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Stanford Engineering Professor Bernard Roth, a founding faculty member of the university’s renowned design institute, told audience members attending one of his recent talks at Stanford University how to “stop wishing, start doing and take command of your life.” That’s the subtitle of Roth’s new book, The Achievement Habit, and he summed it up in terms verging on blasphemous to the science-loving attendees of the April 13 talk. He disputed the wrinkled, green Jedi’s famous line in Star Wars: The Empire Strikes Back: “Do. Or do not. There is no try.” To that, Roth stated flatly, “Yoda was wrong.” Risking the wrath of sci-fi fans everywhere, Roth explained that there is indeed a “try” and a “do.” “There’s really nothing wrong with trying to do something, and there’s certainly nothing wrong with doing it,” he said. “The problem is when you think they’re the same thing.” https://youtu.be/TowYF3-9rFM That assertion is at the heart of Roth’s teaching over the past 40 years, at Stanford and in workshops around the world. Initially offered as classes in creativity, Roth’s teaching has grown to encompass all that goes into “design thinking,” which is rooted in engineering’s focus on building solutions to problems and involves human-centered need finding, prototyping and iterating. More commonly known on campus as “Bernie,” Roth is a Jedi in his own right. He is the Rodney H. Adams Professor of Engineering at Stanford and is a longtime veteran of the university’s design scene, first joining the faculty in 1962. He has a worldwide reputation as a researcher in kinematics and robotics, and his most recent activities have moved him more strongly into experiences that enhance peoples’ creative potential through the educational process. Roth currently serves as the academic director of the d.school, known formally as the Hasso Plattner Institute of Design at Stanford. It has become a hub for innovators throughout campus, where students and faculty in engineering, medicine, business, law, education and the humanities converge “to take on the world’s messy problems together.” At his talk for the Entrepreneurial Thought Leaders Seminar (MS&E 472), Roth acknowledged that his current thinking seems to run contrary to the ethos of design thinking, which focuses on the problems of others, not the ones doing the thinking. But let’s face it, we all have problems — and Roth was intent on proving that the tools for unlocking solutions that he has developed would work for everyone in the audience. In keeping with his emphasis on “doing,” rather than simply talking, Roth showed attendees how to reframe problems in a way that increases what he called the “solution space.” He told audience members to: Think of a problem in your life. Ask yourself what solving that problem would do for you. Turn the solution into the question you need to answer. For instance, one person told Roth that he is slow to get out of bed in the morning. And when Roth asked him what getting out of bed would do for him, the man said it would allow him to get more work done during the day. “So the question is how to get more work done. It has nothing to do with getting out of bed,” Roth replied. “I can figure out a way to stay in bed and get more work done, as an example.” In his book, he calls this “moving to a higher level,” and he applies it to profound problems that everyone faces. He starts with the question “How might I find a spouse?” and then turns it into a declarative sentence that sounds more like a challenge: “Find a spouse.” He then asks, “What question is ‘Find a spouse’ the answer to?” This unlocks a long list of possibilities, including: How might I get companionship? How might I get taken care of? How might I stop working? How might I have (more) sex? “Each of these questions, regarded as a problem, has many possible solutions,” Roth writes in <The Achievement Habit. “Finding a spouse is just one solution to each of these. In actuality, it may not be a very good solution to any of these problems.” However, Roth also cautions that doing isn’t always a virtue, and in his book, specifically calls out Silicon Valley’s obsession with change. In this high-speed, hyper-competitive business environment, companies are always doing something new out of fear that they will stagnate and fold without constant innovation. The problem, Roth writes, is when we let that notion rule our personal lives. “Often the things we strive for only represent more of something we already have: money, fame, appreciation, love,” he explains. “It’s an endless chase; as the saying goes, you can’t get enough from more.”

In the startup world, there may be no such thing as becoming too successful. But for those few ventures that end up growing into a consumer business that reaches massive scale, well, it can get complicated. In the early days of Airbnb, when its founders were happy to just get out-of-towners into their San Francisco loft in order to make rent, they probably didn’t think they would need to worry about how the entire city felt about their business. But because of how wildly successful Airbnb is today, they do now. The company raised over $8 million to defeat a measure on last November’s ballot that would have imposed tighter restrictions on short-term rentals in San Francisco. The debate over the measure reached from city hall to the radio airwaves and overshadowed even the mayor’s race. Opponents included Airbnb and the many hosts who list their properties on the site, while those for the measure were San Francisco residents claiming that the constant stream of Airbnb guests was eroding a sense of community. And that sums up the disruptor’s long-term dilemma: When a startup grows to a point where it is in the public eye, the number of people who feel they have a stake in the venture grows. In short, it becomes their business, too. Chuck Eesley, an assistant professor of management science and engineering at Stanford, has studied how different stakeholders protest corporate behavior — from religious groups that file civil lawsuits, to environmental activists who hold rowdy public protests to attract news vans and bad press for the business. “Innovators and entrepreneurs need to recognize that along with technological disruption, often comes social disruption,” said Eesley, who researches entrepreneurship at the Stanford Technology Ventures Program. “These companies need to be aware of what kinds of regulatory battles might be in their future as a result of their innovation.” “These companies need to be aware of what kinds of regulatory battles might be in their future as a result of their innovation.” - Chuck Eesley Eesley’s study, published online in the Strategic Management Journal, looked at more than 1,300 actions brought against firms by social activists over the span of 30 years to pressure more environmentally responsible corporate behavior. The journal article, “Through the Mud or in the Boardroom: Examining Activist Types and their Strategies in Targeting Firms for Social Change,” was co-authored by Katy DeCelles, an associate professor at the University of Toronto’s Rotman School of Management, and Michael Lenox, a business professor at the University of Virginia and academic director of the Batten Institute for Entrepreneurship and Innovation. Unrest in the valley While their study focused on protests over environmental concerns, some of the findings bear upon some of the most high-profile social challenges currently facing Silicon Valley — tech titans and upstarts alike. Specifically, Eesley and his fellow researchers found that different types of stakeholders tend to employ different protest strategies: “Internal” stakeholders such as activist investors often worked within the system to affect change, like calling for shareholder proxy votes or filing a civil lawsuit. Meanwhile, “external” stakeholders such as social-movement organizations (SMOs) like Greenpeace were more likely to adopt openly confrontational tactics meant to shame firms in the eyes of the press and public. In the tech sector, one such SMO is Silicon Valley Rising, a new labor movement comprising hundreds of janitors, cooks, maintenance workers, receptionists and security guards, all demanding better pay and conditions from the highly successful tech companies that employ them. As for the analog for internal stakeholders identified in Eesley’s study, an excellent example would be Tracy Chou, a female engineer at Pinterest who sparked a national dialog about the glaring lack of women technologists in the valley via her 2013 blog post about gender imbalance. Maybe it’s because she was an “insider,” or the fact that she could speak in a way that relates to her fellow programmers. But one thing’s for sure: Chou’s initial commentary has bent the ear of the entire industry — from the CEO and co-founder of Pinterest vowing to lead the way in diversifying its ranks, to the heads of Apple, Intel and other tech giants now publicly reporting their diversity numbers (or lack thereof). Initially, Chou says public accountability wasn’t part of her plan. But she did want the issue to be discussed industry-wide, and without the blogosphere, she would not have been able to share her thoughts so broadly. “I wasn’t that intentional about it to start, but I think it’s important that these discussions be happening, and the way to provoke them is by being public about the message and the stories,” Chou said. “I think it’s important that these discussions be happening, and the way to provoke them is by being public about the message and the stories.” - Tracy Chou “I think I have a lot more credibility coming from the inside and being someone who has all the ‘right’ credentials,” she added. As it turns out, Chou has ties to both the Stanford Technology Ventures Program and to Eesley in particular. While at Stanford, Chou belonged to STVP’s 2009 cohort of the Mayfield Fellows Program; and as a research assistant for Eesley, Chou helped analyze large databases for his comprehensive study on the economic impact of entrepreneurship and innovation at Stanford. “She had this interest in using data and analyzing data in order to shed light on companies,” Eesley said of Chou. “Now, as an employee in one of these companies, she realized that there was variation across the firms, and that perhaps we should start collecting data and tracking it over time.” Going forward, the measure of a startup’s success may depend not just on how disruptive it is initially, but how responsive it is as the business grows and stirs up the pot of public sentiment.

