Wednesday, December 29, 2010

Food Revolution - Marketing Strategy

Here I am, with the final installment of my commentary on Food Revolution, after indulging in all the sugary goodies that’s associated with the holiday season. I felt this smallest pang of guilt writing about eating healthy while indulging away from the keyboard, but the end of indulgence is near, so here’s the post:

Being a student of marketing strategies adopted by high tech. companies, I found Jamie’s strategy very interesting. I thought some of it was clever but also spotted some missed opportunities.

1. Jamie offered free cooking lessons at different points in time to the community. There seemed to be an implicit assumption that it’s only fast food and processed food that is unhealthy, and that one of the contributing factors why the people of Huntington were eating unhealthy food was a lack of cooking skill. I found this approach a tad questionable, without educating the population on basics of nutrition. Perhaps Jamie’s recipes were healthy, but it’s very easy to cook extremely unhealthy foods from scratch in one’s own kitchen. I did not see Jamie explaining that it’s perfectly possible to undo the positive effects of eating salad for lunch if you don’t go easy on the dressing or choose your dressing wisely. While the cooking lessons were a good marketing tool in that it brought people together, (hopefully) helped them understand that cooking from scratch can be tasty as well as healthy, I might have taken a more multi-pronged approach.

Specifically, I would have added a basic nutrition education component, and enlisted as allies and sponsors manufacturers of these healthy foods. For instance, I imagine companies like Quaker Oats, the makers of “I can’t believe it’s not butter”, and producers of lean cut meats would have been interested in sponsoring a cooking + education session that promoted their products while enjoying the free publicity and limelight. I felt that partnerships that could have made this even better received were left under utilized.

2. Jamie’s interaction with the radio station host made for drama for TV viewers as well as served as a good marketing tool to raise consumer awareness. I though this was pretty clever, especially the part where Jamie won the bet and made a convert of the talk show host...

3. Initially, Jamie had reached out to the pastor of the local church who was a deep believer in Jamie’s “product". I haven’t seen any episode yet where Jamie took full advantage of the pastor’s support and tried this method of outreach to get his message out to the wider community.

4. While reading up on Huntington, I learned that the city is home to Heiner’s Bakery, and this bakery was owned by Sara Lee Corporation, one of the early manufacturers of the Whole grain white bread. I would have enlisted them as an important ally in my marketing efforts. This company is actively pushing the sales of its healthy breads and the irony of it being manufactured in a city that has more pizza joints than number of health clubs in the entire STATE of West Viriginia is inescapable! As one of the largest employers in the city, one would imagine this would make them the perfect ally but nowhere was this mentioned as a part of his marketing strategy.

On November 10, 2010, Sara Lee sold Heiner’s and other assets as a part of a $959M deal. I imagine the value of their brand equity would have been even higher had they been spotlighted in the national media and consciousness as a result of this show! (Caveat: I don’t know if there is indeed already such a partnership that will be revealed in a future episode!)

5. Nearly 30% of Huntington’s population lives below the poverty line. Huntington’s city council consists of 9 Democrats and 2 Republicans. Can these 2 facts be exploited to levy some kind of “health fee” on the pizzerias and other fast food purveyors in town so as to make fast food more expensive? If that’s illegal, perhaps something along the lines of Santa Clara county’s ban on sale of Happy Meal toys and other promotions that come with high calorie fast food sold to children.... The point is waving a carrot in front of consumers to motivate is great, but coupling it with the right stick to deter unwanted behavior makes it even more effective.

6. Eating better is certainly one way to make the population healthier, but it seems to me that putting the right incentives in place for the citizens to pursue a more active lifestyle should go hand in hand with better eating habits to reach the overall goal of a healthier city. Perhaps the show is skewed this way because Jamie is a chef, but it seems like a great opportunity to couple this show with another TV show such as “The biggest loser” to generate a bigger bang for buck all around.

When the campaign goes national, I would also think about harnessing the power of social media - specifically Facebook and YouTube - to make this viral. I did not list Twitter because I feel that an effort such as this one which needs time before results can be observed is not well suited to the instant nature of Twit-verse. I will of course, take back the suggestion to not use Twitter if celebrities want to get involved and use their fan following to help reach critical mass!

Wednesday, December 15, 2010

Food Revolution Market Entry Strategy

It occurred to me that I did not fully address FR’s market entry strategy in my previous post. Traditional wisdom says that when a newcomer attempts to take on a well entrenched incumbent, the newcomer should initially focus their efforts on gaining a strong toehold in a market niche, ideally one that is not well served by the incumbent.

