Intel Disrupted: Why large companies find it difficult to innovate, and what they can do about it

In the 21st century it’s harder for large corporations to create disruptive breakthroughs. Disruptive innovations are coming from startups – Tesla for automobiles, Uber for taxis, Airbnb for hotel rentals, Netflix for video rentals and Facebook for media.

What’s holding large companies back? Here are four reasons:

First, companies bought into the false premise that they exist to maximize shareholder value – which said “keep the stock price high.” As a consequence, corporations used metrics like return on net assets (RONA), return on capital deployed, and internal rate of return (IRR) to measure efficiency. These metrics make it difficult for a company that wants to invest in long-term innovation. It’s a lot easier to get these numbers to look great by outsourcing everything, getting assets off the balance sheet and only investing in things that pay off fast. To do that, companies jettisoned internal R&D labs, outsourced manufacturing and cut long-term investment. These resulting business models made them look incredibly profitable.

Second, the leaders of these companies tended to be those who excelled at finance, supply chain or production. They knew how to execute the current business model.

Intel under their last two CEOs delivered more revenue and profit than any ever before. They could point to record investment in R&D for more expensive chip fabs yet today the writing is on the wall that Intel’s leading days are over.  Why?

Over the last decade, Intel missed two important disruptive trends. First, the shift away from desktop computers to mobile devices meant that Intel’s power-hungry x86 processors weren’t suitable. ARM, a competitor, not only had a better, much lower power processor, but a better business model – they licensed their architecture to other companies that designed their own products. Intel attempted to compete, (and actually owned an ARM license) but fell victim to a classic failure of ignoring a low-end disruptor and hobbling their own chances by deciding not cannibalize their own very profitable x86 business. All of Intel’s resources – fabs, manufacturing strategies, and most importantly executive mindset — were geared towards large, expensive x86 processors, not low-cost mobile cores of someone else’s design.

The result, Intel just laid off 12,000 people, 11% of their company.roadkill

But it’s not over for Intel. Their most profitable segment is very high-end processors used in data centers in servers and the cloud. Today that’s built on the premise that an x86 architecture is the one best suited for big data. It’s becoming clear that extracting intelligence from that big data requires machine learning architectures which are better implemented with non x86 chips from companies like NVidia. It’s possible that by the end of this decade history might repeat itself in Intel’s most profitable segment.

The third reason why companies find it hard to innovate is the explosive shifts in technology, platforms and markets that have occurred in the last 15 years–personal computers moving to mobile devices; life science breakthroughs in therapeutics, diagnostics, devices and digital health; and new markets like China emerging as consumers and suppliers.

Which brings us to the fourth reason it’s harder for large corporations to offer disruptive breakthroughs: startups.

For the first 75 years of the 20th century, when capital for new ventures was scarce, the smartest engineering talent went to corporate R&D labs.

But starting in the last quarter of that century and accelerating in this one, a new form of financing – risk capital (angel and venture capital) — emerged. Risk capital has provided financing for new ideas in the form of startups. Capital is returned to these investors through liquidity events (originally public offerings, but today mostly acquisitions).

Startups have realized that large companies are vulnerable because of the very things that have made them large and profitable: by focusing on maximizing shareholder return, they’ve jettisoned their ability to do disruptive innovation at speed and scale. In contrast, startups operate with speed and urgency, making decisions with incomplete information. They’re better than large companies at identifying customer needs/problems and finding product/market fit by pivoting rapidly. Their size lets them adopt flatter and more agile organizational structures while providing incentives that reward risk-taking and collaboration.

Startups are unencumbered by the status quo.  They re-envision how an industry can operate and grow, and they focus on better value propositions. On the low-end, they undercut cost structures, resulting in customer migration. At the high-end they create products and services that never existed before.

As we’ve seen, corporations are very good at maintaining, defending and refining existing business models, and they’re pretty good at extending existing models by identifying adjacencies. But corporations are weak, and have become weaker, in identifying new disruption opportunities.

Innovation can come from inside the corporation, by adopting Lean Startup language and methods, developing intrapreneurship, and fostering innovation-driving behaviors such as GE’s FastWorks program. And corporations can foster innovation from the outside by promoting open innovation and buying startup-driven innovation. Google has bought close to 160 companies in the last decade. Its acquisition of Android may have been the biggest bargain in corporate history.

So to succeed, corporations must re-think and then re-invent their corporate innovation model, replacing a static execution model with three horizons of continuous innovation: This requires a corporate culture, organizational structure, and employee incentives that reward innovation. It requires establishing acceptable risk level and innovation KPIs for each horizon.

And it also requires understanding the differences between executing the existing business model, extending the business model and searching for and disrupting the business model.

Lessons Learned

  • Even the most innovative companies eventually become yesterdays news
  • To survive companies need to run three-horizons of innovation
    • Horizon 1 – execute their existing business model(s)
    • Horizon 2 – extend their existing business model(s)
    • And for long-term survival – Horizon 3 – search for and create new/disruptive business model(s)


(this article first appeared in the Peoples Daily.)Peoples Daily

Entrepreneurs are Everywhere: Show No. 33: David Comisford and Omar Zenhom

A huge lesson is to raise money at the appropriate time. We didn’t understand our value proposition. We didn’t even have a fully baked-out product. We weren’t ready. So we failed.

Every time I started a business it was because I saw them as good short-term financial opportunities. In hindsight I realize none of these businesses lasted because it wasn’t authentic. I didn’t feel like they were my legacy or something I could really leverage my strengths with. 

Lessons in raising money and making money were shared by the guests on today’s Entrepreneurs are Everywhere radio show. 

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.

David Comisford

David Comisford

Joining me in the Stanford University studio were

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

Omar Zenhom

Omar Zenhom

(And download any of the past shows here.)

Clips from their interview are below.

David Comisford is an entrepreneur currently focused on higher education and ed tech. David was named to the 2016 Forbes 30 Under 30 for his work in launching the EduSourced software platform. His previous startup was Frewg, a regional online textbook rental service. 

While building EduSourced, David learned some lessons around getting funded:

David: We weren’t ready to scale when we first took investors money, which tells me that we took the money too early, but I didn’t know that at the time.

Taking money from investors meant that there was pressure to scale, and pressure to hire, and that hire included a high-powered sales executive, but we did this without understanding our own value proposition.

Steve:  You mean that’s who your investors were telling you to hire? Go hire a sales exec to scale?

David: Yeah. I can understand from the outside looking in, that would seem to make sense, bring somebody in who’s done that before, but we didn’t understand our value proposition. We didn’t even have a fully baked-out product. We weren’t ready to layer a sales team on.

The huge lesson for me was to raise money at the appropriate time (or from people who have patience at the appropriate time).

