate the experience of being an entrepreneur, in an activity that is suitable for students of all ages. This means learning and developing skills for idea generation, teamwork, problem solving and value creation, all in an environment of ambiguity and resource constraints.
In past years at Stanford, the tournament challenge was to create value from common, everyday objects, such as “sticky notes,” rubber bands and water bottles. The challenges can also be concept-based, such as “Make Saving Money Fun.”
As an organizer, you will select the tournament challenge, set the schedule and organize judges and prizes. You will also promote the tournament challenge online or assign the challenge to local students.
Once the challenge has begun, students will have just a few short days to create as much value as possible around the challenge and to upload a video to YouTube to show a record of their progress.
Once the challenge has begun, students will have just a few short days to create as much value as possible around the challenge and to upload a video to YouTube to show a record of their progress. At that point, judges will evaluate the video entries and winners will be selected.
Try placing emphasis on having fun and unleashing student creativity rather than on any competitive aspects of the tournament.
If you are assigning an innovation tournament as part of a university course, the time period just after mid-term examinations seems to be optimal for performance.
Teams can be of any size, from one person to many. Also, we suggest giving students somewhere between four and seven days, including a weekend, to complete the challenge and upload their video.
Wait to pick your award categories until the judges have seen all of the video entries. Name the awards and assign prizes to fit the submissions that warrant recognition.
Reach out to entrepreneurs and business leaders in your local community for experiential prizes. Some ideas include lunch with a startup founder or business executive, or one-on-one meetings with an angel investor or venture capitalist.
Of course, you could also seek out donations of resources to help young entrepreneurs to build the next iteration of their product.
It is raining on the first day of Stanford’s DFJ Entrepreneurial Thought Leaders Seminar series, and it couldn’t be more fitting for today’s speaker. David Friedberg is the CEO of The Climate Corporation (formerly WeatherBill), a weather insurance company. In fact, David came up with his original idea for WeatherBill on a rainy day in San Francisco.
“Founder isn’t really a role. It’s really not a role that I like.”
On his daily commute through San Francisco, Friedberg noticed that rain regularly closed down a bicycle shop that caters to tourists. Soon after, Friedberg would go on to found The Climate Corporation on the observation that so many businesses are affected by the weather. But David Friedberg hates being called a founder. In fact, he says that when his venture capitalists introduce him as the “founder” of The Climate Corporation, he tells people, “Founder isn’t really a role. It’s really not a role that I like.”
Friedberg is a person focused on solving problems. He describes this as “revealing truth and fact,” and he doesn’t hang on to the founder title like others do. Instead, he is practical. He takes the executive position bluntly stating that “I’m the CEO of the company today, and I might not be the best CEO tomorrow.” He is blissfully truthful about his no nonsense role in the company.
He has built a multimillion dollar funded company in a short while, pulled everything together, and readily admits he would be ready to remove himself if/when he is no longer the right person for the job. That is a really intimidating statement to hear, especially coming from someone as obviously talented as Friedberg.
Listening to Friedberg, I sheepishly think of my own LinkedIn profile, where the title of “Founder” is plastered in at least one or two places in connection with some of my previous side projects. I am tempted to skirt over to my profile for some quick resume tidying, but then a question comes to mind: What is a founder?
Continuing with his lecture, Friedberg projects two pictures on screen for the audience. One of the pictures is of a “rock star” founder, just having made his exit — an image commonly featured by Fast Company and Forbes. The other picture is of the archetypal “real” founder, sleep deprived, running on caffeine, and near the end of his rope.
Seasoned entrepreneurs, CEOs, professors and founders alike tell us that the “rock star” picture is a fantasy.
The former image is a Silicon Valley dream boy, a ubiquitous legend not only in the Valley, but also in pop culture. It is simultaneously the joke of Silicon Valley, while inadvertently being a false representation of the Valley and the entrepreneurial community at Stanford. Seasoned entrepreneurs, CEOs, professors and founders alike tell us that the “rock star” picture is a fantasy.
The second of David Friedberg’s pictures looks more like a Stanford computer science student scraping away at the last bugs in a systems assignment, or in Friedberg’s case, a startup. In fact the difference between the two might be minuscule. Students straining on Redbull aren’t much different than those founders pulling late nights on Starbucks. This latter image is a dose of reality, and Friedberg has some statistics to further the point.
According to Friedberg, the odds of starting a company and having it be worth $1 billion dollars in 49 months after founding are about 0.0006%. After accounting for average dilution, this is the equivalent of earning a $73,000 annual salary. But you also have a 67% chance of making absolutely nothing at all. The audience laughs at this, but are we convinced?
It seems there are more people in my Stanford class who are going to be “founders” than employees. I have more Silicon Valley business cards with “founder” on them than anything else. And how often do you hear the phrase “YC Founder” from Y-Combinator, Paul Graham’s premier accelerator? Sometimes I wonder how we have anything but single person LLCs in Silicon Valley. Stanford and Silicon Valley rightly lionize the act of taking initiative, but where is the line between taking initiative to solve real problems and taking initiative for initiative’s sake?
A trend of some of the friends/entrepreneurs I look up to most is to label themselves “janitor at Stealth Startup” on their LinkedIn profiles. It’s a humorous, self- deprecating poke at their predicament. Janitors clean up messes. It isn’t a frilly job, but a janitor’s role is indispensable. To put it simply, janitors solve problems.
“I don’t want to say be entrepreneurial,” says David Friedberg. “I want everyone in this room to walk away from this discussion today, reflective about what it is you want out of life and then make a choice that is based on some of the things that I am trying to tell you about today.”
As the lecture ends, the rain gives the crowd a break as they trickle from NVIDIA Auditorium on the Stanford campus. The crisp California evening air brings clarity, and I am reflecting on Friedberg’s advice.
And weighing a career in janitorial work.
“Good fortune is what happens when opportunity meets good planning.” This is how entrepreneur Thomas Edison viewed the role of luck in one’s life and work. But no two people see luck in quite the same way. Each person’s life experiences, beliefs and expectations mingle together to create a willingness, or refusal, to place much stock in the idea of luck. For example, it’s hard to image ol’ Thomas Alva religiously playing the lottery each week — he was probably too busy getting things done.
In a recent essay for the New York Times, Jim Collins and Morten T. Hanson discuss what luck is really about in successful entrepreneurial enterprises. Having completed a nine-year research study on such organizations, Collins and Hanson do not see luck as abstract occurrences, but as identifiable events. Give the article a read to see how companies like Microsoft and Progressive Insurance handled these luck events, and eventually leveraged them to create ROL — return on luck.
Here are some technology business leaders, who recently visited the DFJ Entrepreneurial Thought Leaders seminar at Stanford, sharing their opinions on the role they hold for luck and the unknown in startups and product development.
Getting Rid of Luck
“Your pursuit should always be to remove the unknown from the equation,” says The Climate Corporation CEO David Friedberg. In this clip, Friedberg shares why this is a fundamental premise in building a successful venture. He also teases apart the different roles that risk and uncertainty play in fully understanding a business.
Luck is Committing to Big Bets
Evernote CEO Phil Libin explains how Evernote creates a great deal of luck by making big bets on which platforms to support. In this amusing and insightful anecdote, Libin tells how Evernote developed their application to work on Apple’s iPad by using cardboard cutouts of the device.
Doing What’s Right Creates Luck
According to Trip Adler, the founder of Scribd, luck is not what made the launch of his company successful. “It wasn’t luck, we were just doing things right,” says Adler. Rather than waiting for good fortune, Adler definitely aligns with the Edison approach to creating your own good fortune. Enjoy this video on eCorner to watch Adler explain how luck comes to any entrepreneur who works hard and remains persistent in trying to reach his or her goal.
Aalto University’s ecosystem brings muscle to Finland’s growing entrepreneurship scene
In Espoo, outside of Helsinki, the entrepreneurial waters are churning thanks to new initiatives connected with Aalto University’s technology and engineering campus. In fact, the Aalto ecosystem is helping to set an exciting new course for the Finnish economy, and entrepreneurship as a whole, throughout the Baltic region. Not sure you know any Finnish startups? Perhaps you’re more familiar with solving puzzles by launching irate birds at evil green pigs.
Yes, Finland is home to Angry Birds, the worldwide gaming sensation from Rovio Mobile. And Rovio’s founders were graduates of the Helsinki School of Technology, one of three schools that now make up the newly established Aalto. However, the university’s students, faculty and staff have even bigger plans for Finland, with their sights set on an entrepreneurship future that blasts past the bird-launching, pig-crushing phenomenon.
While other universities might consider their entrepreneurship work done just by setting up an incubator, Aalto is discovering real momentum by connecting the essential dots between entrepreneurship education, access to funding, student organizations for early development, and the creation of a culture that is open to outsiders. One catalyst for the Aalto entrepreneurship explosion is the intense passion held by students. “We were interested in building companies and changing things,” says Kristo Ovaska, founder of the Aalto Entrepreneurship Society (AaltoES). “We saw the need for something that wasn’t there.”
AaltoES was founded in 2009 as a privately funded, student-led initiative that focuses on building a startup community, not just for Aalto, but also for Northern Europe. Ovaska and his colleagues dreamed of a Silicon Valley-style culture in the Nordic region, a culture that offered students with big ideas the resources and mentorship to create cutting-edge startups in Finland. But when AaltoES was quickly inundated with requests for space from startup teams, the need for an additional organization became clear.
With some seed funding and access to space from the university in 2010, the Aalto Venture Garage (AVG) opened as a co-working space within the Aalto community. Participants in the Aalto Venture Garage work side-by-side with other teams trying to develop and iterate on their products and ideas. Along with their interactive (and attractive) co-working space, AVG has also created Startup Sauna, a self-described “Y-Combinator-esque” accelerator program that identifies promising startups from throughout the Baltic and Nordic regions, and brings them together for an intense six-week entrepreneurship boot camp.
“The students [love discussions] of risk-taking and learning to fail fast. The young people are looking for ways to make cultural changes in their country that will open it up to more entrepreneurship.”
During a teaching trip to Aalto, STVP adjunct faculty member Donna Novitsky saw the excitement that Aalto students have for different aspects of entrepreneurship. “The students loved the discussions of risk-taking and learning to fail fast,” says Novitsky. “The young people are looking for ways to make cultural changes in their country that will open it up to more entrepreneurship.”
While students can drive passion from the ground up, the secret sauce to building a thriving entrepreneurial ecosystem also requires real support from institutions and the larger society. This is where the Aalto Center for Entrepreneurship (ACE) comes in. Established in 2010, ACE seeks to pull more ideas out of the Aalto community and help them to see the light of day as new products and companies.
ACE serves as a one-stop shop for the teaching and research of entrepreneurship, technology transfer assistance, intellectual property management, and early-stage startup support. According to Will Cardwell, who leads the Aalto Center for Entrepreneurship, the center is tackling issues of great importance to Finland. ACE’s activities, and its 15-member team, are funded approximately 60 percent by Aalto University and 40 percent by TEKES, the Finnish Funding Agency for Technology and Innovation.
“The nation needs to speed up the commercialization of technologies to capture more long-term value for both Finnish society and the global society,” says Cardwell. “We’re trying to create fans — corporate, investors and other stakeholders who are interested to interact with the innovations and startups that come out of Aalto. And we’re also seeking to get more Finns to think entrepreneurially.”
“We’re trying to create fans — corporate, investors and other stakeholders who are interested to interact with the innovations and startups that come out of Aalto. And we’re also seeking to get more Finns to think entrepreneurially.”
This point takes on deep significance in light of current trends in the Finnish economy. The longtime flagship of the Finnish technology sector, Nokia, is still struggling to find its footing. At the same time, the mobile gaming sector is taking off fast, led by Rovio’s bird-flinging success. Cardwell clearly sees Finland’s challenges as new opportunities for Aalto-based entrepreneurs.
“As market demands and employment levels are in transition, our idea is to encourage and attract talent to bear on the creation of new startups and the powering of current ventures,” says Cardwell. “At Aalto, we want to be a platform for the rest of the country, and ultimately for the whole region.”
Working with a multimillion-dollar budget and significant support from the Finnish government and the private sector, ACE is looking at business proposals from inside and outside Aalto, including founding teams and ideas emerging from the Aalto Venture Garage. From the past year’s 300 proposals to ACE, 60 percent came from Aalto’s paid researchers and 40 percent came from Aalto students or parties outside the university. This dynamic mix reflects Finland’s interest in being perceived as a welcoming center for developing new ideas in Europe.