It’s easy to see why much of America sees Silicon Valley as out of touch, even as we tap and swipe our devices with renewed vigor each time an entrepreneur churns out a new app. Exhibit A: Tech workers in San Francisco make news when they develop an algorithm that does exactly what the startup founders in the HBO comedy series Silicon Valley are pitching to investors. As you might guess, veterans in the valley have a more nuanced view. Some liken seemingly frivolous apps to baby steps by young entrepreneurs, who could very well go on to launch more important and influential technological innovations as they mature. Others are trying to show the next wave of founders a different path. The one that longtime entrepreneur and investor Mike Lyons wants them to take is more of an uphill climb. He currently chairs a cybersecurity company doing “converged infrastructure virtualization,” based on technology developed through a tech-transfer partnership with Pacific Northwest National Laboratory (PNNL). In 2002, he founded SafeView, Inc., which originally licensed the millimeter-wave technology now used around the world in airport security screening systems. The technology was developed with government money at PNNL, and SafeView invented the imaging system for screening individuals. So, while Lyons is passionate about entrepreneurship, he doesn’t get too excited about the next messaging or mobile-game app. “A lot of that stuff is just polishing the apple,” says Lyons, also a director of an Internet-of-Things company in the valley. He wants to see technology taking on bigger, more complex challenges. And that’s why, since 1988, Lyons has taught the course Technology Venture Formation in Stanford’s Department of Management Science & Engineering (MS&E). Along with two other experienced entrepreneurial instructors, the class brings together graduate students — mostly from the engineering school and graduate business school — to work in teams on a technology that has “a critical innovative advantage that will provide sustainable differentiation.” Among the more than 200 companies that the teaching team estimates alumni of the course have launched are a startup focused on crop science that champions economic and environmental sustainability, a company that provides open software-defined networking solutions, and Skybox Imaging, the micro-satellite maker acquired by Google for $500 million. Serious businesses. “I don’t mind apps and things like that,” says Lyons, a consulting associate professor in the MS&E department. “I just think people should understand the difference between building companies that leverage a previously built, trillion-dollar infrastructure, and ones that are building technically significant products from the ground up, or that leverage such infrastructures in disruptive ways, like Uber.” Think wireless infrastructure, chip fabs, open-source and operating systems. In regards to the lean-startup approach, which advocates for the development of a “minimum viable product” (MVP) and iterative product releases based on customer feedback and data, Lyons says it is a method that makes sense for technologically “light” projects. But he adds that the notion that a handful of engineers can build an MVP over a few weekends does not apply across all startups. “If it’s one of these deep technology products, that’s just nonsense. That’s just not going to happen,” Lyons says. “The MVP could take two years to build.” And those are exactly the kind of innovations he and the rest of the teaching team see in the version of Technology Venture Formation offered in Stanford’s Department of Civil and Environmental Engineering. Students from that class have launched ventures like PlanGrid, a construction app that digitizes blueprints and allows all team members to collaborate on a project via an intuitive interface. Another startup, Mango Materials, aims to transform waste into affordable eco-friendly materials that are competitive with oil-based plastics through a microbial process involving the biogas methane. Mango Materials CEO Molly Morse, who took an earlier version of the civil and environmental engineering course while working toward her Ph.D., says her company is currently getting paid for its products. But to have a meaningful impact in the world of plastics, Morse explains that her operations need to be at the “million-pound-plus scale.” “When we started Mango Materials, we wanted to change the way people think about methane and the fate of plastics in the environment in a big way,” the biocomposites engineer says. “Impactful entrepreneurship to us, is not just creating a new business, it is critically thinking through how our technology can touch people’s lives and the planet.” Other projects in the course have addressed housing and energy infrastructure in developing countries, while some teams have proposed ambitious infrastructure projects like sewage-treatment processes that would generate electricity to power a community. “It’s fantastic because you’re not consuming – you’re net neutral on the grid. You don’t have to buy power to run the sewage-treatment plant,” Lyons said. “Students who really want to make an impact are turning towards this kind of entrepreneurship.”

I was raised to view hierarchy as a bad thing. My late father, an entrepreneur, often ranted about the idiocy he battled in the corporate and government bureaucracies that made life difficult for his little company. He loved the Peter Principle because, to him, it explained why so many organizations were packed with people who had risen to their level of incompetence. Perhaps because of my upbringing, I have always been drawn to arguments — such as management guru Gary Hamel makes — that “bureaucracy must die” and that top-down control is “toxic.” Given my ingrained biases, I was taken aback by my own answer during an interview with McKinsey partner Rik Kirkland. He was interviewing me about Scaling Up Excellence, the book that Huggy Rao and I came out with in 2014. Rik closed the interview by asking what I learned from our scaling research that surprised me most. I immediately said something like, “I have always despised hierarchies in my heart, but this research taught me that they are good and necessary — of course some are good and others are bad, but spreading and sustaining excellence depends on having an effective pecking order.” As I told Rik once the filming stopped (it was a video interview that appeared on the McKinsey Quarterly site), I was surprised to hear my own answer to his question about surprises! Huggy and I reached this conclusion for two main reasons. I still feel a bit ambivalent about it, but the evidence is overwhelming: Hierarchy is inevitable. As our Stanford colleagues Deb Gruenfeld and Lara Tiedens show in a detailed review of research on hierarchy, although the forms it takes vary wildly, it is impossible to find groups or organizations where all members have roughly equal status and power. Whether researchers study people, dogs, or baboons, hierarchies are evident after just minutes of observation. And when strangers meet for the first time, a hierarchy of leaders and followers begins to emerge immediately. This rapid development of pecking orders is seen, for example, in groups of college students who meet in psychology experiments and when strangers start chatting on the street corner — leaders, followers and other signs of status differences nearly always emerge (along with more subtle roles such as “joker,” “hero” and even “scapegoat”). Gruenfeld and Tiedens conclude: “When scholars attempt to find an organization that is not characterized by hierarchy, they cannot.” Organizations that are celebrated for their lack of hierarchy may downplay and reduce status differences, but they always have some people with greater formal and informal power than others — and associated pecking orders. And eliminating titles such as “manager” or “supervisor” doesn’t make the hierarchy disappear. For example, there has been a lot of talk lately about Zappos’ ongoing reorganization into something they call a “holacracy.” Some headlines suggest that the company is getting rid of bosses — that isn’t quite right. While more power is being pushed down the hierarchy, it persists under the new structure. More responsibility is being placed as people are moved into “circles” (which sound much like self-managing teams). Yet even though they have stopped using the word “manager” for many roles, there are still people who perform what sounds like middle-management roles to me: They are responsible for staffing teams and dealing with employee performance issues. And, while Zappos is getting rid of a lot of titles, note that Tony Hsieh is still called the CEO. Hsieh may delegate and empower people more than many CEOs. But Wired’s cute claim that he is “the boss that isn’t” strikes me as somewhat misleading. As I discussed with Jena McGregor when she interviewed me for the Washington Post article she wrote on the change, Hsieh is using his power and position at the top of the pecking order to institute the new structure (which seems like a good idea, at least based on what I learned about it). In fact, this kind of claim that an organization is non-hierarchical because the top dog wields his or her power to push greater responsibility and accountability down to lower levels is also seen in hype about other companies including IDEO and W.L. Gore. Yes, when people are given decision-making power and have the requisite confidence and skills, leaders do not need to monitor or coach them as closely – but there is still a hierarchy and certain people have more decision authority than others. In short, if you can find a group of people (or dogs or baboons) without a hierarchy, I want to hear about it. Yes, power and status differences are sometimes reduced, but hierarchy is a fact of organizational life. Organizations and people need hierarchy. While there is no doubt that some hierarchies are better designed than others, an interesting test is what happens when there is little or no consensus about who has more – and less — power. Gruenfeld and Tiedens describe a series of studies showing that when such agreement is absent (so the nature of the formal or informal pecking order is not clear), members become less committed to their groups, less productive and effective, dysfunctional competition for status emerge, and coordination and cooperation suffer. Another interesting test is what happens when layers of management are removed in a company. Certainly, some organizations have too many layers, but some quite famous founders have discovered that they need intermediate layers — even though they long for the good old days when it was just them and a small team. Google Co-Founder and CEO Larry Page is exhibit one. As we wrote in Scaling Up Excellence: ‘Page has been described as “obsessed with making Google work like a smaller company.” In 2001, when Google grew to about 400 people, Page decided that middle managers were creating complexity and friction — symptoms of John Greathouse’s “Big Dumb Company Disease.” So he got rid of all of them. More than 100 engineers reported to a single overwhelmed executive. Frustration and confusion was rampant. Without those middle managers, it was nearly impossible for people to do their work and for executives to grasp and influence what was happening in the company. Page learned the hard way that a hierarchy can be too flat and that middle managers are often a necessary complexity.’ The upshot is that, as you scale an organization, getting rid of the hierarchy — or even assuming that a flatter one is better — is the wrong goal. Your job is to build the best hierarchy you can. An earlier version of this article appeared on LinkedIn. Bob Sutton is on Twitter @work_matters.

Nowadays, it seems every budding startup claims its new app, product or service will change the way you live. But before passively accepting hyperbole as the new norm, let’s instead ask the question: What does real impact looks like? It’s fine if friends want to post “Best. Ever.” with a phone pic of the burger they just ordered down the street, or rave about some new fashion accessory by typing, “How did I ever live without this?” But we all know what it means to truly make a difference in people’s lives, don’t we? Venture capitalist Mike Maples, Jr. certainly wasn’t exaggerating when he ended his presentation at the Entrepreneurial Thought Leaders Seminar by daring students at Stanford to “only do things that you think have a chance to be legendary.” His VC firm Floodgate invested early in Twitter, TaskRabbit and Lyft, all of which have had a deep and ongoing impact on society. And for Maples, they don’t conjure up images of cute birds, bunnies and bright pink moustaches, either. Rather, he regards them as “thunder lizards,” startups so disruptive that they don’t just redefine markets, they demolish them like Godzilla. https://www.youtube.com/watch?v=lzD26GOA2FU Step outside Silicon Valley, and the definition of “impact” can take on new dimensions. Even just beyond the San Francisco Bay Area bubble, community leaders want tech innovation to address more basic social ills born of poverty and inequity. In the town of Stockton, Calif., city councilman and mayoral candidate Michael Tubbs challenges the tech industry to turn its attention to problems such as racism and illiteracy. The best coders in the world may never develop apps for those issues. But as someone who came from the town once known as the biggest American city in history to declare bankruptcy – and then went on to earn undergraduate and graduate degrees from Stanford on full-ride scholarships – Tubbs draws from both perspectives when he calls for today’s innovators to focus on real-world impact. https://www.youtube.com/watch?v=VqhSjVe9iB8 That mission is at the center of the world’s greatest institutions, from the United Nations to universities such as Stanford. While Hollywood and humanities majors around the country continue to portray Stanford as being singularly focused on churning out the next Google or Instagram, there’s no denying that the university seeks to solve society’s most intractable problems. Last month, Stanford announced that it will launch the largest fully endowed scholarship in the world in order “to prepare a new generation of global leaders with the skills to address the increasingly complex challenges facing the world.” With a total endowment of $750 million, the graduate-level scholarship will begin accepting applications in the summer of 2017 from students everywhere who have the passion and potential to solve global challenges affecting the environment, health, education and human rights. “We will bring together outstanding, courageous scholars to benefit from Stanford’s innovative educational environment, who then go on to lead governments, businesses, nonprofits and other complex organizations and develop creative solutions to effect positive change,” University President John Hennessy said at the time of the announcement. Also speaking recently at the Entrepreneurial Thought Leaders Seminar, Hennessy reflected on his 16 years leading the university and his achievements in industry as a computer-science pioneer. Perhaps most notably, he said entrepreneurship isn’t just about starting a business. It’s about transforming an idea into something real that can have wide impact: https://youtu.be/Qr5ve4NhP4E Hennessy steps down as Stanford’s president this summer, at which point he will serve as the inaugural director of the new scholarship. In honor of his leadership at Stanford, and the generosity of alumnus and Nike Co-Founder Philip Knight, it has been named the Knight-Hennessy Scholars Program.

