Tag Archives: Innovation

Mind the Gap: the seed funding of university innovation

I recently read Mind the Gap: The University Gap Funding Report published by innovosource.

Disclaimer: I usually do not mention my activities at EPFL on this blog and this report deals exactly with the type of funds I manage there: the Innogrants. I was indeed interviewed for this report as one of the active members of the Gap Funding community and the Innogrants are one of the examples mentioned.

Mind The Gap is a great report because it describes a concept which was born a little before 2005, the seed funding, I should even say the pre-seed funding, by universities of their innovations, including start-ups. The next figure illustrates not only gap funding but all the existing tools enabling academic innovation.

Let me just briefly quote it (but you should know the report is not free, so I cannot summarize it in too much detail. The author allowed me however to give you a 25% discount code: USHAPE). In any case, it is extremely rich in data and information.

“This “gap” extends from where the government funding of basic research ends to where existing companies or investors are willing to accept the risk to commercialize the technology.” [page 9]. The author reminds us that “Failure is commonplace in these sorts of pursuits, but ask where you would find yourself (or where you are going) without GPS and the internet, and most recently a little iPhone “assistant” named Siri that originated from the DARPA funded CALO (Cognitive Agent that Learns and Organizes) program through a university consortium.” [page 20]

As a side element, there are also the emerging accelerators, “Popularized in recent years with the likes of Y Combinator and TechStars, accelerators combine access to talent and support services with “stage-appropriate” capital in return for a stake in the company or other repayment structures.” [page 22] but this is another subject!

There are already some “famous” gap funding tools: “another study by the Kauffman Foundation [1] investigated two well-known proof of concept centers at MIT (Desphande Center) and UC-San Diego (von Lebig Center) and reported general process and impacts.” [page 26]

[1] C. and Audretsch, D. Gulbranson, “Proof of Concept Centers: Accelerating the Commercialization of Univeristy Innovation,” Kauffman Foundation, 2008.

I do not want to quote much more this 100-page deep and very interesting analysis. My final comment is that a critical element is the leverage gap funding enables. You will find a full analysis on pages 88-90. In his Report Summary, the author depicts the value of gap funding through:

High commercialization rates
– 76-81% of funded projects commercialized on average
Attraction of early stage capital
– $2.8B leveraged from public and private investment sources
Business formation and job creation
– 395 new start-up companies
– 188 technology licenses to existing companies
– 7,761 new jobs, at cost of $13,600 gap fund dollars per job
Building a community of innovation
– Thousands of faculty and students engaged in the process
– Incorporate networks of technical and business professionals in the evaluation, mentorships, and leadership of these technologies
Organizational returns
– $75M returned to the organizations through repayments, royalties, and equity sales
– Maximize resource allocation and downstream savings, by permitting early failures through exploratory and evaluation tactics
– Empower universities to continue to take risks that support the type of breakthroughs that define our present, and the type of innovation that will carry us into the future

Let me finish with what I contributed to the report, i.e. a short description the EPFL innogrants:

When I met Jochen Mundinger in October 2006 it did not take me much time to make up my mind. I had previously seen many startup ideas and Jochenʼs Internet project looked to me original and powerful. Prior to any due diligence, I told him that if my analysis was positive, he would get a 12-month grant to work on his start-up. Because of this program, I am lucky enough to be able to make fast decisions and by January 2007, Jochen was working on his project. He did not wait until the end of his grant to found routeRank and by October 2007, with the support of business angels. Today, the service has grown and been recognized by the famous MIT TR35 award in 2010.

And then there was Andre Mercanzini, a Canadian citizen, who certainly has the drive and enthusiasm of many North-Americans. Andre obtained his PhD at EPFL following a few start-up experiences in the US. Andre has developed electrodes for Deep Brain Stimulation. The path was not as fast and easy as for Jochen. Though Aleva Neurotherapeutics was founded in mid-2008, Andreʼs prototypes needed further validation to attract venture capital (a major use of the grants). The Swiss ecosystem is rich with mentors and support so that Andre developed further his project to the point of raising $10M in his series A round in August 2011.

These are just two examples of EPFL innogrants. Initially backed by Swiss bank Lombard Odier, it has since received support from KPMG and Helbling, an engineering firm. The fact that similar initiatives were launched in Switzerland is another illustration that gap funding attracts and seduces. The Innogrants are a bet on young people. Since 2005, 48 projects have been funded out of more than 300 ideas and 24 companies created. We admit at EPFL that failure is part of the process and even if no start-up is ever launched, the grant is a learning experience. We also have the vision that Innogrants become role models and hope that more and more students will be less shy about expressing their dreams.

What’s a start-up?

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Why should I ask such a question 4 years after publishing my book and isn’t this obvious? I do not think it is when I see how many times I need to clarify the difference between a start-up and any corporation. After all, any corporation being launched is a start-up, right? Not so. Thanks to my colleague Pascal :-), I just read another article by Steve Blank, Why Governments Don’t Get Startups, who gives the perfect definition:

“While large companies execute known business models, startups are temporary organizations designed to search for a scalable and repeatable business model.”

In my book, I had said it this way: “A start-up is a company which is born out of an idea and has the potential to become a large company” and I had also added “Apple, Cisco, Google, Intel, Microsoft, Oracle, Yahoo, YouTube. You certainly know these names. These companies did not exist forty years ago. They are technology giants today.”

Why do I like Blank’s definition? Because of his use of “temporary” as well as “search for a scalable and repeatable business model”. Apple, Cisco, Google, Intel, Microsoft, Oracle, Yahoo, YouTube clearly belong to the start-ups; I had not mentioned that non-existing business model.

Now Blank adds something:

“Scalable startups require risk capital to fund their search for a business model, and they attract investment from equally crazy financial investors – venture capitalists. They hire the best and the brightest. Their job is to search for a repeatable and scalable business model. When they find it, their focus on scale requires even more venture capital to fuel rapid expansion.”

This is the typical Silicon Valley model of fast and usually non-organic growth. Gazelles have often yearly revenue growth of at least 50%, not to say 100%. Look again at the growth rates of Gazelles and Gorillas in my post on the topic or at the revenue growth below (table 8-8 from the book).

I see at least two opened debates:
– In Europe, the growth is often slower, at least less than 100%! Is slow growth compatible with a start-up definition?
– Blank sees two phases of VC funding, the first one to search and validate the business model, the second one to fuel rapid expansion. At least Oracle and Microsoft never had the second funding and their growth was more than 100% during their first 10 years!

The Lean Startup – Eric Ries

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After reading Clayton Christensen, Geoffrey Moore and Steve Blank, I was expecting a lot from The Lean Startup by Eric Ries. I was disappointed. It could be that I did not read it well or too fast, but I was expecting much more. But instead of saying what I did not like, let me begin with the good points.

