Articles

In the era of the entrepreneur, clever ideas can seem like a dime a dozen. But it’s the committed willingness to act on an idea that turns an epiphany into something much more than an ephemeral intention. To illustrate this, we present insights from the Entrepreneurial Thought Leaders (ETL) Seminar, featuring recent speakers sharing different but equally poignant perspectives on the value and mechanics of taking action. One of the most notable hotbeds for technological leaps is Alphabet, and in particular, X, its well-known “moonshot factory.” From balloon-enabled Internet to self-driving cars, the division has earned a reputation for conceiving some of the most audacious ideas for improving our lives through technology and seeing them through – at least to the prototype phase. Astro Teller, “captain of moonshots” at X, spoke a little of the lab’s secret sauce at his ETL talk, saying that its success starts with a culture that sounds contrary to its mission: While crazy ideas are encouraged and celebrated, they are immediately scrutinized for flaws in feasibility. Calling himself a “culture engineer,” Teller emphasizes the importance of fostering workplace norms that encourage the sharing of big ideas, and of creating a space where people feel safe knowing no limits will be imposed on the imagination. Teller notes that adults often feel they have lost their sense of creativity and miss out because of it. The rate-limiting step to innovation, as he sees it, is that we don’t put all our ideas out on the table because of our self-defeating doubts. https://youtu.be/Uv5irB6L54c Now, once you’ve gotten all those great ideas out in the open and have identified the one with the most potential, it’s time to execute. And while there are many ways to move forward, there’s a tried-and-true formula that works for most teams – whether they are in large corporations or small startups. It’s called product management, and below, entrepreneur Minnie Ingersoll describes its three phases from her time at Google, where she led efforts to create Google Fiber, deploy a citywide WiFi network and improve Google AdWords – all non-trivial tasks for sure. Now the co-founder and chief operating officer of the online used-car marketplace Shift, Ingersoll describes the three phases as 1) defining the vision, 2) deciding what product to build, and 3) execution. The first phase involves getting to know who you’re building for and what problem you’re solving. After all, what good is a solution if you haven’t taken the time to put yourself in the shoes of the user? The latter two phases are setting up a product roadmap and, perhaps most importantly, holding yourself and your team accountable to the product milestones you established. This is where relentless execution on the vision you crafted in the first step of the process separates the ideas that come to fruition from those that don’t. https://youtu.be/iyN5SjPumc0 But imagine a circumstance where, after much debate and deliberation, your team decides to move forward with an idea you vehemently disagree with. What then? After all, we’re proud of our ideas and often find it difficult to set them aside. According to Bob Sutton, organizational-behavior expert and professor in Stanford’s Department of Management Science & Engineering, that’s precisely when we should forego ego and give 100 percent. Citing the wisdom of late Intel co-founder Andy Grove, Sutton says that by fully committing to the project you initially resisted, you’ll know that, if it fails, the flaw was in the idea itself and not in the execution. https://youtu.be/oZw2cg8AXDw To have a good idea without the ability or drive to bring it to life is like having a dinner table without sturdy legs: It’s nothing more than an illusion of having something valuable. This is not to diminish the value of a good idea, which is half the battle in and of itself. But to discover an opportunity worth pursuing and follow through with committed and thoughtful execution, bolstered by strong team alignment, is the very essence of entrepreneurship.

