Category Archives: entrepreneurship

Why do New Ideas take Time to Spread ?

HBR Blog posted on Nov 27, 2012 by Samuel Arbesman : 

Just because a new fact or idea seems right, doesn’t mean it will spread like wildfire. Evolution, hand washing in hospitals, the inevitability that personal computers were the future of technology — none of these ideas were accepted immediately, even though they seem obvious today. Change takes time. But why?

The short answer is we’re intellectually stubborn. We don’t always weigh all the evidence before we make a decision, and this is especially true if a change of opinion requires a wholesale overhaul of our worldview. Usually, we’re defensive in the face of change, spouting alternative theories and contradictory data. Although this type of resistance can help keep everyone honest, it can also produce very bad effects.

Just take Ignaz Semmelweis — a physician who recommended doctors clean their hands prior to delivering babies — who was ignored and essentially driven mad by his colleagues’ refusal to accept the truth. But eventually, in the face of overwhelming evidence, the majority will generally accept the new theory, before their recalcitrance becomes too counterproductive.

Shifting from an old view to a new one is never a clean and seamless process. As numerous scientists have experienced, trying to get a new idea accepted is usually a messy process — and a long one. In fact, it could take until the retirement or death of the holdouts and the influx of younger and more open minds for the new idea to become accepted. The physicist Max Planck seems to have summed up the issue with this maxim: “New scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”

This seems intuitively obvious. Since science and business are human affairs, we can’t expect the old stalwarts to change their minds when a new idea comes along. We just have to wait for them to die. Seems rational enough.

But here’s the thing: Planck’s Principle turns out to be wrong.

Consider Charles Darwin’s theory of evolution. Several decades ago, a study (PDF) examined sixty-seven British scientists from Darwin’s time and found that only about three quarters of them had accepted Darwinian evolution ten years after On the Origin of Species was first published in 1859. So evolution was not the rapid change we thought it might have been.

Why? If events had unfolded according to Plank’s principle, then young scientists would have rapidly accepted Darwin’s ideas while older scientists would have resisted them. But it didn’t happen that way. Although it’s true that those who accepted evolution were younger on average than those who still rejected it after ten years, age explained only 5% of the variation of acceptance or rejection of this theory. The younger scientists didn’t necessarily accept it rapidly; they accepted it at a rate similar to the older scientists who accepted it, over the course of a decade.

So it turns out we can’t even rely on common sense for understanding how this factual inertia works. This is encapsulated in the work of Duncan Watts, a principal researcher at Microsoft Research. Watts has demonstrated, in numerous studies that explore everything from how certain songs become popular to how marketing works, that we are very good at telling stories to ourselves that sound true (e.g. Plank’s Principle). But when we subject our “common sense” to the rigors of quantitative analysis, it doesn’t always pan out. So while our factual inertia is a big problem, we need to be cautious when we hear good stories about how it actually works.

Clearly, science and business, and others fields of knowledge are not abstract ventures. They’re human affairs, so they’re prone to passions and biases. Scientific discovery, in particular, occurs through hunches and chance recognition of relationships, and is enriched by spirited discussion and debate around the lab. But science is also subject to our baser instincts. Data are hoarded, scientists refuse to collaborate, and grudges can play a role in peer review. There’s a lot at play.

So new ideas take time to be accepted. And how they are accepted is far from common sense. But one thing’s for sure: Don’t write off the old folks. They have a lot to teach us.

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All about Venture Capitalists

In whichever way you are involved in a start-up enterprise of any sort, you know that the most valuable insights and advice come not from your mother but venture capitalists. After all, these guys have seen more business world than you have in the initial stages. These are the guys who can be looked at for value add, who can open doors, help you connect with right people in the industry.

The very basic question : How do VCs come across their investment ideas ? Perhaps the word will resonate often in the post – Network. The well established VCs enjoy a good network. And honestly it helps rather than being a lonely bird. It ain’t series of emails over internet. But a good and healthy network where they know the people they know and entrepreneurs constantly communicating, conversing and where they find out right elements.