If you can’t hear the clip, click here

Omar Zenhom is a former educator and the co-founder of The $100 MBA and the co-founder of Webinar Ninja, a webinar platform for online business owners.

Earlier in his career, Omar had a series of what he calls side hustles, including a fashion company. The experience taught him that being a founder isn’t just about the money:

Omar:  Every time I started a business it was because I saw them as good short-term financial opportunities. Then I realized none of these businesses were having any kind of longevity because I can’t add value to them in a way that it has meaning to me.

I didn’t really ask, “How can I add my strengths to any business?” I just saw an opportunity and ran with it. It was working and it was profitable so I continued to do it. 

Then I realized I don’t want to do this anymore. It wasn’t authentic. I didn’t feel like this is my legacy or something I can really leverage my strengths with.

If you can’t hear the clip, click here

David launched his first startup, Frewg college textbook rentals, while in college:

David:  Initially Frewg was a hobby. Over time it became an online book rental platform serving Ohio. We developed a simple algorithm for pricing the textbooks, predicting when a price would fluctuate, when a book would go out of print, that kind of thing. We weren’t reliant on a wholesaler, which was interesting. Most people in that business work with wholesalers. 

Steve: How did you learn about the economics of the business? 

David: Initially we learned by doing simple stuff like going to the bookstore and getting information out of them about what do they pay for a book. I took 5 or 10 different textbooks, got their pricing, and then went and compared it to what I could sell  them for.

If you can’t hear the clip, click here

Between Frewg and EduSourced, David tried starting a startup dedicated to digital textbook content. Here’s why it failed:

David:  No one really cared about our solution. That was the biggest reason why it wasn’t going to work. I don’t think I would have known that if I hadn’t talked to people. 

Steve:  No one cared, meaning the students? 

David: The students weren’t my market. It was the faculty that had to adopt the textbooks.

Steve:  So this sounds like a multisided market. There were students, there was faculty, there were content providers, there were re-sellers, there were authors. There were about 20 moving parts.

David: Exactly. I didn’t know when I started how far in over my head I would have been.

It was interesting learning to recognize defeat, and not even think of it as defeat, but think of it as, “I tried this. I had a concept. I developed it as much as I could.” 

If you can’t hear the clip, click here

Omar was a teacher before becoming an entrepreneur. Here’s why he left his teaching job:

Omar: The moment that really clicked for me is I was asking for a promotion that I thought I deserved. The person I was replacing, I was already doing their job for over a year.

I realized that, hey, what if I left today? I put in so much work into this institution. I’ve put in policies. I’ve built structure to this place and I can’t take anything with me. I have no legacy, I have nothing to show for it.”

If you can’t hear the clip, click here

As a founder, Omar learned to leverage his strengths. Here’s what happened with a podcast he launched before the $100 MBA:

Omar:  I realized I’m not a good interviewer. I didn’t take it as seriously as I should have. I thought podcasting was a great idea. I believed in the medium, and I just said, hey this is easy. Just get on the mic and talk to people. I didn’t really have a strategy . 

After 46 episodes we decided to close it down. I realized I wanted to utilize my ability to teach. I never saw a business podcast that teaches. I saw interview podcasts. I saw discussion podcasts with panelists.

But I wanted to do what Coffee Break French or Coffee Break Spanish does, where they have a regular 15-, 20-minute lesson on how to learn that language.

I knew that if I was on the mic teaching, I would have a competitive advantage.

If you can’t hear the clip, click here

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

Next on Entrepreneurs are Everywhere: Deputy Secretary of State Antony J. Blinken.

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. 32: Evangelos Simoudis and Ashok Srivastava

Innovation outposts in Silicon Valley allow big companies to sense and respond to rapid changes in technology.  Big data is changing how we view the world, and is the fuel for machine intelligence.

How to make corporate innovation work and drive success in startups were the topics of discussion with the guests on today’s Entrepreneurs are Everywhere radio show.

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.

Joining me in from the studio at Stanford University were:

Evangelos Simoudis

Evangelos Simoudis

Srivastava

Ashok Srivastava

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

(And download any of the past shows here.)

Clips from their interview are below.

Ashok N. Srivastava leads Verizon’s innovation outpost (their Silicon Valley R&D center) in Palo Alto focusing on building products and services powered by big data and analytics. He is also a Consulting Professor at Stanford in the Electrical Engineering Department and Editor-in-Chief of the AIAA Journal of Aerospace Information Systems. Ashok formerly was the Principal Scientist for Data Sciences at NASA Ames Research Center.

A thought leader in the area of big data analytics, social media, optimization, machine learning, and data mining, he also served as a Venture Advisor focusing on big-data analytics at Trident Capital, and was on the advisory board of several startups. 

Ashok explained how our use of data continues to evolve:
Issac Newton said, “We can understand the world through physics-based equations.” We certainly did. We have a tremendous understanding of the physical world through equations.

Now we’re in a world where we have the ability to take data and try to understand the physical world again, moving from mathematical models to data models, to reveal new things about the world.

I view the kind of the work that I do … as part of that continuum. 

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

The right data can deepen understanding of a problem, he added:
Ashok: What we see today are tremendous numbers of data points, billions, trillions of data points, coming in through various systems, but we want to have a deeper understanding of the systems that those data points are generated from.

Steve: Is that what makes machine intelligence possible, not only having the hardware and the algorithms but the a stream of data that was never available before?

Ashok: Absolutely…. If we have hardware and if we have algorithms that doesn’t complete the picture. The third element you need is data. You need to have it at scale, it needs to be updated regularly.

It also needs to be depicting the data-generating process.

For instance, if you want to model an economic system, you need to have economic data. You can’t use weather data to do it. You might be able to use a bit of weather data to understand some parts of the dynamics but you really need to have data that’s relevant to the process you’re trying to understand.

It sounds very obvious, but I’m amazed sometimes that I see that people are trying to solve a problem using data that’s not particularly relevant to a problem. 

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

Evangelos Simoudis’ is the founder and managing director of Synapse Partners. His investing career started 15 years ago at Apax Partners and continued with Trident Capital. Today Evangelos invests in early- and growth-stage companies focusing on the enterprise in the areas of data and analytics, SaaS applications, and mobility. He is a senior advisor to several multinational corporations and a recognized thought leader on corporate innovation, big data, cloud computing, and digital marketing platforms.

Prior to his investing and advisory career, Evangelos spent 20+ years in high-technology industries, in executive roles spanning operations, marketing, sales and engineering. He was the CEO of two startups.

In his current work, Evangelos helps corporations innovate:
As corporations start to think of how to take advantage of innovation ecosystems like Silicon Valley., they often confuse the vehicles to innovation –a venture fund, or an incubator or something else — with actual innovation.

