mueller - engr 100 - fall 2011 - november 2011

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Entrepreneurship

John MuellerNovember 2011

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ASK QUESTIONS!!!

(be engaged)

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Who has taken an entrepreneurship course?

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Who wants to be an entrepreneur?

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Who wants to start a company?

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Who wants to be an entrepreneurial?

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Educate Me

Who is an engineer?What is engineering?

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November 14-20http://unleashingideas.org

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http://www.bloomberg.com/tv/shows/techstars/

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Friday, November 18, 2011

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@ Simon Fraser UniversityVancouver, Canada

(SocialQs – 8 members, mostly engineers)

Important Lessons Learnedfrom Rob McCrea

1. Make sure you have a product that customers will really BUY

2. Know your MARKET & initially make it NARROW (to fit plan)

3. Know HOW you will make MONEY & takes LONGER than you think

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• Learn how to think– Paul & Elder critical thinking framework

• Preferably get a non-business undergraduate degree– can get a business graduate degree

• Work for someone else first

• Solve a problem from your knowledge set

• Do what you love

Mueller’s Career Advice (N of 1)

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• Be engaged

• Be continuously learning

• Have positive attitude

• Be persistent at what you do

• Be passionate about what you do

Mueller’s Career Advice for Successful Entrepreneurs

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Have a Happy Thanksgiving

Let’s all go home

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• Official introduction

• What is entrepreneurship?

• Opportunity discovery / recognition / creation

• Why start a firm?

• Performance of new firms

Outline

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Information about Mueller

– Education• BBA – Southern Methodist University (1992)

– Started out in Computer Science (honors)– Management Information Systems (MIS)

• MBA – University of Illinois / University of Texas (1999)– Entrepreneurial way to get an MBA

– 4th year Ph.D. Student• Entrepreneurial finance; resourceful financing

– Interests• Golf• Music• Computers• Travel

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Information about Mueller

– Prior to UofL• 10+ years running my own companies• Worked for others – Jack Nicklaus, Hank Haney, Arthur Andersen• Worked and lived in various places in the USA and the world

– Texas, Illinois, Florida, Colorado– Europe– Middle East– Africa

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Information about Mueller

– GolfSolutions.com (founded in 1998)• Online facility management software• Golf Investors• Golf Watercolors

– SmartBond (founded in 2000)• Working with universities in various places• SmartBond Remote Explorer• Timeline Resume

– Colorado Software Architects (bought in 2004)• 1Disk• 1Safe• 1Disk.com (like Dropbox)• vSERV (storage aggregation)

– Idea Mornings (started in 2011)• Breakfast talks to spark ideas

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Information about Mueller

– My Focus• Entrepreneurial Finance• Technology Entrepreneurship• Sport Entrepreneurship

– Course: Entrepreneurial Finance• Financial forecasting for new ventures• New venture financing

– Course: Entrepreneurial Creativity and Innovation• Entrepreneurship vs. Intrapreneursihp• Opportunity discovery• Become more creative; thinking process

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Practice What I Preach

So What?

(personal gratification?)

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Once an entrepreneur,Not always an entrepreneur

(being an entrepreneur is episodic)

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Ted Leonsis

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Introduction

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Is Tim Cook an entrepreneur? Was Steve Jobs an entrepreneur?Is Tim Cook entrepreneurial? Was Steve Jobs entrepreneurial?

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Once entrepreneurial,Always entrepreneurial

(being entrepreneurial is a way of thinking)

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“Entrepreneurs can change the world”

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Entrepreneurship and Intrapreneurship

– Monster.com (1999)• “When I grow up, I want to be….” commercial

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If I paid you $5 million in total over 40 years to do the following:

Dig a hole in the morning, fill it in the evening,and come back and do that again each weekday

for the next 40 years,

would you take the offer?

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Break into Separate Rooms

(for 30 minutes)

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Entrepreneurship = ?

(word association)

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Who IS NOT an entrepreneur?

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Who IS an entrepreneur?

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What DOES an entrepreneur DO?

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What DOESN’T an entrepreneur DO?

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Examples of Entrepreneurs

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Return from Separate Rooms

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Words Used to Describe an Entrepreneur

– …

Visionary; see potentialAmbitionDrivenThink outside of the boxSee what others don’tPromotingNetworkingEncouragingAbility to dreamImaginationCreatorInnovatorSelf-madeTake risksExplorerEschew rigid rulesPassionateMisfit (doesn’t fit the standard mold)Goal orientedCompetitive (heated rivalry)Rich

Question conventional wisdomWell-rounded; familiar with many thingsCuriosityAt peace; relaxedGood at thinking; constantly thinkingKnowledgeableInitiativeHonestyConfidenceGood personal skills (can read other people)EngagingActiveQualityReputationGood instinctHad a purposeFearless; not afraid of failingCultivated a good reputationAccurate business senseTrustworthyIntegrity

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Engineering = Entrepreneurship?

