We’re wary of using pop culture references to make management points. When you do that, even with pieces of pop culture that are, in part about business and management, like the television series Mad Men, you usually get articles about how to become better managers from thinking hard about a television show, or, laughably, something like this.
But let’s stick with Mad Men for a second. It’s a show about work and one of the things it shows is how people are passionate about that work. In this past weekend’s final episode, which even one of the smartest management thinkers we know is raving about, the show’s star tries to convince his boss to come along with him on a new endeavor. He says:
“I’m sick of getting batted around like a ping pong ball. Who the hell is in charge, a bunch of accountants trying to turn a dollar into a dollar ten? I want to work. I want to build something of my own, how do you not understand that?”
This is art, not real life, so let’s not go overboard on drawing management lessons from a few lines of TV dialogue. But he has a point. He wants to work. He wants to build something. That’s a good pair of goals for any manager, real or fictional.
P.S. We can’t find an embeddable clip of Draper saying those words. Please let us know if you see one.
There was lots of entepreneurial energy in the room at MIT’s Kresge Auditorium today — as a sizable crowd gathered in the morning for a free daylong“Startup Bootcamp” full of lessons from technology entrepreneurs. Here are some insights from just a few of the day’s speakers:
MIT’s Ken Zolot offered a set of questions to ask about an invention when you’re thinking about starting a business around it:
Does it work yet?
Is it special?
Who cares?
What do I have and who do I know?
Who can help?
When you’re in those early stages of developing your idea, Robin Chase, founder of the car-sharing company Zipcar, advised entrepreneurs to think of every person you meet as a free consultant — and pay attention to the questions they ask you about your idea when you explain it to them. “When people ask you things, they aren’t asking dumb questions,” she explained. “You should hone your idea and the way you express it and move forward.”
Adam Smith, founder of Xobni, mentioned the importance of staying small until you achieve product market fit — i.e., you have a product that people want. When you achieve that, you can scale up, according to Smith — and then it’s more about execution.
Daniel Theobald, founder and CTO of Vecna, recommended avoiding taking “other people’s money” as investments if you can — particularly if you have a socially responsible business model as a vision. Vecna, he said, allows employees to spend up to 10% of their work time on community service projects — and the company’s model wouldn’t have worked if the company had taken outside investors’ money. Instead, he said, the company used IT consulting to bootstrap its startup stage — structuring its consulting agreements so that Vecna retained the intellectual property.
More than one speaker alluded to the need for start-up entrepreneurs to experiment and iterate quickly until they get to a successful business model. But that process isn’t necessarily easy for entrepreneurs — as Kyle Vogt, one of the founders of Justin.TV, vividly described. Vogt spoke of stages Web start-ups go through – including the “Trough of Sorrow” that occurs after the initial product has launched but before the company has reached a stage Vogt calls “Acquisition of Loyalty.” While in the “Trough of Sorrow,” Vogt said, entrepreneurs may face tough questions from family, friends — and from themselves. However, according to Vogt, if you stick to it long enough and try enough times, you’ll probably find something people will like. Justin.TV, which began by providing live video coverage from the life of a guy named Justin, now includes a wide range of live video, such as coverage from the Startup Bootcamp — including this excerpt from Robin Chase’s presentation:
One of Tian and Wang’s interesting findings: Venture-backed companies that eventually conducted IPOs (initial public offerings) and were backed by more failure-tolerant venture capitalists were significantly more innovative than other venture-backed IPO companies.
What’s more, the researchers’ analysis suggests that what particularly matters is investment at an early stage by a failure-tolerant investor. Venture capitalists, Tian and Wang conclude, appear to influence the culture of the early-stage start-ups they invest in — and failure-tolerant early investors result in IPO companies that are more innovative.
Tian and Wang measured VCs’ failure tolerance by looking at how long the VCs continued to invest in prior companies that they eventually wrote off. The authors’ measured innovativeness by looking at a company’s patents and the impact of those patents.
Henry Chen, Paul Gompers, Anna Kovner and Josh Lerner examined the location of U.S. venture capital firms’ headquarters, branch offices, and investments — as well as their investment success rates. Here are highlights of a few of their findings:
First, no surprsies: U.S. venture capital is heavily clustered in just three areas of the country – San Francisco/San Jose, New York, and Boston. More than half of all venture capital offices in the U.S. are located in those three metropolitan areas. Just under half of all companies financed by venture capital are located in those areas, too.
And, it turns out, there are reasons for that. Venture capital firms are disproportionately concentrated in regions where VC investments have been successful in the past — and those regions are in states with higher than average levels of economic output per person. VC-intensive regions are also areas with high numbers of patents per capita. What’s more, venture capital firms headquartered in the three regions that the researchers call “venture capital centers” have a higher average success rate than VC firms based elsewhere.
