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:

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.

At a time when the pay and perks of the tech sector can seem much more tempting than the physical and emotional demands of active military service, a course created at Stanford University is giving the next generation of innovators at campuses across the United States a way to serve their country as it fights to keep up with terrorists and hackers who adopt and implement new technologies.

The course, Hacking for Defense, debuted at Stanford in spring 2016 as a way to teach students the “lean startup” approach, a method popular among Silicon Valley entrepreneurs for quickly discovering user needs and developing a product. Instead of building apps for a smartphone, students in these classes build prototypes for mission-critical innovations such as wearable sensors for Navy divers or next-generation bomb detectors.

Navy divers sometimes work at depths of up to 200 feet for two to four hours, so sensors that can measure core body temperature and other biometrics on a single battery charge would be a game-changer. And thus far, robots and drones used by the Army to detect improvised explosive devices and enemies lying in wait have been hampered by environmental factors such as terrain, as well as their own size and weight.

Seeing the original Stanford course as a prototype, the teaching team captured the class’s activities and progress throughout the quarter and shared everything online — including all the lesson plans — for any university interested in replicating the experience at their campus.

“Our goal was to scale these classes across the country, giving students the opportunity to perform a national service by solving real defense and diplomacy problems using lean methods,” said Steve Blank, adjunct professor in Stanford’s Department of Management Science & Engineering. “Our government will benefit from the fresh ideas and perspectives of students who are eager to tackle society’s most daunting challenges.”

Now, Georgetown University, the University of Pittsburgh, James Madison University and Boise State University and the University of California, San Diego, have all debuted Hacking for Defense (H4D) on their campuses. In total, the class will be offered at 23 universities around the country in the next year.

Blank, a retired eight-time serial entrepreneur and a creator of the lean-startup movement, conceived of the H4D course after five years of teaching a popular tech-startup class at Stanford and designing a training program for the National Science Foundation that shows government-funded scientists how to take their breakthroughs out of the lab and into the market.

But Blank is quick to point out that the goal of H4D is not to have students build products for the military to be shipped off to the front lines. Nor does he wish to turn students into entrepreneurs that run off and launch their own startup once the class wraps up.

“As educators, our job is to teach students a way of thinking,” said Blank, who led a teaching team that included faculty from Stanford’s School of Engineering and Center for International Security and Cooperation (CISAC). “So, if students launch a startup, but we haven’t actually taught them anything, we’re in the wrong business.”

The class consists of students forming teams and picking from a list of “challenges” identified by personnel at the Department of Defense or within the intelligence community. These challenges become the team projects that will determine the bulk of their grade, with students using the “Lean LaunchPad” approach developed by Blank.

The main principles of the approach are:

From there, continued feedback intake drives product improvement and, if necessary, any changes in the direction of the business — otherwise known as a “pivot.”

At Georgetown, one of the student projects is to build a tool for identifying possible terrorists in a crowd through the use of augmented reality. At the University of Pittsburgh, students are tackling vulnerabilities within the emerging field known as the “Internet of Things.”

Sam Gussman was a member of the Stanford class that started it all. Then a senior majoring in engineering, Gussman met with U.S. military officers, studied the mental duress soldiers face during combat, and then worked on software that distinguishes insurgents from civilians in video feeds from drones.

“There’s no company or startup that works on problems as interesting as those that the government wrestles with,” Gussman told Bloomberg Technology last November. “Plus with the government, my input can directly help save lives.”

Also on the original teaching team were retired Army Special Forces Col. Joe Felter, a senior research scholar at CISAC, and Tom Byers, a professor of management science and engineering and faculty co-director of the Stanford Technology Ventures Program (STVP). Retired Army Col. Pete Newell and Jackie Space, both visiting research fellows from the National Defense University, also helped teach the course.

In the fall, students can take a different H4D course that Blank and Felter teach with Stanford political science Professor Jeremy Weinstein, called Hacking for Diplomacy, where students work on challenges identified by the U.S. State Department. Former Secretary of State John Kerry spoke to students in the class during a visit to Stanford last fall.

Similar to Hacking for Defense, the course focused on diplomacy drew problems from relevant government offices and agencies — including the Bureaus of Conflict and Stabilization Operations, of Counterterrorism and Countering Violent Extremism, and of Population, Refugees, and Migration. At the end of the quarter, the student teams presented their “MVPs,” one of which was an artificial-intelligence chatbot that would allow refugees to connect with charity workers over Facebook Messenger.