What I’m trying to make them understand is how to separate those two and to do so they need to  create an organizational structure, an outpost, here in Silicon Valley, to do two things.

They need to be able to sense what is happening in the ecosystem of choice and then respond.

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

He also counsels startups to think about potential partnerships with large companies:
Just having an idea is not enough. You need to be able to understand how to take advantage of the market you’re operating in, including how to take advantage of corporations.  

A lot of times entrepreneurs want to create distance from corporations  Today’s environment creates some wonderful opportunities and conditions of the two to come together and create slingshots for taking companies and giving companies and startups, escape velocity.

If you can’t hear the clip, click here

Ashok has taken a Lean approach to innovation at Verizon:
Within a couple of weeks of joining Verizon, they said, “Before you learn a lot about the company, write down what you think we should do.” So I wrote a 9-page charter of what I thought we should do.

It included things like advertising, marketing analytics, cyber security. There were things like drones in there. Very, very far-fetched ideas, frankly. I presented them to our chief product officer and our CTO. Both of them started to see that these things could be executed. I said, “Rather than making a huge investment first, and seeing whether we could do it, let’s build some small prototypes.” Let’s define an MVP, a minimum viable product. Let’s just see if it’ll work. We started to do that in the advertising space first. Just took some things together, wrote some code, made some partnerships.  

Together, as we brought the code, the partnerships together, we started to see, “Yeah. This could be a business.”

Then we ended up buying AOL last year …

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

Having the buy-in of the company’s highest executives is crucial:
When we had our first discussions about what the Verizon Silicon Valley innovation outpost might look like, the senior executives within the company — the CEO, the CTO, our chief product officer, — said, “We understand that if we’re going to do this, it’s not going to be in Basking Ridge, New Jersey,” which is where our headquarters are, “It’s going to be in California and it’s going to be in Palo Alto.”

They made very, very deliberate choice to do that, to their credit because in formulating the hypothesis that data could be turned into a product, that’s leaping out into the unknown.

Secondly, to do it in a physical geography removed from the headquarters is also a pretty big idea.

They invested in it with capital but, equally importantly, they invested in it with their own attention to detail and attention to the vision that I started to lay out.

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

As in a startup, listening to customers is paramount for a big company’s innovation efforts, he added:

If it’s an individual, if it’s a company, they all have a point of view and I always assume that they’re acting in good faith and they’re telling me what they really think.

I try to listen wherever I go. Whether it’s with a brand-new employee, whether it’s with a CEO of a big company, anyone, I always try to understand where they’re coming from and what I need to communicate to them so that they have a better understanding of who I am and what I’m doing and why I’m doing it.

Generally speaking, I find that if I take this approach, people realize that I’m there to collaborate and I can listen and … also tell you what’s possible and what’s not possible and why.

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

In his experience with large companies and startups, Evangelos found one thing critical to success:

Evangelos: For me, there is a common lesson that has come from different perspectives in every stage of my career: the importance of the team.

As an entrepreneur, and later as an investor, I came to see sometimes, by associations, and sometimes very directly, what a good team can do. (And) what an incomplete or a mediocre team cannot do.

The difference is in how you can … achieve the goal that you’re setting up to achieve. 

There are a lot of people who make things happen.

The right team can make the right things happen, and make them happen in the right way.

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

And he offered the following insight into the VC- founder relationship:

Evangelos: As you understand product-market fit, this is where finessing and reworking of the management team, is very important. You need to understand given who you have and where you need to go in order to capture that value, to create that spectacular success-

Steve:  Does that mean changing out people or does that mean growing people?

Evangelos: You need to be able to change people, you need to be able to put the right people in the right role. This is (why it’s important to have) a cohesive board and a cohesive investors’ syndicate because the investors sit on the board of the company and make the company work.

Steve:  And they need to agree.

Evangelos: Yes.

Steve:  Did you sometimes tell the founders they won’t be taking the company to 10,000 people? 

Evangelos: Actually, I have said that to founders more times than I thought I would and that didn’t always endear me to the founders. Though what has been rewarding is that a number of founders who I had to either change roles or even let go, have told me, “You were right. Now I understand what was happening because I applied it to my next company.”

There is certain amount of … reward in having that acknowledgement.

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

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

Next on Entrepreneurs are Everywhere: David Comisford, founder and CEO of EduSourced; and Omar Zenhom, co-founder of The $100 MBA.

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. 31: Congressmen Dan Lipinski and Seth Moulton

Lean methodologies have changed the way science is commercialized in the U.S. Now it is changing how we protect the homeland and keep Americans safe and around the world.

How the U.S. government has embraced Lean methodologies to reinvigorate its innovation efforts was the focus of the latest episode of my SiriusXM radio show, Entrepreneurs are Everywhere.

The show airs on SiriusXM Channel 111 (weekly Thursdays at 1 pm Pacific, 4 pm Eastern). It follows the journeys of innovators sharing 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.

Dan Lipinski

Rep. Dan Lipinski

Joining me in the Stanford University studio were

Seth Moulton

Rep. Seth Moulton

Listen to the full interviews with Reps. Moulton and Lipinski by downloading them from SoundCloud here and here.

(And download any of the past shows here.)

Clips from their interview are below.

Rep. Dan Lipinski is a six-term Congressman and on the Committee on Science, Space and Technology and Ranking Member of the Subcommittee on Research and Technology (and one of a handful with a doctorate).  He championed the National Science Foundation Innovation Corps (NSF I-Corps). I-Corps teaches scientists and engineers how to get their technical ideas out of the lab and into the marketplace using the Lean Startup processes.

Rep. Lipinski also serves on the Transportation & Infrastructure Committee, and three of its subcommittees: Aviation; Railroads, Pipelines, and Hazardous Materials; and Highways and Transit.

Innovation drives the U.S. economy, he said: 

Innovation is really is the life blood of our American economy. … looking back at the stories of Thomas Edison, Alexander Graham Bell and the Wright Brothers, you look at emergence to technology innovation and what it has done for our economy.

We need to continue that. America is full of entrepreneurs, inventor and dreamers.

Coming back to Stanford, reminds me of a German friend when I was here in grad school  It was 1989. He saw the movie, “Field of Dreams.” I asked him what he thought about the movie and he said, “Well, that would never happen in Germany. In Germany, you’d never have some guy with a crazy idea, who’d plow under his field so he can build something like a ball park.” He said, “You just would not. No one in Germany would ever believe that story but in America, things are different. Americans are dreamers. They’re doers.”

I think that’s why we are so good at innovation. We’re risk-takers.

Unfortunately it seems in this presidential election, we’re in a place where we have candidates who instead of growing the pie through innovation, are talking about “How are we going to divide the existing pie differently?” … what we really need to do is to help innovators grow the pie. 

