Category Archives: Entrepreneurship

Small and startup companies.

The Diminishment of Don Draper : Andrew McAfee’s Blog

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Interesting post by Andy McAfee about what he refers to as the Oracular approach to decision making. (Andy took over the Entrepreneurship course I taught while on sabbatical at MIT a few years ago. By all accounts he did an (even) better job than me!)

The above lists of characteristics are focused on a single fictional character in the advertising industry, but in my experience they’re fairly common across business oracles and their decisions in many real-world settings as well. When I reflect on how I’ve seen strategy, marketing, planning, and product design decisions made at large organizations, I see a lot of the stuff listed above.To be sure, I also see business oracles gathering lots of data, commissioning studies, and sometimes even running experiments. But I often get the sense that the point of all this activity is to confirm the soundness of the oracle’s initial idea, rather than to test it a state of affairs captured elegantly by this New Yorker cartoon. Several people at last week’s workshop on business experimentation observed that it takes months for many companies to set up even a simple experiment today, and opined that this is because of the great care taken to ensure the outcome.

via The Diminishment of Don Draper : Andrew McAfee’s Blog.

I’m not going to try to summarize  his post here, but I would add that a good Oracle is called an expert. And expertise is real – and it’s necessary at the Craft end of the Craft-to-science spectrum.

A new idea on mass-customized clothing

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Seph Skerrit was a student  when I taught an entrepreneurship class at MIT a few years ago. (Thanks to Michael Cusumano and Ed Roberts for arranging the very interesting year as visiting prof.)  He seems to have found a new idea in mass customization – congratulations!  I don’t recall my reaction when he proposed the concept, but I might have guessed that “all the good ideas have been tried already” — a classic error. The students in that class were amazingly entrepreneurial – I now think that “serial entrepreneur” is a personality type.

Custom clothes are not my thing, but this would make a nice Father’s Day present. Seph’s team seems to have done a nice job on PR, too, with lots of press coverage in  Style sections.

Today, Mr Skerritt is the founder of Proper Cloth, a New York-based e-commerce dress shirt company that allows shoppers to mix and match fabrics, using computer-generated tailoring for the right fit. Its early success largely derives from being one of a growing number of start-ups that use blogging and social networking websites in place of conventional, more costly marketing. Revenues since launch last year have grown at a rate of 40 per cent a month, and it is on track to be profitable by July, with earnings of about $30,000 a month.

Mr Skerritt emptied his personal savings, scraped together about $50,000 of leftover student loan money, and racked up his credit card debt before raising about $100,000 in seed money from friends and family. He says that the use of social media, as well as being a less expensive form of marketing, provides an easy way for customers to interact with the company and each other. “We want to hear what our customers have to say,” he says. “It’s useful to us and lets our customers feel connected to and engaged with Proper Cloth.”

via FT.com / Entrepreneurship – Custom-made for success.

NYT discovers mass customization

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Mass customization of clothing is at least 10 years old – even Levis does it. (The concept goes back to a book written in 1987, Future Perfect.) The NYT just wrote about it  – the wrinkle is that it’s now called “customer design.”

Still, the article is nice because it shows how low the barriers to entry are. It also has a good description of how the company learns rapidly from customers, with real time chats and phone calls.

Since last Halloween, when the company’s dress shirt design application made its debut at www.blank-label.com, Mr. Bi and his three partners — ages 19, 22 and 30 — have joined a small but growing co-creation movement that uses the Internet to let consumers have a hand in making the products they buy. Web ventures have already popped up that allow shoppers to customize granola MeAndGoji.com, jewelry gemvara.com, chocolate CreateMyChocolate.com, handbags LaudiVidni.com and clothing for girls ages 6 to 12 FashionPlaytes.com. There are also online competitors selling design-your-own shirts, while Brooks Brothers is one major retailer that offers the service on its Web site.

via Prototype – Putting Customers in Charge of Designing Shirts – NYTimes.com.

ANY product can be improved

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For my upcoming product development class. A team, following the methods taught in the course, can improve the design of ANYTHING. A strong claim, admittedly.