“So much of what we’re doing is at the intersection of policy and technology,” Deputy Secretary of State Tony Blinken said in December to the Los Angeles Times. “At the same time, many of us don’t have the background and expertise when it comes to tech.”

This ability to apply the lean approach to product development in different fields has also spawned the course Hacking for Energy, which will be offered in the spring to graduate students at Columbia University, New York University and the City University of New York. Nicknamed “H4E,” the class illustrates how the common principles and components across all the Hacking for courses can serve as a template that might be summed up as “H4X” — where X stands for whatever sector needs accelerated innovation.

And as more universities adopt and iterate on the H4X framework, the vision of the teaching team comes one step closer to reality: to show students around the country how to think like entrepreneurs and act like civil servants.

“I was so pleased to be involved in the Hacking for Defense debut,” said Byers, who holds the Entrepreneurship Professor endowed chair in Stanford’s engineering school. “STVP’s mission is to delight Stanford students with new and innovative courses, as well as help in ways to spread and scale those course designs to faculty around the nation and world.”

Students at Stanford interested in registering for Hacking for Defense in Spring Quarter 2017 can learn more by attending brown-bag lunches and information sessions to be held on campus over the next two months. For exact dates, please visit the course website.

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.”

Oops — of all the people for this to happen to. Schiebinger has spent the last three decades exploring the intersection of gender and science, and her current work on Gendered Innovations in Science Health & Medicine, Engineering, and Environment at Stanford University focuses on how to harness the creative power of “gender analysis” for discovery and innovation.

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.”

Stanford Professor Londa Schiebinger

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.

diversity_in_tech_table
(Courtesy of U.S.Equal Employment Opportunity Commission)

“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:

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.”

Tracy Chou, Project Include

“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:

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.

Photo - Giant spider sculpture
Spider sculpture ‘TaranTula’ by Christina Sporrong at the Meow Wolf Art Complex in Santa Fe, New Mexico.

“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.”

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.

Joshua Reeves, the soft-spoken CEO of a payroll and benefits startup called Gusto, began one talk on entrepreneurship by saying he attended the Entrepreneurial Thought Leaders Seminar at Stanford University 14 quarters in a row while majoring in electrical engineering.

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:

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.

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.

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.

Beyond that, Eisenhardt was the Ph.D. advisor for Shona Brown, the former senior vice president of business operations at Google. Together, they wrote the highly acclaimed business book Competing on the Edge: Strategy as Structured Chaos.

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.”

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.”

Chuck Eesley

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.”

Tracy Chou

“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.”

Among the more than 200 companies that the teaching team estimates alumni of the course have launched are a startup focused on crop science that champions economic and environmental sustainability, a company that provides open software-defined networking solutions, and Skybox Imaging, the micro-satellite maker acquired by Google for $500 million. Serious businesses.

“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.”

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.

This article originally appeared in the Stanford Report.

Photo - Downtown San Jose skyline
Downtown San Jose, Calif. (Credit: Wikimedia Commons)

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?

Headshot of Chuck Eesley

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.

Photo - Shanghai skyline at night
Shanghai skyline at night. (Credit: Wikimedia Commons)

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.

New Entrepreneurship Course Focuses on National Security Challenges

Terrorists rapidly leveraging today’s technology are threatening the safety of our country. So some of Stanford’s top entrepreneurship educators are turning their students’ eyes from the tech industry to national security.

This spring, Stanford’s School of Engineering will offer the course Hacking for Defense: Solving National Security Issues with the Lean Launchpad. Its teaching team will be led by renowned entrepreneurship educators Tom Byers and Steve Blank – creator of the “Lean LaunchPad” methodology. They will be joined by faculty who ran some of the military’s most agile organizations and scholars who have served at some of the highest levels in the military.

In addition, former U.S. Secretary of Defense William Perry, an emeritus professor in Stanford’s Department of Management Science & Engineering (MS&E), will be the course advisor.

The goal of the course (MS&E 297) is to connect the Silicon Valley innovation culture and mindset to the Department of Defense and intelligence community.

Graduate students across the university can apply in teams to take the course and are encouraged to attend one of the brown-bag lunches and information sessions being held this month to learn more.

In a recent blog post, Blank points to ISIS, al- Qaeda, North Korea, Crimea and Ukraine as potential foes that threaten to disrupt America’s national security by harnessing the power of social networks, encryption, GPS, low-cost drones and 3-D printers. And whether they know it or not, these adversaries are using the lean startup methodology, which Blank developed. It emphasizes rapid development and deployment of products – without fear of failure or blowback.

