Saturday, January 23, 2010

Big Questions

There are a lot of big questions out there. For some, I have no answers. For some, I believe I at least have some insight. And I use those to organize* my MBA course.

So, here are some biq questions about innovation and new ventures that I plan to ask some 300 MBAs this semester:

1. What on earth is an idea worth?
2. What do start up teams do?**
3. How do you make a business model?
4. Bake it in or bolt it on?
5. Can you have it all- value, values and valuation?
6. Can founders and funders get along?
7. Are start ups pretty when they are born?
8. Can you keep your job while you start a new venture?
9. Investors- deal or no deal?
10. How do start up investors control risk? (and does it work?)
11. What are the leading causes of start up death?
12. Should entrepreneurs be acquisitive?
13. How do you pitch in the big leagues?
* Some of my students assert this is a verb that should not be used to describe my classes. These students mistake the verb "organize" with the adjective "organized." One describes the effort put into the undertaking, the other its result. So, I think I can use the verb. And, the adjective is not one for which I strive.
** The question some students ask me during this class is: "why are we watching South Park in business school?"

Friday, January 08, 2010

Ending Poverty (period)

It seems like ending poverty has become quite fashionable in recent years. Movie stars, politicians, and economists are all getting in on it. No doubt, it's a great sound bite, and who could possibly criticize it? For much of recent history, it has been articulated as a goal of any modern society.

As humans moved from rural agricultural societies to urban industrial societies, wealth began to be created at levels that made the elimination of poverty possible, at least theoretically. Inspired, we have had "wars on poverty" and much important literature, as well as social and religious movements, have been aimed at this worthy goal. We have seen the launch of the UN's Millennium Development Goals to halve poverty by 2015. We have seen books with titles like "The End of Poverty" (with a forward by Bono) and "Creating a World without Poverty" (just out in paperback).

Well this bothers me.

What's wrong with me? How can I be against ending poverty? Don't I agree with Dr. Yunus's hope that someday our grandchildren will have to go to a museum in order to see what poverty was like?

Sure. It is a grand sentiment: the eradication of poverty, period. But this grand sentiment can have a pernicious effect on entrepreneurs and activists. Billions of people are in poverty, and no one is going to lift all of them out of poverty. Perhaps poverty will always exist.

So, as a budding entrepreneur or activist... what if your venture is only going to help a few villages, perhaps by providing a cleaner source of drinking water? Should you even bother? Surely, it isn't fair to people in neighboring villages who don't get clean water. And, heck, maybe clean water isn't the biggest problem, maybe you need to build schools too. Wise people will advise you to "scale up." Others will tell you that you need to have systemic solutions. Otherwise, you just aren't a player.

One of the people I respect most in the field, Paul Polak (who wrote "Out of Poverty") is fond of saying "if you can't lift 1 million people out of poverty with your idea, don't bother." Now, I know Paul pretty well, and I think he says this with a wink. He is being provocative. Encouraging entrepreneurs to think big, to consider how they could scale up. But I think (hope?) that he has a lot of respect for entrepreneurs that will educate 10,000 girls, or help 1,000 midwives make a living by providing healthier birthing environments.

For better or worse, I hear apparently well meaning people repeating these "don't bother" words like they were engraved in stone and found on a mountain. Who wants to invest in a small village water project? How will we eliminate GLOBAL poverty with these many small efforts? Listening to TED talks and experts, I keep hearing of all these big ideas to eliminate poverty. Woe unto any entrepreneur who wants to figure things out for a while before they talk about scale. The message seems to be: Better to go BIG and be wrong, than go little and get it right.

I disagree. I'd like the donor community to start seeing themselves as community gardeners: encouraging thousands of entrepreneurial seeds to sprout in their plots. Perhaps with each focusing on a few crops, but trying lots of varieties. Sharing their seeds from successful plantings with others who have similar soils and climates. I am pretty sure that monoculture, even from benevolent souls, is not the answer to our global challenges. We are eager to find the super productive and adaptive crop, and transplant it all around the world. To date, these transplants have had little success.

I am skeptical of the large scale efforts, and attempts at rapid scaling. I certainly understand the entrepreneur's propensity to see the limitless impact of their idea and their desire for speedy implementation (these are personality quirks from which I occasionally suffer). A few years ago, word got around that to be attractive to VC's, entrepreneurs had to offer a certain package ("$50 million in revenue in 5 years"). Soon, every business plan hit this number. Then that wasn't enough, and business plan inflation ensued. I am not sure this resulted in new ventures growing any faster, although it may have eliminated some honest entrepreneurs. I am afraid that budding social entrepreneurs are being lead to believe that they need to hit similar numbers to find capital.*

Yes, I hope that we can end poverty, but I believe it will happen one family at a time, one business at a time, one community at a time. The path of human development is a frustratingly slow one. To figure out how to improve income or health for a thousand people is worthy work, and should be celebrated, even if it doesn't "scale up" to millions. The venture that has served 1,000 people has a better chance at scaling than the idea that has served none.

Loren Eisley's starfish fable is instructive. I don't plan to invest my money or my time in ventures that claim they will save all the starfish on the beach (often while standing on a bluff above the beach, sipping chardonnay). I will spend my time on those ventures that are down on the beach, have saved a few starfish already, are dedicated to continuing their work and have a knack for teaching others to save starfish. Period.

*Kudos to Ian Fiske of the William James Foundation Business Plan Competition, who asks evaluators to measure the ventures against their self-defined measures of success, rather than some artificial hurdle of triple bottom line success.