Now, here’s a surprising finding. Even though VC firms headquartered in venture capital centers like San Francisco and Boston perform better overall — and even though VC firms disproportionately invest in local start-ups – the VC firms, on average, get better results from their investments in locations outside their headquarters region.
Why would that be? The researchers suggest one possible explanation: Because venture capitalists prefer to invest close to their offices – so they can more easily monitor performance — they may only invest farther afield when start-ups are particularly promising. Conversely, the investors may have slightly lower standards for start-ups that are closer to home, since such start-ups are less costly to keep tabs on.
In other words, start-ups outside the hubs of venture capital may have to overcome higher hurdles to gain VC investors – and then are more likely to perform well.
Ran across an intriguing article in Sunday’s New York Times. The author, Steve Lohr, raised the question of whether current trends may create a shift in advantage in innovation– from entrepreneurial companies to large ones. The argument is that many of today’s biggest problems are in complex fields such as energy and the environment — and that solutions will need to be multidisciplinary rather than the work of entrepreneurial inventors. “The pendulum of thinking on innovation does seem to be swinging toward the big guys,” Lohr wrote.
The article brought to mind for me an interview I conducted with Harvard Business School’s Clayton M. Christensen last fall. An edited version of the interview with Clay Christensen appeared in the Spring 2009 issue of MIT Sloan Management Review – but one point that didn’t make it into the published version (due to space constraints) was a brief observation Christensen made about established companies and disruptive innovation. Christensen noted that he had become ”a lot more optmistic” in the last five years about leading companies’ ability to successfully innovate disruptively, if the management team understands the principles of disruptive innovation.
Executives wax and wane in their enthusiasm for launching new ventures outside an organization’s core business. In their more enthusiastic moments, leaders often see corporate venturing initiatives as sources of organic growth and vitally important engines of renewal. However, in their more disenchanted periods executives may see new ventures as high-risk, foolhardy distractions from effectively running the core business. What’s more, such pessimism isn’t wrong. Corporate ventures are risky and they usually do not produce hoped-for results.
What do you think? Are the dynamics of innovation changing in ways that favor larger companies? And are large companies getting significantly better at managing innovation — or not?
This week was a big one for innovation here at MIT — in that the winner of the 20th annual MIT $100K Entrepreneurship Competition was announced Wednesday. Ksplice, the winning company from a record 260 entries, has developed technology that enables users to install software updates without rebooting their computers. The start-up was founded by five MIT engineers.
From an innovation point of view, the story of Ksplice’s founding illustrates an important theme: an idea born from a frustration with the status quo. According to an article by Ksplice COO Waseem Daher, Jeff Arnold, one of the company’s founders, was managing servers at MIT. A security update arrived in the middle of the week. Arnold decided not to install it until a more quiet weekend period – only to see the system compromised before then, so that all the software had to be reinstalled.
Arnold’s response, according to Daher? After expressing frustration, Arnold went on to write “an award-winning master’s thesis” addressing ways to update software without system reboots. And that’s the technology behind KSplice.
“While governments deliberate responses to the financial crisis of 2008 and its aftermath, one important question should not be overlooked: What will be the long-term impact of the crisis on technological innovation?” So writes economist Joshua Gans in the new Spring 2009 issue of MIT Sloan Management Review.
Andrea Ordanini takes an interesting look at “crowd funding” in the latest edition of Business Insight. What’s crowd funding? It’s the emerging practice of consumers investing small amounts of money (as little as $1) in products they fancy by musicians or fashion designers. It’s yet another form of community activity facilitated by the Internet.
However, don’t expect an explosion of consumer-funded start-up businesses. Ordanini notes that the “crowd funding” process “works best with products for which customers feel a strong personal attachment — products like music and designer goods. Without that bond, customers are unlikely to support a product beyond simply buying it.”
John Mullins has written a thought-provoking new essay about entrepreneurship. While Mullins is writing specifically about launching a start-up, some of his ideas seem applicable to innovation more broadly. In particular, he notes the importance of experimentation to achieving success — and of testing ideas rather than becoming attached to them from the start. Writes Mullins in an essay on the London Business School website:
“Often with entrepreneurs it’s not the initial plan that reaps success, but ideas that come to fruition much later in the process. In fact, most investors will tell you that the successful companies in which they put their money almost always make their money not on Plan A, the initial idea for which a business plan might have been written, but on Plan B or maybe Plan C, D or Z.”
As a result, Mullins suggest that entrepeneurs, rather than completely committing early on to a particular business plan, figure out instead what questions about their initial plan need answering and testing. “Rather than blindly trying to overcome all the obstacles [to your initial plan], we think it’s wiser to think about the entrepreneurial path as one of testing hypotheses,” he writes.