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

He offered context for the government’s innovation efforts:

The Federal Government plays a critical role in innovation in our country and has throughout our history. If you’re listening to this show on satellite radio, satellite radio was pioneered by the Department of Defense and NASA. If you’re listening on the Internet, DARPA (the Defense Advanced Research Projects Agency) and the NSF (The National Science Foundation) were critical in developing the internet.

Most people don’t know the role that the government has played and continues to play funding most of the country’s technology and medical research. That research is the building block to innovative products. It’s the envy of the world.

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

Rep. Seth Moulton is a Harvard graduate and U.S. Marine Corps veteran who served four tours in Iraq, including two tours as a platoon commander and two tours as a Special Assistant to Gen. David Petraeus. He was elected to Congress in 2014 and serves on the House Armed Services Committee, the House Budget Committee and the House Small Business Committee.

He spoke about the efforts of the Department of Defense to connect the Defense and Intelligence communities with the Silicon Valley innovation mindset, with their first innovation outpost called DIUx:

Connecting to the Silicon Valley innovation culture is another way to make sure that we’re doing as much as we can to protect their lives of our soldiers as they’re putting their lives on the line for our country.  

He acknowledged the role that the new Hacking for Defense class is playing:

There’s a lot of technologies that could save American lives overseas if we could just get them to the troops and get them more quickly. It’s also a great way for people around the country, whether it’s in Cambridge, Mass., or out here in California, to contribute in the fight against terrorism, to help the young men and women who are out there putting their lives on the line for us. 

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

The Cold War spurred innovation, Moulton said: 

Rep. Moulton: There was a time in the 1950s and ’60s, when the latest and greatest technology was coming out of the Department of Defense. Then later our advanced technology came from the civilian sector. That’s why we had the most advanced intercontinental ballistic missiles and bombers and other things that we built during the cold war. 

Today, innovation isn’t happening at the big defense contractors as much as it’s happening right here in Silicon Valley. We’ve got to change them all.

Steve:  The Department of Defense and House Armed Services Committee helped start a  innovation outpost out here called DIUx, didn’t they?

Rep. Moulton: That’s right. It was a recognition in Washington’s that we ought to have better connections out here. This is one of the reasons why I come to visit. Not just because I’m on the Armed Services Committee but because I’m one of the youngest members of congress and I’m one of the only member of congress who has a degree in science. I like to think that I can understand this stuff, at least better than some of my colleagues. It’s important that we have these connections between Washington and the innovation that’s going on out here.

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

As a former Marine, he has first-hand experience with the need to speed defense innovation efforts:

I remember when my GPS mapping system in my Humvee broke down when I was over in Iraq. We had to take it to the base to get reloaded and they brought out a stack of 3 ½-inch disks. A lot of listeners probably don’t even remember what those are.

It was an amazing system … in the late ’80s or ’90s or whatever, but now it’s really out of date. The Department of Defense just hasn’t been able to keep up with the pace of innovation. We would have been a lot better off with iPhones in our Humvees at the time.

We’ve got a lot of work to do on faster integration of innovation inside the Department of Defense. This is something that the committee right now is focused on, including the Republican chairman Mac Thornberry who’s a great chairman, very bi-partisan. One of his priorities is to reform the procurement processes at the Department of Defense so that we can take advantage of all this incredible innovation that’s going on right here at home.

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

He’s also committed to improving the Veterans Administration to better serve veterans’ healthcare needs, he said:

Rep. Moulton: We have a number of bills that we’re working on. The most recent is called the Faster Care for Veterans Act, which directs the VA to conduct a pilot program with existing applications to make appointments on your Smart Phone. 

We all know the stories of veterans who wait in line for months trying to get an appointment. It’s also a problem with waiting in line on the phone to try to get through to schedule an appointment. That’s what someone in my office who’s a veteran was trying to do one day, and he kept, he got in this infinite loop on their phone system: Press 6. Press 2. Press 3. OK, back to the beginning. Press 6. Press 3. Press 2. Someone else in the office just made a video of it, and it went viral on Facebook.

This Faster Care for Veterans Act is totally bipartisan. Cathy McMorris Rodgers of Washington, one of the leaders in the Republican Conference, is cosponsoring it with me, and it’s gotten a lot of support. My bottom line is this: Our veterans deserve the best healthcare in the world. If there’s technology that’s available to folks in the private sector right now, it should be available to veterans as well.

Steve:  Is the problem with these institutions leadership, technology, bureaucracy that has no incentives to change, all of the above?  

Rep. Moulton: It’s all of the above, but I’ll tell you, from my background in the Marines, I think a lot of it does come down to leadership. The leadership is starting to change. The new Secretary of the VA comes from the private sector. He’s a veteran, but his experience is really in corporate America, and he’s quickening the pace of innovation at the VA. So that’s an example of a place where it’s starting to change, but this is also why we need innovators in government.

The government does a lot of important things and so many people are just frustrated with politics today, especially with the presidential election, that they’re just checking out. Actually, this is the time when people need to check in, and especially young people.

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

Rep. Moulton said he is inspired by the culture change he’s seen during his short tenure in government:

Rep. Moulton: I like seeing new young people come into government and give some of the old bureaucrats a run for their money. We’ve got to improve the personnel system to give more opportunities to you young people, but I spend a lot of time as one of the youngest members of Congress just trying to get other young people involved. For some, it means potentially running some day, for others it means working on a congressional staff or just doing something else in government where you can be an important contributor to fixing some of the problems in government. … 

Steve: You’ve now been in the world largest bureaucracies, US military and probably the biggest bureaucracy in terms of spending, the US Congress. What still gives you hope?

Rep. Moulton: I’ve been pleasantly surprised by the impact that a freshman can make. I run my office like startup. I got my chief of staff from Silicon Valley. We’re just trying to think outside the box and do things differently and we run into bureaucratic obstacles every single day but we don’t let them stop us. Just in my own little personal experience over the past year, I’ve seen the difference that innovators, than an entrepreneurial spirit can make in government.

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

Among the ways the government fosters an entrepreneurial spirit is by helping to commercialize scientific research, Rep. Lipinski said:

Rep. Lipinski: Not all research is going to be turned into some new innovation, but there are some things that can be, and that haven’t been, and I think the federal government has a proper role to play in doing that.  

At the Department of Energy I pushed them to create an Office of Technology Transition at the Office of Science so that they can centralize their commercialization activities.

I also was part of helping create the Technology Commercialization Fund created in 2005 to help get research out of labs and into creation of new products.  The third thing at the Department of Energy is Lab Corps which is a … version of the National Science Foundation Innovation Corps.