Just like the previous three authors, Ries shows that innovation may be totally counterintuitive: “My cofounders and I are determined to make new mistakes. We do everything wrong. We build a minimum viable product, an early product that is terrible, full of bugs and crash-your-computer-yes-really stability problems. Then we ship it to customers before it’s ready. And we charge money for it. After securing initial customers, we change the product constantly. […] We really had customers, often talked to them and did not do what they said.” [page 4]

On page 8, Eric Ries explains that the lean startup method helps entrepreneurs “under conditions of extreme uncertainty” with a “new kind of management” by “testing each element of their vision”, and “learn whether to pivot or persevere” using a “feedback loop”.

This is he Build-Measure-Learn process. He goes on by explaining why start-ups fail:
1- The first problem is the allure of a good plan. “Planning and forecasting are only accurate when based on a long, stable operating history and a relatively static environment. Startups have neither.”
2- The second problem is the “Just-do-it”. “This school believes that chaos is the answer. This does not work either. A startup must be managed”.
The main and most convincing lesson from Ries is that because start-ups face a lot of uncertainty, they should test, experiment, learn from the right or wrong hypotheses as early and as often as possible. They should use actionable metrics, split-test experiments, innovation accounting. He is also a big fan of Toyota lean manufacturing.

I loved his borrowing of Komisar’s Analogs and Antilogs. For the iPod, the Sony Walkman was an Analog (“people listen to music in a public place using earphones”) and Napster was an Antilog (“although people were willing to download music, they were not willing to pay for it”). [Page 83]

Ries further develops the MVP, Minimum Viable Product: “it is not the smallest product imaginable, but the fastest way to get through the Build-Measure-Learn feedback loop.” Apple’s original iPhone, Google’s first search engine, or even Dropbox Video Demo were such MVPs. More on Techcrunch [page 97]. He adds that MVP does not go without risks, including legal issues, competition, branding and morale of the team. He has a good point about intellectual property [page 110]: “In my opinion, […the] current patent law inhibits innovation and should be remedied as a matter of public policy.”

So why did I feel some frustration? There is probably the feeling Ries gives that his method is a science. [Page 3]: “Startup success can be engineered by following the right process, which means it can be learned, which means it can be taught.” [Page 148]: “Because of the scientific methodology that underlies the Lean Startup, there is often a misconception that it offers a rigid clinical formula for making pivot or persevere decisions. There is no way to remove the human element – vision, intuition, judgment – from the practice of entrepreneurship, nor that would be desirable”. I was probably expecting more recipes, as the ones Blnak gives in The Four Steps to the Epiphany.

So? Art or science? Ries explains on page 161 that pivot requires courage. “First, Vanity Metrics can allow to form false conclusions. […] Second, an unclear hypothesis makes it impossible to experience complete failure, […] Third, many entrepreneurs are afraid. Acknowledging failure can lead to dangerously low morale.” A few pages before (page 154), he writes that “failure is a prerequisite to learning”. Ries describes a systematic method, I am not sure it is a science, not even a process. Indeed, in his concluding chapter, as if he wanted to mitigate his previous arguments, he tends to agree: “the real goal of innovation: to learn that which is currently unknown” [page 275]. “Throughout our celebration of the Lean Startup movement, a note of caution is essential. We cannot afford to have our success breed a new pseudoscience around pivots, MVPs, and the like” [page 279]. This in no way diminishes the traditional entrepreneurial virtues; the primacy of vision, the willingness to take bold risks, and the courage required in the face of overwhelming odds” [page 278].

Let me mention here a video from Komisar. Together with Moore and Blank, he is among the ones who advise reading Ries’ book. I am less convinced than them about the necessity to read this book. I have now more questions than answers, but this may be a good sign! I have been more frustrated than enlightened by the anecdotes he gives or his use of the Toyota strategy. In na interview given to the Stanford Venture Technology program, Komisar talks about how to teach entrepreneurship. Listen to him!

To be fair, Eric Ries is helping a lot the entrepreneurship movement. I just discovered a new set of videos he is a part of, thanks to SpinkleLab.

Fred Destin had also a great post on his blog about the Lean Startup and you should probably read it too to build your own opinion. Lean is hard and (generally) good for you. Fred summaries Lean this way and he is right: “In the real world, most companies do too much development and spend too much money too early (usually to hit some pre-defined plan that is nothing more than a fantasy and / or is not where they need to go to succeed) and find themselves with an impossible task of raising money at uprounds around Series B. So founders get screwed and everyone ends up with a bad taste in their mouth. That’s fundamentally why early stage capital efficiency should matter to you, and why you should at least understand lean concepts.”

Let me finish with a recent interview given by Steve Blank in Finland:
I have devoted the last decade of my life and my “fourth career” to trying to prove that methods for improving entrepreneurial success can be taught. Entrepreneurship itself is more of a genetic phenomenon. Either you have the passion and drive to start something, or you don’t. I believe entrepreneurs are artists, and I’d like to quote George Bernard Shaw to illustrate:

“Some men see things as they are and ask why.
Others dream things that never were and ask why not.”

Over the last decade we assumed that once we found repeatable methodologies (Agile and Customer Development, Business Model Design) to build early stage ventures, entrepreneurship would become a “science,” and anyone could do it. I’m beginning to suspect this assumption may be wrong. It’s not that the tools are wrong. Where I think we have gone wrong is the belief that anyone can use these tools equally well.

When page-layout programs came out with the Macintosh in 1984, everyone thought it was going to be the end of graphic artists and designers. “Now everyone can do design,” was the mantra. Users quickly learned how hard it was do design well and again hired professionals. The same thing happened with the first bit-mapped word processors. We didn’t get more or better authors. Instead we ended up with poorly written documents that looked like ransom notes. Today’s equivalent is Apple’s “Garageband”. Not everyone who uses composition tools can actually write music that anyone wants to listen to.

It may be we can increase the number of founders and entrepreneurial employees, with better tools, more money, and greater education. But it’s more likely that until we truly understand how to teach creativity, their numbers are limited. Not everyone is an artist, after all.”

Red Herring: the End!

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This is my final post on the old Red Herring magazines I had collected from a friend. It has been fun to read what people thought 10-15 years ago. You can have a look at them through my Red Herring tag.

The most striking “mistake” was clearly linked to the difficutly in predicting the future. Just have a look at the cover page of July 2001.

I am not sure nanotechnologies have changed the world and 10 years is eternity. At least by start-up metrics. Medicine, optics and materials science as mentioned by Jason Pontin below may not have experienced breaktroughs from nanotechnologies.

