Reposted from the June 2014 Dean’s message in Innovations online. Also Congrats to Imprint Energy which just secured a $6M Series A round.
By Shankar Sastry, Dean, College of Engineering, UC Berkeley
Conventional wisdom has it that entrepreneurs are born that way. At Berkeley, however, we thrive on proving conventional wisdom wrong. After almost a decade of teaching entrepreneurship in Berkeley Engineering’s Center for Entrepreneurship and Technology (CET), Ikhlaq Sidhu, Ken Singer, our talented industry faculty and our hard-working staff have demonstrated that indeed, entrepreneurship can be learned, and that Berkeley can teach it.
Since it opened in 2005, CET has launched numerous student-created ventures and trained over 3,000 Berkeley undergraduates using a one-of-a-kind teaching model, the “Berkeley Method of Entrepreneurship.”
The Berkeley Method, co-developed by IEOR professor Ikhlaq Sidhu, CET’s chief scientist and founding director, and Ken Singer, CET’s managing director, uses games and exercises to develop an entrepreneurial mindset in students while offering the tactics and infrastructure to support the process of creating a new venture (see CET’s curriculum page).
Throughout, CET has offered an educational pathway for aspiring entrepreneurs and innovators. Along with the A. Richard Newton lecture series, CET offers innovative course models like “challenge labs” for mobile applications, big data, social entrepreneurship and other areas. We also offer the Venture Lab to incubate nascent projects, and the new SkyDeck accelerator for more polished firms that are launch-ready.
The 3-D printing startup Twindom, for example, began as a CET class project and then took form in Venture Lab and SkyDeck. Twindom generates lifelike ceramic figurines from photographs and has already attracted $400,000 from Tim Draper and other investors.
Other CET-launched firms include Mixbook, inDinero, Imprint Energy, CellAsic, AdsNative and Eko. Thousands of CET alumni have become integral members of the ecosystem of new ventures and innovation leadership in Silicon Valley and beyond.
What is next for technology entrepreneurship at Berkeley? In 2015, we celebrate the 10th anniversary of CET, as we grow CET to support ever more Berkeley students. IEOR department chair Phil Kaminsky will join the leadership team in the role of faculty director, helping to strengthen CET’s connection with its home department, IEOR. Working with Ikhlaq and Ken, Phil will also lead the development of a new minor in entrepreneurship and technology and strengthen ties with our new Jacobs Institute for Design Innovation.
We are really excited to see CET begin its second decade of nurturing entrepreneurs who share a globally aware, socially committed approach to technology innovation – as you would expect at Berkeley. If you would like to get involved, just let us know.
S. Shankar Sastry
Dean and Carlson Professor of Engineering
Director, Blum Center for Developing Economies Email Dean Sastry
You may already be aware that the Berkeley Method of Entrepreneurship (BMofE, see link on our CET website – https://cet.berkeley.edu/curriculum/) is a unique teaching model for developing the entrepreneurial mindset, in addition to teaching tactics and providing infrastructure for the new venture process. One of the big questions in the field of start-up education has always been whether entrepreneurs are simply “born” or whether entrepreneurial skills can be acquired. Our most recent findings give us reason to believe that these critical skills and behaviors can indeed be taught and learned.
We see support for this in the confluence of two major themes:
1) our own co-authored Comfort Zone research showing that entrepreneurs and innovators are comfortable (and continue to be increasingly so) with ambiguity and with experiences outside their comfort zone
2) empirical research studies on motivating success by Carol Dweck, a distinguished Stanford psychology professor. Her findings show that mental growth, learning, and resilience are linked to a specific mindset (growth mindset), which allows students to be comfortable working outside their comfort zones and accepting of new challenges.
Thanks to Rebecca Loeffler, Visiting Scholar with UC Berkeley’s CET and on loan from Germany’s prestigious Ludwig-Maximilians-Universität München (LMU), we are now bringing together concepts from social psychology (part of Rebecca’s academic focus) with our previous work training entrepreneurs.