If you ask, experienced entrepreneurs will make it very clear how difficult their job is, and how slim your chances are of launching the next Uber or Facebook. And yet, around the world, the allure of entrepreneurship grows stronger by the day. It coincides with the mantra that innovation is the answer to all of life’s shortcomings. So, especially in innovation hubs like Silicon Valley, everyone wants to “do a startup” just to do it. And we’re doing it at a time when books, classes and other resources have all but demystified the art of entrepreneurship and turned it into a step-by-step process. Couple that with readily available startup money from a crowded field of venture capitalists competing to back that next game-changer, and you can go from zero to launch in no time. The challenge is knowing if what you’re building is exactly what customers want before you’ve blown all that capital on hiring top talent and building the actual product. Traditionally, that was called “market research.” Then in 2008, with the introduction of the “lean startup” approach by Eric Ries, entrepreneurs turned to business-hypothesis-driven experimentation and iterative product releases based on customer needs. At around the same time, Alberto Savoia, a two-time entrepreneur and early employee of Google, began urging entrepreneurs to “pretotype” before they prototype. Savoia was the search giant’s first engineering director and most recently held the title “Innovation Agitator” at Google before leaving in 2012 to focus on spreading his idea to help you ensure that “you are building the right it before you build it right.” The premise of Savoia’s approach is that most new ideas fail in the marketplace not because they are poorly built or executed, but because they were the wrong idea to pursue in the first place. In his 2011 book Pretotype It — a 75-page manual that begins with the disclaimer that it is itself a pretotype — Savoia states that 90 percent of mobile apps don’t make any money, and 80 percent of startups lose money for the investors. To show that even the most proven innovators are likely to fail, he includes slides in his standard presentation that are riddled with the logos of killed initiatives at Google and Microsoft. The Google Graveyard The Microsoft Morgue (Images courtesy of Pinterest) “We assume too much, plan too much, hope too much … and test too little,” Savoia says. His approach offers multiple techniques for pretotyping something to determine whether you’re building the “right it.” All are ways to test a product or service with minimal build-out, use of resources or emotional attachment. For instance, at Stanford, where Savoia is an educator-in-residence, students came up with a potential business idea called “Second-day Sushi.” Would cash-strapped college students buy day-old sushi from a campus eatery if labels said so and offered a 50 percent discount? Would enough of them be persuaded by the catchphrase “Nothin’ fishy about it!” to make Second-day Sushi an idea worth fleshing out further? [embed]https://player.vimeo.com/video/167921012?title=0&byline=0[/embed] Many of Savoia’s pretotyping techniques reflect his clever approach to experimentation and his focus on “time to data”: How quickly can you get real-world data to support or invalidate your idea. For the students, he proposes printing out some simple stickers that say “Second-day Sushi, 1/2 Off” and placing them on half the sushi containers sold at the eatery. Then, he would stand back and count how many students bought sushi that day, and how many of them chose the discounted containers. From his time at Google, Savoia prefers decisions be backed by numbers. So, he specifies that at least 20 percent of students would have to buy Second-day Sushi to consider it a successful experiment. Savoia is quick to add that the eatery’s permission might be needed to conduct such a pretotype. But even without it, he says students could be stopped before they bring containers labeled Second-day Sushi to the cash register, told that it was just an experiment, and that they are actually holding fresh fish. And in return for unknowingly participating in this market test, you offer to pay for their lunch. “Students get a free sushi box and you get real data,” Savoia says, “not just some fuzzy opinion that provides no metric for success.” This experiment embodies an approach to many of Savoia’s pretotyping techniques, which is, “test before you invest.” And while Savoia acknowledges some overlap between the meaning of pretotype and prototype, he does draw an important distinction: “A key difference between pretotypes and prototypes is that the cost and timeframe for pretotyping is at the lowest end of the spectrum that is usually covered by prototyping,” he explains in his book. “It’s acceptable for a prototype to take months or years of development and cost millions of dollars. In contrast, it’s definitely not acceptable for a pretotype to take that long or cost that much.” He adds, “One of my standard challenges is the ‘24/24.’ Can you get me real-world data in 24 hours or less for $24 or less?” Alberto Savoia is an educator in residence at the Stanford Technology Ventures Program (STVP).

I require my students at Stanford to write a failure résumé. That is, to craft a résumé that summarizes all their biggest screw-ups — personal, professional, and academic. For every failure, each student must describe what he or she learned from that experience. Just imagine the looks of surprise this assignment inspires in students who are so used to showcasing their successes. However, after they finish their résumé, they realize that viewing experiences through the lens of failure forced them to come to terms with their mistakes and to view them as a great source of data about what works and what does not.* On the most basic level, all learning comes from failure. Think of a baby learning to walk. He or she starts out crawling and falling before finally mastering the skill that as an adult we take for granted. As a child gets older, each new feat, from catching a baseball to doing algebra, is learned the same way, by experimenting until you are finally successful. We don’t expect a child to do everything perfectly the first time, nor should we expect adults who take on complex tasks to get it all right the first time. So, how do you prepare yourself for inevitable failures? People who spend their time on creative endeavors know that failure is a natural part of the creative process and are ready when it happens. Jeff Hawkins, founder of Palm, Handspring, and Numenta, gets worried when things go too smoothly, knowing that failure must be lurking around the corner. When he was running Handspring, everything was going swimmingly for the release of the original “Visor”, a new personal digital assistant. But Jeff kept warning his team that something would happen. And it did. Within the first few days of the release of their first product they shipped about 100,000 units. This was remarkable. But the entire billing and shipping system broke down. Some customers didn’t receive the products they paid for, and others received three or four times as many units as they ordered. This was a disaster, especially for a new business that was trying to build its reputation. So what did they do? The entire team, including Jeff, buckled down and called each and every customer. They asked each person what he or she had ordered, if they had received it, and whether they had been billed correctly. If anything wasn’t perfect, the company corrected it on the spot. The key point is that Jeff knew something would go wrong. He wasn’t sure what it would be, but was prepared to deal with anything that came their way. His experience has taught him that failure is inevitable, and that the key to success is not dodging every bullet but being able to recover quickly. Most individual’s paths are riddled with small and enormous failures. The key is being able to see these experiences as a chance to evaluate valuable data, and to move on. For most successful people, the bottom is lined with rubber as opposed to concrete. When they hit bottom, they sink in for a bit and then bounce back, tapping into the energy of the impact to propel them into another opportunity. A great example is David Neeleman, the founder of JetBlue. David initially started an airline called Morris Air, which grew and prospered, and he sold it to Southwest Airlines for $130 million. He then became an employee of Southwest. After only five months David was fired. He was miserable working for them and, as he says, he was driving them crazy. As part of his contract he had a five-year non-compete agreement that prevented him from starting another airline. That seemed like a lifetime to wait. But after taking time to recover from this blow, David decided to spend that time planning for his next airline venture. He thought through all the details of the company, including the corporate values, the complete customer experience, the type of people they would hire, as well as the details of how they would train and compensate their employees. David says that getting fired and having to wait to start another airline was the best thing that ever happened to him. When the non-compete period was over, he was ready to hit the ground running. He was able to turn what seemed like a terrible situation into a period of extreme productivity and creativity. https://youtu.be/aP2bd2uLgTU David Neeleman, in 2003, shares this story at the Entrepreneurial Thought Leaders Seminar. Tackling new challenges in all domains requires a willingness to take risks, and a high chance of failure. However, risk taking is not binary. Each of us is comfortable taking some types of risks and find other types quite uncomfortable. You might not even see the risks that are comfortable for you to take, discounting their riskiness, but are likely to amplify the risk of things that make you more anxious. For example, you might love flying down a ski slope at lightning speed or jumping out of airplanes, and don’t view these activities as risky. If so, you’re blind to the fact that you’re taking on significant physical risk. Others, like me, who are not physical risk takers, would rather sip hot chocolate in the ski lodge or buckle themselves tightly into their airplane seats than strap on a pair of ski boots or a parachute. Alternatively, you might feel perfectly comfortable with social risks, such as giving a speech to a large crowd. This don’t seem risky at all to me. But others, who might be perfectly happy jumping out of a plane, would never give a toast at a party. By my accounts, there are six primary types of risk: physical, social, emotional, financial, intellectual, and ethical. For example, I know that I’m comfortable taking social risks but not physical risks. In short, I will readily start a conversation with a stranger, but please don’t ask me to bungee jump off a bridge. I will also happily take intellectual risks that stretch my analytical abilities, but I’m not a big financial risk taker. On a trip to Las Vegas I would bring only a small amount of cash, to make sure I didn’t lose too much. I ask my students to map their own risk profile. With only a little bit of reflection, each person knows which types of risks he or she is willing to take. They realize pretty quickly that risk taking isn’t uniform. It’s interesting to note that most entrepreneurs don’t see themselves as big risk takers. After analyzing the landscape, building a great team, and putting together a detailed plan, they feel as though they have squeezed as much risk out of the venture as they can. In fact, they spend most of their efforts working to reduce the risks for their business. If you do take a risk and happen to fail, remember that failure is a natural part of the learning process. And, most important, if you aren’t failing sometimes, then you probably aren’t taking enough risks. * I include my own abbreviated failure resume in, What I Wish I Knew When I Was 20, published by HarperCollins.

