Tag Archives: Komisar

How Do You Teach High-Tech Entrepreneurship according to Randy Komisar

It’s the 4th time in a few days that I show the video below to people. It is rather old (dated 2004) and it is just great. A sentence I remember from the first day I watched it is the following: “I think there’s stuff you can’t possibly learn in school and I’m not even sure you can learn that on the job. There’s an entrepreneurial character. Some people have it and some people don’t. Some people may not think they have it, and they may have it. A lot of people they think they have it, and many don’t.” Here is the video and then the full transcript…

I think what can be taught, by and large, is a set of very basic skills about the various domains required for startup to succeed: finance, organizations, transactions, strategy, business models. You can get an exposure to that which can raise your entrepreneur IQ a hundred points. Because starting without that context, it could be awfully hard to understand what’s happening around you as you work in these environments let alone try to do it. I also think you can get exposure to the personality and character of entrepreneurship through the case study method in particular. You can begin to see the tortured lives that many entrepreneurs have to live in order to pursue their dreams. And you can get a sense of how that relates to your abilities to cope and to make tradeoffs in your life.

I think there’s stuff you can’t possibly learn in school and I’m not even sure you can learn that on the job. There’s an entrepreneurial character. Some people have it and some people don’t. Some people may not think they have it, and they may have it. A lot of people they think they have it, and many don’t. The entrepreneurial character is very, very comfortable with uncertainty and ambiguity. That entrepreneur character is very capable of understanding and targeting opportunities that others don’t see and is tenacious about their pursuit. At the same time, they remain permeable to know ideas and to course corrections from feedback from the market and from people who might have more experience or more insights than they’ve got. There’s a personality that works in this environment. And there’s a personality that I think is uncomfortable. And I try to explain this in particular in the classes that I teach. There is a badge of courage in being an entrepreneur. I mean, we sort of, you know, if you read the press and you read the local technology rags you know there is a real sense that entrepreneurs are a special super breed. They’re different. They create a lot of value. I love working with them.

But if you’re not an entrepreneur that’s OK too. There’s lots of other value to be created. There’s lots of other things to be “attacked” in the market place that maybe more appropriate. So I think you can learn a lot. And I think you can accelerate your ability to learn more by building a context. But I think ultimately you got to ask yourself a hard question. Am I suited for the uncertainties and ambiguities, the ups and downs, and the risks of being an entrepreneur, or am I not?

Getting to plan B (or to a Better Business Model)

It’s the second book I read from Randy Komisar (after the Monk and the Riddle) and I have to admit I preferred his first book even if Getting to Plan B is quite good too. I might have been slightly misled by the title even though the subtitle was quite clear, Breaking Through to a Better Business Model. But it might be I never read seriously subtitles. I thought the book was about what you do when you were wrong first. But it is more subtle. It is not so much about what happens if your idea was not good vs. what about finding a better or valid business model. If it says better, you plan A might have been good enough! The other reason I was not totally convinced comes from my feeling the case studies were chosen to illustrate a theory, a process, a framework, but did not prove it. I had the feeling the same case studies might have been used to illustrate opposite views, but again, who am I to say such things!

Mullins and Komisar’s book remains a very good book thanks to a rich variety of cases and lessons. In their preface, the authors say important things. “Entrepreneurship is not easy. [..] they are countless tales of companies that quickly went down in flames. Ultimately [many of them] failed because the economics of their business model didn’t work” [Page viii]. I was a little puzzled because I am not so sure; many companies failed because customers did not buy. But it might be the same! The authors claim “they developed a process and a framework to discover the best business model” [page ix]. Again I am puzzled, I am not sure this exists. But still, they certainly provide interesting tools.

One of the most interesting one is the use of analog and antilogs, that I had already mentioned when reviewing Ries’ Lean Start-up. Again 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”). Analogs are successful predecessors worth mimicking in some way whereas antilogs are predecessors (whether successful or not) in light of which one explicitely decides to do things differently [Page 14]. But when they claim Apple’s plan B was to transform itself from a struggling PC maker to a consumer electronics powerhouse [page 21] , I find the broadness of the plan B concept really too broad!

Then their methodical dashboard is about validating leaps of faith by testing hypotheses. And what is new compared to other important references such as Steve Blank’s customer development is the focus on the business model through 5 elements: revenue, gross margin, operating expenses, working capital and investments.

Business model element Relevant analogs and the numbers they give you Relevant antilogs Leaps of faith around which you will build your current dashboard Hypotheses that will prove or refute your leaps of faith
Revenue model
Gross margin model
Operating model
Working capital model
Investment model

Why plan A won’t work? The authors answer, page 3, by quoting Albert Page: “it takes 58 new product ideas to deliver a single successful new product”. And a few lines below, “figuring out what the customer wants is not easy.” PayPal worked on its plan G! Google’s plan C works. Plan A had no revenue model, plan B was licensing, plan C was advertising. (But remember Google was always a search engine. In terms of product, it was still plan A! That is why I said before I was misled by the title Getting to Plan B)

They begin chapter 1 with the following: “Mediocre success – finding a passable business but missing the real potential – is equally problematic. Arguably, it’s worse than missing the target completely because it will tie down your considerable talent in a venture with no real future. You and other entrepreneurs and innovators like you are the lifeblood of today’s economy. And to waste your talent on something mediocre would be a real shame.”

