Amar Bhide Interview on Startups

[via Abhay Bhagat] Inc (Feb 2000) has an interview with Amar Bhide, author of “The Origin and Evolution of New Businesses”, a book which I’ve just started reading (and would recommend to anyone wanting to be an entrepreneur). Excerpts:

Most successful entrepreneurs start without a proprietary idea, without exceptional training and qualifications, and without significant amounts of capital. And they start their businesses in uncertain market niches.

Most are started by someone who is working for another business, who sees a small niche opportunity — one in which the company he or she is working for is already taking advantage of, or one in which a supplier or customer is involved. And the person jumps in with very little preparation and analysis but with direct firsthand knowledge of the profitability of that opportunity — and pretty much does what somebody else is already doing, but does it better and faster. These entrepreneurs don’t have anything that differentiates their business from other businesses in terms of technology or in terms of a concept. They just work harder, hustle for customers, and know that the opportunity may not last for more than six or eight months. But they expect to make a reasonable return on those six to eight months. And along the way they’ll figure out something else that will keep the business going.

I think we have to distinguish between risk taking and a tolerance for ambiguity. Going to Las Vegas and taking a bet on a roulette wheel requires a lot of risk taking, in the sense you must be prepared to lose what you put up. But a tolerance for ambiguity, which is a characteristic of successful start-up entrepreneurs, is a willingness to jump into things when it’s hard to even imagine what the possible set of outcomes will be. It means going ahead in the absence of information and in the absence of having much capital and in the absence of having a novel idea. In fact, just by looking at the amount of capital that people put on the table, you can see that those entrepreneurs don’t have a lot of financial risk, and because most of them are young, their opportunity costs are not that great.

Most founders of promising companies do not start out as innovators or risk bearers.

Selling PCs – with Lessons from Home Depot

WSJ writes about how Microsoft and HP are “heading to retail outlets to overcome a big impediment to sales: ignorance.”

While Home Depot Inc. has been giving do-it-yourselfers classes in everything from lighting and tiling to home decorating for years, the computer giants decided to set up their own “experience centers” in selected retail chains nationwide, hoping to change the technology-retailing experience and boost sales of their complicated products.

“We actually looked at Home Depot and how they engage consumers in the process,” says Bill DeLacy, vice president of U.S. consumer sales at H-P. “With those types of classes on improvement, the key is giving customers confidence, and that’s now what we need to do with technology products.”

The marketing move came about, in part, because Microsoft and H-P could see that the strategy of relying on ever-lower prices to sell new technology was no longer effective. Industry growth was slowing in a mature market where most Americans already have personal computers in their homes.

The new marketing approach utilizes 15-by-15-foot hands-on displays containing products organized by different scenarios, such as digital imaging, digital music, home office and wireless networking.

“Create,” the photo exhibit, shows shoppers how to transform an HP Media Center PC into a digital-photography center with the help of Microsoft software. “Perform,” the home-office scenario, describes how to stay connected to work when not at the office using products including H-P’s Pavilion notebook PC and Microsoft software. “Connect” details how to set up a home wireless network, and “Play” demonstrates how to transform compact discs into digital music, both using products from the two companies.

The staff, which holds classes about every half hour, is trained in acting and public speaking, as well as technology, and is encouraged to connect with customers at an emotional level, showing them ways the products can help meet real needs in their lives.

“If you can show people how to use the products and make it easy enough so when they get home they can replicate what they saw in the store, they will want to purchase,” says Darrell West, director of business and retail strategy for Microsoft’s Home and Retail division.

“It’s part of a broader trend that has been going on for the past few years,” says Will Ander, a senior partner at the retail-consulting firm McMillan Doolittle in Chicago. “An increasing number of companies are exploring solving problems — we call it ‘solutions retailing.’ The transaction side is bigger because you can sell the package, you can sell the accessories — the things that add value to the consumer that they didn’t know they needed.”

America Tech Might

Business Week asks if the US advantage in technology is slipping.

For half a century, America has reigned supreme in technology. U.S. research institutions have been the best on the planet, and the U.S. capital-formation machine has turned their discoveries into one breakthrough after another in transistors, communications gear, computers, and just about every other key high-tech field.

Now, life at the top suddenly seems a lot less lonely. In fact, although the U.S. is still the undisputed champ in technology overall, in a handful of key areas it already appears to be falling significantly behind foreign competitors.

Never before have so many countries in the world sought to emulate the U.S. system of innovation. As more brilliant researchers steer clear of the U.S. and more and startups appear in emerging economies, a worldwide technology race is taking shape. And it promises to be a marathon.

US companies need to accept that the locus of innovation is moving – perhaps towards Asia. In this context, it may be a good idea for some of the engineering talent to come and spend a few years in Asia working at Indian and Chinese companies to understand the new markets. Think of this as a reverse brain-drain — just like Indians migrate(d) to the US in search of opportunities in the past quarter-century.

IT for Small US Businesses

Business Week recommends two products for small businesses – Microsoft’s Small Business Server and EmergeCore’s IT in a Box.

Windows SBS offers corporate-style computing for little companies. It’s based on the Windows Server 2003 operating system plus high-end add-ons such as Exchange Server for e-mail and group scheduling and SharePoint for collaborative use of Microsoft Word and other Office applications. The software is a remarkable bargain: $599 for five users, compared with $999 for Server 2003 Standard Edition alone. Hardware to run it on will typically cost $1,500 or less.