“We need to be competitive in Finland to create the type of environment where companies would want to develop,” says Cardwell. “No matter where a startup chooses to plant itself, Aalto’s commitment to being open allows us to put our best foot forward.” Proposals identified for support by ACE travel through a multi-level funding process, progress in which is determined by market size, concept feasibility and intellectual property opportunities. At every stage in the process, each idea must show improvement around these factors to move on to the next level of funding. “We’re very ready to fail with these projects in the early stages, if they’re not hitting on these attributes,” says Cardwell.
Some projects will be identified for “fast track” development and be connected with large corporate partners, such as Nokia and Microsoft. Others will continue forward in the evaluation and development process within ACE. The center seeks to develop a portfolio each year that consists of at least 15 startups, 15 new patent families and a growing set of intellectual property licenses that will produce regular revenue to fund the next wave of startups.
“Finns can be stubborn and independent, so they avoid mimicking others. They often don’t really care what others do. I think this independence is a fundamental characteristic for entrepreneurs…”
Stanford Management Science and Engineering Professor Riitta Katila, a native of Finland who teaches a popular course on creativity, innovation and change, sees entrepreneurial advantages in the national mindset. “Finns can be stubborn and independent, so they avoid mimicking others. They often don’t really care what others do,” says Katila. “I think this independence is a fundamental characteristic for entrepreneurs…” While no perfect system exists for establishing an effective entrepreneurial ecosystem, the laser-like focus of the Aalto community points to hot times for entrepreneurship in the Arctic North.
America has fallen hard for entrepreneurs.
The aesthetic appeal is easy to understand. Compare the Fortune 500 CEOs interviewed on the HBR IdeaCast talking about Campbell’s Soup or Coca-Cola (podcast here) with the entrepreneurs at the Stanford Entrepreneurial Thought Leader Seminar Series discussing Pandora and Instagram (podcast here).
The big company CEOs sound just like you’d expect. They are competent, factual, and in control. But while most of them presumably have strong interpersonal skills and a high EQ, they come across as dry, unemotional and focused on the “core business.” In contrast, the entrepreneurs presenting at Stanford wear their hearts on their sleeves. They are vividly passionate. They exude emotion. They are selling themselves, with a kind of animated desperation. They tell student to “do what you love.” It’s an appealing message, and you can see why it catches on.
In contrast, the entrepreneurs presenting at Stanford wear their hearts on their sleeves. They are vividly passionate. They exude emotion. They are selling themselves, with a kind of animated desperation. They tell student to “do what you love.” It’s an appealing message, and you can see why it catches on.
These two personalities generally reside at opposite ends of the business spectrum, presumably reflecting two very different business needs. It’s essential to be brash and irrationally exuberant to start a business. But to sustain a large multinational corporation, you’ve got to be calculating and rational. It’s also a well-described phenomenon that as startups evolve into progressively larger companies, their character changes, and their needs evolve, or “mature.”
Mature organizations are supposed to act predictably, responsibly, unemotionally. The qualities embraced (or at least tolerated) at the startup level can become liabilities. Many startup CEOs hand over the reins at this stage, or at least share them (as Google did for years when Brin and Page hired Eric Schmidt), explicitly acknowledging the need for an “adult in the room.”
While many large organizations might similarly benefit from having a kid in the room — someone who is energetic, passionate, emotional, excitable — it’s hard to envision a corporate phenotype that would be more doomed: the environment just doesn’t support it. Sure, companies trot out bromides about “cultivating entrepreneurship,” while HR departments sponsor group training sessions on innovative thinking.
But the reality is that the culture of most big companies is geared to performing established activities in increasingly efficient ways. Simply stated: doing the old things better takes precedence over doing new things well enough. Most employees (and certainly the ones who last) figure out extremely quickly how you’re supposed to act at work (Sir Joseph wasn’t far off). You could say most large organizations have elected to trade the passion of young love for the predictability of adult relationships.
And perhaps this is why we look so wistfully at entrepreneurs. They seem to exude the raw passion that experience has taught us to modulate, the vivid emotion that we’ve learned to suppress, the intense energy that we learn must be channeled, the unreasonable audacity that has been replaced by sensible objectives. We cheer for them because they represent our youthful hopes, our idealism, our ambitions and our dreams. And when these entrepreneurs defy the extraordinary odds, and succeed, we rejoice, for at the moment we can sense, if only fleetingly, the exceptional untapped potential within each of us. We rejoice, and wonder: what if?
It would be easy to dismiss our infatuation with entrepreneurs as misty-eyed revisionism, the way we might selectively recall and invoke treasured childhood memories while forgetting the many painful challenges of youth and adolescence. The day-to-day reality of getting a new company off the ground is generally far less glorious than the inspirational experiences trotted out by the small minority of ultra-successful entrepreneurs who are routinely invited to share their stories. There’s a significant selection bias here, to say nothing of the urge to write oneself into a heroic cultural narrative.
But I’d argue that if we had to find a group of people to admire and admittedly idealize — and you know we’re going to — we could do a lot worse than taking our inspiration from impassioned, dedicated individuals seeking against all odds “to make a dent in the world.”
Incredible things happen when entrepreneurial skills are layered on top of deep technical knowledge. New products are created that solve real world problems. Markets and industries spring up where none existed before.
And while all individuals reap the benefits of developing entrepreneurial skills, when engineers engage with this type of knowledge, tremendous potential for economic and societal growth is unleashed. Here are some viewpoints on what happens when entrepreneurship skills and engineering collide.
Engineers Come to Understand Customers
The most radical thing a new company can do is sell their product, says serial entrepreneur Steve Blank. He believes that the company founders — not the sales team — should be the first to try to turn a profit, as they will learn firsthand about their product’s shortcomings and usability. Great engineers should directly understand what their customers need. Of course, this idea should also be true for scientists.
Remain Passionate About Entrepreneurship
Renowned entrepreneur and investor Vinod Khosla believes entrepreneurship is the driving engine of the economy. However, the path to entrepreneurial success will be littered with traps of self doubt and setbacks. Khosla reminds engineers to stay committed to their dreams with a passion, as this is an essential ingredient to becoming a change-maker in the world.
Engineers Can Learn Entrepreneurship Skills
Engineers, and students from other technical fields, can learn entrepreneurial skills covering finance, organizational strategy and business model generation, says investor Randy Komisar. These skills are useful for engineers because they provide context about the personality and character of entrepreneurship.
However, according to Komisar, entrepreneurial skills are only part of the equation. In the following clip, he argues that possessing a suitable entrepreneurial character will also come into play. While we believe students can improve their comfort levels for working in environments full of uncertainty and ambiguity, Komisar sees this attribute as an inherent trait that only some individuals possess.
Stanford alumni, faculty and staff engage in many different types of innovation. These are early results from the Stanford Innovation Survey, and I would be grateful for help in catching any errors, suggestions on further analysis, or feedback on what would be most interesting. Over the next several weeks, I will go through some initial results and analysis of various types of innovation and entrepreneurship that we gathered in the survey on the Stanford Innovation Survey website.
One type of innovation that Stanford is famous for is creating new organizations. In recent years, I’ve noticed a trend in my classes towards increased interest in the creation of non-profit organizations. So I wanted to see if we picked up this trend in the data and how many non-profits Stanford alumni were creating.
In the survey, 2,365 individuals reported having founded at least one non-profit organization in their careers. Similar to the phenomenon of serial entrepreneurship, it turns out that many of these alumni have created multiple non-profits. Respondents indicated having founded a total of 6,432 non-profit organizations. If we extrapolate that up, based on the response rate, Stanford alumni, faculty and staff have created over 30,000 non-profit organizations over the decades! Of course, not all of these survive, but that’s quite an impact.
The first figure shows the total number of new organizations (including angel investments, early employee positions and Board of Directors positions) for the respondents.
We also asked what general field the non-profit was operating in. By far the most common type of non-profit created is related to Education. The second most frequent response was Arts/Culture/Recreation followed by Global Health or Healthcare related. Consumer Rights non-profits were the least common.
Next, we turn to the graduation year of the non-profit founder. Here we find that the creation of non-profits peaks with graduates from the 1960s and 1970s. We might expect that the downward curve is due to the fact that graduates from more recent decades may plan to start non-profits in the future or in a more advanced stage of their careers, but have not had time yet.
Interestingly, confirming the trends I have noticed in classes, we do see a big bump upwards in the rate of non-profit creation among students who graduated very recently (in the 2000s). We should also plot these by the year that the non-profit was founded to see if there are similar trends there.
Talking with a few alumni who had engaged in both for-profit and not-for-profit entrepreneurship, I was also curious how many of these non-profit founders had also started for-profit businesses. We see that many of them have founded for-profit businesses as well. In particular, many of those who had founded an incorporated business or been a Board of Directors member had also founded a non-profit organization (either before or afterwards).
The final figure shows the proportion of Stanford alumni, faculty and staff who created a for-profit company vs. a non-profit company. While non-profit entrepreneurship has been growing over time, it is still a relatively smaller percentage compared with the number who engage in for-profit entrepreneurship and innovation.
Visit the Stanford Innovation Survey website and let me know if you have comments or further suggestions. We plan to continue this analysis with the next step being to examine the schools and departments that have most frequently produced non-profit founders and whether there have been changes in those patterns over time.
There are many factors that can inhibit entrepreneurship from thriving in a particular region. Perhaps it’s lack of access to capital. Or maybe governments put up too many barriers to startup creation, either intentionally or unintentionally. The region may not have existing entrepreneurship models with which to inspire the next generation of growth. Even cultural or societal traditions may serve as roadblocks to innovation and a willingness to try new ideas.
In the following videos, successful entrepreneurs and political figures discuss a number of the specific challenges to entrepreneurship in Latin America.
High Friction and Weak Venture Capital Resources
While serial entrepreneur Wences Casares concedes startup success rates are low around the world, he argues that Latin America-based startups face additional challenges due to friction points in the regional ecosystem.
Fellow entrepreneur Meyer Malka explains why venture capital is “wired differently” in Latin America, and how venture support is different in Silicon Valley and Latin America. Casares also outlines an intriguing benefit to building talented technical teams in the developing world, indicating a possible advantage over Silicon Valley.
A Need for Reliable Institutions
Protego CEO Pedro Aspe believes greater amounts of education are necessary for entrepreneurship to flourish in a region. In this video from an Endeavor Entrepreneur Summit, Aspe also articulates why entrepreneurship can only grow in societies with reliable governmental institutions.
As a former secretary of finance in Mexico, Aspe emphasizes the importance of removing discretionary power, in matters of trade and finance, from the hands of public officials in order increase the reliability of an economic system.
Lack of Entrepreneurial Thinking and Education
Chilean science professors are not used to thinking in terms of startups, says Juan Andrés Fontaine, Chile’s Minister of Economy, Development and Tourism. In this video, STVP Executive Director Tina Seelig asks Minister Fontaine to identify skills that students should be developing to become better entrepreneurs, and what Chile’s universities are doing to address these needs.
Fontaine expresses his desire for students to take risks and learn to solve problems using an entrepreneurial frame of mind, and why this type of education can unlock economic growth and opportunities.
Right now, the economy is looking up in Silicon Valley. For a number of possible reasons, this special place appears to be escaping some of the economic woes plaguing economies in other parts of the world. So what can Silicon Valley offer to help alleviate these issues for others? We think programs such as the STEM Center and the Innovation Corps are a terrific start, however, there may be something else we can export… an entrepreneurial mindset.
Thanks! That mindset is really going to come in handy when I need to feed my family and all the jobs have left town. I know… telling someone to build an entrepreneurial mindset is like telling someone to stay positive. However, even if the advice seems soft and intangible, that doesn’t mean it’s not worth trying to follow.
What if the big companies never come back to town? What if no more manufacturing plants show up and hire 5,000 people? What do you do then? The government looks for ways to stimulate the economy, but at the end of the day, the government can’t employ everyone forever. So what do we do? Perhaps it’s time to accept that all careers in the future will be entrepreneurial.
One of the least talked about attributes of successful entrepreneurs is an ability to work in environments fraught with ambiguity. While this skill is important for leaders, thriving amidst ambiguity is a skill that is valuable for everyone. And in these economic times it’s more important than ever. You’re not alone when it comes to building your entrepreneurial mindset, but it will be up to you to reach out to others.
In the following video clip, serial entrepreneur Reid Hoffman (LinkedIn, PayPal) talks about the power of networks to share knowledge, information and resources. As you watch the clip, consider how can you build new networks of knowledge in your community? It’s likely that other members of your community have skill sets you need, or ones you can leverage, to work on new ideas and projects.
