Category: Business

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Business Living

With Entrepreneurs, Luck Is Earned

Brent Bowers writes in the 4th of July edition of the New York Times about how entrepreneurs seem able to generate their own luck.

Bowers quotes Mark P. Rice, dean of the F. W. Olin Graduate School of Business at Babson College as saying “Most people go through life constrained by the path they are on. The key with entrepreneurs is that they are always making connections that we don’t make. … They can’t not be lucky.”

Reading Bowers’ story, what he’s really describing is what I call serendipity – how seemingly unconnected events all of a sudden form a pattern and relate together in some unpredictable way. It’s always amazing to me when it happens – and delightful!

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Books Business

Disruptive Innovation – Christensen Style

BusinessWeek’s Jena McGregor interviews Clayton Christensen, author of The Innovator’s Dilemma and other books.

We use Christensen’s model – disrupting from below – when we talk in our Glenbrook Payments Boot Camps about PayPal’s entry into financial services.

Here’s a one sentence summary from the interview::

“The deep reading is you have to be careful which customers you listen to, and then you need to watch what they do, not listen to what they say.”

That’s tough to do inside a big company – for reasons he describes in his writings and further illuminates in this interview.

Tim O’Reilly’s theme about the future already being here, but not widely distributed echoes a similar philosophy. O’Reilly’s focus on watching what the innovators are actually doing guides his company’s efforts in publishing and conferences – thereby helping to distribute the future that’s already here.

Christensen concludes the interview with a commentary on the Apple iPhone and why, based on his theory of innovation, it’s not likely to succeed.

[Hat tip: BusinessPundit.com]

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Business

Pozen’s Right

Today’s New York Times has an op-ed piece by Bob Pozen advocating that more (indeed, many more) US companies eliminate the quaint notion of providing guidance regarding earnings expected in the next quarter.

Hear, hear! This is one of those silly notions that Wall St. analysts, over the years, have foisted on CEOs.

Pozen’s right, of course. Many more public company CEOs should simply refuse to provide guidance about the next quarter’s results. This is one of those practices that produces lots of stupid behavior inside companies. Investors deserve better – and it’s certainly not by having CEOs guestimating their upcoming quarterly results.

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Business Web/Tech

Economy of Abundance

David Hornik’s got a great post on his blog this morning about “the economy of abundance“. Seems to me globalization is a huge driver of enabling this economy.

That is the overriding attitude of the Economy of Abundance — don’t do one thing, do it all; don’t sell one piece of content, sell it all; don’t store one piece of data, store it all. The Economy of Abundance is about doing everything and throwing away the stuff that doesn’t work. In the Economy of Abundance you can have it all.

…the idea of the Economy of Abundance is not prescriptive. It does not tell you how to run your business. But it points to another significant force at work in the new economy and suggests that entrepreneurs should think creatively about how their businesses might be transformed by utilizing abundant resources in a disruptive way.

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Business

The Chairman Wants What?

Somebody had to have asked that question in the legal department at Hewlett-Packard when board chair Patricia Dunn commissioned her investigation into who among her peers on the board had been “leaking”. Too bad they didn’t realize what they were doing.

Let’s hope we’ll all be better off as one more requirement emerges for serving on any company’s board of directors – a privacy policy with respect to honoring each director’s privacy!

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Business Current Affairs

Snippets

I came across a couple of great quotes about the state of the world while reading the papers this morning:

  • By ignoring predictions of an insurgency and refusing to do homework before charging into Iraq on trumped-up pretenses, W. left our troops undermanned, inadequately armored and psychologically unprepared. — from a Saturday column by Maureen Dowd

  • Late yesterday, Home Depot issued a statement that said in part, “While we understand that the approach we took to the annual meeting was a departure from past practice, it should in no way be construed as either a lack of respect for our shareholders or a lessening of our commitment to high standards of corporate governance and transparency.” Apparently, Mr. Nardelli and the Home Depot board think their shareholders are stupid, too. — from a column by Joe Nocera titled The Board Wore Chicken Suits

  • Indeed, a lawsuit resembles less a mathematical problem with a single correct solution than a chemical reaction, the result of which may depend on any number of slight variations in the ingredients used and the conditions under which the reaction occurs. One may theorize endlessly about the likely outcome of a given reaction, but the reliable result must always come from the test of real experience.

    and

    We can think of no workable test or principle that would distinguish “legitimate” from “illegitimate” news. Any attempt by courts to draw such a distinction would imperil a fundamental purpose of the First Amendment, which is to identify the best, most important, and most valuable ideas not by any sociological or economic formula, rule of law, or process of government, but through the rough and tumble competition of the memetic marketplace. — Apple v. Does

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Business

Auctions Always Win

Strategy consultants frequently like to remind us that “specialists always win.” When it comes to markets, auctions always win.

Today’s column by Joe Nocera in the New York Times is about Bill Hambrecht, the master of the Open IPO process. His firm, WR Hambrecht, specializes in doing auction-based open IPOs – totally different from the closed big boy process historically used by the big investment banks and institutional investors when they do public offerings.

I recently heard Hambrecht speak about his experience – at the watershed event of the Google IPO where the Open IPO was sorta used but not really. Hambrecht’s learnings from that exercise (he was an advisor to Google) came him the strength to stand up and not compromise his process going forward. As a result, companies selecting the Open IPO process raise more money than they otherwise would as their initial offering pricing is, by definition, closely tied to market supply and demand factors.

Hambrecht, besides being a very smart guy himself and street smart in the ways of Wall Street, had the good fortune to have Clay Christensen at his side as his company pursued the Open IPO. Christensen’s advice – to enter from below, serving the unserved and the overserved, is his mantra for disruptive new approaches attacking the big entrenched incumbents. This was a classic “textbook case” – in this case, the text book having been written by Christensen himself.

But, back to the main point: auctions always win. They represent the near perfection of market functioning when they’re done right. The hard part, of course, is doing them right. First, by enabling enough potential buyers to find out about what’s being sold and, then, by enabling an efficient bidding process with fluid, open feedback.

Perhaps the most powerful aspect of the Internet will come to be described by historians looking back on our age as the effect that it had on opening up auction-based markets? But huge markets remain that aren’t yet served by auction-based processes. Think about how merchant fees are set, for example, in the credit card industry.

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Business

From Below

Jason Fried of 37signals writes about Google’s recent acquisition of Writely.

Reading his post, I’m struck by how well it highlights one of the classic aspects of Clayton Christensen’s mantra about “entering from below.”

The reality is that most of us are hugely over-served by the Office suite software that’s been provided to us. We simply don’t need the feature bloat functionality that were the primary upgrade drivers when Microsoft was rev’ving the product every 18 months or so.

This creates the opportunity – provide something that is a better match (ironically, with less functionality) to what we all want to use everyday. We’ll use it like crazy and Google will monetize our attention on the pages it uses to serve up our stuff.

Henry Blodget muses on the same subject – but seems like he misses the point. The next Office upgrade cycle will be fascinating to watch.

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Business Web/Tech

Monks With Energy

BillMonkChuck Groom and Gaurav Oberoi, Code Monks and co-founders of BillMonk, stopped by Glenbrook World HQ yesterday for a get acquainted session. It always fun for me to meet new entrepreneurs and to hear from them all of the things they’re learning as they ramp their business.

After reading about them as “Startup of the Week” on John Cook’s blog, I had blogged about them over on Payments News (where it was the most read story this month!) Mike Arrington’s TechCrunch post about BillMonk a week ago really helped raise their visibility on the web. Talking to Chuck and Gaurav, it was especially interesting to hear how they’ve been hearing from new BillMonk aficionados from literally around the world and, particularly and a bit surprisingly to them, in Europe.

We also talked a bit about web technology, in particular, how scripting languages – particularly Ruby – are so super important to new web startups these days. Big banks haven’t yet tuned into languages like Ruby and frameworks like Rails but I suspect it won’t be long before a corner turn begins.

I wish Chuck and Gaurav all the best as they pursue their dreams with BillMonk! They exude that energy and excitement that always makes it so much fun to work with entrepreneurs. Follow their progress on the Notes from the Bill Monk blog.

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Books Business

Forgetting

As in forgetting is a vital business requirement for successful strategic innovation. The idea is from one of the best business books I’ve read in a long time – about an area that fascinates me: the process of strategic innovation.

It’s that time of year when a lot of top 10 lists get written and talked about as we wrap up last year and embark on this year’s new journey. In a new book by Vijay Govindarajan and Chris Trimble, these two authors explore a new list of 10 rules that they say are required for successful strategic innovation – not in the entrepreneurial context (although many of the 10 rules also apply to raw startups) but primarily in the real audience for this book: CEOs and senior executives of major companies who continue to struggle with developing their next growth step. Govindarajan is a professor of international business at the Tuck School of Business at Dartmouth and Trimble is an adjunct associate professor at Tuck and a senior fellow at Katzenbach Partners.

Why forgetting? It’s actually both forgetting and borrowing that the authors identify as foundation elements for strategic innovation to be possible. Strategic innovation requires setting aside – forgetting – the existing assumptions, mind sets and biases of management while borrowing to get access to resources of real value. Indeed, having this access to valuable assets – customer relationships, distribution and supply, brands, credibility, etc. – is one of the more important advantages an innovation effort inside a big company has over a startup. But, of course, the trick is in borrowing those assets while being able to ignore (forget) the dogma that has evolved as those assets were actually created.

For me, Govindarajan and Trimble’s articulation of these foundation elements has a relationship to the disruptive innovation cycle that Clayton Christensen has written about so well. Forgetting means ignoring the requirements of the company’s best customers – which, of course, is precisely where big company’s stay focused. Borrowing means using access to those best customers when appropriate – for presenting them with new solutions but precisely not for capturing their requirements. Some very nice parallels between the two ideas – with G&T being more prescriptive with their specific recommendations for big company strategic innovation efforts.

Enforcing the rule of forgetting leads directly to another of the top 10 rules: the NewCo organization must be built from scratch and staffed with new people from outside the organization. In my experience, this is one of the toughest challenges for a CEO to work through – as the normal approach is to pick from among the best of the company’s current leaders and to “award” the new opportunity to that person. Bringing in outsiders is a bold move that runs some serious cultural risks – but the authors emphasize the importance of that being part of the company’s DNA and how “rewards” have to be approached differently to break with the past and increase the probability of successful strategic innovation.

Today’s New York Times Business section has an interview with Vijay Govindarajan by William J. Holstein, editor in chief of Chief Executive magazine. In one of his answers, Govindarajan emphasizes another on of the top 10 rules: to avoid suffocation, the new business must report directly to the CEO. Again, in my experience, most CEOs just can’t think of it being done this way. They’ve got their senior team who have been with them for a while, are loyal, deserve great opportunities, etc. Bringing in an outsider who’s separate but equal and who’s not “paid his (or her) dues” is a very challenging cultural dynamic to overcome. It’s here that startups have such a great advantage – it’s easy to ignore that senior team because they don’t yet exist and there aren’t any loyalties to be honored or rewarded!

I made the comparison earlier between some aspects of G&T’s work in this book and the earlier work of Clayton Christensen. While the themes are similar, the practical advice and extensive use of case examples really resulted in my respect for this new work. It’s very well done and should be read and re-read by senior managers as they struggle with how best to enable successful strategic innovation in their midst. Highly Recommended!

Vijay Govindarajan: Ten Rules for Strategic Innovators: From Idea to ExecutionDetails:
Ten Rules for Strategic Innovators: From Idea to Execution by Vijay Govindarajan, Chris Trimble. 224 pages. Published by the Harvard Business School Press. ISBN: 1591397588