“Terrorists today live on the ‘net and they are all early adopters,” writes Blank, who also teaches the course The Lean LaunchPad: Getting Your Lean Startup Off the Ground (ENGR 245).

“They don’t need an office in Silicon Valley to figure out what’s out there,” he continues. “They can crowd-source designs, find components through eBay, fund through PayPal, train using virtual worlds and refine tactics, techniques and procedures using massive on-line gaming. All while we’re still writing a Request for a Proposal from within the US Government procurement and acquisition channels.”

Blank’s co-instructor, retired Army Special Forces Colonel Joe Felter, hopes students at Stanford will step up and lend their entrepreneurial minds and talents to the cause. Felter, a senior research scholar at Stanford’s Center for International Security and Cooperation (CISAC) and research fellow at the Hoover Institution, understands the challenges and opportunities that tomorrow’s technologists face should they decide to focus on the national-security space.

After earning a Ph.D. in political science at Stanford in 2005, Felter helped stand up and lead the Combating Terrorism Center at the U.S. military academy West Point, and later led the International Security and Assistance Force, Counterinsurgency Advisory and Assistance Team in Afghanistan – reporting directly to Gen. Stanley McChrystal and Gen. David Petraeus.

His experiences on the battlefield include serving as platoon leader in the Army’s 75th Ranger Regiment and as a Special Forces team leader and company commander in Southeast Asia. He earned his bachelor’s degree at West Point and his master’s degree at the Harvard Kennedy School, where his academic adviser was none other than Ash Carter, now the U.S. Secretary of Defense.

“The problems are too important not to bring our best people to the table,” Felter said. “We’re going to expose them to the types of challenges that our national security organizations are grappling with.”

The course is presented by STVP, the Stanford Technology Ventures Program, the entrepreneurship education center in the School of Engineering. STVP Director Tom Byers, a professor in management science and engineering, said the partnership with CISAC to offer this new course is truly exciting.

“We want our entrepreneurially minded students to understand that our country needs them just as much as the high-tech industry,” said Byers, who holds the Entrepreneurship Professor endowed chair in the engineering school. “What better way to teach them that they can have a real impact on society than by showing them they can be innovators in the name of national security?”

Students accepted into the course will work in teams on pressing problems facing the Department of Defense, intelligence community and other government agencies. They range from wearable sensors for Navy divers who work in extreme conditions to an app that would aid humanitarian assistance and disaster relief where agencies from the local to international levels need to share information immediately. The teaching team says innovative solutions to these and other problems will help make America safer.

Photo - Marine in full gear in Afghanistan
(Credit: Cpl. Kowshon Ye/defenseimagery.mil)

The goal of the course, however, is not to have Stanford students build these products and have them shipped off to the front lines. Nor does the teaching team intend to turn students into entrepreneurs that run off and launch their own startup once the class wraps up. Their mission is to instill an entrepreneurial mindset, and perhaps, a sense of patriotism.

“As an educator, my job is to teach students a way of thinking,” Blank said. “So, if students launch a startup, but I haven’t actually taught them anything, I’m in the wrong business and so is Stanford.”

That said, Blank also notes that Stanford has supported national security by supplying technological expertise in the past. In his series “Secret History,” Blank describes the rise of what he calls “Microwave Valley,” chronicling the decade of 1946 to 1956 as the university became the hub of military and industry contracting in the Bay Area.

While those years aren’t discussed much these days, Blank said Hacking for Defense is a return to the university and its engineering school contributing to national defense – except with “a more mature” understanding about the role of students and society.

If successful, Blank plans to share the course and its materials with universities around the country in hopes of creating something akin to a “tech ROTC” for the 21st century. That’s not much of a stretch considering Blank’s success with bringing the lean startup methodology to other sectors of the government.

So far, 750 teams of scientists have taken a version of Blank’s Lean LaunchPad course, called I-Corps, which is taught at 53 universities around the country. And over the last few years, other federal agencies like the National Institutes of Health, the Department of Energy and the Department of Health and Human Services have started adopting the course to accelerate innovation.

“We’re seeing terrorism in every city, and in every country,” said Blank, a consulting associate professor in MS&E. “Students ought to be engaged in thinking about this, not just thinking about how to graduate. And there’s already a segment of students who do.”