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Entrepreneurship = Creativity= Innovation= Creative destruction

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Can You Draw Curious George?

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– My question: Is there a time when there is too much innovation?

– My examples:

• Golf balls and equipment becoming too good– Thus players are outdating / out-distancing the current courses– Square grooves– Drivers – material– Ball flies more; spins more

• Basketball shoes– NBA has ruled a certain shoe as being an advantage to players (article)

– Other Examples??

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Entrepreneurship = $

$ = Entrepreneurship

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Entrepreneurship = Philanthropic Work= Greedy

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Entrepreneurship = Good for Society= Productive= Unproductive= Destructive

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Entrepreneurship = Jobs

(new, fast growing firms create jobs)

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Entrepreneurship = High Risk= Uncertainty= Unknowns, unks

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"If you want to be original, you have to accept the uncertainty, even when it’s uncomfortable, and have the capability to recover

when your organization takes a big risk and fails."

Ed Catmull, President, Pixar Animation StudiosSource: "How Pixar Fosters Collective Creativity, HBR, 2008-09

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Entrepreneurship = Cool= Heroes= Gunslingers= Gamblers

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– Examples of an Entrepreneur as portrayed by the media

• Larry Page and Sergey Brin– Founders of Google (1998)– Is Eric Schmidt (CEO) an entrepreneur?

• Jim Clark and Mark Andreesen– Founders of Netscape (1994)

• Kevin Plank and Kip Fulks– Founders of Under Armour (1996 – UofMaryland)– Created moisture-wicking T-shirt; tired of changing t-shirt– Breakthrough – Jeff George (Raiders – wearing one of their mock turtlenecks)

– Are these typical entrepreneurs?

– What about…? Are they cool? Are they heroes?• Dry cleaners• Mechanics owning their own shop• Lawyers working in their own practices• Doctors working in their own practices

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Entrepreneurship = Smart People= Highly Educated

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– Does a college education help / hurt entrepreneurial activity?

– Education doesn’t hurt…how you use it depends on how it will help

– Increase in education, associated with increase in entrepreneurship activity (Shane, 2003)• Except at the PhD level

– But, the following have college degrees:• 317,000 waiters / waitresses (8k have PhDs / pro degrees)• 80,000 bartenders• 18,000 parking lot attendants• 17m Americans with college degrees doing jobs less than their skills• 5,057 janitors in U.S. with PhDs / professional degrees

• Source: Chronicle of Higher Education and Jon Bischke

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Entrepreneurship = Solving Problems

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– Example: Fishbowl Water Faucet

– What problem is being addressed?

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– Example: Gutter Robot

– What problem is the Gutter Robot (iRobot Looj) addressing?

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– Example: Birdie Ball

– What problem is Birdie Ball addressing?

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• Don’t get caught up in the idea and your product…

• Example: Audible.com

• Facebook status update

• The main point: Understand and Address the Source of the Problem

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Entrepreneurship = Think Differently

= See Differently= Visionary

= Diff. Perspectives

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Envisioning the Future

• Bob Rotella – sports psychologist

• Putt: If you don’t think you will make it, what will happen?– Focus is in the wrong direction– Worse, might not even try to make it

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What Do You See?

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Entrepreneurship = Thinking Out of the Box

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How many squares can you see in the graphic?

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How many squares can you see in the graphic?55

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Entrepreneurship = Challenge Status Quo= Critical Thinking= Break Rules

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– By moving one circle, make two rows of 4 circles

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– By moving one circle, make two ROWS of 4 circles

– It doesn’t have to be an exact line; i.e. question the rules

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Entrepreneurship = Hard Working= Perseverance= Persistence= Passion

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James Dyson

– History• Byam Shaw art school (London)• Studied architecture• But he wanted to create, not just draw• Graduated: worked on marine devices (engineering)

– First Invention• Ballbarrow

– Assigned patent to company– Company sold patent, against his will

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James Dyson

• Big Invention

– In 1978, local sawmill, with giant cyclone• Spun sawdust out of the air• Collecting in a chamber

– 5,127 prototypes

– 15 years

– Dual Cyclone technology• First vacuum that didn’t lose suction

– Manufacturers rejected product• Running, to get through difficult times

– Licensed product in Japan in 1983 (G-Force)

– Within 22 months, best selling vacuum in the UK

– Dyson DC101

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James Dyson

– …

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James Dyson

– Other Inventions• Washing machine with 2 drums• Emission-filtering diesel exhausts• Clean air hand dryers• New type of school• ….and more

– Strategy• Keeping inventions secret• Protecting the ideas• Always taking risks

– Quote:• “It seems as though you can’t carry on, but if you

just get through the pain barrier, you'll see the end and be okay. Often, just around the corner is where the solution will happen”

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James Dyson

– Ad on the Ball-technology

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“Glass breaks, why don’t you fix it?” – Executive to an engineer (circa late 1950s)

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Gorilla Glass

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Never Summer Industries (Snowboards)

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Entrepreneurship = Implementation= Execution