It’s wonderful that design thinking is now applied to so many different problems: designing better experiences for hospital patients, designing and implementing better client experiences at social-service agencies, starting new companies, teaching leadership, inventing new radio shows, changing organizational structures, and developing new products and services for people at the bottom of economic pyramid – to name just a few. Design thinking focuses on uncovering human needs, and doing so by not just relying on what people say, but by watching what they do as well. It entails developing a point of view about what needs to address, generating quick and rough solutions, prototyping like crazy and testing ideas with the users, customers, patients, employees or whomever the solutions are intended to help – and doing it all very quickly and not being overly attached to ideas. There is, however, a part of the story that seems to be slipping away – especially in the business press and in business schools, as well as in areas such as education and healthcare where design thinking is being used. Many executives, students and journalists don’t seem to realize that engineers and engineering schools were among the main driving forces behind the start of this movement. David Kelley, the main founder of the innovation firm IDEO and the Stanford d.school, has been teaching mechanical engineering at the university for over 35 years; and Bernie Roth, our academic director at the d.school has been teaching mechanical engineering at Stanford since 1962 (he is a pioneer in the field of robotics). And consider two of the most revered design thinkers and teachers I know: Diego Rodriguez at IDEO and Perry Klebahn at the d.school (officially, the Hasso Plattner Institute of Design at Stanford). When I first met Diego, some 20 years years ago, he had just graduated from Stanford, where he earned a degree in mechanical engineering and was working at IDEO. Diego did get increasingly interested in business, got a Harvard MBA, and now – back at IDEO for years as a partner – has become one of the most imaginative business thinkers I know (check out his blog and tweets). Yet, when I talk to Diego, listen to his ideas, and watch his masterful teaching and coaching, I can always see how the magnificent engineering designer inside him remains the strongest guiding force. His relentless advice to do things like get out and talk to and watch some real human beings, to develop a sharp point of view, to brainstorm, to “prototype until your puke,” and to view ideas as easy to get, important to throw away, and ultimately best to be judged by users and the market (rather than experts) all go back to his product-design roots. This really struck me when, a few years back, Diego was designing a new organizational structure for a client that, many years before, he had designed a product for when working as a young IDEO designer. He remarked to me, “The end product is a lot different, but the process I am using is remarkably similar.” I see the same thing in how Perry approaches problems. Perry has always been a product guy, as he invented the modern snowshoe as a Stanford product-design student and then went on to grow a company that sold and spread the product called Atlas, then was COO of Patagonia, and most recently was CEO of Timbuk2. Perry has also taught numerous product-design classes at Stanford over the past 25 years, and in the last decade, taught over a dozen classes for students and executives at the Stanford d.school. In fact, Perry has taught more d.school classes than any other faculty member since the d.school was founded in 2004 (even though he was CEO of Timbuk2 for five of those years, he kept teaching). Over the years, I have watched Perry move beyond and expand his engineering-design skills to an ever broader set of problems, like helping software executives gain empathy for what millennials want and rethinking the strategy of a Fortune 500 company. Lately, Perry’s students in his d.school classes – which he teaches with others including Kathryn Segovia, Jeremy Utley and me – tackle problems ranging from finding ways for the San Francisco Opera to attract younger customers to improving the experience of buying a bra for women who have had mastectomies. Yet Perry’s engineering roots are always evident. I remember watching Perry use his product-engineering background to guide a class exercise aimed at improving employee selection, recruitment and socialization practices for our d.school fellows program. He pressed the students to look for unmet needs, to identify the problem they were trying to solve, to brainstorm ideas for prototypes quickly, and then to test the emerging ideas with users – even though those ideas were unfinished and crude approximations of organizational practices. This process, although modified by Perry and many others to fit problems of all kinds, is simply a variation of the design process that Perry used as a Stanford engineering school student years ago to invent the modern snowshoe – and then to grow the company and customer base required to make the product succeed. Yes, I am a tenured professor in the Stanford School of Engineering, but I am not an engineer. The core of what we do at the d.school, and of much of what they do so well at IDEO, is rooted most strongly in product-design engineering – especially the flavor taught at the engineering school. That is why, frankly, I feel better when I work with “real” engineering product designers like Diego and Perry in the d.school classes I help to teach – even though I recognize that there are master design thinkers from all kinds of backgrounds, including lawyers, journalists, computer scientists and psychologists. The aforementioned Kathryn Segovia has a Ph.D. in communication (she did her thesis on the psychology of avatars), and Jeremy Utley is a Stanford MBA and former management consultant). Both have developed into two of the most skilled design-thinking practitioners, teachers and coaches I know. Like many people at the d.school, I get in regular arguments about what design thinking is, how it ought to be applied, and the times when it isn’t right to use it. It’s healthy for all of us to question what we do and how to do it better. But one thing we all share at Stanford, whether our students and faculty realize it or not (and some don’t, as the history is fading a bit), is that the brand of design thinking that we teach is a mindset and set of methods that was developed and refined at Stanford’s engineering school for decades – especially by product designers – before design thinking was ever a hot topic in business, entrepreneurship, education, healthcare and so many other places.

