What is a "True Entrepreneur"?

I asked the directors at not one but three of the "12 Business Incubators Changing The World" in Forbes here, how many failures they have had?  (With incredulous looks on their faces) the directors basically said that they only accept applicant entrepreneurs who have an above 50% to 75% chance of success and that the incubator's successful functioning companies output rate is above 95%.  Are you kidding me?  Forbes put you in the Top 12 incubators!?

"... entrepreneurs are contrarian value creators. They see economic value where others see heaps of nothing. And they see business opportunities where others see only dead ends."

"Equally, there is a world of difference between the typical small-business owner (who dreams of opening another shop) and the true entrepreneur (who dreams of changing an entire industry)."

From a brilliant article form Schumpeter in July's The Economist on entrepreneurism, "Crazy diamonds" (quotes in this blog are from the article).

I believe in the "true entrepreneur".  Over the past three decades I have started, built, and sold companies, and lost out as well.  The ones I am talking about have been my ideas, and my investments.  My first functioning company was at the age of 10.  I carry the badge because I created two breakthrough successes out of the ashes of 2008, when most "untrue" entrepreneurs ran for the hills.  Specifically, on one of my ventures I was told failure was guaranteed!  Sorry that did not happen.

"True entrepreneurs" as defined above in Schumpeter's statement are rare, and think fundamentally differently about basic constructs.  A specific example in case is incremental approach to resolving a need versus continuously discovering ways to leapfrog the status quo to get an advantage.  Incrementalism is not a true entrepreneurs domain.

Mr. Daniel Isenberg states "that successful contrarians also need the self-confidence to defy conventional wisdom ... and the determination to overcome obstacles. Indeed, some of the best entrepreneurs are distinguished more by their ability to achieve the impossible than by the originality of their thinking."

These cannot be created through education, they are born with the genes.  Events and experience refine and carve them out.  They cannot be "grown" as in a crop; they cannot be "herded" to form large groups; and they cannot be told what to do and how to do it.

In drops policy makers to help as they may:

"The G20 countries hold an annual youth-entrepreneurship summit. More than 130 countries celebrate Global Entrepreneurship Week. Business schools offer hugely popular courses on how to become an entrepreneur. Business gurus produce (often contradictory) guides to entrepreneurship: David Gumpert wrote both “How to Really Create a Successful Business Plan” and “Burn Your Business Plan!”."

"The policymakers are as confused as the gurus. They assume that it must mean new technology; so they try to create new Silicon Valleys. Or that it is about small businesses; so they focus on fostering start-ups. Both assumptions are misleading."

The super democratization of the true entrepreneur to "we are all entrepreneurs" is incorrect as well.  At least the market economics to some extent cleans out the wheat from the chaff in the entrepreneurs' case, most of the time.

The contrarians should not be reigned in or democratized.  Or perhaps that is what has happened to the US?

"Politicians and bureaucrats do not just confuse entrepreneurship with things they like—technology, small business—they also fail to recognise that it entails things that set their teeth on edge. Entrepreneurs thrive on inequality: the fabulous wealth they generate in America makes the country more unequal. They also thrive on disruption, which creates losers as well as winners."

The global corporate has recognized the power of the entrepreneur.  The corporate development organizations are out there hunting for the next breakthrough they know will not be created within their own borders.  Please see my previous blog "Large corporations and the desire to innovate" here.

In conclusion, "Joseph Schumpeter once argued that economic progress takes place in “cracks” and “leaps” rather than “infinitesimal small steps” because it is driven by rule-breaking entrepreneurs."

Please link to "Crazy diamonds" here... enjoy!

Large corporations and the desire to innovate

About a year ago, I read a three part blog series on large corporation's inability to innovate, particularly the breakthroughs that produce growth versus value results, at the Harvard Business Review website.  There are a few bits of information in the blogs that are valuable to be reminded of:

From the first blog here:

"Big companies are really bad at innovation because they're designed to be bad at innovation."

This is a generalization and perhaps shows a lack of experience on the author's part.  There are large companies like Procter & Gamble who have turned the model of innovation on its head.  While I was at P&G with its $84B in revenue, the company was spending over 5% on R&D, though interestingly over half of the funding was capturing innovation from the outside and being applied into its products.

In the second blog here:

"Mature corporations are designed to execute on the science of delivery — not engage in the art of discovery. They're bad at innovation by design: All the pressures and processes that drive them toward a profitable, efficient operation tend to get in the way of developing the innovations that can actually transform the business."

I cannot disagree with the above statement.  An ideal example of incrementalism driving efficiency is the much touted Six Sigma methodology.  It superbly squeezes out the last ounce of productivity from the humans and machines in the process, but it does not deliver any transformative breakthroughs.

