Posts on Entrepreneur



February 1, 2016

Product Vision and Creative Leadership
Category: Entrepreneur

"So, how did you get that idea?" the aspiring entrepreneur asks the billionaire

Where does product vision come from?

A product vision describes a problem, owned by enough people, that it is worth solving.

Finding a product vision is, then, about finding a worthy problem.

My Quest for a Worthy Problem

As a PhD student at Oxford University, I was prone to solving problems, any problem. Ticking boxes felt like an achievement, like progress. Eventually, I learnt that to contribute to science I would need to solve one problem. One worthy problem.

I asked my PhD supervisor, Mike, to give me my one worthy problem. He told me PhD's were all about the search for the one worthy problem. This search was my quest, my mission, my purpose.

Mike gave me a broad title to frame my search, a broad vision to aspire to, a friendly research lab, and sent me on my way.

For three years I apprenticed and learnt my problem domain, robotics. With time I kept narrowing the focus of my problem to one that still mattered and I could solve.

Only at the very end of my thesis, as I was about to end with no results, did I finally perceive a problem that made a difference, and I could solve

An image analysis method for sure detection and diagnosis of Cancer in mammographs

Mike Brady, Oxford University

How does DNA replicate and how is hereditary information coded on it?

Crick and Watson, Cambridge University, Nobel Prize 1963

Pick Your Problem Domain

A quest for a worthy problem is domain specific. You have to commit to a problem space that is non-generic, a narrow specialization.

Many turn away from specializing in such a narrow domain. Preferring a wider, more generic domain, where clients are more numerous and possibilities more diverse.

Without a quest into a problem space, however, there is no chance of finding a worthy problem. You will not achieve a product vision of any value.

The problem domain is about 3 things:

  1. Users & clients
  2. Markets: the value chain, the competition
  3. Trends & Technology

Tips for choosing your problem space:

  • Who are you, and what makes you different?
  • Where can you make a difference?
  • What trends and breakthroughs are making new problem spaces

First Problem Title - the Problem Framework

Choose a broad problem title to frame your opportunity.

Best to choose a broad, ambitious goal first. A statement of intent

A times ten improvement of an existing problem is a good standard. 10x thinking is favored at Google for framing problems

A narrow, timid, un-ambitious problem framework is unlikely to contain a worthy problem. It will constrain creativity, and will not inspire. Be brave, go ahead, "cure cancer"

Purpose & Belief

At the start, there is no testing, no validation, no process, no management, no derisking, no reassurance.

You have to commit to this fully. Purpose and belief is your only recourse.

If you are not nervous, not un-comfortable, you are doing something wrong. Go back and multiply by 10 the ambition of your problem framework

The searching for a potent product vision is profoundly uncomfortable. Many turn away here.

I am a recovering executive. I like order and structure, certainty and process. Being aspirational and brave in my problem statements is still difficult for me. Hence, I fail a lot.

Jewelry that represents the world of good taste, timeless design, purest materials, and finest craftsmanship

Tiffany's

Sportswear that brings inspiration and innovation to every athlete in the world

Nike

Enabling People to Live on Other Planets

Elon Musk, SpaceX

To enable sustainable transport through making every-day electric cars as soon as possible

Elon Musk, Tesla Motors

Tools to organize the world's information and make it universally accessible and useful.

Google

Computer-animated feature films with memorable characters and heartwarming stories that appeal to audiences of all ages

Pixar

To give people the power to share and make the world more open and connected

Facebook

To give everyone the power to create and share ideas and information instantly, without barriers

Twitter

Well designed home furnishings at prices so low that as many people as possible will be able to afford them

Ikea

To make a contribution to the world by making tools for the mind that advance humankind.

Steve Jobs, Apple

The Quest Process

The first problem title, the initial product vision, will be broad, aspirational and full of potential. It is the framework for the search for a valuable problem.

Finding a potent product vision is about progressively making choices. Progressively narrowing down, focusing till you find the one worthy problem.

focus, focus, focus

As you quest forward, your framework will narrow. Your quest will converge within the framework.

Questing for a worthy problem is like panning and sluicing gold paydirt, looking for nuggets. Focus is the narrowing down to the promising areas.

Focus, the ability to disregard areas, to so no to problems is a joy when it arrives. It arrives in moments of intuition, in fits and starts.

Focus, unfortunately, is fickle and often comes wrapped in doubt. By narrowing down, are you stepping past a worthy problem?

You can never have enough focus. The more limited your means, your time, your assets, the more you need a hard focus

No amount of work, magnitude, can make up for a lack of direction. Without focus and direction, you will not vector forward. Simple Math.

Research Mantra

If you are a large conglomerate, you are HP Innovation Labs, then you can widen your focus, and likely find a handful of worthy problems. If not, you must focus.

learn-dream-build

Best creative work involves talking to people, and making stuff. There are three types of learning;

  • enactive - action based
  • iconic - image based
  • symbolic - language based

The best creative work occurs by combining working with your hands, drawing and talking to people.

At this stage, dreaming is the best form of prototyping

Imagination

Imagination is a difficult exercise. Uninformed imagination leads to re-inventing the wheel, chaotic digging exploratory holes all over the framework field, and gimmicks that have no value.

Yet imagination is key to the best problem category "new to the world". Where the problem is not derivative. A true sideways jump, going outside the box. Seeing things no else sees.

Critical Mass of Focused Know-How

Know-how is bed-rock though. Accumulate enough focused know-how and perception of possibilities multiplies a thousand fold. Past a critical mass of focused know how, and creative output explodes.

Accumulating focused know-how is frustrating though. How much is enough? Is this enough? When does it finish? The narrower your focus, the quicker you will go up the learning curve. So focus down.

The most reliable form of innovation is extending ideas and patterns from an unrelated domain. This form of innovation requires high know-how levels, you must master several domains before you can visualize parallels.

Recipe

So first, critical mass of domain specific know-how, then look to migrate patterns from un-related domains onto your problem domain. Finally, attempt whimsy and imagination; can you reframe the problem? Forget all assumptions about your problem, what comes to mind?

The Perpetual Pivot: Method in the Chaos

During a problem quest, the entrepreneur will appear to be cascading through perpetual pivots. He will look at succession of user segments, points of the value chain, trends and technologies.

