Musings of A B-School Professor of Entrepreneurship

I talk, it types.

Bill — Tue, 20 Jul 2010 15:06:55 +0000

Well, it has once again been too long since my last blog entry. However, I have discovered a new tool that should allow me to blog more easily and hopefully, somewhat more frequently. That tool is the windows speech recognition program which comes as a part of windows seven. It has been a long time since I last used a speech recognition program, perhaps as much as 10 years. I can honestly say that they have come a long ways since I last use them. In fact I “typed” this entire post without ever touching the keyboard. Surprisingly there weren’t very as many errors as I would have expected. I was able to talk at an almost normal pace.

I began exploring speech recognition technology following a conversation with a friend and co-author in which he explained to me that when writing book chapters he often dictates his narratives and then pays a nominal fee to someone overseas to transcribe them. This got me thinking, I wonder how far speech recognition technology has come. There are numerous advantages of speech recognition technology over a method based on dictating and transcribing. First I don’t have to worry about the turnaround time even if it only as a day. Second I can see my thoughts on the screen in real-time. This has the distinct advantage of allowing me to see the logic and flow of the paragraphs as I construct them. Frankly, I am amazed at how far this technological interaction method has come.

I can honestly say that my first year of teaching entrepreneurship at JMU has been a truly rewarding experience. The students have been fantastic and have demonstrated a clear desire to learn about entrepreneurship and in many cases the desire to become entrepreneurs themselves. I’ve had the distinct pleasure receiving several emails and notes from students regarding their appreciation of the hands-on approach which is taken in 372, introduction to entrepreneurship. There are several clear success stories from last year including as previously mentioned rebound hoof pack and madisell. Another group worthy of mention is iGroup or Cool Wax (check their story out here http://igroupjmu.blogspot.com/). There are so many fantastic stories and frankly just not enough space to acknowledge them all here in this blog post.

Intriguingly, Madison magazine decided to run a story on 372 and the merits of the hands-on approach to entrepreneurship education and their upcoming issue. An online excerpt from the story can be found here http://www.jmu.edu/bethechange/stories/wales-entrepreneurship.shtml

Well, I hope to be more active in my blogging in the future particularly given the merits and ease of use of current speech recognition tools. However I’ve also come to realize that blogging tends to be the first activity to be cut in my life when the demands of teaching, scholarship, and service increase during the semester. That being said, going forward it will remain my goal to post as frequently as interesting and blog worthy events occur in my life. Cheers.

A New Semester

Bill — Thu, 25 Feb 2010 14:05:30 +0000

Well, it has been far too long since my last post. I have experienced the void that befalls most bloggers at some point in time as other challenges in life present themselves. I believe their is momentum in tendencies and habits, for good or bad. We are all “creatures of habit” and a lack of posting can be considered just as much a habit as its slightly more costly alternative of posting in terms of time, energy, effort, etc… But without further discussion I would like to present the Spring 2010′s blog feeds, discuss what changes I’ve made, and highlight a few of the better ideas from last semester.

First, while there were many great businesses last semester, more than I could discuss in this post, I would like to note two of particular interest:

An eco-friendly laundry detergent: http://madisell.blogspot.com/

A second (and still operating) example is rebound hoof-pack: http://reboundhoofpack.blogspot.com

Rebound is particularly noteworthy for how it was discovered by accident, the opportunity arising like a phoenix from the ashes of a project that just didn’t work out.. Very similar to the story of 3m’s post-it notes…

Second, what I learned from last semester is that by having teams focus their efforts on only one venture leads them to stall actually starting up until they feel that they have found a sufficiently innovative and compelling venture to start. This is not entrepreneurship, and had to change. Entrepreneurship is about starting many ventures, seeing what works out, and then putting your effort behind the venture that seems most promising. It is difficult to predict the success of many new ventures and thus deciding between opportunities is really challenging. When the costs/barriers to entry are low, some times its worth just jumping in and seeing what you learn along the way. Sometimes what you learn will turn a non-innovative business into the next big thing… but the thing is you need to “be in it to win it” and I feel that entrepreneurs often underestimate the value of learning by doing when costs are low. So this semester teams are rewarded with credit for each venture they put substantial documented effort behind. I expect that with a a portfolio of ventures, individuals will also be more willing to admit that some of their ideas were a failure and thus be more open to learning from these failures. Here’s to another great semester, glad to be back!