That’s good advice not just for would-be entrepreneurs, but for all innovators.
For more on Mullins’ ideas about unknowns and the innovation process, see “Discovering ‘Unk-Unks,’” his article in the Summer 2007 issue of MIT Sloan Management Review.
These days, March is apparently the season for young innovators to apply for start-up financing for the summer. Y Combinator, TechStars and DreamIt Ventures all have deadlines within the next ten days for their summer programs for very early-stage high-tech start-ups.
The idea behind all three organizations? To match would-be entrepreneurial teams who have an idea with expertise and a very modest amount of financing — in hopes of getting some of the start-ups to the next stage, where they may interest more traditional venture capital or angel investors. For example, Y Combinator’s website says the organization typically invests $5000 per participating founder, plus an additional $5000 (so a team of three, for instance, gets $20,000 for the summer) and takes a median equity stake of 6%. Y Combinator invests “mostly in software and web services.”
Not all such really-early-stage investors operate on a summer cycle, however; for example, Founders Co-op in Seattle has a somewhat similar target market — combining very early-stage start-ups in software and web services with expertise and a small amount of capital, ranging from $10,000 to $250,000 — but no fixed summer schedule. And Y Combinator also funds a group of start-ups in a program that starts in January.
Will technology innovation eventually help lead the economy out of recession? Simon Johnson of the MIT Sloan School of Management is predicting “a wave of entrepreneurship,” which will start ”right away” but whose total effect won’t be felt for about five years, according to a recent article in The Boston Globe. Johnson notes that, in recent years, the wealth of Wall Street attracted many of the best technical minds into “financial engineering.” That’s now changing, for obvious reasons.
Meanwhile, MIT President Susan Hockfield recently shared with attendees at the fourth annual MIT Energy Conference her view that innovation will drive economic growth. Said Hockfield:
“I’m convinced that the next wave of economic growth will rise from the same source that powered the information and biotechnology revolutions: from innovation. And today, by far the most powerful potential for immediate, catalytic innovation is alternative energy.”
In what areas could technology bring new prosperity? That question was posed to a number of MIT professors in various fields last spring. Their answers ranged from biosolar cells to robots to sustainable cities.
Here’s a fascinating statistic: A new study of Chinese and Indian professionals and managers who had studied or worked in the U.S. and then returned to their home countries found that slightly more than half think they are either very likely or somewhat likely to start a business within the next five years. The majority of the survey respondents felt that opportunities to start a business were better in their home countries than in the U.S.
But the news isn’t all bad. The San Jose Mercury News recently highlighted entrepreneurial companies that are growingdespite the economy, in sectors such as online video, software as a service (SaaS) and open source software. One key to getting venture capital now? Offering a business model that will save money for customers, according to The New York Times ”Bits” blog. And there’s always the possibility of eschewing venture capital entirely:
Follow all of MIT Sloan Management Review’s coverage of TED.
Someone doing a study of collaborative innovation could start with a look at the TED Prize, three of which were awarded here last night. The winners this year were extraterrestrial life searcher Jill Tarter, ocean researcher Sylvia Earle, and economist, musician, and advocate Jose Antonio Abreu. The idea is that the prize winners announce their dream. TED kicks in $100,000 to start funding that dream. More important, the prize winner now has access to the people in the TED community. Immediately after the acceptance speeches and into today, I’ve seen dozens of TED luminaries pledge in-kind support to the dream of one winner or another.
This stone soup approach isn’t uncommon, but it’s particularly impressive because all these people are at the center of other communities and have much to offer: that’s how they wound up at TED. Indeed, previous winners of the TED prize have had their dreams fulfilled because of intervention and assistance from (that word again) TEDsters. The most high-profile example of that is photojournalist Jim Nachtwey, a 2007 prize winner, who had to surmount multiple political and technical hurdles to tell his story of a deadly disease that’s hidden to most people in the developed world. Contacts at TED helped him do that.
The TED Prize ceremony capped a day in which it was definitely technology, the “T” in TED, held sway. Some of it was about robots. We learned about medical robots that permit minimally invasive surgery and biologist Robert Full revealed what he learned about how tails work while building robots that mimic geckos.
The first day there was plenty of talk about robots, too, and some of the breakthroughs demonstrated on the TED stage have been placed in the lobby so attendees can get a closer look. You can, for example, interact with a realistic Albert Einstein head that changes its facial expression based on yours:
Yesterday’s talk from Shai Agassi, who, like so many other TED speakers, began his talk with a provocative question — “How would you run a country without oil?” — and told the story of his journey to build an electric car. He noted that “electric cars have to be more convenient and more affordable than what they’re replacing” and maintained that the way to do this is to “separate ownership of the car and ownership of the battery” and replace it with a business model in which people and companies “own the car but subscribe to miles.” When explaining why he decided on an all-electric car rather than a hybrid, he got off the line of the day when he quoted Renault CEO Carlos Ghosn, who’s one of many funding Agassi’s international effort:
Hybrids are like mermaids. When you want a fish, you have a woman. When you want a woman, you have a fish.