The quest is chaotic and uncomfortable. Every area and task will require learning anew. Nothing will be a comfort zone.

Yet there is order and a pattern in the chaos. Focus and direction.

The quest is a constrained, disciplined exercise, with boundaries. The multitude of pivots, in user segments, differentiation and technology are framed tightly within boundaries.

An effective entrepreneur has discipline. He stays within his problem framework; sticks to his chosen problem domain, his problem title.

Deadlines are Your Friend

Creativity needs constraints, and a deadline is the best of constraints. A pressing deadline gives you resolve and energy to decide, to make choices.

At this stage, you will have little data, no extensive metrics to gather, no KPIs, no excel sheets. Most choices will be based on incomplete data, on intuition.

Pressing deadlines give you the energy to keep making choices, keep deciding on the way forward. Keep Moving!

Actionable Product Vision

The quest for the one worthy problem finishes when you hand the product brief to a product manager.

The product manager will require

  • customer segment for which the product is intended
  • customer problem which the product will address
  • utility prototype demonstrating the utility to serve the customer's needs
  • technology prototype demonstrating the technology to be used

Introduce the product manager to your fieldwork, the pool of test candidates on which you have been testing your product vision

As a guarantee for your work, explain the user value tests you have conducted. Some measure for User satisfaction, NPS (net promoter score) that proves a defensible differentiation in the market.

Once the product vision reaches this point, it has to have sufficient focus and potency that it requires no more pivots.

Senior product managers will run opportunity assessment evaluations of their own, to establish that the product vision is viable and has potency. They will then proceed with a product discovery process which will detail the user segment and prototypes, and mature them to targeted production quality products.

Senior product managers, with a good UX team, are capable of limited scope product pivots, and minor market pivots. But the product founder should not count on these, and should consider the product vision search complete.

Product Vision Lifecycle

The internet, with its almost perfect information flow, is making a product's differentiation depreciate quickly. Your competitors can copy you quick.

In fashion, it takes only one season for a leading style to go out of fashion, or be copied by other fashion houses.

Product differentiation lessens through both competition and commoditization of the market

So, experienced product managers will demand an appreciable differentiation in the product vision.

The Best Product Team in the World

Differential utility buys the user goodwill essential for a product to engage well with a user. If the utility you offer is available, equally, one click away, you have become a commodity. The user will extend a very limited amount of goodwill during the interaction.

UX design teams sometimes don't understand this.

Usability, lean startup iterations, product identity & narrative, branding, aesthetics, interaction design, and gamification are for naught if the product vision does not provide differentiation

The best UX design work in the world does not make up for poor differentiation.

Even with lean startup iterations around the product vision, the market's maxima positioning is taken by a competitor. The market horizon for the product has become fallow.

It is time to pivot the vision, pivot the product, pivot the business.

Signs of End-of-Life

As differentiation depreciates, the product team will start to struggle with important metrics, KPIs. Starting with virality, then loyalty, then basic engagement.

The efficiency with which a product team achieves its outcomes degrades progressively, as product vision depreciates.

The life-cycle of a product ends either as a monopoly, or as a commodity, like Aspirin. You may achieve basic User engagement through brilliant product, sales and marketing team. But profit margins will be zero.

Either conjure up a new potent product vision, or change the business to provide services to other product companies.

Creative Leadership

Creativity is, increasingly, the only differentiation in the market

So expect to monitor, and prepare for end-of-life of your product vision.

When, ultimately, the product's end-of-life arrives, it will arrive suddenly

Have the next product vision ready.

References:

Product Vision bookshelf

- Understanding a Problem Better than Anybody Else, Chris Dixon

- Generating Startup Ideas, Marc Barros

- Founder's Vision - Entrepreneuship is an Art, Steve Blank

- Framing your Search: Vision vs Hallucination, Steve Blank

- Developing Strong Product Owners, Marty Cagan

- The Role of Domain Experience, Marty Cagan

- Product Strategy in an Agile World, Marty Cagan

- Product Passion: What are you trying to achieve?, Marty Cagan

- Product Evangelism: Sharing the Vision, Marty Cagan

- Product Porfolio Management: Planning the Life of Your Products, Marty Cagan

- Missionaries vs Mercenaris: The Need for a Compelling Product Vision in Driving Product Teams, Marty Cagan

- Product Managers Must Understand Product Vision: Big vs Small Product Owners, Roman Pichler

- The Kano Model: Depreciation of UX Design Differentiators Over Time , Jared Spool

- Emergent Strategy: The Big Lie of Strategic Planning, Roger Martin, Harvard Business Review

- Finding Your Edge, Alice Bentinck, Entrepreneur First

- Startup Playbook, Sam Altman, Y Combinator

- Big Ideas: Google's Larry Page and the Gospel of 10x

- The Zag, Marty Neumeier

- Change by Design, IDEO, Tim Brown

- Driving Corporate Innovation: Design Thinking vs. Customer Development, Steve Blank

- Look, I Made a Think: Confidence in Making, Jon Kolko

- Well Designed: How to Use Empathy to Create Products People Love, Jon Kolko

- Lean Doesn't Always Create the Best Products, Jon Kolko

-Illustrations by Hugh McLeod, Fair Use

-How to Get Startup Ideas, Paul Graham

-Why to Not Not Start a Startup, Paul Graham

-Before the Startup, Paul Graham

-Creative Confidence, Julie Zhuo, Facebook

-Creativity Inc, Ed Catmull, Pixar

- Startup Differentiation: You are the DNA of your Company, Peter Nixey

-Why Founders Fail: The Product CEO Paradox, Ben Horowitz

-Be a Great Product Leader, Adam Nash

- How do You Find the Secret for your Product, Peter Thiel

- On PhD Students, Sir Mike Brady (my supervisor), Robotics Research Group, Oxford University

- Advice for Thriving in a World of Change, Joi Ito

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January 15, 2016

The Future of Competence: Don't Be Generic

My competence seems to cycle from back and forth leading-edge to generic.

I started as a specialist, with a PhD in robotics, head-hunted by the robotics department of the UK Nuclear industry.

A few years later, I was a technology manager delivering solutions to customers in the nuclear, aerospace, pharmaceutical, and financial industries. A generalist

Then, I was CEO. Raising finance, recruiting, designing departments, objectives, process, operations. The ultimate generalist

Then, as the dot-com bombed, I stopped having a job.