Rather than sitting and waiting for someone to give you a chance, embrace ambiguity and connect with others around you to create new opportunities. That is being entrepreneurial and working with an entrepreneurial mindset. Echoing an idea shared by Hoffman, individuals do not create competitive advantage by coming up with a great idea, but by being the ones in motion toward achieving it.
Interest in “social” entrepreneurship continues to soar. The number of conferences and business plan competitions on social entrepreneurship are growing rapidly, the number of courses offered on university campuses is expanding, and social entrepreneurship is getting a lot of press. So, what differentiates a social entrepreneur from a plain old vanilla entrepreneur? I must say that it isn’t clear to me….
“A company certainly does not have to be a not-for-profit to be socially responsible.”
To loosely quote Carl Schramm, president and CEO of the Kauffman Foundation, “All entrepreneurship is ‘social’ because at a minimum it generates jobs and stimulates the economy.” Given that as a baseline, companies can be socially responsible in an endless number of ways. If a company has family friendly policies, it is socially responsible. If a company recycles used materials and installs solar panels on the roof, it is socially responsible. If a company makes medical products that save lives, it is socially responsible. If a company makes energy efficient cars, it is socially responsible. A company certainly does not have to be a not-for-profit to be socially responsible.
I would argue that people use the term “social” entrepreneurship because they don’t always know what entrepreneurship is. The way we teach it, entrepreneurship is about identifying problems and solving them by leveraging scarce resources. It means creating value, where value can be measured in a wide range of ways. To quote John Doerr, “Entrepreneurs do more than anyone thinks possible with less than anyone thinks possible.” This can happen in any arena.
For many years, I have been an advisor to a large student group at Stanford, called BASES, that runs the campus-wide business plan competition. Several years ago they started a parallel competition for “social” business plans. The number of submissions were small and the prizes were much smaller than for the traditional business plan competition. Over the past few years, the number of submissions for the Social E-Challenge has grown until now there are as many submissions as the E-Challenge.
“I would argue that people use the term “social” entrepreneurship because they don’t always know what entrepreneurship is.”
There has always been healthy debate about whether a plan can be entered in both competitions at the same time. My fantasy is that some day the winner of the Social E-Challenge will also be the winner of the E-Challenge. It will demonstrate that a company that is attractive using traditional metrics can also have a powerful social agenda.
Below is a video clip featuring Guy Kawasaki, one of the most popular speakers on STVP’s Entrepreneurship Corner website. Over the years, Guy has shared his insights on everything from principles of startup success to tips on how to build enduring brands. Here he talks about the importance of having the goal of making meaning for your company as opposed to making money. He argues that if you make meaning, you are more likely to make money; but if your major goal is to make money, then you are unlikely to make either.
Innovation sure is popular these days. But saying the word innovation again and again is not enough to make it happen. How can you create and sustain innovation within an organization? How do you encourage an innovative spirit within a group of employees or an entire corporate culture?
We suggest learning from those who have traveled the path and made it happen. This is a guiding principle behind Stanford University’s Entrepreneurship Corner, or ECorner. This free, online collection of over 2,000 entrepreneurship-related videos and podcasts shares the stories of innovators who have changed the world, and who have led the companies who continue to make a global impact.
According to Larry Page, co-founder and CEO of Google, not many companies are innovators in both technology and business. In order to be successful in technical innovation, says Page, you also must understand the business and marketing sides of the equation.
Page also explains that “As you get more and more people working on one thing, it becomes harder and harder for them to be innovative.” He even admits seeing this problem at Google, which at the time of this lecture had almost 400 employees. Today, Google’s headcount is approaching 30,000 employees. This video contains valuable insights for a young startup.
Don’t Take Innovation for Granted
Not only does innovation drive the economy, says JLABS CEO Judy Estrin, but it influences the very quality of our day-to-day life. In the following video clip, Estrin explains how innovations need decades of institutional push and resources behind them to develop.
Estrin also asserts that we have become too shortsighted and more risk averse when it comes to developing new technology, and that this cultural shift away from innovative breeding grounds is to our own long-term detriment.
Never Stop Spending on Innovation
Symantec Chairman John Thompson states a company must never stop spending on innovation, even in challenging times. Early in his tenure as the company’s CEO, Symantec’s customers had no way to measure the effectiveness of the security technology they deployed. To make things worse, Thompson states Symantec was going through a challenging period during that time.
However, Thompson and the management team remained committed to innovation by applying a sizable share of revenue to developing a wave of products and technologies that addressed customers’ needs. This strategy is an example of Geoffrey Moore’s explanation of why product teams hold the power within an organization. The strategy paid off and Symantec’s new portfolio would become, Thomspon argues, industry standards for how security should be done.
“Most of our assumptions have outlived their uselessness.”
Human beings have an amazing ability to create assumptions. In fact, this ability is only trumped by the human race’s ability to rely on these assumptions as facts. The old adage goes, “you know what happens when you assume…,” however, you only risk embarrassment if you refuse to test your assumptions. In this collection of ECorner video insights, Tom Kelley, Ann Winblad and Randy Komisar explain the role assumptions play as starting points for entrepreneurs and, when left untested, as inhibitors to innovation.
Assumptions Blind You to New Products
As the general manager at design firm IDEO, Tom Kelley constantly sees clients anxious for new products. However, companies struggle to innovate when they can’t let go of industry assumptions about customers.
When IDEO was charged with helping a corporate client to design a new children’s toothbrush, Kelley’s team performed hands-on field research on how children actually brush their teeth. Blowing up tired assumptions about pint-sized users allowed IDEO to create a new bestselling product for their client.
Keep Testing Core Assumptions
“As time goes on, turn the assumptions into facts.”
Venture capitalist Ann Winblad advises entrepreneurs to boil down their business plan to identify the “top five core assumptions” for success. Particularly in the case of young startups, founders might make large changes to their product or service, often based on assumptions and incomplete evidence. This is an acceptable course of action, if the company is willing to constantly test these assumptions. “As time goes on, turn the assumptions into facts,” says Winblad.
Assumptions as Starting Points
Even though many ventures do not find success until discovering the pivot, KPCB Partner Randy Komisar sees the value of assumptions in an initial business plan. According to Komisar, any “Plan A” must flesh out your business assumptions, challenges and risk mitigation insights.
Those critical first thoughts on paper help an entrepreneur create the language with which to discuss their strategy. Here assumptions can serve as jumping off points for testing ideas and moving the organization forward.
You will not be alone when starting a company. There will be vendors, suppliers, partners, developers, regulators, and, with some luck, customers who will embrace your company’s product or service. Who knows, you may even get some of them to pay for it.
There should be no shortage of people to make human contact with when getting your venture off the ground. However, in the life of your company, there is one person that will be more important than any other: your co-founder. Unless you choose to fly solo.
The Buddy System
Some entrepreneurs see major benefits in being the sole founder when starting a company (or even being the only board member). However, starting on your own will be a challenging experience, and possibly a lonely one. At the end of each grueling day, who will you talk to who can completely understand what you’re trying to accomplish. Remember, friends and significant others aren’t paid to hear you complain.
For Wences Casares and Micky Malka, co-founders of Patagon and Bling Nation, their positive working relationship thrives on a shared willingness to over-communicate. Also, as serial entrepreneurs, Casares and Malka continue to work together because each man recognizes complementary strengths in the other. Casares comes from a technical background, whereas Malka brings more direct experience in financial aspects of business management. However, according to Malka, “We don’t divide the roles. We always [project] as one coherent owner, founder and CEO.”
Having a strong co-founder relationship also provides the leaders with a sounding board who can see the big picture. You can pitch wild ideas to your partner and know that you will receive honest (sometimes brutal) feedback on whether the idea has merit. “You need to have a strong ego to be an entrepreneur,” says Casares, “or at least very strong convictions about your abilities.”
Both men show this confidence to the outside world, but when it comes time to work together, Casares and Malka solidly believe in leaving egos at door. In this video, Casares and Malka discuss the role of ego and the importance of sharing credit with your co-founder.
Not everyone buys into the necessity of the co-founder relationship. Venture capitalist Mark Suster calls this the “co-founder mythology.” Suster believes Silicon Valley is particularly keen on perpetuating the co-founder model as the only way to go. Of course, he also said Silicon Valley is lazy. And keep in mind that if you choose to have more than one co-founder, and the relationship sours, they might make a movie about it.
In the end, each entrepreneur needs to make the decision that is right for them and right for the venture. Are you the type of personality who can share control, credit and camaraderie with another person? It’s not about adhering to one ideology or another, but about choosing what works best. An intelligent, dynamic and hardworking individual can certainly lead a venture to success. But so can co-founders… like at Google, Yahoo and maybe this new venture will five million users and counting.
Kevin Systrom and Mike Krieger launched Instagram, the wildly popular photo-sharing service for iPhone, in late 2010. Since that time, the young company has attracted users who enjoy their simple-to-use application that allows classic camera filters to be applied to mobile photos before they are shared through social media.
While Instagram’s elegant product took hard work and many long hours to create, discovering solutions is not the hard part when designing a product, according to the co-founders. “The hard part is actually finding the problem to solve,” says Systrom. “Solutions come rather easily for most problems, not all, but most.”
“The hard part is actually finding the problem to solve.”
Rather than just designing a slick web application that was all sizzle and no substance, Systrom and Kreiger always saw Instagram as a solution to the top problems with sharing photos taken on mobile devices: 1) Mobile photos don’t always look great, 2) Uploads of mobile photos take too long, and 3) It’s hard to share these photos with multiple services at the same time.
While Systrom and Krieger personally experienced these issues with other photo services, the co-founders needed to verify that other users struggled in the same way. They got their gut-check by getting their product in front of early users and learning from these interactions. This process of testing your hypotheses is also a fundamental principle of the customer development/lean startup methodology.
Systrom and Krieger are Stanford graduates who also share a desire to tackle problems. While many people in tech claim only to be interested in taking on huge problems, smaller problems present unique challenges, according to the co-founders, as simple solutions are often harder to scale.
“You should not be afraid to have simple solutions to simple problems,” says Systrom. “If you delight people with even a simple solution, it turns out it will go really far.”
Author and venture partner Geoffrey Moore believes it’s a major privilege to work for a high-tech company. While an engineer coming off back to back (to back) all-nighters might disagree, a role in a high-tech firm can provide a number of unique opportunities. According to Moore, this is especially true for individuals who have the chance to tackle roles in product marketing and product management.
In the following video, Moore explains why product roles are special in the technology industry, because the work is often done by young people in their first 10 years of employment. As a product manager, “you actually have your hand on the tiller that will change the fate of your company,” says Moore. He also discusses some tools that product managers can use to build innovation and power for their company. Check out the video.
Moore encourages product teams and leaders to remain innovative even within large organizations. This is an important idea as innovation and entrepreneurship are not just for individuals who start companies. In fact, it often takes a different kind of courage to be entrepreneurial inside a much larger team or organization. To create power and innovation, Moore suggests three valuable tools: creating differentiation, neutralizing competition and optimizing productivity. And heed Moore’s warning that a single team should only be focusing on one of these areas at a time.
Create Real Differentiation
One place to spend your team’s limited resources is on the research and development of new ideas. This is where product teams help create power for the company by building innovations that will hopefully elicit a major “wow” from customers. But the “wow factor” will not come from small tweaks to established products, instead, teams must aim to create the fundamental product differentiation that will allow a company to gain separation from competitors within a category.
Neutralize the Competition
Have you done a gut check on how your current offer stacks up in the marketplace? It’s hard for companies to admit their products are falling behind the competition, but that is often due to stubbornness and pride. If competitors’ products have a standard feature that your product is missing, how can you expect your product to win if it’s not even in the conversation? Engineering teams may not see the glamour in work focused on catching up to the competition, but these tasks are vital if a company wants to stay relevant in a market space.
While “optimization” may seem like a trite buzzword, it’s also a key ingredient to freeing up resources within the constraints of a tight budget. These “found” resources can then be re-distributed to product teams focused on creating differentiation or neutralizing the competition. Moore encourages product managers to get serious about optimizing productivity because, “you have resources reporting to you doing stupid stuff.”
This may be a brash observation, but product managers must always be on the look out for the process and resource inefficiencies that develop over time as teams change in size and focus. This can also be an opportunity to realign your resources and ensure you have the best possible team in place.
“A bad word whispered will echo a hundred miles.”
Amidst the daily pressures of trying to successfully deliver a product and win over customers, entrepreneurs can forget how their words and actions appear to partners and co-workers. What you might view as your unwavering commitment to success, may appear to colleagues as bullying and grandstanding.
