Gambling, Dandelions, Hackers and Swimmers

Here are is the written version of the comments I made today upon receiving the Olympus Innovation Award in San Francisco. I intended that there be a correlation between these notes and what I actually said. And, if any jumpers need to check back on the instructions, look below.
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Thank you for this award. It is an honor to have the Global Social & Sustainable Enterprise program at Colorado State University recognized for its innovation. To me, it is still very much a work in progress, but an award is a good chance to stop and reflect for a minute (or five). It is meaningful that this is happening in the San Francisco Bay Area- the “breadbasket” of the Innovation Economy and a place known through its history as an outpost for the unconventional. In accepting this award, I’d like to reflect on four things: Gambling, Dandelions, Hacking, and Swimming.

Gambling

As one who has always been threatened by the idea of a career track, I have always favored serendipity and opportunism over planning and strategy. It is ironic that I teach strategy and business planning classes, really. But key to pulling this off is gambling. More precisely, to have people gamble on me, and my ideas. I want to thank them for having this vice.

-To start, the number one gambler in my life for over 30 years is my partner, Annie Hudnut. A big part of any venture is the team, and this adventure I call life has been immeasurably enriched by her support, and mostly constructive criticism.

-Three people at CSU gambled on me in 2003. Tony Frank, Ajay Menon and Bryan Willson. They provided wonderful support as I started the transition from being a business person to being an academic. A transition I hope never to complete. And they all encouraged me to start building the GSSE program.

It seems strange to be receiving an award in the company of many of the people who have inspired, guided, and gambled on me. I started teaching in 2003, and attended my first NCIIA meeting in Portland in 2006. Until that time, I was having a difficult time connecting with people who were teaching at the intersection of entrepreneurship, technology and international development. In Portland, I found my tribe. A bunch of gamblers. There are a few other gamblers I’d like to thank, that are here today:

Paul Polak- “Design for the Other 90%”. 90:10 is the Polak Ratio. He does this with me, too. Pushing, questioning and challenging me on 90% of what I say and do. And being incredibly supportive on the other 10%.

Amy Smith and the IDDS crew, for inviting me to join a community where I have learned so much.

Andy Hargadon – for opening new doors for my thinking about innovation and entrepreneurship, and always answering my phone calls.

Carl Hammerdorfer- for succumbing to a transatlantic telephonic seduction and being such an important part of the GSSE program.

Phil Weilerstein- the chief of the NCIIA tribe, who subtly pushes, cajoles, engages, inspires and occasionally funds a number of “crazy” gambles that just might change the world and the way our students look at it.

You have all gambled on me, and I appreciate it more than you can know.

Dandelions

My vision for the GSSE program, from the start, was to build a program of changemakers, and to launch 20-25 of them into the world each year. What should the GSSE mascot be? Tigers? Dragons? Lions. Well, kinda. The image I used was dandelions. Now I know, particularly around this time of year, that dandelions are not greeted with enthusiasm. Some of you will probably start pulling, or even poisoning them, in the coming weeks. But dandelions are hardy, ubiquitous, resilient and tenacious. They reproduce in hostile environments. One dandelion will soon lead to many more. That is how I view my students. If our program can recruit entrepreneurial people, and provide them with tools, experience and networks, they will spread around the world. Like dandelions, they will take root and spread. Their work will empower and inspire others, truly becoming "seed" capital for other entrepreneurial ventures.

Hacking

Schumpeter identified innovation and entrepreneurship as a process of “creative destruction.” A lot of people aren’t comfortable with that in an academic environment. They want entrepreneurs to “play nice” and like to pretend that new enterprises will fit nicely into markets and industries. This is often the way governments like to view entrepreneurs too. But it’s wrong. Entrepreneurs are revolutionaries with a business model. The good ones are looking to hack the system. To create fundamental change. To disrupt. Currently, business as usual, and capitalism itself, is under fire- climate change, social inequity, financial abuse, the rise of China's planned socialist economy. But business as usual is always under fire from entrepreneurs. That is as it should be. If you are an entrepreneur, you need to be aware of what you are going to destroy, as well as what you are going to create. Hacking, in the sense of taking advantage of systemic weaknesses in “business as usual”, is a useful approach to keep in mind. For social enterprises, rather than focusing on destroying an incumbent or competitor, entrepreneurs can focus on destroying conditions of poverty, environmental degradation and disease. Simply: figure out “what sucks” and then “what are you going to do about it.” Make that your BHAWG- your big hairy audacious and worthy goal. To me, that is the simple essence of creative destruction, innovation and entrepreneurship.