I joined 100,000 other business managers who were out of work.

That was the end of a cycle

You have a Choice

The choice of a specialist skill or a generic skill is hard.

The choice, like any investment, is a compromise between risk and reward.

For both people and companies. We either choose or it is chosen for us.

Often we don't seem to have a choice. It just happens

The Lure of Generic Skills

Learning excel or outlook are good investments. They are low risk choices, most likely to pay off

Lawyer, manager, accountant, salesman, marketing are also low risk choices.

Job boards always have openings for good managers and salesman.

A manager, salesman or accountant can work anywhere.

Business is about managing people. If you can manage people, you can manage any business.

Managing Human Capital, Harvard Business School

Generalist skills provide structure, certainty and choice. Established education, clear career path, wide choice of employers and customers.

It is the sensible, reputable choice.

Why be different?

Global Markets: Commoditization of Skills

Globalization and technology have increased the supply of skills and services

Generic skills and services are the first to be replicated by competitors in different geographies.

In the world of Google, and online job search, your competition is just one click away

Being the best at a generic skill no longer guarantees a job.

You can no longer compete by simply being better

The Need to Be Different

To compete, you need a service and skills that are not replicated easily

I dont want to be the best. I want to be the only.

Marty Neumeier

Your skills need to be special, different

If you are not different, you have no identity.

You're just a commodity

To have an identity, you need a point of difference

And if you don't have one, you need to create one

Dave Trott

Differentiation: You Have to Choose

Making yourself different involves choosing. You have to choose a focus. You have to choose your difference.

Persisting with your focus involves saying "no" to jobs, requests and clients outside of that focus

Acquiring a specialism, a differentiation requires a sacrifice. Requires an investment

The greater your focus, the greater the possible reward, the more risky the investment.

Increasingly, without risk, there is no reward. It is the nature of the current market.

You will have to take some risk.

Focus is the Hardest Thing

Most of us like being generalists.

I like being versatile. Give me a problem, I will fix it.

I don't have to make choices. I just serve.

I like diverse problems. I like learning new things.

Variety, is it not the smart thing?

No

Focus is the hardest thing.

Rules of Focus: The One Thing

First choose your focus. Your domain of expertise.

The generic skills are the functional axis, horizontal rows, in an organization chart.

The specialist skills are the product or project columns, the verticals.

The specialist skills, product or client know-how, provide the competitiveness, the differential of the company.

Specialist skills are always domain specific. Highly dependent on context.

You are unique because you know the context that matters.

Pick a narrow specialist skill. How many people claim to be experts in your domain?

The harder the competition, the narrower, the more focus you need.

Conclusion: How Your Company Values You

A company is as competitive as its differentiation in the market

Companies value the people that create the difference

All companies can hire generic skill staff. Therefore, that can't provide the company's differentiation.

The staff with skills specific to the company create the differential. They focus on the company's specific domain, its context, its products.

Computer science purists love the art of coding, “if the algorithm is cool, if the integration is pretty, they’re happy.”

“For me, it’s all about the end product, not how I got there.”

Rasmus Lerdorf

Are you loyal to your products, or to your generic skill?

You can measure Domain Specific competence

How much do you know of the company's specific context?

Do you know the customer? the product users? the specific technology? the product? the competition?

The highest scorer in Domain Specific competence is the company founder, always

If you score high on Domain Specific competence, you make a difference

If you want to make a difference, don't be generic

References:

- College and Business Will Never Be The Same - End of Silo'd Careers, Steve Blank

- Knocking Down Walls, Marty Cagan

- The Internal Agency Model, Marty Cagan

- The Refragmentation, the demise of the corporate class, and rise of creative classes, Paul Graham

- How Google Works, Eric Schmidt, Jonathan Rosenberg

- Developing Strong Product Owners, Marty Cagan

- The Role of Domain Experience, Marty Cagan

- Product vs IT Mindset, Marty Cagan

- Finding Your Edge, Alice Bentinck, Entrepreneur First

- So You Want to Manager?, Julie Zhuo, Facebook

- The Zag, Marty Neumeier

- The Brand Flip, Marty Neumeier

- The Linchpin, Seth Godin

- Theory of Efficient Markets, where return is proportionate to risk

- The no.1 Reason to Focus, Seth Godin

- No is Essential, Seth Godin

- Reductio Ad Absurdum - The One Thing, Dave Trott

- "T-Shaped People", Tim Brown, IDEO

- Understanding UX Skills, Irene Au

- Advice for Thriving in a World of Change, Joi Ito

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January 14, 2016

Contrarian Investing: The Story of Mr Womack, the Pig Farmer
Category: Entrepreneur

"Mr Womack the Pig Farmer" is my top investment philosophy

The man never had a loss on balance in 60 years.

His technique was the ultimate in simplicity. When during a bear market he would read in the papers that the market was down to new lows and the experts were predicting that it was sure to drop another 200 points in the Dow, the farmer would look through a S&P Stock Guide and select around 30 stocks that had fallen in price below $10—solid, profit making, unheard of companies (pecan growers, home furnishings, etc.) and paid dividends. He would come to Houston and buy a $25,000 “package” of them.

And then, one, two, three or four years later, when the stock market was bubbling and the prophets were talking about the Dow hitting 1500, he would come to town and sell his whole package. It was as simple as that.

He equated buying stocks with buying a truckload of pigs. The lower he could buy the pigs, when the pork market was depressed, the more profit he would make when the next seller’s market would come along. He claimed that he would rather buy stocks under such conditions than pigs because pigs did not pay a dividend. You must feed pigs.

He took “a farming” approach to the stock market in general. In rice farming, there is a planting season and a harvesting season, in his stock purchases and sales he strictly observed the seasons.

Mr. Womack never seemed to buy stock at its bottom or sell it at its top. He seemed happy to buy or sell in the bottom or top range of its fluctuations. He had no regard whatsoever for the cliché’—Never send Good Money After Bad—when he was buying. For example, when the bottom fell out of the market of 1970, he added another $25,000 to his previous bargain price positions and made a virtual killing on the whole package.

I suppose that a modern stock market technician (on CNBC) could have found a lot of alphas, betas, contrary opinions and other theories in Mr. Womack’s simple approach to buying and selling stocks. But none I know put the emphasis on “buy price” that he did.