So, let’s connect the dots. Prof. Carol Dweck’s work on mindsets is exciting for education, with most of the study being conducted originally in K-12 settings. What she discovered is that children typically develop one of two mindsets: a “fixed mindset” or a “growth mindset”. The fixed mindset characterizes students who believe that ability is a fixed trait. Often children become constrained in their learning by allegedly permanent “labels” such as being smart or not smart. People with a fixed mindset try very hard to hold their label of being smart by avoiding challenges or situations that might have others question their badge of credibility. They are mostly afraid to lose the label of “being smart” which they have already attained.
In contrast, individuals with the growth mindset believe that ability is the product of effort and can therefore be learned or trained. They believe that they can overcome challenges and develop new mental capabilities. Those who have a “growth mindset” are not afraid of being wrong. Instead they find reward in the experience of overcoming challenges. They continue to take on challenges outside of their comfort zones and they continue to grow.
As mentioned earlier, the amazing part is that this growth mindset can be learned. It comes down to reward mechanisms. For those who are rewarded by themselves or others for “being” smart or successful, it generally leads to less self-driven challenge, less growth, and a downfall in measured results. But for those who are rewarded for the process of “overcoming challenges or trying new strategies or for even effort” the result is a positive reinforcement for taking on harder tasks and a continued increase in capabilities and results (i.e. to get in to the growth mindset on your own, “don’t tell yourself your are brilliant, instead, be proud of the challenges that you have been able to overcome”)
In our most recent Comfort Zone research work, originally developed by Prof. Paris de l’Etraz at the IE Business School, we observed that among the segments of entrepreneurs/innovators, managers, and engineers, it is the entrepreneur segment that is the most tolerant of ambiguity and the most comfortable to take on challenges outside of his/her own comfort zone. Moreover, it turns out that people in each segment would like to increase their comfort with ambiguity believing that they would actually be happier professionally and personally, however, only entrepreneurs/innovators actually continue to grow in this manner. Every other segment regresses slightly after their high school years, while entrepreneurs and innovators markedly increase their comfort with ambiguity.
There are several major results (or at least hypothesis) that could be concluded from this:
A growth mindset allows a person to be comfortable with ambiguity and therefore creates the seminal condition from which entrepreneurship and innovation skills and mindset can be formed.
Developing a growth mindset is essential to become a successful entrepreneur. Successful entrepreneurs are likely to reflect a growth mindset.
A growth mindset can be fostered through certain kinds of feedback and rewards.
Since reward structure has a direct effect on mindset, it’s likely that corporate environment or social environment plays a significant role in creating and incentivizing entrepreneurs and innovators.
Ultimately, we can teach people in ways that will bring out their intrinsic innovation and entrepreneurial potential.
I’m on my way back from Shanghai after being invited to work with a group of Chinese executives on their product innovation and intrapreneurship strategies, using aspects of my newly developed model for professional/executive education. It’s really an exciting model, that I used with Coca-Cola on their beverage strategy in China, with Tencent, a leading retailer with hundreds of stores, GM, World Health products, and other multi-nationals seeking global innovation.
Photo: Coca-Cola and World Health Products executive discussing strategy options for China in Shanghai with simultaneous translation. December 16, 2013.
While many institutions and programs I’ve worked with excel at providing executive education programs with a clear impact, these are more the exception than the rule. For many, I’d say that the time has come for a change. Historically, executive education has focused on succession planning. The formula was that you take experienced, trusted managers and then have them spend some time being polished by academic experts. And that has become a big business: Business Schools today make about 40% of their revenue from Executive Education. That model needs to be refreshed, if it is to effectively solve the problem of innovating in a global environment.
First, most Executive Programs have mixed reviews in terms of quality. It turns out that half of professors actually score below 3.5/5. In other words not all program professors are “best in class”.