Of course, if your startup is a one-person shop, feel free to blast orders as you’ll be the only one responsible for delivering on them. In fact, some founders prefer to fly solo when it comes to all strategic decisions. But when other employees are involved, savvy entrepreneurs should choose their words wisely.
Richard Scheller, Executive VP of Research and Early Development at Genentech, discovered this lesson when he moved from Stanford University to an expansive management role in the private sector. Here Scheller shares his awkward, amusing, but ultimately illuminating first experience with direct management and the employee/manager review process.
First time managers and entrepreneurs may identify with Scheller’s inaugural experience in building open relationships with employees. The careful selection of one’s words is critical in management, as Scheller says, because employees will try to deliver on what you ask of them. Entrepreneurs benefit from strong leadership in operations, not just when sharing the “big” vision, but also when communicating clear expectations to employees.
Keeping these open lines of communication may require entrepreneurs and employees to face honest and open feedback from one another. While some of this feedback may come as a surprise to each party, a willingness to share constructive insights can encourage greater trust among team members. And beyond carefully choosing your words, as Scheller points out, you need to be a better listener and learn to respect other peoples’ opinions, if you want to make the most of your working relationships.
As the United States trudges its way out of recession and high unemployment rates, Silicon Valley appears to be growing jobs at a faster pace. Even if the job market is picking up, competition for jobs at valley companies will continue to be fierce. And if you’re a startup founder looking to add the next key members to your team, the hiring process can be a fantastic opportunity to seek out great people. Here are a few insights on the recruitment process from some iconic Silicon Valley leaders.
Hire Great People
IDEO Founder David Kelley suggests avoiding conventional approaches to hiring, and in this clip, he offers a few recommendations: 1) Hire non-confomists to stimulate the organization, 2) Hire experts and generalists from different fields, and 3) Form “hot groups” of 8-12 people for maximum impact. Kelley says ideal hires interact well with staff and demonstrate an “attitude of wisdom” that balances the ability to promote ideas and still consider feedback.
Hire the Right People
“The number one thing I look for is raw intelligence,” according to Mark Zuckerberg, the high-profile founder of Facebook. Zuckerberg also believes it’s important to hire individuals who align well with the company’s focus. In this video clip, the founder also reveals the skills and balance of experience he looks for when recruiting college graduates.
Hiring Affects Company Culture
Deciding which candidates to extend offers to is no small responsibility. Emphasizing this point, NVIDIA Founder Jen-Hsun Huang states that hiring decisions are the choice of the company and no one else. With skilled engineers everywhere, hiring decisions often come down to the personalities and motivations of the candidates. Huang believes a candidate’s ability to mesh with the company culture must be a primary consideration in the hiring process.
From engineering teams of just a few members, to global companies with tens of thousands of employees, organizations must constantly search for new ways to reinvigorate stressed-out workforces. You may be familiar with corporate initiatives that pop up every few years announcing new (often expensive) employee programs or software purchases intended to make working life easier. However, a lack of tools may not be the root of the problem. Maybe it’s a lack of trust in human relationships.
If trust seems too touch-feely a concept, you may be surprised to learn that it has caught the attention of the US Army. After a decade of continuous engagement around the world, military commanders are faced with “employees” who have been asked to maintain a near-constant state of fighting readiness. In this state, soldiers are often called upon to exert hard power over other human beings. According to author Ori Brafman, this means a workforce overwhelmed by exposure to the stress hormone cortisol. If you can’t avoid exposing workers to stress, how do you create an organization better prepared to deal with this exposure?
Brafman’s suggestion to the Army was to develop the capacity to create more soft power and trust-based networks. In the video below, Brafman describes his experiences working with military personnel to help them relate their feelings and experiences in a more humane way. Between the participants, these interactions actually developed a greater level of intimacy, says Brafman, a concept that doesn’t often come to mind in business or the military.
If you’re dealing with stressed-out workers, perhaps you should hold off on purchasing that new collaboration tool with all the bells and whistles, and instead, invest your energy into improving the relationships between the human beings that make up your company’s human capital.
If you work for any type of business there is a good chance you may get trapped by the innovator’s paradox. At some point in the quest for growth, you will be forced to look at growing into new area or an incredible opportunity will come up. Your business will face the decision of whether to be leaders in a new market or let the competition pass you by. Most likely you will put together a cross-functional team of your best players, they will put together an ambitious plan that gets everyone excited, perhaps even some outside attention from the press about how your corporation is leading out, and then you will start executing.
Most of Your Projects Will Fail
Sadly, despite your best efforts, most likely you will fail. In fact, some research suggests that up to 85% of new initiatives fail. It will start slowly … a few press releases and consulting engagements later, the big new initiative slowly starts to lose steam and higher ups, whether they are the board or the CEO start to doubt whether the new initiative really makes sense. Usually the all-star team starts getting recruited into other projects and the initiative just seems to disappear. Without recognizing it, your team got caught in the innovator’s paradox. You believed in the new opportunity, you allocated resources, you put your best talent on the project, but somehow it didn’t seem to work out. How do I know? Because I’ve lived it and seen it happen inside some of the best businesses in the world.
The paradox is that even though these companies believed in the idea, allocated resources, and planned for success, by doing these things they were actually increasing their chances of failure. Furthermore, most of what you’ve learned in business school won’t help you to manage real innovation and growth. Of course, if you are working on a minor product line extension or something familiar, you may succeed. But if you are trying to conquer a new market, a new product, a new customer, most of what you learned will actually trap you and the consulting companies you hire to help you won’t answer the real questions, instead they will mirror back to you what you already know.
The Innovator’s Solution
The solution to the innovator’s paradox is to use the right management techniques—the techniques to manage unknown problems rather than known problems. Below I highlight the contrast between these two types of management:
If you asked me to say it in one sentence, it would be: identify your assumptions, rapidly test those assumptions, and iterate. When most managers see this list, they nod their heads and say “I already do that,” but in practice, most people don’t. Everything in our training and in our organizations runs counter to managing unknown problems! Why? Because the tactics for managing unknown problems are terrible for managing known problems and the bills today get paid by managing known problems.
The Bills Tomorrow Get Paid When You Manage Unknown Problems
Unfortunately, the bills tomorrow get paid when you manage for unknown problems. Therein lies the fundamental tension for businesses trying to grow. And the tactics for managing unknown problems can be surprising different than those one might think at the outset. As one example, consider John Seely Brown’s recommendations for how to incorporate innovations into the corporation during a recent lecture at Stanford.
I’ll write more about how to really use these tactics in your business. But for those of you who read my posts regularly, if this sounds familiar, it should. But notice I didn’t use the word entrepreneur. Why? Because managers and innovators, you face this problem every bit as much as, even more than, entrepreneurs because you have to fight uphill against the established way of doing things to really innovate. And I’ll help show you how.
Innovators face a paradox: they wouldn’t act unless they believed in their idea but their belief leads them to failure because they use the wrong techniques to execute on a guess
Success depends on recognizing that you face the unknown and applying the right management techniques
Although you may believe you already understand these management techniques, they can be difficult to use correctly, particularly in a corporate environment that favors the opposite
Ten years ago, every company founder dreamed of taking their startup public. Maybe they wouldn’t openly admit to fantasizing about an IPO, but this major event could provide a company with capital for expansion, while also rewarding early investors. But over the past decade, fewer companies have been able to take the IPO plunge. Why has this “dream” become so hard to achieve?
According to SecondMarket CEO Barry Silbert, the factors causing the long, slow death of the IPO also made a permanent impact on all public markets. In the video clip below, Silbert describes some of these factors, including the shift to online brokerages, reduced interest and research in small cap stocks, and the cost pressures of Sarbanes-Oxley compliance, among others.
So if you couldn’t go public, what else could you do? Over the past decade, one popular option was to make your startup an attractive target for acquisition. In fact, many companies just chose to define acquisition as the measure of success. However, according to Silbert, SecondMarket now offers a new way for startups to discover needed capital and liquidity, without being forced into public markets.
In the past few months, SecondMarket’s model has garnered participation from some high-profile companies, including Facebook, Zynga and Twitter. While investors speculate on the valuations of these companies, and when (if ever) they will go public, SecondMarket’s framework appears to be allowing these firms to not only raise capital, but to buy more time to consider their options.
In all the excitement around creating a new product or starting a fresh company, even seasoned entrepreneurs can lose sight of the importance of connecting with customers. Maybe customers aren’t that interested in what you’re selling. Maybe your product doesn’t actually solve a problem they have. Maybe listening to customer feedback is the key to turning your ho-hum offering into a product they just can’t live without. To keep these very important people in the front of your mind, enjoy these excellent insights on connecting with your customers.
Use Technology to Enchant Customers
In the clip below, entrepreneur and author Guy Kawasaki explains how technology implementation affects a company’s ability to enchant customers. Kawasaki urges companies to “remove roadblocks” when it comes to helping customers interact with a product, and he also offers tips on the best types of interactions and information to offer to be successful in social media environments.
Acting on Customer Discovery
Customer feedback simply cannot be outsourced, according to serial entrepreneur Steve Blank. Here he shares an anecdote demonstrating the importance of speaking directly to customers. Blank recalls how an entrepreneur was forced to listen to customer needs and tried to alter his product accordingly. These changes turned single-digit sales into the thousands, and resulted in an eventual $400 million company sale.
Acquire Customers with the Right Model
Originally, Box.net customers were charged for online storage when they signed up with the company. However, CEO and Co-Founder Aaron Levie realized the opportunity to grow the customer base by lowering barriers to product adoption. In this clip, Levie describes the company’s successful implementation of the “freemium” business model, which not only increased their number of customers, but also served as a future differentiator from larger competitors.
Over the past few weeks, many companies have scrambled to address component and part shortages due to the devastating Tohoku earthquake and tsunami in Japan. While large scale natural disasters cause immediate havoc for buyers and supply chain managers, companies that depend on raw materials are beginning to take notice of other environmental hazards looming on the horizon.
In light of the effects of global development and climate change, the safety of supply chains is a growing concern for corporations. Conservation International Executive Vice President Jennifer Morris sees this “enlightened self interest” from companies as a tremendous opportunity to advance her organization’s mission.
As head of Conservational International’s Ecosystem Finance and Markets unit, Morris works to develop corporate partnerships that support sustainable economic development. While these programs provide Conservation International with important resources, they also help to assuage economic fears of supply chain disruption.
In past years, Morris’ team has worked with major corporations, such as Starbucks, Walmart and Marriott International, to customize programs that successfully protect long-term resource needs, while successfully supporting the livelihoods of local citizens in regions around the globe. According to Morris, by analyzing the environmental risks to supply chains, Conservation International can suggest viable solutions that successfully meet the long-term needs of corporations and the planet.
In the video below, Jennifer Morris discusses how Conservation International helps to ensure supply chain sustainability.
We all face uncertainty in life, especially at times of great change or transition. With our minds full of problems and questions, it’s easy to feel overwhelmed by challenging circumstances. Students are keenly aware of this experience upon leaving school, and in today’s guest post, STVP Executive Director Tina Seelig discusses helping students confront uncertainty to turn problems into opportunities.
As we head towards graduation, I have been asked to speak in several classes at Stanford to talk with students about life after school. After sharing some stories about my career path, I decided to do an experiment… I asked the students to write down the biggest problems they are currently facing so that together we could try to solve their problems by turning them into opportunities.
Each student instantly pulled out a sheet of paper and started writing. After a few minutes I asked them to pass them to the front of the room. The problems were all anonymous. As I started reading them, I was shocked and amazed by the problems they wrote down. In retrospect, I’m not sure what I expected, but it was certainly not what I received.
Some problems were written in bold letters (I NEED A JOB) and others were written in tiny letters that were nearly impossible to read (I want a boyfriend). They were scrawled as a quickly crafted list with dozens of existential questions or they were written with an unsteady hand (I am not motivated). It was clear that these big, bold questions are looming in these students minds.
They are finding, as generations before them have, that life after college is filled with zillions of questions without a right answer.
After doing this exercise in a few classes, the patterns started to emerge. Clearly, even after receiving an education at a top tier university, a large number of students are struggling to figure out what they want to do with their lives. And, of course, the gloomy economic environment isn’t making life easier. They are finding, as generations before them have, that life after college is filled with zillions of questions without a right answer.
While in school, students live a life that is cut up into quarters or semesters with a nice long summer break. They are given specific assignments and receive a grade at the end of each one. They know if they have done well or not. But, life beyond college is quite different. It is the ultimate open-book exam.