I realize that many things determine if a stock is a wise buy. But I have learned that during a depressed stock market, if you can get a cost position in a stock’s bottom price range it will forgive a multitude of misjudgments later.

During a market rise, you can sell too soon and make a profit, sell at the top and make a very good profit. So, with so many profit probabilities in your favor, the best cost price possible is worth waiting for.

Knowing this is always comforting during a depressed market, when a “chartist” looks at you with alarm after you buy on his latest “sell signal.”

In sum, Mr. Womack didn’t make anything complicated out of the stock market. He taught me that you can’t be buying stocks every day, week or month of the year and make a profit, any more than you could plant rice every day, week or month and make a crop. He changed my investing lifestyle and I have made a profit ever since.

From John Train's, The Craft of Investing.


The longer your time view, the easier the practice of contrarian investing

The art of waiting for the large sentiment swings. Waiting on the market does not come naturally to investment professionals

Set your own rules, don't be influenced by market volatility.


January 11, 2016

Product First

What Comes First? Sales, Branding or the Product

What comes first? I have had this argument regularly for the last 25 years.

With sales, marketing, technical, and services departments. In fact, with every department director I can think of.

As a junior engineer, my sales director gave me my first "commercial awareness" ticking off; "first, you sell it".

The 21st Century - Your Product is Your Branding

Not long ago, you could create a brand with advertising. Pure Brand Advertising.

Now, you can only create a brand with people, with a community. With a crowd of people that say your stuff is good.

You need buyers on ebay voting you as good. Good reviewers on Amazon. 5 star feedback, social media likes, up ticks, votes

What you think and say no longer matters.

Your brand is what the customers say it is. The crowd uses your product, and they decide

The product creates the experience,

The experience creates the reputation,

The reputation creates the brand

Dave Trott

Your product must do your advertising, your sales and your branding

I know sales and marketing directors who are confused and saddened by this new age

Think of it as an oyster,

You start with a piece of grit, and build a pearl round it,

People buy the pearl, they don't buy the grit,

But no grit, no pearl

Dave Trott

So, please. Product first.

References:

- Death of Salesman, Marty Cagan

- "How to empower the customers who will drive your success", The Brand Flip, Marty Neumeier

- "Is advertising a Con?", Creative Mischief, Dave Trott

- Product Trumps Distribution, Nic Brisbourne

- Positioning, Eric & Laura Ries

- Red Hat Community Branding, Chris Grams

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January 31, 2011

Where Entrepreneurship is Easy
Category: Entrepreneur

The US seems to be steaming ahead in its drive to out-startup and innovate the rest of the world. Consider, the qualities an entrepreneur must show, as Mark Suster well describes :

  • Not very status-oriented
  • Doesn’t follow rules very well and questions authority
  • Can handle high degrees of ambiguity or uncertainty
  • Can handle rejection, being told “no” often and yet still have the confidence in your idea
  • Very decisive. A bias toward making decisions – even when only right 70% of the time – moving forward & correcting what doesn’t work
  • A high level of confidence in your own ideas and ability to execute
  • Not highly susceptible to stress
  • Have a high risk tolerance
  • Not scared or ashamed of failure
  • Can handle long hours, travel, lack of sleep and the trade-offs of having less time for hobbies & other stuff

Evidently, this level of creative drive is more easily sustained when you are not starving or worried about how to pay the rent. When friends, family, and companies in your neighborhood provide a safety net, for you when you crash or need to bounce back.

Then consider the whitehouse's Strategy for American Innovation, whose main lines are:

  1. Expand access to capital for high-growth startups ($2 billion)
  2. Expand entrepreneurship education and mentorship programs
  3. Strengthen federally-funded R&D commercialization
  4. Identify and remove unnecessary barriers to high-growth startups
  5. Expand collaborations between large companies and startups

Entrepreneurship is easier in a context that is so supportive. America is bound to have a lot more people prospecting for new businesses if the cost of failure and bouncing back is so reduced.

Cameron's Silicon Roundabout needs some beefing up to stay competitive.

Update

Speaking of which, just released:

Prime Minister Welcomes Cisco's $500 Million Investment Goal for UK as Part of Support for East London Tech City

March 10, 2008

Executives Don't Make Good Entrepreneurs

A Harvard Business Review article identifies four deficiencies of corporate executives when working in startup and small business environments. The four deficiencies are in fact great qualities for Executives in a corporate environment, but become their Achilles' heel in entrepreneurial work.

High uncertainty, knowledge intensive tasks, and a rapidly changing market sector are a fact of life for startups and entrepreneurs. Training, experience and value system for a competent proffessional administrators give rise to difficulties adapting in startups in the four following ways.

The first tendency is lack of loyalty to comrades. Startups require strong leadership, and great faith from the staff. Startups have great uncertainty, no guaranteed results, little rational assurances. The entrepreneur must offer a great vision, and a sense of a life altering opportunity. The entrepreneur must give of himself and the company (equity). He must be loyal above and beyond, to expect loyalty back. The usual corporate paycheck and pension plan are not enough.

The second tendency is lack of task orientation. Executives are used to large scale service delivery and product improvement operations, where a portfolio of services must be cultivated, maintained and optimized for volume and maximum margins. The resulting inability to learn and see to the detail and finish of individual tasks makes for poor execution and finish of tasks. The cliche is their total reliance on delegating to staff in order to operate.

The third tendency is lack of conviction and single mindedness. Typically and executive will insist on guaranteed results. "But that is not guaranteed" is the cliche phrase. Without a high likelihood of results, the ultra rational executive finds it hard to commit; you need faith here. Startups create businesses where corporations dare not go; the zones of uncertainty.

Fourth and last is the inability to work in isolation. Executives excel through their negotiation, their team leading, their excellent communication and administration. In typical 10 staff startups, these same skills are secondary. The executive is unable to be productive without somebody sitting next to him.

As a former executive, used to directing business units with hundreds of staff, I can vouch that the four deficiencies are valid and representative of the corporate class. The deficiencies are due not just to lack of experience and training, but also prejudices, mis-conceptions and an unflexible value system. "you are too technical" often being the ultimate insult from one executive to the other. It has taken me a lot retraining, and some soul searching, to be a fully useful player in a startup.

