As the vitriolic debate on healthcare reform dominates the news, healthcare industry leaders continue to focus on several issues: innovation to drive growth and promote cost efficiencies; new offerings to generate higher value for each healthcare dollar invested; and the emergence of attractive new global markets and technologies. They recognize that continued economic weakness and new sets of competitive and regulatory pressures create a more challenging environment to drive business growth. At the same time, they see tremendous opportunities to develop cost-effective products and services that can dramatically improve patient care on a global basis.

At Columbia Business School’s 6th Annual Healthcare Conference held on November 6, nearly 500 students, alumni and other professionals heard more than 35 speakers and experts discuss these issues. The attendees benefited from panels on an array of healthcare topics including biopharmaceuticals, medical devices and diagnostics, healthcare services and information technology, venture capital/private equity, mergers and acquisitions and emerging markets. The day concluded with a networking reception and career fair where attendees met with the event’s 20 corporate sponsors.

Fred Hassan, chairman and CEO of Schering-Plough, gave the opening address. Despite economic, competitive and regulatory pressures facing the pharmaceutical industry, he was confident that new therapies and vaccines would be developed to address large areas of unmet needs, most notably Alzheimer’s disease, which represents a devastating social and economic threat to society.

Following his remarks, three concurrent panels took place in the morning. They focused on information technology solutions, growth strategies of Big Pharma and small-cap biotechnology companies, venture capital and private equity investment strategies in healthcare, and the impact of proposed healthcare reform initiatives on payors and providers.

Mike Barber, vice president and head of Healthymagination for GE, reviewed GE’s new $6 billion global commitment to develop new technologies and services to reduce costs, improve quality and expand access for millions of people around the world. Among other objectives, this initiative will accelerate healthcare information technology, support consumer-driven healthcare, create new wellness and healthy worksite programs and facilitate access to cost-effective healthcare in rural and underserved areas.

Three concurrent afternoon panels covered healthcare mergers and aquisitions, medical devices and diagnostics, and challenges and opportunities for healthcare companies in the emerging markets. Alex Gorsky, worldwide chairman for medical devices and diagnostics at Johnson & Johnson, discussed emerging opportunities to develop new therapies to extend and improve a patient’s quality of life, as well as new cost-effective and less invasive medical devices and procedures. He also commented on the changes underway in global healthcare companies and how employees need to expand their skills and experiences, such as seeking new functional roles and positions in new geographic regions to broaden their understanding of different healthcare systems and customers.

Photo courtesy of the Healthcare Conference

Last Thursday, Warren Buffett, MS ’51, and Bill Gates visited Columbia Business School. During the event, Gates identified energy — including renewable sources, like solar — healthcare and IT as the three sectors he sees as having the most opportunity for transformative growth in the foreseeable future. Buffett highlighted the high energy-efficiency and low environmental impact of rail transport as one of the key drivers of Berkshire Hathaway’s recently announced purchase of Burlington Northern Santa Fe Railroad. More MBAs than ever are looking for career opportunities in developing and investing in renewable energy. Where can they be found?

This past weekend, 50 Columbia Business School students were among the 2,400 attendees at the 2009 Net Impact conference at Cornell University. Net Impact is an organization for MBA students who share an interest in using business to make an environmental or social impact. Among the many panelists were leading investors in clean energy from Blackstone, Kleiner Perkins, JPMorgan Chase and Sequoia who spoke about what technologies and business models they believe have the greatest growth potential.

The investors focused on technologies that could, in the long run, be competitive without any subsidies or government support. To this end, they identified specific niches within energy-efficiency and waste-to-energy, as well as solar power.

Solar energy is viewed as an area with tremendous growth potential, with the U.S. market projected to grow 20-fold by 2020. Traditionally, solar energy has been extremely expensive and reliant on erratic government subsidies; however innovative leasing models, falling silicon prices and technological breakthroughs have reduced costs dramatically. Continued cost reductions along with carbon prices could make solar cost competitive with coal and natural gas.

Within solar energy, there are many technologies, and each has its own value proposition. Photovoltaic panels can be installed on rooftops for residential, commercial and industrial applications, or standalone, for us in utility-scale plants. Thin-film PV technology is very low cost but less efficient, making it the optimal solution for sites with plenty of space. Concentrating Solar Power (CSP) plants use mirrors to concentrate sunlight, which generates steam that spins a turbine to allow a much larger scale operation. All these technologies also have their downside — distributed PV generation does not permit economies of scale. Desert sites like those in the Southwest are most attractive for CSP, but CSP also requires a lot of water for cooling, as well as a challenging permitting and transmission environment.

In addition to solar, there is tremendous growth in wind, geothermal, combined heat and power, waste-to-energy and efficient energy. Nuclear energy is also slated for resurgent popularity. Repowering the world will provide tremendous opportunities for MBAs to generate value as investors, developers and operators of clean energy companies. Famed VC investor Vinod Khosla has invested in dozens of clean energy startups in the belief that the space will generate many $10 billion+ companies.

Photo credit: greenlagirl

Last week, Craig Newmark, the founder of Craigslist, spoke with Columbia Business School students about his experience as an entrepreneur and in social enterprise. He recalled the moment he realized that he wasn’t cut out for management early in the firm’s history (today he calls himself a customer service representative) and selected Jim Buckmaster to run the company as CEO in 2001. “The decision made me wince because I had to relegate control,” Newmark said. “But it worked. You need to know when to get out of the way and stop talking.”

So how does a start-up founder know when to get out of the way? We asked Brendan Burns, adjunct associate professor in the entrepreneurship program and who teaches the course Launching New Ventures, for his insight. This is what he told us:

In general, company founders fall into two simple categories: (a) first-time founders, and (b) repeat or “serial” entrepreneurs. In both cases founders tend to be special individuals whose idea(s) are spawned from a unique customer insight (often from a sales background), technical innovation (technology background) or a perception of a future opportunity (futurist/evangelist type). Company founders are not usually people who excel in process, building of an administrative infrastructure, compliance with various regulations, etc. That is not to say they are cavalier about it, it is just not at the top of their mind or specifically germane to building a company.

