Steve Blank's Blog, page 28

Entrepreneurs are Everywhere Show No. 18: Sarah Calhoun and Steve Sims

Realizing you need help and learning how to ask for help are crucial skills for a founder.

And while how much money you make at startup is a way to keep score, a successful life can’t be measured only in dollars.

These topics were the focus of interviews with the latest guests on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111 (airing weekly Thursdays at 1 pm Pacific, 4 pm Eastern).  The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Sarah Calhoun

Joining me in the Stanford University studio were:

Sarah Calhoun, founder of Red Ants Pants workwear for women
Steve Sims, founder of Bluefish executive concierge service.

Steve Sims

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below.

Sarah Calhoun has spent two decades building nonprofits and small businesses. She was the 2012 National Women in Business Champion for the Small Business Administration. In 2011, she served as a as a US Delegate to the APEC Women in Business Summit in San Francisco. The same year, President Obama invited her to attend a White House forum on jobs and economic development, and she was named Montana’s Entrepreneur of the Year.

Sarah graduated from Gettysburg College with a degree in environmental studies and worked with Outward Bound and the Student Conservation Association. She had no startup experience, but decided to start Red Ants Pants when she couldn’t find work pants that fit her properly. Here’s how she found her way:

I learned a lot from other people. My pattern maker and this fellow Richard Siberell, (a designer for Patagonia who took her under his wing) were incredibly patient with me explaining the process. I did a lot of reading and research on my own. I asked for help whenever and wherever I could, and that’s a big piece that I think is essential.

Steve :  Is that hard?

Sarah :   Yes.

Steve : Why?

Sarah : I think in general, it’s somewhat of a vulnerable topic, when you just admit that you don’t know something that you need, and that you need help. … because it was all new to me, I was comfortable admitting that. …  

If you can’t hear the clip, click here.

In addition to founding Bluefish, Steve Sims is the CEO of the celebrity charity auction platform BLUEcause; a speaker; consultant; and author of the book 7 Ugly Truths. From the time Steve was young, he was on a quest to get rich. Over time, he learned money was not as important as he once thought.

…As you get more successful you get into the trappings. You get the suits. You get the watches. You get the cars. You get the penthouses. You get all of these things because, hey, once I’ve got those I’m successful.  

Then you get it and you walk into your penthouse and you go, “Not much has changed. I’m just on a higher floor now and with a bigger mortgage.”

You suddenly start realizing … once you’ve got (these things) that it’s not all that it’s cracked up to be.

(If I could) I would probably just sit my younger self down, pour a whiskey, and go, “Look, it will be fine. Just keep your word and it’ll be smooth.”

Steve Blank : Would you have listened?

Steve Sims : No. I was young and obnoxious and arrogant. Of course, I never had anything to lose. …I never had any of those trappings to risk. I went out like a bull in a china shop, “Grab grab grab, get it, get it. I want that deal, I’ve got to do that. I’ve got to make sure they’re happy.”

I made sure things worked for my clients because I knew if I looked after you, it would look after me. Without realizing it there was a little bit of intelligence there …

If you can’t hear the clip, click here.

—

Like many founders, Sarah is an idealist, but she didn’t initially look to doing a startup as a way to realize her dream of making a difference:

When I got into college, I was an environmental studies student and wanted to save the world. … I looked down upon those marketing majors, who just wanted to make money, and I thought this was the last thing that I would ever do.

…I wanted to make more of an impact as far as doing good in the world, and at that time I didn’t see business as an avenue for that. I didn’t know much about business. I’ve still never taken a business course in my life.

If you can’t hear the clip, click here.

She had no idea what she was getting into:

There were no work pants that fit women out there on the market. None, whatsoever. As you can imagine, curvy hips do not fit well into square men’s pants.

I was fed up with wearing pants that didn’t fit, as I realized lots of other women in the industry were. I talked to some companies to try to get them to start a line of work wear for women. No one jumped at it.

One guy said, “If you’re serious about it, why don’t you start your own business?”

So at the age of 25, I very naively asked myself, “Well, starting a business, how hard can this be?”

If you can’t hear the clip, click here.

Sarah’s advice for other founders is straightforward:

Be true and be brave.

There’s a lot of scary things out there, especially getting into a world or an industry that you don’t know and don’t have experience in but having a lot of courage and integrity and going into that …  

We could all afford those things, right? We don’t need to take a loan for more courage. We can do that. We just have to trust our gut too. That’s a big one, I make all my decisions just based on what feels right which may or may not be advisable to everyone but so far it’s worked for us.  

If you can’t hear the clip, click here.

—

While he kept trying to get a bank job, Steve worked the door at clubs in Hong Kong, throwing parties and events that became the toast of the town. He never planned to start a company:

I started … with this delusion that I would get to rich people. I started putting on parties and clubs and events. And people would hire me to put on these events with the idea that if I captured enough rich people, that would do it. Without it realizing it, people were saying, “Can you do this? …” “Do you know people in Monaco?” “Do you know people in London?”   

So before it actually became a concept as an industry, I was becoming this international concierge. I was … flying to Macau and flying up to Japan to … try and find the coolest places.

Then I would send people there and go, “Oh yeah, you know because of my recommendation, that’s $1,000 but if you want me to get you a penthouse and a chauffeur … then that’s 10 grand.  

So I was making it up on the fly. And (at the) parties that I would throw, because I was on the door and I like humble people, I would give people a password to get into my club. And one of the passwords was finish this line, “One fish, two fish, red fish…” 

So people would walk up to the door, it would be me and another meathead on the door and they would say, “blue fish,” and I would let them in.

And if they didn’t and they were too arrogant and would go, “I’m here for the party,” we’d say, “I’m sorry. There’s no party here. I don’t know what you’re talking about.” And there’d be a line of people getting in and the door would open up and music would barrel out. …

That’s how it started. It was a password.

If you can’t hear the clip, click here.

The company quickly acquired some mystique, but not by design:

We launched … a website and we forgot to put an email on there and a phone number. Everyone was in the media going, “Oh, that’s so exclusive. They haven’t even got a phone number.” We forgot to put it on there!

…No one could contact us and … this myth suddenly grew … We didn’t have business cards because we thought no one would take us seriously so again people thought we were that exclusive because we didn’t even have cards.

If you can’t hear the clip, click here.

Like Sarah, Steve’s advice to other founders is simple:

Keep your word. … There is no better asset or title than someone turning round and going, “That Steve, he keeps his word.” …  

(Nowadays) I think people feel that it’s OK to let someone down and then apologize about it and then try again. I think if you’ve got someone that keeps their word no matter what, even if you lose money because you priced it wrong, nothing better than your credibility.

… I held onto that (maxim) from an early stage, and it worked well for me.

If you can’t hear the clip, click here.

Listen to my full interviews with Sarah and Steve by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere : , former director of the Center for the Study of Intelligence at the Central Intelligence Agency and co-author of Rebels at Work; and , Intellipedia Doyen for the Central Intelligence Agency

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show?  Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com  describing your entrepreneurial journey.

Filed under: Customer Development, SiriusXM Radio Show

Hacking for Defense @ Stanford – Making the World a Safer Place

Introducing Hacking for Defense – Connecting Silicon Valley Innovation Culture and Mindset to the Department of Defense and the Intelligence Community

Hacking for Defense is a new course at Stanford’s Engineering School in the Spring of 2016. It is being taught by Tom Byers, Steve Blank, Joe Felter and Pete Newell and is advised by former Secretary of Defense Bill Perry. Join a select cross-disciplinary class that will put you hands-on with the masters of lean innovation to help bring rapid-fire innovative solutions to address threats to our national security. Why? 

Army, Navy, Air Force, Marines, CIA, NSA

What do all these groups in the Department of Defense and Intelligence Community (DOD/IC) have in common? Up until the dawn of the 21st century, they defined military technology superiority. Our defense and intelligence community owned and/or could buy and deploy the most advanced technology in the world. Their R&D groups and contractors had the smartest domain experts who could design and manufacture the best systems. Not only were they insulated from technological disruption, they were often also the disrupters. (During the Cold War we used asymmetric technologies in silicon and software to disrupt the Soviet Union’s lead in conventional weapons.) Yet in the last decade the U.S. Department of Defense and Intelligence Community are now facing their own disruption from ISIS. al-Qaeda. North Korea. Crimea. Ukraine. DF-21 and Islands in the South China Sea.

Today these potential adversaries are able to harness the power of social networks, encryption, GPS, low-cost drones, 3D printers, simpler design and manufacturing processes, agile and lean methodologies, ubiquitous Internet and smartphones. Our once closely held expertise in people, processes and systems that we once had has evolved to become commercial off-the-shelf technologies. U.S. agencies that historically owned technology superiority and fielded cutting-edge technologies now find that off-the-shelf solutions may be more advanced than the solutions they are working on, or that adversaries can rapidly create asymmetric responses using these readily available technologies.

Its Not Just the Technology

Perhaps more important than the technologies, these new adversaries can acquire and deploy disruptive technology at a speed that to us looks like a blur. They can do so because most have little legacy organizational baggage, no government overhead, some of the best software talent in the world, cheap manpower costs, no career risk when attempting new unproven feats and ultimately no fear of failure.

Terrorists today live on the ‘net and they are all early adopters. They don’t need an office in Silicon Valley to figure out what’s out there. They are experts in leveraging Web 2.0 and 3.0. They are able to collaborate using Telegram, Instagram, Facebook, Skype, FaceTime, YouTube, wiki’s, IM/chat. Targeting, assessments, technology, recipes, and tactics all flow at the speed of a Lean Startup.  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.

We’re Our Own Worst Enemy

In contrast to the agility of many of our adversaries, the Department of Defense and the Intelligence Community have huge investments in existing systems (aircraft carriers, manned fighters and bombers, large satellites, etc.), an incentive system (promotions) that supports the status quo, an existing contractor base with major political influence over procurement and acquisition, and the talent to deliver complex systems that are the answer to past problems.

