360 Degree Entrepreneurship

One of Eric Schmidt’s venture funds, Innovation Endeavors recently caught my eye.

Too often, in tech investing or entrepreneurship, there is a herd mentality resulting in a narrow field of vision in seeing, pursuing, or funding opportunities. Think group messaging or photo apps earlier this year, for example.  Dror Berman, the head of Innovation Endeavors, has a nice quote in BusinessWeek about taking a broader view, recognizing and pursuing other opportunities beyond the flavor of the moment:

Venture capital firms typically focus on a few tried-and-true industries; Innovation’s investments are intentionally all over the map. “Ninety percent of the world’s entrepreneurs are working on solving 10 percent of the world’s problems,” says Berman. “We’re trying to find entrepreneurs who want to solve the other 90 percent.” He’s backed startups as wide-ranging as Project Slice, a service for organizing shopping receipts in an e-mail inbox, and ReBloom, a sleep-inducing soft drink.

The fund also has a competition called Runway to put together teams of people who hadn’t previously known each other to search for a business to work on after formation of the team.  This approach, empowering entrepreneurs with a general passion to be innovative above all, even pre-idea and pre-team, also reflects a broader view.  It’s a bet that there may be high returns from betting on and reducing barriers for people with an overwhelming passion to do something innovative, even where there isn’t a fully-formed idea or team.

Super-Empowered Me

Today, Tom Friedman’s column, titled A Theory of Everything, finds the connections among a number of contemporary events in the world from London to the Arab Spring to the Israeli Summer to European protests to the Tea Party. He writes:

So let’s review: We are increasingly taking easy credit, routine work and government jobs and entitlements away from the middle class — at a time when it takes more skill to get and hold a decent job, at a time when citizens have more access to media to organize, protest and challenge authority and at a time when this same merger of globalization and I.T. is creating huge wages for people with global skills (or for those who learn to game the system and get access to money, monopolies or government contracts by being close to those in power) — thus widening income gaps and fueling resentments even more.

Put it all together and you have today’s front-page news.

While Tom Friedman’s column is focused on macro events in the world — various examples of society-wide turmoil and collective anger around the world — several trends fueling the discontent on a macro level are important on a micro-level as well.  They can be forces for good on an individual level for those of us who want to be innovative and don’t want to wait around.

First, is the importance of mastering technology and new forms of communication:

Why now? It starts with the fact that globalization and the information technology revolution have gone to a whole new level. Thanks to cloud computing, robotics, 3G wireless connectivity, Skype, Facebook, Google, LinkedIn, Twitter, the iPad, and cheap Internet-enabled smartphones, the world has gone from connected to hyper-connected.

This is the single most important trend in the world today. And it is a critical reason why, to get into the middle class now, you have to study harder, work smarter and adapt quicker than ever before.

If you can do that, you can super-empower yourself.

This globalization/I.T. revolution is also “super-empowering” individuals, enabling them to challenge hierarchies and traditional authority figures — from business to science to government.

There is a window of time to use this mastery, to break down hierarchies in whatever your field is and leap frog yourself faster and higher than possible. The message for those of us with that innovative attitude — and it does not matter what your age is — is to use this opportunity in whatever your niche, profession, or area of interest is.

The Universe and Us

Nearly all the world’s most innovative companies are run by megaminds who set themselves hubristic goals such as “putting a ding in the universe” (Steve Jobs).

Six Months: Checking In, Taking Stock

In the sixth month of keeping this blog, I am taking stock. For anyone thinking of doing something similar, I am enjoying it thoroughly, finding it valuable in exploring thoughts, hopefully sharpening them in the process.  This recent post by Fred Wilson on blogging, and particularly the excerpt below, captures some of the personal joy and value of the effort.

Have a long form blog on a domain that you own and that is permanent. Like Anil Dash says in the comments to Tom’s post, this is about compiling a set of work that is substantial. Anil says:

Based on the past dozen years that I’ve been writing it, I expect that my blog will in some ways be one of the most significant things I create in my life.

I’m 100% with Anil on this. People ask me when I am going to write a book and I laugh at that suggestion. AVC is more than a book will ever be. It is live, it is deep (in terms of total posts), it keeps going, evolving, and ends when I end.

I agree completely.

You Don’t Have to Be An Engineer To Be A Hacker

To be an entrepreneur, you need to be an entrepreneur, nothing else.  There are no velvet ropes or innovator licenses that should deter you.