For enterprising MBAs who know that it is at the founding of a business that equity is divvied up, I recommend a post by Jeremy Liew at Lightspeed Venture Partners, to give a balanced view of the skills a business founder needs. For corporate executives looking for more fulfilling work with startups, John Smithson's "The role of the non-executive director in the small businesses" is good.

It takes more than good administration to create a business. I find entrepreneurial and creativity training is still poor at most schools and universities. A tolerance for uncertainty and volatility is hard to teach; rational administration is still the core of most entrepreneurship courses.

As for John Hamm's HBS article on the limitations of entrepreneurs, it is easier to criticize the flaws of an entrepreneur, than to identify, praise and teach entrepreneurial skills.

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December 25, 2006

Quaero, the French Challenger to Google Bites the Dust

eu
As is the usual form for a high profile publicly funded projects with dubious political motives as its driver, Quaero has died at the hand of its own politicians. Germans and French politicians have fallen out over undisclosed issues, and are parting ways. Unsurprisingly the high rhetoric and principals which launched the project have not survived the self interest of the politicians running the program.

A spokeswoman at the French Agency for Industrial Innovation said it was continuing with the project to build a search engine called “Quaero” that would be able to index not only text but also photos and videos.

Some German firms would still be involved in that project, despite the withdrawal of others to work on the separate German-developed engine called “Theseus” that would be more focused on analysing text. “There will be a French project and a German project, and as they are not working in the same areas, they will not be rivals but complementary to each other —there will be two programmes instead of one,” she said Friday. Germany to work on their own search engine called ?Theseus?

Let me stand on my soap box and say again: Publicly funded projects have good intentions, bad politics and bad economics. Private, market funded projects have "bad" profit motives for intentions, good politics and good economics.

In my opinion, entrepreneurs and venture partners, with a profit motive, are a better vehicle to improve Europe's competitiveness in technology. the €600m assigned to Quaero are being wasted by this committee driven project.

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October 31, 2006

Why is Entrepreneur a Dirty Word in Europe ?
Category: Entrepreneur

Such are the questions that bemuse the 2006 Nobel Prize winner in Economics, Edmund Phelps. In his opinion, Europe's experiment with "social market economy", which creates economic growth through market intervention rather than startups, is failing.

The introduction of institutions to protect "stakeholders" and "social partners" of the free market economy is resulting in low GDP growth and high unemployment. The employer confederations, trade unions and monopolistic banks are giving rise to "high context" political environments, where the individual entrepreneur's dynamism and creativity are being shut down.

In attempting to correct the free markets excesses, seen in the America capitalist system, the European interventionist policy is killing off its efficient market economy. The European market favours established players and dampens the input of independents and outliers. In a top 10 list of startup friendly countries, Europe has one of the most hostile environments for startups, which deprives it of its essential seed bed of growth, the startups and entrepreneurs.

Our economy is more dependent on true free enterprise and the work of real entrepreneurs than it has been in over one hundred years. This is no time for us to embrace the kind of socialized entrepreneurship we see in much of Western Europe. [Prof. Phelps]

Eastern Promise: Asian Entrepreneurs

Other economies are harnessing and empowering individual entrepreneurs. In third world countries entrepreneurs are the key tools for economic recovery of nations, as signaled by the 2006 Nobel Economic Prize to Dr. Muhammad Yunus and the Grameen Bank. Their revolutionary micro-credit loan programs empower third world entrepreneurs to enter Global Trade Markets. According to the Norwegian Nobel Committee

Every single individual on earth has both the potential and the right to live a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development.

My few experiences with people in harsh economic environments is that they demand the opportunity to earn a living in dignity, and feed their families; not free hand-outs. They want to trade, and a chance to take part in a capitalist market. Their choice path to a sustainable high standard of living.

Social entrepreneurship is the new Peace Corps.

The best way to give back to a community: become an entrepreneur on its behalf. Social entrepreneur association Ashoka defines a social entrepreneur fellow as follows

Ashoka Fellows are leading social entrepreneurs who we recognize to have innovative solutions to social problems and the potential to change patterns across society. They demonstrate unrivaled commitment to bold new ideas and prove that compassion, creativity, and collaboration are tremendous forces for change. Ashoka Fellows work in over 60 countries around the globe in every area of human need.

unitus microfinance

Bhagyamma Vadla, left, started a dairy with $674 from Unitus Global Microfinance. She is the kind of entrepreneur eBay founder Pierre Omidyar is hoping to fund with his $100m donation to Tufts University microfinance program.

The American Dream

In the US, entrepreneurs are seen as wealth and employment creators. Culturally the entrepreneurial dream is deeply entrenched in everybody's lives. How many taxi drivers in New York, Los Angeles, Boston or Chicago, inflict their startup dream on their rides; be it private jet company, general services firm, limousine services, they all have a dream and are not ashamed to pitch it.

Professor Phelps is quick to trace the excesses of the American capitalist market to a failing of the American electoral politics, not the free market itself.

Only the Brave Declare Themselves Entrepreneurs in Europe

I remember negotiating hard to omit details of my company acquisition in the Libertysurf IPO filing in 2000. Where else in the world does an entrepreneur seek less press coverage of a good outcome ?

Professor Phelps speculates that Europeans associate entrepreneurs with entrenched wealth and power...

....it appears that the recent street protesters associate business with established wealth; in their minds, giving greater latitude to businesses would increase the privileges of old wealth. By an "entrepreneur" they appear to mean a rich owner of a bank or factory, while for Schumpeter and Knight it meant a newcomer, a parvenu who is an outsider. A tremendous confusion is created by associating "capitalism" with entrenched wealth and power.
from "Dynamic Capitalism: Entrepreneurship is lucrative--and Just", Edmund Phelps

As my company's communication director can attest, pushing company founders to interact with the media is more akin to herding cats than advising a company officer. Few places in the world have an entrepreneurial community so intent on discretion, and less self promoting than Europe.