Swimming

One analogy I use is that entrepreneurship is like swimming. You can read about it, you can watch others do it, you can ask others about it. But until you jump in the water, you can’t understand it. Just as you can’t understand “wet” until you are in the water, you can’t understand entrepreneurship until you start a start up. Our GSSE program is designed to get people into the water, into the currents of innovation, into the flow of starting an enterprise. An enterprise that will make the world a better place.

So I want to end my remarks with a request to the audience on helping more people swim. Could I see the hands of people who are swimmers? That have started an enterprise, built a business, developed and sold a product? Great… now could you folks stand up… and make some swimming motions… freestyle, butterfly, you decide. OK, now, could I see hands for those of you who are on the entrepreneurial water’s edge? You are planning to jump in, you have watched, but you want a bit more guidance from people who know how to swim. Great- OK, you folks are “jumpers”. Now, here is the drill: 1) jumpers spot a swimmer. 2) some time before the end of this conference, go up to the swimmer and say “I am a jumper and I am going to jump” and tell them in 30 seconds what you are planning to do. Then ask them for advice. 3) Swimmers, provide 2-3 positive suggestions to the jumpers- ideas, connections, activities. 4) NOW THIS IS IMPORTANT- jumpers, make a commitment to your swimmer to take an action in the next week to move your venture forward, and to let them know when you have done it. Then keep them posted on your swimming.

Thank you again Olympus and NCIIA, for supporting innovation, and honoring the GSSE program at CSU. You have supported gamblers, dandelions, hackers and swimmers. And that is important.
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March 29 Update: Here is the press release on the awards.

Wham Bam, what's a YAM?

I'm currently working with some student venture teams on market analysis and marketing plans. Sometimes there is some confusion with terms such as Target Available* Market (TAM) and Served Available Market (SAM). While these are useful concepts, the one that really matters to startups is what I call YAM.

Let me share what I hope is a "sticky" example. I have developed a wonderfully fresh, local, healthy, sweet potato pie. It is awesome. It has yummy yam filling. I want to go sell these pies through grocery stores, starting in Northern Colorado. But one of my advisors, who thinks he's a marketing wiz, has asked me about my TAM and SAM. He asserts I must know them before I go into the pie business.

Here is what I'd tell him. My TAM is "baked goods" and I need to go research national sales levels and trends in this segment. My SAM is "pies," since I am not selling cakes or breads, and I would want to look into grocery store sales, in particular those in Colorado. But this is still pretty abstract, and TAM and SAM are likely to be big numbers. Such big numbers might tempt me to take the easy way out, saying "well, if I get 3% of the pie market I will sell thousands of pies and be able to supplement my professor's income over the upcoming lean summer months." TAM and SAM will fuel my dreams of becoming the Bill Gates of pies. They will show the potential of my business in the long run. But they won't get me started selling those first 10 or 100 pies. They count a lot of people who won't really be my customer in the early days, and may never be.**

See, for my sweet potato pies, I really need to know my YAM. "Your Available Market." How many pies get sold in Northern Colorado grocery stores? How many grocery stores are there in Fort Collins that sell pies? How many pies do they sell per week? Who buys them? When? How much do they pay? Important info, and hard to get. I am going to have to go hang out in some stores. Watch who is buying pies. Ask them if they would prefer sweet potato pie to that cherry pie they just bought. Figure out what stores I'd like to be in, and how many pies I might sell in each. See if I can do some in store demos.

Then I will be able to estimate the YAM for my sweet potato pie business. And build a bottom up strategy to sell my pies. First 10. Then 100. Then 1000. It's gonna be awesome...
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* some prefer "addressable" to "available" for their "A" word.
** for an interesting look at the odds of finding matches out of large numbers, listen to this This American Life podcast (prologue on dating in Boston). Or see the calculations for DC dating on this blog. See, while there may be a lot of people "available" they may not really be possible dates, or sweet potato pie customers.
*** if I were selling pies over the internet, I'd try to figure out what other food sites were doing, and try to find other means of drilling down (non-geographic) to find out who really was a potential customer. Or just start a site called ePotatoHarmony.com and see who orders.

Derivative Book List

People often ask me for a book list. "What should I read if I want to find out more about... social entrepreneurship, international development, innovation, policy, leadership?" Well, I don't have a great memory for names, books, movies, records... so I often blank out. And while I read quite a bit, I sure haven't read everything on these topics.