Finally, here are the blog feeds for the new start-up teams this semester. Great examples, albeit only one or two posts into telling their stories, of what young entrepreneurs are capable of starting with limited resources.

Here is the 2pm class (8 teams): http://goo.gl/pHPH

Here is the 5pm class (4 teams): http://goo.gl/USZW

Money is Toxic

Bill — Sun, 15 Nov 2009 16:28:22 +0000

I often get asked the question, what should I spend my seed funding on when starting up? My answer is always the same, where you can create the most customer value as quickly as possible. Intriguingly, I mean really intriguingly, a really smart venture team doesn’t need a whole lot of money to create a lot of value for customers. In fact… too much money is actually, in many ways, ToXiC. When capital is free flowing managers don’t have to scrutinize how much value is really being created with each dollar spent. Managers in this environment are prone to buy the color copier instead of the black and white version, new office furniture, mass marketing placements, secretaries, and the list goes on… How much value does each of these expenses really add to quality of the product/service the companies end consumer experiences? 0, that’s right, a big goose egg. Smart teams realize that all you need to create value is to really, truly, understand their customer’s need and to satisfy that need better than currently available alternatives. That means sacrificing in every other facet of the business, to maximize the quality and delivery of value.

Take for instance a social media consulting business. How much capital do you need to get this firm off the ground really? To deliver value (e.g., solve the consumer’s problem), all you really need is to understand the ways in which social media can be leveraged to enhance B2B or B2C relationships and then help the company implement a new social media focus. You must be responsive to customer inquiries, so perhaps an email/web enabled phone is a justifiable expense… then again, if you are like me, you rarely go more than a few hours without having access to Wi-Fi… a 2hr delay isn’t perfect, but it’s good enough when starting up… and that’s the key what is “good enough”… Settling for good enough in this example allows you to spend the extra 30-50 dollars a month you saved on your cell phone bill on Google advertising or other means of acquiring new customers, providing value, etc…

It all comes down to economics. You know that subject no one really seemed to pay attention to all that much in school. But as individuals with limited resources, the key word being limited, it means we can’t optimize (or buy the nicest choice possible) all the time or we would quickly run out of resources, and then likely find ourselves wanting down the road for something we really really need – but don’t have the resources to buy… It’s not rocket science that if you have 1000 dollars and you make a series of expensive purchases you are soon in the red, living on credit….

So the trick is, in life as in start-ups, to try to minimize the cost of anything that isn’t of any real value to you… think about your next trip to the Walmart… every trip to the store can provide you with insight into what you really value… did you buy the 89 cent 2-ply tissues because all you really want to do is blow your nose, or did you by the 3 dollar 3-ply w/ aloe tissues? Maybe the 3 dollars is a justified expense – in valuing, the value is always personal, so it’s impossible to make universal maxims… but for me I’d rather save the 2.11 dollars so that I can optimize the purchase of something other than tissues, like my TV…. I have a very expensive TV that I afforded just by minimizing many other purchases to free up the resources necessary to optimize the TV purchase… I optimized the TV because (a) I spend many hours a day watching TV, (b) I am a huge geek and it looks freaking sweet. So my personal philosophy to purchasing something is (a) how much will I use it and (b) can I get away with something less expensive and really not care all that much.

Student Initiatives

Bill — Sun, 18 Oct 2009 12:30:19 +0000

Below are a few links to some great examples of student potential when tasked with real world entrepreneurial goals. These links are aggregate feeds of the blogs being kept by the 8 teams in the 9:05 class, an the 9 teams in the 10:10 class. If any team’s post is of particular interest, you can follow the links in the aggregate feed to their individual blogs. As we are at the midpoint in the semester, these are evolving stories with lots of exciting developments to come. Cheers to all of the students of 372.

Aggregate Blog Feed for Teams in the 9:05 Class:

http://www.google.com/reader/shared/user%2F02682954300046605579%2Flabel%2F9%3A05%20Class

Aggregate Blog Feed for Teams in the 10:10am Class:

http://www.google.com/reader/shared/user%2F02682954300046605579%2Flabel%2F10%3A10%20Class