Spot on is Randi Zuckerberg’s resignation note, appropriately enough to Sheryl Sandberg:

“I am thankful for the strong mentorship, guidance, and support, which is empowering me to follow my dreams and show that you don’t have to be an engineer to be a hacker.”

Few people disrupt.  It is independent from being an engineer: you don’t have to be an engineer to be an innovator, and conversely, just because you can code (or alternatively cannot code) does not mean that you have vision.  Just as importantly, if you are an innovator, whether you code or not, you better find some way to take action and hack away.

Some prior posts on this topic here and here.

Consumer-Driven Innovation: Bringing Others to the Ball

If regular consumers get more helpings of innovation, then perhaps enterprise and corporate customers need to act more like consumers.  They need to find ways to implant that “innovate to survive” instinct onto their suppliers, and make innovation about “more than words.”

Of course, the resistance from enterprise and government customers and their suppliers is “this is different.”  A Fortune 10 company is not going to use a software system developed in someone’s garage.  And the US government is unlikely to have three kids in hoodies knocking on its door with a working prototype of a stealth, next-generation fighter jet.

Not untrue, but also a predictable, “maintain the status quo” response.  How do you insert the innovation instinct given the particular industry circumstances?  In some situations, the answer may be to procure in the consumer-driven market when you can and to set up incentives to replace the consumer-driven dynamics when you cannot.  For the former, where there is an opportunity to go with the consumer version of an application (many software and IT solutions have consumer versions), an enterprise or government can rely on that solution.  For the latter, the customer can minimize the upfront payment, and pay on a subscription basis to maintain the ability and credible threat of switching.

Another perhaps more structural way is to expand the invitation list to the ball. Firms can find a way to bring in more innovative start-ups perhaps by providing smaller courts for the newer players to compete — parallel to whatever is happening at center court — giving them an opportunity to start small, grow bigger from there, aspiring to eventually making it to the big show.

This draws from Clayton Christensen’s ideas.  Christensen points out that incumbent firms rarely disrupt their own business.  His work suggests that disruptive innovation comes about when innovative companies pursue business models of providing simpler/cheaper products or business models, upsetting the status quo.  While, at first, these innovations are pooh–poohed as having less performance; often, they grow to become the market as consumer adopt them and the suppliers improve the offerings.  Customers have to invite in firms that have an incentive to disrupt the status quo by going beyond the incumbents. Where it does not exist organically, customers need to generate this dynamic in one’s industry, perhaps by signaling to entrepreneurs that this is an industry where disruption will be welcome.

One thing I will blog more about in the future are what I am calling (for now) “red sauce” industries.  These are massive sectors of our economy that seemingly would be ripe for the same disruptive attitudes (“go solve real problems”), wearing big targets on their chests because of their size and customer unfriendliness, that nonetheless seem to be immune from the forces of disruption.

Yearning For The Vast and Endless Sea

If you want to build a ship, don’t drum up the men to gather wood, divide the work and give orders. Instead, teach them to yearn for the vast and endless sea.

– Antoine de Saint Exupéry (this quote is perhaps misattributed, but it’s great anyway.)

—

Recently, Vinod Khosla tweeted this link to an old Dave McClure post, with some advice on making an elevator pitch.  That surely is reason to pay attention.

“Here’s the secret: PITCH THE PROBLEM, NOT THE SOLUTION.”

“That’s it. done! that’s all there is… just tell me the problem FIRST, not the SOLUTION.  the reason is, i may not be able to understand what your solution does, but if you connect emotionally with me on what the problem is — and i hopefully i also have the problem, or know someone who does — then i’ll give you PERMISSION to tell me more about how you’re going to solve the problem.”

I have a prior post about Vinod Khosla and his “black swan” approach to thinking about an opportunity by focusing on the size of problem, even where there is a 90% chance that there might be failure.

It’s not just evaluating opportunities and pitching them; there is something inherently more collaborative and emotionally engaging about discussing the problem statement in motivating and connecting with yourself and others, rather than jumping into a solution, which creates more distance with and resistance by the listener.  There is much more risk in the “solution first” approach of coming off as a know-it-all, distracting from your idea however good.  Chances are too that you have a great target and opportunity, but you need to pivot with your solution.  You may be more likely to get the chance to pivot if you have made others “yearn” to solve your problem.