Cultural change is inevitable though; American trained entrepreneurs are spreading all over the world, and rattling European cages. Martin Varsavsky is an excellent role model, with his irrepressible baiting of established and "high-context" European institutions. Spanish Telecoms giant, Telefonica, might have won the first battle against Varsavsky's Jazztel telecom challenge in 2000. But he is back for round two of his fight against incumbent state backed monopolists. He describes the progress of his free wifi networking company FON in his ebullient blog entries.

loic le meur

Another European entrepreneurship standard bearer is Loďc Le Meur, a successful entrepreneur and political lobbyist. His blog is a great source on the political state of affairs for entrepreneu's in France. His recent endorsement of Nicolas Sarkozy at the next 2007 presidential elections has caused controversy in France. Loďc explains

The reason I did that is that Nicolas Sarkozy, currently #2 in Government and future candidate is the only politician in France to my knowledge to say he wants to transform France into a "nation of entrepreneurs" when entrepreneurs are often seen as "enemies of the State" these days, so I can only support him. Of course, many people disagree.. Loďc Le Meur

Even I find myself blogging freely about entrepreneurs. Then again, I am now based in the UK, which embraces unfettered entrepreneurship.

[Via | Business Blogs - RSS Feeds - Business Case Studies | Business Thought Leadership | BNET]

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August 18, 2006

Top European Countries for Doing Business
Category: Entrepreneur

europe

The world bank has published its Doing Business in 2006 report, with interesting results. The conclusion is that the best way out of poverty is starting businesses; starting businesses = low unemployment rate. A view that is not currently shared in some countries; in France the equation is protect workers = low unemployment .

The list of european countries ordered by their world ranking of business friendliness is shown below. Compared to the GDP ranking, European countries are one of the least business friendly environments in the world:

World Rank         World Rank
Norway
Denmark
United Kingdom
Ireland
Iceland
Finland
Sweden
Switzerland
Belgium
Germany
5
8
9
11
12
13
14
17
18
19
Netherlands
Spain
Austria
Portugal
France
Poland
Bulgaria
Italy
Romania
Greece
24
30
32
42
44
54
62
70
78
80

The table shows a distinct north-south divide, same as for GDP and wealth per capita. Continental Europe, specially southern Europe lags behind in the rankings.

What are the Factors

1. Starting a Business: Procedures, time, cost and minimum capital to open a new business
2. Dealing with licenses Procedures, time and cost of business inspections and licensing
3. Hiring and firing workers Difficulty of hiring index, rigidity of hours of index, difficulty of firing index, hiring cost and firing cost
4. Registering property Procedures, time and cost to register commercial real estate
5. Getting credit Strength of legal rights index, depth of credit information index
6. Protecting investors Indices on the extent of disclosure, extent of director liability and ease of shareholder suits
7. Paying taxes Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit
8. Trading across borders Number of documents, number of signatures and time necessary to export and import
9. Enforcing contracts Procedures, time and cost to enforce a debt contract
10. Closing a business Time and cost to close down a business, and recovery rate

Where is hiring and firing easy—and where not?

One of the biggest factors bearing on startups is the ease of hiring and firing. Also the area hardest to reform. Below is the league table of countries according to hiring and firing difficulty

Difficulty of Rigidity working Difficulty of Cost of Cost of
hiring  hours Firing Hiring Firing
Spain  67 80 50 66 32
Greece  78 80 40 66 30
Germany 80 40 55 21 67
France 80 40 66 47 32
Turkey  44 80 40 55 22
Italy  61 80 30 57 33
Austria  11 80 40 44 31
Hungary 80 20 37 34 34
Sweden 60 40 43 33 24
Finland 60 40 48 22 24
Netherlands 60 60 49 16 16
Ireland 40 30 33 11 52
Poland 60 40 37 26 25
Norway  44 40 30 38 14
Belgium  11 40 10 20 55
Iceland 60 0 31 12 13
Switzerland 40 10 17 14 12
Denmark  11 40 10 20 1
UK 11 20 10 14 9
US 0 0 10 3 8

Discussing this with my partners, we feel the staff count of the companies we are involved with would rise by 20% if labour laws were more flexible in southern Europe. We recruit in the shadow of potential layoffs far into the future. A far cry from Google's we hire three people a day policy, or Microsoft's 65,000 employees.

Food for thought.

[The report was highlighted by Guy Kawasaki.]

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July 20, 2006

Achilles Heel of Web2.0 and A-List Blogs: Attracting the Mainstream
Category: Entrepreneur

Many web2.0 companies, blog networks, and even A-list bloggers are struggling to generate sales. But, being popular among bloggers is not generating the wished for revenues. Enthusiast bloggers are currently too few, notoriously fickle, and do not buy everything they sample.

The essentials to keep in mind for web2.0 ventures are three, in order of importance

  • Provide value to the Client: a value proposition for the client - makes or saves him money
  • Clients have money and an immediate need
  • Be Unline the rest - better than the alternatives in some way

Early adopters, unfortunately, do not behave like Clients with Money - often on a sampling spree as they delight in trying free samples of many different products

crossing chasm

A mainstream niche, shown in the figure, must be part of a startups vision right from the beginning. A startup's initial clients will likely be early adopters who help bootstrap the company, and do the viral marketing, but at some stage the startup must cross into a mainstream customer segment, and leave early adopters behind.

Enthusiast blog readers and early adopters are essential for viral marketing, but are ultimately a means to an end, before maintream readers arrive.

Another much debated issue is uniqueness: Differentiation is essential for strong growth. But if demand outweighs supply, differentiation can be secondary. Many a life-style company makes a living, and provides employment for its staff, without significant differentiation.

A good breakdown of 11 Suggestions For Not Being a Dot-Bomb 2.0

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July 4, 2006

Lifestyle Companies - The Scourge of VC Portfolios

In a moment of weakness marketing guru Seth Godin muses that "So, what's wrong with small business?". In VC culture, stable no growth companies - or lifestyle companies - are disaster investments little better than bankruptcies.

Barings Bank observed in a recent review of startup investments that 20% of companies developed into substantial profitable businesses, 20% failed and lost all equity, and 60% drifted sideways often regressing to life-style businesses for a small group of owner-managers.

The fact is that an investor, bank or VC fund, does not inject money into a business to improve the founders life-style and status. A VC fund usually has a 5 to 7 year window in which to realize the value of their investment. Investors want growth, preferably in multiples of 10. Life-style companies clutter up a portfolio, and require investors to negotiate a buy-out with managers. Not quite bankruptcy, but not much better.

However, ultra-growth comes at a price always. No pain, no gain. Or in financial notation, no volatility - no return. Startup owners have to suffer through extreme risk and volatility in order to accomplish growth. Life is easier and safer for the small business owner, happy with his place in the status quo.