You can learn more about Agassi’s company, Better Place, which he’s using to develop — you guessed right — a community around his endeavor.
And, finally, there was a big storm yesterday in Long Beach, as you can see:
The MSTIR collection focuses on several cutting-edge subject areas where teaching materials are not as widely available as they are for more traditional areas of management study: global entrepreneurship, sustainability, and industry evolution.
A new BusinessWeek article raises the question of whether Silicon Valley — and, more generally, America’s environment for innovation in information technology — is losing its edge. One expert cited in the article, Intel’s Andy Grove, a lecturer at Stanford, thinks contemporary Silicon Valley entrepreneurs aren’t ambitious enough – and think too much about exit strategies. “Intel never had an exit strategy,” he told BusinessWeek.
How do you ensure that your product stays relevant in the future? Reach out to the next generation of innovators. In what sounds like a smart marketing tactic, several large companies are seeking to encourage software start-ups to use their products and services – through initiatives that range from free software development tools to a contest.
Microsoft in November launched a program called BizSpark that offers eligible software start-ups around the globe free access to various Microsoft products — as long as the start-ups are privately held, less than three years old, have annual revenue of less than $1 million and are referred by partners such as venture capitalists. (The start-ups do pay a $100 fee when they leave the program.) Meanwhile, Sun Microsystems has a program for start-ups called Sun Startup Essentials that includes discounted servers and open source software. And Amazon Web Services (AWS) recently announced this year’s winner of a contest it sponsors for start-ups that use its cloud computing platform.
Microsoft is also reaching out to those who may become future innovators: High-school and college students in a number of countries can participate in its DreamSpark program to download a number of Microsoft software development tools for free.
Why do some locations — such as Silicon Valley — seem to have higher rates of entrepreneurship than others? Given the role start-ups often play in bringing forth new ideas, that’s a question many people interested in economic development would like to know the answer to. And it’s one two researchers from Harvard examine in a new working paper. Edward L. Glaeser and William R. Kerr of Harvard looked at manufacturing start-ups throughout the U.S. over a period of more than two decades — and tested a number of hypotheses about why some cities have more entrepreneurial activity than others.
Their findings? Well, for one thing, places with lots of small suppliers tend to have more manufacturing start-ups. The authors found strong support for a hypothesis put forward by a researcher named Chinitz in the 1960s, who argued that new businesses benefit from a network of small, independent suppliers willing to work with them.
Another finding from this new working paper is not very surprising but reinforces the importance of economic clusters: It turns out you’re more likely to find start-ups in a given location if there are other industries around that hire the same type of workers the start-ups do. In fact, the results suggest “that people and their human capital are probably the crucial ingredient for most new entrepreneurs,” conclude Glaeser and Kerr.
From both business and cultural perspectives, one of the lasting innovations of the late-’90s dot-com boom was getting individuals and companies comfortable purchasing items via their computers. On the consumer side, the twin ecommerce giants of the late ’90s were eBay and Amazon. In tomorrow’s New York Times, Brad Stone’s Amid the gloom, an ecommerce war looks at how those two giants are faring nowadays.
The basic observation is obvious: while DIY online auctioneer eBay seemed best-suited for bad times (“eBay is to some extent recession-proof,” former CEO Meg Whitman once said famously), it is Amazon, according to Stone, that “has emerged as one of the most vibrant and reliable retailers in the country.” Why is Amazon thriving? Stone asks CEO Jeff Bezos:
Mr. Bezos credits Amazon’s tolerance for risky, expensive bets like the Kindle electronic reading device.
“Our willingness to be misunderstood, our long-term orientation and our willingness to repeatedly fail are the three parts of our culture that make doing this kind of thing possible,” he said.
It’s that tolerance for risk — and the willingness to take time for a risk to pay off — that closely characterizes Amazon’s innovation. The piece is full of ways in which Amazon innovated and eBay didn’t (most decisively in the area of digitally distributed goods). And the section in which Whitman explains why her company focused on Google rather than Amazon as its prime competitor is a must-read for executives looking for ways to avoid fighting the wrong war. Part of successful innovation is knowing who you’re innovating against.
Transparency, accidental innovation, trust, collaboration — as sustainability affects how the world works, so will it affect how business works in the world.
We’re wary of using pop culture references to make management points. When you do that, even with pieces of pop culture that are, in part about business and management, like the television series Mad Men, you usually get articles about how to become better managers from thinking hard about a television show, or, laughably, something like this.
Yesterday’s talk from 