Paul Budnitz: Make Beautiful Things, Assume It Will Work Out

Interesting article in Inc Magazine.  Paul Budnitz is the founder of Kidrobot, a maker of hip art toys, and an “all over the place” (meant in a good way) entrepreneur, guided by a succinct vision statement, which he applies as he pursues ideas in art toys, bikes, children’s books, ringtones, and other areas:

Business is a vehicle to make something beautiful.  And my basic business plan, if you could call it one, is just to make and sell beautiful things and try not to be stupid about it—make sure it’s at least possible to make a profit—and just assume that it’ll work itself out and make money. This usually works, and occasionally doesn’t.

Consumer-Driven Innovation: More Than Words

For good reason, when we think about innovation we think about visionary entrepreneurs molding reality to realize their visions.  But it is also worthwhile to consider innovation from the customer-side, i.e., what are customers doing to demand innovation and are there systematic differences in incenting innovation with different types of customers?  In other words, what is the relationship between the type of customer (consumer, enterprise, government) and innovation?

Not to grossly oversimplify, but there are at least some directional differences.  For companies in consumer industries, innovation is often about survival: stop innovating and you stop (or have no hope of) getting attention or getting paid.  For companies selling to enterprise and government customers, innovation sometimes is little more than marketing copy  — mere words added onto incentive structures that do not require innovation.  It is the innovation equivalent of pretending that the cherry on your ice cream sundae makes it healthy.

In an interview with Fortune magazine, former US CIO Vivek Kundra reflected on his experience in government and commented on the difference in innovation between consumer and enterprise IT, noting one relationship (observed by not just him) is that consumer companies must innovate constantly as they are “one click away from extinction.”

There’s a huge divide between the consumer space and the public sector. Why? The reason is that in government there isn’t a Darwinian pressure to innovate that’s in the consumer space. Consumer companies are one click away from extinction, so they have to innovate constantly. Yet in enterprise IT, which is far inferior to consumer IT, victory is considered winning that contract. Once companies win that contract, the incentives are to optimize their margins, not to innovate or make sure they’re providing better services.  You address that problem by adopting consumer technologies.”

As he notes, enterprise IT is about winning a long-term contract, and collecting annual maintenance checks.  By contrast, in dealing with consumers, you are dealing with consumers with shallow-pockets, unable to scrounge for and deliver dollars if the product is not delivering value.  In fact, it is hard to monetize even when you are delivering value — think about how hard it is has been to find revenue models for consumer internet companies where the consumers pay.  Consumers are less likely to sign contracts, and when something better comes along or the product becomes less interesting, they move on.

In fact, If you are marketing to consumers, it’s all about the consumers.  Consumers are not likely to cut producers any slack like a business or government customer might.  In that same vein, Kundra noted about procurement:

I asked a very simple question: How would a startup company launch in the private sector? If you went to venture capitalists or your board of directors and said, “I need millions of dollars to hire an army of consultants to stand up my e-mail system and build a custom financial system and build out a data center so I can host a website,” you would get laughed out of the room. And that’s exactly what the federal government was doing.

Startups are going to Google for e-mail, or to Microsoft, or to Hotmail. They’re going to Intuit and using QuickBooks for the financial systems. They’re going to a number of providers online to set up a website, and they get value day one, literally. They don’t spend months or years procuring those services. Imagine if the federal government, with purchasing power of $80 billion, demanded from the vendor community, “We want value day one. We don’t want to wait years, and we don’t want to spend millions of dollars, because we’ve seen this movie, and it always ends poorly.”

If you are serving a customer base that demands value from day 1 or there is no check, there is no choice but to innovate from the industry.  Contrast this with an industry, in which there is a stream of huge payments even before there is a product, and a massive stream of payments even where the product has missed numerous timing, cost, and performance benchmarks. The extreme example is defense procurement.  The Economist had a recent story about the F-35 Joint Strike Fighter, our next-generation fighter jet, and the most expensive military program in history. It is running 6 years late, and the planes are running at double the acquisition cost, and at a”jawdropping” trillion dollar cost to support and operate after the $400 billion or so it will cost to buy the planes. Despite this, apparently, Lockheed, the contractor, thinks it is doing a great job.

Obviously, things are different, but can you imagine an angel or venture capitalist handing out gold stars to a portfolio company that had such results?