But honestly, what I liked the most was Anthony Perkins’ contribution in December 2001. “Its back to the good old days”.

So let just me expand why I liked it (by putting in bold fonts what I liked). Here is the text again:

***********************
Just before halloween, Red Herring held NDA, its annual CEO conference on the future of technology. Like the holiday it preceded, NDA started as a spooky affair. More than 400 industry insiders showed up at the spanking new St. Regis Hotel in Dana Point, California, with no idea what to expect. After all, the technology industries have suffered a relentless series of blows to the midsection, and the attendees’ first order of business was to look around and see who was left standing. By the time coffee had been served, however, such fears started to subside. Folks like Qualcomm president Paul Jacobs; Allegro Networks president, CEO, and chairman Dave House; chair of Edventures Esther Dyson; and cofounder of Integral Capital Partners Roger McNamee, were all happily strolling the hotel hallways.

By late afternoon the first day, an enthusiastic, even optimistic, attitude started to take hold. During the “Eggheads Unplugged” panel, which featured Steve Jurvetson, managing director of Draper Fisher Jurvetson; Eric Schmidt, the new CEO of Google; Bruce Schneier, founder and chief technology officer of Counterpane Internet Security; Tim Harris, president and CEO of Structural Genomix; and John Gage, chief researcher of Sun Microsystems, it was encouraging to hear these supergeeks riff on topics like nanotechnology, quantum computing, and other far-out innovations. [1] Almost suddenly, all was well again: our industry was still full of smart people talking about cool things.

At this point, Michael Schrage, codirector of the Massachusetts Institute of Technology’s Media Lab eMarkets Initiative, was edging up to me and observing that technology industries were far from becoming “sunset” industries. “Everyone at this conference is speaking in terms of exponential growth,” Mr. Schrage said. “The only debate that is going on is whether we are going to grow at a rate of ten squared or ten to the eighth.” [2]

On the morning of the second day, I gave a presentation on the “Always-On Generation”. After explaining why I thought the economic growth curve associated with the Internet was still well in front of us, I ended with a slide titled, “What Great Entrepreneurs Are.” [3] First and foremost, I noted that the great entrepreneurs I know are focused. I talked about how Bill Gates had sensed, back in 1995, that he had to turn around the Microsoft battleship and begin focusing on the Internet. He knew that it was going to be such a Herculean task that he had to kick himself upstairs and take on the role of chief software architect to get the job done. I also recounted that when Steve Jobs took back the reins of Apple Computer, he consolidated the company’s product line from 85 different models to two clearly defined families of computers–one for professionals and another, colorful one for consumers.

The second virtue of great entrepreneurship, I explained, was cheapness. This is probably the skill we abandoned most dramatically during the Internet bubble era, when the idea of making a profit seemed the last thing on our agendas. “Michael Dell has built a multibillion dollar business based upon being cheap,” I observed. I also spoke about the virtues of competitiveness and imagination. Throughout my professional career, I have observed the world trying to compete with vigor against Bill Gates. In fact, as far as I am concerned, I noted, Scott McNealy, Larry Ellison, and Steve Case have made careers of trying to topple the king.

Finally, I talked about the fact that great entrepreneurs have a high tolerance for taking risks. To illustrate this point, I noted that the six blue-chip technology companies that had successfully made the transition to the Internet era–Apple, Cisco Systems, Dell Computer, Intel, Microsoft, and Oracle–are still run by their original entrepreneurs. In essence, I believe that it takes the same aptitude for risk to point a large corporation in an entirely new direction as it does to start a company.

After finishing my talk, I felt strangely satisfied that my thoughts had been somewhat original. That was until I sauntered to the back of the room and sat next to Paul Deninger, Broadview International’s CEO and a Red Herring board member. “You know, Tony,” he said in his typical bottom-line style, “its amazing, but what you were just talking about is Entrepreneurship 101. And ironically it seems like we were all listening to these things for the first time!” This is when it occurred to me that somehow–magically–we were back to the good old days. Back to the basics. Back to the days when, as Steve Jobs used to observe, “overnight successes sure take a helluva long time.” When we have to work hard, we earn our glory. And, you know what? It sure feels great!
***********************

So here are my comments:

[1]: you need to be imaginative, nanotechnologies, quantum computing, and elsewhere in the 2001 issues, I read about Nanotechnologies again (including fullerene, gallium nitride) and nanotech start-ups (Nitronex, Zyvex, not to forget Nanosys; I am not sure where they are), Europe irising (in biotech. Really?), Robotics, including artificial intelligence, face analysis and recognition. Coming! We need to dream, do not get me wrong. But RH missed Google (just as I did) and probably the Web2.0.

[2] The only debate that is going on is whether we are going to grow at a rate of ten squared or ten to the eighth.” Well, aren’t we in a recession?. Too easy now that we know.

[3] But the piece I like the most is the back to basics, entrepreneurship 101: focus, competitiveness and imagination, cheapness, high tolerance for taking risks. This is what great entrepreneurs are about. Jobs, Gates, Ellison back then. Brin and Page today.

RIP RH!

Steve Blank and Customer Development

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Although I had mentioned him in previous posts such as The Art of Selling and his Views on Entrepreneurship, I had never read Steve Blank’s until now. I just finished reading The Four Steps to the Epiphany and I must just say it is a great book.

I will explain into some details his theory but the main reason I love this book is how he explains why founders are critical in all the decisions of the early phases of a start-up. Not the usual “hire business people”, but “learn and become an expert until you reach your limits”. I should immediately add that it is not an easy book to read and certainly mostly useful to people in the process of launching a start-up or developing new products. His web site steveblank.com is also very informative, you will find tons of slides of his teachings on the web and I particularly recommend the list of books he suggests reading.

Steve Blank is famous worldwide (mea culpa for not mentioning him more before) for his theory on the Customer Developement. Whereas we all know that the high-tech world is not about technology (no it’s not; ideas and technologies are far from sufficient to explain this world), we have a tendency to focus on products (much more important than technologies) and markets (business vs. technology). But Steve Blank explains how products can be an illusion (if never sold to customers) and how markets can be extremely dangerous if not well understood; whereas what counts are the users of products, the people which make markets, i.e. the customers. He explains how important it is to interact with potential customers in an iterative manner (bottom-up) even before designing and developing the product, then while developing them and be careful about a top-bottom-only analysis of the markets.

This is one of his famous slides where he explains that Product Development in isolation is deathly and should be done in parallel with Customer Developement only. Start-ups do not need teams in Marketing, Sales or Business Development, but only two teams, in Product Development and Customer Development, each headed by one of the Founder(s)/CEO. Below is another detailed description of this process (also available online). Then when they become large, they can switch to the traditional models.