From the third blog in the series here:

"No company ever dazzled the world by lackadaisically going after a market. Executives never reach the pinnacle of their industry by consistently taking timid action. So why, despite all the evidence to the contrary, do we see so many corporations dip their toes into the pool of innovation instead of diving in? Corporate innovation is already a difficult proposition; why doom it to failure by pursuing it half-heartedly?"

In this blog the author discusses Xerox PARC and how it has been the precursor to significant number of todays breakthroughs; while Xerox itself today is a poor reflection of what it could have been.  Another example of course is Kodak.

I believe that most large corporations live a self fulfilling prophecy of inevitably trapping themselves into linear cycle of starting with a breakthrough idea to accelerated growth to growth to value to sustain to divest (or bankruptcy) and ending in ceasing to be what they were or could have been. Yet, rare it is, exceptions do exist to prove the rule!  Perhaps perpetual growth is simply not possible.  Can Apple continue to wow the consumer forever?

What business can learn from military

One of the delights each week for me is to read Schumpeter in The Economist.

"Military mottoes make strong men cry:("The few, the proud"; "Who dares wins"). Most corporate mission statements make desk warriors cringe with embarrassment."

Military in however small or large a form or design has been one of the oldest institutions in the world.  They have always had a special forces concept and the general armed forces.  That is what the astute corporations are doing as well - creating a front end of innovation arm feeding the products or services development and deployment organizations.

Schumpeter's article here highlights the wealth of experience a military men and women bring to the table and their value to today's businesses.  The education provided to the military has tremendous knowledge embedded in it, with a few millennia of detailed case studies to learn from.

"An officer must never issue an order that will not be obeyed, so he must learn to gauge the mood of his men."

I had the opportunity to work with three corporate leaders across four companies who interestingly all were West Point graduates. Another individual, a colonel gave me the best advice when I choose to build two companies out of the ashes of the economic meltdown of 2008; "Recon ten times before you attack."  Because once the battle has begun, you are in it - in business, or otherwise.

Bank balance of corporations

From The Economist back in February, 2013.  This is indeed thought provoking.

Design and customer experience

"No one buys a Swiss watch to find out what time it is.  The allure is intangible: precise engineering, beautifully displayed."

So states an article in The Economist.  Why does one drive a BMW versus a Ford?  "Precise engineering beautifully displayed."

See the graph to illustrate the point.

See more of my blogs related to design here.

Random is a better pattern

I am sure the 2010 Nobel Prize winners Drs. Alessandro Pluchino, Andrea Rapisarda, and Cesare Garofalo are well known for demonstrating mathematically that organizations would become more efficient if they promoted people at random. See details here.  See a Java based simulator to create your own organization and experiment here.

Now, (from the Wired) Drs. Pluchino and Alessio Biondo "took 15 years of data from four of the world’s biggest stock exchanges and pitted four top trading algorithms against one programmed to trade at random. The random algo did at least as well as the others—and it experienced a lot less day-to-day volatility."

Science is exploring new grounds. Is there true randomness or only unpredictability?

Read my related blogs "Predictions - Who to trust" here, and "Gorilla hiding in plain sight" here.

Power of Vision

Mr. Elon Musk is in the rocket business! A brilliant and serial entrepreneur, he heads SpaceX.  In all his ventures, I believe he looks at a future he wants to create, which most will not believe, or disagree with, yet he delivers.

Take for example the two companies that NASA has awarded International Space Station resupply contracts to - Orbital Sciences and SpaceX.  While reading an article on both, it was clear that SpaceX's rocket Falcon is designed with a breakthrough vision while Orbital Sciences' Antares is for the immediate.  The Article states:

"Musk's Falcon is designed to be scalable, with more engines - because ultimately he plans to send this space Ferrari to Mars.  The ISS is just a stepping stone."

Creative vision is the impetus to human innovation.

Please read more about Mr. Musk here.  Please read the Wired article here.

Creative Destruction from outside the sector

Joseph Schumpeter's Creative Destruction comes from the outside of the sector most of the time.  Vacuum tubes versus transistors; newspapers and print media versus digital content providers; etc.

Here is one in the making, which may up end a part of the medical sector: non-invasive surgery.  And it is not a medical doctor but a physicist who has come up with the breakthrough.  Enjoy!

Innovation is coming from outside the sector

Breakthroughs emerge from within as much as from outside an industry. Mostly, inside the sector, the incumbent products market share forces Kodak's of the world to hide the digital camera they could have developed, or the Xerox's of the world to not create what could have transformed the company. The list goes on.