Since companies typically grow in phases, or between inflection points that call for different levels of infrastructure, a lack of process refinement usually helps, not hurts, in the earlier stages. Creativity, flexibility and openness are crucial to success in these stages. As you add more people (employees and partnerships), customers and the overall number of transactions, process and discipline become hugely important parts of “scalable growth.”

For every company, reaching that inflection point where things start to fall through the cracks is a true test of long-term viability. The exact metrics are different for every company, but the ability to anticipate these issues, add professional management to negotiate them and put ego aside in the pursuit of supporting the right outcome determines success or failure.

Not surprisingly, first-time founders fail more often than serial entrepreneurs at navigating these growth pains. Serial entrepreneurs more often have the self awareness to step aside or recruit executives with complementary strengths to support scale. Also, serial entrepreneurs more often go out and attract advisers who help hold them accountable to making these changes.

Photo credit: JD Lasica

Should we really be encouraging students to start businesses early in their careers?

I must admit that while my instinct has always told me yes, there have been moments when I wondered if I was right. While our success rate is similar to that of the venture capital industry as a whole, not all of the students we have encouraged to found businesses have been successful.

So in the spring of 2006, some colleagues of mine and I decided to collect some data. We wanted to learn about the entrepreneurial careers of Columbia Business School graduates so that we could know how to serve them better during their time as students.

After analyzing the survey results, we found that the answer to the question of when best to start your own business is not straightforward.

For our survey respondents, starting a first business two to five years after completion of business school led to the creation of the most successful businesses in terms of revenue. However, starting earlier than that was strongly correlated with starting multiple ventures — which was an even more important predictor of success.

The thousands of unique stories that lie beneath these results, all reveal that learning by experience is hard but unavoidable. We’ve found that students learn best when they are working on real projects, and that combining academic and practical experience while in business school can minimize the pain and maximize the gain of entrepreneurial endeavors. We seek to combine the best of academic and practical experience.

Becoming an entrepreneur is a very personal decision, and the right time to start a business is when it’s right for you. On average, 90 percent of the entrepreneurs we surveyed felt it was a good professional decision to start their business when they did; only 10 percent regretted their decision.

But regardless of what the timing may be, there is ultimately nothing more satisfying than running your own company and being master of your own destiny.

Next Week: What to Consider When Starting a Business

About half way through my MBA I began to realize that I was not only learning new skills, but also a new way of thinking. The change in perspective was a bit unexpected. I knew I would learn analytic skills, leadership and marketing techniques at Columbia Business School, but I did not anticipate evaluating opportunities differently or gaining insight into why some business prosper while others fail. That perspective would have served me well in a number of situations. It is something I should have and could have learned in high school or even earlier.

About a year ago I decided to use this summer to try and teach kids about how to be entrepreneurial in business, in life and in their academic careers. A friend of mine runs a NGO in Mexico called PEACE Mexico. The organization hosts summer camps for children and she agreed to let me offer a program focused on entrepreneurship to middle school and high school kids. We opened the camp to public school kids in some of the smaller towns surrounding Puerto Vallarta.

At first, it was a bit of a hard sell — when you are 14 spending your summer learning how to run a business is not the most exciting proposition. But we created a fun and interactive curriculum that teaches entrepreneurship through English language classes, art workshops, games and outdoor activities. We hired most of our camp counselors locally and we also have six volunteer English teachers from the U.S., including Lauren Wall ’09.

On the first day of camp the students heard from a roundtable of local business people who spoke about their experiences as entrepreneurs. The business people spoke about the hard work, challenges and failures they have experienced as entrepreneurs in addition to talking about all the great parts of owning a business. One of the guest entrepreneurs distributes ice cream to local restaurants. Each flavor of ice cream is packaged in the skin of the fruit that it comes from (coconut, orange, etc.). The campers loved hearing about that business because ice cream is always a popular topic, but also because the business idea was launched almost a decade ago in a similar student business plan competition. The ice cream is now sold throughout all of Mexico.

	In addition to learning about entrepreneurship we also did all the things you are supposed to do at summer camp — go to the beach, play soccer, have water balloon fights. Both campers and counselors have had a great time.

We are now wrapping up the fourth and final week of camp. Our 60 campers have learned about famous entrepreneurs, considered their career plans and thought about how they can make a difference in their communities. They have also learned the four Ps of marketing (product, price, place and promotion) and discussed operating and financing businesses. Each group has created a plan for a business that they would like to launch and they will be pitching their ideas in a business fair to local entrepreneurs in hopes of finding funding.

Our students have come up with a range of business ideas. All are easy to start and appropriate for young entrepreneurs to run. One group of kids will take photos in their communities and use those photos to hold photo exhibits and to make calendars. With the money they collect from the calendars they will make improvements to their school (a new science lab is the first project they hope to fund). A second group is going to start a dance school and will teach dances to kids in their community for quincenas (a Mexican tradition much like a debutante ball or Sweet Sixteen celebration). A third group plans to open an after school program for primary school children where they will offer help with homework and extra curricular activities.

All of the business ideas are unique. And like all ideas, some will succeed and others will fail. However, our hope is that the lessons learned can be applied later in life when the students are faced with supporting themselves and their families. For many of the students who are attending the summer camp, life’s prospects are challenging. They come from low-income families and the chances are high that many will not complete high school. Even for those who do make it through high school and college, salaries can still be very low. In Mexico, business ownership is often the key to achieving a solid middle-class lifestyle.

Although I won’t have three months off next year to run the summer camp, the groundwork has been laid. The camp is self-sustainable and the curriculum can be reused. This year we charged kids 10 pesos a day to attend (about $0.80 USD). But not to worry, I haven’t given away all the secrets of business school — some of the kids can probably still benefit from getting an MBA later in life.

Melissa Floca ’09 received the 2009 Nathan Gantcher Prize for Social Enterprise.

Photos courtesy of Melissa Floca ’09

The key challenge that healthcare enterprise leaders face is determining how to drive innovation while addressing problems of affordability, inefficiency and gaps in quality. This task is now complicated by strong economic headwinds that limit the resources available to attack these problems. Industry executives are also dealing with new sets of competitive and regulatory pressures on their efforts to drive business growth.

At Columbia Business School’s 5th Annual Healthcare Conference held in New York City on November 21, over 500 students, alumni and other professionals heard more than 40 speakers and panelists discuss these issues.