DIY Small Business

Bill — Sun, 04 Oct 2009 12:50:08 +0000

It occurred to me recently that do it yourself sites (DIY) provide a great source of information for individuals looking for a product or service idea that they might be able commercialize in the form of a small, perhaps growth oriented, business. DIY sites typically provide inexpensive solutions to consumer problems – the potential basis for a consumer value proposition in the marketplace through either the construction and sale of the DIY solution, or through the service (i.e. labor) associated with implementing the DIY solution for the consumer. Clearly not all DIY projects can be transitioned into profitable business models but some can. I have encouraged all of my student teams in MGT-372 Entrepreneurship to search through the DIY sites to find possible ways to make the $200 in sales profit required for their final project. Another part of the final project is that they must give a final pitch describing their thoughts on how they could scale from $200 in sales profit to $20,000 (e.g., show that there is a way that they could grow this business beyond a quick $200 in profit – a hard enough challenge/lesson in and of itself). While the first posts to the student’s team blogs are not officially due till this coming Monday, here is an example of a team experimenting with the creation/sale of a new laundry detergent formula principally obtained online from DIY recipes http://madisell.blogspot.com/. Just be sure to maintain a focus as you grow from your DIY roots, or risk becoming a ragdoll/handyman business of unrelated products/services – and the academic research is pretty strong that unrelated diversification ultimately undermines organizational competitiveness.

Odds & Ends

Bill — Sun, 20 Sep 2009 10:04:44 +0000

I was contemplating taking this week off from posting, but in an effort to continue posting every two weeks I’ve decided to turn what I first perceived as a problem (e.g., a lack of time this week) into an opportunity (e.g., to share a few links that I’ve found really interesting of late).

Be your own target market (great post!):

http://www.adam-mcfarland.net/2009/09/09/be-your-own-target-market/

For entrepreneurs, everyday is gameday (every Sunday I think of this post)

http://blogs.harvardbusiness.org/cs/2009/09/when_youre_an_entrepreneur_eve.html

How the healthcare mess affects entrepreneurship (the data speaks)

http://boss.blogs.nytimes.com/2009/07/27/how-the-health-care-mess-affects-entrepreneurship/

10 Under-hyped web-based applications (cool stuff!)

http://lifehacker.com/5361979/top-10-underhyped-webapps-2009-edition

Motivation, the Seinfeld calendar (great method indeed)

http://www.nevblog.com/2009/06/motivations-seinfeld-calendar.html

And finally, HowTo turn a radish into a one-up mushroom in seconds (haha)

http://lifehacker.com/5353008/turn-a-radish-into-a-power+up-mushroom-in-seconds

__________________

If you liked any of these links and would like to follow the feed of my favorite posts from around the web:

http://www.google.com/reader/shared/06062775866661414803

Elevator Pitches

Bill — Sun, 06 Sep 2009 21:26:26 +0000

If you have ever been interested in listening to entrepreneur’s pitch their latest and greatest entrepreneurial ideas, it has never been easier. In fact, it’s now a part of prime time TV. Every Tuesday night on ABC during the fall lineup @ 8 pm The Shark Tank will be airing (see http://abc.go.com/shows/shark-tank). It is a take-off of the show, The Dragon’s Den (see http://www.bbc.co.uk/dragonsden) from the UK. Both shows are very interesting and instructive.

The basic concept of a show in which entrepreneurs pitch their ideas to a panel of “sharks” or “dragons”, e.g., high net-worth venture capitalists has been replicated across more than a dozen countries/cultures (see http://en.wikipedia.org/wiki/Dragons’_Den).

Additionally, MSNBC hosts a segment in which they give entrepreneurs 60 seconds to give their elevator pitch to slightly more friendly investors than the VC’s on the Shark Tank (for example, see http://www.msnbc.msn.com/id/21134540/vp/31993614#31028165).

Ent @ JMU

Bill — Sun, 23 Aug 2009 10:35:51 +0000

Well it is official, I have moved to James Madison University in Harrisonburg, VA. It’s a great school with – similar to Skidmore – really exceptional students (albeit a lot more of them 18,500 students vs. 2,400 students at Skidmore). I will be working with some truly talented educators and scholars to bolster JMU’s entrepreneurial educational experience. This fall I will be teaching MGT-372, Entrepreneurship. As JMU has a follow-on course in venture creation MGT-472, I have developed a course which blends together many of the most successful elements from my experiences and exceptional student feedback from teaching entrepreneurship in the past in an effort to set the students up for success if they choose to pursue venture creation farther – see my earlier post with student comments here. It is my goal to extend the runway so to speak so that students are able to begin experimenting with their ideas earlier and really grasp the teachable lessons around the concept of value creation sooner rather than later. As in years past the course will be very experiential right from the beginning. However, this time around I have decided to experiment with giving the teams a variety of team challenges over the course of the semester – challenges I will describe and discuss the outcomes of in later posts in an effort to devote sufficient blog space to the reasoning of each challenge, how it relates to value creation, and what I learned from the student feedback about the take-aways from each exercise. Additionally, the course will close with every team being tasked with generating sales revenue, actually running a revenue-positive business, as in previous incantations of the course. Here’s to a new semester! Good luck all.