This article originally appeared in the Stanford Report. Downtown San Jose, Calif. (Credit: Wikimedia Commons) From humble beginnings known for its fruit orchards, Silicon Valley has transformed into the heartland of entrepreneurship and innovation in the United States. Each year hundreds of budding entrepreneurs from all over the world descend on Silicon Valley in search of the secret sauce. What makes this environment ripe for creativity and innovation? Can the environment be replicated in another country? Charles Eesley, an assistant professor in the Department of Management Science and Engineering and at the Stanford Technology Ventures Program, has been studying the implications of institutional change for entrepreneurship in the United States, China and Japan. This week, a study by Eesley and collaborators Delin Yang, a professor at Tsinghua University, and Jian Bai “Jamber” Li, a doctoral student at Stanford, was published in Organization Science that analyzes the successes and failures of one of China’s primary efforts to encourage innovation. The work looks specifically at Project 985, an educational reform program funded and implemented by the government of the People’s Republic of China and launched in 1998. It sought to foster a belief in the importance of innovation among students of 39 partner universities, with Tsinghua University and Peking University each receiving a current value of nearly $276 million. This funding provided new classes and programs on innovation and commercialization, recruitment of accomplished researchers from overseas institutions and corporations to teaching positions, construction of new facilities and acquisition of new equipment needed for advanced research. Following is a Q&A with Eesley about his research: What did your research reveal about innovation funding and outcomes in China? Government funding provided additional resources both in classrooms and in the lab, and students graduating from the Project 985 universities were significantly more likely to create innovative, high-tech firms. However, when they commercialize their technologies in a startup, they find that innovating in a manner advocated by Project 985 negatively impacts firm financial performance. How does Project 985 negatively impact firm performance? It turns out that political networking results in better firm performance in the Chinese context. This is a counterintuitive result. From a U.S. perspective, you would expect the additional funding for research and development would lead to more innovative products that would result in better firm performance. The other institutions in the U.S. that are implemented to support startups, such as intellectual property and antitrust laws, are lacking in their enforcement in China. Also, state-owned enterprises are often favored and it often becomes difficult for a startup to compete against a state-owned enterprise no matter how innovative the product. We found that those students influenced by Project 985 reform were less likely to engage in political networking and more likely to spend time and invest in research and development activities. They thought that the great technology that they developed was enough to succeed and they were actually spending time on activities not linked to better firm performance. Shanghai skyline at night. (Credit: Wikimedia Commons) How would you compare entrepreneurship in China to Japan and the United States? A big part of my research is that environment shapes the type of entrepreneurship for a specific region. China, the U.S. and Japan all have very different cultural and institutional environments. The forms of entrepreneurship that you see are a reflection of the policies at each place. Each of these markets is at a different stage of their development. In the Chinese market over the past decade, they have been going through a boom in manufacturing that the U.S. and Japan went through a couple of decades ago. The U.S. economy has moved more fully into services and the type of entrepreneurship that you see is focused on e-commerce, health care, financial services – and less about agriculture and manufacturing. The Japanese economy is also advanced. With their aging economy, low-end manufacturing is becoming more commoditized and moving into robotics and high-end manufacturing. Some of the market struggles that we are seeing in the Chinese economy are a reflection of transitions taking place. The services industry is one of the fastest growing in China and manufacturing is slowing down. The million-dollar question: Is there a formula for boosting innovation and entrepreneurship that can be replicated? It is complicated and there are a lot of factors. There are institutional policies and culture, both of which take time. What we learn from this study is that sometimes changing just one policy in isolation is not effective and we need other complementary policies to be enforced as well. For instance, Taiwan mimics U.S. policies. However there is something about the education system in the U.S. that allows students to be creative and think outside the box and do something different. To purely compete on efficiency and low cost is very difficult over time and you don’t gain the higher profit margin from offering a differentiated product or service. You have to consider both the policies, and their correct implementation, and the cultural environment. Educational institutions have an important role to play as well both in technical education as well as in entrepreneurship education and informing policymakers. In the end, it’s a bit of copy and adapt depending on the local environment.

These days, organizations across the board claim to be focused on innovation. But when you look at how well different types of entities responsible for bringing new products and services into the world actually do so, some are better than others. The most obvious type of organization that helps launch new products is a venture capital firm, which funds entrepreneurs and often works with them to bring their concepts to market. Another is corporate venture capitalists, who typically work within a larger corporate structure and seek to acquire innovative startups that can be folded into the parent company. A third entity is government, which supports innovation by issuing grants for groundbreaking research and for early-stage development of entrepreneurial ventures. Among those three flavors of funding partners, traditional venture capitalists (VCs) fueled the most innovation, according to a recent study by entrepreneurship researchers from the Stanford Technology Ventures Program (STVP), the entrepreneurship center in the university’s Department of Management Science & Engineering (MS&E). Their study, “Who Takes You to the Dance? How Partners’ Institutional Logics Influence Innovation in Young Firms,” is published in the journal Administrative Science Quarterly. The study’s co-authors include STVP-affiliated faculty Riitta Katila and Kathleen Eisenhardt, both professors in MS&E. The lead author is Emily Cox Pahnke, an assistant professor of management at the University of Washington, and a graduate of STVP’s Ph.D. program. “We attribute these differences to VCs having a closer advisor relationship with the venture,” said Pahnke, whose dissertation provided the data for this study. She added that traditional venture capitalists are driven by better-paced and more motivating milestones than either corporate VCs or government agencies. The authors studied almost 200 ventures in the United States, over a 22-year period, that make minimally invasive surgical devices, counting which ones received the highest number of patents and FDA approvals. The ones that worked with VC firms performed the best, primarily because their professional norms and practices made them more nimble and nurturing funding partners than corporate VCs or government agencies. Regardless of the type of funding partner — venture capitalists, corporate VCs or government agencies — all proved to be good at selecting innovative ventures and having valuable technical and commercial resources on hand. The problem, the researchers concluded, was that the latter two were less involved during the relationship. Traditional VCs, especially those in boutique firms, are deeply engaged with the entrepreneurs they fund, serve as advisors and sit on the boards of their startups, the co-authors explained. Corporate VCs, on the other hand, turned out to be less effective partners because the complex division of labor within corporations, and broader strategic goals, seem to hinder progress and slow the decision-making process. Meanwhile, the entity with perhaps the most altruistic reasons for seeing society advance through scientific and technological innovations proved to be the least effective funding partner. The effort on the part of government agencies to be fair and treat all private ventures equally resulted in particularly passive relationships, cookie-cutter approaches and “one size fits all” resources, according to the study. In the field of surgical devices, the primary government agency that funds firms is the National Institutes of Health (NIH), which issues grants to support both technical breakthroughs that advance science, and commercial innovations that can improve public health. However, despite the NIH’s immense technical and informational resources, they remain largely out of reach because of the agency’s hands-off approach. “So, then the question becomes whether it should be the government’s role to support startup innovation,” said Katila, whose research is at the intersection of technology strategy and organizational learning. Given how important innovation is for society, she admits that she and her co-authors were disappointed to see government not outperform the other types of funding partners. But on a positive note, Katila said that their findings can show the public sector how to be better backers of innovation by identifying what works best in the private industry. The government is beginning to catch on: The U.S. Patent and Trademark Office recently opened a regional office in Silicon Valley to save entrepreneurs on the West Coast a trip to Washington, D.C. And over the last few years, several government agencies — including the NIH — have trained their scientists and researchers in the “lean startup” methodology that has fueled much of the current tech boom. “Government and Silicon Valley have much to learn from one another to boost innovation,” Katila said.

