Category Archives: research

Importance of powerful founders

Here is a short video where I discuss my research at the 2014 AOM meeting in Philadelphia. Thanks to Andrew and family for filming and posting!

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Winner of the Heizer Award

This summer has been very productive for me, involving a lot of  research and travel work. Particularly, I have been pleasantly surprised to win the Heizer award from the Entrepreneurship division of the Academy of Management. It is a great honor and promise for the future (not to say responsibility) as this award makes one part of a select researchers’ club, joining other prominent scholars such as William Gartner, Patricia McDougall, Harry Sapienza, Ron Mitchell, Gary Dushnitsky, Denis Gregoire, or Nathan Furr, who, among several others, won the award for the dissertation in their time. I have also learnt a lot more about the Academy this year, due to the doctoral consortium for the junior faculty, kindly (and well) organized by Kim Eddleston and Franz Kellermanns, and especially while reading the book edited by Ron Mitchell about “Research Excellence”.

Below is the picture immortalizing myself with Skip Heizer and his wife Lynn, receiving the award at the AOM conference in Philadelphia.

Heizer-2

I also learnt more about the history of venture capital as Ned Heizer (1929-2009) was actually one of the founders of the industry in Chicago, funding several startups in the 1960ies and 1970ies, including Federal Express and Intel, while unfortunately saying “no” to Steve Jobs’ fledgling Apple. Interestingly, Ned Heizer’s background was very diverse. He majored in chemical engineering as an undergraduate, then got a law degree from Yale, worked for Arthur Andersen to become a certified public accountant, then for Kidder Peabody & co in investment banking, and then at Booz Allen and Hamilton to finish off with management consulting. This experience apparently equipped him very well for his ambitions as a venture capitalist thereafter. The importance of broad experience in Ned Heizer’s case relates very nicely to the findings of my dissertation, where I explain how the diversity of founders’ experience, in combination with power to execute, enables them to innovate business models. Based on a single observation in this case, for Ned Heizer diversity of experience also helped to succeed in venture capital.

Although the prescription might be clear – get a lot of diverse experience before trying to innovate when starting a business (or funding one), things are not as straightforward unfortunately. To be successful in our society, there are strong pressures not to venture outside one’s field of expertise during one’s career, which might proceed in different firms, but often constrained to one or two industries. Thus, entrepreneurs with diverse experiences from various distinct fields such as finance, chemistry, healthcare, technology, accounting, or cultural industries combined are rather an exception than the rule. Despite finishing my dissertation, I continue to find this topic fascinating and would love to learn more about it in the future.

Firms, names, and identity

Starting to work on a new project about firm identities, I came across this list explaining the origins of some of the well-known firms’ names. It has been reposted in several blogs, thus I am not sure about the origin or the veracity of some of these stories. Suffice it to say they make for an entertaining read. So what is the relationship between firm name, its origins and founders, and firm identity? Naming is a very human and a very social activity, names help us make sense of people, things, and firms. Some argue that names actually enact the reality we perceive around us. What’s in a name? If you are entrepreneur, how should you name your business? So far more questions than answers for me, an interesting reflection to be continued.