Second, case method and other generic materials are often not relevant. They provide very few targeted insights for the executives. Picking useful cases requires significant industry experience-based judgment and they must be supplemented with additional insights. Many of these programs simply do not have ways to address the actual context, strategy, and threats that their firm’s executives are facing.
Third, and this is a pretty important one, these programs are not accountable. There is no mechanism to follow up to see what came from the experience. Sometimes the courses can be “interesting” or “fun”, but in the next week, its business as usual.
And my best reason to believe that it’s time for a change is that most of these programs are focused on research results of the past. Firms live in the present and plan for the future. In fact, the pace of innovation has been accelerating significantly in the last 100 years and its not slowing down. The current issue for most firms, as pointed out by banking innovator Carlos Beldarrain, is that, the minimum pace of innovation to simply survive, is also accelerating. The time is right to find a model that works even better.
Here is the challenge I offer to those interested in evolving what is generally today’s state of the art for executive education:
We need to actually focus on the goals of the firms. This means that successful programs will build in the time and methods for the faculty to actually know the company and its people at a deeper level.
There has to be a mix of academic and industry experts. For year’s at Berkeley, we have been bringing Silicon Valley know how into our teaching program though entrepreneurs, investors, innovators, and executives. Choosing the right faculty is also critical because they need to have the breadth of how to teach executives as well as a relevancy on current industry issues.
The firm’s executive champions have to be directly involved. I’ve always been known as an innovator. But with experience I’ve learned, no matter how capable you are at innovation, you can’t innovate within an organization without “permission” from the organization to actually create the innovation. For this reason, its critical that the executive sponsors participate to “offer the permission” for the participants to innovate, and to let them know that its safe to do so. By the way, “some people” are going to innovate anyway, as Steve Jobs said, you can’t stop them and you can’t ignore them either.
It’s really about the project, not the lecture or the case. Yes, there are essential materials to cover, but the project has to be a real problem of the firm. Barriers such as confidentiality or NDAs cannot be excuses to work on fake projects.
Projects need to be holistic. A company’s project cannot be only about design or only about strategy or only about branding. No, you need complete alignment on the project, because the result has to be financial success and impact or maybe learning and failure. Isolated skill development is not an executive level challenge.
And finally, we need to have accountability of the result. What happened after one quarter, one year, or longer. You can’t teach it if you have not lived it in some way, and you also are not qualified to offer your certification if your institution does not have skin in the game, just like your students.
For institutions and programs who can evolve and incorporate these aspects, I respectfully suggest that it will result in a big step forward for both education and innovation.
By now it’s well known that Target Corporation (Target) “knew a teen girl was pregnant before her father did”. Not only was the story told many times over in the New York Times, but it also became one of the lead examples illustrating the intrinsic value of “big data”. A bit creepy, yes, but basically Target uses a pregnancy prediction score inferred from past purchases to develop a pregnancy-likelihood and confidence interval on every woman who shops at Target. They use this score to target baby product ads at the right time and to the right people.
If you are a retailer or other business you might think this implies that you could mine all kinds of seemingly unimportant data to increase profits or save costs, if only you had the right “big data” hardware and software technology. But there is a bit more to this story. All the data and analytics tools are not going to do you much good unless you also have sound judgment and employ the leadership lessons articulated below.
Today’s data analytics technology is becoming increasingly powerful. It’s as if we previously had the equivalent of a glider and now we have a jet powered fighter plane. Without a skilled pilot, the new technology is more dangerous than it is helpful. If we take a closer look at the Target example, we can see the leadership skills required to make use of these more powerful tools.
Lesson 1: It’s critical to have a revenue-driven or risk management-driven business case.
To start with, in Target’s case there is a well researched business thesis: based on studies from the 1980s, we know that people mindlessly buy everyday items by habit and are almost completely immune to advertising or coupons that attempt to get them to switch to other products. But there is one big exception – a life changing event like getting married, moving to a new city, or having a child. Without this powerful business insight, the pregnancy prediction score and ad targeting would be pretty useless.