This article is republished courtesy of INSEAD Knowledge. Copyright 2016. In the contest for competitive advantage, startups should use a very different playbook from their larger rivals. If the Fortune 500 had a motto, it could be “go big or go home”. Large companies excel at bold, expensive moves intended to intimidate the competition. After all, they have enough resources to follow through on their aggressive threats. Startups, however, don’t have the luxury of belligerence. With their limited resources, attracting the attention of more powerful rivals too early in the game can be fatal. However, their smallness can also be a distinct advantage, allowing them to make market inroads right under the noses of the giants. These differences can be exacerbated by the market context. In the newer, less certain markets that many startups enter, a company’s ability to discover untapped opportunities tends to matter more than the size of its assets. Therefore, it stands to reason that entrepreneurial firms need an entirely different strategic mindset from the big boys in order to successfully compete. As this issue sits at the intersection of competition and innovation, which happens to be my area of concentration, I took part in researching it for the paper “All the Right Moves: How Entrepreneurial Firms Compete Effectively” (co-written by Riitta Katila of Stanford University and Eric L. Chen of Onyx Pharmaceuticals), published in Strategic Entrepreneurship Journal. Our findings indicate that startups can potentially gain competitive advantage even in crowded markets if they keep in mind that their greatest weapon is the element of surprise. The permutations of competition For this experiment, we used the INSEAD-developed Markstrat software, widely known for its accuracy in replicating real-world competitive business environments. Player groups form virtual companies and vie with one another in simulated marketing and R&D activities (everything from market research to allocating advertising budgets). The system periodically “grades” the simulated firms’ performance, giving them a share price as well as sales, market share, and customer satisfaction data. During the years 1999-2006, we assigned a total of 160 teams of MBA students from a major U.S. university to compete in either mature or untested market simulations. In addition, we made two out of every five teams “startups” by granting them fewer financial resources and less market power than the other three. In this way, we were able to observe and learn from the different permutations that unfold when firms of various sizes compete within both new and established markets. Established markets The mature-market Markstrat simulation has well-established customer segments and product features. A new entrant must work hard to outperform the incumbents, but the potential rewards are huge. The virtual startups that succeeded in the mature-market environment developed a strategy that worked around the large players but ultimately surprised them. In general, they engaged in more exploitative R&D moves, or process-based R&D—introducing low-cost products—and exploratory market moves, i.e. entering new market segments. Essentially, they stayed below the radar while probing for weak spots in their more powerful competitors. In post-game interviews, these teams spoke of “shifting strategy according to our competitors’ moves,” and using cheap products as a “Trojan horse” preparing the way for full-scale market siege. Their success in established markets was based on their ability to seize upon incumbents’ complacency and tactical errors. The large firms were able to prevail by doing the opposite: constantly innovating within established market segments, introducing new products and refining current ones so as to increase their existing advantage and, over time, cement their supremacy. New markets MBA teams competing in the new-market simulation had to contend with uncertainty and instability that only increased as the game went on. It was unclear who the competitors would be, how consumers would behave, and whether the market would even be profitable at all (of course, it ultimately was). Here, the high-performing startup teams were the ones that quickly got a feel for the uncharted terrain through rapid-fire exploratory R&D and market moves—releasing a spate of new products aimed at diverse market segments. This strategy enabled them to scout for opportunities while remaining light-footed enough not to be toppled when the ground shifted beneath them. A fully exploratory strategy allows startups to exploit their natural agility. Unlike in the mature market, where the winning competitive strategy for startups was heavily reactive, in the new market startups had no choice but to lead. I suspect this is because the pervasive uncertainty of new markets levels the playing field, thus erasing the invisibility advantage entrepreneurial firms enjoy elsewhere. Getting in and out of markets ahead of the established players is the best way for smaller firms to avoid being muscled out of the running. As the students put it, entrepreneurial firms needed to “be nimble and quick…willing to leap from segment to segment.” By contrast, one startup team that chose a “slow and steady” approach finished last place in their industry. Large firms are sometimes at a disadvantage in new markets because they are forced to employ both exploratory and exploitative moves simultaneously. In other words, they must innovate like startups without putting existing strongholds at risk. One team illustrated this approach by saying, “Milk current products, but be prepared to have new ones at hand to catch the next wave and gain new advantage.” Quality vs. quantity On the whole, our findings suggest that startups can achieve success with fewer competitive moves than their large rivals, but those moves need to be expertly timed. In established markets, entrepreneurial firms can enter late, keep their head down, and strike hard once they spot an exploitable weakness. In less mature markets, they can leverage their agility to structure new markets before large firms have the chance to enter. It appears that when it comes to gaining competitive advantage, entrepreneurial firms play by a different set of rules.

If there’s one thing we know for sure, it’s that entrepreneurship is an uncertain and risky journey where surprising discoveries often lead to breakthrough progress. So, how do we set ourselves up to be open to these “aha” moments and learn from them? In our daily lives, we tend to have certain expectations about what will happen in any given situation. But it’s when actual results don’t line up with those expectations that we should learn to really pay attention. Let’s take Intuit as an example. In the video below, Scott Cook, co-founder of the accounting software maker, describes how he ignored one bit of customer feedback year after year because it didn’t make sense to him … until it finally did. And once he accepted the unexpected data, it opened the door to a whole new market. Welcoming cognitive dissonance isn’t trivial. As we’ve now seen, for entrepreneurs, puzzling findings can lead to lucrative opportunities. And this can also hold true for the venture capitalist who invests in them. Here in Silicon Valley, where perhaps the world’s highest concentration of VCs hear pitches from an equally high number of potential founders throughout the year, it’s easy to see how startup investors eventually adopt a “seen it all before” swagger. But it’s the ones who resist thinking that way, and remain open to letting their beliefs be challenged, that increase their chances of discovering the next big thing. Rebecca Lynn, co-founder and general partner at Canvas Venture Fund, emphasizes the importance of paying particularly close attention when something doesn’t make sense. She explains that her ability to hone in during these moments has opened her up to some of the most interesting ideas she’s ever come across. Even opportunities for self-development come by way of opening up ourselves to contrarian views. As Mike Rothenberg of Rothenberg Ventures discusses in the video below, growing as an entrepreneur hinges on relentlessly inviting feedback from others. And beyond listening intently when we experience cognitive dissonance, Rothenberg says we should express our gratitude for the new learning. The truth is, expectations, beliefs and worldviews are uniquely personal and, as a result, are bound to vary from one person to the next. But as entrepreneurs and growing individuals, moments of utter surprise that challenge our deeply held beliefs should be reframed as valuable opportunities to pause, listen and learn. Insights about how to grow our careers, our businesses and, most importantly, ourselves come disguised as experiences that cause cognitive dissonance. The key is to embrace the anomalies, not ignore them.

Too many of us use the terms “going to school” and “getting an education” interchangeably when, in fact, a formal education is just one part of it. The experience of classical schooling is multi-faceted and encompasses a mix of acquiring academic knowledge and softer, more abstract skills. Though fundamental knowledge serves as the foundation for any innovation, being an entrepreneur takes much more than just book smarts alone. Once, in the midst of his own academic pursuits, Albert Einstein beautifully captured all that an education is: “Education is what remains after one has forgotten what one has learned in school.” That’s not to say school isn’t important — it is. But perhaps the biggest takeaways are retaining the thirst for knowledge beyond graduation, and building upon the life skills that helped get us there. While impressive, graduating from a prestigious college with a slew of classes aced and a degree in hand doesn’t necessarily say anything about a person’s ability to succeed professionally. In the video below, Stewart Butterfield, co-founder and CEO of Slack, dispels the notion that an elite education guarantees excellence. So what else should we look for in an education? The true test should be that we are able to demonstrate our learning and showcase the skills we acquire. And perhaps grades alone can’t adequately capture this. Then what can? In the following clip, Sal Khan describes a new model for education from his book The One World Schoolhouse. The founder and executive director of the free learning platform Khan Academy highlights that walking out of school with a portfolio of work, projects and accomplishments says more about one’s ability — both as a student and as a member of the workforce — than grades and a degree do alone. This is already the case at Stanford and campuses across the country, where experiential education is being emphasized just as heavily as traditional learning approaches. There is obvious value in both, but differing opinions abound on the importance of domain-specific expertise versus the development of someone who can just jump in and learn along the way. The debate is particularly fascinating when you pose that question to scholars and practitioners sitting right next to each other – as we see here: A formal education remains incredibly important for a variety of reasons: It offers a venue for exposure to a wide breadth of topics and offers us the opportunity to make connections across disciplines. For entrepreneurs, school not only provides subject-matter knowledge, but also the frameworks necessary to remain a lifelong learner. Academic institutions are incredible places where curious minds gather to learn for the sake of learning. Ultimately, however, let’s not forget that classes, schooling and degrees are just part of the education equation.