But is safe not risky ? With increasingly dynamic markets, globalization, a stable life-style company can have some nasty surprises as competitors, with greater economies of scale, descend on its little niche. Everybody has to acquire an appetite for change, either gradual or in big lumps. Small companies are not what they used to be.

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June 22, 2006

Jack Welch: "Anyone Can Squeeze a Company"

The debate between long-term and short-term concerns never stops in a company, specially in growth industries. Google is already having "The Debate", in its "we are a technology company rant".

It takes place between the operations and the strategy teams. Between the Chief Operations officer and the Visionary founders. For a successful company, they are the two faces of the same coin. Long term can't survive without short term. The daily grind can't succeed without the long term investment. It is a bad sign when the debate stops.

Corporate managers, with the rational black-hat, excel sheet approach rarely push the creative, disruptive agenda. So it is refreshing to get Jack Welch weighing in on the creative class side: he states that "anyone can squeeze a company".

"Look, anyone can manage for the short term just keep squeezing the lemon. And anyone can manage for the long just keep dreaming. You were made leader because someone believed you could squeeze and dream at the same time. They saw in you a person with enough insight, experience, and rigor to balance the conflicting demands of short- and long-term results. Performing balancing acts every day is leadership

from Jack Welch on leadership, in his new book "Winning".

Corporate class warriors are no longer solely central to corporations. A healthy company needs creative and disruptive skills, not just an admin and management team. The mix is not easy though; corporate culture has difficulty with uncertainty, risk, irrational decisions, volatility, disruption, and continuous change. Takes strong corporate management to be continuously challenged in this way.

Watch a video Jack speaking at an MIT lecture

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June 12, 2006

The next Google will come from outside the US

A great quote from Danny Rimer, the EU venture capital partner behind the Skype company. But, if not from the US, will the next Google come from Europe ?

Danny is getting a huge amount of mainstream press coverage. And well he should, the skype investment has netted his family VC firm in excess of £300m. The limited partners of the last fund recouped 100% return with the skype deal alone.

Judging by the amount of PR, Index Ventures must be fundraising again. I would wager that the majority of their fundraising will come from US investors, who are keen on the strong European technology base. The "capital preservation" culture among fund managers in Geneva, Index Ventures home town, wll not encourage great uptake from banks in their neighbourhood.

Some of Danny's observations on Europe are:

To be an entrepreneur in Europe, there is a stigma attached to it," he explains. "There's a reason why England is known as a nation of shopkeepers. Part of it is the idea that it's better to have a shop and keep it up and running than close the doors and try to do something much more significant.

Steady personal income is pretty much a must in Europe. The idea of embracing greater volatility and uncertainty is an alien one. A disastrous attitude if you are to encourage serial entrepreneurs. To quote Stelios Haji-Ioannou, founder of EasyJet, there is no such thing as easy money; all great returns are paid for with risk and volatility.

Danny goes on to say,

"The environment in Europe these days is a brutal one, as huge private equity houses pull in billions while smaller venture groups struggle. Index is one of the few to have had little trouble attracting big investors."

Unfortunately, Index Venture's success is almost an anecdotal statistic in Europe. Even after the 2002 bust among VC firms, established VC funds have been unable to raise finance. Many talented venture fund managers have been struggling to raise a minimum size fund. Julie Meyer has been trying to close a fund since she exited from "First Tuesday" 6 years ago. Similarly Jon Snyder and Marting Bloom at Cambridge Accelerator Partners, and Marc Goldberg at Occam Partners.

Danny concludes with

Innovation is not a problem in Europe. But the lack of a unified market to sell that innovation, or even give it away, is a problem - and so is the paucity of investors willing to back it. "The next Google is more likely going to come from outside the US," says Rimer. "Whether it's in Europe, I am not sure. A lot of things have to change

European entrepreneurs will have to work extra hard if the next Google is up to them.

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June 7, 2006

Guy Kawasaki on - How to create the next Silicon Valley
Category: Entrepreneur


Guy has come up with a great article on How to Kick Silicon Valley's Butt. Guy's extensive experience advising Apple's independent software partners, and years of advising startups shines through. If only politicians would listen. Here are my favorite pointers


ON ATTRACTING AND HARNESSING THE CREATIVE CLASSES

  • Beautiful, but not gorgeous, surroundings California is beautiful. The weather is good. It s fun to live here. No matter how great an entrepreneurial environment Cleveland creates, it s always going to have people wanting to move away.
  • High housing prices. If houses are cheap, it means that young people can buy housing sooner and have kids. When they have kids, they can’t take as much risk and don’t have as much energy to start companies.
  • Cities, crowds, and high- if not over- population. The pressure of these conditions make people jealous of each other; this in turn makes them compete. Cities also bring people together to work. People can’t telecommute to a startup. People need to get together to bounce ideas off one another, argue, and cajole.
  • Absence of multi-national companies, especially the finance industry. If your companies have to compete with conglomerates or banks like Goldman, Sachs throwing money at people, it’s going to be hard to get anyone for a startup. Pity the startups in New York, London, and Singapore.
  • Focus on educating engineers.The most important thing you can do is establish a world-class school of engineering. Engineering schools beget engineers. Engineers beget ideas. And ideas beget companies. End of discussion.

    If I had to point to the single biggest reason for Silicon Valley’s existence, it would be Stanford University—specifically, the School of Engineering. Business schools are not of primary importance because MBAs seldom sit around discussing how to change the world with great products. Mostly they care about how to get interviews at multi-nationals and consulting firms.

  • Send the best and brightest to Silicon Valley. I can hear the complaints already: “This will lead to a brain drain which is exactly what we are trying to prevent.” This attitude misses the essence of entrepreneurship: it’s not about preventing bad things, but fostering good things.

    The goal is to infect them with the disease called entrepreneurship and show them that there can be more to life than “a job;”. Sure, some people will never return—like me. But those who do return come back with a much broader perspective on what life and a career can be. Maybe they will build another Silicon Valley because they’ve seen it done before. Here’s a dirty little secret: Silicon Valley is more a state of mind than a physical location, and you can’t alter a state of mind by staying a home.