Lesson 2: You need modeling, simulation skills, and creative measures.
Second, a model must be developed using samples or estimation. This also requires human insight and creativity. In Target’s case, they used the baby registry as the sample space from which a model could be developed and then used to analyze larger data sets.
Lesson 3: Understand the concept of Value of Information.
Third, is the concept called the Value of Perfect Information popularized in Douglas Hubbard’s book, How to Measure Anything. The idea, which we will slightly adapt here, is that you can estimate the maximum that you could expect to save or expect to gain with a given decision by assuming you had perfect information. By comparing the perfect information to the expected result (given that you have no new information), you can figure out how much it’s worth to be more accurate. In Target’s case, they could figure out how much more value could be captured by more accurately modeling a Pregnancy Prediction Score (i.e. from 80% confidence to 90% confidence interval). This concept allowed Target to estimate whether it’s worth the expense to get better data and a better model.
Lesson 4: Yes, you still need the tools.
Lesson 5: The process must however lead to decisions.
Lesson 6: It’s a continuous process, not a one-time event.
With this background and context, data can be collected and analyzed and used to determine who to target with coupons. And with this information, there is a new state of business results and the cycle of business justification and data collection starts over.
Measurement and Learning Models
Lesson 7: Big data leadership requires judgment for ethical considerations and privacy.
The risks? After some time, people start to feel as if they are being observed a little too closely. To counter this, Target then began interlacing baby product coupons to pregnant women with coupons for lawn mowers and other random items to avoid the perception that they are spying on their customers. Even then, this case may be immersed in privacy, ethics, and regulatory issues.
If Target crosses the line about what information they collect and how they use it, they run risk of a public backlash. If by chance they violate a regulation, they may suffer legal action and even damage the brand itself.
The central point is that leadership skills for big data require a great deal more than technology and statistics. In fact, to manage it effectively, requires a holistic understanding of the business case, modeling techniques, value of information, decision-based action, and ethical judgment. The enabling technology is great, but it’s just the first step.
I’ve just returned from Madrid, teaching in the final week of our inaugural Global Engineering Leadership Program. This program extends the content I designed for the Silicon Valley Professional Program, with an Asian and European perspective on technology firm leadership.
While the program covers a variety of new and interesting topics, including Positive Psychology, What Does it Take to Innovate Within a Large Firm?, and New Management Issues with Big Data, the most surprising discussion theme related to the implications of a person’s comfort or tolerance for ambiguity. Tolerance for ambiguity is often correlated to innovation and entrepreneurship. But how do you measure it? Is your professional comfort zone different than your personal comfort zone? If you are more comfortable with ambiguity, will you be less stressed, more effective in your career, or even happier as an individual?
Take a minute to measure your own ambiguity tolerance by answering a few questions in this link, http://bit.ly/18qerkF. Assess your comfort level with ambiguity, and help support our research in this area. Research results will be posted to this website.
Our Madrid discussions started by reviewing the research in “Quant Mentality” by Prof. Paris de l’Etraz, with whom I am collaborating to further his work. Prof. de I’Etraz originally defined a “Comfort Zone Scale” (illustrated below) to self-assess a person’s comfort with increasing levels of personal and professional ambiguity.
The scale is simple to use and intuitive to understand. On the left of the drawing is Certainty and on the right is Uncertainty. The levels P1 to P4 refer to your personal life. P1 means you hate uncertainty in your personal life, while P4 means that you are very comfortable with uncertainty in your personal life. Similarly, W1 means you hate uncertainty in your professional life, while W4 means that you are very comfortable with uncertainty in your professional life.
If you are P2/W4, for example, it means that in your personal life you are a bit careful and dislike uncertainty while in your professional life you are willing to go to Alaska to try to sell ice to Eskimos!
