Rejection Therapy: For PhDs, entrepreneurs & other failures

What is the most significant thing that differentiates entrepreneurs from others? Somehow, in the face of overwhelming odds that they will fail, they still manage to push forward. Rejection, almost inevitable, doesn’t deter them. The rest of us kill inventive ideas before we even test them because we fear rejection. This NPR story explores a new form of therapy where rejection is turned into a game: how many times can you get rejected in a day? Could desensitizing people to failure create more entrepreneurs? This also has important implications for academics who typically face many rejections from journals for each manuscript that gets accepted. Without “rejection therapy,” they may avoid sending papers to journals because they are concerned that the work will be rejected. Like would be entrepreneurs, they kill ideas before they have had a chance to test the waters.

Contributed by Don Hatfield

Strategic Magic: Success stunts learning

i-failAn emerging literature focuses on learning from failures — both in terms of entrepreneurship and strategy more broadly. For some recent examples, see studies by Ariño and de la Torre (1998), Eggers (2012), and Kim & Miner (2007). It might appear that learning from success should be taken for granted — the actor has done something well and will naturally repeat the behavior. However, in the complex world of strategic decision-making, causality and can be especially hard to determine. It turns out that failure tends to trigger more rigorous analysis of the causes (even if these analyses suffer from attribution biases). On balance, success may tend to trigger much less rigorous analysis (if any) that is even more biased in the attributions made. This WSJ article on a magician’s ability to dupe audiences illustrates the principle nicely. In class, this discussion might be used to discuss the role of luck and how it may skew attributions, reducing the likelihood of serial success in strategic decision-making. The magic trick described in the article (or something similar) might be a nice, and dramatic, way to introduce the topic in class — all you need is two dimes…

Contributed by Donald E. Hatfield

Honda “B” Emerges

In this video, Henry Mintzberg presents the story behind the classic Honda B case. That is, when Honda tried to enter the traditional US motorcycle market with large machines but ran into implementation problems that pushed it toward introducing small bikes through non-traditional distribution channels. As a result of their pivots, they were able to create a new market for smaller bikes in the US. This was a startling contrast to the “A” case which implied that the strategy was intentional from the start.

Heard Through Marko Rillo

Changing the Game

This interview with the founders of and Twitch presents an example of how founders shift their strategy in the face of feedback from customers, and emerging opportunities. They started to broadcast their lives, but soon discovered that people really wanted to watch gaming. This interview describes how they pivoted. In a strategy class, this illustrates intended vs. emergent strategies as well as the need for entrepreneurs to pivot off of initial ideas. There is also an interesting discussion of how technology has helped to make gaming and poker into competitive sports. You may think these guys are crazy, but Amazon paid $1 Billion for Twitch. The video goes on (@ 19 min) to discuss their involvement with Y-Combinator which provided seed capital. Warning: around 13:45 there is discussion of mature content that some students may find inappropriate.
Contributed by Susana Velez-Castrillon

Scenario Planning Success?

In 1993, AT&T released a series of commercials offering their vision for the future. Their predictions were surprisingly on target (ebooks, turn-by-turn GPS directions, iPads, sending documents via mobile devices, video conferencing, electronic tollbooths, on-demand videos). Someone had a good handle on technology possibilities that would transform our world. And yet, AT&T was decidedly NOT the company to bring us this future: it was effectively gone within a decade. Colbert offers some explanation for how the AT&T brand collapsed and rose again after the disappearance of the old ma bell. Mike Leiblein points out that the company may have failed to make appropriate investments or been concerned about cannibalization of their existing products. This old case about internal disruptors from Bell Labs trying to shake things up at AT&T suggests that is true – the company ejected the “disruptors” and tried to suppress the heresy that the internet would change everything. Ironically, at the time these commercials were filmed, Rebecca Henderson was writing about organizational limitations that hinder incumbents from successfully pursuing radical innovation. These ads make a nice point about the limits of scenario planning. Even if a company has people who can see the future clearly, it may be unable to execute. Here are a few slides that Charlie Williams uses to make that point.

Contributed by Charlie Williams

Fail to Pivot: Battleship v. Lighthouse

Sometimes no matter how strong your resources are, you still can’t win. In those cases, it’s critical to avoid conflict so you can fight another day. This classic video depicts a battleship demanding that a rival change course to avoid collision. This might be useful for competitive dynamics (game theory), entrepreneurship (failure to pivot) or strategy process (cognition & stubbornness) where it may be critical to know when to change course. Guoli Chen, Crossland, & Luo’s recent SMJ article on CEO overconfidence is a nice academic complement to this. Of course there is a large literature on escalation of commitment that is also relevant.