Efficiently Being Inefficient

Our drive for ultimate efficiency in buying military systems (procurement) has made us our own worst enemy. These acquisition and procurement “silos” of excellence are virtually impenetrable by new ideas and requirements. Even in the rare moments of crisis and need, when they do show some flexibility, their reaction is often so slow and cumbersome that by the time the solutions reach the field, the problem they intended to solve has changed so dramatically the solutions are useless.

The incentives for acquiring and deploying innovation in the DOD/IC with speed and urgency are not currently aligned with the government acquisition, budgeting, and requirements processes, all of which have remained unchanged for decades or even centuries.

The Offset Dilemma – Technology is the not Silver Bullet

Today, many in the Department of Defense and Intelligence Community are searching for a magic technology bullet – the next Offset Strategy – convinced that if they could only get close to Silicon Valley, they will find the right technology advantage.

It turns out that’s a massive mistake. What Silicon Valley delivers is not just new technology but – perhaps even more importantly – an innovation culture and mindset. We will not lose because we had the wrong technology.  We will lose because we couldn’t adopt, adapt and deploy technology at speed and in sufficient quantities to overcome our enemies.

Ultimately the solution isn’t reforming the acquisition process (incumbents will delay/kill it) or buying a new technology and embedding it in a decade-long procurement process (determined adversaries will find asymmetric responses).

The solution requires new ways to think about, organize, and build and deploy national security people, organizations and solutions.

Stanford’s new Hacking for Defense class is a part of the solution.

Hacking for Defense (H4D) @ Stanford

In Hacking for Defense a new class at Stanford’s School Engineering this spring, students will learn about the nation’s emerging threats and security challenges while working with innovators inside the Department of Defense (DoD) and Intelligence Community. The class teaches students entrepreneurship while they engage in what amounts to national public service.

Hacking for Defense uses the same Lean LaunchPad Methodology adopted by the National Science Foundation and the National Institutes of Health and proven successful in Lean LaunchPad and I-Corps classes with 1,000’s of teams worldwide. Students apply as a 4-person team and select from an existing set of problems provided by the DoD/IC community or introduce their own ideas for DoD/IC problems that need to be solved.

Student teams will take actual national security problems and learn how to apply Lean Startup principles to discover and validate customer needs and to continually build iterative prototypes to test whether they understood the problem and solution.

Most discussion about innovation of defense systems acquisition using an agile process starts with writing a requirements document. Instead, in this class the student teams and their DOD/IC sponsors will work together to discover the real problems in the field and only then articulate the requirements to solve them and deploy the solutions.

Each week, teams will use the Mission Model Canvas (a DOD/IC variant of the Business Model Canvas) to develop a set of initial hypotheses about a solution to the problem and will get out of the building and talk to all Requirement Writers, Buyers (Acquisition project managers) and Users (the tactical folks). As they learn, they’ll iterate and pivot on these hypotheses through customer discovery and build minimal viable prototypes (MVPs). Each team will be guided by two mentors, one from the agency that proposed the problem and a second from the local community. In addition to these mentors, each H4D student team will be supported by a an active duty military liaison officer drawn from Stanford’s Senior Service College Fellows to facilitate effective communication and interaction with the problem sponsors.

Today if college students want to give back to their country they think of Teach for America, the Peace Corps, or Americorps. Few consider opportunities to make the world safer with the Department of Defense, Intelligence Community and other government agencies. The Hacking for Defense class will promote engagement between students and the military and provide a hands-on opportunity to solve real national security problems.

Our goal is to open-source this class to other universities and create the 21st Century version of Tech ROTC. By creating a national network of colleges and universities, the Hacking for Defense program can scale to provide hundreds of solutions to critical national security problems every year.

We’re going to create a network of entrepreneurial students who understand the security threats facing the country and getting them engaged in partnership with islands of innovation in the DOD/IC. This is a first step to a more agile, responsive and resilient, approach to national security in the 21st century.

Lessons Learned

 Hacking for Defense is a new class that teaches students how to:

Use the Lean LaunchPad methodology to deeply understand the problems/needs of government customers
Rapidly iterate technology to produce solutions while searching for product-market fit
Deliver minimum viable products that match DOD/IC customer needs in an extremely short time

The class will also teach the islands of innovation in the Department of Defense and Intelligence Community:

how the innovation culture and mindset operate at speed
advanced technologies that exist outside their agencies and contractors (and are in university labs, and commercial off-the-shelf solutions)
how to use an entrepreneurial mindset and Lean Methodologies to solve national security problems

Sign up here .

Filed under: Customer Development, Science and Industrial Policy, Teaching

Entrepreneurs are Everywhere Show No. 17: Tiffani Bell and Clay Hebert

If you’re a technical startup founder, one of the painful lessons is that it’s not enough just to build a great product. You must also understand the value the product provides customers (along with the rest of your business model.)

And going for crowdfunding before you do customer discovery with customers can lock you into the wrong idea too early.

These topics were the focus of interviews with the latest guests on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111 (airing weekly Thursdays at 1 pm Pacific, 4 pm Eastern).  The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Tiffani Bell

Joining me in the Stanford University studio were:

Tiffani Bell, co-founder of the Detroit Water Project
Clay Hebert, founder of Crowdfunding Hacks

Clay Hebert

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below.

Tiffani Bell is the co-founder and Executive Director of the Detroit Water Project, a platform that connects donors to people in Detroit and Baltimore in need of assistance paying their water bills. Since its founding in 2014, more than 10,000 people have given to turn the water back on for over 1,000 families. Tiffani was also a 2014 Code for America Fellow working with the City of Atlanta.

Her first startup, Pencil You In, grew from a personal need to schedule hair appointments. It ultimately failed because she was focused on engineering the product, but didn’t validate the rest of her business model (product/market fit, distribution channel, customer acquisition, etc.)

I should have realized earlier that I was building a marketplace… I could have built what now is like, Thumbtack or ServiceMagic or something like that. Instead, I went the Software as a Service route and tried to charge for what was a commodity product. There was nothing special about it; you could just book appointments on it. I tried to charge for that and nobody wanted to pay for it.

(Instead) I could have given it away and then done something around a marketplace sort of thing and charged for it.

… A marketplace would have worked (like this:) if you book a house cleaner through Pencil You In, we could have taken a percentage of that fee. … We could have let you have the software for free, basically.

… I didn’t (know that was possible) at the time but later I read things and just saw what was happening with competitors. …

It was like, “Duh, we should have done that!”

If you can’t hear the clip, click here.

Clay Hebert is the founder of Crowdfunding Hacks, which helps startups fund their dreams using crowdfunding platforms like Kickstarter and Indiegogo. He also is an advisor to corporations and startups, having spent a decade at the consulting firm Accenture .  

Clay stressed that crowdfunding should not replace Customer Discovery:

… Customer Development and Customer Discovery need to be moved earlier – before you launch. I always say crowdfunding projects get funded before they launch, not while they’re live… meaning conceptually you need to launch to a tribe of people that you’ve already have identified. Yore launching to the customers you’ve already discovered and validated your ideas.  

… you need to do the customer discovery and validation ahead of time, and then crowdfunded can come in at the point in the process where, it’s not a replacement for it, but it can be a great validation of the idea.  

Steve : I run into a lot of students who say, “Hey, why do I need to get out of the building, I just started something on Kickstarter?” 

Clay : And they’re almost never successful.

Steve : Or worse… some are successful, and now they’re forced to either fail very publicly and messily, or have to deliver something that they no longer are passionate about.

Clay : That’s a very, very good point. … In an ideal world, by the time you click publish on Kickstarter or IndieGoGo, you’ve been iterating, working on this thing for a year or more, and collecting emails and building permissions.

If you can’t hear the clip, click here.

—

The Detroit Water Project began after Tiffani read about problems Detroit families were having paying their water bills. So far, the startup has been able to help more than 1,000 families. Talking with those people gave Tiffani and her team a deeper understanding of their needs, as well as ideas for other ways they might help.

The idea that people can’t pay their water bills was foreign originally, but just digging deeper into people’s situations (we’ve learned so much more). … For example, in Detroit and Baltimore you can lose your kids over not having water in your house. … They can be taken away from you through Child Protective Services. The house can be declared condemned because it doesn’t have running water.  

… We didn’t know these things (initially).  

We had several families who didn’t have electricity or water. We’ve had folks where they are in between jobs or their hours have been cut. We didn’t know any of these things, so it’s been interesting to dig into situations and do Customer Development … take time to talk to people, whenever they apply, just to figure out what’s (their) situation.  

…People originally said this could be a Band-Aid, but we’re thinking more in the future now about how to help people according to what their specific situations are.

If you can’t hear the clip, click here.

Having developed a passion for coding when she was very young, entrepreneurship seemed a natural leap for Tiffani:

I started reading Wired (magazine) around probably eighth grade. … I was totally a nerd. That was probably around ’99, which was the first dot.com boom, so I read about all those people doing all those things, and I figured out that, “They’re doing the same thing I am.”

(She told herself) “They’re building more complicated stuff, but they’re the skills are the same, so why couldn’t I do the same thing?”

I didn’t know the first thing about how to start a company, but I kept reading Wired and learning about all the different venture capital firms and what people were getting funded for and that sort of thing.

If you can’t hear the clip, click here.

Like a lot of founders, she has no interest in a traditional job:

I don’t have the personality to be an employee. I ask a lot of questions and (keep) … weird hours. … I could never work for someone else. I need to be my own boss.

… I have a personality where I just like to do things. I don’t like to be in meetings. I like to make stuff happen … (as in) we have an idea, let’s go build it and try it out.  