One way to find out what makes a good entrepreneur is to, well, ask a successful entrepreneur. And if that person has done well in your chosen field, then it’s highly likely what she says will be relevant to you. But if you want a more basic understanding, in terms of the right mindset and skills needed to succeed, it might make more sense to ask people who observe and invest in entrepreneurs on a regular basis. Through repetition and experience, these people can see patterns emerge in the traits of those who excel and those who don’t. When you ask these experts, as we do every week in the Entrepreneurial Thought Leaders (ETL) speaker series, they don’t call an entrepreneur good or bad based solely on their net worth. Rather, they talk about the individual’s work ethic, enthusiasm and intelligence. Pattern recognition is one sign of intelligence. But beyond the ability to see when something occurs again and again, the flip side of pattern recognition is noticing where things aren’t happening. The business-strategy term “blue ocean” refers to just that: a wide-open market that no one else has yet noticed, and so abounds with opportunities. And in his recent ETL talk, venture capitalist Mike Rothenberg — whose seed-stage fund identifies, invests in and cultivates tech entrepreneurs — has just two words for those with serious startup aspirations: Start swimming. https://youtu.be/6GMkApYvA-A As the longtime host of this seminar series, Stanford Professor of the Practice Tina Seelig has spoken to hundreds of entrepreneurs over the years and learned what traits the best ones have in common. She shares these lessons in her new book, Insight Out: How to Get Ideas Out of Your Head and Into the World, and in the classes she teaches in Stanford’s Department of Management Science and Engineering. She also spoke about it at ETL last fall, presenting a model that lays out the knowledge, attitudes and skills that are crucial for any would-be entrepreneur. In a framework she now calls the “Invention Cycle,” Seelig says the journey from imagination to implementation begins with engagement — noticing opportunities in your everyday environment. https://youtu.be/CB_YuOuPipA As co-founder and partner of one of the most prominent venture capital firms in Silicon Valley, Ben Horowitz, also knows a thing or two about what makes a good entrepreneur. He, too, wrote a book that sums up his insights, The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. As the title implies, it aims to be a no-nonsense guide for entrepreneurs, explaining brutal truths and dispelling common myths. It all starts with being able to build a great product, Horowitz said when he spoke at ETL last fall. If you can’t build something that consumers want, Horowitz explained, you’re not going to be able to build a great company. The co-founder of Andreessen Horowitz spent a lot of his talk describing how many of the non-technical skills that entrepreneurs need — people skills, management skills — are not intuitive. But they are absolutely essential to succeed and scale up. https://youtu.be/RXaWdC8QVaQ

The concept of “entrepreneurship education” still has its skeptics, perhaps because what immediately comes to mind are iconic entrepreneurs like Elon Musk or Oprah Winfrey. How could anyone possibly teach an individual to be remotely as influential or visionary as either of those two? Educators, however, know that “entrepreneurship” is an umbrella term that embodies many teachable skills — such as creativity, design thinking, leadership and the basics of business and management. Although entrepreneurship may not be as exact a science as, say, bioengineering, the associated knowledge, skills and mindsets can be taught. Just like a child can be nurtured over time to be a great writer or athlete, a person can learn to be entrepreneurial if given the right guidance and opportunities to internalize important lessons through hands-on, experiential exercises that gradually develop the required tools. One of the latest entrepreneurship educators to demystify her field is our own Tina Seelig, executive director of the Stanford Technology Ventures Program, the entrepreneurship center in the university’s engineering school. In her new book, Insight Out: How to Get Ideas Out of Your Head and Into the World, Seelig presents a series of steps that anyone can follow to do exactly what the title states. The “Invention Cycle” Seelig describes in her book is based on 16 years of teaching as well as hundreds of interviews with entrepreneurs and innovators, including those she hosts as part of the Entrepreneurial Thought Leaders Seminar series. Time and again, Seelig says the path these entrepreneurs took followed the steps of her Invention Cycle: imagination, creativity, innovation and entrepreneurship. And she recently took to the seminar stage herself to explain how those concepts constitute the cycle, beginning with imagination. https://youtu.be/CB_YuOuPipA After imagination, the next two steps in the cycle are creativity and innovation. Creativity, as Seelig defines it, is applying imagination to address a challenge or opportunity. Innovation, then, is applying creativity to generate unique solutions. That is, creative ideas are new to you, and innovative ideas are new to the world. These two concepts are illustrated perfectly in the story shared by entrepreneur Alon Cohen, who, along with his wife, Adi Tatarko, founded the home design and remodeling website Houzz. After several frustrating rounds of trying to remodel their own home — failing at first by going with a friend’s referral, and then later taking the inefficient route of leafing through piles of books and magazines — they decided to build a website that showcases and aggregates the work of architects for the countless others in their situation. And because it was one of the only websites of its kind at the time, word spread quickly and Houzz started offering content for homeowners in Chicago, New York and other major markets across the country. The site also grew rapidly in scope, attracting interior designers, landscapers and other professionals. Clearly, Houzz wasn’t just a creation. It was an innovation. https://youtu.be/OQyR9xJyAUo The last step in the Invention Cycle, entrepreneurship, isn’t so much about starting a company, as it is about influencing others to support your innovation in order to magnify its impact and truly get your idea out “into the world.” Hence, Seelig explains, entrepreneurship requires encouraging and empowering others — whether that means they join your team, fund your work, use your products or even just spread the word. “Great founders are amazing at getting support. They are amazing at getting support from people who can really help them,” says Mike Rothenberg, founder and CEO of Rothenberg Ventures. “That is what entrepreneurship is, is getting support outside of what you can currently control.” Rothenberg Ventures identifies, invests in, and cultivates technology value and talent at scale, having provided early funding for such startups as Planet Labs, SpaceX and ZenPayroll. Rothenberg himself founded and bootstrapped three companies. So not only can he recognize the traits of a good entrepreneur, he is one, harnessing all the parts of the Invention Cycle — imagination, creativity, innovation and entrepreneurship. https://youtu.be/Hg3gmg0QH8c

Think back to when you were in high school. How did you do your hair? How did you dress? People generally develop a sense of personal fashion over the ensuing years into adulthood, after a few flings with different styles — and hopefully, some honest feedback from friends and family. But Susan Koger, co-founder of the independent online retailer of women’s fashion known as ModCloth, says it’s perfectly “OK to look back and cringe.” She wasn’t talking about day-glow tops and friendship bracelets, though. She was speaking at the Entrepreneurial Thought Leaders (ETL) Seminar series, sharing advice on pursuing one’s passion, with students on the cusp of launching their own careers. Her point: Your first attempt at anything new will likely be crude, and so you should give yourself the permission to just do it. If you stick with it and get better, yes, you will probably look back years later and wince. But next to no one crushes it the first time, anyway. True, the stakes may seem higher if you’re an entrepreneur debuting your first rev to the world. But Koger, ModCloth’s chief creative officer, insists that getting started is better than waiting till it’s perfect. https://youtu.be/9aUU1_hUlEE Admitting to ourselves that we are bound to err is humbling. But in the business world, where showing confidence and competence are the norm, having humility may be what gives the entrepreneur an edge. William Marshall, co-founder and CEO of startup satellite maker PlanetLabs, also had some wise words for those interested in entrepreneurship at another recent ETL talk. Actually, he cautioned students at Stanford — all deeply immersed in the Silicon Valley vibe — against “defaulting” to a startup the next time they have an idea that seems to have business potential. Another non-intuitive bit of advice Marshall shared was to not get an M.B.A. Reflecting on his own career, the former NASA scientist said some of the best physicists he’s known didn’t study physics. “The same is true in business: The best business people didn’t study business,” Marshall says. But his final bit of advice, in the video below, was to have humility. Rather than promise everyone that you’re going to create a great product, build it first and then show people how amazing it is. Marshall says they will be much more appreciative if you take that approach. https://youtu.be/BgsueulufRE In that clip, Marshall briefly mentions hiring people smarter than you among his tips for future founders. Heidi Roizen, however, shares that same advice, but in much blunter terms. “My goal truly is to be the dumbest person in the room,” Roizen said at her ETL talk last year, titled “Adventures in Entrepreneurship.” Roizen has spent her life immersed in the Silicon Valley ecosystem, as an entrepreneur, corporate executive, venture capitalist, educator and board member for companies public and private. She is currently is the operations partner at the venture capital firm DFJ and lectures on entrepreneurship in Stanford’s Department of Management Science & Engineering. In short, she knows what she’s talking about. https://youtu.be/xtAO0poIPYE

Even for those who aim to think “outside the box,” rules and constraints aren’t always bad. They focus our thinking and remind us to be deliberate with our execution by keeping our goal in mind. So in order to thrive in a landscape characterized by unmade decisions, it’s critical to be thoughtful about what rules we create and how they might guide our choices down the road. At her recent Entrepreneurial Thought Leaders Seminar talk, Stanford Management Science & Engineering Professor Kathleen Eisenhardt drew on the principles from her new book, Simple Rules, on how heuristics are crafted. In the video below, we see how rule formation guides a multinational company through an uncertain future in a responsible manner: [embed]https://youtu.be/COBLkJYnaUk[/embed] Not only do rules inform intelligent choices about the way we do business, they also provide us with constraints, which, as David Heinemeier Hansson said in his 2010 ETL talk, “are your friends.” In an overwhelmingly competitive landscape, boundaries bring us face to face with a hard truth: Sometimes, you just can’t outdo your competition. But you can think differently than your rivals and, ultimately, succeed by recognizing and operating within your own zone of expertise. Amazon Founder and CEO Jeff Bezos once said: “One of the only ways to get out of a tight box is to invent your way out.” Teams and organizations that leverage their own operational limits to think more creatively about how they do business often reap the rewards of differentiation. This sort of creative exercise doesn’t just prompt us to think about how to do things faster, cheaper or better ‐ it makes us question our assumptions and sometimes reinvent ourselves entirely. Hansson — creator of the popular Ruby on Rails web-development framework and founder of the collaboration program Basecamp (formerly 37signals) — talks us through just how this looks in practice: [embed]https://youtu.be/cAr-g7gFvxg[/embed] Perhaps the most important part of developing constructive constraints in business is to first think about our own work ethic. Why do we make the choices we do? Are our own actions aptly guided by a simple set of rules? What personal limits to place on ourselves? Hemant Shah, CEO of Risk Management Solutions, underscores the seriousness of recognizing this as a means to then realizing when we should seek help from others. [embed]https://youtu.be/cOMG2hPCodA[/embed] Rules and limitations can seem like irritating constraints on what we can and cannot do. But think for a moment just how powerful they could be if harnessed in the right way: a simple set of guiding covenants that empower us to make informed choices, ask for help when necessary, and ultimately allow us to save our time and energy for the more important matters in our lives.