Think about this …what are you? This is effectively the size of the mental box that holds you back from experimenting and testing new ideas. When evaluating your own comfort zone size, here are some quick guidelines:
The scale is designed to find out if you “can be comfortable” having progressively less certainty about what will happen as a result of your decision.
The scale should reflect your “ability to be comfortable” not the ability to withstand discomfort. So if you are in an environment which causes you to take repeated risks that you are not comfortable with, then you are not higher on the P1-4 or W1-4 scale.
I consider myself a P2/W3, while Prof. de l’Etraz says he is a P1/W4. We suspect that a measure of your comfort level and tolerance for ambiguity while making critical decisions may be seminal to innovation, entrepreneurship, and engineering leadership overall. Moreover, people seem to change levels throughout their lives. It’s also likely that this psychological characteristic could be changed with training, for those who want it. So go ahead, use the link http://bit.ly/18qerkF to let us know where you are on the scale. It’s been a big topic in Madrid!
If you want to understand how to build a culture and organization for truly “high performance teams”, then take a close look at “Netflix Culture: Freedom & Responsibility” developed at Neflix by Patty McCord and posted by CEO Reed Hastings on Slideshare. Facebook’s Sheryl Sandberg has called it “the most important document ever to come out of the Valley.”
You pretty much need to go through the slide set to absorb it. However, a key idea is that this type of organizational culture is not like a family. Instead, its much more like a professional sports team. Professionals are paid at top rates. The goal is to hire stars for every position. The rationale is that each high performer can deliver 10X in performance. And unlike a family, they don’t mind when its time for a player to leave. The culture also does not provide career planning. The best long-term security is to have a have a great reputation of having accomplished great things and the skills to match.
Of course high performance teams are flat (non-hierarchical) and they typically value innovators, conflict (required to seek out the best of ideas), and clear, direct communication. Other concepts for high performance teams are:
Results-oriented. Hard work is actually irrelevant, only the results matter. The firm won’t measure anyone’s time in the office or even vacation days. In fact, there is not even an expense policy. The guidance is to simply use common sense to do what is right for the organization.
Low Process/High Flexibility. High performers thrive on freedom. However, as firms grow, they use processes to combat the complexity from scaling. This has a tendency to cripple innovation and drive out high performers. The proposal made in this slide set is to grow by hiring only truly high performing people and to avoid adding process and new rules. This leaves the organization flexible so that it can adapt to the inevitable changes yet to come.
Context-focused not delegation-focused. There is some highly relevant advice for managers as well. As we know, high performers thrive on freedom, so consider this concept from Antoine De Saint-Exupery, “If you want to build a ship, don’t drum up the people to gather wood, divide the work, and give orders. Instead teach them to yearn for the vast and endless sea.” According to McCord, “The best managers figure out great outcomes by setting the appropriate context, rather than trying to control people.” Don’t set top-down decisions, don’t use management approvals, and don’t defer to committees. And planning and process should never be valued over result. “When one of your people does something dumb, don’t blame them. Instead: Ask yourself what context you failed to set.” And, “when you are tempted to control, ask yourself what context you could set instead.”
The document explains the behaviors that a high performance culture expects. According to its author, high performance culture is not for everyone. And for that matter, it’s not for every organization.
Questions to consider:
How would you know whether a “high performance culture” is right for your organization’s mission?
Could this be established in pockets of the organization or does it need to be driven top-down and implemented everywhere?
What are the drawbacks or downsides to high performance team culture?
Innovation and Entrepreneurial Policy – Asia Perspective
Last month, I hosted our Global Engineering Leadership (GEL) module in Hong Kong, which offered a fascinating perspective on innovation and entrepreneurial policies across Asia, in particular East Asia’s main economies of Korea, Japan and China. One of Asia’s main business differences relates to the intertwining of family- owned and state-owned business. And as most people know, cultural aspects such as the concept of “saving face” and “making decisions as a group” are fundamental characteristics. Having said this, Korea, Japan and China have very different and uniquely designed industrial policies.