You should absolutely read this if you are in a start-up mode. This may help you avoid many (possibly deathly) mistakes.

The challenge of growth (3/3): views from a WEF report

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Following my two previous posts on the challenge of growth through Greiner and Google, here is my final contribution thanks a recent WEF report: Global Entrepreneurship and Successful Growth Strategies of Early-Stage Companies

It is a 380-page rich analysis of what it takes to grow and the ecosystem of high-growth companies. I will soon give a few data points on venture capital compiled by the authors, btu I want to focus here on the challenge of growth. Section 2 of the report (The Early-Stage Entrepreneurial Company Journey) focuses on growth accelerators and different growth challenges as well as dark moments and the main lessons from entrepreneurship.

On the growth accelerators (pages 37-38), market opportunity comes first but HR and organization is not too far behind. For the growth challenges (pages 37 and 42), HR is far ahead with market opportunity really behind. Dark moments (pages 37 and 42): it is much more balanced with financing 1st, markets and environement both second, top management 4th.

What is really inresting in the report are less the statistics than the summaries of the inetrviews and let me extract quotes on the dark moments and main lessons on entrepreneurship. they do remind me reading the books Founders at Work, Betting It All and In the Company of Giants. I hope you will appreciate tham as much as I liked putting them here!

Dark moments

There were times I went to bed thinking ‘game’s up’ and when you wake up you find it is not. The many systems challenges in our early years created some very stressful Saturday afternoons that were at times particularly dark moments.” (Betfair)

We thought we were invincible […]. But we didn’t know what was coming and that we were going to face serious trouble[…] All our glory and credibility disappeared. On top of that, my partner left the business. Many of our people in the US left. The company was declared ‘almost irrelevant’ [..]. But we decided we didn’t want to let the company go. I wanted to turn the company around, and the board supported me in that. So we made a number of key moves. (Business Objects)

We needed to convince people that the Internet was a real market. Many potential distributors thought that the Internet was a research network and had no commercial potential. Thus, convincing people to be our first distributors in 1993 to 1994 was by far the biggest challenge. (CheckPoint)

The core issue was a failure to properly plan for the hyper-growth of the site. […] As long as the site was functioning, it was easy to ignore the engineering team’s pleas that the site was running on Band-Aids™ and fumes. […] Unfortunately, those pleas were discounted by members of the senior team until it was too late.” (eBay)

The general worst moments are as you’re running out of cash […] and there’s no term sheet yet […] that was a periodic dark day as I call it. That would come somewhat predictably, but it always and nevertheless hung heavily in the back of my mind. It was one of the few things that could interrupt my sleep. (eSilicon)

There was one particular time in our history, and that was back in the very earliest days of the company when we were still based in New Mexico. One of our first customers was MITS, which was acquired by another company, they stopped paying us and we basically had no income for a year. We were just barely able to hang on, and after that I had a rule that we always had to have enough cash on hand to be able to operate for a full year, even if nobody paid us.
“The first decade it was IBM that almost killed us. I mean they were a great ‘angel’ in a way, but they also almost killed us a few times. We were in a situation long before Windows where we were totally at the behest of IBM. And IBM could have crushed us on many occasions. They had huge demands on us and sucked our resources. We were basically a low cost, outsourced programming sweatshop for IBM. They paid us very little and the only thing we really got from them that turned out to be very lucrative was the right to sell the DOS operating system to other companies. IBM was a large company and we were a small company and every new code release would have to circulate around to all these different divisions, and it was very difficult to keep our technical people motivated to serve the beast, as it were. When we launched Windows, IBM had a competing project, which they were working on with us called OS/2. Previously, IBM had always set the standards. We would provide the technology and their brand recognition and clout in the industry were what really set the standards. When we launched Windows 3.0, that was the first time that we really went out and did it without IBM. We had made an internal decision before that, that whether IBM was with us or not, we were going to launch Windows 3.0. The day before the launch, IBM reluctantly decided to endorse Windows.” (Microsoft)

There were maybe two dark moments. Because it was difficult to get financing, we decided to bootstrap the company as much as we could with our own money and develop the service. That was a challenging period. That was in the spring and summer of 2003. As we started to incur costs in the software developers, we started to run out of money. Some people internal to this project maybe did not believe it would happen. That was one big challenge. (Skype)

“The first dark moment occurred in the summer of 2002. We were running out of money, struggling with a new product and having difficulty penetrating any major customer. We were about to be saved from our misery through an acquisition by our largest competitor, but then they walked away from a definitive acquisition agreement after two months of diligence, during which they had learned all of our secrets and dirty laundry. We could easily have let this situation destroy us, but instead, we took it as a slap-in-the-face and redoubled our efforts and commitment to success. Our founders took this slap personally, and within a year, they had delivered a breakthrough product that was much better than our competitors’ products and allowed us to penetrate Cisco and other key customers. (Netlogic)

“Every company has dark days. In a young company there’s a huge amount of uncertainty. One dark day occurred in the first quarter after we went public. I’m off on a Friday with my wife and my aunt and uncle, and we’re up in Point Reyes –there was no email. So I called into my voicemail, and we had just got notified by one of our customers that they were cancelling a US$ 375,000 development project. We were going to miss our first quarter public. The rest of the day, I’m living in a silent movie. They’re all talking to each other, but I have no idea what’s going on. I’m sitting there spinning in my own mind. I have a knot in my stomach. I am calling into the office every 15 minutes, but there is no news. I came into the office on a Monday morning, after having some time to reflect on it. I said, ‘Well, first we ought to try to go back up to this company that cancelled us and see if we can get them to give us US$ 100,000’. We did a lot of things that quarter, and we figured it out. It was a very dark period. Bad news travels fast and everybody knew we were just hosed. There was no way to fully make it up, and it was awful.” (Veritas Software)

Lessons from entrepreneurship

1. The three Ps are important: Persevere, as you will have many setbacks; be professional in everything you do; and be passionate.
2. Being able to overcome problems is a pivotal skill: After you overcome each problem, you will feel good because you know you are on the right end of that problem and that some other company
will have to handle it.
3. The most undervalued commodity in an entrepreneurial venture is time: You must get things done in a time-efficient way and with minimal distraction.
4. When you get lucky, two things are essential: (a) quickly take advantage of it; and (b) don’t kid yourself it was not luck. Be brutally honest with yourself.”
(Betfair)