  • Celebrate your heroes.Every region needs its heroes. These folks take role modeling to an extreme; they have names like Steve Jobs, Bill Gates, Ted Turner, Steve Case, Anita Roddick, and Oprah Winfrey. Kids need heroes, so that they can say, “When I grow up, I am going to be the next Steve Jobs.” In many places, a successful person is pulled back down because of jealousy. Sure, there’s jealousy in Silicon Valley, but our way of dealing with it is to try to outdo the person, not pull her back down.


ON THE GOVERNMENT NOT MEDDLING

  • The short answer is that the government should not do much except provide more funding to the engineering schools.Unfortunately, that probably won’t seem like enough to most people.


  • Dont create a venture capital fund. The thinking here is that a government created venture capital fund would kickstart entrepreneurship because of the influx of money. However, if there’s one thing you can depend on in venture capitalists, it’s greed. If you show them good engineers with good ideas for good companies, they will appear by (private) plane, canoe, dogsled, and camel. Such a region doesn’t need to create a fund. A supply of capital does not create demand from entrepreneurs--at least not the kind of entrepreneurs that you want.



Guy has definately burnt his bridges with European politicians. Most European politicians know that you cannot delegate entrepreneurship and economic growth to the market and the masses. All you get is creative destruction, market disruption, and upset all the old encumbent monopolies. You bad boy !

Jacques Chirac, the french president, is so upset with these Google upstarts, his government is funding a French alternative. The state knows best.

A case in point are the entrepreneurs that have been successful in continental Europe. Disrespectful, unpredictable, and irreverent. Why do these individuals always try to beat "The System"?. How is a career politician supposed to work with individuals so outside the established network. They don't even wear suit and tie!

Joking aside, the proportion of successful EU entrepreneurs that secured their funding from US and UK sources rather than EU sources is sadly high. Obviously, there is nothing quite like greedy money.

Guys definately pulled his punches on labour laws. Mr Paul Graham seriously let rip on the need for labour flexibility at the recent Amsterdam XTech conference. Not a popular view in France.

Guy has my vote for EU president.

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May 30, 2006

All Strategy and No Tactics
Category: Entrepreneur

Two of my favorite thinkers, Richard Feynman and Seth Godin in the the same blog entry. How about that ? I have Seth's The Big Moo and Richard's Surely You're Joking Mr Feynman on the same bookshelf. One is nobel laureate physicists, the other a marketing guru. What can these guys have in common ?

Seth is quoting one of Richard's more serious stories, about not fooling yourself and always looking for the truth about why things work. Do not just copy what is the fashion of the day. Clearly they are both conceptual fanatics. Always looking at the concepts and fundamentals of why things work (or don't work).

On a few occasions I have been asked what makes a good entrepreneur and innovator. Being an Oxford PhD, I like thinking that understanding why things work, being conceptual, is a must. Never copy a marketing design or business model unless you have understood why its going to work for you. Right ? Maybe not.

One of my partners often tells me "Who cares why its selling, lets just copy it and we will learn a lesson if we flop". And he has a track record you do not argue with.

As I see it, a good entrepreneur is often just perceptual. Reacting to, adapting and copying things he sees in the market. By the time a deep thinker has finished strategizing and working out the market landscape, an impulsive copier has tied up the market. Sometimes you just have to copy and work it out afterwards.

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May 25, 2006

Contrarian attitude in Venture Investment
Category: Entrepreneur

Good post by Fred, on turnarounds and dark times in VC investments. I would say, in the best contrarian spirit, the best investments are made during the darkest times, when all you see are smouldering ashes of a business model.

It takes true vision and trust in fundamentals to go against everybody's advice to give up. Or, as with many entrepreneurs, it takes a contrarian pig-headedness that relishes going against the mainstream trend. The trickiest part of bucking the trend, however, is timing. And that is when you need luck.

May 23, 2006

Entrepreneur Lifestyle
Category: Entrepreneur

Good post from Rajesh Jain, India's premier entrepreneur

Talk of Blue Oceans and Black Swans an Entrepreneurs Lifestyle

As an entrepreneur, I have always bet on futuristic ideas. Most of the times they have not worked out. But that hasn't stopped me from making the bets. That is the only way I know how to create new businesses. Until recently, I did not have a name for it. Now, I can term it as blue ocean strategy. The theory is easy to understand, but building a blue ocean business is tough. When one is trying to create a future that doesn't exist, skeptics abound. This is where an entrepreneur has to keep the faith. There will be many testing moments through the venture the entrepreneur has to face up to them with confidence.

Till a venture takes off, it requires immense belief in the vision to live through the daily challenges. And if a venture is not taking off, it requires great courage to accept failure and move on in life. Either way, the entrepreneur's life is about making difficult decisions and walking an often lonesome path.

This is not easy. Most of the time, I end up losing money. These are relatively small amounts of money I do not make bets which can wipe me out financially. I believe in making a few bets on what tomorrow's world will be and hope that the companies I am involved in can execute well enough to not just make that future a reality but also be big winners. I didn't have a name for this approach till I read Nassim Taleb's book, "Fooled by Randomness", And then a phrase came to me - I am a black swan entrepreneur.

Just like Nassim Taleb, who bets on extreme events as part of his investment strategy, I am betting on extreme ventures. These ventures are not about incremental change, they are about disruptive innovation. And as we were told again and again, most new ventures and products fail. But a few do succeed. Just because many new initiatives may have failed in the past, it does not mean that the next initiative will also meet the same fate. This is similar to seeing white swans. Just because one has not seen a black swan, one cannot conclude that it does not exist.

A good description of the trial and error fundamentals of successfull entrepreneurship. Not quite the turn of phrase used by Seth Godin in Zooming. Seth runs a mile with the whole embracing uncertainty concept. But good descriptions of entrepreneurial attitude and lifestyle are hard to come by.

In fact, little is successfully taught about entrepreneurial attitude. Formal "managing innovation" courses emphasize the systematics nature of making choices, with BCG matrices and weighting functions. Little prepares an MBA graduate, bursting with enthusiasm on graduation, for the day to day life of an entrepreneur. Like a goldminer setting out for the hills, the bad times are hard, while the good times ridiculous. Total volatility. MBA graduates can rarely stomach the extreme uncertainty, in wages and career path.

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About Eucap

Entrepreneur

From the french word, "entreprendre", "taking on" or "embarking on". The biggest source of growth for an economy are new born companies. Entrepreneurship is concerned with creating new businesses, startups.

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