South Korea Perspective:
This is an amazing success story. The county rebuilt from almost zero after the Korean War, which ended in 1953. Under the leadership of Park Chung-hee (1961-1979) the Korean economy experienced immense growth, mainly from family-controlled small and medium enterprises, known as chaebols. Park encouraged their success with favorable tax incentives and put in place an economic policy that has been carried forward for 40+ years. Many of these small Korean enterprises grew to become today’s global multinationals including Samsung, LG, Hyundai, and POSCO. As explained by Professor Wonjoon Kim of KAIST (Korean Advanced Institute of Science and Technology), the government’s long-term policy has been a key driver of economic success.
Government regulations literally forced markets to focus externally. Korea’s current leader, and the country’s first female president, Park Guen-hye (Park Chung-hee’s daughter) appears interested in continuing this focus. She began her term in February 2013 and has been quite open about plans for promoting technology and entrepreneurship. She has proposed using tax incentives, alternative methods for raising technology capital and has held fact-finding meetings with US entrepreneurs such Bill Gates (Microsoft Founder), Larry Page of Google and most recently Mark Zuckerberg of Facebook.
Meanwhile, the owner-driven Korean growth strategy has been a combination of fast-follower for product design and innovation and leader in process, materials, and manufacturing. Mass import of global talent has also played a key role.
What’s next for Korea? According to Professor Kim, heavy investments in capital emerging intensive businesses such as biotech.
Japan rebuilt its industry after WWII with market-friendly policies and twenty-five years ago, was where Korea is now. More recently, Japan has suffered from a lack of sustained leadership with an adverse impact on its economic growth agenda. Today, there is a lot of optimism around proposed economic policies of current Japanese Prime Minister Shinzo Abe. His LDP recently increased their power base, winning additional seats. “Polls showed Sunday’s win was largely over the economic policy dubbed “Abenomics” that Mr. Abe has engineered since taking power last December and due to a surge of optimism among voters for a recovery of Japan’s economy, which has struggled for two decades and has lost competitiveness against rivals such as China.”.
Economic policies may not be enough in Japan, as it faces a maturing population, the effects of zero population growth and very little immigration. There is a literally shortage of a young, risk-taking workforce. While the current government policy supports entrepreneurship as a way forward, anecdotes of government incubators are not reassuring. It seems executives, close to retirement with no past entrepreneurial experience, often run them. So their primary objective is to simply not let anything “blow-up” before the retirement.
According to serial entrepreneur and GEL instructor, Jeff Char, Japan is also a potential economic time bomb that would make Greece seem insignificant. He states that “in 2012, Japan’s debt service was 23% of GDP, with interest rates at 1%, and Japan’s gross public debt is projected to hit 230% of GDP by 2014. If [yields] rise from 1% to just 2-3%, Japan’s debt service will literally explode. And likely, a vicious cycle of higher yields, bigger fiscal deficits, and inflation will occur.” Modest interest rate increases could simply break the country’s financial model.
What’s next for Japan? There have been a number of high profile entrepreneurial successes, such as the Line messaging mobile application, globally popular with 180M users, and developed in response the telecom outages from the last Tsunami. However, available investment dollars for new ventures continue to be low, risk aversion is high, immigration policy is unfavorable, and a number of social barriers still exist. Japan could apparently benefit from policy intervention. “Abenomics” and sustained leadership may provide the needed boost.
China policy, in contrast is very much driven by a need to serve its 1.3B people and the number two global economy. The scale of the country and the solutions are incredible. Over 5M people in China graduate college every year, which is as many people as there are in Chicago or Hong Kong proper. The Chinese government feels the pressure of serving its growing population. China must create 5M jobs every year just to support newly graduated students every year. The consequence of not creating at least 5M jobs annually is a very unhappy population. This is why the target growth rate needs to be 8%.