Now the book shows that success does not have only one way. The Silverglide case [pages 74-78] shows that an entrepreneur can succeed with $80k for friends and family money whereas I am not even sure how many hundreds of millions Jeff Bezos needed before reaching profitability for Amazon.com [pages 186-192]. Many case studies illustrate how to optimize each of the 5 business models elements [chapters 3-7], whereas chapter 8 shows that you will need to find a balanced solution trying to get the best of these 5 key financial objectives. Amazon.com needed to reach a very large size to make its automated process worthwhile but “great lessons are born from leaps of faith” [page 192].

I fully agree with their final chapter’s early sentence: “As you know by now, this is not a book about business planning. It’s about, in a sense, business discovering. Quoting Eisenhower, “plans are useless, but planning is indispensable” or McArthur: “No plan ever survives its first encounter with the enemy”. So again, the building blocks of the process are:
– an identified customer pain and a solution or an opportunity to offer delight,
– some relevant analogs and antilogs,
– which lead to some as-yet-untested leaps of faith,
– which lead to a set of hypotheses to test them,
– a dashboard to focus your attention on what’s most important right now and to provide some mid-course corrections,
– all comprehensively organized, in just the right sequence, to inform and create the five elements of your business model.

[page 208]

Does this mean you need a plan B right from the start? The answer [page 212] is nice: “There’s a temptation to think that, since plan A probably won’t work, you should have plan B in your hip pocket. Don’t do it. A contingency plan would probably be just as flawed.”

There is clearly in the eraly 21st century a new trend in that business plans may not be a sufficient tool, not to say even necessary. From Randy Komisar, through Eric Ries, to Steve Blank (including my recent account of Cohen’s Winning opportunities), the important element is the discovering process of your business, of your customers in an iterative and flexible manner. This is clearly an important lesson to remember.

The Monk and the Riddle: a great book

Do not ask me why this book is entitled The Monk and the Riddle as I will let you discover it if you decide to read this “old” book (a more than 10 year-old great piece of Silicon Valley description). Its subtitle is clear though: The Education of a Silicon Valley Entrepreneur.

Not all agree on the fact it is a great book as you may find at the end of this post, from the comment by the Red Herring in 2000. Still, I loved reading this book and let me explain why. Randy Komisar, today a partner at Kleiner Perkins and former enrtepreneur, has written a book about passion and inspiration. He does not tell you how to do your start-up (but he tells you how not to do it). He also explains also very well what Silicon Valley is, the locus of risk taking, where failure is tolerated, where a start-up is more a romantic act than a financial endeavour. “Business isn’t primarily a financial institution. It’s a creative institution. Like painting and sculpting.” [page 55] Here are a more few extracts I scanned from Google Books.

First Mr. Komisar explains that an entrepreneur is a flexible visionary and why the business plan does not have to be strictly followed (or should not always be) [page 37]:

Of course, venture capitalists look for such people [page 38]:

But there is a danger with VCs: the down round which is the consequence of failed momentum [page 52]:

Mr. Komisar gives much more than basic advice. Even if he admits he may not have followed these when he was younger, he understands now how important they are. His book his about the meaning of life where he defines the Deferred Life Plan (that should not be followed) [page 65]:

He therefore considers that personal risks are more important than business risks [page 154]:
Personal risks include:
– the risk of working with people you don’t respect,
– the risk of working for a company whose values are inconsistent with your own;
– the risk of compromising what’s important;
– the risk of doing something you don’t care about; and
– the risk of doing something that fails to express – or even contradicts –who you are.
And there is the most dangerous risk of all – the risk of spending your life not doing what you want on the bet you can buy yourself the freedom to do it later.

[… page 156…]
If your life were to end suddenly and unexpectedly tomorrow, would you be able to say you’ve been doing what you truly care about today?

He also explains why Hard Work is a critical and necessary value of Silicon Valley [page 125]:

But People and Culture remain the most important elements [page 128]:

Another interesting concept is the fact that start-ups need 3 CEOS [page 128]:

But nothing replaces Vision [page 144]:

When I wrote above that Silicon Valley is about tolerance to failure [page 150]:

Obviously it means even success should be mitigated [page 151]:

I really advise you to read this great book, not only for the Riddle but also for the nice, funny and sad story of Lenny and Allison. Enjoy!

Here is what the Red Herring published. The analysis is not wrong, but even 10 years later, I am not sure Silicon Valley is so well understood as the RH thought…