Going by that logic, Jamie should have picked a school district where the parents were already reasonably health conscious, whose kids did not eat at the school cafeteria because the offerings were unhealthy and it would have been preaching to the choir to talk to these parents about the importance of healthy school lunches. This would have been a great slice of the market to go after because:

(a) Barriers to entry would have been lower - he would have enjoyed widespread parental and potentially educator and administration support

(b) Results would have been relatively easy to show (say the percentage of students bringing lunch from home went down from 50% to 10%, it would have been an impressive statistic)

(c) Given the correlation between income and healthy heating habits, these schools would have been located in wealthier neighborhoods where fundraising to support his goal would have been easier

However, Jamie went after the “fattest city” in the “fattest country” in the world - Huntington in West Virginia in the US - irking many people right off the bat with that characterization. I speculate he may have chosen this market entry strategy for a couple of reasons:

(a) Forgive my cynicism in listing this as #1, but the drama makes for good TV. Think back to the tear-jerker episodes where he interviews the overweight families and takes them to the doctor who tells them their daughter will die before the parents if she doesn’t lose all that extra weight... To be fair though, if a TV show was generating your paycheck, helping you sell more cookbooks and gear, and making you a celebrity while you’re at it, this is a pretty astute and strategically sound decision. People who are not in nearly as bad a situation will see it as if-they-can-do-it-we-can-do-it. Works either way.

(b) If the goal is to make something widely adopted, it’s a much more compelling story with a greater impact if it was applied on the worst possible case, and that case was turned around to produce results. It’s a combination of couple of Cialdini’s principles of persuasion. A greater authority is conferred upon Jamie if he succeeds with the “fattest city” making it much more likely his suggestions will be accepted elsewhere, and people in a similar situation will see it as social validation.

(c) It nips arguments such as “they could do it because they lived in a wealthy school district that was not in a cash crunch” type of arguments in the bud.

(d) In some ways, raising money from the administrators of the local hospital is a shrewd move in that it forces the more educated, health conscious section of the Huntington community to commit to effecting a change in their community. It also enhances their public image in the minds of those who view the hospital as benefiting financially from the poor health of those living in the community.


Overall, I can see why FR adopted the latter strategy when theory says the former might be the way to go. Goes to show that theory and practice are not always congruent, but there’s a good reason behind it in this case at least!

Monday, December 13, 2010

Jamie Oliver’s food revolution and business strategy

I was catching up on Jamie Oliver’s TV show “Food Revolution” last night, and my mind couldn’t help but draw parallels between the entrepreneurial nature of what Jamie was trying to do and launching a new start-up or a new product. If you have not heard of the show, details can be found here and you can also watch the episodes online for free. I thought it would be fun to do a strategic analysis and compare theory to practice.

The challenge: Take on entrenched incumbents (processed junk food), change consumer behavior (eat freshly cooked unprocessed foods) through marketing (customer education and raising awareness) and eventually capture the American market (every school in America should offer their students nutritious food choices).

When entering a new market, one of the first things to do is to determine the state of the current and future markets. In this case, the current market is the total number of schools in the US, with schools being classified as elementary or secondary (high) school. Per this data from the National Center for Education Statistics, the market consists of 132,656 schools. The future market is expected to grow since the census predicts that the US population will reach 392 million people by 2050. This is mildly reassuring from a business perspective. I say mildly because although the US population is growing in terms of absolute numbers, the growth rate is expected to slow down significantly as the population ages and dies in the coming decades. Assuming that the market entry strategy of food revolution (FR) focuses on schools and is not an end in and of itself, one recommendation might be for FR to next target the other end of the age spectrum since that demographic is growing rapidly and may I dare say, experiencing first hand the effects of years spent eating junk food.

The second thing to look at is competition. In this case, the competition is the processed food currently being served in school cafeterias. They have an advantage over the newcomers in a couple of different ways (a) it’s cheaper (b) less work for the school cooks (c) it’s easy to buy in bulk and (d) they have a longer shelf life than fresh food. Here, it’s important to look at how competition will respond to the entry of a new competitor. In this case, I suspected competitors will react by dropping prices even further making it hard for cash strapped school districts to financially justify replacing processed food with fresh ingredients. I was proved right in the latest episode where Rhonda was considering introducing processed food in the school cafeteria on Fridays to work through the stock in the warehouse. Even more alarming, she had already placed an order for the 2011 school year with the processed food suppliers, citing “cheap” as a reason...