The featured healthcare leaders said they are embracing change to develop creative solutions to the industry’s growing problems and to provide attractive investment opportunities on a global basis. A career strategies panel of executive and corporate recruiters also presented their views on the skills and talents necessary for healthcare professionals to succeed in this dynamic environment. This was followed by a concluding career fair and networking reception with the conference’s 17 corporate sponsors.

Ed Ludwig ’75, chairman and CEO of BD (Becton, Dickinson), gave the opening keynote address. Ludwig said that a successful global healthcare company must use technology, scale, global reach and operational excellence to offer value-added products. These products should reduce costs, enhance the quality of patient care and generate sustainable earnings growth.

Following his remarks, four concurrent panels took place in the morning session on the topics of pharma and biotech, medical devices, diagnostics and payor/provider issues.

The pharma and biotech panel discussed the trend among companies to narrow their therapeutic priorities, focus on biologics, pursue licensing and target acquisitions and seek enhanced productivity and cost savings. Numerous early-stage biotechnology companies are turning to larger pharma and biotechnology firms to survive as they are unable to secure capital from the public market. Global medical device companies are seeking to introduce innovative and cost-effective products in a challenging regulatory and pricing/reimbursement environment and pursuing acquisitions and new markets to meet growth objectives. The consensus of the payor/ provider panel was that any healthcare reform in 2009 would likely be incremental due largely to economic and political headwinds, and that a key focus would be on information technology and expanding access to those without insurance coverage.

Robert Essner, former Chairman and CEO of Wyeth Pharmaceuticals and now executive-in-residence at Columbia Business School, provided the lunchtime keynote speech. He suggested that although the pharma industry faces significant challenges, the combination of new drugs, biologics and vaccines in key areas of unmet need (e.g. Alzheimer’s, cancer, congestive heart failure) and the massive influx of informed baby boomers, who are demanding health solutions, provides favorable long-term growth prospects for innovative global pharmaceutical companies.

Three afternoon panels covered M&A, life science investments and emerging markets. It is anticipated that healthcare M&A will remain active across all sectors and that consolidation among Big Pharma companies appears inevitable. Early-stage life science companies and investors face a capital squeeze, which is threatening the viability of existing companies with lower levels of funds available for new investment. Emerging markets are an increasing focus for global pharmaceutical and medical device companies that are seeking new markets for their products.

The final panel of the day focused on the changing talent acquisition and development strategies of major healthcare enterprises. Panelists commented that successful leaders will need to have global and cross-functional experiences; that employees should be open to lateral moves that broaden their skills and experiences; and that healthcare companies considering new hires are seeking a broader “toolkit” of skills that reach beyond the traditional focus on healthcare backgrounds.

For more information about the conference and sponsors visit www.cbshealthcareconference.com.

Columbia Business School’s Social Enterprise Program is poised to reach a milestone this fall when Professor Ray Fisman begins as faculty director, succeeding Ray Horton who stepped down as director of the program in the spring.

In the new issue of Hermes, the cover story tracks the development of the program under Horton’s guidance over the past 25 years. He attributes the proliferation of student interest in social enterprise to corporate scandals and a changing attitude toward the value of contributing to society. Last March, speaking at a social enterprise conference hosted by the Korea Development Institute and Columbia Business School, he elaborated on the meaning, scope and potential of social enterprise. (Complete video of his presentation above.)

Broadly defined, the field of social enterprise is the application of business skills and methods to social problems, Horton said. That can take place in many forms, from socially responsible investing and corporate responsibility to nonprofit management and social entrepreneurship. Horton says that one of the biggest challenges entrepreneurs in the social sector face is how to sustain growth.

	How does an entrepreneurial organization approach the challenge of scalability? Please leave a comment.

“The factor more than any other that clouds the potential of social entrepreneurs is the difficulty of bringing the organizations they found to scale, to sustainable scale,” he said. “The inability to attract sufficient resources converts many would-be social entrepreneurs into salaried employees of larger organizations...Fortunately, there are new developments and new institutions and new ways of using the market that will bring financial and human resources.”

NOTE: In a school-wide effort to conserve materials and reduce costs, Hermes magazine will no longer be mailed to alumni unless they confirm they would like to continue receiving it. If you are an alumni of the School, please log in and confirm your preference.

Cover photo credit: Simon Harvey

	McHugh was recently featured on MSNBC’s “Your Business” (watch the video).

Emily McHugh ’99 is the CEO and co-founder of Casauri, a manufacturer of designer laptop cases and accessories. This post is re-published from McHugh’s Casauri blog.

When I applied to Columbia Business School I was not exactly sure what I was going to do once I received my MBA. My hope was that I would “figure” it all out in business school and ultimately end up with a job that was better than the one I had before business school. Business school gives one the opportunity to be exposed to various opportunities from a unique vantage point. It is like being offered a smörgasbord of career paths from which to choose. However, in order to choose, it is important to ask yourself whether you are able to muster the passion necessary to be truly happy and fulfilled in a particular career. Being passionate means that you love something so much that you are willing to suffer and endure whatever it takes to be successful.

I came to the realization of my passion during the last semester of business school when I took an entrepreneurship course. It was in that class that I finally “figured” out what I was going to do with my MBA — go into business for myself. After all, I would be able to put everything I ever learned into practice and become a true-blue businessperson.

Having an MBA is not a prerequisite to becoming an entrepreneur, neither does having an MBA guarantee or improve your chances for success. However, the MBA teaches key business principles. The MBA helps to remove some of the uncertainty in the business landscape by teaching the vocabulary and components of business.

The entrepreneur can expect that having an MBA will: 1) add credibility to a potentially incredible endeavor, 2) develop confidence to overcome the impossible, and 3) build stamina and endurance to persist in the face of uncertainty. Having an MBA will not: 1) make starting a business easy, 2) save the entrepreneur from struggles and hardships, and 3) teach you everything you need to know about starting and running a business.

It is probably safe to say that with or without an MBA, most entrepreneurs have to start their businesses from scratch without the benefit of a defined and predictable path. Most entrepreneurial skills have to be learned on the job or during the course of the entrepreneurial journey. Moreover, despite the commonalities that entrepreneurs share, each entrepreneur’s experience is unique and highly dependent on the type of business venture being pursued.