Adobe  – Came from name of the river Adobe Creek that ran behind the house of founder John Warnock.
Apache – It got its name because its founders got started by applying patches to code written for NCSA’s httpd daemon. The result was ‘A PAtCHy’ server -– thus, the name Apache.
Apple Computers – Steve Jobs was three months late in filing a name for the business because he didn’t get any better name for his new company. So one day he told to the staff: “If I’ll not get better name by 5 o’clock today, our company’s name will be anything he likes…” So at 5 o’clcok nobody come up with better name, and he was eating Apple that time… so he keep the name of the company ‘Apple Computers’.
CISCO – Its not an acronym but the short for San Francisco.
Google – The name started as a jokey boast about the amount of information the search-engine would be able to search. It was originally named ‘Googol’, a word for the number represented by 1 followed by 100 zeros. After founders – Stanford grad students Sergey Brin and Larry Page resented their project to an angel investor, they received a cheque made out to ‘Google’
Hewlett-Packard (HP) – Bill Hewlett and Dave Packard tossed a coin to decide whether the company they founded would be called Hewlett-Packard or Packard-Hewlett, and the winner was NOT Bill…the winner was Dave.
Hotmail – Founder Jack Smith got the idea of accessing e-mail via the web from a computer anywhere in the world. When Sabeer Bhatia came up with the business plan for the mail service, he tried all kinds of names ending in ‘mail’ and finally settled for hotmail as it included the letters “html” – the programming language used to write web pages. It was initially referred to as HoTMaiL with selective upper casing.
Intel – Bob Noyce and Gordon Moore wanted to name their new company ‘Moore Noyce’ but that was already trademarked by a hotel chain, so they had to settle for an acronym of INTegrated ELectronics = INTEL
Lotus (Notes) – Mitch Kapor got the name for his company from ‘The Lotus Position’ or ‘Padmasana’. Kapor used to be a teacher of Transcendental Meditation of Maharishi Mahesh Yogi.
Microsoft – Coined by Bill Gates to represent the company that was devoted to MICROcomputer SOFTware. Originally christened Micro-Soft, the ‘-‘ was removed later on.
Motorola – Founder Paul Galvin came up with this name when his company started manufacturing radios for cars. The popular radio company at the time was called Victrola.
ORACLE – Larry Ellison and Bob Oats were working on a consulting project for the CIA (Central Intelligence Agency). The code name for the project was called Oracle (the CIA saw this as the system to give answers to all questions or something such). Acronym for: One Real A****** Called Larry Ellison??
Red Hat – Company founder Marc Ewing was given the Cornell lacrosse team cap (with red and white stripes) while at college by his grandfather. He lost it and had to search for it desperately. The manual of the beta version of Red Hat Linux had an appeal to readers to return his Red Hat if found by anyone!
SAP – “Systems, Applications, Products in Data Processing”, formed by 4 ex-IBM employees who used to work in the ‘Systems/Applications/Projects’ group of IBM.
Sony – From the Latin word ’sonus’ meaning sound, and ’sonny’ a slang used by Americans to refer to a bright youngster.
SUN – Founded by 4 Stanford University buddies, SUN is the acronym for Stanford University Network.
Xerox – The inventor, Chestor Carlson, named his product trying to say dry’ (as it was dry copying, markedly different from the then prevailing wet copying). The Greek root `xer‘ means dry.
Yahoo! – The word was invented by Jonathan Swift and used in his book ‘Gulliver’s Travels’. It represents a person who is repulsive in appearance and action and is barely human. Yahoo! founders Jerry Yang and David Filo selected the name because they considered themselves yahoos.

Constructing Robust Business Models – Spotify

In my research, I theorize about designing robust business models.  One example of such a design is Spotify.  The Swedish start-up followed up on Apple’s revolution in the music industry, by instead of downloads offering a streaming service, based on a monthly subscription fee for listening to Spotify’s music library.  Spotify offered listeners an improved experience by enabling them to almost instantaneoulsy access millions (over 13M actually) of songs without ever downloading them to their computer (and thus reducing the urge for piracy).

Spotify designed a robust business model by not only solving the music fans’ problem of legitimate music access across devices, but also by involving the record labels in a profitable formula.  Indeed, music labels report Spotify to be the second-biggest, and in some countries like Sweden or UK, THE biggest source of revenue from digital music.  Moreover, Spotify also provides these partners with very useful and very detailed data about the evolving music tastes, something few other distribution channels can easily offer.  Furthermore, Spotify smartly partnered with Facebook to generate positive network effects for both parties by sharing your Spotify activities with friends.  By relying on these very legitimate partners, Spotify, a start-up, quickly gained rapid proliferation in Europe, where granted less competition exists, – and has also recently entered the US market, a harder nut to crack due to the much higher competition and the prevalence of iTunes there.

It would be interesting to see which business model will become the dominant design in the future for the music industry – owning your songs through downloads on iTunes or subscribing to a streaming model developed by Spotify?  Apple has already retaliated by launching “Apple Radio”, implicitly recognizing the threat this challenger might be posing to the incumbent…the saga to be continued!

Business Models and Ecosystems, What Is the Link?

I have recently finished reading Ron Adner’s book on ecosystems, the Wide Lens.  As luck would have it, during one of my research presentations on business models, an audience member asked me to clarify the difference between business models and ecosystems.  I found it an interesting question, and that is what I will attempt to answer in this post.

Ron’s main argument in the book is that in order to innovate firms have to apply a wide lens,  not only considering their customers’ needs and implementing their ideas well, but they also have to be aware of what their complementors and competitors are working on – that is considering the whole ecosystem instead of looking only at their own strategy.  Ron used several examples of innovation failures that I found useful and informative – for instance, he explained how Michelin failed to implement new run-flat tires, or how Nokia rushed too quickly with the launch of its first 3G phone.  Here is a video where he explains what happened to Michelin:

Interestingly, Ron also used several successful (or expected-to-succeed) examples about which I also talk in my business model classes such as Apple, M-Pesa, and Better Place.  So coming back to the original question of this post – what is the difference or the link between business models and ecosystems?  Basically, Ron’s point is that ecosystems matter in today’s business world.  The premise is also similar in the business model research – given the more complex world we live in today, more novel business models are introduced in addition to simple product innovation seen in the past (Zott and Amit, 2010; Teece, 2010).  Whereas ecosystem research takes the “wide lens”, business model research keeps the strategic focus on the focal firm.  Although the assumptions are similar, the locus of attention is different in these two burgeoning research streams.