Building a Better  Mailbox

It is often said that there are no new ideas, but Ms. Troyer and Mr. Farentinos turned that cliché inside out. By correctly anticipating how the high-tech future would change the way we shop, they updated one of the most low-tech items around: the repository of snail mail, the trusty mailbox. Along the way, they responded to a growing concern — identity theft — that established mailbox suppliers had failed to address.

via Prototype – Architectural Mailboxes – A Tale of Determination – NYTimes.com.

The course is based on the textbook by Ulrich and Eppinger:  http://www.ulrich-eppinger.net/

How to lie with statistics – example 322

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Paul Kedrosky reproduces some data on supposedly  fast growth industries:

According to a new study, here are the best and worst performing industries of the last decade as measured in revenue percentage change terms. Here are the leaders:

source: http://www.ibisworld.com/

Some of these are doubtless valid, but the top 4 are all industries that had virtually no revenue at all in the 1990s, since they basically did not exist were not measured until Internet companies started to go public.  It’s easy to have an astronomical growth rate if you make the base number small enough. Startups do this a lot – “our revenue grew 1500% in our first 2 years.” That could mean they had $1000 of revenue in year 1, and $15000 in year 3!

Immigration and high-tech startups: not correlated, after all?

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Some colleagues have just published a new analysis of high-tech entrepreneurs, and the results are  surprising. There has been a lot of talk  lately that high tech firms are disproportionally founded by immigrants.  But according to my interpretation of this new, and more carefully done, study, that’s  not true.  Here’s my summary of their results:

Only about 3 percent  of the founders of high-impact, high-tech companies are foreigners (about 60 out of 2034).   97 percent are US citizens, and specifically 87 percent are US-born, while 10 percent are naturalized US citizens.    Furthermore, most foreign-born founders lived in the US for decades.  These founders are statistically very similar to the average US population in terms of birth and immigration status.

What’s the evidence? The study is by David M. Hart, Zoltan J. Acs, and Spencer L. Tracy, Jr.High-tech Immigrant Entrepreneurship in the United States A summary of their report is at http://www.sba.gov/advo/research/rs349.pdf

Here’s the odd part: the authors draw a rather different conclusion from their data than I do. Specifically their lead is “The central finding of the study is that about 16% of the nationally representative sample of high-impact, high-tech businesses that we surveyed count at least one foreign-born person among their founding team.” And indeed, their data does say this. But they failed to make a comparison to the US population in general. And classifying as “immigrant founded” a firm with any foreign-born founders is inherently biasing the results toward a higher number. They report that “of the 205 Immigrant Founded Companies in the sample, more than half [ie. at least 8% of the firms in the sample] were founded only by foreign-born entrepreneurs,” which seems to me more informative than the 16% number.

For what it’s worth, I’m very sympathetic to the view that immigrants have a positive effect on technology and entrepreneurship. My nationalistic perspective is that we (the US) should educate in our universities the smartest kids we can get our hands on worldwide , and then keep them in the US.  We’ve always been a nation of immigrants, and there is no reason to change. Of course, there are many nuances and ramifications of this debate.

Here’s my comparison data on the general US population, based on latest-available information from US Census.  In 2003  about  11.7 percent of the population was foreign-born.    (http://www.census.gov/prod/2004pubs/p20-551.pdf)  Of these, only about 40 percent are naturalized US citizens (http://www.census.gov/prod/2003pubs/c2kbr-34.pdf). But corrected for the same average age (or residence time in the US), it looks like very roughly 70 percent of immigrants are  naturalized.  And, if we adjusted for region of residence, since startups and immigrants both disproportionally reside in some regions, the fraction of immigrants in their sample would probably be even lower than the general population in the same region.

On the other hand, it might be more relevant to look at the status of company founders in the year of founding, rather than today. Presumably fewer of them were US citizens at the time (although the percentage foreign born would be the same). But a similar correction would apply to the immigrant population of the US as a whole, so it’s still not clear that the two would differ meaningfully.

Finally, this research looks well-done to me. It’s only their spin on the executive summary  that I disagree with. They seem to have done a much more careful job than previous analysis on this topic, and if you read their report carefully they don’t overstate their results.

[A good comment on this research is at http://www.usnews.com/blogs/capital-commerce/2009/07/16/immigrants-a-driving-force-behind-innovative-firms.html#3323010 . The commenter has delved into the report and extracted some numbers I didn't notice, that support the view that this research is NOT pro-immigration, at least not directly.]