The third thing to examine is the barriers to entry. I see the following as barriers to entry for freshly cooked food in school cafeterias: (a) fresh ingredients are more expensive (b) have a poorer shelf life (c) need more resources to process (people and time) (d) need cooks to be re-trained to use them and (e) students’ palates need to be retrained to appreciate this food. I liked how Jamie systematically tackled each of these issues. The big market risk in this case is that the students may not like this new food and may clamor for the old menu.

The fourth and final thing I would think about when introducing a new product or entering a new market is a strategy for entering the market. In this case, it’s rather obvious that neither acquisitions nor joint ventures are options, and FR must start from scratch.

In my next post, I will attempt to analyze FR’s marketing strategies and their effectiveness.

Wednesday, December 8, 2010

Hiring practices

I interviewed for several positions in the last few months, and that too fresh from listening to people like Paul English who have finessed the practice of hiring to an incredible art+science. I had drunk the kool-aid and only interviewed for positions I was passionate about and with companies that I thought I could make significant contributions to. My experience and the prescribed best practices were a world apart.

It started with a company trying to source authoritative information from the wikipedia, assuming it would not have crossed my mind to Google myself. They topped it off by sending me an email (which I have saved) questioning my integrity and intelligence. Struck rather speechless and extremely offended, I escalated the issue to a certain level within their organization, and then moved on, overwhelmed by the negative energy, making a mental note to never ever cross paths again. I was off to a great start at the races.

It was followed by an experience where it took a full 6.5 weeks from the date of initial contact to hear the outcome and this experience was even more strange - they requested FIVE references overnight after 2 rounds of interviews, and I pinged a lot of very busy people who were very gracious and agreed to serve as my reference at such short notice. These references were then made to wait a week, in some cases called late, in other cases had their requests for preferred communication modes ignored. Each reference was interrogated for at least 45 minutes and *then*, I was told that I didn’t meet the basic job description after all. I had already completed 2 round of interviews before this. I might be forgiven for thinking they’d figure out I didn’t meet their basic criteria a lot sooner than this! Chalk that down as weird experience #2.

Then came two interview experiences where no one would tell me what POSITION I was interviewing for, or even which group within the company, but instead repeatedly kept asking me “what would you like to do?"! Apparently this is a part of their strategy to assess where I would fit best and to prevent candidates from giving canned answers. (Yes, I had applied for a specific position - but the minute I walked in, my interviewers made it clear that it’s not necessarily the position I was being interviewed for and wouldn’t tell me what else I was being considered for!). Seriously, if the candidate doesn’t even know which group they’re interviewing for, leave alone the position, how on earth are they supposed to tell you what they can do for you?! Maybe this strategy might work if they only interviewed people with the exact background and skill set needed, in which case they will be able to hear what they want to hear. But given my diverse background, I need to know what it is you want done before I can tell you whether I have any relevant experience, and how I can help! It’s simply not possible to list every skill, kitchen-sink style, on a one page resume, and not confuse the heck out of the reader. I was surprised to come across not one, but two companies that followed this interview method.

Next came another interesting experience - this company made me go through 3 rounds of interviews, including a take-home exam! I invested over 20 hours interviewing with this company. I thought the interviews went extremely went well and was therefore shocked to hear that I hadn’t made the cut. I requested feedback and got none. I then tried escalating my request for feedback and got no response - not even a polite email explaining it’s not company policy to provide feedback. Really? And this is considered acceptable? You ask a candidate to invest 20+ hours of their time interviewing, but will not take 10 minutes to provide one-time feedback even after I had made it clear, in writing, that verbal feedback is perfectly fine (in case they’re worried about liability issues) and I was strictly asking for self-improvement purposes only. That completely turned me off the company culture.

I muse about this for a couple of reasons:

1. Are our hiring practices so screwed up in this country (I have no outside the US interview experience) that interested AND qualified candidates must jump through ridiculous hoops in order to get hired? Maybe it’s a function of the economy - hiring managers only want to hire people who are an exact skill fit. It flies against Paul’s wisdom (which I agree with) about hiring for
intelligence, attitude, lack of dysfunctional behavior and the ability to get stuff done.

2. Is my experience just an unlucky coincidence or have others experienced something similar?

3. Why is there such a huge disconnect between the theory and practice of hiring?

When it’s my turn to hire, I intend to hang Paul’s advice on my wall and make it my mantra.