The course Engineering 145 at Stanford University examines the fundamentals of technology entrepreneurship as practiced in Silicon Valley and similar regions of innovation around the world. Often called “E145,” the course is open to all undergraduates at Stanford, of any major, and admits from 40 to 60 students per class. The course is offered three times in the autumn and winter quarters for Stanford students, and when the academic year ends, E145 is taught again as a Stanford Summer Session class that students from universities around the world take for credit.

E145 is taught by different instructors each quarter, so the course focus and activities vary. In the fall, it is taught by Stanford Engineering Prof. Tom Byers, who stresses the inclusiveness of the course and the comfortable-but-intense workload. He says what makes E145 unique among the many entrepreneurship-related courses at Stanford is that it carefully examines the entire journey of a tech venture. (See his full syllabus.)

“It fits completely with our job as educators to take students and transform them into leaders,” said Byers, faculty co-director of the Stanford Technology Ventures Program (STVP), the entrepreneurship center in the universityʼs School of Engineering.

Housed in the school’s Department of Management Science & Engineering, STVP is a lab for creating and delivering courses, performing research and developing tools and programs to accelerate entrepreneurship education at Stanford, across the country and around the world.

E145 certainly opened Wade Morgan’s eyes to a new realm of possibilities. Having grown up in what he described as a low-income environment on the East Coast, Morgan said the thought of a career in high tech used to be as remote as Silicon Valley was geographically to his home state of New Jersey.

However, Morgan actively seeks out new challenges and opportunities for growth. He applied and got into Stanford, joined the men’s basketball team as a walk on, and after completing all that’s required for his political science major, started taking courses such as E145 to learn more about Silicon Valley’s vibrant innovation ecosystem.

Morgan said that studying the entire journey of tech entrepreneurship in E145 has put the much-hyped startup success stories in the press in perspective — and even made them seem attainable.

“I was empowered to know that I don’t have to be the person who is coding away to still lead a company. I can lead it with my vision and with my passion,” said Morgan, who has accepted a sales-and-marketing position at LinkedIn that starts after he graduates this spring.

In Winter Quarter, E145 is taught by Chuck Eesley, an assistant professor in management science and engineering whose learn-by-doing approach has prepared his students well. In class, they identify a real-world entrepreneurial opportunity, recruit and assemble a team of classmates, gather resources, develop a business plan and execute on their idea.

“The way the class is structured really facilitates organic learning both in the team and from speakers,” said entrepreneur Trent Hazy, who took Eesley’s E145 course in 2011. “The classroom setting was really helpful for me because I knew I could try and fail and learn and push my limits in a safe environment.”

Hazy now occupies a suite in an industrial building in San Francisco’s chic south-of-Market area, where he serves as CEO of MindSumo, a recruiting-based startup he co-founded in 2012 that uses real-world challenges to match college students to relevant companies.

“Especially now, I’m three years into a business, and I’m thinking about scaling,” Hazy said, “and had we not done the case studies and done the deep learning in those areas in E145, I would be totally clueless right now.”

Erin Parker, another Stanford alum taught by Eesley, took his class to heart: She treated her team’s project, not simply as an assignment, but as an actual business that she would work on full time after graduating in order to be self-sufficient.

While the business she worked on in E145 was completely different from the one she now runs, Parker said the biggest takeaways from the class proved to be essential for her tech venture today — a health-and-fitness company whose first product is a strength-training app called Spitfire Athlete.

Spitfire Athlete

Spitfire currently has more than 50,000 registered users, and Apple has featured it on its App Store’s Health and Fitness page for months. Parker, a national-level Olympic weightlifter, said the lasting effect of E145 is that she never forgets the importance of talking to customers regularly, prototyping a product before shipping it and testing out assumptions.

“It’s really the skill set of learning how to discover opportunities, and then take those opportunities and form them so that they’re this great product or service that people really need,” said Parker, who also taught herself to code while earning her degree in economics at Stanford.

In keeping with STVP’s efforts to accelerate entrepreneurship education around the world, E145 is also taught to learners globally as a Stanford Online course by Eesley. And each summer, the course is taught by management science and engineering lecturers Tom Kosnik and Rebeca Hwang.

Occasionally, they see a Stanford student or two in their class. But mostly, they teach to a room full of international students, who also form teams and work on tech-venture projects based on entrepreneurial opportunities they see back home.

