Category Archives: Entrepreneurship

Is Effectual Entrepreneurship the solution to unemployment in mature economies?

I’m currently reading the book by IMD Professor of Marketing, Stuart Read, about “Effectual entrepreneurship”. He has nicely summarized his book on 5 short videos all available on YouTube:

I’m now getting close to the end of the book and seriously wonder:

  • Would effectual entrepreneurship by the answer to the unemployment problem in many mature and underdeveloped economies today?
  • If yes, don’t we need to teach our Youth that the future will be less and less about “finding” a job vs “building” it by applying in your venture the 4 heuristics (aka principles) of effectual entrepeneurship?
  • How much longer longer shall we wait to make it happen?

Maybe there is in today’s post the seeds of my next personal venture 😉

Is Google on the decline already?

In this 8min INSEAD knowledge video,  Silicon Valley veteran, Adeo Ressi, argues that there are clear market indicators that Google is on the decline already and the trend is here to stay as companies like Facebook and Twitter continue to make their way in the new connected world…

Effectuation Part 2 by IMD Professor Stuart Read

Interesting second video during which IMD Professor Stuart Read argues that managerial principles, models and theories learnt in business Schools may not enable entrepreneurship and support an entrepreneurial spirit but hinder it instead… Why? Because they overlook the personal dimension of most new ventures started off by a single individual as a personal project .

Here are some of the common questions an entrepreneur would go through when considering a new venture:

  • How much time and money am I ready to invest into it (no matter how compelling the business case may be)? If things do not play out as well as I anticipated, how much am I willing to lose personally?
  • How can I make the best use of what I already have and the people I already know?
  • Whom do I know in my surrounding that will want to put some skin in that venture with me?

Presented that way, it becomes a lot clearer why you do not need to hold a MBA to be a successful serial or expert entrepreneur. We often believe that successful entrepreneurs had a brilliant idea, which they were able to turn into a successful business. What we tend to forget is that very often the ultimately successful business had in reality very little to do with the original idea. What made the venture a success was actually less the original idea itself than the discovery and development process that the entrepreneur had to go through in order to do something with his idea.

That’s the fundamental principle embedded into “Effectuation”: Having an idea and doing something with it !

Effectuation Part 1 by IMD Professor Stuart Read

Gary Hamel is reinventing Management. Stuart Read, Professor @ IMD, is reinventing entrepreneurship with a lot of humour, energy and enthusiasm !

I’m not a marketing fan but I would not mind taking a marketing lesson if Stuart was the professor !

Enjoy !

What does it take to innovate?

This short video by IMD Professor of Marketing, Sutart Read is a good reminder that most innovations occured unexpectedly, as a surprise to some extent, while people were actually trying to find something else.  Examples of that abound in history and Professor Read shows several of them.

There is a beautiful English word to describe that, it is “serendipity”. Interestingly enough, this word has no equivalent in most foreign languages , French included. Serendipity is this whole notion that innovation cannot be ordered and commanded, it has its own ways and will very often appear where you expect it less…

As a result, we shall expect that very narrowly focused innovation programs will not yield in most cases the expected returns  because people are just too focused on a single goal. Reversely, you can embrace serendipity in the Google way by giving freedom to all employees to spend 20% of their time on whatever project they are interested in.

Gardeners and farmers got it a long time ago: there are things that can’t be forced, no matter how much fertilizer or whatever you put in the ground, it will take what it takes for the plant or the corn to germinate and grow. Innovation is not different from agriculture:  it can only emerge with care and time.

In our fast-paced world where business results must be immediate and focus is the key, maybe another way to innovation will be to relearn patience and curiosity?

Who’s the boss in an open world by Bob Sutton

Here is a refreshing excerpt from an interview of Bob Sutton, Professor of Management at Stanford University.

The part that I did enjoy most is the end of it where he shares with us the unique challenges that the CEO of Mozilla has to face by running a business, which only exists because there is an open community of Software developers that is committed to it. Interestingly enough, even though he is the CEO, he has no authority on the new features that will be added to its Firefox web browser. How does he live with it? Well.. actually very well, because he has understood and accepted that this software development effort is led by people, who are so much more knowledgeable than himself in that particular area that it is actually a safe bet to delegate the ultimate decision to them…

Wow, that’s a profound leadership lesson, the kind of we would like to see more often !

An internal market as a source of innovation

Here is an idea that I would like to see implemented more often in large corporations. A lot of start-ups exist because entrepreneurs get access to funds through venture capitalists. This relationship between entrepreneurs and venture capitalists works like a market. So what if we applied these principals to innovation and entrepreneurship within a large corporation?

In other words, innovators and entrepreneurs would present their ideas and projects to an internal market, that would be ready to place bets on some of them. Within a large corporation, who has the money? Business Unit General Managers so these guys are the ones, who would act as “internal venture capitalists”. Rather than  spending their R&D $ on projects coming from the labs, they would have access to a much broader scope of projects and ideas that they may be interested in pursuing further.

Remembering an article I came across some time ago that was showing that a large group of people is more likely to make more accurate future predictions than a panel of experts, we could even imagine that the project selection process is not the privilege of the GM’s and their direct staff any longer but is actually opened to all employees.

I’m wondering what kind of innovation and entrepreneurship would emerge within a large corporation if they implemented a model like this one…

Is Google still innovative?

It is interesting to see how everything is a matter of perspective. I received this RSS feed earlier today:

  • Google’s Schmidt hands top job to Page as company posts strong Q4. Google’s Eric Schmidt has announced his resignation, and will hand the CEO job to company co-founder (and original CEO) Larry Page. Schmidt, who will remain as executive chairman to advise Page, says the change “will result in faster decision making and better value for the shareholders.” Analysts say the move is aimed at helping the company regain an entrepreneurial stance, addressing claims that it has grown too large and bureaucratic. In Q4, Google’s earnings rose 29 percent to $2.54 billion, with revenue rising 26 percent to $8.44 billion. Research firm eMarketer notes that the company’s revenue, while still mainly driven by search ads, was boosted by a growing stake in the display ad market. New York Times; Wall Street Journal; USA TodayAssociated Press (also Bloomberg Businessweek)

So Eric Schmidt would be stepping down in order to reinvigorate Google’s entrepreneurial spirit ! Well… I can only speak for myself but Google was still in my eyes one of the iconic brand conveying an innovative and entrepreneurial image. So what a surprise !

That being said, it would be too early to cry for Eric Schmidt. He does not leave his CEO position uncovered for the future:

  • Google’s Schmidt gets $100m grant: Google’s Eric Schmidt, who recently announced his plans to move from CEO to executive chairman, has received an equity award of $100 million in stock and stock options. Experts say the award is unusual, as apart from the sheer size of the award, most such awards are granted to new CEOs. Outlets also note that Schmidt recently filed to sell $335 million in company shares.

Again a matter of perspective. Many people will find such a golden parachute  indecent in the current economic climate. However, I’m sure that if he were interviewed on the matter, he would say that this is a fair compensation for the business value he contributed to generate for Google.

One single reality, multiple possible interpretations of it… what’s the truth? Is there only one? Who holds it?… I’m puzzled

Did you know the story behind your Gore-Tex outdoor clothes?

This post is another reflection on the to be published book by IMD Professor of Marketing, Stuart Read.

W.L. “Bill” Gore was an employee at Dupont working on Teflon applications. Very early in the 1950’s, he envisioned that Teflon was promised to a bright future as a coating material for cables in the computer industry. However, Dupont was not convinced and refused to invest.

In 1958, Gore created his own company with his wife in his basement: WL Gore & Assiociates was born. 10 years later, they were employing 200+ employees and Gore cables were used on missions to the moon.

Later as the competition increased in the cable coating industry, Bill and his son figured out a way to stretch the material so that it could be woven as fabric: Gore-Tex was born.

That’s a great success story, isn’t it?

What is also interesting with WL Gore & Associates is their unwavering commitment to Innovation.  All employees are called Associates and carry the same level of authority. So Leaders can only emerge if they have followers for their projects and ideas.

Finally, Gore quantified the optimal team size and built his organization accordingly. As a result, a manufacturing plant at Gore will never exceed 150 Associates in order to keep personal engagement, commitment and accountability high.

Obviously the model has merits. But what could be some of the drawbacks? First off, production costs must remain high as there will be no plant with more than 150 associates, so production volume is capped. In order to double the production capacity, a new plant is required rather than extending the capacity of the existing one. What is true for production costs is also true SG&A costs (Selling General & Administration): as units are small, there must be a lot of overhead costs in the Gore model. Last but not least, corporate governance of a lot of small units of 150max associates must create some interesting challenges.

On the other hand, a lot of small and autonomous units makes it a lot easier to divest a business as it is not tightly intertwined and dependent upon shared resources provided by the corporation.

All together, the Gore model looks very interesting as an incubating model for a growing business started from scratch. You can keep it separated until it reaches the critical mass and then and only then integrates it into a bigger business unit. I have seen that in the past and did not understand the rationale for it. Now I do !

Creating and growing a business requires focus, attention and a mindset that varies greatly from the one commonly shown by corporate executives. So applying to innovation an organizational model that is radically different from the one we use to run mature businesses may help to ignite and sustain in major corporations a spirit of innovation and entrepreneurship that they are struggling to nurture otherwise.

Becoming self-aware of Threat rigidity

I had the privilege to get a sneak preview of one chapter of the book about entrepreneurship to be published by IMD Professor of Marketing, Stuart Read. In his book, he describes an experiment that was conducted with senior corporate executives in order to assess if and how they rely on predictions based on past experiences to make decisions.

Executives were split in 2 groups: 1 group had to deal with a very mature industry with very little change. The other group was challenged by having to deal with uncertainty in the same mature industry (new entrants, M&A., new products.. etc).

As we would expect, executives dealing with the stable environment based their decisions on predictions in line with their past experiences.

However, what is interesting is that the second group of executives that had to deal with uncertainty seemed to rely even more on predictions based on past experiences even though there was obviously a disconnect between what they were used to manage and the new situation. As the scenario became more and more challenging, they relied even more on predictions even though the disconnect kept increasing…

In conclusion, in front of a threat, people will mostly react based on what they know even if what they know is not appropriate to deal with the situation at hand. This is what is called “Threat rigidity”. This seems very human: in front of a new situation that you have no clue how to deal with, you will first try to do what has been successful for you in the past.

But that was not the end of the experiment. Uncertainty was tested on Executives both in the form of threats and opportunities. Interestingly enough, when faced with threats, people relied more and more on predictions based on past experiences while when faced with opportunities they were a lot more open to try out new things and adopt an entrepreneur spirit.

Here is an interesting learning and something to always keep in the back of our mind: When faced with a threat, we will always have a natural tendency to try to deal with the situation based on what we know even if there is no connection. By default, we may only allow ourselves to be innovative and entrepeneurial when we see an opportunity and a positive outcome.