Contributed by Russ Coff

Strategy on the High Road

The recent legalization of marijuana in Colorado and Washington State offer an unusual view of industry emergence. In anticipation of pent up demand, entrepreneurs scramble to assemble resources. Scarce resources get bid up — one example in Washington is licenses to grow and sell. The second video in the sequence below features an entrepreneur seeking to sell his business to cash in on the license he has. Markets for complementary products and services are booming as well (from tourism to private security and ways to store cash that cannot be deposited into federally regulated banks). Who will win out in the scramble to exploit the opportunity? The results so far in Colorado suggest that many in the state will benefit from the boom — $11M in taxes were raised in just the first 4 months of business. The setting is bound to get students’ attention and it is a nice context to examine entrepreneurship, resource scarcity, ethics, and industry structure (among other things).

Contributed by Russ Coff

Keeping Your Cool in Alliances

Quirky is a company that collects ideas on innovative products from it’s “community members.” It is governed somewhere between crowdsourcing and a holacracy (see the posts on Zappos and Valve). They have formed an alliance with the much more established and traditional, General Electric (GE). The two companies have very different strengths which can be the basis of complementarities that drive value creation in alliances. Together, they have produced Aros, a connected air conditioner that, for example, uses one’s Phone location to tell the system when to turn on and cool one’s house. This is a nice opportunity to apply the frameworks for achieving a network advantage (see Greve, Rowley, & Shipilov’s new book). For example, Shipilov describes the Alliance Radar framework which allows you to see if an alliance portfolio is balanced and identify what kinds of alliances will create the most value. Below is a video review of the resulting product. See also Henrich Greve’s blog post on the alliance for a discussion of how it has worked. While GE handled the product design, manufacturing and sales, the core idea came from Quirky.

Contributed by Aya Chacar

Beaten: An Alliance Out of Tune

Beats by Dre has a newly told story of an alliance partner that did most of the work but lost everything in the process. Monster, a father and son business (Noel and Kevin Lee) came up with the technology but was severely out negotiated by ts more experienced partner. A great cautionary tale for the study of alliances. I use the “Four C” alliance framework to teach alliances:

  • Complementarities. Monster had the engineering chops to design the path-breaking audio. Interscope and Dr. Dre had the marketing expertise and contacts to make them a fashion item. Clearly these complementary capabilities were strong.
  • Congruent goals. While they had a strong interest to cooperate, their interests diverged on the issue of who would own the intellectual property, brand, and on how the value would be split.
  • Compatibility of the Organizations. The larger and professionalized Interscope had a team of experienced lawyers. Kevin Lee had a BA in engineering. They could work together but not necessarily understand each other.
  • Change. Over the course of the alliance Interscope needed Monster less and less. Once the first products were designed and produced, they could hire other expertise to keep the products fresh (much of that was around fashion rather than new technology). This allowed Interscope to shut out Monster altogether.

Contributed by Russ Coff

Failure to Pivot: Stroke of bad luck?

Of course entrepreneurs need to anticipate when to pivot off of their initial plans (same applies to larger firms but it’s harder). This silly video drives home the need to pivot lest you run up against a wall. You might then follow up with some examples of first movers who had the business model almost right but failed to pivot (firms like MySpace, LinkedIn, AOL, Yahoo).

Contributed by Russ Coff

Graphene with a Kitchen Blender?

Can a simple “kitchen blender” method of making graphene shake up the electronics industry? The one-atom thick sheets of carbon may one day replace silicon wafers and revolutionize computing and electronics. For example, recent findings suggest that electricity can be generated by running salt water over graphene. Samsung may soon use graphene to make ultra thin hard cases for it’s phones. A fun thought experiment in class might be to develop scenarios for how this disruptive innovation might alter the dynamics of the industry (and adjacent industries).

Contributed by Russ Coff

Exercise: Seed of an Idea

Stanford’s Tina Seelig describes a classroom experiment (below) where students were given $5 of “seed” funding and 2 hours to make as much money as possible. The best teams made money by working outside of the stated constraints (e.g., ignoring the seed funding & timeframe). Understanding their human capital and unique resources was critical. This really simple exercise gets at the crux of entrepreneurial opportunity.

Contributed by Russ Coff

How to Build a Network Advantage

Network Advantage: How to Unlock Value from Your Alliances and Partnerships” is written for MBA, Masters of management, and Executive Education programs. It can be used in core strategy courses or electives on corporate strategy innovation, or strategic alliances. The book offers a step-by-step guide for how to build network advantages.