Woody Allen quoted, “Life is 90% showing up”. So show up ! When you have the opportunity to communicate, do so by being together in a room. Get to meet in person. They will try to talk to you over phone, skype. But the fact to understand is that they try to experience the magnetism and spark of the founder. And that cannot be well assessed over audio or computer screen.

Be very thorough and forthright about competitive landscape. When VCs know more than the person presenting his own idea or business model, it’s a cause of worry. The facts and numbers should roll off your tongue as fluently as uttering I love you to your girlfriend(wife’s out of picture certainly !).

Personally, if you don’t have any experience, approach them with some real progress. Your start-up should have caught many eye-balls by now. If not, think and work harder.

An entrepreneur-VC relationship is akin to a good marriage. When VCs make an investment, they know that the relationship can potentially last for 8 to 10 years. Hence, to have a good partner is crucial. Therefore, get to know who will be on your board. Earn their respect. Generally, it’s one or two investments annually per partner. So if you  have the opportunity to meet a person, you’ve got to stand out to be that person’s deal for one whole year. Get to know how much investments they’ve made, how many boards they are on, do they miss board meetings, do they send analysts instead of coming by themselves, etc. Equally important is analyzing their investment history.

If possible, get to know where the money is coming from. The fatness of the investment figure determines the ideology and mindset of VCs and Angels right from the start. If the investment is around 1 crore, they will look for scaling up to a certain extent and sell it to big companies for higher returns to as much as 100 crores. That’s that. Quick sale and no IPO. But when the investment itself is  1500 crores, they will swing for the fences and bypass the early acquisition factors as they won’t matter for huge inputs.

All in all, the conclusion is –

  1. Get to the main points
  2. Demonstrate passion and commitment 
  3. Make sure you state the value proposition in a concise & simple manner
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IBM’s entrepreneurship

For a person seeking  career in business, he has to indulge himself into a lot of articles, policy makers’ writings, industry chief’s opinions, etc to gain a vague dimension of what and how it is to build a company from scratch to a strong and sustainable structure.Like others, I had a share of my reading too. But my whole understanding of entrepreneurship has changed for a better cause radically.One comes across terms like fellowships, venture capitalism, sustainable business model, etc.A not so good thinker would obviously follow and try to have a close association of them without a clear understanding of what it takes to approach them.It is a simple four lettered word “IDEA”!

All the terminologies in entrepreneurial world would be a tyranny if one doesn’t know what to do, if he doesn’t have an idea.And with idea i mean business idea which would be worth undertaking (after being processed through rigorous market analysis and surveys) and which would be “innovative”. Though this is not the case with fellowships. One can interact with fellows just for the sake of exposure and their approach and understanding. This is followed by a business model.And if the business is multi-dimensional, one must learn to establish connections among different business models.

IBM’s idea was simple –  to create a “Smarter Planet”.What is smarter planet ? It is all about deploying intelligence in data management. This is internet’s age and a consistent change(increase) in information,data is constant. Every company is facing with overwhelming increament in it. So there have to be new insights, new analytics, new intelligence to deal with this explosion of data.And with this data management,  it is passionate about bringing fundamental changes in varied sectors like transportation, power, finance, communications, water, healthcare, cities, etc. As much as it is committed to optimize them in their outputs, it is equally focussed to do it in a “Greener” way. For it is most dominant theme for next generation’s customer solutions.

THE BUSINESS MODEL

Factually, IBM was not so cool company in early 1990-2000’s. It was little late in recognizing the “dot-com” trend. While other companies caught up. But IBM ddidn’t want to repeat the failed mondays. So it reckoned the collaboration with small companies mostly bootstrapping ones. IBM did so because it was successful in realizing the potential of growth of start-ups and consequently came up  with “Global Entrepreneurship Initiative” GEI. This was a collaboration programme devised to identify innovation hot-pots across the globe with an aim to cultivate sustainable relationship. IBM wanted itself to be more accessible to the smaller companies. The start-ups worth filling the void and which matched IBM’s ideology for innovation propagation had their share.