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

The NSF I-Corps is the biggest example of this effort, Rep. Lipinski said. To date, more than 800 teams of scientists and engineers have gone through the program which is built on the Lean LaunchPad curriculum.

I don’t have a background as an entrepreneur. It’s not something that’s in my blood so I honestly had never really thought to myself, “If I had an idea, how would I go about trying to do something with that idea?”

Your Lean LaunchPad class, which became the National Science Foundation Innovation Corps, made complete sense to me, to my engineer mind.

You have an idea but before you say, “I’m just going to launch myself full-force into it,” you must find out, “Does this idea make sense to customers? Do people really want this product?” Maybe they want something a little bit different. You need to get out of the lab to figure that out. …

As someone who was a university professor, I know what some professors are like. These are extremely intelligent people, but they spend all their time in the lab. You really don’t know until you get out and you ask questions, and find out what are people really looking for.

The idea of taking a professor, a graduate student working under the professor and they get together with an entrepreneur — someone who has the experience — and work as a team, going through the whole Customer Development and Lean Startup process … just made complete sense to me and I thought everyone would see that. I thought there was no question.

This is so obvious. First of all, I don’t know why no one came up with this before, and once people hear this they’re going to feel like I feel: This is such a great idea, we’ve got to do everything we can to promote this and spread this. 

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

But while the idea was a no-brainer to Rep. Lipinski, he had to convince others on Capitol Hill to support the program:

Well first of all I got a lot of pushback on the Science Committee. Questions about “Well, should we be choosing winners and losers here?”

A lot of members, mostly Republicans — OK all Republicans — would say, “Solyndra. Remember Solyndra? Remember that our government put all that money into this solar company and it went under, so why are we going to pick winners and losers like this? That’s something the market should do.”

The other thing was, “Well, the National Science Foundation should not be doing this. The National Science Foundation should just be doing basic research. This is not an area the NSF should be in.”

Although if you go back to the original charter of the NSF it clearly lays out that it is something that they should be in. I said, “Look, this is about education. NSF certainly is about education, what we’re doing is educating professors and graduate students about how to be an entrepreneur.”

I still could not get a hearing on the Innovation Corps. … This is the way politics works: 

I was the top Democrat on the Research and Technology subcommittee. Mo Brooksthe Republican chair of the subcommittee, said to me, “I want to have a hearing in my district. If you come to my district for a hearing I’ll come to your district and do a hearing and you can pick whatever topic you want.” So I said OK.

We went down to Huntsville, Ala., he did something with local educators about science education and I said “OK, I want to have a hearing in Chicago. It actually has nothing to do with anything locally,” but this was my chance finally to say “I’m going to bring Steve Blank in and others from the NSF and we’re going to talk about the Innovation Corps.” That was the first hearing.

I tell you, things have certainly turned around since then and I think the Innovation Corps has really been embraced in Washington, especially on Capitol Hill by both sides of the aisle.

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

The program has had a tremendous impact, he added:

There aren’t that many things that get done in Washington these days, not many things, especially, that really work. I tell you that day that I came out to Stanford, and sat in on your class, met with you, talked with you, I came out of there thinking this is just an incredible idea.  

After the NSF I-Corps had been running for a while I visited and heard the presentations from the I-Corps teams and then saw companies developing from those ideas, venture capital coming to some of these companies that were being formed, I realized this is something that it really works and it’s something that I championed that was right – and good for the country.

The NSF I-Corps is a great idea, something the government needs to really continue to invest in, and I’m very proud of this maybe more than anything else that I’ve been a part of in the 12 years that I’ve been in Congress because it’s working and making a difference.

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

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

Next on Entrepreneurs are Everywhere: Evangelos Simoudis, co-founder and managing director of Synapse Partners; and Ashok Srivastava, Verizon’s chief data scientist.

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. 30: Guido Kovalskys and Doris Korda

There was a time when having the information gave you the power. That’s no longer the key. The problem isn’t getting information or data; it’s knowing what to do with it.

Founders will always encounter naysayers, shut out the voices and listen to the customers instead. It gets you to a business faster.

Two lessons from the guests on today’s Entrepreneurs are Everywhere radio show.

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.

Guido Kolvaskys

Guido Kovalskys

Joining me in from the studio at Stanford University were:

DorisKorda

Doris Korda

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

(And download any of the past shows here.)

Clips from their interview are below.

Guido Kovalskys founded four companies in the last 15 years — classroom education, entertainment, health care and adventure vacation destinations and worked at McKinsey & Company before becoming a startup founder.

 While doing Nearpod his education startup, Guido learned to listen to the customers and shut out the naysayers:

Guido: I was clueless about how the education system worked other than as a consumer… so I’m learning a lot. Including that there are a lot of naysayers in the education business. They say things like “There’s a lot of government money and we don’t want to deal with that.” “There’s unions and you don’t want to deal with unions.”

There’s a lot of negative stuff from investors, from sometimes employees. … the publicity around working in education as a for-profit company is not the best one, but it’s huge and important for our society, and I think we need more entrepreneurs in this space.

So I decided to ignore the naysayers. If you feel passionate, and have positive customer feedback, then go do it. You’ll find a way to actually make a business in the space.

Steve:  With almost everything great, people have said, you can’t do that. “The world is flat, you’re going to fall of the edge.” “You can’t go to the moon.” “You can’t build electric cars.” “Who’s going to want a personal computer on your desk?” and “Who’s going to want to talk to your friends on some Facebook? That’s just some kind of stupid idea.” I think every great idea has had that phrase. 

Guido: (Nods.) Nearpod in particular had a lot of that feedback. The first one was, “Mobile devices are not going to get into classrooms anytime soon.” Well they were wrong, it’s happening now.

The second thing we heard was, “Teachers, these are not great customers. They don’t make a lot of money. They will not spend their money on these lessons. They don’t have an influence on the ways the districts spend money. I’ve seen it before. There’s a Death Valley of startups trying to do business with schools and teachers. Don’t do that.”

Well, here we are with $5 million in annual revenues and we’re a consumer company that starts with teachers first, and we don’t charge them a dime.

Now the new naysayer narrative is, “this is not going to scale. …”

So there’s always a good way to destroy what you’re doing. If you really believe it, you put energy and effort, there might be a chance.

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

Prior to her 21 years as an educator, Doris Korda spent 15 years as an engineer-turned-entrepreneur in the cowboy days of the high tech industry. She started at AT&T Bell Laboratories, then grew a small network company she sold to Sterling Commerce.

While working at Bell Labs, Doris honed one of the most essential skills for a founder:

Doris:  I learned to ask questions and not to be afraid of asking questions. That sounds like a simple thing, but back then, in the tech world, it was mostly engineers talking tech, bits and bytes. There were lots of people in the room (who were) a lot smarter than I was, technically. I always wanted to know why should we do this, who wants it, who needs it. I talked to people.