An entrepreneur, as the quintessential self-starter, naturally looks inward for inspiration when the road gets rockier and the hurdles higher. But no matter how awesome you are, people can’t always be walking nuclear reactors that generate a constant supply of motivation in a contained, self-sustaining way. And you don’t necessarily need to max out the memory of your tablet with a bunch of the latest books by big-name motivational speakers. You need only look around you to replenish your emotional reserves when the entrepreneurial journey begins to wear you down. Perhaps the most obvious source of motivation outside yourself are the people around you. Imagine you’re the head of a fast-growing startup, confident you’re about to receive a $50 million infusion from several large investors. Then, all of a sudden, you get a call that they’re backing out. Visions of laying off all your loyal and hardworking employees – who laid everything on the line up to this point — cause you to break out in a cold sweat. This is precisely what happened at the biotech startup Invitae at a critical point in their pre-IPO days. But the shared determination of everyone on the team, from the founders to the bankers representing them on the phone, pulled them through, Invitae President and Chief Operating Officer Sean George says in this video clip: https://youtu.be/PyVk6ZRa2cw Motivation can also be found in the mission of your venture — that is, if it’s lofty enough. Again, the path of entrepreneurship is riddled with adversity, and day after day, people will want to dismiss your idea and say you can’t do it. Sooner or later, you’ll wake up one day and ask yourself whether it even makes sense to keep going. For Ron Gutman, founder and CEO of HealthTap, his startup’s mission is “to help people live healthier, longer and happier lives” through on-demand patient treatment services made possible through an app that connects paying members with a network of over 67,000 doctors. A mission as important as that, Gutman says with a smile, “never gets old.” https://youtu.be/vCJQ5sfl_IY A less obvious, but very valuable source of inspiration is the challenge itself — but not so much in the sense of someone simply rising to the occasion. As personal-brand expert Tristan Walker described when he came to speak at Stanford last year, an obstacle is simultaneously “a blessing.” The founder and CEO of Walker and Company Brands learned this after speaking with filmmaker Tyler Perry, and he shared the advice with Stanford Professor of the Practice Tina Seelig at the Entrepreneurial Thought Leaders Seminar series: that every challenge an entrepreneur faces yields a lesson on how to deal with it next time. In that sense, the lesson is simply a gift, Walker goes on to explain in this final clip. And once you understand that challenges are just gifts in disguise, you’ll always be able to find motivation in the face of adversity. https://youtu.be/GDzbovUjPsY

Taking time to reflect and understand what matters most to us, both professionally and personally, provides us with a strong framework for making decisions. In addition, staying clear on what matters to us often leads to a greater sense of fulfillment in life altogether. Whether implicitly or explicitly, some of our most recent speakers in the Entrepreneurial Thought Leaders Seminar series discuss how introspection keeps their efforts in line with their values. Joshua Reeves, CEO and co-founder of ZenPayroll, raises the familiar point that professional success does not equal personal happiness, and hence, how crucial it is to choose our path carefully. In other words, take the time to understand what gives you a genuine sense of purpose and, yes, “mission.” In college, Reeves says the academic quarter system provided built-in breaks from work to reflect on where studies were leading you. But even after launching into a career, he insists that we can structure our lives in a way that allows for periodic reflection and soul searching. That’s how Reeves realized his passion for developing technology that empowers others to do what they love. https://youtu.be/IaZ8G0xMtWw Be it during a stroll through a neighborhood park or while commuting to work, taking the time to ask ourselves questions about why we do what we do can get us back in touch with what we consider meaningful and what our real priorities are. Again, it comes down to choice, according to longtime venture capitalist Kathryn Gould. We can spend our time responding to the many opportunities that come to us, or we can choose to actively seek out the opportunities that truly excite us. For Gould, one of the first women venture capitalists in Silicon Valley, the choice was clearly the latter. https://youtu.be/bpxOWEzH-BU However, it is also important to distinguish between what we desire most deeply and when we can compromise. For John Collison, co-founder of the online payment system Stripe, it was always about creating a way for commerce to be seamless across different countries and currencies. Everything else, such as app features and design elements, become bendable means to a steadfast end. This is especially relevant in entrepreneurship, where success depends largely on constant iteration based on customer feedback. But as Collison explains, understanding when to heed others and make adjustments, and knowing when not to budge, only comes after much self-reflection. https://youtu.be/gdloi-SkTr4 There are a few principles in life that keep us on track: a strong sense of what matters, our personal values and our vision. Adopting a ritual that allows for routine reflection keeps us asking the right questions of ourselves and, ultimately, allows us to lead a more fulfilling life. So think for a moment – are your actions in line with what matters to you?

If you’re leading an entrepreneurial venture, the new year can be an ideal time for redefining and rejuvenating. In a startup’s early days, founders can code all night, talk to customers all day, while keeping a small and devoted team on track the rest of the time. But once a business grows and becomes more complex, those sleep-deprived entrepreneurs will have to let go of some of those responsibilities to focus full time on leading the company and charting its path forward. In other words, it becomes a matter of redefining the leadership role. For the final Entrepreneurial Thought Leaders talk of 2014, Ben Horowitz, of the Silicon Valley-based venture capital firm Andreessen Horowitz, pointed to Google Co-Founder Larry Page as a poignant example of someone who simply cannot take on everyday technical tasks anymore. “He cannot work on production products. It’s a full-time job – even for somebody who can do as many things as Larry,” said Horowitz, author of The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers. “If Larry can’t do it, you can’t, either. I guarantee you.” https://youtu.be/ddxF90a6J7k A new year can also be a great time to start seeing things with fresh eyes. As she discovered while researching for her book Rookie Smarts: Why Learning Beats Knowing in the New Game of Work, leadership educator and author Liz Wiseman found that experience had the ironic effect of limiting people’s ability to see things clearly – because they often made assumptions based on previous experiences instead of being open to new data points, perspectives and possibilities. The solution, Wiseman says, is to maintain a “rookie” mindset. But what if you’re a grizzled veteran in your field who has seen and done it all before? Here, Wiseman shares how a surfer-turned-CEO, French filmmaker and accomplished scholar all found ways to return to their rookie roots and reinvigorate themselves. https://youtu.be/hbqWxM6omik Once rejuvenated, however, it’s also important to maintain perspective. A new year and a new outlook may inspire you to begin the next chapter in your venture. The challenge of building on success, whether it’s refining a product or reinventing a business altogether, is one that few in the tech sector have pulled off at scale: https://youtu.be/dxuGBfautbg In the clip above, Lewis Cirne, founder and CEO of New Relic, shows cautious optimism that his software-analytics company will be able to pull it off. And yet, entrepreneurs have always been known to fixate on that next big thing. So, if the only alternative is complacency, is there really any other choice?

It can be tempting around the holidays to tune out all the consumerism. But entrepreneurs would do well to heed customer sentiment. Whether the product being built is a free app or fresh apparel, the bottom line is that, if consumers don’t want it, you’re out of business. Usually, a successful venture begins with identifying an unseen opportunity or a widely shared pain point that no one else has addressed yet. But once you figure out your solution to that problem, or your unique product, building it out before seeing what potential customers think of your idea would be folly. The financial loss from a flop is the most obvious risk. But nowadays, with the average consumer wielding the megaphone of the Internet, if a company gets it wrong, that individual can — and will — let the business and the rest of the world know about it in an instant. Especially in retail, brands no longer have the one-way advantage of dictating tastes to customers. As Tina Wells of Buzz Marketing Group says in this video clip, today, consumers dictate their desires to brands: https://youtu.be/gf-8xdY6mgE At the same time, it’s wise to look closely at cases where others got it wrong – because they can guide you toward success. This was how Method Products, the maker of hip and healthy household cleaners, managed to compete against established giants in the industry: by studying their missteps. Given Method’s niche of making only non-toxic cleaning products, the company asking customers to bring their empty containers to the store for refills would be in line with its Earth-friendly stance. But Method Co-Founder and “Chief Greenskeeper” Adam Lowry saw how others failed with that approach, and in fact, inconvenienced customers more. “You can create the most beautiful, the most sustainable product in the world,” Lowry explains. “But if nobody wants to buy it, if you don’t get a lot of people to buy it, then I would argue that it’s actually not innovative.” https://youtu.be/drSeT8pGxls And by the way, if you can’t build a great product, how can you expect to build a great company. That had a lot to do with the tremendous bust that followed the dot-com boom of the 1990s, according to Silicon Valley luminary Ben Horowitz. Investors turned to “professional CEOs” who knew nothing about building a product that customers would want and relied on these leaders to rapidly grow a company — except that it would fold just as fast because no revenue came in. Again, it all comes back to the consumer — empowered by the digital age, and as ever, holding the power of the purse strings. So take heed: https://youtu.be/CmFOzjW0ow8