The two most valuable lessons I learned in business school that helped to prepare me for entrepreneurship were valuation and negotiation. One does not become an expert in these areas just by taking a class, however, one becomes aware of the tools needed to be effective in assessing value (valuation) and persuading someone to give you what you want (negotiation). Ultimately, communication unifies the above two skills. Being able to express or “sell” yourself expedites entrepreneurial success, since most of your time is spent trying to convince people to believe in you.

	What has been the most valuable lesson from business school in your experience? Please leave a comment.

In business school, valuation is mainly taught from a financial perspective in terms of valuing companies or pricing securities. However, valuation principles are applicable to any situation where determining worth is in question. Since most of the decisions entrepreneurs make involve applying limited resources to limitless needs, being able to intelligently allocate resources is essential. As entrepreneurs, we have to constantly determine value — of products, employees, customers, and services. This skill requires extensive practice, since it is not an exact science.

Negotiation is another nebulous area, as it involves many independent factors to be effective. Negotiation is the ultimate team sport. It is like a dance where you try to avoid stepping on the other person’s toes. To negotiate requires research and as thorough an understanding of the given situation as possible. We negotiate at every level of our lives, starting from infancy to adulthood. Entrepreneurship requires endless negotiation, the ability to overcome obstacles, inspire others to action, and risk losing what you actually may want to obtain.

The MBA provides the tools that improve one’s ability to valuate and negotiate. Beyond these skills, the MBA provides access to an incredible network of contacts that can help propel your business forward. It is a personal choice whether the business school experience will be appropriate for each entrepreneur. I would not recommend to someone contemplating entrepreneurship to wait, go to business school, and then start a business as a fixed formula. However, I would recommend seizing opportunities as they present themselves. In my case, I am very glad the opportunities included an MBA.

This post is part of a series following the “CBS World Tour” organized by Shoaf and incoming MBA students.

This week marks the beginning of the second annual CBS World Tour where nearly 150 admitted students from the class of 2011 will be meeting up in 40 countries around the world. Along their journey, students will be adventuring through jungles, hiking volcanoes, and visiting with senior executives and officials who can share a unique perspective of their countries and industries. Alumni chapters around the world are hosting informal gatherings and helping to arrange company visits. Most impressively, the tour is being organized by admitted students (who haven’t even begun the program yet). In each of the 40 locations on the itinerary, a local admit is hosting a group of five to 20 students in their home countries.

Initially, the World Tour was designed exclusively for admitted students, but this year we extended the invitation to the graduating class of 2009 as a way to build a bridge between incoming and outgoing students. The idea is to foster relationship between the newest alumni and the new students that will be courting each other during on campus recruiting this fall. (Read blog posts from last year’s tour.)

The itinerary is broken into six four-week itineraries and includes a number of exciting locations such as Galapagos, Iran and Cambodia. The most popular trips this year (based on demand) seem to be Eastern Europe, South America and China.

Over the next 10 weeks, the 2011 Travel Team Captains will be posting blogs to share some of their experiences and lessons learned from the road. Stay tuned and visit the World Tour’s web site to learn more about the tour. For questions, please contact jshoaf10 *at* gsb.columbia.edu.

Alumni Clubs from across the globe will host events on or around Thursday, June 11, 2009 to recognize and celebrate Columbia Business School’s global alumni network during the third annual Worldwide Alumni Club Event. Click here to learn more about the events.

“Suddenly every investment banker wants to be an entrepreneur,” says Tom Bowen Wright ’09, founder of Neighborhood Hero. “Finding great talent is much easier right now.” The downside? “Raising capital in this market is really tough,” he adds.

Regardless of the economy, there are evergreen challenges for young companies. “All your policies and procedures have to be developed from scratch, and that can be an extremely time-consuming part of the start-up process,” says Jennifer Wright ’09. Costs can add up if you’re not careful. “Running up legal bills is actually very easy,” says Robert Liebesman ’09.

This weekend a group of start-up companies started by Columbia University graduates, including this year’s four Lang Fund Board investment picks and ventures from the School of Engineering, will take part in a Columbia Ventures Showcase. We spoke with this year’s Lang Fund recipients about the most important lesson he or she learned at Columbia.

Tom Bowen Wright ’09, Neighborhood Hero, a digital communication tool to help merchants and local consumers connect

“It is critical to encapsulate a powerful vision behind your idea and you need to package it and sell it. I have also learned that you need to do as much research as possible before jumping into the deep end. There is no reason why, before you invest thousands of dollars in R&D, you can’t have already established who the customers are, their specific needs, what they would pay for your product if you were to make it and what it would take to actually close a sale with them. If you haven’t proven to yourself and to others that there is a genuine need, you should not roll the dice.”

Arlyn Davich ’09, PayPerks, a corporate incentive program to convert employees to electronic pay checks

“The power of a win, win, win proposition. The time I have spent honing the value proposition of each layer in the value chain has paid off in dividends.”

Robert Liebesman ’09, Palogix USA, provides reusable and rental storage and shipping solutions

“Listen to people’s criticism and don’t get disheartened. You take five steps forward and then three backwards. Make sure to process information and to not have a selection bias — there are threats to your business; make sure you are aware of them. I have found that stepping back and looking at the big picture can help me get out of treading water. Make sure to have a balance in your life; this stuff can consume your life pretty quickly, so force yourself to have an hour or two a day for other people and hobbies. I get my best thinking done during long runs. Give your head a chance to sort out the clutter.”

Jennifer Wright ’09 (EMBA), Environmentally Conscious Organization Inc. (e.c.o.), a design, licensing, manufacturing and subcontract management firm dedicated to the use of recycled materials

“Professor Cliff Schorer told us ‘Never turn down an opportunity to talk about your product.’ I believe this to be true and I made sure we were present at every entrepreneurial event at Columbia to talk about our product. You never know who could be instrumental in helping your business.”

It is no secret that the mobile phone industry is thriving in emerging markets, and that this growth has helped make cell phones the fastest spreading technology in human history. Less known, but equally as important, is that this growth has extended well beyond the ability to make phone calls. Today mobile operators in Africa, Asia and Latin America also offer their customers the ability to send cash to relatives, pay bills, and even check whether a taxi is legal or illegal, all via their cell phone. Many of these services have even begun transforming entire societies — in Kenya alone a mobile phone-based cash transfer service called M-Pesa has over six million customers.