Kosnik and Hwang are well suited to teach E145 with an international slant. During the academic year, Kosnik teaches the popular, longstanding course “Global Entrepreneurial Marketing.” And Hwang — with her unique Korean-and-Argentine background — was a co-founder of YouNoodle, which grows global entrepreneurs through a network of startup competitions.

“The process of startup creation has a lot of parallels with the way you plan your own career and life journey,” said Hwang, now a lecturer in management science and engineering at Stanford. “A lot of the concepts and tools that we teach throughout the class can be applied to planning your career — and that’s pretty much universally applicable to any major, to any career orientation, to any country.”

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.”

The Stanford Technology Ventures Program is ready for another fantastic year of delivering entrepreneurship education to students in the School of Engineering and other entrepreneurially-minded students from across the Stanford campus.

Even if you’re not ready to found a company, there’s no time like the beginning of the academic year to start exploring entrepreneurship. Not sure where to start? We’d suggest registering for the Entrepreneurial Thought Leaders Seminar, MS&E 472 — the gateway into entrepreneurship.

Below you will find course information for Autumn 2011, along with links to available course websites and instructor bios. For course information covering the entire academic year, you can also view the STVP Courses page.

MS&E 140: Accounting for Managers and Entrepreneurs (3 – 4 units)
Instructor: Vic Stanton
Limited enrollment

MS&E 140 provides an introduction to accounting concepts and the operating characteristics of accounting systems. The principles of financial and cost accounting, design of accounting systems, techniques of analysis, and cost control are explored throughout the quarter, as is the interpretation and use of accounting information for decision making.

This couse is specifically designed for the user of accounting information and not as an introduction to a professional accounting career. Non-majors and minors who are taking elementary accounting are not advised to enroll.

Young woman gesturing among a crowd of students in an STVP entrepreneurship courseMS&E 178: The Spirit of Entrepreneurship (3 units)
Instructors: Heidi Roizen

This course teaches students to think like a successful entrepreneur by learning how to analyze key parts of various startup business models. The course uses the speakers at the Entrepreneurial Thought Leader seminar (MS&E 472) as the source of the companies to be explored.

Students meet before and after each Entrepreneurial Thought Leaders seminar to prepare and debrief, respectively.

MS&E 180: Organizations: Theory and Management (4 units)
Instructors: Kathleen Eisenhardt
Limited enrollment; Preference to MS&E majors

MS&E 180 offers an examination of classical and contemporary organizational theory. The course will explore the behavior of individuals, groups, and organizations. Students must attend the first class session.

Jeffrey Schox

Jeffrey Schox

ME 208: Patent Law and Strategy for Innovators and Entrepreneurs (2 – 3 units)
Instructor: Jeffrey Schox

The course will provide a foundation to understand the patent system, and strategies to build a patent portfolio and avoid patent infringement. Students will learn how to conduct their own patent search and how to file their own provisional patent application on an invention of their choice. Although listed as a ME course, the course is not specific to any discipline or technology.

MS&E 270: Strategy in Technology-Based Companies (4 units)
Instructor: Kathleen Eisenhardt
Limited enrollment.

This course provides an introduction to the basic concepts of strategy used within high-technology firms. MS&E 270 examines decisions and actions that shape the long-term future of these organizations by establishing, sustaining, and enhancing the basis for their competitive advantage.

Topics covered within the course include competitive positioning, resource-based perspectives, “co-opetition” and standards setting, and complexity/evolutionary perspectives.

In this video clip, Professor Eisenhardt discusses opportunity creation.

httpv://www.youtube.com/watch?v=-NEyfDtwlZ4

MS&E 273 Technology Venture Formation (3 – 4 units)
Instructors: Mike Lyons and Audrey MacLean
Limited enrollment; Recommended prerequisite: MS&E 270, 271, or equivalent.
View the MS&E 273 course website.

This course forms integrated teams from graduate engineering, computer science and business students to experience the immersive and “no-holds-barred” process of creating a Silicon Valley startup, including presentations to business experts and venture capitalists.

Learn to build venture-scale technology firms where engineers and business personnel can clearly articulate the market opportunities and value proposition of leading-edge technologies to investors. MS&E 273 teams are treated as real startups, as they explore concepts of opportunity assessment, marketing and distribution strategies, R&D and operational planning, legal considerations, and more.

MS&E 472 DFJ – Entrepreneurial Thought Leaders Seminar  (1 unit)
Instructors: Tom Byers, Tina Seelig and Thomas Kosnik
Required web discussion. Course may be repeated for credit.