November is National Entrepreneurship Month in the United States. But if you have an entrepreneurial mindset, opportunities present themselves every day – whether for a new business, or even just learning something new. The first step is noticing these opportunities. And while it may seem obvious that this requires paying attention to what’s going on around you, it is worth noting because we can all be blinded at times by our own beliefs. Inexperienced entrepreneurs can be especially prone to thinking that a personal epiphany is an opportunity, and unfortunately, pursue it without first verifying whether what they perceive is the reality. Stanford Engineering Professor of the Practice Tina Seelig, a thought leader in the area of creativity and innovation, presented a new model that maps out the process for how ideas are brought to life and what is required at each stage. Called the “Inventure Cycle,” Seelig explains here how one must observe their surroundings before envisioning an opportunity: https://youtu.be/CB_YuOuPipA Opportunities can also be found in places that others overlook or simply don’t care about. This doesn’t mean pursuing things that aren’t important, though. If you can bring passion and optimism to the table, you really can make an impact and even address one of the world’s great problems. Take home heating and cooling. In the United States, the amount of energy needed to keep every house comfy and cozy is greater than the total amount of electricity generated by all the solar or nuclear plants in the nation. The letters H-V-A-C don’t signal sexiness, but clearly, attention is needed here. That’s where Matt Rogers, co-founder and vice president of engineering of the smart-thermostat maker Nest, saw an entrepreneurial opportunity. And before that, when he was a new employee at Apple in 2005, he enthusiastically took on what was then considered just a side project: prototyping the iPhone. Sticking with it at Apple showed how “intrapreneurial” he could be, and this video clip shows how well that experience prepared him to be an entrepreneur in the next chapter of his career. “I think I’ve built my entire career – actually, probably my entire life’s work – on things that no one cares about,” Rogers says. “And I’ve actually done really well doing it.” https://youtu.be/-Iur3kn-uvU Even for the entrepreneur who has already launched a startup, day-to-day activities can lead to new opportunities if you’re observant and take action. That was certainly the case for the founders of the ticketing service Eventbrite. When they spoke last month at the Entrepreneurial Thought Leaders Seminar Series, the wife-and-husband team Julia and Kevin Hartz recounted how their business goal evolved. Initially set on taking down market leader Ticketmaster, they soon realized the opportunity lying just beneath the tip of the iceberg: all the everyday events that need ticketing. “It’s everything you do in your everyday life where you gain access … cooking classes, yoga seminars, obstacle races,” Julia Hartz says in the clip below. “Capturing this opportunity that wasn’t from the get-go very attractive is why Eventbrite is here today, and why we’re seeing the growth that we’re seeing.” https://youtu.be/jx_Tq5hMbGo

Whether it’s Yahoo! buying Alibaba, or Google gobbling up Nest and Skybox Imaging, the acquisition of startups by tech giants are no longer just fodder for the business section. In today’s screen-lived age, they are increasingly the top news stories of the day. But while entrepreneurship in the tech sector can sometimes seem like a race to cash in from the moment a startup is founded — OK, for some, that’s exactly what it is — acquisition isn’t always the goal. When corporate giants snatch up smaller competitors just to show growth, it hasn’t always worked out well. And when founders allow their startup to get acquired simply for a profit, it can mean the end of a venture that might have otherwise been able to make a truly lasting impact on the world. In short, acquisitions have to be strategic for parties on both sides of the negotiations. Here, Padmasree Warrior, chief technology and strategy officer for Cisco, lays out her company’s rigorous and structured approach to mergers and acquisitions. According to Warrior, Cisco’s acquisitions fall into one of three categories: tech and talent purchases, acquisitions that fill strategic gaps with growth potential, and large, complex platform acquisitions that immediately raise revenue. For the startup being courted, the entrepreneurs behind it also face some tough questions. Although it may be hard to imagine it now, Yelp was once a scrappy upstart — rather than the modern-day Better Business Bureau it has essentially become. In the following clip, Geoff Donaker, the increasingly popular review site’s chief operating officer, talks about the company’s early decisions to turn down lucrative acquisition offers pre-IPO. While selling would’ve benefited Yelp’s founders and early investors, Donaker says it was unclear at the time what the effect would have been for the rest of Yelp’s employees and growing user community. What is clear now is that the company made the right choice. What still has some people scratching their heads is the bold decision by Snapchat’s founders to walk away from Facebook’s $3 billion all-cash offer in late 2013. In the ensuing weeks, mashable published an article in which the messaging service’s CEO Evan Spiegel explained that he and his fellow cofounders sensed desperation when Facebook CEO Mark Zuckerberg flew out out for repeated face-to-face meetings to convince them to sell out. “There are very few people in the world who get to build a business like this,” Evan Spiegel told Forbes for its cover story on him. “I think trading that for some short-term gain isn’t very interesting.” While some may still question Snapchat’s move, a startup assessing its own market value by seeing how much others would be willing to acquire it is not new. Here, Ed Catmull, president and cofounder of Pixar Animation Studios, recalls how the late Steve Jobs would enter into talks with other companies about selling Pixar as a tactic to determine its market worth. And Jobs, who also co-founded Pixar and was its chief executive officer, was testing the waters at a time when the movie studio was still in startup mode and struggling financially, according to Catmull.

This month, we decided to turn to our own faculty and staff for their favorite eCorner video clip from the past school year. With so many to choose from, it was interesting to discover that all the picks contained profound observations on the importance of emotional connections and focusing on what really matters in life. There is no more basic a need than clean drinking water, and yet, diseases from unsafe water and a lack of sanitation kill more people every year than all forms of violence — including war. That’s why Scott Harrison founded the nonprofit charity: water, which has funded over 13,000 water projects in 22 countries since 2006. Here, Harrison explains how leveraging the strengths of technological tools such as web-based templates, Google Maps and Twitter have allowed his organization to emotionally engage supporters in a way that few nonprofits have traditionally done. https://youtu.be/-2JvmkojPyM For Matthew Rabinowitz, technological fixes are all well and good. But the most important thing for an entrepreneur to focus on first is a problem that needs to be solved, not some technology invented in the vacuum of a research institution. Rabinowitz can certainly appreciate this academic lure. He completed his undergraduate, master’s and doctoral degrees at Stanford, receiving the university’s highest student honors in engineering and physics. While completing his dissertation, he co-founded an intelligent online merchandizing company, Panop.com, which later sold for $100 million. Then in 2003, when a family member had a child born with a genetic disease who later died, Rabinowitz began to see entrepreneurship as a way to address more fundamental problems. Drawing on expertise from his seemingly unrelated background, Rabinowitz embarked on a journey with the goal of ensuring that other families need not experience similar pain wrought by the inability to have a healthy child. He brought together a team of experts in medicine, engineering, statistics and genetics – and along with his own skills in optimization, signal processing, informatics and entrepreneurship — he founded Natera. https://youtu.be/LQWY1CWW430 For entrepreneurial thought leadership, you might not think to turn to a Hollywood legend. But during Heidi Roizen’s talk at Stanford last spring, the operating partner at venture capital firm DFJ did just that — evoking the wisdom of longtime entertainer Shirley MacLaine. Roizen, who teaches a management science and engineering course at Stanford titled “The Spirit of Entrepreneurship,” credited MacLaine with coming up with a so-called “20-40-60 rule,” which sounds like it might relate to ownership splits or stocks. What the rule actually captures is a far more important insight that is both empowering and liberating for anyone, whether you’re an entrepreneur or not: “At 20, you are constantly worrying about what other people think of you,” Roizen explains. “At 40, you wake up and you say, ‘I’m not going to give a damn what other people think of me anymore.’” Completing the thought, Roizen then finishes by saying, “At 60, you come to realize that no one is actually thinking of you.” https://youtu.be/Vxrq86WIInU

What’s bad about mentorship? Nothing really. But exploring the nuances can actually reveal some less-than-obvious benefits — especially for entrepreneurs. Isolation is a reality for startup founders passionate about their venture, who commonly find themselves working day and night in the pursuit of perfection. That sort of dedication can morph over time into an obsession that possesses a founder to hold onto control of every aspect of the business, even when help from others could take it to the next level. In his recent Entrepreneurial Thought Leaders Series talk, Hemant Shah of Risk Management Solutions (RMS) provided a real-life example of just this scenario. Having successfully launched a software company in the unique space of earthquake-risk modeling, and securing about $3 million in venture funding based on early evidence of worth to customers, around that time, Shah said he was introduced to someone being considered as the company’s next CEO. In this video clip, Shah first refers to the person as a “colleague.” But Shah said, over the years, this colleague became a mentor who showed him how to grow the company out of its “experimentation phase” into a truly strategic and scalable business. https://youtu.be/cOMG2hPCodA Another wrinkle in the mentorship dynamic is that the relationship need not always take the form of a fatherly figure passing on pearls of wisdom to a wide-eyed newbie. During her Entrepreneurial Thought Leaders talk last May, Kate Mitchell of Scale Venture Partners said she had mentors who were peers, as well as those more senior and junior. Additionally, Mitchell talked about having mentors who worked in the same field as her, and some outside of it. Hearing all those perspectives, Mitchell said, gave her a well-rounded picture of what she was doing well, and what she wasn’t. In this video clip, Mitchell also makes a point that often goes unsaid but that is a vital element in ensuring effective chemistry between a mentor and mentee: the latter must make it easy for the mentor to share brutally honest feedback. Check out her excellent advice on how to do that: https://youtu.be/kfQ83VddA6g One last distinction about mentorship is that the rewards aren’t just reaped by the one receiving advice. The benefits — emotional and physical — of helping others out of the goodness of your own heart are well known by now. And it’s no different in the particular instance of an entrepreneur helping out another. That’s one of the main strengths of StartX, the 5-year-old nonprofit that runs an accelerator program for Stanford-affiliated entrepreneurs. In the video clip below, alumni of the program talk about its “code” — that if you can assist a fellow founder, “you stop what you’re doing and help them.” And back to the benefits of being a mentor: For those who listen as keenly as they speak, they may just glean something that helps them with a problem they’re working through. Otherwise, simply by interacting with someone who reminds you of your younger, hope-filled self, being a mentor could very well rekindle your own passion. https://youtu.be/bE4PyHxcI3k