UPDATE: I heard from a number of friends after they read this post. The story has a happy ending fortunately: I will be joining a stealth start-up come January.

Friday, October 1, 2010

Wesabe vs. Mint

Wesabe and Mint were both financial services start-up that aimed to make it easy for consumers to manage their finances. They were “born” at around the same time, whereas Mint was acquired by Intuit about a year ago and Wesabe shut down a couple of months ago. I came across this thoughtful post by one of the founders of Wesabe on why Wesabe lost to Mint and it made sense to include it in my “lessons learned” blog. The takeaway sounds very simple but is not, as can be attested by many a start-up founder who did not succeed:

"Focus on what really matters: making users happy with your product as quickly as you can, and helping them as much as you can after that. If you do those better than anyone else out there you'll win."

Tuesday, September 28, 2010

Online checkout - what not to do

I came across this excellent article on 10 worst things than can happen during the online checkout process. It inspired me to add to the list:

1. An "over-persistent" cookie: If a consumer added something to their cart in the last visit and came back later to buy other items, allow the consumer the option to delete the items without jumping through hoops and don’t be a nag and try to push the item.

2. If an item is available in multiple colors/sizes, offer the option to change color/size of order in the shopping cart itself. Or, at least make it easy to go back and change the order. Like the article says, don’t trap customers in the checkout and force them to open a new tab to go back to the shopping page.

3. Make it easy to identify the “Ship to” address and make the customer confirm the address before confirming the order. This will save both the customer and the vendor hassle, time and money.

4. Offer options for partial payment: the customer may have a gift card or store credit that they want to use, and may only want to pay the balance with a credit card. Many sites offer the option but don’t explain that they do this. If you do something customer-friendly, advertise it!

5. If an item is out of stock, offer to notify the customer when fresh stock arrives. It’s easy to do, costs the vendor very little and is an excellent marketing opportunity to bring a customer back to your site where they might end up ordering other things while they’re there.

6. If you have a brick and mortar store in addition to an online store, emphasize it. This is a great feature to emphasize particularly if returns can be dropped off at the store and don’t have to be mailed back, or if customer can get free shipping if (s)he offers to pick-up in store. In-store pick-ups/returns maximize the opportunity for impulse buys.

Tuesday, August 24, 2010

Thoughts on pricing

I recently had to fly into Oakland airport and needed to get to the South Bay as soon as possible after I landed. As I started exploring my transportation options, I was reminded of a service I signed up for recently called "TaskRabbit". I logged on to TaskRabbit and happily enough, one of the errands I was allowed to request was a ride from one place to another. I therefore decided to put out a request for a ride, mentioned that I need to get to the South Bay ASAP, and requested errand runners to bid on my task.

The responses I got left me puzzled. I got quotes ranging from $65 to $90 for a one way ride of about 45 miles. A taxi ride would have cost me $60. If I had picked up a rental car (one way), I got a quote of $50 and if I were willing to make a round trip to return the rental car, the cost of my transport was approximately $30. This made me think as to how the errand runners might have priced their services. It seems they each based it on their costs (time + gas + mileage).

It occurred to me that they perhaps missed a fundamental point about pricing - they were actively competing against other transportation alternatives available to me, in order to earn my business. While I was willing to pay a small premium for the convenience of having someone wait for me as I walked out the door and not having to pick-up/return a rental car, I was not willing to pay a 100% premium. Instead of pricing competitively from the customer's perspective, they priced it based upon their costs.

This seemed like a great example to share with my blog readers about how to think about pricing, and the importance of examining business decisions from the shoes of customers!

Friday, July 9, 2010

5 critical skills entrepreneurs need

Venturebeat has an excellent article today on 5 critical skills entrepreneurs need. The speaker is serial entrepreneur Jerry Kaplan.

Jerry Kaplan highlights these as the 5 critical skills:

1. Leadership: the ability to get everyone to move in the same direction even when they disagree
2. Communication: the ability to get everyone on the same page
3. Decision making: knowing when to make a decision - neither prematurely nor too late
4. Team player: know when to delegate and,
5. Telescope: the ability to zoom in and focus on details and zoom out and focus on the big picture as needed.

Well worth watching the ~9 minute video.

