(gcf2007) ict as a driver of innovation and entrepreneurship

1© 2006 Massachusetts Institute of TechnologyCorporate Venturing

Kenneth P. Morse, Senior Lecturerand Managing Director

MIT Entrepreneurship Center

One Amherst Street, Room E40-196 Cambridge, MA 02142-1352 USA

phone: +1-617-253-8653 fax: +1-617-253-8633

e-mail: [email protected] http://entrepreneurship.mit.edu

1st Global Competitiveness Forum

ICT as a Driver of Innovation and Entrepreneurship (and vice versa)

Outline of a Discussion Riyadh, 08 November 2006


Desired Outcomes of this Meeting

1. Begin a productive, and hopefully stimulating, dialogue about what it takes to create a vibrant, dynamic climate for entrepreneurship in the Kingdom.

2. Discuss ICT’s key role as a driver of innovation, entrepreneurship, and high growth tech startups.

3. Discuss the key relationships and roles to be played by governments, established businesses, and high tech startups in creating a culture of entrepreneurship and steadily improving productivity. Example – be a lead customer.


Desired Outcomes of this Meeting

4. Appreciate that increased speed of decision making is a fundamental underpinning to acquiring leading edge technologies and improving productivity.

5. Provide an opportunity for tough questions, followed by serious networking. Examples: Transparency…? IP protection…?

6. Consider how we might cooperate in this important endeavor in the years ahead.


Technology Rate of Adoption (1/2)

10010090908080707060605050404030302020101011 110110

ElectricityElectricity(1873)(1873) TelephoneTelephone

(1876)(1876)

AutomobileAutomobile(1886)(1886)

TelevisionTelevision(1926)(1926)

RadioRadio(1905)(1905)

VCRVCR(1952)(1952)

MicrowaveMicrowave(1953)(1953)

Cell PhoneCell Phone(1983) (1983)

PCPC(1975) (1975)

Source: Rich Kaplan, Microsoft

InternetInternet(1975)(1975)

9090

8080

7070

6060

5050

4040

3030

2020

1010

00

100100

Percen

tage o

f Ow

nersh

ipP

ercentag

e of O

wn

ership

Number of Years Since InventionNumber of Years Since Invention


Technology Rate of Adoption (2/2) Leading countries in the world have steadily improved their

ability to embrace and deploy new technologies. As shown in the previous graph, the number of years it took for

the following technologies to reach 25% of U.S. households :

Automobile = 56 years

Electricity = 45 years

Telephone = 36 years

Microwave = 31 years

Television = 26 years

Internet = 23 years

Cell phone = 14 years


Late-Comer StartupsWhen an industry’s growth slows, and the shakeout begins furiously, do new startups still have a chance?

Main Search Engines• Yahoo• Altavista• Excite• AOL Search• Ask Jeeves• Direct Hit• Lycos• MSN Search• Netscape Search

• Google (late comer, but…)

PC Manufacturers• Acer• Apple• Compaq• Digital• Gateway• IBM• Packard Bell• Toshiba

• Dell – late comer, with new business model:

• Build to order;• Inventory = -1 day.


Innovation and Entrepreneurship at MIT

"The ideas that drive the economy and improve our quality of life are increasingly emerging from inventive, interdisciplinary collaborations - across different fields and with other institutions in the public and private sectors.This spirit of openness, invention and teamwork are hallmarks of MIT and, I believe, are the keys to our future. MIT's intense creativity, passion, intensity and playfulness drive everything here--the entrepreneurial ideas, the innovations, the discoveries.”

MIT President Susan Hockfield

May 2005Photo by Donna Coveney/MIT


Examples of what CAN be taught (1)

Teamwork creates value and success: Lone wolves build perpetually small companies.

Appreciation and mutual respect for different types of people guarantees better company performance: Excellent sales people are essential

(not lower life forms).

Customers are the reason for your company’s existence. They need to feel they have a relationship before they will buy from you.


Examples of what CAN be taught (2) Business Basics: CFIMITYM

Profit vs. cash flow Risk is higher when you’re growing fast

Failure is Acceptable in North America No such thing as winners and losers More like: winners and learnersThis positive attitude is a U.S. national asset; other

societies and cultures may be different.

Is it OK to fail in the Kingdom?


The MIT EDPMIT Entrepreneurship Development Program

29 January – 2 February 2007

Participants learn from: “Live case studies” of successful MIT entrepreneurs; Our faculty and the MIT entrepreneurial spirit; and Route 128 venture capitalists, lawyers, and institutional investors.

In 1999, 25 participants came from Taiwan, Ireland, Cambridge (UK), Germany, Thailand, France, & US.

In 2000, 65+ persons came from 10+ countries. In 2001, 95+ persons came from 16+ countries. In 2002, 70 persons from 13 countries. In 2003, 93 persons from 9 countries. In 2004, 140 persons from 16 countries In 2005, 109 persons from 19 countries + storm of the decade In 2006, 137 persons from 20 countries

A one-week program tailored to the needs of future entrepreneurs, economic development professionals, and university entrepreneurship faculty and staff.