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TNG Pharmaceuticals

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Entrepreneurship = Opportunity

= Greedy= Opportunistic

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Entrepreneurship

– Entreprendre (French) – “to undertake“

– Various definitions for entrepreneurship, entrepreneur, entrepreneurial

• Owner-manager (economists)

• Self-employed (economists)

• Founders of new businesses (Davids, 1963; Draheim, 1972)

• Person assuming risk in a business venture (Cantillon, 1755)

• Innovation in business; new combinations (Schumpeter, 1942)

• The pursuit of an opportunity without regard to resources in hand(Stevensen, 1983)

• The process of discovering, evaluating, and exploiting an opportunity (Shane and Venkat, 2000)

• and others….it can get messy

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Opportunity Discovery(or recognition or creation) Evaluation Exploitation

(or exploration)

* Keep evaluation separate from opportunity discovery (idea generation)

Start a new firm orwithin a firm

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Opportunity Discovery(or recognition or creation) Evaluation Exploitation

(or exploration)

* Keep evaluation separate from opportunity discovery (idea generation)

Start a new firm orwithin a firm

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Opportunity Discovery

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Exercise: Missing Numbers

1 1 1 1 1

1 3 5 7

1 5 13

1 7

1 ?

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Exercise: Missing Numbers

1 1 1 1 1

1 3 5 7 9

1 5 13 25

1 7 25

1 9 ?

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Exercise: Missing Numbers

1 1 1 1 1

1 3 5 7 9

1 5 13 25 41

1 7 25 63

1 9 41 ?

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Exercise: Missing Numbers

1 1 1 1 1

1 3 5 7 9

1 5 13 25 41

1 7 25 63 129

1 9 41 129 ?

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Exercise: Missing Numbers

1 1 1 1 1

1 3 5 7 9

1 5 13 25 41

1 7 25 63 129

1 9 41 129 321

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What does this exercise have to do with opportunity discovery?

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The Person with the Best Imagination Wins

– Believe it can be done– Get in the habit of thinking up ideas– Keep an idea journal– Look for better ways to do things– See problems as opportunities– Relax, daydream– Think young– Be curious– Inspire yourself

“Problems don’t get solved by the smartest or the fastest or the strongest; they get solved by the one who sees the possibilities.” – Dan Roam

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Announcements

– Hiring at Zappos (CEO: Tom Hseih)

– Question they ask in an interview:

– Study:• Asked them if they were lucky• Then had them read a newspaper and count how many photos• Some headlines said: “There are 37 photos, stop now and collect $100”

• Conclusion: Lucky people tend to be open to a wider realm of options and solutions – thus can work with more people and come up with more creative ideas (“be creative and a little weird” – from Zappos culture definition)

Do you consider yourself lucky?

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The Candle Problem

The Goal

Affix the candle to the wall such that the candle will not drip wax onto the table.

Use only the materials provided in the picture.

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The Candle Problem

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The Candle Problem

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The Candle Problem

– Example of “Functional Fixedness”; include the box

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Be Aware of Environment and Changes in It

– Change Blindness: The Bistro

Source: http://nivea.psycho.univ-paris5.fr/Slow%20changes%20bis/1_BISTRO.HTM

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Be Aware of Environment and Changes in It

– Change Blindness: The Workroom

Source: http://nivea.psycho.univ-paris5.fr/Slow%20changes%20bis/5_IVRY.HTM

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Be Aware of Environment and Changes in It

– Change Blindness: The Door Study

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Why Start a Firm?

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Why Not Start a Firm?

– Fear– Risk aversion– Lack of resources– …

“Don't let the fear of the time it will take to accomplish something stand in the way of your doing it. The time will pass anyway; we might just as well put that passing time to the best possible use.”

– Earl Nightingale (1921-1989)

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Why Start a Firm?

– Self-realization– Financial success– Roles– Innovation– Recognition– Independence (autonomy)– Necessity (lost job, can’t find job)– …any others?

– Guy Kawasaki (formerly w/ Apple)• Make Meaning

– Increase quality of life– Right a wrong– Prevent an end to something good

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• Guy Kawasaki “Make Meaning” video

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Performance of New Firms

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• # of firms in the USA– ~27.4 million (2007)

• # of firms started each year in the USA– ~670,000 (2007)

• # of firms closed each year in the USA– ~595,000 (2007)

• % of firms raising from angel investing, venture capital funds, IPO– Angel investing: 1-3%– Venture capital funds: 0.3 – 1%– IPO: < 0.1%

Performance of New Firms

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• Failure (Success) rates

Performance of New Firms

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Why do new firms fail?

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• Business Idea / Model

• Founders (Management)

• Capital Structure

• Environment

Performance of New Firms

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Entrepreneurship = Happiness?

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Entrepreneurship = Happiness &Success

IF (love what you do &passionate about what you do

) THEN

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Is being an entrepreneur for everyone?

No, but being entrepreneurial is beneficial for many

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John Muellerjohn.mueller@louisville.edu