Yet, this lesson is not lost on the leaders in the oil and gas sector. It was delightful to read Mr. Gerald Schotman comments when he was asked recently, "What is an example of a freaky idea that became successful?" Mr. Schotman's replied:

"In the offshore business, there was a guy who went with his kids and bought one of these small plastic reptiles toys. If you put them in a bottle, they expand. Someone realized that if you want to seal off water zones in an offshore well, that is exactly the material you need. You put it next to the well, when the oil starts to turn to waters, then that material swells and closes off that water and the water will not interfere. It is a nice way of shutting off water zones. The thought required to develop that material and do tests – that was a nice freaky thing which is now a reality."

Read the complete conversation here.

Procter & Gamble has made this art into science a while back, see an article "Innovating from the outside in" here explaining some of the thought process and in market results.  The article states:

"We don't corner the market on good ideas and every good idea doesn't have to be ours," said Vice President of Business Development, Jeff Weedman. "The goal is to identify and collaborate with innovators who can help us consistently improve existing brands and create new products that delight the world's consumers."

See Procter & Gamble's Open Innovation program Connect + Develop here.

Visualization of Data

Previous Procter & Gamble colleague, Mr. Franz Dill writes about the Harvard Business Review article on visualization of data for decision support at P&G, "How P&G Presents Data to Decision-Makers".  The article states:

"... (Procter & Gamble) has institutionalized data visualization as a primary tool of management...  — over 50,000 P&G employees now have access to a "Decision Cockpit"..."

The author Dr. Thomas Davenport, a visiting professor at Harvard Business School, and a senior adviser to Deloitte Analytics, is particularly taken with heat maps.  I though am more aligned with Franz on this subject who states:

"In general, heat maps distort comparisons between data, so they are readily scan-able, but are not a good means for interacting with complex data. Other graphics shown in the article are more typical dashboard visualization styles."

Read Franz's complete blog here.

The author highlights a key insight:

"P&G's CIO Filippo Passerini calls it "getting beyond the what to the why and the how." If decision-makers have to spend too much time with the data figuring out what has happened in an important area of operations, they may never get to why it happened, or how to address the issue."

I previously wrote about the Business Sphere here.  Read the complete HBR article here.

Predictions - Who to trust?

Harvard Business Review publishes ""Experts" - Who beat the odds are probably just lucky".

"People whose predictions were most in line with conventional wisdom proved the most accurate overall. But those who made contrarian predictions that paid off big once or twice were viewed as the real market sages—even though their forecasts were incorrect more often than not."

Jerker Denrell answers the questions to prove the about point with his research. He is a professor of behavioral science at the Warwick Business School. One of the more interesting questions was:

"What leads people to make wild predictions? Personality? In the lab, that seems to be the case. In the world there are any number of incentives to make bold predictions. TV ratings, for example. Think of sports prognosticators. Being right about the upcoming game is much less important than getting people to tune in to their outrageous predictions. This is why we used Wall Street Journal inflation and interest rate predictions—those forecasters had no incentive to make optimistic predictions."

Read the complete article here.

Future of our identities

United Kingdom's Department of Business, Innovation & Skills provides an excellent study "The Future of Identity".  The report published by Sir John Beddington, UK's last Chief Scientist describes the trends, predicts changes, and suggest areas for actions related to our "notion of identity"!

Mr. Pallab Ghosh, science correspondent for the BBC discusses the report in his article "Web 're-defining' human identity says chief scientist".  He states specific to the impact of online social applications and role playing games:

"One consequence could be communities becoming less cohesive... This change could be harnessed to bring positive changes or if ignored could fuel social exclusion, says the study."

In specific, I enjoyed reading the part of the report on "Hyper-Connectivity".  Sir John Beddington said in his comments to BBC News:

""The most dynamic trend (in determining identity) is hyper-connectivity," ... "The collection and use of data by government and the private sector, the balancing of individual rights and liberties against privacy and security and the issue of how to tackle social exclusion, will be affected by these trends," he said. "I hope the evidence in today's report will contribute to the policy making process.""

I am curious to see the action UK's government plans to take as a result of the report.  There are generations alive today to whom the speed of change is excessively fast.  While the latest crop of tweens expect faster, smaller, cheaper, embedded, always on, realtime, push relevant content, etc. devices to continuously emerge every year.  A simple example is, some of today's tweens don't know what is laser disk, or any rotating digital storage device; they only understand unlimited storage and that too available to them wherever they are, independent of geography!  Absolutely fascinating.

Mr. Ghosh's article can be read here. The report can be downloaded here.