Traditional vs. Entrepreneurial Career Paths

High School

University

Big Company

Retire

High School

University

Practical Experience

Management Training

Well Managed, High Growth Firm

Startup Venture

Another Startup?

Venture Capital or Angel Investor

Never really retire


Some Critical Success Factors in Entrepreneurship and Intrapreneurship

1. Believe that New Ventures can Succeed: Parent(s) who are entrepreneurs. Early contact with successful entrepreneurs. Exposure to success stories and case studies.

2. Gain practical, real world experience before, during and after university studies.

3. Be willing to be Unusual/Unconventional.

4. Agree to Embrace Risk, and possibly failure.

5. Want to leave a large Company.

6. Live in a society that sees the above as normal, not a strange exception.

7. Focus on speed, execution, and results. Be willing to “break the harmony.”


Building Your New Company

Need an “A” Team – “3K” experience Serious Technology – sustainable advantage

Solve an important, valuable problem… For clients who have money … Who want to pay well… With a short sales cycle… And will buy more, soon …

YOUR VALUE PROPOSITION MUST BE COMPELLING, QUANTIFIABLE, PROVEABLE, REFERENCEABLE, AND EASILY EXPLAINABLE…


Selecting Your Financial Partners

Seek True Value Added – “Blue” Money Operating Experience Rolodex/Network Awesome Portfolio (in your space) Cool Limiteds (in your space) Deep pockets / courage to stay the course

Keep Realistic Expectations Time to Market Revenue growth Valuations


New Ways of Thinking (1/2) To create a positive climate for innovation

and change requires sustained top level commitment, openness about past mistakes, and focus on looking only forward.

Outside pressure helps: De-regulation/WTO Benchmarking Transparency Financial disclosure Corporate governance Global competition

New thinking: we’re on a burning platform…


New Ways of Thinking (2/2) Entrepreneurial, but not anarchy. Invite in outsiders (entrepreneurs):

Expose employees to new thinking. Accelerate employee learning. Benchmark internal projects.

Advantages of single large investor: Patient Money Deep Pockets Market Knowledge Market Presence / Distribution

Must have commitment of CEO, CTO, CFO.


Walking Before Running Siemens, Eastman, and other large, established

firms created highly successful new venture groups. Both invested first in 6-20 excellent VC funds as a

way to learn the new venture creation business, and to benchmark their own culture and speed of decision making.

Speed: both firms benefited from “outside pressure” to change their business processes and move faster.


Corporate Venturing Consortium

Share Knowledge. Identify Best Practices. Build Institutional Processes. Attract Best People. Create Training Courses. Communicate Consistent and Coherent

Messages to Top Management.


Members of theCorporate Venturing Consortium include:

ARAMCO

BASF

Biogen Idec

Boeing

Danfoss

Eastman Chemical

Hewlett-Packard

IHI

INTEL

Motorola

Novozymes

Qualcomm

UPM-Kymmene

Time Warner

others…


Latest Trends in Corporate Venturing (1/3)

1. Enlightened Firms view CV as a vehicle to drive Innovation and improve Productivity.

2. Some firms remain committed to CV for decades; others stop after 3-4 years, and then restart after a few years of hiatus.

3. Committed firms are allocating significantly more capital for venture investing:

spin outs spin ins other

4. There is great potential in the Kingdom to create significant synergies between large existing firms and new frisky startups.



5. In some cases, major firms have “outsourced” a significant portion of their new product development function to local startups and the venture industry:

* more leading-edge technology * faster development cycles* more aggressive people, with….* more intense customer focus.

6. New Organizational Models are being adopted:* “Star”: actualize, empower* “Engineering”: loyal to project and team

(not necessarily to the company)* “Commitment”: flat, long life, paternalistic* “Bureaucracy”: meritocracy, systems* “Autocracy”: do it my way



7. Recruit, Support, and Celebrate “Weird” people who are results-oriented, relish change, and have very fast clock speeds.

8. Throughout the CV process there is renewed passion and focus on delivering significant value to customers, from the CEO on down.

9. To deliver significant customer value, the ROI proposition must be quantified, validated, and referenceable.

10. To be most effective, and to increase the speed of decision making, excellent elevator pitches are needed.


Discussion and Next Steps Sustained improvement in national productivity depends on

many factors.

Embracing and deploying new technologies is key.

Startup companies consistently embrace the latest technologies and innovations more rapidly.

Startups are usually necessary and most effective at driving productivity improvements in their clients’ businesses.

Through corporate venturing activities, large established firms can work more closely with startups. If they move faster, and begin to behave more like startups they will achieve great leaps in productivity for themselves, and their customers.

(gcf2007) ict as a driver of innovation and entrepreneurship

Technology

technology

corporate

technology

decision making

move faster

2006 massachusetts

desired outcomes

latest trends