The DFJ Entrepreneurial Thought Leaders Seminar is a weekly speaker series that presents innovators from across business, finance, technology, and philanthropy sectors, to share their insights with aspiring entrepreneurs. Through MS&E 472, students have the opportunity to learn real world knowledge from prominent leaders and entrepreneurs.

Learn more about this quarter’s line-up of engaging speakers.

DFJ ETL Speaker Lineup for Fall 2011:

Here are video highlights from 2011 DFJ ETL speakers.


Additional STVP-Affiliated Course News

Mayfield Fellows working on a glass board at StanfordMayfield Fellows Program: ENGR 140 C
Our class of 2011 Mayfield Fellows will be completing this intense, nine-month work/study program designed to develop a theoretical and practical understanding of the techniques for growing technology companies.

The program combines an intense sequence of courses on the management of technology ventures, a paid summer internship at a startup company, and ongoing mentoring and networking activities. Learn more about MFP and see where the 2011 Fellows interned over the summer.

Picture of Stanford Professor Tom Byers

Prof. Byers Teaches in Bing Overseas Study Program
During the fall quarter, MS&E Professor and STVP Co-Director Tom Byers will be teaching entrepreneurship courses in Florence as part of Stanford’s Bing Overseas Study Program.

Summertime for entrepreneurs means less time at barbecues and more time for business model generation. For those of you planning to spend the summer working on a venture, or developing the next great technology innovation, here’s a quick round-up of cool insights for you to use as you sweat out the hot weather. Of course, you could also make a business out of soaking up the sun.

Hit Your Niche Fast

Loic Le Meur, Photo by Joi Ito

Loic Le Meur

That’s a key piece of advice offered up by serial entrepreneur Loic Le Meur, who recently participated in a Rebooting Business Live Chat on The Wall Street Journal’s Tech Europe website. In the rapid fire chat, Le Meur discusses the value of different business models and compares the entrepreneurial ecosystems of Silicon Valley and Europe. However, the slew of sage advice for entrepreneurs in the planning stage may be the most valuable piece of the interview.

Plus, enjoy this video of Le Meur sharing his entrepreneurial story at Stanford.

httpv://www.youtube.com/watch?v=e1G4w8EQ5LU

Large Scale Change Won’t be Easy

[quote_right]One of the impediments to successful change is that people use the belief that “it is difficult and takes a long time” to avoid trying to make necessary changes at all.
— Prof. Bob Sutton[/quote_right]Stanford Professor Bob Sutton is currently working on a new book, with colleague Hayagreeva Rao, on scaling constructive action. As the author of Good Boss, Bad Boss and The No Asshole Rule, Bob is widely known for engaging work that consistently presents valuable insights into human and team interaction, particularly in the workplace.

Earlier in June, Sutton shared a post on his blog discussing the direction of his current thinking, and examined earlier research on why organizations cannot always achieve large scale change through simplification of processes to reduce cognitive load on employees. Read the full post Sutton’s blog: Work Matters.

Reducing Your Innovation Risk

Nathan Furr

Nathan Furr

BYU Entrepreneurship Professor Nathan Furr is currently blogging for Forbes.com on topics related to entrepreneurship and innovation. In a recent post, Furr describes the challenges faced in unlocking the secrets to repetitive innovation. When picturing innovators, it’s easy for most people to become enchanted with the romantic notion of one creative individual repeatedly coming up with big successes.

However, Furr believes reality lies in understanding innovation as a process, rather than a series one-off moments of invention. Furr also provides a model for how to lower the risks of innovation, by increasing the speed with which entrepreneurs attempt to validate new ideas in the marketplace.

Also, check out Furr’s previous post on the innovator’s paradox.

Are We in a Tech Bubble? Yes. No. Maybe…

Last week on The Economist’s website, serial entrepreneur Steve Blank debated the tech bubble issue with venture capitalist Ben Horowitz. Blank, who teaches a Lean LaunchPad entrepreneurship course here at STVP, argued that, yes, we are definitely in a tech bubble. He lays out a cogent argument for this position, including his views on current private and public tech company valuations that, in his words, “exceed any rational valuation to their current worth.”

Perhaps even more interestingly, he goes a step further in suggesting that tech bubbles are not a bad thing for creating long term value and innovation. See Blank’s full closing argument on his blog.

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.

STVP Stanford Management Science and Engineering