I learned a lot about asking questions, asking why? I learned how to form and cultivate shared interest among people in a system where everybody had individual interests. That sounds like a fancy thing, but it’s really just about a lot of relationship-building.

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

Doris had been on the job at Bell Labs for a year when the company was broken up. Her youth and inexperience became assets as the company worked to remain competitive:

Doris: Some of my colleagues were paralyzed by the change, but I looked for ways to take the piece parts that my particular unit was allowed to work with and create new solutions. I partnered with people all over the company and I basically built new products.

It was really exciting, because they were so desperate for any kind of competitive success, and I was really, really successful. I ended up at a very early age being promoted, and that put me on the fast track, given awards, all this stuff. When I look back and I think about how young I was, and what they let me do, they were crazy. But it was a great opportunity.

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

A founder must love his work, Guido said:

You have to fall in love with the problem. If you’re going to spend your next 5, 10, 15 years working on something it might be as well something that you really feel passionate about. 

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

He talked about what went wrong with Bionexo, his first startup:

Our plan was very theoretical. The business model for automating hospitals was perfect on paper, but we missed very tiny little details, like hospitals don’t have computers for example! This is back in 2000 and most hospitals in Brazil didn’t have computers. And we missed another detail like the procurement process in hospitals in Brazil were corrupt. The person that needed to approve the system was not really interested in actually pushing it forward.

Even though the theory was perfect, we were way ahead of our time.

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

And he discussed why immigrant founders face cultural challenges:

Guido: I get the feeling that as an immigrant when you put your feet off the plate you get punished harder. You always have to be watching your back. It’s not that I feel that way at all. I was lucky to come legally to the U.S I came for business school I came for work. I didn’t suffer the typical stigma. I worked at McKinsey. That gave me that interesting aura, really respect academic and professional background. But I think immigrants in general have a challenge in terms of behaving extremely well …

Steve: They have to be better citizens than the citizens just to prove that you deserve to be a citizen?

Guido: Yeah.

If you can’t hear the clip, click here

The Hawken School entrepreneurship program is modeled on the Lean LaunchPad curriculum, and has been adopted by high schools across the country. Doris explained how it works and why it’s effective:

I find real businesses with real and urgent startup problems around Cleveland who are willing to let a bunch of high school kids work on those problems.

The students get out of the building to talk with customers. They learn creative problem solving. They learn collaboration.

We run the class like a startup. The students are on four different teams working on real problems with real deadlines. They learn critical thinking. They read more and write more. We can’t imagine how much. They learn quantitative analysis. They learn statistics.

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

She also discussed why the education system is ripe for an overhaul:

Doris:  The school system that we have now was created at a time when what mattered most was that everybody learn pretty specific content and it worked. It worked for a long time.

Steve:  What do you mean, like math and history?

Doris:  Yeah,  if you’re going to take a math class, these are the exact things you need to know and this is out of all of what’s happened in history, you need to graduate high school having learned the following things, etc.

What the world needs is not a bunch of people who’ve graduated high school and can recite the quadratic formula from memory, but people who can be smart about knowing what questions to ask and how to solve really complicated problems that the world has never seen yet. 

There was a time when having the information gave you the power. That’s no longer the key. The problem isn’t getting information or data; it’s knowing what to do with it.

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

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

Next on Entrepreneurs are Everywhere: Congressmen Daniel Lipinski and Seth Moulton discuss how the government’s innovation efforts are now Lean.

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. 29: Ajay Kshatriya and Steven Cohn

Entrepreneurs see opportunity where others see obstacles and why hubris is an entrepreneur’s worst enemy, were two topics of discussion on my SiriusXM radio show, Entrepreneurs are Everywhere.

The show airs on SiriusXM Channel 111 (weekly Thursdays at 1 pm Pacific, 4 pm Eastern). It follows the journeys of innovators sharing 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.

Ajay Kshatriya

Ajay Kshatriya

Joining me in the Stanford University studio were

  • Ajay Kshatriya, co-founder and CEO of Biota Technology, which applies DNA sequencing technology to the energy industry
  • Steven Cohn, founder and CEO of Validately, which helps user researchers, product managers and others validate demand or usability for prototypes and live sites.
Steven Cohn

Steven Cohn

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

(And download any of the past shows here.)

Clips from their interview are below.

Ajay Kshatriya has 15 years of experience in biotechnology in energy, healthcare, and software. Before co-founding Biota Technology, he was an investor and entrepreneur-in-residence at Seed Capital, a investing in science-based innovation. Prior, he was a senior manager at Genentech in operations and project management.

Switching from venture capital to startup founder required a different mindset, Ajay said:

All day in a VC firm, you’re saying ‘no’. That’s how your brain’s oriented. You’re constantly critically analyze the gaps in someone’s business plan.

When you’re an entrepreneur, yeah, there’s 100 gaps. But you go figure out how to solve them. It’s kind of a brain switch that you have to make in order to be successful as an entrepreneur.

You really have to take that optimistic lens and say, “This can work, and here’s how we can do it.”

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

Before becoming a founder at Validately Steven Cohn was an executive at Quantcast and DoubleClick and had started and sold two companies. The first, Buy Your Friend a Drink, was a success and Steven was eager to start up again.

However, his second venture, Irrive, quickly failed. Here’s why:

Steven: We did everything wrong. We built before testing. We over-designed the product, overbuilt the product, and we built something really beautiful that no one wanted. … 

Steve:  Was it that you didn’t know what you got right the first time?

Steven: Nope, hubris. … Once I had a success in my first company with my second I raised $2 million of seed capital with just a PowerPoint presentation. I didn’t even have a team or anything. People were like, “Wow, you just hit a home run with your exit to LivingSocial. … “You must be a genius. It must be you.”

I’d drunk my own Kool-Aid, I believed it, and so I did everything wrong from a product perspective. …

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

Biota, Ajay explained, is using DNA sequencing of microbes found underground to help oil companies optimize production when hydraulic fracturing.

Here’s how his team validated whether there was a need to increase efficiency in the energy market and how he found Biota’s target market: 

Ajay: We had  done some customer discovery to validate that there was a need in the American energy market to become dramatically more efficient with hydraulic fracturing. They’re wasting a million dollars an oil well, and they’d like to lower that direct cost. Oh, and by the way, if they could, there’s a huge environmental benefit, too. There’s a double bottom line, so we knew that was the case.

Steve:  What’s the environmental benefit?

Ajay: If you know where to fracture, you also know where not to fracture, so you could save 3 million gallons of fresh water a well. There’s 125,000 wells, so that’s billions of gallons of water that you can save.