For most of us, the reorganization of Google into a network of separate subsidiaries under the holding company Alphabet had zero effect on our lives. In the wake of Larry Page’s announcement in August 2015, we searched the web, mapped our routes, checked our Gmail, and it all felt exactly the same. That’s because those core products remained within the original blockbuster business, now known to investors as Google, Inc. But over the long run, the restructuring could unleash the full ambition and creativity of the Silicon Valley company — influencing our lives dramatically in the way that it has with search, and could with self-driving cars and the rest. That’s Kathleen Eisenhardt’s take on it. She is the S.W. Ascherman M.D. Professor in Management Science and Engineering at Stanford University, and a leading scholar on strategy and organization — especially in technology-based companies and high-velocity industries. Beyond that, Eisenhardt was the Ph.D. advisor for Shona Brown, the former senior vice president of business operations at Google. Together, they wrote the highly acclaimed business book Competing on the Edge: Strategy as Structured Chaos. In advance of next month’s annual stockholders meeting at the Googleplex, the first in the age of Alphabet, and Page’s promise of increased transparency into finances and operations, Eisenhardt explains how tech companies (and even terrorists) have turned to an agile and modular structure — and what needs to happen to fuel outsized innovation beyond just another corporate re-org. Stanford eCorner: Alphabet CEO Larry Page says this will allow for cleaner operations, while industry observers say it will soothe shareholder concerns about Google’s increasingly “wild investments.” What do you find most interesting about the restructuring? Kathleen Eisenhardt: The most interesting aspect of the Google restructuring is that it took so long to do it. Google has an amazing search business — no doubt about it. Many people even call it Google’s “ATM” because it generates so much cash. But at the same time, Google has had a rough time developing successful new businesses. Many (or even all) of Google’s winning innovations and businesses outside of search per se — like YouTube, Google Earth, Nest and so on — came from acquisitions. Even DoubleClick that was pivotal to the search business was an acquisition. So, like other companies with enormously successful core businesses (like Intel and Microsoft), Google’s management has found replicating its search success difficult to do organically — that is, from inside Google itself and without the boost of acquisitions. In my mind, reorganizing was long overdue. eCorner: In Competing on the Edge, you and Shona Brown aimed to help organizations find the balance between too much and too little structure. How did this restructuring size up with the concepts from that book? Eisenhardt: Shona and I wrote about too much and too little organizational structure – and several processes, one of which we called “patching.” Patching simply means frequently reorganizing companies into focused business units that match changing markets. The term patching comes from quilting: the size of the cloth “patches” on a quilt. A major insight of patching is the critical importance of business size — organizing into a few large businesses favors efficiency and fits in stable markets. In contrast, organizing into lots of small businesses favors agility and goes with changing markets. This size tradeoff is another instance of balance between too much and too little structure. In the case of Google, it’s likely that its management stayed too long in an organization that favored efficiency when agility was the better choice. Another point of patching is the importance of having businesses that are about the same size. This reduces politics — a huge benefit. But, it will be challenging for Google to achieve the same size across its business, and so keep the search business from suffocating the others. At the same time, Larry Page is right: The new organization will make for a cleaner organization. The “sunshine” of this new organization should be immensely helpful in the C-suite for clarifying the actual performance of different businesses, and assessing whether the right managers are in place. eCorner: Do you think the separation of Google into subsidiaries — web-based businesses, medicine, investing and assorted technologies (Nest, X, Sidewalk Labs) — will increase the pace of innovation and bring more breakthroughs into the world? Eisenhardt: Yes, I absolutely think that the separation will turbo-charge innovation. Of course, this somewhat depends on the investment level. But generally speaking, if implemented well, the new organization lets Google’s leaders install top-notch management teams for each business and gives those teams the freedom to run their businesses. The key will be to push decision-making (both tactical and strategic) down to the business level — to those managers in the best position, with the most relevant skills and information — to make quick and informed choices. They are the ones, after all, with the pulse of the market. There’s another subtler point, too — that is, one of the toughest challenges is to manage businesses that are operating at different speeds, like simultaneously managing some that are moving at Internet time and others that are running at a slower pace for now (like autonomous vehicles). It is difficult to manage to the beat of different market metronomes. So the new structure should help Google managers to stay in rhythm with their markets. eCorner: You’ve also recently looked at the virtues of simplicity. And if anything, “Google” was the essence of simplicity in corporate identity. Doesn’t the corporation lose something in this restructuring that adds complexity (at least internally)? Eisenhardt: Google’s identity may have been simple, but its structure was not. The new business-unit organization should be a lot simpler for people inside and outside of the corporation. In fact, this