However, despite these innovations, we believe mobile-phone based services remain limited relative to their potential in emerging markets because they rely on a fairly basic form of technology: SMS text messaging. These messages are limited to 160 text characters and due to their simplicity are simply not designed to deliver the advanced services we are accustomed to in more developed markets.

For us, these facts beg the question: when will mobile services in emerging markets evolve beyond text message technology? Relatedly, when will consumers in emerging markets embrace the enhanced functionality that comes with purchasing a more advanced handset? We believe that time is now, at least for certain customer groups. So-called “smartphones” — phones such as the Blackberry, iPhone and G1 that have the ability to download new software applications — have already transformed the way consumers in developed markets use and access data (iPhone customers alone have downloaded more than one billion applications). And certainly smartphones, which are in effect mini-computers, have even greater potential in emerging markets where relatively few computers exist. There is little doubt that smartphones will soon be more widespread in emerging markets yet a central question remains: who will build applications for these underserved customers?

Enter Frogtek, a for-profit social venture that began as an idea in the classroom at Columbia Business School and will soon begin formal operations in Colombia. Frogtek is premised in part on the theory that smartphones can solve several major problems endemic to emerging markets that text-messaging based technology solutions cannot. Of course, we recognize that getting customers to use smartphones in emerging markets today comes with a unique set of challenges. Perhaps most prominently, smartphones are still fairly expensive. Moreover, most software applications for smartphones were developed with a rich consumer in mind. These challenges are not insignificant.

For these reasons, Frogtek today is focused on what we believe can be a vanguard customer group in emerging markets, one that already has access to capital and a demonstrated need for simple and customized technology solutions: micro-retailers. The need we’re addressing is that most of these “mom-and-pop” shops do not keep sales records, which can result in inefficient business operations and even bankruptcy. Hence, our first product is an accounting and inventory management tool that allows a shopkeeper to use a smartphone as a point-of-sale device; the camera even doubles as a bar code reader. The phone generates basic reports about sales, inventory and profitability, and information is also uploaded to Frogtek servers wirelessly for secure storage and further analysis.

At this stage we have completed a prototype and will be working with SABMiller and a prominent Colombian NGO this summer to test our product with 50 shopkeepers. By the end of the summer we plan to have a complete version that we can distribute more widely in Colombia and eventually Latin America.

Accounting solutions are only the first step for Frogtek. If we are successful this summer and shopkeepers become comfortable using smartphones, we believe it will be relatively easy to develop and introduce additional products via smartphones such as micro-insurance and branchless banking. Time will tell whether our idea is premature but there is little doubt that smartphones are coming soon to an emerging market near you.

David Del Ser '08 is a 2009 Echoing Green Fellow. He is also the 2008 winner of the Nathan Gantcher Award in Social Enterprise at Columbia Business School.

Images courtesy of Frogtek

Naif al Mutawa ’03 of the Teshkeel Media Group, left, receives the Social Entrepreneur Award in the Middle East from Hilda Schwab, chairperson and co-founder, Schwab Foundation for Social Entrepreneurs at the World Economic Forum on the Middle East at the Dead Sea, Jordan on May 16.

It has been a big year for Naif al Mutawa ’03. The founder and creator of comic book company Teshkeel and The 99, an Islamic comic book series based on the 99 attributes of Allah, opened the company’s first theme park in Kuwait in March, and last weekend al Mutawa was honored with the Social Entrepreneur Award in the Middle East by the Schwab Foundation. Public Offering recently spoke with him about his adventures with superheroes and his advice for entrepreneurs.

How is a comic book a social enterprise?

I wanted to create alternative heroes that wouldn’t disappoint and would be positive. In so doing, I knew I needed to create something that would have legs in U.S. and Europe and Asia. One of the ideas that I send out through the series is that the values implicit in the 99 attributes of Allah tie us all together as people. Our focus is on the values that humanity shares while building a business around it and to create an alternative to those who would have others believe that there is a clash of values between Islam and the rest of the world.

How does the company fit into the larger trend of social enterprise?

We are a social enterprise through our values and the medium is comic books. It’s our philosophy that we are doing well by doing good. You hear about the philosophy of business at the School; this is the business of philosophy.

In the nearly five years since you launched the company, what has surprised you?

I have had to switch our focus. At first, we focused on protecting the property and creating the concept with [the artists] … We were covered extensively in the press and had a lot of positive publicity before we even had a product. I mistook that to think I could expand outside of the region, but that time might have been better spent focusing on the region. So we let go of that a little and we raised a second round of financing. We converted the company to an Islamic company and that allowed us to be accepted in new places, which led to the opening of the theme park and that allowed for more opportunity for us in the Middle East.

What advice do you have for entrepreneurs starting out?

Networks are very important. Never burn a bridge and don’t let your ego get in the way, because an opportunity may come down the road. It is also important to know the difference between luck and skill and don’t confuse the two — we got extremely lucky.

Photo credit: World Economic Forum/Nader Daoud

This post contains an update.

Sugar Plum didn’t make it and neither did Fred and Ginger. But Chocolate Fudge Brownie is a bestseller.

Not every flavor makes it to your freezer; but if you’re Ben & Jerry’s Ice Cream, you keep trying. Indeed, making ice cream has been a metaphor for the way the company has become a leader in sustainable business.

“Figuring out how to have a socially conscious business was like creating a new flavor,” Jerry Greenfield told students in a presentation at the Feed Your Conscience event on April 22. “We had no idea to do it, but it didn’t prevent us from trying and failing, making improvements and trying again.”

Greenfield spoke with Julius Walls, Jr., President and CEO of Greyston Bakery, at the event, which was sponsored by the Eugene Lang Entrepreneurship Center, the Social Enterprise Program, the Social Enterprise Club, the Green Business Club and the Columbia Entrepreneurs Organization. The presentations were followed with brownies a la mode.

Walls shared his experience connecting Greyston’s business model to a community mission and urged students to look beyond financial returns.