We started by doing customer discovery –  talking to 75 people in the oil industry over the first four months which was extremely helpful. I mean, what does a guy who’s been in biotech for 15 years applying DNA and software know about the oil industry that’s been around for about 120 years? 

Steve:  Hopefully after 75 people, you know a bit more. Right?

Ajay: (Nods.) I have the world’s biggest hammer looking for a nail. So how do I articulate that value proposition in a way that the customer gets? That was one of the biggest challenges that we had. They hear exactly what you heard. ‘DNA sequencing in the oil?”, what the hell does that mean?

Steve: You needed to translate that to a real customer problem? It took you a while to understand the problem.

Ajay: You got it.

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

Business comes down to relationships and building trust, said Ajay, who is the son of Indian immigrants and grew up in Texas. His early life taught him how to make personal connections:

Ajay: One day you’re eating ribs, the next day you’re eating chicken curry, and you know, you kind of wear two different hats. You have two faces: inside the home, and outside the home. You learn that pretty quickly. That was probably one of the most formative parts of growing up in a place like that, with that background. 

Steve:  How do you think that affected you?

Ajay: To relate you have to find commonalities between people. If I’m hanging out with a bunch of guys in Texas, how can I connect and relate to them? Then if I go hang out with all my dad’s friends who grew up in India, how do I connect and relate to them? It kind of creates a chameleon-like personality you develop in connecting with people in different ways. 

Learning how to connect helped me a lot as an entrepreneur  When you’re a founder you got to sell all the time – to a wide variety of people.  You got to convince people that you’re crazy idea can work, you got to hire people, you got to get investors to write you checks, customers to give you money to do what you say you can do. The most important part of sales is building trust, and you can’t build trust if you you’re not able to connect with people.

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

Ajay also shared his recipe for success:

The three rules of a career that have helped me and I continue to follow:

  1.  find mentors who are 10, 20, 30 years your senior that you aspire to be when you get to that age. Ask them for advice and do what they tell you to do. …
  2. surround yourself with people way smarter than you. It’s not a sign that you’re dumb; it’s a sign that you have perspective and maturity.
  3. most importantly, out-work everybody. Look to the person to your left, look to the person to your right. The only way to guarantee your success is just to work harder than they do. 

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

Despite having a Harvard Business School education, Steven learned some of his biggest business lessons outside the classroom:

Steven: I went to business school at Harvard but when I graduated I said, “There’s a couple of things I want to learn before I start my own business.” I think I was hesitant because of the experience my father had where he tried a bunch of businesses that were unsuccessful.

So my first job out of business school I wanted to learn finance and I went to Merrill Lynch in investment banking. There I learned about how to raise capital.  I also learned how to sell a company — the process, the steps to sell a company. Both of those skills – raising capital and selling companies have helped me throughout my career because I’ve sold two companies of my own prior to starting my current company.

Working at Merrill Lynch I realized I’m not a big company guy. Even today when I’m interviewing people I say, “You know what? You’re great, and our company is great, but it’s just not a fit.” Sometimes when I interview people I think they’re very talented, I just don’t think they’re going to fit within our company culture, what we need to do. That’s just as important as their skills. I think there are some people who are builders, there are some people who are creators, and there are some people who are managers, they like to manage big organizations. I think those are very different skill sets.

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

In starting his first company, Steven found himself talking to customers in an unlikely place:

Steven: I went into bars and I said, “My name is Steve Cohn, I’m thinking about starting a company called ‘Buy Your Friend a Drink,’ and the way my product would work is, people would walk in here with a gift certificate that’s pre-bought for a drink.”

I remember the first bar I went into — I didn’t have a website, I didn’t have anything … The bar manager said, “That sounds great. I’ll sign up. Where’s your contract?” I said, “Uh, contract? I’ll be back in two weeks!”

I found that the first thing I did — the bars and restaurants, and supply-side of the market — was very easy to do.

Steve:  That’s a big win, right? To figure that out – 

Steven: Yeah, a big win. … The first day … I just literally walked around. … I had nothing behind me besides me and what I could say to people.

I didn’t have business cards, I didn’t have anything (and) I was able to sign up a half-dozen bars in one day.

Steven also discussed one of the darkest times he encountered while building Buy Your Friend a Drink:

I can’t tell you how painful it was (during the financial crisis) in January of 2009, in December of 2008, when you see everything that you had built crumbling because of macro-factors you have no control of.

My wife was pregnant at the time, we were running out of cash. I hadn’t taken a salary in two years just from when I started the company and we were low on capital, our personal wealth. I was getting a tremendous amount of pressure.

Shareholders were yelling at me because I was running out of cash. I’m like, “Do you realize what’s going on in the world? CitiBank is trading at $2 a share. If we knew that, I would have put the cash in and shorted CitiBank, right?”  

No one knew what was going on but I persevered through and it turned out to be a very good outcome

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

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

Next on Entrepreneurs are Everywhere: Guido Kovalskys, co-founder and CEO of Nearpod; and Doris Korda, associate head of school and director of entrepreneurial studies at the Hawken School.

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. 28: Magdalena Yesil and Michael Mondavi

If I had spent less time on the business and more time with the family, we’d have been better off as a business and as a family.

Family must come first in a family business.

And if others don’t get your startup idea, it won’t matter how hard your team works to try to achieve it.

Balancing business and family, and ensuring demand for your product were key lessons shared by two veteran entrepreneurs on today’s Entrepreneurs are Everywhere radio show.

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.

Magdalena Yesil

Magdalena Yesil

Joining me in from the studio at Stanford University were

Michael Mondavi

Michael Mondavi

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

(And download any of the past shows here.)

Clips from their interview are below.

Magdalena Yesil is a founding board member and first investor of Salesforce. In Silicon Valley for three decades, spent eight years as a partner at US Venture Partners. Before she was an investor, Magdalena founded two electronic commerce companies, CyberCash – a pioneer in the secure electronic payment systems, and MarketPay, an embedded payments software company.

Magdalena was a pioneer in the commercialization of the Internet, helping move it out of the government and university domains and in establishing the infrastructure for e-commerce and financial transaction platforms.

Despite her later career success, Magdalena’s first venture failed. She explained why:

Magdalena:   … you can have a fantastic idea, you can have a great team, you can have what you believe is a great market opportunity but you can die at the end so none of those are sufficient.

Steve:  Why? What did you miss?

Magdalena:  What we missed was capital … We spent three years on developing and actually even structuring deals to buy Internet access companies out of Stanford and out of MIT, and no venture capitalist would give us a penny.

Steve: Because they didn’t get it?

Magdalena: (Nods)… They did not believe that taking a nonprofit from a university and turning it into a commercial entity made any sense. There was no demand in companies for using a wide area network like the Internet and they didn’t believe that the demand would ever be there so we got no funding. We had to fold after three years of not making a dollar. Basically, it was a very sad end.