Wednesday, July 7, 2010

E-mail newsletters: the new trend

I came across this post on GigaOm today that speculates it’s time to stop blogging and start an email newsletter instead. It seems to be the hot thing these days with people like Sam Lessin (the founder of drop.io) opting for paid email newsletters. I am happy to report I remain committed to blogging and disagree with the whole paid newsletter thing (and no, it has nothing to do with the fact that I am not a celebrity with a fan following willing to pay for nuggets of my wisdom :)

To my mind, knowledge is not meant to be hoarded, it’s meant to be given freely. If/whether the recipient benefits is up to the recipient. To say that someone will share their best tips with you only if you pay $2 per month and sign up for their email newsletter seems somewhat disingenuous. It’s like charging someone to make an introduction - both parties know money was involved and that can potentially diminish the relationship. Seeing as how this knowledge is most likely not proprietary and was gleaned through interaction with others (either as received wisdom or experience), I question the fairness of charging for this knowledge.

E-mail newsletters seem like a step backward in some ways.

1. One of the huge benefits of social media is its inherent viral nature. Paid e-mail newsletters are big dampers of viral loops.

2. RSS feeds are a blessing for anyone trying to keep up with the information overload. To regress and increase the email volume in already overloaded inboxes is a big step backward in my opinion.

3. How many paid newsletters is the average person going to subscribe to? Even if each of these newsletters is priced $2 or less, it very quickly multiplies if a single person only follows 25 RSS feeds which convert to paid newsletters.

4. Then there’s the matter of how these people are going to get paid - I worry about credit card security and theft, and would be very uncomfortable having so many people bill me small amounts every month (increases the probability I won’t detect fraudulent entries), even if I am willing to share my credit card/Paypal information with so many third parties!

If this is the trend, I smell a new entrepreneurial opportunity. I want to build myself an email newsletter aggregator software that will take care of aggregating all those emails in one place and parse the data per my preferences, plus will take care of the billing so that I only need to share my financial information with one company. Interested in co-founding, anyone? :)

Thursday, July 1, 2010

Why ARE Asians better at Math?

This is a little different from my usual posts about entrepreneurship, but given the strong positive correlation between education levels and being a successful entrepreneur in technology, I figured it’s worth the digression.

I am currently reading Malcolm Gladwell’s “Outliers” and just finished reading the chapter on why Asians are better at math. I was initially very excited to read it but upon further reflection am wondering if his theory is really true. Gladwell attributes the success of Asians in math to three major factors:

(1) He draws a parallel between the work ethic instilled by working long hours in rice fields which fostered a culture of hard work and the work ethic in today’s generation of Asians who continue to be similarly hard working.

(2) Apparently, the human mind can remember and process 2 seconds worth of numerical data points. Unlike English, Asian languages use monosyllables to describe numbers. Therefore, where the person who knows the numbers in English can typically remember 4 digits, the average Cantonese speaker can remember 10 digits.

(3) The numbering in Asian languages is logical and intuitive compared to English. For instance, in English we count eleven, twelve etc. not the logical one-teen, two-teen, three-teen etc. Whereas in Asian languages (including my own mother tongue of Tamizh), it is counted off as ten and one, ten and two, ten and three etc. Similarly, in Chinese, the fractions are literally written out as one part of four, three parts of four etc making the concept intuitively easier to grasp.

Gladwell argues that the logical numbering makes it a lot easier for young children to grasp fundamental concepts like addition where they can skip the step of translating say “eleven” into a number before they can add it, learn fractions easily because of how they are framed in their mother tongue. This in turn means they enjoy math more, do their homework with less resistance and therefore begin a virtuous cycle.

Sounds good in theory, but...

(1) I count in English. I understand numbers up to 1000 fluently in 3 different languages but always translate any other language to English in my head before I can perform any mathematical operations. For the purposes of the American census, I am Asian and I suppose as an engineer who started learning calculus in ninth grade and can do math in her head, I live up to the Asians-are-good-at-math stereotype. Several of my friends of my generation and background fit this same mold, so I am not trying to draw a generalized conclusion based upon a data set of one nor am I exceptional in any way.

(2) I know several people whose families are of Jewish origin, who have worked incredibly hard over many generations. Hard work is no stranger to their cultural fabric or the present generation, who recognize that what they enjoy today would not have been possible without the hard work of their ancestors. It seems a stretch to say that only the rice farmers of Asia know the true meaning of hard work and have therefore integrated it into their culture and passed it down to subsequent generations.