But today, I am grading book reviews by students in our "Sustainable Technology Entrepreneurship for Engineers and Scientists" class.* I figure I will share a few of the titles they read. Perhaps it will give you a few additions to your reading list:

Making Globalization Work, Joseph Stiglitz.
The Power of Unreasonable People, J. Elkington and P. Hartigan
Elusive Quest for Growth, William Easterly
Be the Solution, Michael Strong
The Soul of Capitalism, William Greider
The One Straw Revolution, M. Fukuoka
Engineering, Poverty and the Earth, G. Catalano
The Cart that Changed the World, Terry Wilson
Small is Beautiful, E.F. Schumacher
The Bottom Billion, Paul Collier
Renewable Energy Policy, Paul Komor
The Plot to Save the Planet, Brian Dumaine
Mystery of Capital, Hernando DeSoto
Reengineering Your Company: From Engineer to Manager to Leader, Howard Eisner
Wings of Fire, APJ Abdul Kalam Azad
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*I did not come up with the name. It is descriptive. And it is also probably a winner in any buzzword bingo game.

Launching the FAB Campaign

Financial Access at Birth. A crazy, audacious idea. We can't even get Americans to agree on a health care plan, yet here is a group of people proposing that every child in the world should start life with $100 in a savings account!

The idea sprang from Professor Bhagwan Chowdhry at UCLA. If you meet Bhagwan, he does not strike you as a dreamer or a schemer. Yet he shares this idea with evangelical persistence. While not a panacea to all that plagues the poor, such a simple idea could help with education or starting a small business. As pioneers in microcredit have shown, even small loans can make a big difference. Nobel prize winner Muhammad Yunus started his first village loans with $27.

Perhaps as importantly, a FAB account would be an important step toward broader financial inclusion. Access to financial services often begins with a bank account. It can also be a source of individual empowerment- leading to further savings, independence, and a source of start up funds.

If you are interested in more info, read the full proposal at Fast Company and the write up in the Economist. And if you like the idea, please take a minute to register your support at the FAB site.
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Note: Bhagwan and I are both members of the Faculty Council of the Center for Financial Inclusion at Accion International.

Symbiotic or Parasitic?

I'm working with my MBA class these days on the various challenges between company founders, founders and funders, and multiple funders. Lots of permutations if you have multiple founders and several rounds of funding, and it deserves some thought in the early days of a venture. Some of our work focuses on cases, articles and discussion about the "long shadow" that early funding decisions cast into the future of the organization. I encourage entrepreneurs to think about how they can design an organization that can best balance these sometimes competing perspectives.

But while organizational design is important, the day to day relationships are also important. Last week, our class centered around the question: "can founders and funders get along" ... and eventually prosper? To many, the answer is "NO." Not just for my students, either; I hear this sentiment from many who are interested in being entrepreneurs, and from entrepreneurs as well. Yet when pushed for examples, one discovers more legend than fact. Somehow, it has become widely believed that investors are bad for ventures. Many people seem to think that investors want to come in and steal the company away from the founders. I think this is a rare case, and usually occurs after a "series of unfortunate events" (as the saying goes).

What is the effect of this "venture legend"? If an entrepreneur starts out with this mindset, might they create a self fulfilling prophecy? Why would a good investor invest in a venture team that views them with suspicion? To paraphrase, "to make an investor trustworthy, you must first give them trust." How can founders and funders get along?

Here is my advice for start ups that require outside investment.* An investor is paying you to do what you want to do more than anything else in the world. (And if this isn't true, your likelihood of funding, or success, seems remote to me). At the same time, you need to create value and share some of it with your investors. As others before me have advised, think about getting money as "hiring an investor." And, just as with any new hire, work to build a trusting, informed, respectful, mutually beneficial relationship from the beginning. Avoid the trap of seeing an investor as a potential parasite, sucking your cash and resources, intent on taking over the host. With your investors, focus much more on offense (how they can help your venture) than on defense (how they can harm your venture).** From identifying potential investors, to meetings, to negotiating terms, to building your board. Offense.

The entrepreneurs I respect build a symbiotic ecosystem around their company, including their relationships with investors, suppliers, employees and co-founders. As with many systems, these interconnected relationships seem more resilient when the inevitable set backs do occur.
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*You may have skipped over this clause. Don't. Deciding on whether you need outside capital, and the form it takes (debt or equity) is one of the more important decisions you will make as founders.
** Note I did not say "don't play defense." I said focus more on offense.