1. “The famous lesson from Jim Robbins’ book, Good to Great: ‘Confront the brutal facts but never lose faith in the positive outcome’. This is essential to come through victorious from difficult periods.
2. “Have a clear concept of value and innovation: We started with a great innovative concept that was easy to explain to our customers and we created a brand new market.
3 “Follow a proven entrepreneurial model: a) attract venture capital and have options available for employees to participate in its financial success, b) go global as early as possible, c) find the better market for going public.
4. “Encourage a culture of passion: Adapt quickly to changing circumstances and always be clear about the growth drivers. Cascade goals all the way down in the organization and measure or monitor. Communicate [goals] heavily to your team, so they can lead their own teams.
5. “Take advantage of a global talent pool: it completely changes the fabric of an organization and creates new opportunities.”
(Business Objects)

1.Key leaders in an organization need to be extremely flexible with the ability to get into a completely new field and build a team and strategy to handle it.
2. You never stop being an entrepreneur. At every step you need to build a working and stable infrastructure, and yet still challenge yourself with shaking things up and finding the next new opportunities.
3. In order to succeed, you need an innovative product, a growing marketplace and a great team of people. It is impossible to succeed without the right people, but the other factors are critical to successful growth.
“Whenever you do something, try to do it in the best possible way. If it works, you will establish a precedent that will last for many years. So try to do the right things in the right way the first time.”
(CheckPoint)

One of the things I found really rewarding while working in Silicon Valley is that risk is not only accepted – it’s encouraged. There are tons of experiments going on there all the time. Risk is, in part, how work gets done there. For me, failure only happens when you don’t learn from your experiences. […] Being an entrepreneur is a tough occupation – you have to believe in what you’re doing, even when others are pointing out all the reasons why your idea won’t work. You have to develop a higher risk tolerance and be ready to find the lesson in each idea that doesn’t work.
(eBay)

Point number one is about the motivation for entrepreneurs. On a risk-adjusted present-value basis, no rational person would ever be an entrepreneur if they did it just for the money. Most young entrepreneurs go into this thinking it’s a quick route to the gravy train. And in fact it’s not. It’s more about creativity and self-actualization than it is about compensation.
“Point number two is about having the right venture capital behind you. I encourage people to seek senior partners who hold central power in the VC firm and will be your long-term funding champion.
“Point number three is about the people. A great product or technology misapplied in the market cannot be recovered by a bad management team. But a great management team can take a B product and win by making the right chess moves at the right time.
“Point number four is our three S’s: speed, simplicity and self-confidence. Winning requires speed. Speediness is achieved through simplicity (non-bureaucracy and non-territorialism). Self-confident people feel good about their position in the company and deliver speedy solutions without behaving bureaucratically. A CEO has to ensure that the three S’s are engrained into the company culture.”
(eSilicon)

“One of the key things is that you have to be in the right place at the right time. This isn’t a question of luck. It means that you have to recognize the opportunity early, and go after it with incredible focus and commitment before anyone else does. […]. You also have to be willing to take risks and make mistakes. Nobody should have to worry about being penalized for trying something new and not having it work out. The key is to learn the right lessons from mistakes so you can continue to move forward.”
“Hire the best people you can. One of Microsoft’s strengths was it innovated that way. It spent a lot of time at universities, before that was fashionable, to seek out talent. They hired for high IQs first, and then figured out a way to organize them and make them productive.”
(Microsoft)

1. “Think big and think global. Think differently. And even if people around you don’t believe it, if you really think you have something, you need to believe in your gut feeling and go for it.
2. If you want to go anywhere in life, if you want to pursue your dreams, you have to take risks. Risks involve failures. You cannot be afraid of failure if you want to pursue your dreams.
3. Entrepreneurship is a lifestyle. It is about what defines you. It is about a passion to change and build things. When you look at it this way, it is also about having fun.
4. Once you get going, stay very focused on getting the right people.”
(Skype)

1. “Think beyond the possible and then back off to reality. Just sit down with a piece of paper and look at what you’ve got. I really believe in a very simple SWOT analysis. Then plan, plan, plan. And then adjust.
2. Hire the best people when you can afford it. A great idea can come from anyone in the company.
3. Be prepared to make mistakes and keep innovating.
4. Customer pull is a hundred times more important than a technology push, but nothing is more important than a great engineer.”
(Arm Holdings)

“The first lesson is, don’t start a company just because you want to make money. You start a company because you believe in your idea and are passionate about it. Also, the idea has to be practical, be implementable and solve some real user problem. Then wealth creation will be a by-product.
Second, you should get off the ego trip. Associate yourself with the right people to complement you. Don’t think, just because you are an entrepreneur and the founder, you should be the CEO. You may or may not be CEO material. To succeed, use your strengths rather than assuming you’re strong in every area.
Another important lesson is that you’ve got to attract good people. You can do it if you have a convincing idea that is really attractive. If you don’t have the right idea, or if you’re not passionate enough about it, you can’t attract the right people. You can’t do it alone. Not any one person will have all the expertise.”
(Brocade)

“Personally, I would recommend that any founder and entrepreneur not initiate a venture on one’s own. In my view, the fact that we had a founding team of three – and later four – meant that we could share the psychological load and stress that a fast-growing company brings. While good friends, we largely had independent social lives so we could ‘switch off’ the company from time to time.
(Iona)

The most important lesson is cliché. In technology, the intelligence, creativity, motivation and teamwork of the people ultimately determines the level of success. Providing an environment that attracts, keeps and motivates top employees is an absolute requirement.
(Netlogic)

1. “The most important thing I learned from Silicon Spice is that no matter how sexy or exciting your idea may look, if you want increase your chances for success, then you must actively engage with potential customers early on. They may not become your ultimate customer, but they certainly will teach you about the product and its features and functionality very early on. I would say that’s one of the most critical things to do, even if you have to make a sweetheart deal with them to get their engagement.
2. As an entrepreneur, you have to have the DNA in you to not give up. I could have easily given up on Silicon Spice and moved on to do something else. This drive to succeed at any cost is part of every successful entrepreneur I have worked with. You have to figure out whatever it takes to make a success of the company.
3. The biggest thing I learned from Intel and that I have carried with me since is there is a discipline about focus and execution. You have to focus on very crisply defined deliverables. You can’t just clutter people with 100 things. You have to distil them down to one or two. However, you have to be very careful. You can’t dump all of Intel’s culture into a start-up, either. But there are elements of the Intel culture that, when brought in a suitable manner, can help a start-up become far more efficient and successful.”
(SiliconSpice)

