High-Impact Entrepreneurship

Reprinted from Harvard Business Review. Original article here.

By Daniel Isenberg

Would you allocate more of society’s resources to giving birth to more babies or to raising children well? Now, think about enterprise creation and the challenge of economic growth. Societies’ leaders need to rebalance entrepreneurship policy towards scale, not start.

In recent years, we have been witnessing a significant global shift in attitudes towards entrepreneurship in countries around the globe. This is reflected in the dramatic proliferation of start-up programs: Start-up America, Start-up Chile, Start-up Russia, Start-up Britain, Start-up Weekend, and dozens of others. “Start-up” has replaced “Silicon” as the reigning entrepreneurship buzzword: There is hardly a country or city that is lacking a start-up program.

Unfortunately, this is being guided almost exclusively by a narrow conception of entrepreneurship as consisting primarily in the starting-up of an enterprise. Equating entrepreneurship with start-up is not wrong; it is just very incomplete. It is also problematic because of two flawed implied messages: The first is that the most difficult and important task of the entrepreneur is launching his or her venture. The second is a notion we might call “the more the merrier” — i.e., the more start-ups, the more successful the program. Quantity of start implicitly trumps quality of scale.

Both of these messages are doubtful. If we look at entrepreneurship in terms of extraordinary value creation and capture, which I do, then it is clear that value can be created and captured in a large variety of ways, and there is no a priori reason to think doing this from scratch via a start-up is the only or even the best way. Extraordinary value creation may involve acquiring, re-purposing, spinning off, or recombining underutilized or undervalued assets, or what my Stanford colleague George Foster calls “re-starts.” The Kaspersky’s, for example, founded their leading anti-virus company by spinning it out from a struggling Russian institute they worked for. Over the past decade or so, search funds have become an effective vehicle for acquiring undervalued companies to infuse with capital, management and growth. Family businesses, large corporations, R&D centers and universities — any of these can be essential in creating or freeing up assets rich with untapped potential. And yet:

Extraordinary value creation cannot occur without growth, and entrepreneurial growth post start-up has numerous challenges which can be an order of magnitude more difficult than simply starting a venture. Growth entails developing a powerful sales and marketing machine, building an organization by hiring and managing diverse groups of people, and knowing how to acquire strategic inputs such as the right kinds of capital and suppliers. Growth requires amazing amounts of energy and dedication, not to mention smarts. Forward-looking policy, as well as culture and the private sector, must support all these skills and resources more than it does at present.

Indeed, when I dig into examples of start-up programs, ranging from Scandinavia to the Middle East to both North and South America, scale-up is the far bigger challenge: After two years and $12 million, Start-up Chile’s largest resident start-up employs three people, according to Horacio Melo, the CEO. A comprehensive set of start-up programs and policy reforms in Denmark in the early 2000s led to a dramatic increase in the numbers of ventures formed, but when analyzed five years later, the vast majority had plateaued at a few employees, and fewer than 1% met the fairly modest criteria set to be considered “growth” ventures.

Chile and Denmark’s policies are not “wrong” (in fact, in Denmark this finding has provided policy makers additional impetus to strengthen efforts to crack the code of scale). The lesson is: scale-up is so much harder than start-up entrepreneurs (and policy leaders) realize. As one of my successful entrepreneur friends warns, “This is tough bloody s[***].” We need to turn the focus on growth-after-start: growth will not somehow take care of itself. To return to the imperfect analogy of my lede above, anyone who has been a parent knows that the long and complicated job of growing a healthy, educated and moral child is vastly more challenging than giving birth. I vividly remember how our first birthing class spent hours on breathing and epidurals, yet I had no clue about how to change a diaper or deal with a rash let alone be a father of teenagers! And societal resources required to formally and informally prepare parents for and support them in parenthood are immeasurably greater than for the birth process itself.