  • The impact of individual alliances, partnerships and their portfolios on the firms’ competitive advantage (Introduction, Chapters 1 & 2).
  • The role of complementarity and compatibility between partners for the formation of successful alliances and partnerships (Chapter 3)
  • Differential impact of the “hub and spoke” alliance portfolios and “integrated” portfolios on competitive advantage. These represent inter-organizational networks rich in structural holes and dense ties, respectively (Chapters 4 & 5).
  • The role of organizational status in competitive advantage (Chapters 6 & 7)
  • Should the firm build its own alliance portfolio or join another firm’s network (Chapter 8)
  • How to improve information flows inside the firm to attain competitive advantage from alliances and partnerships (Chapter 10).

Most chapters introduce tools for how to develop a collaboration strategy. These are compiled at the end of the book. A short introductory video is available on youtube:

Contributed by Andrew Shipilov

Google Graveyard: An optional story

Google has brought many products and ideas to market that have been unsuccessful and ultimately pulled back.GoogleGraveyard Forbes recently published an infographic that illustrates many of these. This is valuable to point out the uncertainty surrounding new products and services and how a real option portfolio might be an appropriate tool for making investment decisions. Ultimately, the process may look a bit like a venture capital portfolio. Given Google’s successes, we may forget their many ideas that have not worked well in the marketplace. There are a number of other resources here that help to focus on real options as a strategic tool.

Contributed by Russ Coff

Keystone Cops in a Detroit Robbery

Competitive advantage is not visible to all stakeholders at the same time. This is why entrepreneurs can have an advantage in negotiating with stakeholders who come late to the game. The bank robbery below illustrates how even a small advantage in awareness can change the game.

Contributed by Karl Wennberg

Schmidt on Disruptive Technologies

McKinsey has put together a video of Google’s Eric Schmidt discussing disruptive technologies. It is divided into four segments: 1) Biology goes digital, 2) Materials and manufacturing, 3) My computer my friend, and 4) Man vs. machine. They also have a transcript of his comments available.

Contributed by Russ Coff

Do We Need Managers? Valve doesn’t…

Valve Corporation is a game developer that has 400 employees, no bosses, and is very successful. How can you have a structure that flat? The company, a spawn from Microsoft, seems to be doing just fine thank you. The information at the following seven web links (including a podcast and the employee handbook) contain all of the raw material required for a live case:

I think you could probably just give these seven web links to students, say “discuss,” and get out of the way.

Contributed by Rich Makadok

Jay’s Coinflip: Innovation as luck

coinflipJay Barney describes a coin flip exercise to make the point that innovation might be modeled as an outcome of pure luck.  If so, how can firms manage such processes? The exercise is simple:

  • Distribute coins to the class and have them flip.
  • Those who flip “heads” remain standing, “tails” sit down (unless everyone gets a tail – then they remain standing)
  • Repeat until one person is standing & pass all coins to him/her

Discussion focuses on several key points (Russ Coff’s slides emphasize real options):

  • What capabilities/skills did the winner have? Make a big show of trying to find out how the winner did it (it’s all in the wrist, etc.). Often the winner will have flipped 5 in a row or more (a 3% probability?). People will laugh since they know it’s luck.
  • Is it possible that innovative companies are just lucky? We don’t see a lot of repeat innovators and, if it is luck, even these might be explained.
  • Selection bias is a problem if we try and draw conclusions by only looking at winners. In a population (like the class), the probability that someone will flip 5 in a row is rather high. We can only identify causality if we study the whole population.
  • If it is luck, how should one manage investment? This is a nice lead in for portfolios of strategic investments/real options or superior expectations/forecasting.

Contributed by Jay Barney

Groupon Follies: Get a Brazilian…

This Groupon Superbowl commercial is quite funny (even if it is in bad taste). However, the company has struggled and one year after its IPO the price was 81% below the initial price. A recent spike when a hedge fund took a toehold position only underscores the company’s troubles as investors hope for better management. Before the IPO, Groupon turned down a $6B offer from Google — something that Google should appreciate since the company is worth less than half that amount a year after the IPO. One reason for the bearish response is that the entry barriers are fairly low and the competition is significant (e.g., Living Social and even a new eBay venture along these lines). Why was this so hot anyway?

Contributed by Russ Coff

FBI Investigates Kickstarter as a Scam

This ONN report describes Kickstarter as a cyber crime scam. Of course, Kickstarter has some spectacular successes. However, this spoof does underscore some legitimacy issues that impede this business model and this may lead to a valuable discussion.

Contributed by Russ Coff