Once a start-up earns this tag, it cannot define the value of benefits it gets. IBM makes sure it has access to every genre of research and talent pool it possesses. To broaden this perspective, IBM has tied with universities and incubators across the world. And since India has the largest number of student start-ups, IBM has spearheaded with SmartCamp here. SmartCamp is all about intensifying and high pitching the value of the collaboration. A senseful and state of the art mentoring is provided to the earners. “Rely on mentors, ask questions rather than making statements, learn to establish connection among different business models….”, they say.

But there is a very important part of the strategy to be understood. If IBM finds a company’s offerings is used again and again, acquisition is immediately the next step. So owning the assets is rule of the game, unlike TCS .Whereas Microsoft has the legacy of its softwares, it has failed in venture programmes. Cisco on the other hand, let the companies build their product and eventually come out with customization like a careless mother.And if the association fails due to erroneous, fading energy of the starters, it is gulped down by $ 100 billion revenue company.

All in all, IBM’s entrepreneurship has good business model, idea and composition. It is all about taking care of a baby from start to end with whole head, heart and mind. It has been yielding tangible results but impactful transitions are yet to be seen.

(The views expressed are writer’s own.There has been considerable amount of expenditure of brains, brawn, time, capital, energy, analytic and intellectual power.Feel free to oppose or comply. )

Why R&D is important?

Bharat Heavy Electricals Ltd. and Bharat Electronics Ltd. are top two PSU’s(public sector undertaking) which top this year’s 100 most spenders in R&D. BHEL at No.2 and latter at 11.The concept can be compared to the saying “a stitch in time saves nine”.

Statistics have shown that the increment in revenues are tremendous while investing in research and development.These companies follow the tagline “Spend Today,Earn Tomorrow”.Indeed its true,they have bagged orders worth crores of rupees and even they have been exporting the technologies earned through R&D.While it is only recently that many companies are realizing the importance of it,the Govt. run companies have recognized this years earlier.Leave aside the pharmaceutical companies because the sector itself is research driven.

BHEL

It was established in 1956 with the collaboration of Soviet-Union technology,they would export it and the firm would develop it as per the Indian markets.Post-liberalization era in Indian economy,when all the customs were lifted in power sector,firms like GE(General Electric),Siemens refused to collaborate for their own-profits.This was the time when BHEL recognized that it needs its own calibre in R&D.

The figures have shown that copyrights and patents have been filed per day.With R&D facilities attached at all its 14 centers,it has spent 2.4% of its revenues in it.6723 crores were earned when 829 crores were infused in research.Some key achievements of BHEL in context of R&D are-

  • coal gasification technology allows thermal plants to generate electricity with 40% more efficiency.
  • permanent magnet motors to reduce the size of submarines to help better mobility.
  • insulated-gate bipolar transistor based inverter for rail locomotives to consume power with more efficiency.It helped BHEL bag 400 crore deal from Indian Railways.

Bharat Electronics Ltd.

When we talk of defence technology,we talk of BEL.The firm is largest supplier of equipments to defence sector of the country leaving giants like Wipro,TCS behind.It has invested around 5.4% of its revenues in R&D.A huge revenue stream is generated by constantly investing into research arena.Some key highlights are –

  • BEL is awaiting the order from Indian Govt. of coast surveillance system guarding 7600 km coastline of Indian sub-continent.It uses electro-optic sensors.The project has already been developed keeping in mind the safety post Mumbai terror attacks.
  • Stars V mark II radio is an advanced radio which lets users to change the frequencies to prevent the interception from the enemies.It uses frequency hopping algorithm developed by BEL.
  • BEL wrote algorithms for EVM’s(electronic voting machines) which are widely being used across the country by voters.This technology is now being demoed to countries like Uganda,South Africa,Philippines,Honduras….

It is evident that one who has edge on technology stays ahead irrespective of the field one is in.Innovation drives businesses.Whether it is product or service oriented,creativity and differentness is the punchline.For these all,research and development are very crucial.