In companies that’s not, sometimes, welcome and accepted. … I have a bias for action and … if I see a problem, I want to solve it. Sometimes it doesn’t work well in companies. You need to respect authority and hierarchy and things of that nature.   I’ve had, mostly, jobs where I’ve had the ability to … do my own thing. … I’ve been lucky that way.

If you can’t hear the clip, click here.

—

Clay’s father founded a furniture business that ultimately failed. Watching his father struggle had a strong influence on Clay and his brothers:

Me and (my brothers) saw my dad as this very smart, very hardworking guy. And before he was an entrepreneur, when he was at a foundry, things were going really well, and he was promoted to foreman.

For many years I sort of got it wrong, I thought: here’s this guy who’s really smart and really hardworking, and yet the entrepreneurship thing isn’t working. I think (we) rejected the path of entrepreneurship because our one big data point was that even if you’re smart and hardworking it may not work. …

Steve : Is that what drove you to corporate consulting.

Clay : It is, absolutely. …

Steve : You said anything but entrepreneurship?  

Clay : Yeah.

If you can’t hear the clip, click here.

Before starting Crowdfunding Hacks, Clay worked as an intrapreneur:

I tried for 5 years to bring (Lean Startup-style) thinking inside of Accenture (with) very limited success.

… Because Accenture as an organization … works much better as a machine with interchangeable people. If they can unplug me from the project in Boston, and plug me into the project in Chicago with no training and no time lost, that’s great.  

What was frustrating to me was the tagline for the entire company at the time was “Innovation Delivered” and here I felt like I’d found some of the secret scrolls of bringing some of this creative thinking and innovation inside, and yet it was much more a cookie-cutter process making everybody the same so that they were sustainable in any other project and quickly changeable.  

If you can’t hear the clip, click here.

Would-be startup founders working in day jobs shouldn’t put off their startup dreams, Clay said:

Start a blog, throw up a landing page for an idea that you have, do it nights and weekends.

When we talk about places to hide (from your dreams), one way to hide is convincing yourself that: I have a corporate job, I have a spouse and kids, and I don’t have time to do this other thing.  

You and I know lots of people who made the time – sometimes from 9 pm to 2 am – to get started working on their dream. Because Lean Startup methods, Crowdfunding, Amazon Web Services and the Internet that connects us all, is bringing the cost of failure to zero.  

You don’t need money; you just need to carve out a little bit of time. Chase that idea, stop hiding, carve out the time you need. … I always tell people … “99.9% of people don’t care at all about what you’re building, that’s great news, not bad news, because all you have to do is go find that .1% and that’s actually plenty.”

If you can’t hear the clip, click here.

Listen to my full interviews with Tiffani and Clay by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere : Sarah Calhoun , founder of Red Ants Pants workwear for women and Steve Sims , founder of Bluefish executive concierge service.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show?  Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com  describing your entrepreneurial journey.

Filed under: Customer Development, SiriusXM Radio Show

Entrepreneurs are Everywhere – Show No. 16: Wayne Sutton and Dave Kashen

Silicon Valley’s pay-it-forward culture means that others will help when you’re starting up. Yet this same network of connected people affects who gets funded, how startup teams form, and who gets hired. 

And a company culture and values need to be design and engineered just like the product. 

These topics were the focus of interviews with the latest guests on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111 (airing weekly Thursdays at 1 pm Pacific, 4 pm Eastern.)  The show follows the journeys of founders sharing their experiences of what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows that pushed them forward.

Wayne Sutton

Joining me this week at the Stanford University studio were:

Wayne Sutton, co-founder of BUILDUP VC
Dave Kashen, co-founder and CEO of Worklife

Dave Kashen

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below:

 

 

Wayne Sutton is a partner and co-founder of BUILDUP VC , a Bay Area non-profit that connects, mentors, and educates underrepresented technology entrepreneurs. He is also the co-founder of Tech Inclusion , dedicated to exploring innovative solutions to  diversity and inclusion in tech.

Looking to create their accelerator/incubator, Wayne and seven other founders rented a Silicon Valley house together one summer.

The experience proved to be a wealth of learning opportunities, but one lesson in particular stood out:

… I learned (from) that experience that if you show that you’re willing to put in the work and the effort, there are mentors and people out there willing to volunteer to help you, but you have to take a risk. You have to put yourself out there.

…By creating the BUILDUP VC incubator and accelerator … we’re got into the business of providing education and access. We learned that people were willing to provide us resources, provide mentorships, and open their doors. …It proved to us and our companies that … if you are willing to take the risk of coming to Silicon Valley and work on your startup, people want to help.

If you can’t hear the clip, click here.

Dave Kashen is co-founder & CEO of Worklife , a Y Combinator-funded startup whose mission to have everyone love their job. Their first product aims to make meetings more productive. Prior to Worklife, Dave was a CEO coach, leadership trainer and culture consultant to some of Silicon Valley’s fastest-growing technology companies. Previously, he was co-founder of Wellsphere, an online health and wellness company that grew to over 6 million monthly visitors.

He faced several challenges with Wellsphere early on:

We were a little bit too early in a couple different dimensions so I learned the importance of timing…  

In ’05, social networking was not quite as prevalent as is it today. The idea of a social network inside of an organization wasn’t a thing yet so that was a little bit scary and even the linkage between healthy behaviors and saving healthcare costs and becoming more productive and being less absent and all of that, a lot of that research has emerged over the last 10 years. 

(Just as important as the product) we did not pay a lot of attention and we’re not particularly intentional about how we were building the company (and its culture.)   

We had this mission. We were both non-technical co-founders so that had its own challenges. We were probably a little bit arrogant in our thinking of what we could create and how we could lead developers to create these ideas that we have.

We were also arrogant in the sense of we have this idea of how the thing should work and we built it … This was a little bit before Lean Startup was very popular, so we just built this thing that we thought would work and lo and behold, it didn’t work. …The features didn’t match what ultimately the customers would buy or wanted.

If you can’t hear the clip, click here.

—

Wayne set his sights on entrepreneurship when he was a teen, working in the tobacco fields of North Carolina:

I remember working in the tobacco field one morning. It was about 10 am, and it was hot, maybe one of the hottest summers that season. It was maybe 100 degrees. … around me, I saw people my father’s age, I saw some family members as well, and people that could have been even my grandfather’s age working in the field with me.

I understood that this was their opportunity to make money, and in their generation there wasn’t many other opportunities besides farming for them to make money.

I looked at myself, and was like, “When I get older, I’m not going to be working in a tobacco field.” I wanted my own company. …I wanted to be in charge of my own destiny, and that started my drive.

If you can’t hear the clip, click here.

He first startup idea had potential, but he gave up on it too quickly:

It was going to ESPN before ESPN. … North Carolina is big basketball country, a big basketball world like ACC, Duke, UNC. I met these two athletes … one had a little bit of stint in the NBA, the other one had just graduated college and played overseas a little bit. I was like, “… It’s going to be big. People are going to go online and vote for their favorite athlete and all, post pictures.” This was around 2001.

… They were like, “Oh, this sounds good and everything, but I’m not sure if this thing is going to work out.” … I bought the domain and started doing events… launched a website, and was doing polls (but his co-founders gave up on it, and so Wayne did as well).

… The lesson there is that if I believed in the vision of what things could be. … You have to realize that you may be too early, the market may not be ready, but also … there’s benefit in sticking it out. I look at that lesson (and think) heaven knows what could’ve happened if I would have stuck it out.

If you can’t hear the clip, click here.

Wayne also spoke about working to increase the number of minorities in tech:

It’s not an easy problem to solve. It is not just one thing, -… it’s not just  about (a lack of) people in the pipeline, its not just as a problem in terms of biases. Not just a problem in terms of access to technology. (It’s all of these.)

We don’t think about that in 2016, everybody doesn’t have a smartphone. Everybody doesn’t have hi-speed Internet. Everybody doesn’t have or is even aware of success stories such as Steve Blank or the process of launching a startup.  

Even though we have all this information online, not everybody is aware or have access to this, and (on top of this there) is lack of role models … especially for underrepresented entrepreneurs. And it’s a culture issue.  

…Look at the history of America and what has been the role models or the examples of a way out for a lot of underrepresented entrepreneurs minorities? It has been sports and entertainment, not tech.

I feel like now we’re beginning to see people focus a little bit more on tech, but it’s not just one thing. It’s all those pieces. …

…(Silicon Valley) is a network-based system — about who you know … who gets funded, how teams are forms, who gets hired in certain companies, how promotions (are determined) — that is all relationship-based.

Steve :  You think there is implicit rather than explicit bias?

Wayne : Yes.

Steve : That’s an interesting … It’s truly an ‘old boy’ network.

Wayne : Yes.  

Steve : Even though the old boys are not very old.  

Wayne : No.

If you can’t hear the clip, click here.

—

Right out of college, Dave chased a dream of being rich, becoming an investment banker. It turned out to be the wrong path for him.

Long Island, (where Dave grew up, is) a fairly materialistic place and I was reasonably intelligent, so everyone said to me you’re going to be a millionaire. I thought that was what I was supposed to become, and so that kind of got drilled in my head. … The point was to make lots of money and that’s what led to happiness, and that was kind of the mindset for a while.

…my dad was a doctor, my mom was a teacher. … They were divorced when I was 5, so the distinction between my dad’s lifestyle and my mom’s was very apparent to me. I think that was part of the fuel, but there was no entrepreneurs, no real business people in the family, no finance people, I didn’t know what investment banking was, but there was this really, I think, deeply embedded mindset of like you’re supposed to become wealthy and do high-status things, and that’s how you become happy.  

If you can’t hear the clip, click here. 

Wellsphere found success, but not in the way Dave had anticipated.

…We pivoted the company toward what the market wanted, and what our users and customer wanted, but away from my initial vision and passion.

It worked in the sense of we built value. We were able to grow really quickly from a very small to 6 million monthly visitors. We found a core distribution model that worked in terms of long-tail search. … but by the time we did, it was no longer aligned with my passion, and the vision of the impact I wanted to have.  

In some way, part of the decision to sell the company at that time was because I lost that alignment. I think we could have built more value, had we continued.

Steve : That’s another great lesson. If you’ve founded something, but find you’re no longer passionate about what you’re doing, it becomes just a job.

If you can’t hear the clip, click here.

The experience led him to create Worklife and, he said, helped him become a better manager:

I’m way more conscious about hiring for values and listening for alignment (with the company’s values). … As I moved from (a founder of my own company) into the world of coaching, and training, I’ve worked with clients on discovering their own (personal) values and their company values, then devising systems and processes used to make sure that 1) that they’re hiring for values; 2) they’re actually living them day to day.

As a coach over the last five years (I learned) that the way to motivate somebody is to have the situation occur to them as if it’s in their best interest. …. When I talk about values, in part it’s trying to understand, what does this person value and do those things overlap with the experience would be like working here. …

If you can’t hear the clip, click here.

Listen to my full interviews with Wayne and Dave by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere : Tiffani Bell, co-founder of the Detroit Water Project ; and Clay Hebert , founder of Crowdfunding Hacks .

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

 —

Want to be a guest on the show?  Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big company’s. Send an email to terri@kandsranch.com describing your entrepreneurial journey,

Filed under: Customer Development, SiriusXM Radio Show

Entrepreneurs are Everywhere Show No. 15: DJ Jayalath and Mark Hatch

A cool product by itself is not a company. And why being a military veteran is great training for starting up.

The importance of using customer feedback to shape Minimum Viable Products and why world-class founders are disciplined were topics discussed by the guests on the latest episode of Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111.

Joining me in the Stanford University studio were:

DJ Jayalath, co-founder of Athos fitness apparel
Mark Hatch, co-founder of TechShop prototyping studios

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below, but first a word about the show:

Entrepreneurs are Everywhere airs Thursdays at 1 pm Pacific, 4 pm Eastern, on Sirius XM Channel 111. It follows the entrepreneurial journeys of founders sharing their experiences of what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries to entrepreneurial education and more.

The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows and pivots that pushed them forward.

While studying electrical engineering at the University of Waterloo, DJ Jayalath and his co-founder, Chris Wiebe, devised the Athos workout gear to address their own fitness needs. Interest from a VC catapulted the two, post-graduation, into doing a startup.

One thing DJ learned is that inventing a cool product doesn’t equal having a business:

You can develop whatever you want to develop (but) until you have customers giving you feedback, none of it counts.  

… The product’s great but you really need all the feedback you can get so you can improve on it. You want to move as fast as possible to be able to get that feedback and that might not be the perfect product you wanted to build. You want to have at least some of the earlier versions of it out there like … a minimum viable product that at least demonstrates a key component so that people can start like giving you feedback. … it might inspire some of the things you’re not doing and also validate some of the thoughts you had before.

If you can’t hear the clip, click here.

Mark Hatch is one of the leaders of the Maker Movement . Prior to co-founding TechShop , the former Green Beret was an exec at Kinko’s, Avery Dennison and Health Net. Author of The Maker Movement Manifesto , Mark was recognized by as one of the Bay Area’s Most Admired CEOs and by Popular Mechanics as one of 25 movers and makers reinventing the American Dream.

Mark explained why being a Green Beret is good training for entrepreneurs:

(I learned) confidence, leadership, discipline, stick-to-it-iveness, the ability to function on very small amounts of sleep.

…Discipline (is most important for entrepreneurs). … I think most successful entrepreneurs are very disciplined at some level. … even if you’re not necessarily disciplined with your schedule, you’re always running in the back of your head, “here are the important things that have to get done,” and there’s really nothing that’s going to stand in your way between getting them done and not getting them done. … You have to get them done, so you’ll find a way. … Failure is not an option.

… I think I had part of (those traits) in me, but the military really helped unpack it in a very substantial way. Becoming a Green Beret is not a really easy feat. … 5 percent graduate, 8 percent graduate, something like that. At the end of it, you know you can do just about anything that you put your mind to, and in (Special Forces), in particular, we’ve got a lot of really bright guys. … You have a decent IQ and then you have to be able to operate in extreme environments for extended periods of time.

… It’s a perfect … training ground for an entrepreneur.

If you can’t hear the clip, click here.

—

Before college, DJ dreamed of making robotic prosthetics. An internship set him on a different path:

… I thought I wanted to study mechatronics engineering… to make robots, because robots are cool.  

… I wanted to make intelligent prosthetics. (For example) a leg that bends at the joint, that’s actually smart enough to adapt to you. … (However) I quickly realized I liked making cell phones much better.

… I worked at Qualcomm and RIM at the time … for my internships. … I worked on Android there and it was cool. … That was definitely a thing I was really interested in, hardware design. How all these things went together and how you can work with manufacturers to help you do all the work. …  

Steve :  So much for making limbs to make people’s lives better.

DJ : Exactly. …This is way cooler.

If you can’t hear the clip, click here.

DJ and Chris created Athos’ technology to fill a personal need:

All the time that we spent at the gym, not knowing exactly how to get the most out of the time. We’ll go there for an hour and lift a bunch of weights, but how do we know that’s the most we can get out of that time? Being engineers we wanted to optimize that.

We couldn’t really afford a personal trainer; for us $50 an hour was a ridiculous amount of money. …. We started looking at what type of information we could get that was really valid about what is going on with your body. …

(At the time, it was less about building a company and) much more about we needed a project for our final design project. … We wanted to do something that was a little more ambitious. … it needed to be a product that we wanted to use. …

(This was important because) when you’re able to relate to the problem you … get to make the trade-offs very easily because you understand, OK it needs to be like this otherwise it’s not going to be really useful.

… We recognized … that we were lazy. We forgot to take a pen and paper to take notes as to what kind of workout we did. There was no chance that we’d take another piece of hardware to go to the gym, so we had to build (the technology) into something that was already a part of our existing routine. … We (built it) into gym clothes because we already took our gym clothes. …  

(We thought) let’s make it as easy as possible for people to use something, so that it increases the likelihood for them to adopt it, because you don’t have to build a new habit or routine to use it.

If you can’t hear the clip, click here.

Here’s how their idea became a startup:

We got lucky. … We were demonstrating this at our final year symposium. … Somebody … came by who talked at us for about 10 minutes. We had no idea who he was (but) he was better dressed than everybody else was. That was a hint. … He said, “Really cool guys,” and … walked away.

(Turns out he was a VC.)… a couple weeks later he sent us an email saying, “… I’m really interested in what you guys are doing. … I want to fund you guys, and keep working on this. Can we talk some more?”

Steve :  … while you are thinking this just happened, I’ll suggest entrepreneurs make their own luck. If you hadn’t … noticed this guy with the nice clothes, and you probably spent another extra couple minutes with him, rather than someone else. … You made a connection in a way, that while you think it was just luck, I’ll contend you actually influenced the event.

If you can’t hear the clip, click here.

DJ said developing a founder’s mindset was challenging:

When you’re an engineer, you’re always used to working towards the right answer or the correct answer, but (for a founder) there is no concept of a correct answer. It’s more like writing an English essay where you can do your best job, but you never know if you’ve had the right answer until you’re looking back when you got the graded paper.

… You just can do your best (but) you don’t know that you’re doing the right thing or if you’re doing the best thing until … later on.

If you can’t hear the clip, click here.

—

TechShop, Mark said, is Kinkos for geeks:

(TechShop co-founder) Jim Newton … built (TechShop) for himself. He built a 20,000-square-foot facility with every tool you need to make anything on the planet.

… Machine tools … mills and lathes …It had every tool you’d need to make anything. … You (can) build (an) entire (prototype) from the ground up.

Steve :  If it’s something mechanical, this was the ultimate toy store.

Mark :  Absolutely. … the Kauffman Foundation says that 50 percent of all successful companies come out of the founders’ personal need. This happens to be one of those stories. Jim needed access to these tools … because he had … 200 new product ideas in his inventor’s notebook. … He sat down and said, “Here are all the tools I need to do every single one of these,” and that became the minimum set, which was magical.

Nobody else on the globe had come up with this concept for a minimum set for an inventor’s paradise. …

If you can’t hear the clip, click here.

He explained the Maker Movement’s impact on entrepreneurism:

I talked to three different entrepreneurs back to back, and each one of them told me that they had saved 98 percent of their startup costs by using the TechShop platform. … (this) quote came to mind: The future is already here; it’s just not evenly distributed. …  

… if you can reduce the cost of a startup by 98 percent, you’ve completely changed the economic reality for a very significant piece of the economy.

If you can’t hear the clip, click here.

Mark added that founders should take the media’s fairy-tale startup stories with a grain of salt:

It’s a lot harder than it looks. Don’t believe the magazine articles. …The magazines always tell you the success stories. They don’t tell you the 95 percent of the other people who failed.  

Steve : Right, and your co-founder quitting and your biggest customer going away. …  

Mark :  … And firing your best friend, laying people off. If you’re not prepared to let people go, then you’re just not really setup to be able to do this. …

…The enterprise tells you what it needs, and if you’re not prepared to listen to it, and give it what it needs, then you’re probably going to fail at some point.  

You got to listen very carefully. Listen to your customers, listen to your staff, and then make the modifications as early as you possibly can. That’s a hard thing to learn.  

If you can’t hear the clip, click here.

And he offered this advice to other founders:

Focus on your strengths as an entrepreneur. (The management consultant) Peter Drucker talked about this in one of his classes. He … said, “Nobody ever became great working on their weaknesses.”

… the intriguing thing is that … if you’re in a big company and HR talks to you, they typically use that conversation around what you’re bad at as a reason why you didn’t get a promotion or whatever. Then they tell you this is what you need to work on. That’s the worst possible advice. …

If you can’t hear the clip, click here.

Listen to my full interviews with DJ and Mark by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere : Wayne Sutton , co-founder of BUILDUP ; and Dave Kashen , co-founder and CEO of Worklife .

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Filed under: Customer Development, SiriusXM Radio Show

Entrepreneurs are Everywhere Show No. 14: Matthew Wallenstein and Jason Young

Knowing your customers is the single biggest driver of startup success, and there’s no substitute for getting out of the building to learn about their problems and needs.

How and why Customer Development shapes a startup was the subject of discussion with the two latest guests on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111.

Joining me at the Stanford University studio were:

Matthew Wallenstein, chairman and co-founder of Growcentia, which aims to revolutionize management of soil health to help crops grow better and faster
Jason Young, co-founder of MindBlown Labs, which makes mobile social games to teach young adults about personal finance

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below, but first a word about the show:

Entrepreneurs are Everywhere airs Thursdays at 1 pm Pacific, 4 pm Eastern on Sirius XM Channel 111. It follows the entrepreneurial journeys of founders sharing their experiences of what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries to entrepreneurial education and more.

The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows and pivots that pushed them forward.

Matthew Wallenstein is the co-founder of Growcentia and director of the Innovation Center for Sustainable Agriculture at Colorado State University (CSU). A professor at CSU, his research examines how microbes that live in the soil respond to environmental change, and how those responses impact natural ecosystems. His work led to the development of beneficial microbes that can improve how well plants grow, which Growcentia has commercialized.

In working on the initial idea for Growcentia, Matthew did quite a bit of research and spoke with other academics about the concept. He was sure he was on to something.

Talking with customers during his participation in the 10-week National Science Foundation I-Corps program changed everything, however:

We got out of the building and talked to farmers, and guess what? They didn’t care about our product.

… It was enlightening. We certainly didn’t give up, so we asked the farmers what keeps them up at night? How much do they spend on fertilizer? Phosphorus was not a big deal.

… (We thought it was a big deal) because we had read papers from other academics, saying it’s a big deal but we didn’t get out of the building and we didn’t talk to any farmers at that point.

(So) we explored other markets. We talked to people who ran golf courses. We talked to lawn care companies and agricultural companies. We did find some interest. The big agricultural companies are looking at a longer time, where as they see an emerging problem.

(We spoke to) over a hundred (customers). … (The experience) was life changing…. It changed our perspective of how to identify real-world problems that people need help with. …  

What I didn’t realize (before we got out of the building) is that I was just talking to other smart people within academics and I was not directly connected to the end user and the people that I thought might benefit from what I was doing.

If you can’t hear the clip, click here.

Jason Young is a serial entrepreneur who caught the startup bug as a kid. In addition to co-founding MindBlown Labs, Jason is the co-founder and president of The Hidden Genius Project, a nonprofit that trains underserved black teens in technology and entrepreneur; and served on the founding team of Wikinvest.com. He was recently appointed to the President’s Council on Financial Capability for Young Americans.

Like Matthew, Jason sees enormous value in talking with customers:

The biggest thing I learned was just how much you don’t know. There’s just so much you don’t know and you’re never going to know everything, but …

…. you’ve got to do the customer development. You’ve got to do that early.

… Get out of the building. Talk to the end users. Understand who all the end users are, because that’s going to have a huge impact. You can build the greatest product in the world (but it) doesn’t matter if it doesn’t work for the end users. You need to understand not only their needs but … any politics that would be involved that would prevent the adoption of your product.

If you can’t hear the clip, click here.

—

Matthew explained Growcentia’s goal:

…We’re trying to …recapture that natural ability of microbes to make nutrients available and give farmers a tool to further increase their yields. Most importantly, increase the efficiency of the fertilizer that they put on the field.

If you can’t hear the clip, click here.

He also told me how the company stumbled on its first customer segment by accident, in conversation with prospective customer:

(They asked) Have you guys thought about cannabis?…

Steve :  Cannabis, like marijuana?

Matthew : Cannabis, marijuana … We’re doing this great experiment in Colorado where it’s legal to grow and to purchase and consume marijuana. There is this exciting new industry. At that point, we hadn’t explored it, (but) because … this company was serious about it, we thought we should really get serious and check it out. Sure enough, we started talking to people in the industry and it turns out they have a phosphorus problem.

… (Cannabis) is a phosphorus hungry plant during the budding phase, that plant is just sucking up phosphorus as fast as it can and they often see phosphorus deficiency in that plant.

… It turned out that we were solving an important problem that we weren’t aware of at the time. … We now have that product that we developed in the lab, in a flask, on commercials, on shelves at retail stores.

Steve :  It’s microbes you put in your marijuana plants and makes them grow some measurable percentage faster or better?  

Matthew : That’s right. We’ve done a lot of testing and we found that on average, yields increase 16 percent when you add our bacteria into the grow operation….

Steve :  What are the other markets you’re going to go into?

Matthew : Right now, we have our product in trials with tomato growers. We’re looking at strawberries. …we’re now doing a systematic exploration of where we think our product can deliver the best value.  

Steve :  Truly engineering microbes to figure out what the right mix of microbes are particular plants?

Matthew : That’s right and we’ll develop future products that address other specific needs.

If you can’t hear the clip, click here.

—

Jason went to Harvard, working to get in to the university after a high school classmate bet him he couldn’t. After college, he worked at Merrill Lynch as a senior specialist. Personal challenges brought him back to doing startups.

… I am the first in my family to graduate college, but I’m not the first to attend. My older brother, Patrick, went to college and he dropped out … because he ran out of money. That happened because he really didn’t understand the financial aid process. I think at a more holistic level, he didn’t really understand the importance of college to his future success. …

… I saw how he struggled as he came out working minimum-wage jobs and now he’s doing much, much better, but it took him like a decade.

… And the second piece happened when I was in college, so during my sophomore year, I came home for Christmas break and the day after Christmas, my mother was evicted. She had … taken out a variable rate mortgage years before. She hadn’t really understood how they functioned. Interest rates increased. It was temporary, but it was long enough for her to fall behind.  

… Seeing that really … impressed upon me the need to make wise financial decisions, but it also instilled in me a very strong desire to help other people to the same.

… I knew that other people had this problem, but I had no idea how widespread it was. It wasn’t until years later, when I had joined a technology startup … that was focused on helping young adults … make investment decisions, that I (saw how big the problem is.) … I was volunteering on the side, helping different young adults at a very basic level with their personal finances. I was working with dropouts. I was working with folks who had Master’s degrees. …It just became really apparent to me that this problem of financial literacy was huge and that it was impacting people across the socioeconomic spectrum and … of all ages, but that it starts young. …

If you can’t hear the clip, click here.

At first, MindBlown Labs was to be a tool to track allowance. Here’s what Jason discovered about that concept:

We … came to the conclusion that this thing is not going to work.  … it was a bad idea. …

We scrapped it. …. We just didn’t see the engagement with what we were doing.  … It was focused on parents and parents said, “Yeah, this is great,” but it would take them forever to … use the initial prototype. 

… So we … went back to the drawing board and that’s when MindBlown Labs was born.

At that point, we decided to do a mobile game. … We started testing it with kids initially … we … went to the mall (and) put it in kids’ hands to see “will they play this thing?” The good news is that they did play it. And as we continued to work on it, they played it more and more.

So we saw we had something really engaging for students and that was the first (important thing), because most financial literacy, financial capability tools are boring. … So that was a first initial premise, let’s make this engaging for the end user. …

We did that, but then we figured out that delivering it to them in the wild… really wasn’t going to work all that well for our impact goals. … So we started looking at going into classrooms. That’s when we figured out that… teachers are awesome, but they have a wholly different way of looking at the world than the ultimate end user, which is the student.

We then started thinking about ways we could make the overall experience work in a classroom setting and we started talking to teachers … gathering information. It’s now used in schools and … nonprofits.

If you can’t hear the clip, click here.

—

Both men are passionate about what they do.

Matthew explained that Growcentia allows him to make a bigger impact than he can doing research alone:

I looked at what I was doing and I was studying how these microbes in soils were responding to climate change and other forms of environmental change. If we were to sit next to each other on an airplane and you said, “Matt, well why should my taxpayer dollars be paying for this kind of research?”  

Steve :  I think Congress is asking that now.

Matthew : They always do and it’s a reasonable question, I would tell you that my work is really important because it’s going to allow us to better predict how the earth is going to function in a future climate and that will help inform policy. You know what, those policy makers in DC, they don’t read my papers. They never read my papers. The work that I was doing was not really trickling up to have an impact on decisions that we make as a society or it wasn’t really, I wasn’t doing the work of translating it so that other people could use it.

… I wanted my work to have more impact and I figured I was the one who needed to do that, no one else is going to take my work and translate it for me.

If you can’t hear the clip, click here.

As a kid, Jason worked for a neighborhood plumber earning $10 a day to do minor tasks. It opened his eyes to the prospect of running his own business and a series of small ventures followed, including selling candy to his schoolmates, and a brief foray into a housecleaning business. At 13 he tried yet again:

My next venture was a travel agency. … I was able to get a company to let me use their license for a percentage of my revenue. … They were web-based, so I got my mom to sign the paperwork because I was only 13 and then … I got set up. I had Sabre … an online booking system that gives you access to all the airlines…

Steve :  You really had travel agency access and you were able to book people and how did you create demand? How did they find you?

Jason : Yellow Pages, I had an ad in the Yellow Pages, it’s funny because this was all pre-2000… there was Internet, but … I had a dial-up connection.

Steve :  Did people know how old you were?

Jason : I had a deep voice, my voice changed when I was about 9. … I also did sell to friends and families, I sold to different groups that I was a part of, like I booked a couple of conventions.

Steve :  Were you hooked then on entrepreneurship?  

Jason : Yes at that point I was pretty much done.

If you can’t hear the clip, click here.

Listen to my full interviews with Matthew and Jason by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere : DJ Jayalath, co-founder of Athos; and Mark Hatch, co-founder of TechShop.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Filed under: Customer Development, SiriusXM Radio Show

How to Set Up a Corporate Innovation Outpost That Works

This is the fourth in a series about corporate innovation co-authored with Evangelos Simoudis. Evangelos and I are working on what we hope will become a book about the new model for corporate entrepreneurship. Read part one on the Evolution of Corporate R&D, part two on Innovation Outposts in Silicon Valley, and part three The 6 Decisions to Make Before Setting up an Innovation Outpost.

In our last post, we addressed the six key questions that senior management should address to determine if an Innovation Outpost makes sense for a company. If the answer is yes, here’s a step-by-step guide to help set one up.

——–

Now that your company had decided to set up an Innovation Outpost, how do you do it? How do you staff it? What should the team in the Outpost be doing day-to-day? In what order?

Successful Innovation Outposts typically develop over a period of time through three stages. In the first stage the Outpost focusses on networking and partnering in the Innovation Cluster in which it is based (i.e. Silicon Valley, Boston). In the second stage, it moves into Investing, Inventing, Incubating and Acquiring technologies and companies, and in the third stage building product(s). Each stage needs a clearly defined set of objectives, and the right team to match those objectives.

Stage 1: Networking and Partnering – the Technology Connectors

As the eyes and ears of the parent corporation, a new Innovation Outpost’s first priority is to “sense” innovations by actively engaging with the Innovation Cluster. The Outpost is on the lookout for innovations that:

Could become threats that could lead to the disruption of the corporate parent.
Could allow the corporation to be disruptive by entering adjacent markets to the ones it currently serves.
Could create and introduce new and disruptive products and/or services for new markets.

To make this happen the Outpost’s first employees must be technology connectors – people who understand the parent corporation’s strategy and can execute it tactically.

The technology connectors need to start with a deep understanding of the:

One or two big strategic problems the corporation wants the Outpost to solve. For example, BASF wanted to keep pace with university R&D in inorganic materials and biosciences.
Innovation areas the corporation is interested in. For example, the Silicon Valley outposts of automakers like Mercedes and BMW and automotive parts suppliers like Delphi are focussed on keeping pace with self-driving car technology.

These priorities have been identified by earlier planning work at the senior management level. (see the previous post.)

Next, tactically the Outpost needs to engage with the Innovation Cluster to figure out how connecting the corporation to specific resources can solve the 1 or 2 problems and/or provide the data in the areas the corporation needs. This means the Outpost needs to identify and connect with:

Investors
Academics, consultants, incubators
Startups, entrepreneurs, and management teams

And take what it learns and regularly update the corporate engineering, strategy,  VC groups and business unit heads, on technology and market shifts.

In addition to getting plugged into the ecosystem’s network, the first role of the Outpost is to partner. These partnerships may take the form of Proof of Concept projects with startups, getting to know VC firms and their portfolios, and familiarizing themselves with university groups doing research in the established strategic problems. (It may invest in a few startups in this Stage but that’s not the goal.)

For example, one of the big strategic problems a corporation may want its Outpost to solve is to connect the company to the leading PhD and faculty in specific departments at Stanford and Berkeley. A Stage 1 Outpost could partner with universities to set up a “Post Doc” center focusing on the strategic problem.

It’s important to establish the ground rules for these partnerships, recognizing that working with startups requires two-way value exchange. Companies and their outposts must be willing to share their knowledge, data, and technology with startups and introduce them to their networks. In exchange, the startups provide companies with their disruptive ideas, technologies and business models.

(Companies unwilling to empower their Outposts with the ability to exchange data with startups have set up the outpost for failure.)

Therefore, the profile of the initial team to staff an Innovation Outpost should be a technology-savvy business development group. These Technology Connectors will have deep business development (partnering) experience so that they can network broadly within the startup ecosystem with entrepreneurs, startup management teams, venture investors and other intermediaries.

Companies often initially staff their innovation outpost with a venture investing group. This is not the the optimal way to start. Corporate VC needs to be part of an innovation investment portfolio with a mix of incubate, invest and acquire. (Time horizons for Return on Investment from a VC investment may be 7+ years, ROI from the acquisition of an earlier stage company, 4-5 years and the ROI from acquisition of a mature company, 2-3 years.) Until a company has enough data from its Stage 1 innovation outpost, starting an Innovation Outpost with corporate VC is often results in “ready, fire, aim.”

Finally, it is essential that all of the Outpost team members are well-respected and networked within the corporation so that their recommendations can be heard and adopted by the CEO, board, and business unit (BU) executives. There’s nothing more wasteful than having an Innovation Outpost reporting on disruption heading for the company’s core business (autonomous vehicles, machine learning, Virtual Reality, Cloud, Internet of Things, et al.) when no one at headquarters wants to listen. For all these reasons, the team must consist of a small group of individuals reporting to a single leader, who in turn reports to the CEO.

Figure 1: Three Stages of Corporate Innovation Outposts

After its initial success in “sensing” the Innovation Cluster and partnering, the Outpost team has to assess how to “respond” to these threats and opportunities. Should the corporation invest, invent, incubate, or acquire?  The answer to this question sets up the Outpost for Stage 2 of its growth.

Stage 2: Investing/Inventing/Incubating/Acquiring –  Adding VC’s and Acquirers

In stage 1 the Innovation Outpost was essentially an “early warning” and innovation identification vehicle for the company. For the majority of corporations having this stage may be sufficient to solve the 1-2 big strategic problems they’ve identified. However, the company may decide to expand the responsibilities of the Innovation Outpost to invest, invent, incubate, acquire or partner.

In Stage 2, the corporation adds venture capital and/or mergers-and-acquisition teams to provide these functions. Examples of Stage 2 Outposts include: BMW’s Silicon Valley development group, working on self-driving vehicle technologies, while their venture group has been making investments in companies like ChargePoint and Nauto. And Qualcomm which invests around robotics and incubates in collaboration with Techstars.

Before deciding to move to Stage 2, the CEO, exec staff and operating heads should revisit whether investing, inventing, incubating or acquiring startups can make an important contribution to the achievement of their corporate innovation goals. If the company needs immediate results, then identifying acquisitions, particularly of more mature companies, should be the priority. If the company has a longer term horizon, then investing or incubating should be considered. At times this means that the company must be willing to share knowledge, data, technology, and processes with these startups.

In Stage 2, the corporation is starting to invest serious time and money in the Outpost. Therefore, it’s important to have a permanent executive running the Innovation Outpost and reporting to the company CEO. Appointing Outpost leadership as a temporary assignment leads to weak relations between the innovation ecosystem and the Innovation Outpost and increases the risk of failure.

Stage 3: Productizing the Solution to Corporate Problems

In Stage 3 an Innovation Outpost creates a product development group to bring to market the solution(s)  (a product or service) to the challenge(s) that led to the establishment of the Outpost in the first place.

Examples of Stage 3 Outposts include: Verizon (which has been developing their mobile video player, infrastructure, monetization/advertising and analytics product(s) in Silicon Valley; Walmart which has acquired, invested and been implementing their Commerce platform in their San Bruno center; and GE which has created a software development organization around big data, and their Predix platform, which works with GE units that focus on big data.

Before moving to Stage 3 and building products, answering these 5 questions can save a ton of resources, time and frustration:

Do we have corporate buy-in to build a product?

This is where the rubber meets the road. Is corporate willing to give both the financial and organizational support for product development in the Innovation Cluster?
Is the Outpost product officially part of a corporate Innovation Portfolio?




What solution are we productizing?

Do we have an initial definition of the solution, have gotten out of the building and validated product/market fit and have a first pass of a validated business model.

Where in the company will this new solution fit?

Do we have buy-in from existing business units for products that fit existing business models (Horizon 1) or extended business models (Horizon 2).
Disruptive solutions with new business models (Horizon 3) require an a priori agreement on the criteria for creating a new business unit (revenue, profits, value-added, etc.)




Who will lead this new effort?

Four excellent examples of this transition include BMW’s  brand, Verizon’s online video business unit , Telefonica’s Open Future business unit, and Samsung’s Connected Home business unit. Google’s Car organization is in the process of making this transition. Google just named the organization’s leader .




Do we have a Lean Startup Methodology in place?

Can we deliver Minimum Viable products?
Do we have a go/no process – agreed with corporate – that ensure follow-on funding and deployment?

At the end of Stage 3, the Outpost is ready for new challenges and the innovation cycle repeats.

Lessons Learned

Does your Stage 1 outpost have Technology Connectors as its key leadership/staff?
Does your Stage 2 outpost have a permanent executive running the Innovation Outpost?

Do they report to the company CEO?


Does your Stage 3 outpost have corporate buy-in for productization?

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Filed under: Corporate Innovation

Blank’s Rule – To predict the future 1/3 of you need to be crazy

In a rapidly changing world those who copy the past have doomed their future.

When companies or agencies search for disruptive and innovative strategies they often assemble a panel of experts to advise them. Ironically the panel is often made up of people whose ideas about innovation were relevant in the past.

I’ve seen this scenario play out in almost every large company and government agency trying to grapple with disruption and innovation. They gather up all the “brand-name wisdom” in an advisory board, task force, panel, study group, etc.  All of these people – insiders and outsiders – have great resumes, fancy titles, and in the past brilliant insights. But unintentionally, by gathering the innovators from the past, the past is what’s being asked for – while it’s the future that’s needed.

You can’t create a blueprint for the future. But we know one thing for sure. The future will be different from the past. A better approach is to look for people who are the contrarians, whose ideas, while they sound crazy, are focused on the future. Most often these are not the safe brand names.

If your gathered advisory board, task force, panel, study group, etc., tasked with predicting the future doesn’t have 1/3 contrarians, all you’re going to do is predict the past.

——-

In the 1950’s and 60’s with the U.S and the Soviet Union engaged in a full-blown propaganda war, the race to put men in space was a race for prestige –  and a proxy for the superiority of one system of government over the other.

In 1961 the U.S. was losing the “space race.” The Soviets had just put a man in orbit and their larger rockets allowed them to launch larger payloads and perform more space spectaculars than the U.S. The new President, John Kennedy looked for a goal where the U.S. could beat the Soviet Union. He decided to raise the stakes by declaring that we would land a man on the moon “before the decade is out” (brave talk before we even got someone into orbit.) This meant that NASA had to move quickly to find the best method to accomplish the journey.

NASA had panels of experts arguing about which of two options to use to get to the moon: first they considered, direct ascent; then moved to another idea, Earth-orbit rendezvous (EOR).

Direct ascent was basically the method that had been pictured in science fiction novels and Hollywood movies for a decade. A giant rocket would be launched directly to the moon, land and then blast off for home. But there were three problems:

direct ascent was the least efficient way to get to the moon and would require a giant rocket (the Nova) and
the part that landed on the moon would be 65 feet tall (requiring one heck of a ladder to the surface of the moon.)
it wasn’t clear that a rocket this big could be ready by the end of the decade.

So NASA settled on the second option: Earth-orbit rendezvous. Instead of launching a whole rocket to the moon directly, Earth-orbit rendezvous would to launch two pieces of the spacecraft – one at a time – using Saturn rockets that were then in development. These pieces would meet up in earth orbit and send a ship, (still 65 feet tall as in the direct flight mode), to the moon and back to Earth. This idea was also a decade old – it was how they proposed building a space station. The advantage of Earth-orbit rendezvous to go to the moon was that it required a pair of less powerful Saturn rockets that were already under development.

If you can’t see the movie click here

All the smartest people at NASA (Wernher Von Braun, Max Faget,) were in favor of Earth-orbit rendezvous and they convinced NASA leadership this was the way to go.

But one tenacious NASA engineer, John Houbolt believed that we wouldn’t get to the moon by the end of the decade and maybe not at all if we went with Earth-orbit rendezvous.

Houbolt was pushing a truly crazy idea, Lunar-orbit rendezvous (LOR). This plan would launch two spaceships into Earth orbit on top of a single Saturn rocket. Once in Earth orbit, the rocket would fire again, boosting both spacecraft to the moon. Reaching orbit around the moon, two of the crew members would climb into a separate landing ship they carried with them – the lunar excursion module (LEM). The LEM would detach from the mother ship (called the command module), and land on the moon. The third crew member would remain alone orbiting the moon in the command module. When the two astronauts were done exploring the moon they would take off using the top half of the LEM, and re-dock with the command module (leaving the landing stage of the LEM on the moon.) The three astronauts in their command ship would head for home.

The benefits of Lunar-orbit rendezvous (LOR) were inescapable.

You’d only need one rocket, already under development, to get to the moon
The part that landed on the moon would only be 14′ tall. Getting down to the surface was easy

Yet in 1961 LOR was a completely insane idea. We hadn’t even put a man into orbit, let alone figured out how to rendezvous and dock in earth orbit and some crazy guy was suggesting we do this around the moon. If it didn’t succeed the astronauts might die orbiting the moon. However, Houbolt wasn’t some crank, he was a member of the Lunar Mission Steering Group studying space rendezvous. Since he was only a mid-level manager he presented his findings to the internal task forces and the experts dismissed this idea the first time they heard it. Then they dismissed it the 2nd, 5th and 20th time.

Houbolt bet his job, went around five levels of NASA management and sent a letter to deputy director of NASA arguing that by insisting on ground rules to only consider direct ascent or earth orbit rendezvous meant that NASA shut down any out-of-box thinking about how to best get to the moon.

Luckily Houbolt got to make his case, and when Wernher Von Braun changed his mind and endorsed this truly insane idea, the rest of NASA followed.

We landed on the moon on July 20th 1969.

——-

I recently got to watch just such a panel. It was an awesome list of people. Their accomplishments were legendary, heck, every one of them was legendary. They told great stories, had changed industries, invented new innovation platforms, had advised presidents, had won wars, etc. But almost none of them had a new idea about innovation in a decade. Their recommendations were ones you could have written five years ago.

In a static world that would be just fine. But in a corporate world of continuous disruption and in a national security world of continuously evolving asymmetric threats you need to have crazy people being heard.

Or you’ll never get to the moon.

Lessons Learned

Most companies and agencies have their own John Houbolts. But most never get heard. Therefore, “Blank’s rules for an innovation task force”:
1/3 insiders who know the processes and politics

half of those who would provide top cover to non-standard solutions


1/3 outsiders who represent “brand-name wisdom”

They provide cover and historical context


1/6 crazy insiders – the rebels at work

They’ve been trying to be heard
Poll senior and mid-level managers and have them nominate their most innovative/creative rebels
(Be sure they read this before they come to the meeting.)


1/6 crazy outsiders

They’ve had new, unique insights in the last two years
They’re in sync with the crazy insiders and can provide outsiders with “cover”

Filed under: Corporate Innovation, Science and Industrial Policy

Entrepreneurs are Everywhere Show No. 13: Liz Powers and Rocio Perez-Ochoa

Successful founders believe anything is possible but they build strong founding teams to achieve their startup dreams.

Naivete and a shared vision are among the key markers for success, two social entrepreneurs said on the latest episode of Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111.

Liz Powers

Joining me at the Lean Startup Conference in San Francisco were:

Liz Powers, co-founder of ArtLifting, a for-profit online art gallery that features the work of homeless and disabled artists
Rocio Perez-Ochoa, co-founder of Bidhaa Sasa, which finances and distributes household goods that can improve families’ quality of life in rural Kenya

Rocio Perez-Ochoa

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below, but first a word about the show:

Entrepreneurs are Everywhere airs Thursdays at 1 pm Pacific, 4 pm Eastern on Sirius XM Channel 111. It follows the entrepreneurial journeys of founders sharing their experiences of what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries to entrepreneurial education and more.

The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs, lows and pivots that pushed them forward.

Liz Powers is a social entrepreneur with a passion for helping homeless people. The Harvard graduate has received multiple awards and grants for her work. She started ArtLifting with her brother, Spencer, in 2013, and acknowledges her youth and enthusiasm have been assets.

Being naive is good. … If people knew all the challenges that were ahead of them, any rational person wouldn’t do it.  

Steve : I always say you’re too young to know it can’t be done.  

Liz : Exactly. A lot of times people would give me a ton of push back and say I was insane when we were starting ArtLifting. … Ignoring those negatives around you and figuring out who are the most strategic partners to be able to scale that impact. 

… If we had really thought through ArtLifting beforehand then we wouldn’t have launched three months after the idea stage. We went for it. We just started a beta (test) with four artists, and super basic website template. A week later we had $10,000 in sales. It’s the same concepts as Lean Startup as get your idea out there as soon as possible and then pivot with customer reaction.

If you can’t hear the clip, click here.

Rocio Perez-Ochoa is a former hedge fund manager who also was climate change policy advisor in the UK. Her first startup experience involved managing the financial arm of BBOXX, a manufacturer and distributor of solar home systems in the UK and Africa.

Early on in her journey to build Bidhaa Sasa, she discovered the importance of having a strong founding team.

The willingness to listen is something that I found is not very common. The willingness to experiment, get your hands dirty. You do it yourself, acquire … that philosophy. As a founder, you have to do it yourself. Otherwise, you never get firsthand information and just stick to your guns.  

(Building a founding team) is really difficult. … We were three at the beginning. For one of them, it didn’t work.

Steve :  Most of our listeners should understand that at least a third of startups never even get to start, because they melt down because of founding issues. In this case, you didn’t melt down, but you lost one-third of your founding team.

Rocio : Totally. In the first few months, it was clear for one of them, it didn’t work.

If you can’t hear the clip, click here.

—

Liz is a world-class sailor, the first woman in US sailing history to win the Intercollegiate Sailing Association’s National Sportsmanship Award. She draws parallels between sailing and doing a startup:

A lot of times the thought of sailing is like sitting on a yacht drinking wine and eating cheese. (But) I was in dingy sailing, boats that flip over all the time. We did a lot of weight lifting to prepare for nationals and prepare for top competition. I think that relates a lot to entrepreneurship because … you get right back up, but also with waking up early to do weight lifting in February, you know that this is for a competition six months down the line but you keep pushing to get yourself to that point.

If you can’t hear the clip, click here.

Here’s how she got the idea for ArtLifting:

I felt a little guilty because I won this grant to start up art groups (to connect homeless women) because there weren’t any in Cambridge, in shelters, but (then) realized, well, just across the river, in Boston, there’s seven. … I had been in the field for four years and I didn’t know that.

… (Unsure of what to do next) I went around to all different art therapists and learned from them, and realized, oh, my gosh they, literally, had closets full of amazing art work (completed by homeless artists, but tucked out of sight). … I realized, I’ve been in the field for four years and I have no idea these exist. A normal person really has no idea they exist. Why not create a company to help get this artwork out there?  

If you can’t hear the clip, click here.

And why it is her dream job:

I’ve had so many relationships with homeless and disabled individuals who really just wanted their first break. … A lot of times the stereotypes of homeless individuals are “lazy.” All the individuals I know really just want a break. ArtLifting is helping provide that.

Steve :  … you went to Harvard, and most of your classmates probably didn’t end up in this field, but you did, why do you think that was?