restructuring is an old story. A classic book in business history is Strategy and Structure, by Alfred Chandler. He studied several corporations from the beginning of the 20th century, including and notably DuPont. DuPont was primarily an explosives manufacturer that emerged from World War I with huge stockpile of cash. DuPont executives used that cash to diversify into a slew of new businesses, but they stayed in the same monolithic structure that had brought success during the War. By the early 1920s, DuPont was losing money in almost every business except explosives. The flood of red ink finally led DuPont’s senior executives to reorganize the corporation into small business units focused on particular products. DuPont and other corporations that followed this same path went on to become the backbone of U.S. industry. They diversified, stagnated and then reorganized, just as Google has done. Today, companies like Johnson & Johnson, General Electric and 3M have prospered for decades using this same business-unit structure. Even terrorist groups like ISIS successfully use it, unfortunately. In fact, one of Silicon Valley’s most iconic firms, Hewlett-Packard, remained at the top of the tech world for over 30 years. By contrast, Apple and Google are still a long way from this kind of staying power. A major reason for H-P’s success was its very modular business-unit structure. Regrettably, H-P faltered when its corporate executives added complexity and slipped out of this structure. So yes, Google’s switch to their new structure is an old story and an overdue one. The new “simpler” Google will be a better Google.

If you’re going to lead the lab that launches moonshots like self-driving cars and balloon-powered Internet, you need to be incredibly ambitious and intelligent. But that will only get you so far. It turns out you also need courage and confidence in the people around you. Those sentiments came up again and again when the director of Alphabet’s moonshot factory, X, spoke at Stanford on April 20 as part of the Entrepreneurial Thought Leaders Seminar series. The geniuses inside the secretive lab at the Googleplex in Mountain View are encouraged to identify every possible reason why an incredibly ambitious idea won’t fly, as soon as it’s been thought — and certainly before costly brainpower and other resources are committed. The teams celebrated most fondly at X aren’t the ones that complete their projects, according to Astro Teller, director at X. He says the teams that kill their moonshots before they even see the light of day are the true rockstars. This is how the Silicon Valley mantra “fail fast” is lived, and not just given lip service. “This is the difference,” said Teller, who earned his bachelor’s and master’s degrees from Stanford University’s computer science department before getting his Ph.D. studying artificial intelligence at Carnegie Mellon University. “Creating the feeling that failing fast would actually get you what you want, instead of getting you the opposite of what you want.” https://youtu.be/cqTOHcXBJxc Teller gave a similar TED talk in February titled “The unexpected benefit of celebrating failure.” But his discussion at Stanford allowed him to go deeper and engage the audience with an insightful question-and-answer session at the end. More than any of the moonshots that his factory is known for, Teller said he is most excited about “systematizing innovation.” He does this by creating a work environment where employees are encouraged to be audacious, and by giving them the freedom to work on ideas that inspire them and that they want to own — whether they fail or succeed. https://youtu.be/adLiT8JAc3E In addition to the self-driving car and Google Glass, other well-known innovations out of X include Project Loon, which is providing Internet access through stratospheric balloons, and Project Wing, a fleet of next-generation drones intended to deliver goods ranging from consumer products to emergency medicine. And yet, X also drops ideas by the dozens every year. Some projects that X has famously pulled the plug on include a space elevator, a jet pack and vertical farming. Those projects were not fruitless, though. Teams within X taking them on meant there was some potential for a breakthrough, because those working on the projects wouldn’t be there in the first place if they didn’t possess both intelligence and integrity. That’s where the confidence in others comes into play. “I’m not pro-failure. I’m pro-learning,” Teller said. “We mean find incredibly efficient ways to learn.” Calling himself a “culture engineer,” Teller also explained that good ideas can come from anywhere, and that the positivity that results from such optimism must be protected in order to fuel real creativity, audacity and honesty without fear of reproach. At one point in his talk, Teller described how the audaciousness of an idea for generating electricity once shared in Alphabet’s moonshot factory far outweighed its impracticality in his mind. He then sums up the decision-making process at X for whether or not to put resources behind a project, using the terms “false positives” and “false negatives.” In this context, a false positive is when an idea is thought to be worth the time and effort, but ends up not going anywhere despite all the trouble. A false negative, Teller explained, is when an idea is considered unworthy of resources and passed up, when in reality it could’ve been a major breakthrough. He said a false positive is much more costly than a false negative for X — or for any innovation factory. https://youtu.be/Ja4Ye71R2VM Toward the end, Teller addressed a question from the audience about how other organizations could possibly create a culture that incentivizes bold failures if they don’t have Alphabet’s deep pockets. To that, Teller pointed to all the research showing that salary increases do not lead to long-term worker satisfaction. “What people want is recognition,” Teller said. “You don’t need cash and you don’t need (job) promotions to do what I’m describing.”