So it is just now dawning on many in business and government that when these start-up programs are successful in stimulating venture birth rather than venture scale, the tremendous challenges of growth may paradoxically become worse, not better, and can leave many stagnant or overvalued ventures that may have little real prospect of growth.

We can refocus policy on scale-up in a number of ways. One is structural: stop treating venture survival as an indicator of policy success and start looking at those that grow. It is also necessary for policy to facilitate extremely high levels of venture death and recycling in order to avoid a plethora of valueless start-ups. Focus much more attention on enriching the local labor pool, an essential aspect of an effective ecosystem. Entrepreneurs I meet with from Boston to Bangalore to Barcelona who have succeeded in obtaining market traction almost universally complain about the paucity of appropriately skilled people and managers to hire. Entrepreneurial ventures can never grow without talent, and the two basic types of talent needed — new employers and new employees — must evolve together.

Furthermore (and here is where the parenting analogy breaks down), experience and the existing data suggest that a very small number of high-growth ventures may be sufficient to generate almost all of the social and economic benefits of entrepreneurship. One venture which grows to 100 people in five years is probably more beneficial (to entrepreneurs, shareholders, employees, and governments alike) than 50 which stagnate at two. Endeavor has recently shown that just two or three unusually scaling ventures can have an utterly disproportionate impact on dozens of successors, and impact the entrepreneurship culture in a region.

Which is more important, giving birth or raising children? Obviously, birth is necessary, but it is greatly insufficient. In focusing entrepreneurship policy almost exclusively on start-ups we are favoring quantity of start-up at the expense of quality of scale-up.

Reprinted from Wamda. Original article here.

by Abdullah Alshalabi

Starting a new business is like having a baby. I’m no expert in raising kids, yet I know that when your first baby is born you’ll always seek your parent’s advice. The same thing applies when you have your first startup, you should find your parents (mentors) for your newly born baby (startup). Yes, your mentors will be your new parents.

You’ll need mentors that have gone through the ups and downs of an entrepreneur’s life. The mentors should be experienced entrepreneurs that previously built two to three startups and can advise you against making the same mistakes they did. Ideally, they will guide you when you are lost, support you when everyone is laughing at you, and will be honest with you when everyone else is just being nice. Good mentors are usually nice people too, and tend to follow the “Give before you get” mantra.

Unfortunately, good mentors are rare! I’m super lucky to have two great mentors helping us with our startup, fishfishme.com: [Endeavor Entrepreneur] Omar Koudsi, the co-founder of Jeeran.com, and Migeul Angel Ferrero, the co-founder of quehotels.com. They have opened our eyes to great opportunities and have saved us from doing crazy things.

Now, the question is “how do you get access to great mentors?”

Good question: first you need to do your homework. You need to find out who you want to be your mentor, and why. Don’t be limited by geography or nationality. Next, follow them on twitter and get to know a bit more about them. Let them know who you are by retweeting or replying to some of their tweets.

Next, try to find out if they are participating in regional events and try joining these events. Then, you have two options: 1) talk to them directly, in person or over email. 2) Find someone who can introduce you to them (the better option). Don’t mention anything about mentorship yet.

The next step to ask them one or two specific questions about some challenges you are facing at your startup, asking for their advice (over coffee or a Skype call). Do this a couple of times, and then introduce the idea of being a Mentor and a Mentee.

You can’t imagine the value of having a mentor until you have a good one yourself. It’s still uncommon in our region and people still struggle to understand what does the term “Mentor” means. We need to change this, and Wamda is already working on it; last weekend I attended a great event organized by Wamda called Mix N’ Mentor event (which is also coming to Dubai this Thursday). They invite experienced entrepreneurs and VC investors from all over the world to give entrepreneurs some feedback in their startups and to help them find their new parents (mentors).

I never dreamt I would meet Dave McClure of 500Startups in the Middle East, yet that was what exactly happened. I’m glad I got in touch with Omar and the Wamda team and came to this awesome event.