The second main driver of economic development policy is the large population in the west of China that has not yet benefitted from China’s industrialization. Accordingly, the party based government is currently organized into two main subgroups: one for the growth needs of eastern China and the other for the industrialization of western China. As explained by Prof Jian Gao of Tsinghua, China’s economics tell two stories. On one hand, China’s GDP is over $7T which is approx ½ of the US economy (i.e. wealth creation and very large scale), and on the other hand a per capita GDP of only $6,000 (i.e. large numbers of people without sufficient means).
Due to growth needs, pains, and challenges, China policy is fueling entrepreneurship at a massive scale and with intense competition. According to James Tan, GEL speaker and Managing Partner of QuestVC, Beijing’s Zhongguancun area next to Tsinghua, is the home of 4,000 start- ups. Throughout China, there are 10 LinkedIn competitors and large numbers of Groupon comparables. Creating jobs is the number one goal from the government’s perspective.
What’s next for China? Policy considerations in China are different from Korea and Japan. Since there is a large young population, immigration is not a bottleneck issue. Degrees of openness to culture infusion are as yet hard to measure. The good news is that there is very large domestic market and it will be an increasing focus of China policy.
From an innovation policy perspective, there are some fairly common levers that can be used to guide the system, whether direct or indirect. These levers include access to capital, skills development, tax credits/incentives, economic policy, immigration policy, enterprise governance controls, and even the effects of democracy on policy. It is interesting to see how in each of the Asia cases, the policies have been selected to match the specific needs of each local situation.
 ” Growth Not Missile Threat Tops Park’s South Korea Agenda,” Bloomberg Markets Magazine, 20 May 2013.
 “Vote Empowers Abe to Pursue Vision for Japan,” Japan News, The Wall Street Journal, 21 July, 2013.
No matter how much value comes from the design quality of a company’s products or services, the fact is that “products don’t sell themselves”. Knowing how to build a sales and marketing campaign is as critical for engineering leaders to understand, as knowing how to build the right product or service for the right market.
Paul Nerger, veteran sales guru, industry fellow and Applied Innovation Institute Chairman, regularly shares his sales and marketing expertise in our engineering leadership programs. Paul suggests that a sales campaign should be designed with a few particular aspects in mind. The key is to start backwards or at the end, with the customer, and understanding the “buying” behavior. For example, if your goal is to sell 10 units of product for $100K each ($1M in product revenue), you have to work backwards to understand each of the buying steps that need to happen. That list of steps might include a) showing interest in the product, b) watching a video, c) speaking to a sales person, d) deciding to buy, e) going through legal, and f) delivering a signed Purchase Order.
For each of these “buying” steps, there is a corresponding marketing or sales activity. To continue the example, “a marketing advertisement” might be used to generate the “interest for the product”, and a follow-up e-mail may result in “watching the product marketing video”, which may result in a “sales contact call” and so on.
In the video clip below, Paul describes the design and modeling of a campaign. Although the model is only an initial hypothesis of the sales process, it’s incredibly valuable because it provides an estimated sales cycle (time to sell the product to a new customer), the cost of sales (i.e. how much will it cost you to sell $1M of product), and what can be done to improve the efficiency and effectiveness of the sales process. The model can be continuously improved, as you accumulate more information on the likelihood of proceeding from one step of the sales campaign, to the next.
As you examine the model and process, you will see that a greater degree of sales and marketing integration is a possible outcome of developing the model. You can also see that a wider funnel with more leads is more expensive and less effective than a narrower funnel of more qualified leads. Follow the model described by Paul and do this exercise:
a) For a product or service that you are selling, develop a model for the campaign to sell a target number of initial units.
b) How many people do you have to reach initially, to achieve your target?
c) What is your anticipated cost of sales and your anticipated sales cycle?
d) Where can you get the data to increase model accuracy?
e) From the model, can you identify what marketing activities are required, what sales activities are required, how many marketing and sales people you will need and how the marketing and sales people should coordinate with each other?