EmergeCore’s IT in a Box is a simpler solution for small companies that prefer to do it themselves. The $1,395 IT-100 is a compact box not much bigger than a cable modem. It provides standard Internet e-mail that is simple but lacks the collaborative features of Exchange, plus file-sharing, network management, a firewall, and built-in wireless access. You can even run a public Web site on it, though it’s a better idea to pay a hosting company for that service, given security concerns.

The IT-100 runs on Linux, but the operating system is completely hidden from users and administrators. All interaction is through a Web browser, and normal maintenance, such as adding and deleting users, is easy. Initial setup is more difficult, so most small businesses could use some help.

SBS is a good product for a small business that wants corporate-style computing and can pay the price. IT in a Box is a solid choice for a company with enough tech smarts to handle the setup and administration, since outside help may be hard to find.

Both products are still too expensive in the Indian context.

Indian Newspapers

After my return from the round-the-world trip, I browsed through 2 weeks of newspapers: Indian Express, Times of India, Economic Times, Business Standard and Financial Express. And wasn’t I disappointed. The mediocre reporting and lack of depth hit me hard, especially in contrast to reading the international papers daily (Wall Street Journal, New York Times and Financial Times) as I travelled. Of course, I read the WSJ, IHT and FT daily on a regular basis, so I should not have been that surprised. But, as I spent a couple hours scanning through the Indian papers, I realised that we are still far behind in our quality of coverage. Our two leading newspapers, ToI and ET, have dumbed down to attract a more youthful readership to an extent that needs to be seen to be believed. The others, presumbaly because of lack of ad revenue, have better (more serious) editorial coverage but still lack a wider perspective that the rader of today needs.

I could not help but think that if we can get a group of top-notch journalists in India to start a weblog with serious, deep thinking articles, it could definitely attract an influential readership. The question is: will it be self-sustaining financially. Nevertheless, Indian print media (at least the English ones) could do with a lot of improvement. For starters, they could at least do away with the flimsy headlines.

TECH TALK: As India Develops: Information Access

Information abounds around us, but if it is not available at the right time to support decision-making, then its value is limited. The Internet helped bring ease the distribution of information globally. In India, too, we have benefited significantly over the past decade. But a lot more needs to be done to take the benefits of information access to larger numbers across India. The need is to leapfrog from the request-reply (1-way) web to the publish-subscribe (2-way web).

Before we look at how we can build the next-generation information platform and reach out across urban and rural India, let us take a look at how the Internet has had an impact in China, so much so that Chinese will make up the largest user base by 2006. Wrote Business Week in a recent cover story in its Asian edition:

The expanding audience has set off a building spurt in recent months reminiscent of Silicon Valley in the late 1990s. Local businesses such as Kingsoft are moving onto the Net, staking a claim to the rich opportunities ahead. Foreign Web companies, including Yahoo! Inc. and eBay Inc., are making acquisitions to expand their operations in the country. And entrepreneurs from around the world are opening shop on China’s Net. They range from Peggy Yu, a 38-year-old MBA from New York University who runs what she hopes will be the Amazon.com Inc. of China, to Li Ka-shing, the Hong Kong billionaire whose Internet portal, Tom Online Inc., expects to raise as much as $200 million in an initial public offering scheduled for this month.

Investors are just as gung ho about the market. Sina Corp., the largest Net portal in China, has seen its shares surge eightfold over the past year, to $45. After the strong IPO of travel site Ctrip.com in December, numerous companies, like Tom Online, are lining up to sell stock to a hungry public. One of the hottest prospects? Shanda Networking Development Co., a Shanghai online gambling outfit that is expected to raise as much as $200 million in an IPO scheduled for later this year. Even venture capitalists are getting bolder. In February, business-to-business auction site Alibaba.com landed $82 million from Fidelity Investments, Softbank, and other venture players — the largest VC investment in a Chinese dot-com ever.

Yet, China is playing catch-up in many Net markets. E-commerce, for example, has been slow to develop in China because so few people have credit cards and the postal service isn’t reliable. But Peggy Yu is starting to make progress with Dangdang.com, a distinctly Chinese version of Amazon. Dangdang began letting would-be buyers pay with money orders and even old-fashioned cash on delivery. To get packages to customers, Dangdang hired a fleet of delivery boys who zip around China’s biggest cities on bicycles. Yu says more than 2 million customers have bought books, CDs, and DVDs from Dangdang, with an average order of about $10. “We have figured out the basics,” she says.

So have business-to-business Net companies. At Alibaba, CEO Ma had to win over manufacturers worried about fraud when doing business with strangers over the Net. To help customers get up the Internet learning curve, Alibaba sends representatives to the factory floors of each new manufacturer to explain how the site works. Ma says more than 1 million companies have signed up to be listed on Alibaba’s import-export site. What attracted the record-breaking VC investment is Alibaba’s potential: Companies from around the world can request bids from Chinese manufacturers for thousands of products from cookware to washing machines. Purchasers don’t need a representative in China to buy directly from the manufacturers that often have the lowest costs in the world.

Indian Internet portals have stagnated over the years partly due to a lack of investment in the space, and also because the slow growth is the user base limited the advertising money that the portals could count upon as revenues. The Chinese portals were helped by the boom in mobile phones and online gaming. Neither of this has not yet happened in India. And yet, the need for useful information exists. In the absence of centralised portals creating the information, can we create a distributed, emergent platform to pool together what we all know?

Tomorrow: Information Access (continued)

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