Owning Failure

Bill — Sun, 09 Aug 2009 10:08:18 +0000

When we think of business, we think of management. And when we think of business school, we think of people learning how to become managers. An interesting question that most people rarely ask is, what do managers actually do that is so valuable to organizations? The answer is….. they make decisions. Managers are decision-makers and thus an “expert” manager is an “expert” decision-maker. This is one reason as to why the CEO’s of large corporations get paid so much money in our society. It is assumed that these individuals are able to make better decisions than others. And they are rewarded as such.

Intriguingly, the finance literature is full of evidence that when firm performance improves, so does CEO compensation. However, when performance declines CEO pay stays relative stable. In essence, it would appear that shareholders are generally content to attribute positive firm performance to CEO leadership and negative firm performance to factors beyond managerial control – for instance, the market as a whole is down, the industry has experienced a shake-up, new regulations are looming on the horizon, etc…

People have a tendency to attribute their successes to their actions, and externalize their failures to factors beyond their control. This is troublesome because often what lead to the failure of the project can be traced to something they did, a decision they made, etc rather than to some external damning force. It’s important, in my opinion, that people “own” and accept their failures. Externalization prevents learning, prevents the possibility of “failing forward” towards success. Thankfully, the interesting thing about human biases is that if you have knowledge that they exist, you have a chance of cognitively fighting the tendency from occurring – such as the external attribution of failure.

Service Plans, A Necessity?

Bill — Sun, 26 Jul 2009 10:46:54 +0000

Another example of changing incentives I recently encountered occurred when a sales agent of a consumer electronics giant I was considering purchasing a $1200 HDTV from spent 30 minutes informing me of the quality of the HDTV, then recommend that I purchase a $200 service plan because the model I was looking at “was likely to fail overtime”. I couldn’t help but smile at the change in incentives. Having worked for the same electronics giant between high school and college, I knew that they were praised based upon the number of service plans they sold per day and that service plans represent virtually pure profit for the company (e.g., no tangible item is being sold, only a promise that if the product breaks within a certain time frame that the retailer will allow the consumer to exchange their product for a new or equivalent model – which the retailer may then attempt to ship back to the manufacturer as a defective model). Generally speaking, it’s always better to self-insure (e.g., avoid buying service plans) if you can afford to replace the product if it fails. If you can’t afford to replace it and want to pay someone else to take on the risk it is understandable, or if consumer reviews suggest that the product has a really high failure rate and you still want to buy it (ex., the Xbox when it was first released, you might have wanted one even though they were really low in reliability).

However, if you can afford to self-insure you’re better off in my opinion for several reasons.

(A) You have 30 days typically to return the product to the retailer along with a manufacturer’s warranty which typically lasts for another 60 days to a year. Often when it comes to technology, if the product has worked well for the first 30 days, it is likely to work well free of failure for the normal lifetime of the product. Insurance plans generate profit for businesses because most people don’t cash in, e.g., experience a recoverable failure. Which leads us to…

(B) Not everything is covered in a service plan. What if what causes the device to fail is something that is a technicality that the business won’t reimburse?

(C) Finally, the money you spend on the service plan is money that you can’t spend on the next item you will inevitably wish to buy sometime down the road to replace the item you are currently buying when it becomes obsolete. It is almost inevitable, particularly with technology, that you will want what’s new e.g., in 3 years you will want the newest iPod, not an equivalent of your 3 year old iPod.

What if a sales associate said to you “You can buy this TV for 1200, and a service plan for 200 to replace it for 3 years, or you can save the 200 dollars to put towards the purchase of your next TV and 3 years from now what you can get in a 1200 TV is going to be way cooler than what this one offers… or if three years from now you want a similar TV to this one you can probably buy it for a third of what it costs today or say 800 dollars so the 200 dollars you save will represent 25% of the cost of your next TV…” Intriguingly, often when you rephrase decisions in a way which emphasizes the opportunity costs individuals make different decisions based upon the new perspective afforded by a reframing of the problem. Thoughts?