“Number one: The most important thing is the right product, in the right market, at the right time.
“Number two: The greatest flaw that the entrepreneurial character has is that they get excited about their own ideas and they start filtering with a confirmation bias. What you want to do is open all portals to new information.
“Number three: One of the hardest things for me is this very profound ambiguity you experience. You have a vision of what you want to do, who you are and what defines you, but along the way, you have to do all these opportunistic and pragmatic things, which draw you in different directions and you just never see that original vision. You have to be able to do things that betray that original vision for the good reasons along the way. Sometimes you have to just abandon it and move onto the next thing because it’s the better thing to do. For me, that turned out to be a very hard thing to do.
“Number four: If you don’t listen to your board, you may or may not get fired. But if you listen to your board and investors, you’re guaranteed to get fired. I believe you have to take leadership. And if I sit and think about the business 24 by seven, and when you run a company – it’s the only thing in your life, it’s 24 by 7 – guys that show up once a month or quarter, and kind of flirt with this thing, are simply not qualified to have a better opinion. And investors who buy your stock and sell it ten minutes later, are even less qualified to have a better opinion – although that doesn’t prevent them from having opinions. You have to do what you believe is the right thing for the company and you have to put your job on the line to do it sometimes, and that’s just part of what it is. Sometimes you win, sometimes you lose.”
(Veritas Sofwtare)

The challenge of growth (1/3): Greiner

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Growth of start-ups is probably their biggest challenge. As you may imagine given my interest for the company, I will focus on Google in a future post, but first let me mention an article mentioned to me by my colleague Jean-Philippe M.-F. (thanks 🙂 ): Evolution and Revolution as Organizations Grow, by Larry E. Greiner. As the author writes, it is a quite generic article: “In one sense, I hope that many readers will react to my model by calling it obvious and natural for depicting the growth of an organization. To me this type of reaction is a useful test of the model’s validity.”

What is interesting for me is the first phase of company growth, called Creativity. If your start-up is in that phase or if your are helping such a one, then it should have the following features (quoted from Greiner)

– The company’s founders are usually technically or entrepreneurially oriented, and they disdain management activities; their physical and mental energies are absorbed entirely in making and selling a new product.
– Communication among employees is frequent and informal.
– Long hours of work are rewarded by modest salaries and the promise of ownership benefits.
– Control of activities comes from immediate marketplace feedback: the management acts as the customers react.

and a crisis will arise at some point, called the leadership crisis:

“As the company grows, larger production runs require knowledge about the efficiencies of manufacturing. Increased numbers of employees cannot be managed exclusively through informal communication; new employees are not motivated by an intense dedication to the product or organization. Additional capital must be secured, and new accounting procedures are needed for financial control.

Thus the founders find themselves burdened with unwanted management responsibilities. So they long for the “good old days”‘ still trying to act as they did in the past. And conflicts between the harried leaders grow more intense.

At this point a crisis of leadership occurs, which is the onset of the first revolution. Who is to lead the company out of confusion and solve the managerial problems confronting it? Quite obviously, a strong manager is needed who has the necessary knowledge and skill to introduce new business techniques. But this is easier said than done. The founders often hate to step aside even though they are probably temperamentally unsuited to be managers. So here is the first critical development choice–to locate and install a strong business manager who is acceptable to the founders and who can pull the organization together.”

More in Greiner’s paper and then my post on Google in the near future.

What is (open) innovation ?

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A few publications I read recently push me to revisit a topic which is quite well-known and (I discover it is not that) simple. I would like to discuss again the basic definition of innovation and then mention why the term “open” before innovation has been quite misleading for many readers.

Innovation is not invention, it is its complement. Some say it is the commercialization of invention, others the scaling of invention (which was for me a new and interesting concept). The difficulty lies in the fact that there is a continuum and a lengthy process from the idea (invention) to its application (innovation) and all the actors playing a role in between are impacted by the constraints of innovation.

So let me directly jump to open innovation, a concept I have been uncomfortable since the first time I heard about it. Open Innovation was developed by Henry Chesbrough (http://en.wikipedia.org/wiki/Henry_Chesbrough) and his book is probably among the best selling books with innovation as the main topic.

His main idea is that corporations are developing products in a distributed manner and not anymore in a vertically integrated manner where the corporation masters all aspects of its development from the initial ideas to the final selling. Innovation is nowadays “open” because corporations in-license and out-license intellectual property from and to partners, collaborate with universities, work, outsource with partners. Of course the term is a little misleading because it does not mean innovation is available to external partners, it means that corporations have extended their borders to the outside in order to innovate better.

Julien Penin, a researcher from Strasbourg, argues in his paper “More open than open innovation? Rethinking the concept of openness in innovation studies” that this is not a good definition of open innovation. He adds a number of new constraints which would make innovation really open. In his conclusion, he states: “We identified three constitutive elements of a context of open innovation: (i) Voluntary knowledge disclosure; (ii) Openness of knowledge and; (iii) ongoing interactions among stakeholders.”

He is not saying open should be free, but he is fighting for (neutral) access to knowledge. Where I am a little puzzled though I like what he says is that I am not sure he is talking about innovation or invention. But he has a clear point on the definition of openness. He further adds in his introduction that “Open innovation à la Chesbrough is therefore synonymous with distributed innovation […], disintegrated innovation, modular innovation […], network innovation, or collaborative innovation.” and a littler later “We propose therefore to rethink the concept of openness in innovation studies [… where] an open world is opposed to a world of control or permission.”

You may react and think that these are only definitions but I think it goes much further. Let me expand a little bit. In a recent Xconomy post, Wade Roush wrote about Xerox PARC and Apple, and their relations to describe how innovation works: PARC Fires Back at New Yorker, Claiming Old Apple Legend Misses Point of How Innovation Works Today. It is well-known that Xerox has been good at inventing but weak at implementing its inventions into innovations. Well. Silicon Valley as an innovative cluster has always been an open ecosystem, because the borders are very fuzzy. Just check again the Wagon Wheel Bar story or the arguments by AnnaLee Saxenian that Silicon Valley has been more successful that Route 128 in Boston because the culture is more opened (https://www.startup-book.com/2011/02/25/google-silicon-valley-and-the-spin-off-virtuous-cycle/) .

One interesting comment on the Xerox/Apple link is a comment taken from Malcolm Gladwell’s May 16 New Yorker article, “Creation Myth: Xerox PARC, Apple, and the Truth about Innovation”: “It takes a combination of Soviet-style systematic analysis, U.S.-style high technology, and Israeli-style improvisation under constraints to run a successful war or create a successful product.” PARC, he argues, had only the technological abundance, not the analysis or the constraints, added Wade Roush. Interesting!!

And he further adds “Open innovation is the idea, worked out by Berkeley business professor Henry Chesbrough and others, that companies should have permeable boundaries when it comes to intellectual property—licensing in technology from outside when it’s key to building new business lines, and licensing it out from inside when it’s not being properly exploited.” Well it is not clear at all that open innovation creates “permeable boundaries” and it is clear at all that open innovation is good for all partners.

Whereas Silicon Valley has been something different, something more open that Chesborough ‘s definition. The eight traitors, the Apple story, Google or Facebook today show that SV is an open environement which Richard Newton described as (see https://www.startup-book.com/2010/11/12/google-vs-facebook/) “Silicon Valley and the Bay Area are cradles of innovation.” And he further added, stating a colleague of his: “The Bay Area is the Corporation. […When people change jobs here in the Bay Area], they’re actually just moving among the various divisions of the Bay Area Corporation.” This may be closer to the open source movement, but this is of course too simplistic when people who know Silicon Valley could experience how competitive and aggressive it can be.

Google Innovation: Culture and Practices

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When I heard about a talk on innovation at Google, I was obiously interested all the more that the brief summary looked great. here is the video on youtube, and below the summary:

It was given by Dan Russell, Research Scientist and Search Anthropologist, Google and was part of the Series of the CITRIS Research Exchange from UC Berkeley on March 16, 2011.

12:00 p.m.
Wednesday, March 16
Banatao Aud., 3rd floor, Sutardja Dai Hall, UC Berkeley
http://events.berkeley.edu/?event_ID=39124

About the talk:

As a company, Google clearly relies on innovation to keep our business alive and growing. Translating that desire into a continual innovation practice is central to the outlook and world-view that Google has as a corporate culture. Innovation isn’t just for the futurists, but a part of what everyone in the company is expected to do on a day-to-day basis.
People who work on internal processes, for example, are expected to be as innovative as engineers and product managers who drive externally visible products. Innovation isn’t something that the company can just leave to a few bright minds, but is deeply embedded in the culture of the company.

Beyond culture, though, there are a few pragmatic behaviors that help Google be innovative. A commonplace belief is that innovation originates with an identified market or user need. While we design for the user, we recognize that innovative ideas originate in many places—sometimes with user needs, but also occasionally from technology opportunities that suddenly become available. In these cases, the user need might not be clearly identified at the outset of research, but become evident only over time. Ultimately, of course, an innovation has to be user-relevant, but we understand that not everything starts that way.

One of the key drivers of Google innovation is our focus on data-driven analytics of our products. We instrument just about everything we can think of, log the data (anonymizing along the way to preserve privacy), then analyze it extensively. We recognize that innovation often proceeds in an evolutionary fashion, and that apparently large leaps in design and novel concepts are often hidden beneath a great deal of under-the-covers work the precedes the public announcement.

In user-interface design, for example, we don’t just do A/B testing, but often A/B/C/D/E/F/… testing. And one of the deep lessons of such an extensive testing program is that we recognize that our intuitions are often incorrect. Large changes in the design may very well lead to poor performance shifts, while tiny, sometimes imperceptible changes can have profound consequences. In many of our products, the UI changes significantly over time, particularly as we learn from our experiments, but also as new technology and data becomes available.

Innovation is thus often smoothly evolutionary, albeit looking like punctuated evolution from the outside, but driven by continual rapid iteration and redesign, always driven by an objective function that includes goodness-of-fit to the environment and exaptation of opportunities as they arise.

Finally, we find that innovative products really are the product of many minds. A very small team might drive the initial design and creation of the concept, but having multiple people look at, evaluate, comment-upon and lend supporting insights is valuable. The trick is to allow these additional insights to be supportive, and not weigh the original ideas down with extraneous freight. Keeping an innovation clear, clean and useful to the consumer is an important practice to avoid losing the key insight and value in the innovation.

Start-Up Nation: Israel

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Thanks to an opportunity I got to meet with the Israel Chief Scientist, and the fact I was offered Start-Up Nation at the end of the meeting, let me give you my views on this very interesting book. But first a few things about Israel and innovation.

As the map (adapted from John Kao, Harvard and showed at the OCS meeting) indicates, Israel is an innovation superpower. Cisco, Intel, Microsoft, Novartis, Nestle and many others are located there. Check Point is just one of the many start-up success stories. Israel has more start-ups quoted on Nasdaq than Europe and venture capital is very active there. Finally the office of the chief scientist manages and funds the public side of innovation in Israel. All this is perfectly analyzed in the book Start-Up Nation that I have just read.

I thought I knew a lot about Israel, but the book is rich in anecdotes. The history of Israel is well described and innovation was probably a necessity to survive. If there is a point I appreciated less is the importance the authors give to the military. They may be right, that’s not the point, but I thought the topic came too often in the chapters. This remains a great book and a must read for anyone interested in high-tech innovation and entrepreneurship.

I’d like now to quote a few things I liked. It’s not structured at all, but I invite you to read the book!

From the Introduction

Google’s CEO and chairman, Eric Schmidt said that the United States is the number one place in the world for entrepreneurs, but “after the U.S., Israel is the best.” Microsoft’s Steve Ballmer has called Microsoft “an Israeli company as much as an American company” because of the size and centrality of its Israeli teams.”

The authors begin by explaining that adversity and multidimensionality as much as the talent of individuals, are critical: “it is a story not just of talent but of tenacity, of insatiable questioning of authority, of determined informality, combined with a unique attitude toward failure, teamwork, mission, risk, and cross-disciplinary creativity.”

Chapter 1- Persistence

The usual joke Americans need to put, but it is a good one!
Four guys are standing on a street corner . . .
an American, a Russian, a Chinese man, and an Israeli. . . .
A reporter comes up to the group and says to them:
“Excuse me. . . . What’s your opinion on the meat shortage?”
The American says: What’s a shortage?
The Russian says: What’s meat?
The Chinese man says: What’s an opinion?
The Israeli says: What’s “Excuse me”?
—MIKE LEIGH, Two Thousand Years

– No inhibition about challenging the logic behind the way things have been done for years.
– A rude, aggressive culture which tolerates failure.
– Israeli attitude and informality flow also from a cultural tolerance for what some Israelis call “constructive failures” or “intelligent failures.”
– It is critical to distinguish between “a well-planned experiment and a roulette wheel
(During the meeting with the chief scientist, there was a similar argument: “if we have a 5% success rate, we’d better give the responsability to donkeys to choose and if it is 70% success rate, we do not take enough risks”)
– Amos Oz talks about “a culture of doubt and argument, an open-ended game of interpretations, counter-interpretations, reinterpretations, opposing interpretations. From the very beginning of the existence of the Jewish civilization, it was recognized by its argumentativeness.”

Chapter 2- Lesson from the military

– Narrow hierarchy and autonomy gives a lot of responsibility to individuals, authority is discussed
– People are mature earlier.
– No need to wait for order to act.
– “The key for leadership is the soldiers’ confidence in their commander. If you don’t trust him, if you’re not confident in him, you can’t follow him.”
– “If you aren’t even aware that the people in the organization disagree with you, then you are in trouble”

– “Real experience also typically comes with age or maturity. But in Israel, you get experience, perspective, and maturity at a younger age, because the society jams so many transformative experiences into Israelis when they’re barely out of high school. By the time they get to college, their heads are in a different place than those of their American counterparts.”… “The notion that one should accumulate credentials before launching a venture simply does not exist.”