“It’s not about the dollar and making money,” he said. “It’s about people, planet and profits. You don’t have to give up one to serve another — business should serve humanity.”

Both leaders agreed that community outreach and ingredient sourcing have been key parts of their sustainability mission. In an audience Q&A, Greenfield responded to questions about the challenges of both becoming a public-owned company as well as a subsidiary of Unilever, which it has been since 2000.

“How do you maintain the mission in founder-driven entrepreneurial companies?” he asked. “The jury is still out. It’s very difficult.”

However, Greenfield said the strongest endorsement of the mission is in the bottom line.

“Our experience is that the more giving and caring we are, the more successful [the business] is,” he said.

UPDATE (5/6/09): Watch video from Feed Your Conscience ’09, now posted on Columbia Business School’s YouTube channel. -CN

Photo credit: Anna Berger

In developing countries, it makes up 41% of gross national income, 30% of the GDP, accounts for 70% of employment and in many countries is growing faster than the overall economy. This thriving area of growth is also known as the informal sector.

For those who haven’t spent much time in a developing country, you may be wondering this means exactly. The businesses that make up this sector are not gangster-run outfits operating in clandestine markets. Instead, they are unofficial businesses that operate openly. They are “tolerated” by local governments, which cannot or will not make the benefits of formality accessible to local business owners. The vast majority of people operating in this sector are simply trying to scratch out a living — and are sometimes thriving — by buying or selling goods.

However, the invisibility of these businesses, as well as their transactions with consumers, leaves the door open for opportunistic behaviors. Both my personal experience and the limited data I’ve been able to find lead me to think this is a much bigger barrier to business growth than is commonly understood.

I spent two years living and working in Kenya with informal businesses and small-holder farmers who operate as informal entrepreneurs selling produce. Time and again I heard stories of business deals gone wrong — of a middleman who bought produce on credit only to disappear without a trace and carry away hundreds of dollars worth of goods without paying for it. While the vast majority of businesses are honest dealers, and most transactions are smoothly conducted, it only takes a few such incidences to discourage otherwise worthwhile business investments. Would providing businesses with a virtual community to allow them to tap into their social networks to gain trust and credibility unleash an explosion of economic growth at the base of the pyramid?

My business partner Felix Macharia ’09 and I have set out to try this concept in Kenya, a country we both know well. Our business, Dango, seeks to create a referential mobile phone-based business directory and social messaging platform for the Kenyan marketplace. The system will work entirely on the simplest and most widely available ICT form available: text messaging. Imagine each of those thousands of informal businesses listed in a business directory accessible to anyone with a mobile phone? What if they were also linked to their regular customers, and through them, thousands of potential new customers? What if they could use their good reputation to find new customers and make bigger and better business deals? Dango will provide them a way to list their businesses, link with customers and reach out to new customers using their existing social networks. Non-business owners may use Dango as a social network and share news and information with groups of friends or formal groups like churches and student groups, and finding trusted businesses through the social networks inherent in these groups. If a Dango member searches for a car seller in a particular area, for example, he will be able to find one who is known to him through a friend or colleague.

Currently, Felix and I are conducting concept tests in Kenya and developing a prototype of the system. We will be in Nairobi this summer piloting the system with some select church and business groups. To get to this point, we’ve leveraged CBS’s resources tremendously.

Through the Entrepreneurial Greenhouse Program, CBS’s intensive incubator program for aspiring second-year entrepreneurs, we’ve gained exposure to entrepreneurs and investors and have been pushed to hone our business plan and pitches. Through the International Development Club’s Pangea Advisors, I was able to meet with leaders of top Kenyan businesses and social enterprises while conducting a field study of Kenyan businesses for Nancy Barry’s Enterprise Solutions to Poverty, a new organization that works with large companies and social enterprises in the developing world to create inclusive business models.

As a student in Professor Gita Johar’s “Global Marketing Consulting for Social Enterprise” class this semester, I led a team on a consulting project for Yasmina McCarty’s EMBA ’08 GreenMango, a fully localized online service marketplace that provides an easy way to find local small businesses for Indian professionals. The experience I’ve gained in working with GreenMango has provided me with an entirely new lens through which to see my own venture. Last but not least, the leadership experience I’ve gained as co-president of the International Development Club has given me confidence that I can lead a team in executing my vision to make Dango a reality. When I reflect on how I’ve been able to bring all of these experiences together in such a short two years, I am in awe of how much I’ve been able to accomplish.

As I prepare to walk out the doors of Uris Hall for the last time (as a student, at least!) I’m grateful for incredible opportunity I’ve had to bring my dreams closer to reality.

Photo credit: Ken Banks, kiwanja.net

How much is your virtual yuan worth?

Green Panda Games is hoping quite a bit. The gaming company, a new venture by Megan Bordi ’09 and business partner Nate Altschul, recently won the Eugene Lang Entrepreneurship Center’s annual A. Lorne Weil Outrageous Business Plan Competition. (check out their winning elevator pitch)

Green Panda is a free-to-play virtual world and educational online game for Chinese kids and tweens. The company’s goal is to create an alternative product to the popular but violent role-playing games and culture that has become prevalent in China.

One of the key elements of the platform — and Green Panda’s primary revenue stream — is the use of microtransactions, a model that has been very profitable in the Chinese gaming market. That format both localizes the platform and provides an educational component with virtual allowances and bank accounts.

“If the kids are buying things, the parents ultimately pay so we recognize that we need to target both groups,” says Bordi, who is a participant in the Entrepreneurial Greenhouse Program Master Class.

However, Green Panda is careful to learn the lessons of other American Internet companies, such as Google, that have gone into the Chinese market.

“We are focused on developing the product from a Chinese perspective and we have a Chinese development team,” Bordi says. “We’re not adapting an American product.”

Altschul adds, “We’ve done a lot of research and work with gaming experts to understand what parents, educators and kids want.”

With the product in private beta testing now, Bordi and Altschul plan to launch the game platform later this year.

Watch video for Green Panda’s winning elevator pitch (opens Flash player).

Throughout my time at the School, I really wanted to come up with The Next Great Idea. It didn’t come then, and I waited for the right opportunity to arrive. In 2007, I had the idea for ZocDoc, an online service to connect patients with doctors, and I quit my job to give all of my time and attention to the company. The challenges came right away. But so did the lessons.