In fact, after school, we are the students AND the teacher, creating the tests ourselves. Nobody gives us a text book or a course reader, and the comforting rhythm of semesters and summer breaks is gone. In fact, a colleague of mine in Chile provocatively tells his students that they should take courses from the worst professors at their school since this will prepare them better for life where they won’t have a talented teacher showing them the way.
In the classes this quarter we organized all the questions into categories and spent as much time as needed addressing all the concerns. Students stayed long past the allotted class time to think about these problems in creative ways. One of the benefits of this public discussion was that the students all realized that each of them was facing similar challenges. They are all going out into the unknown and need to learn a brand new set of skills, including how to motivate themselves, how to make decisions with incomplete information, and how to embrace the uncertainty on the path ahead.
Is it possible to have an amazing product, but have no idea who it’s for? Absolutely, according to Idealab Founder and CEO Bill Gross. Before starting Idealab, the tech incubation firm that started Picasa and Overture, Gross started an educational software company called Knowledge Adventure.
In the early 1990’s, Knowledge Adventure was selling a reasonable number of their multimedia CD-ROM products, but as Gross explains in the video below, the company struggled to explain who their products were actually for. Gross even admits one product’s packaging claimed it to be, “fun for ages 8 to 108.”
While this is an understandable approach in trying to capture a larger audience, the result was less than effective in targeting specific customer groups. To attack this issue, the company mobilized their workforce into “weekend warriors,” deploying employees into retail outlets to demonstrate the products and gain direct customer feedback.
“We would have never, ever discovered it, if we had not been in the stores, seeing the confusion of [customers] in the aisle.”
While this initiative boosted sales, more importantly, the effort illuminated a customer pain point that would become the basis for a major pivot. After each weekend excursion, employees shared stories and insights from their experiences with customers. One major observation was that parents were confused as to which product to purchase for their child. Was the cool Space Adventure product in their hands meant for their five-year-old or ten-year old child?
Knowledge Adventure subsequently built and marketed a product specifically for children just entering kindergarten. The result: the age-specific product sold “20 to 50” times as many units as the company’s other products. Off this success, the company would eventually build targeted products for children entering the first through sixth grades.
Pursuing valuable customer feedback allowed for the discovery of this major pivot, which Gross admits, “We would have never, ever discovered… if we had not been in the stores, seeing the confusion of [customers] in the aisle.”
You’re the CEO/Founder of an early-stage startup and it’s your favorite time of the month. Are you ready for the board meeting?
How much time (or days) have you spent preparing for it? Do you look forward to sitting down with your board or do feel like you’re headed for another round at the Inquisition? These get-togethers should be useful and productive for CEOs, but they can also result in animosity between management and directors. So here’s a new method for avoiding board fights. Have you ever considered being your own board?
“There was only one person on the board, and that was me, and we always got along.”
Brent Constantz, founder of cleantech firm Calera, came to this idea from direct experience. As the founder of numerous companies, Constantz regrets the time he lost preparing for board meetings, claiming this work can devour up to 20 percent of a management team’s time. Rather than preparing a defense for every operational decision he made, this time would have been better utilized focusing on innovation and operations. “It’s a sad thing, but board[s] of directors debilitate companies,” says Constantz. “It’s not intended, but it’s the reality of the situation.”
A few companies back, Constantz decided to be his own board of one. No longer would he deal with directors who don’t review the board packet and then fire off “shoot from the hip” decisions. Nor would he have to deal with these same directors questioning the intelligence of their own decisions in the following month’s meeting. While Constantz sees value in putting together advisory boards and quarterly operating plans, he admits being a board of one has real benefits. “There was only one person on the board, and that was me, and we always got along.”
Building a team for your company can be a daunting task. While you may be focusing on how many employees you need, whom you actually choose to bring in can be a far more important issue. That’s why successful OptiMedica CEO Mark Forchette believes figuring out how to put the right people in the right seats is the single most important thing entrepreneurs can learn.
Building the right company dynamic certainly includes selecting the right board members, investors and fellow employees. Entrepreneurs should always be trying to work with great people. However, putting the right people in the right seats can also extend to personal relationships. Whom do you choose for friends, partners and even a spouse? The entrepreneurial life is hard enough, so make sure to surround yourself with people who support what you are trying to accomplish.
Another reality is that dysfunctional teams probably know they’re dysfunctional. Whether exemplified by poor overall morale or negative communication between internal teams, it’s really easy to tell (at least for employees) when your organization just isn’t working as it should. “Everybody probably knows when they’re not the right person in the right seat,” says Forchette. Entrepreneurs must be brave enough to acknowledge when a relationship just isn’t working out and be ready to make a move.
Comparisons are frequently drawn between CEOs and the head coaches of sports teams. Maybe this explains all the management books written by championship winners. In this comparison, CEOs are leaders who create game plans and find the players they need to win. Jack Dorsey, Twitter co-founder and CEO of mobile payment company Square, sees his job as being much closer to the role of Chief Editorial Officer.
Young companies are constantly flooded with input from customers, engineers, and support teams. However, startups need to choose the one or two ideas that are truly worth focusing on to sustain the product and service for the long-term, says Dorsey. As the Chief Editorial Officer of a startup, he targets three areas in which to apply his editorial guidance.
Editing Team Dynamics
Dorsey believes that if you’re trying to build a group of people to focus on building one great thing, it’s important to aim for the optimal team dynamic. “Edit the best people in, so [you] have a good cast of characters, and edit away any negative elements,” says Dorsey. Moreover, “editing away negative elements” may not mean you have bad employees, but that these employees may just not be the right fit at this time.
All competent CEOs appreciate the need to communicate vision to internal teams, but what about external audiences? Dorsey believes that a company needs to communicate everything they are through the product or service. Customers and the general public should not be thinking about a person (like a CEO?) when they think about your company. According to Dorsey, the CEO needs to offer editorial guidance to ensure that, “The product is the story we are telling the world.”
Editing the Money in the Bank
For Dorsey, the CEO also fulfills an editorial need when choosing from financing options for a startup. Do you take money from angels or venture capital investors? Or do develop a business model that allows you to build revenue from the start? Dorsey says Square has been fortunate enough to take in revenue since day one, which allows his firm to better balance these issues. However, as every startup is different, a CEO must constantly be editorially selective in choosing the right blend of revenue generation and outside investment to power future growth.
We’re a big believer in the idea that entrepreneurial skills can be taught. It may take a tremendous amount of effort for an individual to develop their entrepreneurial mindset, but it can be achieved. However, what about inherent personal qualities of entrepreneurs? Are there common character traits or behaviors found in these risk takers? Based on experiences throughout her career, UCSF Chancellor Susan Desmond-Hellmann can identify two such traits.
Tenacious “Like a Dog on a Bone”
The first trait she acknowledges is a relentless tenacity mixed with optimism. Desmond-Hellmann says that a successful entrepreneur will refuse to quit in the face of setbacks, and stays locked on their goal, “like a dog on a bone.” Great entrepreneurs never accept that a problem is unsolvable. Moreover, this never-say-die tenacity is often mixed with optimism, according to Desmond-Hellmann. Entrepreneurs constantly face criticism from naysayers and non-believers, so the ability to persevere with your chin up is a critical ability. Of course this is a valuable life skill for everyone, not just entrepreneurs.
No Fear of Embarrassment
“Don’t think of what others think of you, think about the purpose or the outcomes you want.”
Entrepreneurs must also be willing to overcome the fear of embarrassment. During Desmond-Hellmann’s tenure as president of product development for Genentech, she recalls colleagues literally rolling their eyes at her suggestion of an innovative new treatment for cancer. It’s hard to think you might be making a fool of yourself in front of peers, but entrepreneurs must remain so committed to the value of their idea that they can withstand such attitudes. According to Desmond-Hellmann, if you’re the type that has the courage to take risks “don’t think of what others think of you, think about the purpose or the outcomes you want.”
How do you make a company endure? Author, VC, and entrepreneur Guy Kawasaki believes that a secret to building enduring brands is to enchant your customers. But what are you willing to do to make this happen? For the Grateful Dead, it meant letting their fans tape their concerts and share them with the world — starting in the late 1960’s. This model didn’t hurt business, and it’s now even a subject of management studies.
“Once we’re done with it, the audience can have it.” This quote about the band’s music is famously attributed to late Dead guitarist, Jerry Garcia. While listeners were certainly enchanted by the Dead’s music, this audience-centric attitude moved people from being fans to becoming devoted followers. As Kawasaki shares in the video below, the Grateful Dead even set up special sections at concerts to help fans in taping (ask your parents) the highest quality audio recordings.
“Once we’re done with it, the audience can have it.”
It’s not that hard to see parallels between technology startups and up-and-coming bands. How will you enchant your customers? What can you do to build deep value for your “fans?” Share your ideas and experiences on creating great customer value below, and watch Guy Kawasaki’s full lecture on Enchantment at ECorner.
In the volatile life of a young company, success often comes to those who take risks. The willingness to try new ideas and ways of doing things is a valuable trait within a startup culture. But earlier this month, an up-and-coming Silicon Valley firm was publicly embarrassed by a young engineer’s overzealous suggestions. At what point does risk-taking become bad ethics?
What type of culture exists where any employee considers bad ethical choices as viable tactics?
In this particular case, the company responded by placing the engineer on leave, and then claimed they did not even possess the technical capacity to act on the young engineer’s questionable strategies. However, that response sidesteps the real issue. What type of culture exists where any employee considers bad ethical choices as viable tactics? Rather than approaching this issue as a public relations embarrassment, a company leader should consider this opportunity as a teachable moment for all employees. Doing so allows a commitment to the highest ethical standards to become a central tenet of the growing company’s culture.
In the following video, former Hewlett-Packard CEO Carly Fiorina discusses the role of ethics in a company. She describes the reality that many organizations will tolerate behavior “on the edge,” because these choices often produce better results in the short term. However, leaders who tolerate these ethical lapses are not only gambling with long-term results, but according to Fiorina, they are also abdicating their core leadership responsibility to show that “values matter and ethics count.”
It’s easy for entrepreneurs to become discouraged when looking at the competitive landscape for a new product idea. However, as a small startup, or as an individual entrepreneur working on the next great idea, how can you possibly “out effort” a major corporation? Rather than becoming frustrated that you don’t have the financial and human capital of an Apple, Cisco, or Facebook, embrace the fact that constraints can be your friends.
In the video clip below, David Heinemeier Hansson, partner at 37signals, explains how constraints help you examine the reality of what you can achieve, and also allow you to focus on bringing the best possible product to life. An individual or small team only has so many hours to put towards developing a new product, so it might be wise to consider building a simple, innovative product that allows you to avoid getting into head-to-head competition against 800-pound corporate gorillas. David Heinemeier Hansson also articulates why this approach can pay major dividends when it comes to winning over customers.
Aaron Levie is a young man with some very big ideas on improving how enterprises share and work with information. Levie started Box.net out of his college dorm room, upon realizing fellow students shared his need for cheap and accessible online storage. Along with identifying this pain point, he also recognized major changes occurring in business and computing. With data storage efficiency continuing to improve at a rapid pace, and greater calls to enhance data access for remote workforces, Levie saw a serious opportunity he needed to jump on before someone else did. In this video from Levie’s visit to the DFJ ETL speaker series, he discusses the decision to make the leap.
Constantly Changing Business Models
According to Levie, Box’s business model would go through nearly constant changes in the early days. The young company examined numerous ways to build revenue and grow their customer base. At the company’s inception, users were charged for online space, a model that had some initial success. Box also considered sponsorship agreements with media companies, an idea that was met with little interest. The company even considered licensing the technology, allowing partners to rebrand the service as a white-label product. But Levie and his team were also focused on finding ways to reduce friction and increase product adoption. The successful answer, as Levie explains in the following video, was the introduction of a “freemium” model.
Deciding to Focus on the Enterprise
Once Box saw huge increases in their customer base, the company needed to drill down on where they could best compete in the burgeoning “cloud” computing space. Looking at the major companies that were entering the space, or would have the resources to do so at any moment, caused a question to arise. Would Box have better chances of success staying as a consumer offering, or becoming a targeted service for the enterprise market? Box settled on enterprise, based on a number of factors that Levie shares in the video below. The most interesting of these was Box discovering they could out innovate much larger competitors by releasing product iterations at a much faster rate than industry-standard three-year product cycles.