With entrepreneurs all vying to come up with the “next big thing,” it’s easy to see why everyone is putting work first — and the rest of life second. There are, however, some positives that can result from being obsessed, along with the better-known negatives we seek to avoid. So, while it’s important to keep tabs on when our obsession might turn into something destructive, it’s also worth noting that such behavior can play an incredibly empowering role in entrepreneurship. Take the tale of Blue Bottle Coffee, founded just six years ago in the San Francisco Bay Area, with a mission to deliver coffee in a way that paid special attention to the roasting process. James Freeman, Blue Bottle’s founder and a recent guest at the Entrepreneurial Thought Leaders (ETL) Seminar, explained how his foray into business paralleled the artistic process of a musician. All too often, we’re told about the “greats” in any field: Mozart in music, Einstein in science and, nowadays, perhaps Elon Musk in engineering. But Freeman notes in the video clip below that, all too often, striving for that level of perfection is both unrealistic and paralyzing. [embed]https://youtu.be/c-Rt4mguzDc[/embed] Freeman makes a good point when he describes his passion for perfecting the process, not the outcome: It’s worth being obsessed with the ritual and practice of an art, as opposed to being driven to achieve a particular end result. This nuanced form of obsession is rare — and remarkable when we find it in a person. A healthy obsession with the product or service is just what entrepreneurs need to cut out all other distractions and get an idea off the ground.Prominent venture capitalist and author Michael Mortiz echoed this very concept in his conversation with Lisa Sugar, founder and president of Popsugar, who he says embodies this sort of obsession. With a company motto that once read “Insanely Addicted,” the pop-culture website for women highlights what pragmatic obsession and undying focus can empower an entrepreneur to accomplish. It certainly made a believer out of Moritz. [embed]https://youtu.be/b_2kGEmjQ9s[/embed] Besides obsessing over a product, entrepreneurs constantly think about the health of the company they founded – at least the good ones do. This internally focused obsession is evident in a 128-slide presentation published by HubSpot Co-Founder Dharmesh Shah, famously known as the Culture Code. In a recent ETL talk by Shah, he emphasizes the importance of talking about something like culture incessantly because it’s the only way to ensure that it continues to evolve and improve over time. Like any good product or idea will show, being obsessed with iteration and growth is the only path to staying relevant. [embed]https://youtu.be/yHZUa-2BnjA[/embed] This sort of focus is indicative of a personal conviction and dedication to the journey that entrepreneurship represents. But the downside of obsession is equally real, and the initial phases of a startup can easily eat up a founder’s every waking hour. You’re busy building your business and your team, iterating on your product and raising capital all at once. For Derek Belch, co-founder and CEO of Strivr Labs, his goal was to generate revenue and make his startup profitable. Strivr Labs uses virtual reality to train athletes, and in order to capitalize on all the current buzz around VR, Belch said he spent an entire summer on the road — away from his pregnant wife — to sign up professional and college sports teams around the country. Fortunately, he returned just in time for the birth, explaining in this segment of his ETL talk that opportunities sometimes present themselves to a fledgling startup … and you simply have to “sprint.” [embed]https://www.youtube.com/watch?v=vuJzB6ZPB8U[/embed] Putting our personal lives on hold in order to grow a project or idea into something that will outlive us may be worth throwing work-life balance off in the interim. Just realize obsession for what it is, and how it could benefit your endeavors as long as you know how to harness it. And hopefully, those closest to you will understand when you aren’t getting back to them.

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?