The common attitude towards business school is that grades don’t matter. True as this may be, your reputation does. People need to know they can count on you. This served me well when we were looking for angels — half of ZocDoc’s angel investors were classmates of mine.

Though many people supported me in this venture, I definitely heard “This will never work” more than I cared to. But I pressed on. Healthcare is the largest sector of the U.S. economy, and it also happens to be plagued with problems. It was always my intention to fix one simple problem instead of trying to fix them all, and I think this is an effective way to succeed in the healthcare sector. Focus on one problem and do it better than anyone else.

With the nation’s current climate, I’m glad to be working in healthcare. It has always been a strong industry, and with the economy we have now, ZocDoc isn’t affected as much as other startups might be. People will always need to find a dentist or a doctor. Also, healthcare seems to be high on the Obama administration’s agenda, and we look forward to positioning ourselves as a leader in the changing landscape that surely lies ahead.

The future of healthcare in America is bright, and if you are interested in starting your business in this space, be patient with yourself. Wait for the right idea, and then go for it. All in.

Have you ever ripped off the lid of a pizza box to make an impromptu plate? With the Green Box, Jennifer Wright ’09 (EMBA) and her business partners at environmentally conscious organization, inc. (e.c.o.) have made the task a lot easier — changing the way we consume pizza, one box at a time.

Along with her two business partners, Wright — who is part of the Entrepreneurial Greenhouse Program Master Class led by Cliff Schorer, adjunct professor and entrepreneur in residence — created the box from 100% recycled material. The top of the Green Box breaks down into four serving plates, while the bottom converts to a small storage box — perfect for that slice you’re saving for tomorrow’s breakfast.

Wright’s e.c.o. partner William Walsh is the engineering whiz behind the new box. Walsh’s aha! moment, Wright says, came in college, when as a football player he consumed his fare share of slices — only to be left with a pile of leftover boxes. Walsh, who found the boxes too unwieldy for the recycling bin, realized that they could be broken down and put to use. They just needed to be perforated in the proper places.

Eight years later, the new box is patented and ready for buyers. “It’s our entrée product,” says Wright, who along with her partners at e.c.o. is busy developing other like-minded products.

Wright attributes a large part of the product’s early success to the Greenhouse Program.

“The program has been a fantastic experience for me,” she says. “It has provided the platform to go beyond the plan and actually further develop the business, as well as the access to potential clients that would be otherwise difficult to achieve. In addition, the guidance and support offered by Professors Schorer and [Brendan] Burns has been invaluable.”

Consumer spending typically falls during a recession, but does that mean that entrepreneurs have to wait until the economic clouds have passed to introduce new products?

Just the opposite, says Professor Amar Bhidé in a recent New York Times Room for Debate blog post. In a recession, Bhidé says, consumers are forced to reexamine their behavior — and it is in this “reshuffling of the deck” that entrepreneurial opportunities are born. Bhidé, author of The Venturesome Economy, points to the early 1980s as an example of how a changing economic landscape paved the way for many successful businesses:

About 20 years ago, I studied 100 founders of Inc. magazine’s 1989 list of the 500 fastest growing private companies in the U.S. Virtually all of them had started between 1981-83 in the midst of an awful recession.

But that didn’t prevent those founders from starting a new venture — in fact, in many ways it may have helped. Several had lost their jobs, so they weren’t risking steady employment — and they were able to hire employees who didn’t have great job prospects on the cheap. Landlords offered leases without asking too many questions about credit histories. Suppliers were willing to wait to be paid.

And even though the old economy and the rust belt was in a deep slump, the personal computer was taking off, and with it opportunities not only for new hardware and software makers but also for retailers, resellers and even magazine publishers.

Bhidé expands on the importance of consumers’ continual thirst for innovation in a recent op-ed published in the Wall Street Journal. He writes, “The venturesomeness of consumers has nourished unimaginable advances in our standard of living and created invaluable human capital that is often ignored.”

He cites the personal computer as a product whose success was driven by forward-looking consumers who, despite a challenging economic environment, were willing to change their purchasing behavior and adopt an innovative new product.

History suggests that Americans don’t shirk from venturesome consumption in hard times. The personal computer took off in the dark days of the early 1980s. I paid more than a fourth of my annual income to buy an IBM XT then — as did millions of others. Similarly, in spite of the Great Depression, the rapid increase in the use of new technologies made the 1930s a period of exceptional productivity growth. Today, sales of Apple’s iPhone continue to expand at double-digit rates. Low-income groups (in the $25,000 to $49,999 income segment) are showing the most rapid growth, with resourceful buyers using the latest models as their primary device for accessing the Internet.

The takeaway? Purchases of cars and other big-ticket items may be down, but consumers are still willing to pay for innovation — and that may be the ladder we need to climb out of this dark economic hole.

Photo credit: Fr3d

Believe it or not, engineers have emotions just like everyone else. I know this because I used to be one — in the car industry, at that. Before going to Columbia Business School, I spent seven years working at Ricardo, one of the world’s leading automotive engineering and management consultancies. After graduation, I founded rightpedal, an automotive social media site for Generation Y. While it is difficult to say what makes an engineer tick, one thing is true of the people who make the world’s machinery: they love a challenge.

This is why the news that troubled giant General Motors was shutting down its High Performance Vehicles division — responsible for cars like the Chevrolet Cobalt and V-Series Cadillacs — came as a blow not only to engineers in the car industry but many car enthusiasts, as well. While the shuttering of a small division responsible for a negligible number of cars seems like minor news against the backdrop of a much deeper crisis, it this kind of act that will have a major psychological and symbolic impact on the car industry.

Nothing gets automotive engineers quite as excited as a project with a purpose. One such project is what I like to call a “halo car,” an automobile designed to rejuvenate a company’s morale and, in turn, its overall product line. With halo cars, engineers are asked to outdo themselves creatively and intellectually. While halo cars aren’t always supercars, it’s often the case.

Creating high-performance cars allows engineers to have fun and think back to when they used to peer up at that poster of a red Lamborghini and dream of one day being close to one. Almost invariably, these halo cars end up being special and historic machines; the original Dodge Viper was concurrent with a brief but confident era for Chrysler, when even its minivans and LH-platform cars were lauded by the automotive press for their innovative design and engineering.