Compete Through Product Iteration
Levie believes the success of a startup is directly tied to an organization’s ability to try many things on the market, and to quickly shut down the ones that don’t work. Beyond this concept of “failing fast,” Levie believes startups need to find ways to compete that are impossible for bigger competitors to accomplish. In this space, for a company such as Microsoft, they would need to cannibalize multiple revenue streams to better compete, according to Levie. Of course, this option may not be possible for a large firm, so Box can take advantage of this situation by maintaining focus on their product, and staying agile to respond to future threats. While the use of cloud computing continues to blossom across many industries, this agility may be Box’s most competitive advantage. In this video, Levie explains this competitive position.
Entrepreneurs are often excited to receive initial customer feedback about their newest product or service. Of course, when so much time, sweat, and (maybe) tears have been poured into the latest iteration, the process of collecting feedback can also fill entrepreneurs with deep anxiety. And once all the feedback is gathered up, entrepreneurs want to quickly analyze the collected information, look for patterns, and make decisions for the next iteration.
However, according to entrepreneur and KPCB partner Randy Komisar, there may be a problem with responding to all that feedback — customers aren’t paid to be visionaries. While great insights can be gained from actual product users and customers, you can’t ask them whether a new innovation is something they need today.
“You’ve got to ask them the questions that allow you to know whether or not you think that innovation is something they will respond to when it’s ready,” says Komisar. This requires a great deal of focus and discipline on the part of entrepreneurs. Smart entrepreneurs still need to collect as much contextual information from customers as possible, but, in the end, they must find the answers to these questions for themselves. Remember, you’re the innovator.
In the following video, Komisar shares his thinking on this issue with STVP’s Executive Director, Tina Seelig.
At STVP, we work to develop “T-shaped” individuals. Within Stanford’s School of Engineering, that means helping students with strong skill sets in a technical or engineering discipline to also develop broad entrepreneurship and innovation skills. Learning these new “top of the T” skills allows students to more easily approach problems as challenges.
The generation of novel and unique solutions to problems are easier to develop when you gain the big picture perspective that comes with entrepreneurial thinking. However, the value of an entrepreneurial mindset increases for those who work hard to attain that initial deep well of knowledge in a particular area of study.
Tom Conrad, Pandora’s chief technical officer, has worked for major organizations with different views on whether employees should be “renaissance” thinkers, or should stay tightly focused on a specific role. Entrepreneurial skills benefit employees in both types of environments, but Conrad urges individuals to find out what they are great at, and to always look for opportunities to go deep.
The desire for change is an easy concept to capitalize on in America. A society that embraces consumerism-based “retail therapy” and has an endless appetite for self-help products indicates a robust market. However, how hungry are people and organizations for actual change on a transformative level? The desire for change, the taking of action to create change, and the lasting commitment to achieve change are three entirely different things.
In 1989, when Wendy Kopp came up with an idea to try and end inequities she saw in America’s education system, she was only at the first stage. Kopp would come to learn hard lessons about creating change as CEO of Teach For America, the social entrepreneurship organization she built to tackle these major issues. Whether you’re a fan or foe Teach For America’s efforts to change education in some of the nation’s most disadvantaged communities, Kopp’s experience still provides solid lessons on staying committed to change.
Not Everyone Wants Your Brand of Change
When an organization tries to make change, a plan is developed and put into action. However, even with the most thorough planning, new information and unexpected situations will present themselves upon the plan’s execution. When Teach For America released its first 500 teachers into schools, according to Kopp, many of these bright and passionate agents for change ran straight into walls. These new teachers found themselves in the midst of rigid, traditional school districts throughout America, populated with teachers and administrators that took offense at the idea that a person with just a summer’s worth of pre-service training would know how to better teach students than more experienced educators. Kopp quickly realized that affecting change in such entrenched systems was going to be an even harder task than originally thought.
Learning Curves Never End
Teach For America learned that having a plan for change is not enough. In the video below, Kopp describes the various learning curves that she and the organization would come to face. An organization must be willing to constantly iterate their approach and processes to address new insights gained along the way. Teach For America continues to learn new things about recruitment, professional development, financing models, and working to affect change through classroom instruction and public policy initiatives. The great lesson is to accept that learning curves never end.
Leaders Must Commit to Change
Over her organization’s 20-year history, Kopp has come to identify certain factors that make environments more conducive to achieving transformational change. When asked for the most common factor, Kopp explains that within an environment the leaders must be absolutely committed to making change happen. This may seem an obvious point on the surface, but think of how often we see leaders walk back from early proclamations of change, such as department heads who pull funding from product teams when a project begins to stall, or politicians who back down when faced with political interference.
For Kopp, the leaders who bring about the most transformational change retain their tenacity for seeing the change happen, and also bring high-levels of energy and discipline to the effort. While Teach For America builds leaders in education, Kopp also sees these traits as similar to those observed in transformational leaders from other industry sectors. In the following video, Kopp elaborates on these traits, and identifies other important leadership qualities, including an obsession with building strong teams and systems, and the willingness to create cultures committed to continuous improvement — qualities all entrepreneurs should seek to build.
Entrepreneurs spend an immense number of hours dedicated to bringing their ideas and businesses to life, so they should carefully choose the colleagues who will surround them during all that time. Of course, technological or organizational knowledge is a fair prerequisite to have in coworkers, but the human factor can easily be overlooked until a problem arises. Are you surrounding yourself with crew members that not only bring out the best business results, but also the best in their fellow employees?
In this video with Gregory Waldorf, from when he was CEO of eHarmony – now CEO of Invoice2go – he discusses the value of working with great people. According to Waldorf, this can be one of the most memorable and joyful aspects of choosing an entrepreneurial career. In fact, finding a way to work with great people is not only an excellent idea for entrepreneurs, but also for employees working in organizations of all sizes, from small businesses to enterprises.
Don’t lose sight of this aspect of your working life. As you create the next path in your career, be judicious when choosing the crew members you want around for the battles ahead. Success is not easily won, especially for startups, so having the support of quality individuals around you will definitely improve your chances and experience.
You’ve had a “great” idea for a long time. Maybe it’s for a game-changing hardware product, or an iPhone app, or a web service, and you “know” it’s a great idea because it’s been bouncing around your head for months. So you’re at a party, or a family gathering, and you can’t take it any longer — you start telling everyone your idea. How’d it go Mr./Ms. Soon-to-be Entrepreneur? How many people liked your idea?
“No good idea that changes the world is universally regarded as one at the outset.”
In the following video, Steve Jurvetson, managing partner at Draper Fisher Jurvetson, explains that ideas from some of today’s biggest companies (Google, Skype, eBay) were laughed at by investors when they tried to secure early funding. If everyone likes your idea, according to Jurvetson, maybe it’s just not that “big” of an idea. In fact, if most people don’t like your idea, that can be a great thing as long as you find one person who truly loves it. Jurvetson also touches on ever-shortening forecast horizons, trying to identify “black swan” events, and the impact of society’s perpetual future shock. There’s tons of entrepreneurial takeaways in this short video. Watch, reflect, repeat.
How do some ideas take flight when others never get off the ground? What causes audiences to engage while being constantly bombarded with media images and stories? Stanford professor Jennifer Aaker seeks answers to these questions, and works to understand the core components to building powerful ideas that grab audiences and move them to action.
Aaker is co-author of The Dragonfly Effect, a book that guides individuals and organizations to use social media to advance social change. During her visit to the DFJ ETL seminar series, she shared principles to guide the crafting of stories and ideas in the social media sphere. It turns out that a person’s happiness can play a key role in how and when they choose to take action. However, happiness is not the same for everyone.
The Paradoxes of Happiness
The idea of happiness is more complex than you think, according to Aaker, who describes a number of happiness paradoxes. The first paradox is that individuals have varying conceptions of happiness, depending on factors such as age, gender, and culture. The second paradox is that each person’s conception of happiness constantly changes as they move through life. The third paradox is a false belief that meaning can be built solely through short-term happiness, when a mix of both short- and long-term happiness is required. In the following video, Aaker explains how the concept of happiness changes over a lifetime.
Create Environments That Allow for Happiness
Aaker believes a growing body of research shows that attaining a state of happiness often requires individuals to “unplug” from the search of trying to “find” happiness. Perhaps time and resources would be better spent on trying to create environments that allow for happiness to develop organically. If so, what would such an environment be built upon?
Aaker identifies three key factors that need to be present in environments to encourage happiness. The environment should:
Enable people to build meaning
Enable people to find connections
Allow people to feel they are a part of something bigger
Aaker describes the happiness-enabling factors in this video.
Instant Brands and Social Action
As the shifting conception of happiness can mean different things to different people, sometimes delivering a compelling story to an audience can achieve meaning and subsequent action. Aaker illustrates this idea with the emotional story of Sameer Bhatia and Vinay Chakravarthy. When both men were diagnosed with leukemia, their friends led an integrated social media campaign to organize bone marrow drives in an effort to find good donor matches. Team Sameer and Team Vinay became instant brands, powered by web 2.0 tools and a compelling story, with the single goal of registering 20,000 individuals.
Sadly, even though good matches were found for both Sameer and Vinay, both men did eventually pass away from leukemia. However, in just 11 weeks, the social media campaign successfully resulted in the registration of over 24,000 South Asians, a group that is commonly underrepresented in the bone marrow registry. This type of lightening fast social action shows how a powerful, meaningful story can connect with audiences through social media, and drive audiences to make positive social change.
Learn about 100K Cheeks, a Stanford University-based advocacy group dedicated to increasing the number of people enrolled in the international bone marrow registry.
As 2010 comes to a close, it makes sense to take a moment to consider how we have spent our time throughout the past year, and to choose what to focus on in 2011. Anyone planning entrepreneurial adventures in the coming year should be prepared to judiciously manage their time, as it’s one of an entrepreneur’s most precious commodities. Today’s guest post is on the real value of time, from STVP‘s Executive Director, Tina Seelig.
Most people look at their bank accounts with great attention and assess how much money they have to spend, to invest, and to give away… but, they don’t look at their time the same way, and end up wasting this incredibly valuable resource. In fact, time is much more valuable than money because you can use your time to make money, but you can’t use money to purchase more time.
Time is the great equalizer… each day has only 24 hours — nobody has any more than anyone else. Everyone, from poets to presidents, fills those hours, one after the other, until they are all filled up. Every single minute is unique, and once gone, can never be regained.
When you look at someone who has accomplished a lot, you can be pretty sure that he or she has spent considerable amounts of time mastering the required skills, filling hours upon hours with hard work. There are those who look at others’ accomplishments and say, “I had that idea, “ or “I could have done that.” But ideas are cheap and intentions are just that. If you don’t invest the time needed to achieve those goals then all you have are empty ambitions.
People often say, “I don’t have the time to…,” fill in the blank with whatever you like: exercise, make dinner, write a book, start a company, run for political office. What makes these people think that they have less time than anyone else? Of course they don’t. We all have the same 24 hours in each day and make real decisions about how we spend them. If you really want to get in shape, then carve out time to exercise. If you want to write a book, then pick up a pen and do it. And, if you want to run for president, then get started. It isn’t going to happen if you plan your day around your favorite TV shows or spend hours updating your Facebook page. These are entertaining distractions that eat up your irreplaceable time.
I teach a course on creativity and innovation at Stanford University. During a workshop on how to brainstorm I often give the following prompt: There aren’t enough hours in a day. Come up with creative solutions to this dilemma. The brainstorming results in an endless list of solutions — from the practical to the preposterous — demonstrating that there are lots of ways to extract more from each hour, each day, and each year. Some of the most interesting solutions involve figuring out how to do two things at once. I know many people who have successfully incorporated this approach into their own lives.
For instance, I met a woman named Audrey Carlson several years ago who was struggling to figure out how to spend time with her friends and take care of her growing family. She started a group called “Chop and Chat.” Every Sunday six friends got together to cook at a member’s home. Each member brought the ingredients to make a different recipe that was then split into six portions. Members took home six different main courses for the week. Chop and Chat was an inventive way for the women to cook together, socialize, and prepare meals for their families.
Another example is venture capitalist Fern Mandelbaum. You would assume that meetings with Fern take place in her office… and you’d be wrong. Fern is an avid athlete and her meetings take place on hiking paths. Everyone who knows Fern knows to wear walking shoes and carry a bottle of water to their meetings in anticipation of a strenuous hike. Fern finds that this strategy is a great way to get to know each entrepreneur while also getting exercise.
There is an oft-quoted saying that “time is money.” You can interpret this to mean that time is a valuable currency. In fact, each day another 24 hours is deposited into each of our “bank accounts.” We get a choice about how to spend these hours. We decide how much we spend right away, how much gets invested for the future, and how much we give away. The worst choice is to waste these hours by letting them slip away.
It is almost noon, and I have 12 more hours to invest today!
Marc Andreessen is no stranger to the challenges of achieving startup success, possessing in-the-trenches entrepreneurship experience as a co-founder of Netscape and Ning. And as co-founder of the venture capital firm Andreessen Horowitz, he uses his experience and insight when evaluating projects to discover the next big thing.
During his visit to our DFJ ETL seminar series earlier this year, Andreessen described the three criteria needed for high-tech startup success.
Is there a big market?
Does your company plan to disrupt established companies in an existing market, or do you believe your offering will do something amazing in a new market?
Will your company or product provide a fundamental change?
Andreessen believes that a new company must bring a product to market that can “punch through the status quo.” As an rough indicator, consider if your product will cause a “10x” type improvement in technology or a significant economic change.
How outstanding is the founding team?
Do you have a great technologist on the team? Or how about more than one? Also, does the founding team have members with complementary skill sets, including someone with a deeper understanding of markets and sales?
In the following clip, Andreessen expands on the criteria for market, product, and team, and even explains which of three areas a wise investor might be willing to compromise on.
The relationship between boss and employee can be filled with respect and integrity. It can also be filled with tension and conflict. And for some, the relationship is filled with dread, acrimony, and dysfunction. Stanford Management Science and Engineering Professor Robert Sutton studies the dynamics and behaviors at work in these unique relationships. Sutton is a bestselling author whose latest book, Good Boss, Bad Boss, examines the actions and behaviors of bosses that become capable and respected leaders and the actions of those that, well… don’t. During Sutton’s recent lecture at the DFJ ETL seminar series, he discussed a number of issues relating to boss and employee interaction.
Beware of Power Poisoning
“When you become successful is when you should be especially wary you’re going to turn into an idiot.”
According to Sutton, the most reliable way to turn a human being into a jerk is to put them into a position of power over another human being. Invariably, three things begin to happen in this situation, which Sutton describes collectively as “power poisoning”: 1) The person in power focuses more on their own needs and concerns, 2) The person in power focuses less on the needs and concerns of others, and 3) The person in power begins to act like the rules don’t apply to them. Sutton warns that when a boss or manager (or CEO, for that matter) reaches a great moment of achievement or success, this is the same moment when the boss is at greatest risk of succumbing to power poisoning. In this video clip, Sutton describes these points in greater detail.
Hallmarks of a Good Boss
Sutton explains that good bosses diligently strive to remain in tune with their employees. Beyond building a stronger bond with employees, staying in tune makes addressing problem issues easier to do. Another hallmark of a great boss is being able to modulate one’s assertiveness. If a manager has the ability to turn up, or turn down, their assertiveness level in a given situation, the behavior is looked upon from employees as being a positive attribute. Knowing when to push and when to back off on employees is a necessary tool for a good boss.
In this area, there are particular dangers when managing employees who do creative work. According to Sutton, current research indicates that managers who relentlessly ping employees with questions in a constant state of evaluation, inhibit a creative employee’s willingness to try out or suggest new ideas. In a positive example of a great boss, Sutton cites IDEO founder David Kelley as “the master of management by walking out of the room.” When a meeting begins to go well, Kelley will step out of the room to avoid being a distracting authority figure. While traditional management theory may call for a boss to stay in the face of employees, Sutton suggests this method may not always create the best results. Sutton discuss these points in this video clip.
Listening for the Truth
Employees have many reasons and incentives to not tell bosses the truth. This can be true in all types of interactions, on all types of subjects. One issue of concern is a concept that Sutton describes as the “mum effect.” Sutton explains this effect as, “when people deliver us bad news, we like them less.” Somewhat conversely, Sutton also says that flattery affects how we interact with and feel about others. He explains that the research on flattery shows that not only does it work, but false flattery works too. In the clip below, Sutton shares how these issues come together to keep the truth from reaching bosses.
While CEOs may be able to pick-up early on market trends, they cannot see the future with certainty. They approach each day, as we all do, knowing they will be presented with new information and unexpected changes in their business, their particular market sector, or the general economy. If everything is constantly changing, what is the most rational management mindset to have in the face of this environment? Get comfortable with ambiguity.
In the clip below, NVIDIA co-founder Jen-Hsun Huang describes his ability to “see around the fuzzy edges” and be comfortable with ambiguity. In the current economic and financial environment, this ability may be more critical than ever before. According to Huang, CEOs my have varying characteristics and attitudes when it comes to communication and management styles. However, he sees the ability to be comfortable with ambiguity as a much more common trait among successful CEOs.
Are you comfortable with ambiguity? Watch the video below.
Are you one of the over 12 million players of World or Warcraft, or WoW? If yes, according to Dr. John Seely Brown, your game play may prove the concept of exponential learning.
For those not fluent in the online world of Azeroth, WoW is a massively multi-player online role-playing game, or MMORPG, that allows thousands of players to interact within an online gaming world, at the same time. Individual players form guilds that work as collective units to achieve advanced goals, such as going on raids within the fantasy world. The wildly popular game just released Cataclysm, the fourth expansion pack in the WoW series.
As an Independent Co-Chairman of the Deloitte Center for the Edge, and former Chief Scientist at Xerox PARC, Brown believes a major knowledge economy exists on the edge of the WoW ecosystem. He argues that so much knowledge is created within the game each day, without the collective guild structure, individual players would be compromised by the onslaught of information to process and learn from. On an average night within the WoW universe approximately 12,000 new ideas are created — a pace that outpaces even biotechnology, according to Brown.
Whether you’re a spell-casting mage or a healing druid, Brown claims successful guild members work together to process all these new ideas each week, and then distill this information into actionable ways in which to act in the future. High-end guilds even go a step further by doing after-action reviews following each raid. This form of play requires players to craft their own dashboards to measure personal performance, as well as comment on the performance of fellow guild members.
Watch the video for a deeper understanding of the knowledge economy within World of Warcraft.
This week, the Abu Dhabi Water and Electric Authority announced their selection of Hara’s environmental and energy management solution to address a number of the authority’s energy initiatives. Using the Hara software’s ability to offer strategic and tactical suggestions, based on energy input and output data crunching, Abu Dhabi Water and Electric may be able save 10 million tons of carbon-dioxide by the year 2020, according to Hara.
Look for Opportunity Across the Globe
It’s easy to be impressed by the physical (and assumed financial) size of this deal, especially involving a company that has only been selling for the last 18 months. However, sealing deals without limits on geography is part of the plan, according to Hara CEO and Founder Amit Chatterjee. In this video clip from Chatterjee’s recent visit to our DFJ Entrepreneurial Thought Leaders seminar, he explains why globalization doesn’t just mean more competition for entrepreneurs, but also access to a planet full of future customers.
Change the Market When You Arrive
From the beginning, Hara saw that enterprise firms could measure energy consumption in as many ways as the want, and still not make smart decisions based on all the incoming data. Knowing energy outputs may help an organization fill out a regulatory reporting form, but it does nothing to help take actionable steps in changing the numbers. Out of this issue, Chatterjee saw an opportunity to form a unique energy management business process, at the intersection of info-tech and clean-tech. To understand how Hara approached the development of their idea in the early stages, in the following clip, Chatterjee outlines his company’s decision to function in stealth mode through its initial round of funding.
Build a Team for Lasting Impact
Hara clearly sees energy management solutions as having enormous room for growth in the next decade, but to maintain leadership in the space, Chatterjee set out to build a team to achieve the company’s hope of delivering a lasting impact. According to Chatterjee, it was important to build a team culture that demands excellence. The Hara CEO also warns company founders to be aware of their own issues when building the most effective team.
A founder may be intimidated by hiring someone more talented in a particular area of expertise, but how will you grow and learn, if you are always the “smartest” person in the room? This theory of being surrounded by the brightest and most capable individuals carries over into recruiting a high-quality board of advisors. Personal hubris, or relying solely on your technology, is not enough to navigate uncharted business waters, so a team of advisors provides solid support in times of crisis and confusion. In the following clip, Chatterjee expands on these key points to building success.
Maybe you’ve stopped taking note of what’s around you.
Have you noticed that a certain part of your brain seems dialed-up when you travel somewhere new? In the engaging video below, Tom Kelley, general manager of juggernaut design firm IDEO, discusses why this higher level of awareness is a huge benefit when trying to come up with new, innovative ideas.
“You are the undisputed expert of your own experience.”
Kelley points out that when you travel to a new destination, you become acutely aware of everything that may be different, right down to the currency being used and the shoes people are wearing. But what would happen if you maintained this kind of mindset for use in your everyday thinking? Get ready for a wave of new insights and ideas.
However, these new observations may be fleeting, and Kelley urges you to capture them in any way you can. By doing so, you are not only creating a well of new ideas, but you may also be constructing a more up-to-date view of human behavior. This can be another major advantage when it comes to innovating a product, design, or concept. According to Kelley, “you are the undisputed expert of your own experience.” Think like a traveler and capture all the lessons around you.
Approximately half of Amazon.com’s revenue comes from outside the United States, according to the company’s Senior Vice President of International Retail, Diego Piacentini. This makes global strategy a key component to the company’s continued success. During Piacentini’s visit to the Entrepreneurial Thought Leaders seminar, he explained that, for Amazon, global strategy means delivering a consistent customer experience based on their original vision: Allow customers to discover the products they want to buy at the lowest possible price. Amazon aims to be the “most customer-centric company on the planet.” But what do you build, and how do you act, to make this mean something?
Not Everyone Thinks Customer First
“Start with the customer and work backwards.”
Many companies publicly claim to think about their customers first. However, a fully realized commitment to be customer-centric requires a disciplined approach to developing new products and programs. This is a critical step in Amazon’s process; their logic always takes into consideration what the customer is thinking. “Start with the customer and work backwards,” says Piacentini. An example of this process appears in Amazon’s popular Kindle reading device. Once the company realized how easy it was to purchase a book on the Kindle, they added a purchase process step to allow customers to confirm whether the purchase was intended or just a mistake. In this clip, Piacentini shares Amazon’s idea of thinking customer first.
Keep Your Core Values
When a company expands into foreign territories, common thinking dictates the company must learn to do business according to cultural norms. But Piacentini feels Amazon is better served by discovering ways to continue to deliver on the company’s customer driven vision, even if it goes against cultural business expectations. While the mechanisms and process may need to adjust, the customer experience and the company’s core values must remain consistent across the globe.
According to Piacentini, when Amazon began doing business in China in 2004, some of the company’s core values came into conflict with traditional business practice. After a sudden competitive price drop for the latest Harry Potter book, Amazon refunded the price difference to recent purchasers of the book. While this decision came as a shock to Amazon’s regional business partners, it also maintained Amazon’s core value commitment to low prices for customers.
The Myth of Best Practices
“In our business model, everything is equal unless proven with data that it needs to be different.”
Best practices are often just good intentions, says Piacentini. Moreover, good intentions don’t work — mechanisms work. In Amazon’s view, good mechanisms make for complete processes.” In our business model, everything is equal unless proven with data that it needs to be different,” says Piacentini. Amazon refers to its business model as the “virtuous cycle”, where growth is central, driven by product selection, customer experience, sales results, and lower prices. By focusing on this business cycle, Amazon honors the desires of its global customers as, according to Piacentini, it turns out that all customers like low prices, fast shipping, and access to Amazon’s large selection of products. Piacentini describes the myth of best practices in the following clip.
Take Risks Outside Your Core Business
Piacentini admires Amazon’s willingness to take risks outside of their core business, and he points to some prime examples. Amazon’s revenue flow from its main retail business is seasonal, particularly in the western world. This means that a great deal of the company’s information technology resources previously went unused in other parts of the year. This issue became an opportunity when the company began offering Amazon Web Services (AWS), a cloud computing service that allows companies to replace their web servers. What were once unused servers became a rental revenue stream.
Another example of taking a risk outside of the company’s core business was the development and release of the Kindle reading device. Piacentini says that building hardware was “clearly outside the company’s comfort zone, but we didn’t want to turn out like Kodak.” Through risk-taking and customer focus, Amazon feels positioned to maintain its dominance in the online retail space.
We are experiencing strange economic times. Even if you appreciate the idea that economies move through cycles of growth and recession, at the very least, we are muddling through a strange cycle. However, do investors also go through cycles? In the clip below, Vinod Khosla, co-founder of Sun Microsystems, discusses how investors swing back and forth between cycles of fear and greed. In the clip from 2002, Khosla claims we will see the cycle of too much money again in five or six years. 2002 + 6 = 2008. Interesting…
After the meltdown of 2008-9, we continue to experience stagnant growth in 2010. So is this current economic cycle due to investors being stuck in a cycle of fear? In Khosla’s words, we are at a point where no one “wants to believe in an upside.” If so, how do we get out of it? These are enormous questions, but a possibly prescient Khosla suggests we can move out of this cycle once “a few things squeak by.” This is where entrepreneurs come in. Maybe it’s time to start something.
Are we in a cycle of fear?
If so, are you ready to escape the cycle and put your next great idea into action?
Watch the video and share your thoughts.
Born from radioactive eggs deep beneath the ocean, thunder lizards rise out of the sea and arrive on the scene with an epic attitude to devour everything within their path. Nope, we’re not talking about Godzilla. We’re talking about the kind of startup founders that Ann Miura-Ko, co-founding partner at FLOODGATE, is interested in investing in. Along with her FLOODGATE partner Mike Maples, Miura-Ko seeks to identify entrepreneurs with this unique DNA and ambition. During her recent visit to our Entrepreneurial Thought Leaders seminar, Miura-Ko shared this description and discussed how many of the barriers to starting a company, or testing a product, are lower than just a few years ago.
Go Build a Prototype
A prime example of a lower barrier is the highly reduced costs to actually build a product. Miura-Ko identified a number key technological advances that give entrepreneurs a leg up on their predecessors. These advances include the proliferation of open-source software and commoditized technology hardware. In years past, software and hardware would have been major gating factors to getting an idea up on its feet. Miura-Ko also pointed to the cost benefit of crowd-sourced infrastructure. For example, if you need to analyze a piece of video content, using actual people through crowd-sourcing may be a better financial choice than employing high-powered technology solutions. Mirua-Ko also espoused the elastic and scalable power of cloud computing as an advantage that current-day entrepreneurs should leverage, if they are developing ideas in the technology space.
Don’t Run Out of Product Iterations
Entrepreneurs are often most concerned over funding sources. The drama surrounding this topic can be overwhelming for any founder. However, Miura-Ko believes startups should be far more worried about running out of product iterations than running out of funding. You can replace funding, but when you run out of iterations for a product, that is when hope is lost. Miura-Ko suggests modeling the lean startup concept, championed by Steve Blank and Eric Ries, to smartly manage your money, so you can squeeze as many product iteration cycles as possible out of existing funds. By doing so, founders can avoid raising additional capital, which exposes a startup to greater dilution. This is another important benefit to the use rapid prototyping.
Business Models Beat Business Plans
At the seed funding stage, thoughtful business models are more impressive than long-winded business plans, says Miura-Ko. Business models allow entrepreneurs to thoroughly examine all of the assumptions they have about their business. Miura-Ko suggests evaluation of a number of critical component areas to understand your startup’s position within the business ecosystem. In this clip, Miura-Ko expands on these critical areas for every business model to address.
Just about everyone has heard the advice, “learn from your mistakes.” However, actually following this bit of wisdom is much harder to do. You may easily remember your mistakes, or the embarrassment and consequences that came with making them, but how do you actually deal with mistakes?
Marissa Mayer, Google’s VP of Geographic and Local Services, was a recent guest on a Digg Dialogg video interview. A number of the interview questions, submitted by Digg users, asked Mayer about Google’s biggest mistakes. Her answer offers a unique way of viewing the whole idea of mistakes. According to Mayer, because Google constantly experiments with new products and launches early, “mistakes” will always happen. However, Google then quickly reiterates the product based on user feedback during the initial release.
Rather than preventing mistakes, this process openly accepts mistakes as part of an innovative creative process. When Mayer spoke at our Entrepreneurial Thought Leaders seminar, she discussed this very point.
Watch the video, and then share how you deal with mistakes.
In a recent guest post on the Harvard Business Review website, economic strategist Umair Haque took Silicon Valley venture capital firms to task for backing companies that only create “thin value.” Haque suggests Zynga and Facebook as examples of “light-weight, feel good” companies, who, though popular, do not actually create “thick” value capable of powering economies on a global level. Haque describes this lack of VC interest in “thick” value creation as disruption deficit disorder. His argument may or may not be true, but it actually raises interesting questions for entrepreneurs.
Do VC firms focus on ideas that can scale quickly and turn profits for investors? Sure. If an entrepreneur pitches a compelling business model, an easy-to-build-and-scale prototype, and low projected startup costs, investment firms will likely be interested. However, if an entrepreneur pitches an idea that could create “thick value” through disruptive technologies, but also requires massive funding, within a business model that assumes working in the red for a long period of time, VCs will have reservations. These are venture capital realities. The fact that your idea could contribute to developing new industries and sustained job growth does not really enter the picture. Is this solely the fault of venture capitalists? Maybe the “Disruption Deficit” starts somewhere earlier in the process. Does the founder or entrepreneur play a role in this?
When an entrepreneur discovers an amazing new idea or technology, the “a-ha” moment rarely involves running the idea through a social value filter. Although some “social entrepreneurs” may come from this perspective, the vast majority of entrepreneurs do not lead with this type of thinking. Bare-knuckle technology entrepreneurship goals usually focus on two things: amazing technology applications or an amazing market opportunity. Of course, it’s nice when both come together at the same time. Moreover, it’s hard enough to pull off smart execution in either of these two areas. But are there other factors to consider, perhaps even an approach that can help you achieve financial goals by thinking about social impact first. In the clip below, Guy Kawasaki explains why seeking to build meaning may be the best thing to focus on when starting a company.
Now, maybe you think this whole discussion is of little concern. You’re saying, “there’s already too many things I have to worry about as a bootstrappin’ entrepreneur.” However, what if making a deeper value impact, beyond financial profit, is actually an opportunity. Discovering an idea that can be financially successful and benefit society is really just a bigger challenge. But if startup founders and entrepreneurs won’t take on this challenge from the very beginning of the idea development process, it won’t matter when you get to venture capital funding, since the idea will already be missing thick value creation as part of its design.
During our Entrepreneurial Thought Leader seminars, many of our Stanford engineering students (read: budding Stanford entrepreneurs) ask a variation of the following question to our speakers: If you were going to start a business right now, what would it be? In that question, you can hear the churning wheels of desire for financial success. However, this type of thinking is a version of selling yourself short. Investors discuss the concept of leaving money on the table. As an entrepreneur, have you ever considered that your quick-to-market idea is leaving innovation on the table? Are you selling your creative technical skills short by just creating a “thin value” variation on an existing idea? If you develop a check-in service for retail shops that lets users earn badges and discounts… well, that’s nice. There will be many competitors, and we wish you the best of luck. However, maybe you’re leaving something on the table – that bit of extra brilliance that is needed to help change the world.
The Stanford Technology Ventures Program serves as the entrepreneurship center for Stanford’s School of Engineering. Teaching entrepreneurship to engineers is critical because engineers and scientists are the very people positioned to bring brilliant technical knowledge to the effort of creating thick value. These professionals can raise their technical gifts to an entirely different level by pursuing challenges that will change the world. It’s not about whether you have a moral compass to guide your technological prowess, or whether VCs are interested in funding your idea. It’s about whether or not you are willing to step up to a truly big challenge: Use your technological gifts to build scalable concepts that treat improving society as a given requirement, rather than an optional by-product.
Look at the society around you; are you ready for a real challenge? It’s really up to you.
Starting your own business takes immense courage. It is a leap of faith — a bet placed on your wisdom, skills, and tenacity to deliver on a dream. With so much often at stake, why would anyone actually choose this path? Is it for money? Is it for power or notoriety? Is it because you’re a swashbuckling risk taker? Or is it for an entirely different reason?
The true answers can be as unique as the people who make this choice. The courage to take this kind of risk can come from so many places. Were you inspired by an amazing idea? Did your struggles with a problem lead you to discover a solution right before your eyes? Or is it something within calling upon you to make an impact in society? In the following video, a group of young entrepreneurs discuss their personal reasons for taking the leap.
Their reasons are all different, some even a bit surprising.
So watch the video, and then tell us… what is your reason?
Having an exciting, disruptive technology is not enough to build a solid business. To grow scale and profits requires entrepreneurs to respect the value of solid operations. Thomas Prescott, CEO of medical technology firm, Align Technology, shares this perspective. When the company’s “invisible braces” product first appeared in August 1999, the use of plastic for custom-built braces was clearly a disruptive technology amidst the long-standing industry norm of using wires and brackets for orthodontic care. However, Align raised $280 million in capital before making any profit. Backed by this level of capital, even companies with the most leading-edge technology are under tremendous pressure to hit milestones. Prescott believes solid operations are a key force in a company’s ability to grow scale and capture profit.
Operational Focus Makes Customers Happy
When the CEO arrived at Align in 2002, the company was shipping product, but “we were not operationally capable,” says Prescott. The company had real weaknesses in shipping logistics, product quality, and customer service, all of which hindered the company’s ability to scale. Prescott realized step was to stop making angry customers, so Align went down the list of problems and addressed the issues. With a revived focus on operations, the company improved customer satisfaction, reduced their burn rate, and turned cash flow positive in 2003.
Operator and Founder Relationships
According to Prescott, maturity is a main component to building a great relationship between a company founder and a new operations leader. This requires an operations person who wants to leverage their skills, but who will also maintain enough respect for the company to avoid trying to “fix” everything on day one.
Start with the Right Team
Leaders often think success is based on building that “perfect” strategy to achieve success. Prescott now realizes the real key is to have the right team. Having the right people also means having a team that evolves to meet current needs. The people you start with may not be the right people to scale with — and that might include you.
Make Money or Cease to Exist
Financing issues can crush even the most incredible companies. “At some point,” according to Prescott, “you have to not be a non-profit anymore.” Even if you a cash rich company, making lots of money, you may only be a few turns around the corner from disaster. “If you can’t see how you will finance it, then you got to figure out how to bootstrap it yourself and cover your costs,” says Prescott.
Execution is Most of the Game
What is execution? It’s everybody knowing what they’re supposed to be doing, and then making that happen again and again, says Prescott. As in Align’s early days, the problem might not be your strategy or product, but rather you inability to execute. “Where strategy is often about the beginning of a plan, execution is about being able to deliver on the plan you set out.”
Going Too Fast Can be a Good Thing
When you don’t make a decision, that still counts as a decision. While going too fast can create a certain type of problems, going too slow burns the one thing you can never get back — time. If you are headed in the right direction, you can make adjustments quickly. This is far better problem than going too slow and considering a problem forever.
Oh, what to do when your organization is so big it can no longer focus on inventing new products and technologies? Maybe it’s time to go shopping for companies. In this clip, former Yahoo! COO Dan Rosensweig discusses why Yahoo! goes out and buys a company. He makes no bones about Yahoo! being in the advertising business, the never-ending pursuit for more eyeballs.
Even if Yahoo! purchases something that doesn’t make a sound business on its own, the purchase could make a great add-on to their other services. Anybody ever hear of Flickr? So let’s say you have a great online product or service, but you’re just having a hard time with the whole monetization thing. What is the smart play?
Do you hang in there on your own, as competition springs up on all sides?
Or do you make the deal when Yahoo!/Google/facebook come calling?
Give the video a look and let us know — do you stay or do you go?
STVP‘s Executive Director, Tina Seelig, empowers her students to embrace all their experiences by creating a failure résumé.
Yes… a failure résumé.
This is a great way to appreciate the lessons you learn through experience. So while you’re busy polishing up a standard résumé, framing your most attractive qualities and accomplishments for others, you might want to take time out to build your failure résumé.
Here is Tina’s explanation of this powerful tool:
I require my students to write a failure résumé. That is, to craft a résumé that summarizes all their biggest screw ups — personal, professional, and academic. For every failure, each student must describe what he or she learned from that experience. Just imagine the looks of surprise this assignment inspires in students who are so used to showcasing their successes.
However, after they finish their résumé, they realize that viewing their experiences through the lens of failure forced them to come to terms with the mistakes they have made along the way and to extract important lessons from them. In fact, as the years go by, many former students continue to keep their failure résumé up-to-date, in parallel with their traditional résumé of successes.
A failure resume is a quick way to demonstrate that failure is an important part of our learning process, especially when you’re stretching your abilities, doing things the first time, or taking risks. We hire people who have experience not just because of their successes but also because of their failures.
Failures increase the chance that you won’t make the same mistake again. Failures are also a sign that you have taken on challenges that expand your skills. In fact, many successful people believe that if you aren’t failing sometimes then you aren’t taking enough risks. Additionally, it is pretty clear that the ratio of our successes and failure is pretty constant. So, if you want more successes, you are going to have to tolerate more failure along the way.
You deserve to take credit for all that you have learned in life, so use this tool to do it. What are you waiting for? It’s a job each of us is perfectly qualified for.