A dense network – the whole country is one degree of separation (Yossi Vardi)

Chapter 5- Order and chaos

– Singapore’s leaders have failed to keep up in a world that puts a high premium on a trio of attributes historically alien to Singapore’s culture: initiative, risk-taking, and agility; in addition to being real experts who can improvise in situations of crisis.
– Innovation is fundamentally an experimental endeavor (improvisation over discipline)
– Learn from mistake with no fear of losing face.
– Nobody learns from someone who is being self defensive
– Fluidity, according to a new school of economists studying key ingredients for entrepreneurialism, is produced when people can cross boundaries, turn societal norms upside down, and agitate in a free-market economy, all to catalyze radical ideas.

Chapter 7 – Immigration

Immigrants are not averse to starting over. They are, by definition, risk takers. A nation of immigrants is a nation of entrepreneurs.—GIDI GRINSTEIN

Sergey Brin spoke in an Israeli high school: “Ladies and gentlemen, girls and boys,” he said in Russian, his choice of language prompting spontaneous applause. “I emigrated from Russia when I was six,” Brin continued. “I went to the United States. Similar to you, I have standard Russian-Jewish parents. My dad is a math professor. They have a certain attitude about studies. And I think I can relate that here, because I was told that your school recently got seven out of the top ten places in a math competition throughout all Israel.” This time the students clapped for their own achievement. “But what I have to say,” Brin continued, cutting through the applause, “is what my father would say—‘What about the other three?

The authors mention the seminal work of AnnaLee Saxenian (Regional advantage, the New Argonauts). As a few examples of Israel tech. diaspora mentioned in the book:
– Dov Frohman – Intel – 1974 – Wikipedia link. Apparently Israel has been the core of Intel innovation in the past decade and Intel is the largest private employer in Israel.
– Michael Laor – Cisco – 1997 – Linkedin profile. Cisco has acquired 9 israeli start-ups since Laor came back (more acquisitions than in any other country except the USA)
– Yoelle Maarek – Google – http://yoelle.com now at Yahoo!

But one should not forget Mirabilis/ICQ (see below) or Check Point. Check Point was established in 1993, by the company’s current Chairman & CEO Gil Shwed, http://en.wikipedia.org/wiki/Gil_Shwed at the age of 25, together with two of his friends, Marius Nacht (currently serving as Vice Chairman) and Shlomo Kramer (who left Check Point in 2003 to set up a new company).

Chapter 9 – Yozma

Another member of the tech. diaspora: Orna Berry – PhD USC – Unisys-IBM then Ornet and Gemini then OCS chief… The VC industry was really launched through the Yozma effort as well as Israeli incubators. Gemini was the first Israel fund. See the wikipedia article about venture capital in Israel.

Another quote on start-ups vs. more mature industries: “In aerospace, you can’t be an entrepreneur,” he explained. “The government owns the industry, and the projects are huge. But I learned a lot of technical things there that helped me immensely later on.”

Chapter 12 – Transdisciplinarity

“There’s a multitask mentality here.” The multitasking mentality produces an environment in which job titles—and the compartmentalization that goes along with them—don’t mean much.
– “Combining mathematics, biology, computer science, and organic chemistry at Compugen”
– “Putting this together required an unorthodox combination of engineering skills.”

The term in the United States for this kind of crossover is a mashup. And the term itself has been rapidly morphing and acquiring new meanings. … An even more powerful mashup, in our view, is when innovation is born from the combination of radically different technologies and disciplines. The companies where mashups are most common in Israel are in the medical-device and biotech sectors, where you find wind tunnel engineers and doctors collaborating on a credit card–sized device.

But the authors do not forget to mention that Israel is A country with a motive

Role models

Though Israel was already well into its high-tech swing by then, the ICQ sale was a national phenomenon. It inspired many more Israelis to become entrepreneurs. The founders, after all, were a group of young hippies. Exhibiting the common Israeli response to all forms of success, many figured, If these guys did it, I can do it better. Further, the sale was a source of national pride, like winning a gold medal in the world’s technology Olympics.

“There’s a legitimate way to make a profit because you’re inventing something,” says Erel Margalit “You talk about a way of life—not necessarily about how much money you’re going to make, though it’s obviously also about that.”

“Indeed, what makes the current Israeli blend so powerful is that it is a mashup of the founders’ patriotism, drive, and constant consciousness of scarcity and adversity and the curiosity and restlessness that have deep roots in Israeli and Jewish history. “The greatest contribution of the Jewish people in history is dissatisfaction,” Peres explained.

Again “Not just talent, but tenacity, insatiable questioning of authority, determined informality, unique attitude toward failure, teamwork, mission, risk and cross-disciplinary creativity.”

As a conclusion

“So what is the answer to the central question of this book: What makes Israel so innovative and entrepreneurial? The most obvious explanation lies in a classic cluster of the type Harvard professor Michael Porter has championed, Silicon Valley embodies. It consists of the tight proximity of great universities, large companies, start-ups, and the ecosystem that connects them—including everything from suppliers, an engineering talent pool, and venture capital. Part of this more visible part of the cluster is the role of the military in pumping R&D funds into cutting-edge systems and elite technological units, and the spillover from this substantial investment, both in technologies and human resources, into the civilian economy. … But this outside layer does not fully explain Israel’s success. Singapore has a strong educational system. Korea has conscription and has been facing a massive security threat for its entire existence. Finland, Sweden, Denmark, and Ireland are relatively small countries with advanced technology and excellent infrastructure; they have produced lots of patents and reaped robust economic growth. Some of these countries have grown faster for longer than Israel has and enjoy higher standards of living, but none of them have produced anywhere near the number of start-ups or have attracted similarly high levels of venture capital investments. What’s missing in these other countries is a cultural core built on a rich stew of aggressiveness and team orientation, on isolation and connectedness, and on being small and aiming big. Quantifying that hidden, cultural part of an economy is no easy feat. An unusual combination of cultural attributes. In fact, Israel scores high on egalitarianism, nurturing, and individualism. In Israel, the seemingly contradictory attributes of being both driven and “flat,” both ambitious and collectivist make sense when you throw in the experience that so many Israelis go through in the military. There is no leadership without personal example and without inspiring your team. The secret, then, of Israel’s success is the combination of classic elements of technology clusters with some unique Israeli elements that enhance the skills and experience of individuals, make them work together more effectively as teams, and provide tight and readily available connections within an established and growing community.

If you have arrived here, you were interested enough in this long article. Logically, your next move would be to buy Start-Up Nation!