So:

If I can do the Math in English in my head just as fast as any other Asian who computes in his mother tongue, if there are other cultures that have worked equally hard to succeed and have hard work ingrained in their cultural fabric, I submit that it’s a matter of sufficient practice and hard work, which is not the exclusive domain of any one culture. To generalize it in that manner might be a disservice to the individual. This is where stereotypes come from and they’re not always a convenient thing to live up to.


What is your opinion on Gladwell’s theory?

Monday, June 28, 2010

Back from a sabbatical!

I have been gone from my blog for nearly 3 months and during that time, much water has flown under the bridge. I earned my third degree and walked in one more commencement ceremony, travelled to 5 countries, 8 states and made some life decisions. Not bad for 3 months...

During the time, I have been blessed with the opportunity to see entrepreneurs in different walks of life, and expanded my vision of entrepreneurship considerably. I also came to the conclusion that my cup of tea is definitely innovation + technology and one without the other is not quite as exciting. So here are some random thoughts:

- Warning bells should sound when you’re initially recruited by people other than founders for early stage start-ups. They should sound even louder when only 1 of the founders speaks with you... either they’re not quite as interested in you as you think, or it’s an indication of internal challenges the company is working through.

- Acquisition of a start-up by a larger company inevitably results in indigestion. The question is how bad is the indigestion. It’s almost never a good idea to work for a recently acquired start-up within a big company. A lesson learned after many hours wasted doing the back-and-forth dance the past couple of months.

- Companies innovate yes, but make sure the kind of innovation is the kind you’re comfortable with! I have come across companies that innovate to lower cost (buying older machines and retooling them, innovating manufacturing techniques etc) and others that innovate and create bleeding edge products that will help them attract new customers and gain market share. I find I prefer the latter.

- Sometimes, life makes you choose between the proverbial devil and the deep sea. I came across this excellent article on how to make good decisions - some I had already learned through experience, others I was grateful to get a heads-up about. I am still puzzled though how one can apply foresight to distinguish between a big decision and a small decision. Sometimes, the things I have thought of as minor decisions have had huge implications and sometimes even changed my perception, and others that I spent hours mulling over ended up being moot points in the journey of life.

What are your thoughts on the decision making process and what lessons have you learned?

Monday, March 8, 2010

Desh Deshpande at MIT

Desh Deshpande is speaking to the Founder’s Journey class at MIT and I am blogging live. He is being interviewed by Prof. Tom Magnanti who was Dean of Engineering at MIT until 2007. He is one of 14 faculty members to carry the title "Institute Professor", the highest honor that MIT can offer. It was under Prof. Magnanti’s leadership as Dean that Desh Despande was inspired to create MIT's Deshpande Center for Technological Innovation. Many people, after being named Institute Professor and after retiring as Dean, would take a break and rest. Not Tom Magnanti. He has just taken on the task of creating a new university in Singapore, described in this press release:
http://www.moe.gov.sg/media/press/2009/10/professor-thomas-magnanti-name.php.

With two of the most respected people at MIT on the stage before me, we are in for an incredible evening densely packed with pearls of wisdom.

The conversation kicked off with “when do you know you should persevere, and when to give up?”. The class came up with lots of interesting suggestions, including “if it’s VC money, keep on spending, if it’s personal debt, quit!” :D

Desh’s advice on this topic was as follows:

- Distinguish between what you can control and what you cannot control
- Trust your gut
- Set milestones and timelines: when you don’t meet a milestone or the expected results aren’t there, read the writing on the wall and move on.

On the topic of tensions between entrepreneurs and VCs, Desh made the following points:

- It’s not possible to achieve a big vision purely through bootstrapping. VC money is necessary.
- If the entrepreneur hits every milestone as promised, VCs will respect the entrepreneur both for their ability to set realistic milestones as well as their ability to execute.

On how he got into entrepreneurship after a PhD:

Met Peter Brackett who was working on a start-up. Joined him at his invitation. The start-up was acquired by Motorola soon after. The business eventually grew to 100s of millions of dollars. If he could do this for Motorola, why not independently? Thus the seed of entrepreneurship was sowed.

Tom Magnanti is doing a fantastic job of guiding the conversation, and seems to be a natural at this. He’s asking all the questions that are on the top of the audience’s minds as we hear Desh speak.

On the topic of luck in entrepreneurial success:

- Analogy of kids playing soccer. The kids have fun kicking the ball around. Parents get upset because the kids are not kicking the ball a certain way. Entrepreneurship is like that. When you are having fun doing what you do and are passionate about it, you will play to have fun. How many goals you shoot is a bit dependent on luck. Chances of having a huge exit as an entrepreneur is like shooting a goal. If you are not playing for the fun of it, you are going to be very unhappy like the parents who are onlookers.