[From the left in the photo above: Omar Koudsi of Jeeran, Mohammed Alzubi of Global Investment House and Sand Hill Angels, and Dave McClure of 500Startups and Geeks on a Plane. ]

Reprinted from Wamda. Original article here.

By Oubai Elkerdi

Dynamic teams made of passionate, curious, and talented self-starters produce exceptional outcomes.

But building a highly dynamic team is easier said than done. It’s crucial to nurture individual curiosity, develop skills, and create opportunities for personal growth, while designing a workspace that fosters collective ideation, experimentation and improvisation.

Few employers are currently willing to really invest in creating thoughtful institution for growth, but smart companies understand that a focus on team culture is essential to sustainability and success. This is why, a few years ago, Ferrari launched a program that is entirely geared toward employee training and development.

In an HBR article, director of human resources and organization Mario Almondo was asked how Ferrari trains its employees to be creative, to which he responded:

“You can’t methodically teach creativity. But you can provide an environment that nurtures it. Several times a year, we run a program called Creativity Club that is designed to get employees’ creative juices flowing. We have six events at which employees meet various types of artists. We’ve had painters, sculptors, a jazz musician, a writer, a radio DJ, a photographer, a chef, an actor, an orchestra conductor, and others. The goal is for our employees to learn about how artists generate ideas and solutions.”

Ferrari isn’t the only company that cares about the personal growth of its employees. At Pixar University, 110 courses on everything from improv to self defense are taught to all employees. The point of this in-house education “is to push Pixar employees to try new things, work together better and test new ideas.”

In his book Innovate the Pixar Way, dean of Pixar University Randy Nelson says “the skills we develop are skills we need everywhere in the organization. Why teach drawing to accountants? Because drawing class doesn’t just teach people to draw. It teaches them to be more observant. There’s no company on earth that wouldn’t benefit from having people become more observant.”

At IDEO, employees are introduced to new ideas on a weekly basis. Tom Kelley writes, “nearly every Thursday evening, a world-class thinker shows up to share their thoughts with us.” This “Know How” speaker series is not only educational; it also stirs all kinds of fresh conversations and insights.

Environments that stimulate and engage problem-solvers in provocative learning experiences are more likely to give birth to innovative solutions.

Jazz as a first step

But how do we create environments that promote vibrant interplay? Especially when building lean startups?

It turns out there is much to learn from jazz, especially when it comes to mastering the art of improvisation.

A jazz improviser assumes that a melody can be molded out of a chaotic rhythm, so he pays close attention to his surroundings and waits for an opportunity to embellish, to “link the familiar with new utterances, and adjust to unanticipated musical cues that reframe previous material.”

Jazz musicians also take advantage of errors. Which is also how the pacemaker was created, recalls Barrett: “A simple mistake – pulling the wrong resistor out of a bag – and a willingness to stick with it long enough to connect the pulse of the oscillator to [an] overheard conversation about irregular heartbeats… led to an invention that has done untold good.”

Errors are the stuff of new discoveries because they disrupt our expectations and throw us into new territories where we have to look for original approaches and ways to combine previous knowledge with the tools at hand.

This is why innovators like Brian Eno like to disorient the members of a band – while they’re rehearsing in the studio – by having them switch instruments. This may result in less refined music, but “it enlarges the envelope of possibility within which they navigate,” says Eno in a conversation with Stephen Johnson.

Lastly, it is important to allow employees to design their own workspaces within a flexible, relaxed structure. Cross-disciplinary dialogue requires vigilance and followership. It also requires minimal, obtrusive, intervention.

What a manager should do is play the role of the anthropologist; keep her distance and make sure she is observing her team in its most natural state. Or just pick up and instrument and join the groove! Join – as in follow, not lead.

Companies and organizations that are excellent at delivering innovative products and services also happen to be platforms of experimentation and learning, and they often empower employees to become proactive agents of change beyond the walls of their organization.

So go ahead, spread those ideas and give them a try!