Over the past 10 years, Internet ad revenue has grown by 7X, from approximately $1.5B to now $10B annually. A major driver of this growth is a “behind the scenes” network of cookie collection companies, data exchanges, and data analytics that lead to customer data collection and highly targeted digital advertising – in short, Big Data.
And while the Internet economy has grown, the views of Internet privacy have also started to change. The view in the late ‘90s was simply, “you have no privacy, get over it”. However, over the past 10 years, we have seen an increasing number of law suits and regulations that limit the ability of Internet firms to collect and use customer data. Apple has been sued for iPhone tracking, Facebook was ruled “deceptive”, and Google was recently fined $22M for privacy violations.
These are all the early signals of what could be the SOX regulations yet to come for Internet. And it could be both a limitation on the growth of the Internet economy as well as a new opportunity for those new firms that will be able to guarantee compliance with upcoming privacy regulations.
This new trend is the subject of one of our latest white papers, authored by Anil Dagar, Yasuhiro Endo, Abhay Gupta, Yan Li, Kuldip Pabla , and Sridhar Ramaswamy from our Engineering Leadership Professional Program at UC Berkeley. The greatest sentiment for the privacy protection trend is in Europe. Examples being considered by the European Union policy makers include 1) requiring people to give permission before being tracked, 2) provisions to fix data collection errors, and 3) offering the “right to be forgotten”.
For now, regulators are on the fence. Most consumers prefer privacy options, but at the same time, policy makers are aware that such changes will likely pose a challenge to the Internet economy as well as the real economy. And where there is a challenge, there is also an opportunity. See [link] to read the full report.
As engineers and engineering leaders, we often forget the important role of “storytelling” in our work. Usually, this takes the form of a myopic focus on our technology capabilities or markets served. What we forget is that it won’t matter unless the concept is meaningful to people. And stories are the medium that humans understand best.
Simple example: every internal company pitch and every venture pitch is actually a story. As noted by my colleague Ken Singer, Managing Director for Berkeley’s Center for Entrepreneurship and Technology, pitches generally have a protagonist (the user), a villain (the pain they suffer), a setting (competitive landscape) and a resolution (your solution). Facts are fine, but telling the story communicates your idea better and builds the brand.
In this article, I’d like you to think about stories at two levels: 1) the story that you tell to communicate your project and 2) the story that a company tells to build its brand.
Learning Lesson 1:
Read “Storytelling Tips from Salesforce’s Marc Benioff” Story-telling-Benioff-Salesforce by Carmine Gallo. Salesforce has been famous for building a software company around its “no software” story (since it is a service) and vilifying some giant software companies in the process. We use this example in our Engineering Leadership Program, as first introduced to our program by Prof. Burghardt Tenderich, Annenberg School for Communication & Journalism at the University of Southern California. Here is a key excerpt:
“Tell classic stories. Most reporters don’t care about a tiny startup, and that’s why Benioff never positioned himself as such. He told a classic David-vs.-Goliath story. “We gave the media something different. We gave them something new. We always positioned ourselves as revolutionaries. We went after the largest competitor in the industry or the industry itself. We made our story about change. We were about something new and different that was good for customers, and good for the community. We talked about the future” says Benioff. Although the media landscape is changing, Benioff believes there will always be a need for content. The delivery model might be changing, but exchanging and sharing stories and information remains as important as ever.”
Learning Lesson 2:
Then watch this clip (above) introduced to me by my colleague Prof. Tom Byers at Stanford. He presented it in a program we taught (and publicly available at STVP’s E-corner). The clip shows Jack Dorsey (a founder at Twitter and Square) describing his process for getting ideas out of his head, onto paper, and eventually into public communications of the company.
After reading the Gallo article and watching the clip, consider the following questions:
How could you improve the story of what you would like to develop next?
How should the story evolve once you show others?
How do you achieve consistency in the story across others in the firm?