How to identify big ideas:

- Big ideas are the usually the result of a shift in the market. They are very simple ideas in hind sight.
- Pick a small simple idea that’s easy to bootstrap. The bootstrapping allows for much easier course correction. Once you build credibility by tackling the simple problems successfully, you will be better prepared to tackle the big problems.

On how to build the ideal team:
- Once you get a few good people, it snowballs
- Develop an eye for good people; learn to see each individual’s strengths
- Best people to hire are the people who have the potential but haven’t achieved the peak yet
- When you hire people, you never know whether they are going to work out or not. If you made a mistake, fire them quickly.

If you make a mistake, admitting to a mistake and correcting it as a very important trait.

Qualities of an entrepreneur:

- Naive
- Wildly optimistic
- Don’t get hung up on why the world is fair/unfair.
- The mentality that “I am giving up so much to play this game” - the sacrificing mentality, instead of “I love playing this game!” is fatal. An entrepreneur should do it for the opportunity and fun of doing it, instead of getting hung up on the outcome.

Parting advice:

Entrepreneurship is about taking the leap to jump in and solve a problem. Don’t get hung up on whether you’re rewarded for it or not. Judge the quality of an opportunity by assessing the ability to make a difference. Make a bigger difference in whatever you do. You will be the CEO of your life, your family, your career - cultivating this attitude will make a difference.

Prof. Magnanti just wrapped up the conversation by asking the audience to call out the key lessons they took away from the conversation. It’s clear that the audience recognizes the privilege they have been offered, and between the 75 odd people in the room, the lessons get cemented into memory and is capped off by thundering applause.

Sunday, February 14, 2010

Lessons in negotiation Part 1

This semester, I am taking a class called "Power and Negotiation" at MIT. Last class was a very interesting one and I thought I would summarize the lessons learned. First, the acronyms and basic definitions:

RP = Reserve Price. The minimum price one's willing to pay to achieve desired outcome. For example, my reserve price for selling my used text book will be based upon the value of the book on half.com. Since half.com is my other option if the current negotiation does not come through, it is also my "Best Alternative To Negotiated Agreement" or BATNA. Therefore, by definition, BATNA = RP. I know, complex math there.

AP = Aspiration Price. This is the price that I would like for my textbook if my negotiations are successful. For instance, if a new American edition of the textbook costs $200, half.com has an international edition for sale at $50, my aspiration price for my book maybe $100.

With the definitions out of the way, these were my takeaways from the class for successful negotiations:

1. If the value of the deal is clear to both parties, be the first person to make an offer. In my example of textbooks, the buyer had access to the same market price information I did. In this case, it's to my advantage to name the asking price.

2. If the value is unclear, allow the other party to name the price. For instance, if buying an antique car which can't be priced easily, have the other party name a price first.

I am not completely clear on the rationale behind this advice, and is something I am hoping will become clear in future classes.

3. When going into a negotiation, do your homework and know your RP and AP going in.

4. Don't let yourself be anchored to a price named by the counter-party or by your own BATNA.

5. Don't let your reservation price determine the aspiration price or your negotiation strategy. The aspiration price should strictly be determined by market research only.

6. Don't fall into the "happiness trap". People who get anchored by their RP are happier because they set low thresholds and allow this to determine the success of their negotiations. Don't fall into the trap!

Thursday, February 4, 2010

Dearth of women entrepreneurs in Technology

Vivek Wadhwa authored an excellent article in Business Week today titled "Addressing the dearth of female entrepreneurs"

While I do agree that one explanation for the phenomenon is that it's a supply issue, I am not convinced that it's the sole explanation. As an engineer, an entrepreneur and a woman, this is a topic very close to my heart and therefore also happens to be the topic of my thesis. I am working on collecting data about how many technology companies with female founders or CEO/CTO/COOs were funded in the last 4 years, and how that number compares to the number of companies which were founded by male entrepreneurs.

I am also speaking with a number of VCs who have been pitched by both men and women and taking notes about their observations. Some of what I heard took me by surprise. For instance, some women who pitch a VC do not get funded because they come across as being over-confident and not genuine! I was under the impression that many women suffered from the opposite - not as assertive or outspoken, and erring on the side of caution! I am not sure if this is a function of the fact that women who do found tech. start-ups have a different mindset and self-select into entrepreneurship, or if there's an observer bias, or if there is a stereotype bias here! What do you think?