Liz : I’ve never applied to a normal job before.

Steve :  Why is that?

Liz : I think it’s because I love being curious and seeing problems and trying to solve them. …

If you can’t hear the clip, click here.

—

Rocio holds a Ph.D. particle physics and so was drawn to the Lean Startup’s scientific method as she began her venture:

I don’t think many people have any methodology. It’s not that this methodology is better than this one. It’s (that) there’s none. I thought, “Well OK, there’s a higher chance of succeeding, I think, if you have a methodology.”

… The (Lean Startup) methodology is … scientifically based so I can relate to (it) … That’s easy for me to understand about experimentation. The metrics that matter. To measure. To communicate. To learn as you go and iterate. I love the idea of iterations. The best thing is to admit that you don’t know anything until you start, and then you learn as you go.

If you can’t hear the clip, click here.

She explained that Bidhaa Sasa faces a formidable challenge:

My clients… live in really basic living conditions; their lives are not great. If I could bring the products that help with their quality of life, I think it could have a massive impact in their lives. …

(But) the problem is that the products don’t necessarily reach the people that need them. …

My clients are not consumers … they don’t have much income. They don’t go shopping, they don’t know how to compare products, they don’t even know these products exist. It’s really complicated because you have to really go back to the very basic stages of awareness.

Hence the NGOs are there because the NGOs are really good at awareness. They have plenty of money to create awareness about (issues like) if you keep using dirty water, your kids will be ill, and then (families) make the link between the two and say, “Aah, that’s why they’re always ill, it’s because of the dirty water.” I’m a step behind the NGOs and trying to piggyback on their work, because the awareness is very expensive stuff.

…It is a Last Mile problem. … We are not talking about the last tribe in the middle of the desert. It’s not that at all. It’s the bulk of the East African people. …they live in relatively dense areas so logistics is not necessarily the bottleneck. The bottleneck is, do they know these things exist; can they pay for it?    

If you can’t hear the clip, click here.

She also explained how, at her first startup, she learned an invaluable skill:

… I got sucked into a full-time job in one of these companies, and then I realized, “Oh, my God, this is so complicated. This is really complicated.”

… we were operating in three countries in East Africa, based in the UK, so operating in emerging markets is quite complicated by definition… It’s relatively fast-paced, and you feel that you’re in a competition, even though I think that is a bit of a misunderstanding when you talk about competition. It was very chaotic. It was completely chaotic.  

… I don’t mind, but I could see that there is lots of people don’t deal well with chaos.

I was a manager so I was quite senior in this company, and I had to often pretend that I knew what I was saying, and I was under control because … especially in Africa … there’s another culture, (a) hierarchical structure. They’re expecting to be told what to do, and it’s very different from operating in the western world, so I bluffed all the time and I said everything was under control when it wasn’t. …

If you can’t hear the clip, click here.

Listen to my full interviews with Liz and Rocio by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Matthew Wallenstein,, chairman and co-founder of Growcentia; and Jason Young, co-founder of MindBlown Labs.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Filed under: SiriusXM Radio Show

How to Avoid Innovation Theater: The Six Decisions To Make Before Establishing an Innovation Outpost

This is the third in a series about the changing models of corporate innovation co-authored with Evangelos Simoudis. Evangelos and I are working on what we hope will become a book about the new model for corporate entrepreneurship. Read part one on the Evolution of Corporate R&D and part two on Innovation Outposts in Silicon Valley. 

—–

Corporate Leadership’s Innovation Outpost Decision Process

Today, large companies are creating Innovation Outposts in Innovation Clusters like Silicon Valley in order to tap into the clusters’ innovation ecosystems.

These corporate Innovation Outposts monitor Silicon Valley for new innovative technologies and/or companies (as emerging threats or potential tools for disruption) and then take advantage of these innovations by creating new products or investing in startups.

Most CEOs assign the responsibility to establish and manage their innovation outposts (and the outpost’s relationships to startups) to their R&D organizations. While that avoids internal management conflict, it’s the wrong way to make an innovation outpost decision.

Instead CEOs and their exec staff should start with a high-level discussion to decide whether their companies should even establish an Innovation Outpost, whether in Silicon Valley or some other innovation ecosystem. Because this is a critical decision that requires broad management buy-in, the conversation should include senior management, particularly the Chief Digital Officer, the Chief Strategy Officer, the Chief Financial Officer, and the Head of R&D, and maybe even their board of directors.

This group needs to carefully consider six key questions to understand if and where an Innovation Outpost makes sense for their company.

1.  Do we believe  “startup-driven” innovation (innovation that comes from relationships with external, early-stage companies) should be part of the corporate innovation portfolio?

Including “startup-driven” in the corporate portfolio may make sense if a company:

Is being disrupted now, as is happening in many IT, print, retail and telecommunications corporations
Anticipates being disrupted in the near future, as is the case in the automotive and chemical industries
Cannot keep up with the pace of innovation in its industry, as is happening in the pharmaceutical, financial services and consumer packaged goods industries
Wants to promote intrapreneurship to extend its business model and retain creative employees like Google, Amazon, and Facebook do

2. What is the timeline to ROI and the amount of risk we are willing to assume? Will an Innovation Outpost provide results at the speed we need?

An Innovation Outpost focused on the sense and respond model (see Post) will best work for a company when:

A disruption has not already happened or is not imminent. In other words the disruption is expected to happen within 5+ years.
A disruption does not present an existential threat to the corporation, it can be addressed with a relatively modest investment required to establish and expand an outpost, rather than the large investments required for corporate moonshots, e.g., IBM’s Watson. (We’ll cover “corporate moonshots” in a subsequent post.)
Startups are developing IP relevant to the disruption.

Acquiring a growth-stage private startup can provide a faster ROI at lower risk than the acquisition of an early-stage startup. For example, Google’s acquisition of Nest (which had customers, revenue and a distribution channel) allowed it to enter the connected home market immediately. In contrast, Facebook’s acquisition of the virtual reality hardware company Oculus still requires significant product development, identification of a viable business model – and the target market and revenue may never materialize.

If the innovation threats the company faces do not match these, the corporation may need a different approach to addressing the disruption such as making a large scale acquisition, e.g., VMWare’s acquisition of Nicira, merger, or outright selling itself, e.g., EMC’s sale to Dell.

3.  W hat would be the charter for our Innovation Outpost?

Senior managers should define the 1-2 big strategic problems that can be addressed through a day-to-day presence in the innovation ecosystem. These challenges may be either strategic or tactical. For example, one of Verizon’s strategic innovation goals for its Silicon Valley organization is to create disruptive solutions (technologies and business models) to monetize the digital media accessed by its subscribers on their mobile devices.

In the process of defining the challenges and goals for an Innovation Outpost, a company must understand why these can be addressed in a particular innovation ecosystem. They may require the utilization of technologies that are prevalent in the ecosystem, (big data or 3D printing) or specialized business models, (on-demand services) or specific innovation practices (design thinking and lean startup) or the development of a particular type of partner ecosystem (IBM’s Watson partner ecosystem.)

Identifying these strategic problems enables the corporation to decide on the location of the Innovation Outpost, define success, and the innovation KPIs that will be used to measure progress.

4.   H ow quickly can we get out of the building to explore and validate the ecosystem?  

Before committing to a particular innovation ecosystem, the CEO and exec staff need to get out of the building and visit the ecosystem to be assured that the reality on the ground matches the corporation’s innovation challenges. These visits should be led by the CEO, and maybe even include the corporation’s board of directors, along with execs who are expected to be innovation change agents. This exploration requires a deeper understanding than can be accomplished in a single visit.

While the default for most Innovation Outposts is Silicon Valley, it may not necessarily be the best fit for a particular company. Visiting the Valley might help an exec staff understand whether this innovation ecosystem would be right for them. For example, CVS opened its Digital Innovation Lab in Boston as did John Hancock, while Thomson Reuters picked both Boston and Waterloo Canada and Coca-Cola has its Bridge Innovation Lab in Tel Aviv. Exploration may require several visits to each of the innovation ecosystems of interest to pick the right one.

5. What is our company’s strategy for successfully integrating an Innovation Outpost?

Innovation Outposts most often fail when they come up with innovations no operating division wants and/or the company refuses to fund. (The ghosts of Xerox’s failure to adopt their Innovation Outpost inventions that became the Apple Macintosh still haunt Innovation Outposts.) There needs to be prior agreement on what happens if the division develops disruptive products that do not fit the existing company business model. Does it become a new division? Does it get spun out? Sold?

6. How do we establish the Innovation Outpost and staff the innovation enabling group(s) which will be part of the first phase of the Outpost?

Establishing an outpost enables innovation but does not constitute innovation. Once a company has decided to open an Innovation Outpost, it has to choose:

How to leverage startup innovation in the cluster – will the outpost invest, partner, acquire, incubate or invent?
What is the timeline to a ROI for Innovation Outpost? Again, the participation of the senior executives in these decisions is critical.

This process for establishing the Innovation Outpost will be the topic of the next post.

The complete six-step decision process is shown in Figure 1.

 

Figure 1: The decision process for establishing a Corporation Innovation Outpost

Lessons Learned:

To avoid “innovation theater”, Corporations should use a step-by-step decision process to determine the role the Innovation Outpost will play
The decision to establish (and later expand) an Innovation Outpost must be taken by the CEO working with the senior management team

It requires hands-on management by the CEO and the senior executive team
Just saying it has “executive support” means it’s dead-on-arrival
If the Innovation Outpost’s is successful it will almost certainly conflict with other corporate innovation-related decisions.


Just establishing an Innovation Outpost doesn’t mean that the corporation is innovating

At first it just means there’s a new building

The next post will describe How to Set Up a Corporate Innovation Outpost.

Filed under: Corporate Innovation