We went and teamed up with a company called UUNET (one of the first Internet companies). UUNET ultimately ended up executing on the vision that we were trying to do and what was fantastic was that co-founder Dan Lynch and I as a team were able to make ourselves become part of UUNET and then we were able to realize our dreams through UUNET.

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

Michael Mondavi is widely credited with helping to establish and build the Napa Valley wine industry as we know it. His career began in 1966 when he and his father Robert co-founded the Robert Mondavi Winery in Napa Valley.  

In 2004, he launched Folio Fine Wine Partners with his wife Isabel and their children, Rob, Jr. and Dina.

A successful family business is a balancing act, he said:

…If my father and if I, when I was younger and my children were growing, spent less time on the business and more time with the family, we’d have been better off as a business and as a family.

(When I running the company) I would do extra travel to enhance the personal relationship with our customers across the United States. To do that, I had to sacrifice time away from my son and daughter and wife as the kids were growing. I didn’t get to as many ball games or soccer or whatever as I would have like to. I got to probably ten times as many or a hundred times as many as my father got when I was growing up, but still not enough. 

One of the things we wanted to do for the next generation is have them have the entrepreneurial spirit, but understand more balance of family with business rather than business, business, business and then family. …

… you can drive your children away from the business if they are jealous of the time you spend in business rather than the time you spend with them.

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

Magdalena shared one of the keys to her success:

Magdalena: Curiosity drove me more so than anything else. Technology is a fantastic field if you’re a curious person because there’s always something new to learn. My career pretty much mirrors Silicon Valley; because I always wanted to get on the next wave. I was always curious to find out what the next developments were. I moved from semiconductors to systems then from systems to software, then from software to online services.

Steve:  But you weren’t qualified, you didn’t have 15 years of experience in any of these things. How did you get those jobs if you know nothing about them?

Magdalena: But you’re never qualified in technology. Everyone’s a newbie because when there’s a new wave happening, no one knows really the depths. We all figure it out together. The key isn’t to know a lot, the key is to know more from the guys next to you.

Steve:  How did you that?

Magdalena: It’s really studying up. My skills as a student even today are in good use. Always studying up, always trying to figure out how you can learn as to where the research is, where the developments are, having a very good mind as to where the potential market opportunities might be.

Steve:  You kept reading past your current domain expertise, is that?

Magdalena:  I always did. I always have. curiosity drives most technologists. Let’s face it. When there’s a new technology that’s emerging, there’s very little information about it but the only thing you can do is speak or look at the research that’s going on. Today, it’s not just what’s happening here in Silicon Valley but internationally and then apply yourself and become a specialist.

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

Founders don’t have to be in Silicon Valley to have a successful venture, she added:

Everyone who is bright, ambitious and willing to work hard now seems to find their way to Silicon Valley from around the world.

But coming to Silicon Valley is not nirvana. The truth is you can start your startups wherever you are. What you need to do is to learn from Silicon Valley but apply it to your own ecosystem. In fact, the chances of you being successful where you are is probably a lot higher than packing your bags and coming mid-career to another country.

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

When Michael and his father started the Robert Mondavi Winery, few people were drinking California wines. Europe had the market cornered. Michael explained how some Stanford grad students helped establish the California brand:

Michael: We loved to take European wines – whether it was a great Burgundy or great Bordeaux – that would cost three to 10 times the price of ours and put them on the table next to our California wines and have people taste them blind. The question we asked was not, “Which wine is better?” We asked, “Do these wines belong to be on the same table complementing this meal?” The majority of the time people preferred drinking our California and Napa wines over the Bordeaux or Burgundy ones.

Before that, restaurateurs would never compare California with France. It was “France is great” and “California is jug wine.”  Time after time after time we had to take our wines and do tastings side by side against the first growth Bordeaux.

Steve:  It seems like there was a multisided market. You had to convince the wholesalers and the distribution channel, but you also had to convince the end users, right? How did you do that?

Michael: Back then, the average wine drinker had to be over 50 years of age because the people below 50 were into cocktails. They didn’t care about wine.

So our first targets were Wine & Food Society groups, Medical Friends of Wine. Back then, they were all at least 50 percent older than me.  At Stanford I would do all of these wine and food society groups, black tie events, and try to present our wines versus the French. Then I went to graduate schools, and I would conduct wine tastings for the graduate schools.

We began getting a group of young college graduates from Stanford, from Berkeley, from Harvard, from all of the key schools, who started following our wines. And we were the only people doing it.

I was tired of serving wine to penguins in tuxedos who were a lot older than me.

My thinking was graduate students are going to want to learn about wine. They’re going to be able to afford wine and who else to become your ambassador?

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

A customer crisis nearly destroyed the Robert Mondavi Winery in the mid-1970s. Some quick thinking saved the business:

This large customer, the Geyser Peak Winery, owned by the Schlitz Brewery at the time, cancelled a 5-year contract for bulk wine and said, “If you don’t like it, sue us.”

If we didn’t do something with that wine and convert the liquid to cash in a relatively short period of time, we would have gone bankrupt.

I went home and took all of these different cabernet, pinot noir grape varieties and I put all the red together in a blend and all the white together in a blend and I called it “red table wine” and “white table wine,” put it in a magnum bottle with a cork and was able to convert that wine into cash in a period of a year and a half. … No one had done that before.

in 1974 60% of all wine sold  was in half-gallon jugs with a screw cap and a handle called “Burgundy” and “Chablis.” I was the first one to put a quality wine in a magnum bottle with a cork and call it red table wine and white table wine.

It mainly sold through restaurants. …They were selling a glass of Chablis for $1.25 a glass, but the Chablis was kind of sweet and didn’t invite you to have a second glass. I convinced the restaurateurs to sell mine for $1.50 a glass. It would cost them a little more, but they’d sell 2 or 3 glasses because the wine was drinkable.

We went from 0 to 100,000 cases of wine in 1 year.

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

One of the things that keeps Michael going at age 73 is his willingness to keep learning from others:

If I don’t learn something every day I’ve wasted the day. One of the beauties of working with different families in Europe and representing their wines here is that they have a different thought process. Take the Frescobaldi Family: before they’ll make a decision, on a strategic issue for the business, they ask, “Will this impact my great-great-grandchildren?”

Here in this country we say, “What will happen in the next 90 days?”

So dealing with different people and exchanging ideas with them it keeps you fresh, it keeps you young.

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

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

Next on Entrepreneurs are Everywhere: Ajay Kshatriya, co-founder and CEO of Biota Technology; and Steven Cohn, founder and CEO of Validately.

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.

Follow

Get every new post delivered to your Inbox.

Join 209,312 other followers

%d bloggers like this: