The Mission Model Canvas – An Adapted Business Model Canvas for Mission-Driven Organizations

As we prepared for the new Hacking for Defense class at Stanford, we had to stop and ask ourselves: How do we use the Business Model Canvas if the primary goal is not to earn money, but to fulfill a mission? In other words, how can we adapt the Business Model Canvas when the metrics of success for an organization is not revenue?

H4D screen top

Alexander Osterwalder and I think we have the answer – the new Mission Model Canvas.

Here are our collective thoughts.

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The Lean Startup is the way most innovators build startups and innovate inside of existing companies. As a formal method, the Lean Startup consists of three parts:

The Business Model Canvas has been a great invention for everyone from startups to large companies. Unlike an org chart, which describes how a company executes to deliver known products to known customers, the Business Model Canvas illustrates the search for the unknowns that most new ventures face. The 9 boxes of the canvas let you visualize all the components needed to turn customer needs/problems into a profitable company.

From Revenue Streams to Mission Achievement
The Business Model Canvas has served all of us well in thinking about building businesses – and therein lies the problem. In a business the aim is to earn more money than you spend. What if you’re a government or a military organization or part of the intelligence community? In these cases you don’t earn money, but you mobilize resources and a budget to solve a particular problem and create value for a set of beneficiaries (customers, support organizations, warfighters, Congress, the country, etc.)

For these organizations, the canvas box labeled Revenue Streams doesn’t make sense.Business Model Canvas no revenue In a mission-driven organization such as the defense and intelligence community, there is no revenue to measure. So the first step in building a canvas for mission-driven organizations is to change the Revenue Stream box in the canvas and come up with a counterpart that would provide a measure of success.

We’re calling this alternative Mission Achievement. Later in this post I’ll explain how we’ll measure and describe Mission Achievement, but first our Mission Model Canvas needs four more tweaks.

  • Customer Segments is changed to Beneficiaries
  • Cost Structure is changed to Mission Cost/Budget
  • Channel is changed to Deployment
  • Customer Relationships is changed to Buy-in/Support

Mission_Model_CanvasThe rest of this blog post explains the how and why of these changes to the canvas.

Customer Segments Change to Beneficiaries
At first glance, when developing a new technology for use in the defense and intelligence community, the customer appears obvious – it’s the ultimate war fighter. They will articulate pains in terms of size, weight, form fit, complexity and durability. But there are other key players involved.  Requirement writers and acquisition folks look at systems integration across the battlefield system, while contracting officers, yet another segment, will count beans, measure the degree of competition and assess the quality of market research involved. The support organizations need to worry about maintainability of code or hardware. Does legal need to sign off for cyber operations?  So yes, war fighters are one customer segment, but others need to be involved before the war fighter can ever see the product.

So the first insight is that in the defense and intelligence community mission models are always multi-sided markets with the goal of not just building a great demo but getting the product adopted and deployed.

Second, in the defense and intelligence communities almost all of the mission models look like that of an OEM supplier – meaning there are multiple layers of customers in the value chain. Your product/service is just part of someone else’s larger system.

So to differentiate “customers” from the standard business model canvas we’ll call all the different customer segments and the layers in the defense and intelligence value chain beneficiaries.

The Value Proposition Canvas
Of all the nine boxes of the canvas, two important parts of the model are the relationship between the Value Proposition (what you’re building) and the beneficiaries. These two components of the business model are so important we give them their own name, Product/Market Fit.osterwalder books

Because of the complexity of multiple beneficiaries and to get more detail about their gains and pains, Osterwalder added an additional canvas called the Value Proposition Canvas.  This functions like a plug-in to the Mission Model Canvas, zooming in to the value proposition to describe the interactions among these beneficiaries, war fighters, etc. and the product/service in more detail. Using the Value Proposition Canvas with the Mission Model Canvas lets you see both the big picture at the mission model level and the detailed picture of each beneficiary at the “product/market fit” level.

Value prop zoom bus modelIn the defense and intelligence community mission models, there will always be multiple beneficiaries.  It’s important that each beneficiary gets its own separate Value Proposition Canvas.

value_proposition_canvas

Distribution Channel changes to Deployment
In the commercial world we ask, “What type of distribution channel (direct sales, app store, system integrator, etc.) do we use to get the product/service from our company to the customer segments?”  For the Department of Defense or Intelligence organizations, we ask instead:

  • “What will it take to deploy the product/service from our current Minimum Viable Product to widespread use among people who need it?” (What architecture components can they innovate on and what can’t they?)
  • “What constitutes a successful deployment? (number of users, units in the field, time to get it into the field, success in the field, etc.)”
  • “How do we turn a Horizon 3 innovation into something that gets adopted by a Horizon 1 organization?”

Customer Relationships changes to Buy-In/Support
In an existing business, Customer Relationships is defined as establishing and maintaining a relationship to support existing customers. In a startup we redefined Customer Relationships to answer the question:  How does a company get, keep and grow customers?

For the defense and intelligence communities, we have modified Customer Relationships to mean, “For each beneficiary (customer segment), how does the team get “Buy-In” from all the beneficiaries?”

Customer discovery helps you understand whose buy-in is needed in order to deploy the product/service (legal, policy, procurement, etc.) and how to get those beneficiaries to buy-in? (Funding? Mandates? User requested? etc.) In addition, the long-term support and maintenance of new projects need to be articulated, understood and bought-into by the support organizations.

At the Pentagon a favorite way to kill something is to coordinate it to death by requiring buy-in from too many people too early. How to determine who are the small group of critical people to get buy-in from – and how to determine who are the next set required to sustain the iterative development of future MVP’s – is one of the arts of entrepreneurship in the defense and intelligence community.

Revenue Streams changes to Mission Achievement
Mission Achievement is the value you are creating for the sum of all of the beneficiaries / the greater good.

It’s important to distinguish between the value for individual beneficiaries (on the Value Proposition Canvas) and overall Mission Achievement. For example, Mission Achievement could be measured in a variety of ways: the number of refugees housed and fed, the number of soldiers saved from roadside bombs, the number of cyberattacks prevented, the increased target surveillance of sensor fusion, etc.  None of these are measured in dollars and cents. Keep in mind, there is only mission achievement if it delivers value to the end beneficiary.

Lessons Learned

  • In the defense and intelligence community the metrics of success are not revenue but mission achievement
    • We’ve modified the Business Model Canvas into a Mission Model Canvas
    • Changed Revenue Streams to Mission Achievement
    • Changed Customer Segments to Beneficiaries
    • Changed Cost Structure to Mission Cost/Budget
    • Changed Channel to Deployment
    • Changed Customer Relationships to Buy-in/Support
  • Organizations without specific revenue goals can now use a version of the Business Model Canvas

Entrepreneurs are Everywhere Show No. 21: Grant Warner

While finding product-market fit is important, getting the rest of the business model right is the difference between a great demo and a great business.

And embracing risk-taking or failure is hard when you go to college and have to be the example for your family.

Lessons learned from starting up and teaching entrepreneurship were the focus of an interview with the latest guest on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111 (airing weekly Thursdays at 1 pm Pacific, 4 pm Eastern).

The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Grant Warner

Grant Warner

Joining me in SiriusXM’s studio in New York was Grant Warner, director of innovation and entrepreneurship at Howard University’s College of Engineering Architecture and Computer Science, and co-founder of ConnectYard.

Listen to the full interview by downloading it from SoundCloud here.

(And download any of the past shows here.)

Clips from his interview are below.

Dr. Grant Warner is the Managing Director of the HowU Innovate at Howard University. HowU Innovate provides campus-wide innovation courses, in which students are guided through the process of founding technology startups.

Grant is a core faculty member of the NSF I-Corps and directs the Howard University – Hampton University I-Corps Site, which commercializes university research. Additionally, he is the co-founder of ConnectYard, a social analytics platform for e-learning platforms. He is also a co-founder of XediaLabs, a DC-based incubator that provides training and technical consulting to local startups.

While building ConnectYard, Grant learned that product-market fit is not the only ingredient for success:

Grant: One thing I would say about my co-founder, he’s very intuitive on the sales side. We did do a lot of … customer discovery. We did a lot of talking to customers, trying to understand who really had the need. What was the value proposition? That helped us develop a product.  

What we didn’t do as well was really explore the (rest of the) business side – channels and all the other things. …(And that) hurt (our effort).

… We had raised some money and had moved forward. We found customers who said, “Yeah, this is a real problem,” developed a product, they said, “Yeah, we dig it.” We were able to acquire some early customers … (and) used that to raise some money. Then we decided, “Yeah, we’re going to go and sell this directly to universities.”

(But not focusing on the other aspects of the business model) hurt tremendously. We pretty much ran through all of the money without finding the proper way to reach (customers).

Steve:  You weren’t thinking about the right channel and that should have been something else being tested in customer discovery? If you would have had a framework, you would have said, “Hey! We haven’t tested these hypotheses.”

Grant: Correct.

If you can’t hear the clip, click here.

Howard University’s approach to entrepreneurship education for students in this historically black college has them plugging into the DC-area startup ecosystem. Grant explained why:

…This parallel between hip-hop and startups is an important one, particularly when you think about technological entrepreneurship for people of color.

When I think about hip-hop, it started off as something that people did as a hobby. Then an opportunity to grow business ventures off of hip-hop (emerged), and that opportunity spread like a virus. People said, “Wait, hiphop is a model that shows how I can step through this to grow what I’m interested in.”

 I think the same opportunity is available now for people of color to participate in technology startups. We need to show the model and broadcast the model.

Steve: You think that’s widely understood among people of color, that this is an opportunity not just for white folks? 

Grant: Yeah, I think there’s a growing understanding of it but there’s two sides to the coin. One side is understanding for people of color, this is something that you can do. But on the flip side, it requires people who are driving industry to say, people of color can participate in this. … 

Steve: You think there’s bias in funding and in startups?

Grant:… Look, we’re people, right?  There’s no reason why funding should act any differently (based on color) but there’s an unintentional bias that comes from networks and exposure to networks. One of the things that we’re trying to push (at Howard University) is the integration of what we’re doing on campus in entrepreneurship with the broader (Washington) DC ecosystem. We want our students to understand who are the movers and shakers in the ecosystem that can help them grow.

If you can’t hear the clip, click here.

He also spoke about the cultural implications of failure:

Grant: Fear of failure has some cultural implications for us. For our students, they come in to school, and they think, “you have to be the example for your family”. You might be (the first in your family to go to college). 

Steve:  And entrepreneurship is for crazy people. 

Grant: Right. (They think) it’s only for crazy people. We want to encourage them to take more risks with their career. Part of it is real, right? You might feel like, “I want to graduate, get a good job, so I can help my family.” That’s a real thing that people feel.  

Our take is that, “Well, you could graduate. Take a risk. If you fail, the good job is always going to be there as long as you learn a lesson.” So you’re not recklessly failing. … 

… what we’re pushing against is that you can fail without being a failure.

If you can’t hear the clip, click here.

Grant said doing a startup changed his overall mindset:

Despite all of the years of undergrad and graduate school, I learned more in the first couple years of building ConnectYard than I had prior to that point.

… ConnectYard changed the way I viewed what I was doing at the university. … I’d go to faculty meetings and realize, “These conversations are pointless, nobody wants to get anything out of this (meeting).” (At ConnectYard) we couldn’t afford that. Each meeting we went into for ConnectYard,had to end with hopefully something positive. If not something positive, at least something quick. That changed the way I thought about making decisions.

Steve:  That’s a great lesson. … I remind entrepreneurs that in a startup there are only two types of decisions, revocable decisions and irrevocable decisions. In a meeting, if it’s a revocable decision, meaning you can change your mind later, you are making a decision in that meeting. There is no other meeting to have the meeting to schedule the conference room to have the meeting. However, there are a few decisions that irrevocable. Who are you taking money from? Do we sign a five-year lease? Do we hire 50 sales people? Those are hard to roll back. For a startup you might want to have 48 hours to consider those. I think what you just pointed out is some people in large organizations tend to make revocable decisions into a four-year meeting process.

Grant: That’s exactly what it is. They just go on forever.  

Steve: What was the light bulb (moment) that changed you?

Grant: It really was going through the life or death of ConnectYard, realizing that each day was a day that the runway (of money left in the bank) was running out. We couldn’t afford (to waste time). It changed the way I looked at things. The other piece was that my partner had some of the Lean Startup process down cold. Thinking about that … helped me think about how you approach projects, and understand what’s important in the project and get to a result quickly. … 

Steve:  You think it’s made you a better faculty member?

Grant: It’s made me a better everything. … Really, I do believe that. Definitely a better faculty member because it’s helped me talk to students in a different way. It’s helped me approach projects in a different way.

If you can’t hear the clip, click here.

Listen to my full interview with Grant by downloading it from SoundCloud here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Nina Tandon, co-founder of EpiBone; and Brandon McNaughton, co-founder and CEO of Akadeum Life Sciences.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show?  Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com describing your entrepreneurial journey.

Entrepreneurs are Everywhere Show No. 21, Part 1: Kathy Ku and Orin Herskowitz

Research done by professors and their grad students in U.S. universities labs are being turned into commercial products and life saving drugs and devices thanks to an act of Congress – and the efforts of technology transfer offices in schools like Stanford and Columbia.

How this research is transferred outside the university, and why this “tech transfer” process is important was the focus of an interview with two of the latest guests on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111 (airing weekly Thursdays at 1 pm Pacific, 4 pm Eastern).

The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Katharine Ku

Kathy Ku

Joining me in SiriusXM’s studio in New York were:

Orin Herskowitz's picture

Orin Herskowitz

Listen to the full interview with Orin and Kathy by downloading it from SoundCloud here.

(And download any of the past shows here.)

Clips from their interview are below

As executive director Stanford University’s Office of Technology Licensing, Kathy Ku oversees the licensing of Stanford-developed technologies.

From 1994-98, Kathy was responsible for Stanford’s Sponsored Projects Office. She took a break from Stanford in 1990 and 1991, as VP of business development at Protein Design Labs, Inc. Prior to that, she spent 12 years at Stanford; worked at Monsanto and Sigma Chemical as a research scientist; administered a dialysis clinical trial at University of California; and taught chemistry and basic engineering courses.

Kathy has been VP and trustee of the Licensing Executives Society (LES), and was president of the Association of University Technology Managers (AUTM) from 1988-90. She received the AUTM 2001 Bayh-Dole Award for her efforts in university licensing, and is currently a member of the NIH Advisory Committee to the Deputy Director of Intramural Research.

Orin Herskowitz has been executive director of Columbia Technology Ventures since 2006 and is also VP of Columbia’s Intellectual Property and Tech Transfer.

In addition, Orin has served on boards or as the Principal Investigator for the NYC Media Lab, PowerBridgeNY, and the Columbia Coulter Translational Partnership. Prior to joining Columbia, Orin spent seven years with the Boston Consulting Group’s New York office.

Tech transfer is about far more than simply licensing technology, Kathy and Orin explained:

Kathy: Tech transfer has a broader mandate. … it’s helping entrepreneurs, it’s creating the culture, the ecosystem for fostering entrepreneurship and startups. I think our mandate is just getting broader and broader. 

Orin: …The rap on tech transfer used to be that it was about picking the winners. The offices would only focus on (licensing) the one or two things that were going to be blockbusters. That is certainly not the case (anymore) at all. The mission of tech transfer is to get as much out of the (university) labs and into the market as possible, because you never know what’s going to be a hit.

You never know what’s going to transform the world. I think what you’ve seen is an increasing effort among the tech transfer offices to professionalize, to try to make (the tech transfer process) as transparent as possible, as fast as possible, and as predictable as possible, so that the negotiations don’t drag on for years, you’re not asking for exorbitant rates, it’s just easy and fast.

Steve:  Kathy said a phrase I thought was pretty important for the future direction of tech transfer, and that is “tech transfer offices are helping to create an ecosystem around our universities.” That is, instead of just  looking inward, thinking that your job is to create the most amount of money for the university, it sounds like you’re also now thinking your charter is to actually build the ecosystem around the universities.

Kathy: For sure. I think many universities are feeling this pressure (to create a broad entrepreneurial ecosystem). I think there’s … pressure to do more applicable research with results that are useful to the public. The tech transfer mission has broadened, and it really literally is technology moving from the university sector out for the public good. … it typically moves out with the smaller companies I would say.

(Smaller companies – startups) are more risk-taking organizations. They don’t have to worry about the quarterly report (or other) financial reports that the big companies have to do. Also I think that whole revolutionary technologies are hard to get into an old established company with a product to protect.

If you can’t hear the clip, click here.

Kathy and Orin provided a brief overview of what tech transfer does and how it works:

Kathy: The federal government funds most of the research at universities … (to the tune of) tens of billions of (dollars a year).

(In the 20th century) the U.S. government research agencies (the National Institutes of Health The National Science Foundation, The Department of Energy, etc.) … all had different patent policies (on what universities could do with the research that the government funded). …

Steve:  Meaning if I was a government agency and i gave your researchers money, you had to follow my agencies rules; there was no national standard of what I could do with that technology. Is that correct?

Kathy:   … The law at the time said the government (not the university) owned these patents.

Steve:  (This was true) even though these were university researchers, because they got government money, the government owned the rights to this stuff.

Orin: …You can imagine what a priority that would have been for the government at the time … to actively market these technologies and find venture capitalists and all that. (The government had no interest and/or ability to market these technologies and find venture capitalists.)

Steve:  Congress passed a law, which was called Bayh-Dole to solve this problem… what did the Bayh-Dole Act do?

Orin: … Essentially what the Bayh-Dole Act does is transfer the right to own these assets from the federal government, to the university that receives the research funding.

Steve:  That’s a big idea. The government says, even though we’ve paid for this, even though we funded this research, here Stanford, Columbia, and any research university getting a grant, you guys go make money on this if you can figure out how. Is that what the Bayh-Dole Act said?

Orin: Essentially. The idea was … (to) give the incentive to transfer the rights and obligations to do this to the people who have an incentive to try and make it work.

Kathy: …(Bayh-Dole) was a huge deal. (At Stanford) we had individual agreements with a few of the agencies, the NIH and NSF notably. We could take title (ownership) too those inventions funded by that agency, but the rest of them we had to go and fight each time and say, we wanted to take title or not. The agencies were all of differentiating ilk, and so they may or may not give us title.

Orin: The thing to keep in mind, too, is that … this initially was only relevant for the faculty members that were working on federally funded research.

… What most universities have done since then… is extended (tech transfer to include) to any research done on campus, that uses university funding, or university labs.

Steve:  (So it means today a university will try to license and commercialize more than) just the stuff that gets money from the federal government. Anything that the university would have claim for, now says we’re happy to license and whatever, but oh by the way, if you did it on campus, we own it.

Kathy: Right. … Bayh-Dole was not necessarily created to have the universities make money, but to incentivize universities to do this tech transfer thing. The government realized that all the patents that they had filed on, just sat in some repository, and never got used.

If you can’t hear the clip, click here. 

Here’s how Columbia and Stanford universities market their technologies:

Kathy: Right now, what Stanford does is … market our technologies to … anybody who might be interested…. We put (these inventions and patents) out on the web or we contact companies etc.

Steve:  That means you have an invention that one of your professors have done that does x and y. Here’s the description, is that what you mean by market?

Kathy:  … and it might do this and it might be cheaper, faster, a better something … (We basically say) come and tell us if you’re interested in it (whether you’re a startup or a large company). (But) The reality is most times nobody is interested. …It’s really too early. That’s the sad thing. We have lots and lots of good technologies but it seems that our system is such that many of the large companies can’t either recognize that or don’t want to invest in this early stage stuff. 

Orin: … (The problem of getting someone interested in University technology is even tougher than it sounds) … take the role of a venture capitalist. … In the average VC portfolio … 1 in 10 companies (they invest in) will turn out to be a big hit. … And if you’re in the pharmaceutical industry, 1 in 100 compounds that start life with a big pharma will actually make it to market and be a big success.  

Our science (we license) is early (for VC’s and companies) because unlike a corporation, when the faculty members have a new idea, they are going to publish it in a journal (that’s how academics get credit and recognition for their research.) So we file our patents very, very early on (often before the ideas get published.) The most successful moments for us, when we pop the champagne, is when we license something to a venture capitalist for a startup or to a pharma company to become one of those 100 things that might make it to market someday.

If you can’t hear the clip, click here.

Orin shared Columbia University’s recent Eureka moments:

Orin: Last year, we had roughly 200 faculty members who interacted with our office and (those 200 faculty members) created 400 new inventions. (Think of those as) roughly 400 Eureka moments by the faculty.

Steve: These faculty say, we think this idea is worth patenting or licensing?

Orin: (Nods.) (For) some of them it’s very clear. They say, “I have a new compound that has never been seen before that I believe is relevant for this specific disease.” In other cases, they might say, “I’ve observed this cool interactions between two things. I don’t really know how it’s going to be used yet.”

… 200 faculty labs, 400 inventions… at Columbia at least, we file patents on roughly two-thirds of those, so 200 some odd patents get filed. We, last year, did 117 licenses with companies of which 27 were startups.

If you can’t hear the clip, click here.

Kathy offered insight into the process at Stanford:

(At Stanford) here are close to 500 (new inventions that my office sees.). I would say we file patents on about 60 percent of them… and we license about 25 to 30 percent.

(Non-exclusive licensing of any invention is essentially) “you go over my bridge, you pay my toll.” We offer a mix of what we call non-exclusive licensing (we will license the same invention to multiple companies)– — (We also offer) exclusive licenses (we’ll license the invention to just one company. We do that as an) incentive for the company to invest the resources (to further develop the technology into a product). … I would generally say (we do) 50-50 (exclusive and non-exclusive licenses.)

We have a strong engineering school, strong medical school, but we’re way more successful in licensing in the medical side of things. I think (it’s because) the medical industry believes and realizes the importance of patents patents. They  also understand the long R&D phase, much more than high-tech. High-tech is just trying to get a new product every 18 months out. Their patents are just a piece of their picture.

If you can’t hear the clip, click here.

Listen to my full interview with Orin and Kathy by downloading it from SoundCloud here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywheremy interview with Grant Warner, director of innovation and entrepreneurship at Howard University’s College of Engineering Architecture and Computer Science, and co-founder of ConnectYard, in part 2 of this post coming later this week.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show?  Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com describing your entrepreneurial journey.

Entrepreneurs are Everywhere Show No. 20: Nayeem Hussain and Will Zell

Your product and company vision needs to match your appetite for funding.

And know that just because a venture failed doesn’t mean that you’re a failure.

Funding challenges and other issues founders face in the early days of starting up were the focus of interviews with the latest guests on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111 (airing weekly Thursdays at 1 pm Pacific, 4 pm Eastern).

The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Nayeem Hussain

Nayeem Hussain

Joining me in SiriusXM’s studio in New York were

willzell

Will Zell

Listen to the full interviews by downloading them from SoundCloud here and here.

(And download any of the past shows here.)

Clips from their interviews are below.

Prior to founding Keen HomeNayeem Hussain spent his career focusing on M&A, corporate development/strategy, and financial analysist, first at Prudential Financial and then at Loral Space & Communications. He previously founded N&N Investments LLC, a real estate investment holding company; and is a program leader and fellow of the Startup Leadership Program. 

He stressed that your product and company vision needs to match your appetite for funding:

One thing that we learned very early on was, have a plan for fund-raising. … We had a lot of inbound interest from investors, but to be painfully honest … we were not ready to engage with professional investors (because) we weren’t able to coherently communicate a broad vision.

We were portraying the company as a vent company. 

Steve:  And they wanted a bigger business than just a vent company.

Nayeem: (Nods.) If you’re a venture capitalist … you have limited partners that give you money to invest on their behalf, and you’re responsible for giving them outsize returns. The limited partners could put their money in the stock market, but instead, they give it to you, the venture capitalist, which is much more risky, but you’re promising them huge returns. Therefore a venture capitalist needs to invest in startups that can turn into billion dollar companies.

Steve:  And a vent company wasn’t that?

Nayeem: A vent company might have been a hundred million, or a couple hundred million (dollar company,) which to most people, including myself at the time, sounded great. That’s a huge company. I’m coming out of business school building a three hundred million dollar company. Slam-dunk. (But) go in to pitch to a venture capitalist, and … I’m off by a zero. They need to return the value of their whole fund.

Steve:  They want Nest, not the vent, right?

Nayeem: That’s correct. We quickly understood that we needed to really understand what our brand was going to be. … Everyone needs to ask themselves that question. Is your … company venture-scalable and venture back-able?

… For a lot of people, the answer is no, but they refuse to see that, and they end up pitching the wrong type of investor.

If you can’t hear the clip, click here.

Will Zell started his first company, a real estate business, at age 22. Over the past decade, he has launched multiple businesses, including three technology companies. Will was honored at the White House as part of the 2011 Empact 100 list, for his work as a young entrepreneur.

Here’s how Will copes with the inevitable failure founders face:

I think that’s one of the biggest challenges is to not let failure define you. … You really have to separate the pursuit that you’re on, the business pursuit that you were taking, from you as a person. It’s hard, because you’re emotionally invested, financially invested, and it’s tough when something doesn’t work …

One of the most important things that I do, when I have something that doesn’t work is separate the journey …from me as an individual, and then learn as much as I can.

Literally take a significant amount of time to think back, to look back, to analyze what happened, what went wrong, what could I have done better, what could I do better in the future, and be brutally honest with yourself.

Also know that because this particular venture failed doesn’t mean that you’re a failure.

If you can’t hear the clip, click here.

Getting Keen Home’s smart vent to market was no small task. Nayeem explained why:

Building a hardware product standalone is very, very difficult because you have to deal with supply chain, you have to deal with customer service, you have to deal with fulfillment.

our product is manufactured in Shenzhen, China … along with most of the high-tech electronics in the world, so we had to locate a factory, we had to find the right partner to build this product and work with us …

Steve:  Did you personally know about any of this?

Nayeem: I didn’t, no. Thankfully we were able to hire our … Chief Technology Officer, who did this his entire career.

… (Still) We had no idea the complexity that would be involved from sourcing the manufacturer and how long it would take once you found that manufacturer to be able to engineer the product… It’s very different when you’re engineering a product to make 100 of parts. …

You can start by using all sorts of off-the-shelf components, etc. …(But) when you’re going to scale, you have to source components oftentimes from all around the world with different lead times. For example, our product has more than 300 discrete components … just for the vent.

 … oftentimes if you buy the parts in advance they can be as much as 50 percent cheaper. So there’s what called spot market, and a futures market (for parts). Imagine a chart that’s 300 lines long for each component and you have to strategize when you’re going to buy this component and how far in advance you need to purchase it in order to get the price you need to get your cost of goods sold low enough that you’re going to make money on this thing. 

Steve:  Wow, and those are some pretty big unknowns because (the price of) those parts could swing back and forth.

Nayeem: That’s correct.

If you can’t hear the clip, click here.

A strong founding team will help a startup weather the chaotic early days, Nayeem said:

The key thing that I would tell people is really know yourself, know what you’re good at, and know where your holes are. Hire around you to fill those weak spots. …

As an entrepreneur, you’re always fighting that external war whether that’s with partners or with investors. … Make sure that the team you build around you are those that share your passion, share your vision, and really fill the holes from a skill set perspective. ….

Steve:  …was there any time a crisis of faith?

Nayeem: There wasn’t. I can honestly say there wasn’t. There was very many times when we were almost running out of money. Very, very many times. … That’s a crisis of bank account but …, to my team’s credit … when one person’s down the other person picks them up.

…That’s how you know you have a good team because some people are going to have bad days inevitably and you trust your team members to pick you up. Thankfully my team members always have.

If you can’t hear the clip, click here.

Keen Home appeared on the TV show, Shark Tank, in 2012, landing one of the highest valuations in the show’s history. Here’s how being on the show affected the company:

The process for getting onto the show is pretty grueling. You have a lot of weekly touch points with producers for months on end. When you’re trying to build a company, any commitment like that eats up a lot of your time, so you have to think very carefully about it, because it’s an opportunity cost to do other things that might directly benefit your business. We asked ourselves that all the time and the producer was very honest telling us almost every week, “You may not get on a show.” There’s no guarantee that after all this time investment you’re even going to get on television.

We rolled the dice … Certainly, for us, it was worth it because we were on prime-time television for 10 minutes talking about our product.

… It really exploded our perception and visibility in the United States. … Orders increased. Inbound interest for partnerships, for employment, for investment (increased) — you name it from small companies, small HVAC contractors to large companies like AT&T. Certain big brands and large companies that would never return my phone calls were all of a sudden emailing us saying, “Hi. We’re big fans of the show. We saw you were on it. Wonder if you’d be willing to tell us a little bit more about Keen Home.” It really opened a lot of doors for us.

If you can’t hear the clip, click here.

Will learned one of the most important founder skills while working as an insurance salesman during college:

Insurance is a commodity, right? You can go anywhere and buy insurance, and you’re going to get a competitive price in most places. You really have to be able to differentiate yourself when you’re sitting across the table selling someone an insurance policy. That ultimately boils down to the personal relationship that you can build with them in a short period of time.

Steve:  Do you think learning how to sell is an integral part of learning how to be an entrepreneur?

Will: Absolutely, 100 percent.

Steve:  Why is that?

Will: Because you’re always selling … You have constituencies, right? When you’re an entrepreneur or when you’re going to start a company… you have groups of people that you have to influence. … You have investors … or directors and advisors. You have your team. … whether that’s partners or employees that you bring on. And most importantly, you have your customers that you want to sell your product or service to.

It’s different types of selling. But it’s sales that really drive your progress with those three groups of people.

If you can’t hear the clip, click here.

Being in Ohio, which lacks the startup ecosystem of an entrepreneurial cluster like Silicon Valley, made it difficult for Will to get funding for his first startup, Huddlewoo:

The type of business that we were building needed an investment of capital ahead of revenue.

Steve:  So you needed to raise money to actually build the business?

Will: Yes, and that was my first brutal intro into the difficulties of raising venture capital where I lived.  

Steve:  There is probably is no venture capital for 50 miles, if not 500 miles.  

Will: Yes, (although)… Columbus, Ohio, has come a long ways, frankly, from a venture perspective.

Steve: Seed round to maybe an A round? 

Will: Ironically, you can get an A (funding round) a lot easier than you can get a seed round right now. …Drive Capital came in (to Columbus). Mark Kvamme, who was with Sequoia Capital, launched a $250 million fund. (But) that didn’t exist (when Will was first starting up) … and even getting a seed round is still pretty difficult. There are some angel investment groups, but the pool of investment capital and number of investors at the earliest stages is very, very small.  

If you can’t hear the clip, click here.

Will also shared the hardest part about being a founder:

Being misunderstood, just completely misunderstood.

Steve:  You mean in the community you’re in where the founder is an outlier, rather than at the core where you go to New York or you to go Silicon Valley and everybody’s a founder, including the waiters?

Will: Absolutely. Every time I go to Silicon Valley I’m like, “Oh, this place is great.”

Steve:  And so why do you stay?

Will: … I want to focus on impacting my community and region as much as I possibly can. That’s important me. Because of that I believe, and am even more convinced now, that there is opportunity and there is ability to build great tech companies in Central Ohio, so I stay because I’m committed.

If you can’t hear the clip, click here.

Listen to my full interviews with Nayeem and Will by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Next on Entrepreneurs are Everywhere: Orin Herskowitz, executive director of Columbia Technology Ventures; Kathy Ku, executive director of Stanford University’s Office of Technology Licensing; and Grant Warner, director of innovation and entrepreneurship at Howard University’s College of Engineering Architecture and Computer Science, and co-founder of ConnectYard.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show?  Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com describing your entrepreneurial journey.

Entrepreneurs are Everywhere Show No. 19: Carmen Medina and Don Burke

Change agents inside a corporation or government agency know how to build consensus and be a rebel at work.

They are attuned to finding colleagues who think like they do. And they can figure out how to get new ideas adopted within their organization’s culture and framework.

And oh by, the way my two guests did it while at the CIA.

How to be a rebel at work was the focus of interviews with the latest guests on Entrepreneurs are Everywhere, my radio show on SiriusXM Channel 111 (airing weekly Thursdays at 1 pm Pacific, 4 pm Eastern).  The show follows the journeys of founders who share what it takes to build a startup – from restaurants to rocket scientists, to online gifts to online groceries and more. The program examines the DNA of entrepreneurs: what makes them tick, how they came up with their ideas; and explores the habits that make them successful, and the highs and lows that pushed them forward.

Carmen Medina

Joining me in SiriusXM’s studio in New York were:

  • Carmen Medina, former director of the Center for the Study of Intelligence at the Central Intelligence Agency and co-author of Rebels at Work
  • Don Burke, digital architect for the Central Intelligence Agency

Don Burke

Listen to the full interviews by downloading them from SoundCloud here and here. (And download any of the past shows here.)

Clips from their interviews are below.

Carmen Medina, co-author of the book Rebels at Work, spent 32 years at CIA. In her last assignment she was the Deputy Directory of Intelligence and part of the team that led the CIA’s Analysis Directorate. She began the CIA’s Lessons Learned program and led the Agency’s first effort to address the challenges posed by social networks, digital ubiquity, and the emerging culture of collaboration.

Carmen was the first CIA executive to envision many of the applications now used by CIA analysts, including online production, collaborative tools, and Intellipedia, the Intelligence Community-wide wiki developed by Don Burke and Sean Dennehy. Upon her retirement from CIA, she received the Distinguished Career Intelligence Medal. From 2011 to 2015, Carmen was a member of Deloitte Federal Consulting serving as senior advisor and mentor to Deloitte’s flagship innovation program, GovLab, sponsoring research on Bitcoin, Millennials, and the impact of the Internet of Things on government. 

Carmen’s two keys to successfully innovating inside a large organization:

If you’re going to be an effective change agent, you can’t do it alone. Even if you have one other person who can help you and be your guide and counsel during that journey, it’s really important to have it.  

Two, you can’t give up. If your idea is important enough to you, and you’ve socialized it with other people, so that you have other people supporting you, you owe it (to your company to stick with it.) … In my case I owed it to the CIA, and I owed it to what I thought was the national interest to argue hard and not give up on the idea.

If you can’t hear the clip, click here.

Don Burke has worked 24+ years in the Federal government. In 2005, while at the CIA, Don helped found Intellipedia, the Intelligence Community-wide wiki, with his colleague Sean Dennehy. Intellipedia helped show the way for many other “Web 2.0” initiatives across the Federal Government; Don established many of the core principles for how the Intelligence Community uses Intellipedia. In 2009, Don and Sean won a Service to America Medal.

Don also brought the Wiki concept to the Department of Energy through a project called Powerpedia where he enabled collaboration across the DOE. He is currently working as a “Digital Architect” to transform the CIA’s records management tools, culture, and processes from paper-based to electronic as required by a recent Presidential Directive to all Federal Agencies to manage their records electronically by 2019.

Getting others in the agency to buy in to the Intellipedia idea was critical to the project’s success. Here’s how Don and Sean did it:

What was really powerful is we came together as a team that was cross- organizational…. That allowed us to come at things from very different perspectives. One of the things that I think was critical for us is we had … gravitas in the organization. Both of us were very highly respected, we were both managers, we both had really large networks of people that we knew. … 

Steve: You just weren’t some crazy people who just came in the agency running around saying, look what’s going on outside.

Don: Exactly, and we weren’t part of the IT organization. We were from “mission.” We were from part of the organizations that were … supposed to being doing stuff.

What we literally had to do was we … call every one of our contacts. We would … go down our contact tree, and we’d say, ‘Can we come talk to your organization about this thing called Intellipedia?’ We would go tell them about it, and we’d ask them questions about … their pain points… Invariably… (the people in) that room would say, ‘Well you know, that’s not really for us. The guys right next to us, it’d be really great for them.’ (And) that (would be) the room we just came from.

Steve:  It was circular firing style.

Don: Exactly. (Except) almost without exception, one person in that room would be looking at us with a little … twinkle in their eye. A little questioning of what, maybe (this would work)…

… We had to be extraordinarily attentive to body language, to the language that they were using, and we’d find those folks. Then the next day, we’d go talk with them …

Steve:  You mean you had to act like an intelligence agent.

Don: That and really (for) anyone who’s trying to help people transition their thinking, from one way of habit to another way of habit, you have to be very, very, attentive to their thinking.

If you can’t hear the clip, click here.

Carmen discussed the pitfalls of “large organization disease” and how it manifested itself when she worked at the CIA:

I thought that, “Here I am an analyst, and I’m a smart person, and I have only the best intentions, and that the organization would want to hear my new ideas.” It came as a rude shock to me that the last thing anybody really wanted to hear from me were my ideas that were different from the prevailing orthodoxy of the organization.

Steve: In hindsight, what’s going on when smart, crazy, innovative people intersect with the, “No, this is always how we’ve done it” (establishment). What’s going on?

Carmen: Well, there’s several things … going on. In my case, one of the … was that I was advocating too early for an idea whose time had not yet come, as far as that organization is concerned.

An organization has spent so much time preserving and establishing that wisdom, and the protocols and the way of doing things, and along comes this new idea. One of the things I learned is that there is nothing so weak as an idea whose time has not yet come. In an organization, when you’re someone from below trying to present that idea, unless other people see the idea as you do, it’s very difficult to get any kind of traction.

If you can’t hear the clip, click here.

Change agents must to understand an organization’s current culture and how to work within it, she said:

I would stand there and … broadcast my brilliant idea. I gave brilliant speeches and wrote beautiful essays.  

I did that before I did any homework. Before I actually understood how the organization worked. Before I understood the bureaucratic landscape.

What happens in a large organization like the CIA, or really any larger organization, one of their pathologies, one of the symptoms of large organization disease is passive-aggressive behavior. By shouting out my ideas before I did any homework, or any planning, or understood the organization, all I was doing was warning the passive-aggressives, who went out — because they understood the administrative rule book way better than I did — and laid all these traps, and I just stumbled right into them.

The first thing you have to do, there’s no precise order, but there is an order in your organization that’s going to work. You as a change agent need to be smart about that before you start broadcasting your ideas.

You have to understand the order of battle and the tempo. (Some) of the … characters that live in large organizations I call … bureaucratic black belts. A bureaucratic black belt is the person who (understands) the existing order of the organization. That’s, after all, what organizations are there to do: preserve the existing order. They know all the rules and they want to preserve that order. A change agent like me usually thinks like they’re the scum of the earth. They’re worthless. Our advice to change agents … is befriend a bureaucratic black belt… who can be your guide.

Find someone who’s neutral or to whom you can talk. Ask them questions… People love to be interviewed. … They love to be flattered. Ask them questions like, “You’ve been around for 20 years, Jack, and I bet you’ve seen some successful initiatives. What made them succeed?” Another question, “The ones that weren’t worth the effort, what about them told you not to support them?”

If you can’t hear the clip, click here.

Also, Carmen cautioned, not all rebels at work are effective:

A bad rebel does it alone. Bad rebel is ego-driven, which is probably similar with doing it alone. … Bad rebels don’t have a sense of humor about what they’re doing. (They) are really eager and aggressive to go forward.

We say that good rebels are actually reluctant because a good rebel has actually understood what he or she is getting herself into and is not sure that they want to risk their job, their livelihood, their reputation on this.  

Steve:  You also said good rebels build consensus.

Carmen: Yes, of course.

If you can’t hear the clip, click here.

Don shared how Intellipedia came to be:

(In 2005, Stephanie O’Sullivan, then the CIA’s director of science and technology) asked me to look at how do we do a better job capturing and tracking information, because the world was changing so fast under our feet …

…. If we think about that, even in the 2000s, (circa), 2005, the iPhone wasn’t out yet and we were still really emerging into the modern era. But a decade or so in, probably a little more, we were living in a world where the information was flowing so fast inside our organization, in shared drives and different kind of databases, and here and there, that it was much harder to actually know … what we knew.

Steve:  You were being swamped by information. 

Don: Absolutely, and … she wanted to know how could we do this a little better? My past experience had said, we try to do these big projects that solve these big, hard, intractable problems … and they can never get enough money, they can never get enough traction, because the organizations revolt.

Steve:  You mean like building a giant data warehouse. …There’d be a hundred million dollars, we’ll get Oracle software and we’ll do this, we’ll get three hundred programmers, etc. By the time you get it out, it’s no longer needed or your specs have changed.

Don: Exactly. Just about that time a colleague (Calvin Andrus) had written a paper called The Wiki and the Blog: Towards a Complex Adaptive Intelligence Community.

… He was briefing it around (she Intelligence Community) saying there’s this thing happening. … As a nerd I had a little bit about Wikipedia, which was four years old at the time … and these things called blogs. Can you imagine? Inside our hierarchical organization, the concept of that was just going nowhere, of course. It was just like, “Are you kidding? Anyone can just edit?”

He started talking to my colleague Sean, and through a whole series of efforts we partnered with a variety of people to set up a server in a part of the network that allowed all of the different intelligence agencies to access it. This was really novel stuff at the time.

… the idea that there would be a place where anyone in the intelligence community could post something without approval was really, really a transformative and disruptive idea.

If you can’t hear the clip, click here.

Here’s how Don engaged his colleagues in the effort:

I learned (that) inside of large organizations (one of) the most important things is to not have a big title and not have a lot of money.

… Because inside of large organization you have to change multiple teams. There is no way of having disruptive innovation by changing just one team. When you have a big title and you have a big program everyone sees you through the lenses of that title and that program.  

… You become your title and they wonder what really is your motivation? What are you really after, and the result is they think you’re on a power play. It is much harder for you to expend, to execute persuasion because of the biases of that title. Sean and I during Intellipedia time selected titles that didn’t mean anything. 

… I adopted Intellipedia doyen (as a title). … I got that because a friend of mine who we had persuaded Intellipedia was an interesting thing had used that term (doyen) to refer to me. Of course I had to look it up at that time.  

… It basically means like a senior statesman in country … without portfolio. They’re a person that has gravitas. I adopted that …

Steve: (So) they didn’t feel threatened?

Don: Well, they may. (But) The first they had to ask, Who are you? and Where do you report in the organization? and What’s your authority? By that very fact they were then having to engage in an intellectual conversation to understand me and what I was trying to do, rather than just say, “Oh you’re a program manager. I know what a program manager is.”

If you can’t hear the clip, click here.

He also explained the difference between intrapreneurship and entrepreneurship:

The core lesson of innovators’ dilemma is if you’re in a big company and you want to create this new thing, you have to expel it. You have to push it out and let it survive on its own. Find its own customer base, build its own structures for reporting, and all startups, I think, do that. They become this small, little nucleus and they try to survive.

Inside of big bureaucracies, you don’t get that luxury. You have to create the change with the existing structures, or build new structures inside the interstitial space of that organization. You don’t get to change out the people. You have to persuade the people.

If you can’t hear the clip, click here.

Listen to my full interviews with Carmen and Don by downloading them from SoundCloud here and here. (And download any of the past shows here.)

And read the blog post on Why Corporate Entreprenuers Are Extraordinary.

Next on Entrepreneurs are Everywhere: Nayeem Hussain, co-founder and CEO of Keen Home; and Will Zell, co-founder and CEO of Nikola Labs.

Tune in Thursday at 1 pm PT, 4 pm ET on Sirius XM Channel 111.

Want to be a guest on the show?  Entrepreneurship stretches from Main Street to Silicon Valley, from startups to big companies. Send an email to terri@kandsranch.com describing your entrepreneurial journey.

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