I expect to finish my thesis in May 2010, and will write a follow-up post describing my findings. Stay tuned!

Wednesday, January 20, 2010

Knowing when to quit...

I came across an excellent post today that analyzes the “how do you know when to quit” question from the lean perspective.

I found myself nodding in complete agreement to this especially:

"If your acquisition efforts are failing, there need to be signs from other places in the model (conversion, upsell, retention) that the business is on the right path. If you’ve been at it for a long time and acquisition is poor and everything else is muddling along, then it’s time to quit. However, if you have found that you can either convert, upsell or retain customers well, then keep plugging away. The feedback from users is that your startup is on the right path…. now it’s time for incremental improvements in the other areas of the model to allow the business to reach the next level.

The original post is here.

Tuesday, January 12, 2010

Dr. Jack Gill at MIT - Day 2: Start-up dynamics

I have the privilege of being a TA for Dr. Jack Gill's short course at MIT titled "High Tech start-ups". Today, the topic was "Start-up Dynamics" and the guest speaker was Luca Erceg, founder and CEO of Simbol Mining. They spoke to a packed house with standing room only about 30 minutes into the talk.

Simbol won the 2008 Cleantech Group's Most Promising Technology Award. They are commercializing zero waste, zero carbon footprint production processes for lithium, EMD, and zinc battery chemicals sourced from geothermal brines.

Dr. Gill first characterized the elements of high-tech start-ups as follows:

- 1 to 3 driven founders
- Proprietary product technology
- Sizeable market
- Satisfies an unmet need
- A R&D team to create the product
- A mission, vision and milestones for the company
- Sufficient capital to execute
- Tenacity and,
- Lots of luck.

He shared with the group a template that Vanguard Ventures uses to analyze and investment when they are pitched by entrepreneurs. It was a lot of what an entrepreneur expects to be assessed on, no surprises there. Since most of the audience was comprised of engineers and scientists, he went into the nuts and bolts of how to access venture capital and what to expect. He pointed to www.NVCA.org and the Western Association of Venture Capitalists as resources. I didn't know about WAVC, it was good to learn. He then went on to speak about common stock and preferred stock, the differences, pricing differential between the two and also touched upon convertibles and warrants. It was a terrific preview to the entrepreneurial finance class I am signed up for this coming semester!

One of the most useful pieces of advice I took away from his talk was the importance of being able to learn very quickly and adjust the game plan on the fly. When pitching an investor, if the pitch doesn't go so well, use that as a learning opportunity. Understand why the investor declined to invest, and when you leave the meeting, go to the closest coffee shop with your team and do a post-mortem analysis of what worked and what did not, and what needs to be refined for the next pitch. Sounds very similar to customer development for start-ups, perhaps this should be called "investor development for start-ups"!

He then went on talk about what a typical term sheet looks like and explained some of the jargon - what's pre-money valuation, option pools, vesting, and board size and composition.

Another topic I found very interesting that he touched upon is frequent start-up problems. He listed:

- Competence of CEO
- Inadequate capitalization
- IP issues
- Poor cash management
- Lack of focus
- Over optimistic forecasts
- Underestimating competition and,
- Mediocre drive and commitment

Having been a victim to IP issues with my first start-up, it was particularly interesting to me to hear about other traps I might fall into if I don't watch out.

I was intrigued to notice the similarities between what Dr. Gill and Dr. Bob Langer (who visited Founder's Journey last semester) said about creating a real company versus a product line. A real company is built on a technology platform, not on a single product.

Luca was a great speaker who responded to the questions addressed to him with very frank answers. As a first time CEO and founder, his observations were particularly relevant and timely. I enjoyed hearing about the importance of the CEO actively managing his relationship with his board of directors, and how an ideal relationship with will result in a two-way flow of information and will get the CEO the feedback and advice he needs to effectively run the company.

I also enjoyed his description of how he was approached by VCs after winning the Cleantech most promising technology award, and how he chose to raise an angel round first to have results before approaching VCs. He offered sage advice on the importance of selling oneself effectively to investors - the importance of having a really crisp elevator pitch, and revealing enough information to be intriguing and land a follow-up meeting with investors, but not too much information that will allow for snap judgements and no room for clarification or rebuttals.

In all, an excellent morning spent hearing start-up wisdom.