The loss is more than just esoteric or emotional. High-performance cars are crucial to the advancement of technology. Given that these automobiles are usually low-volume and premium-priced, their manufacturers briefly become less risk-averse, and willing to experiment with new and expensive technologies that may some day find their way into regular passenger cars.

Take, for instance, the VTEC system that is today found in many Hondas. The variable valve-timing system, which allows Honda engines to perform more efficiently across their operation range, was first tested in Honda’s brutally successful Formula 1 racing engines and then put into production in the cult classic Acura NSX supercar. The Acura NSX was the first production car in history to feature a full aluminum chassis. While it never sold considerably well due to its exorbitant price, the NSX did change Honda forever.

In a day and age when cars are under attack for ruining the environment and “green” is the socially hip moniker du jour, let us take a moment to remember supercars and their importance in the annals of automotive engineering. If inspirational projects are quashed within R&D centers around the world, innovation itself might be in peril.

Photo courtesy of Hootan Mahallati

This post contains an update.

The notion of getting a “bailout” has, by now, become embedded in American culture, emboldened no doubt by unprecedented federal support for troubled companies like AIG. So far the rationale has been to protect companies that are “too big to let fail.” There are some things that are “too small to let fail,” too — the young enterprises which are the entrepreneurial backbone of our economy.

As Americans, we hold our tradition of entrepreneurship dear. Decades of growth have been fueled by innovators and have spawned entirely new industries, high-value jobs and stock market gains. Yet one result of the financial crisis is that the current wave of these innovations will inevitably be slowed — or withheld from us as consumers, investors and perhaps even employees entirely — by the lack of adequate investment sources.

Many of these companies are now facing serious cash shortages and some outright failure, not for lack of entrepreneurial promise but for lack of dependable funding from venture funds. These budding enterprises are typically underwritten by venture funds that invest in young, high-potential companies and hope to see a return as the companies mature. But these funds are experiencing a capital drought of their own. Their principal investors, high-profile pension funds and endowments, are reeling from losses, markdowns and greatly diminished equity portfolios. As a result, some institutions are beginning to retrench on honoring capital calls and rethink their commitment to the investment category including venture capital.

Additionally, the lack of a viable IPO market is a difficulty. Public markets are a crucial capital source for these enterprises and an exit for the venture funds. Today, there is no viable public market access and none is likely soon.

Some inappropriate ventures will fail, but many could succeed. Those that do offer the promise of many desirable attributes — new technologies, new products and new efficiencies — all nice things to have on an accelerated timeframe in an economic downturn. There is also job creation, economic activity and perhaps an exciting story or two to breathe some life back into the IPO markets in the not-too-distant future.

I suggest that we place a few stimulus chips on the best of these young and soon-to-be cash-starved enterprises, rather than bet everything on outdated industries or new infrastructure. An agency could consider taking over venture fund commitments from legitimately cash-constrained institutions or making “side-car” investments alongside venture funds with promising investments. Meaningful taxpayer protections are not that difficult to devise, and the benefit is injecting some fiscal acceleration into this important entrepreneurial sector. Further, with the right kind of protections, a taxpayer might get a decent return on their invested tax dollar.

No jets full of entrepreneurs or venture capitalists are flying (or driving) to Washington to make the case for this particular form of stimulus. But think about it for a moment: in a few years, would we be better off with some of our tax dollars invested in a few years’ vintages of U.S. entrepreneurs, or in Detroit or a bridge?

UPDATE: PricewaterhouseCoopers reports “first-time financings dollars dropped in the fourth quarter to $1.1 billion, down 28 percent from the prior quarter, the lowest level invested since the first quarter of 2004. The number of companies receiving venture capital for the first time in the fourth quarter also dropped by 17 percent from the prior quarter to 236, the lowest number in three years.” (View Q4 / Full Year 2008 MoneyTree Report, PDF)

Photo credit: D.B. Blas

How are entrepreneurs weathering the financial storm? Panelists in a recent Master Class on Innovation and the Economy discussed some of the ways entrepreneurs can stay competitive in a down market. (view video of the Master Class)

1. Look for money in the right places
While money is scarce (and being used to fund existing portfolios), it’s not impossible to find, the panelists agreed. “You can raise money if you have the right idea, but it has to be very real and very targeted,” said Professor Cliff Schorer. Alumni panelist Leonard Sylk ’65 said cutting costs was essential to raising funds and that firms should look to their suppliers for money. “Ninety days from your supplier is a gift because that can be interest-free money,” he said.

2. Secure your balance sheet
Preserve cash flow, ensure that there is capital on your balance sheet, take the long perspective and be wary of a high burn-rate, said Professor Morten Sorensen.

3. Find the opportunity
“Look at your resources and assets and find the opportunity,” said Schorer. “Ask, ‘Where can I take advantage of pockets of gold?’” Panelists discussed healthcare and energy as two areas with the potential for growth. “Provide services that can help companies run more efficiently and find places where there is revolutionary change,” continued Schorer.

4. Tap hidden resources
Schorer recommended that entrepreneurs wanting to build intellectual or leadership capital enlist the help of retirees. “Look to older people who are not returning to the work force and who are willing to help,” he said.

5. Be prudent to survive the game
“Resist the urge to expand beyond what you can handle, especially with fixed costs, and know how much debt you can take on,” said Sylk. “Have the discipline to say, ‘It’s not the right thing to do.’ Learn how to not be greedy and secure your position. If you can survive, that’s the most important thing, because you won’t have much competition left if you do.”

Photo credit: Jim Wallace

Transforming market uncertainty into opportunity is the theme of the 15th Annual Private Equity and Venture Capital Conference, which is taking place at Columbia Business School today. More than 700 people are expected to attend the conference’s six panels.

Dan Primack, editor of PEHub and moderator of the conference’s panel on venture capital, said that one of the questions the panel will address is how the weak IPO market affects the basic model of VC. Primack said that VC must consider these questions:

How they will honestly make money without an IPO market?
Can VC make money without an IPO market?
Do you make different types of investments without an IPO market?

“The average investor’s chances of making of money would have been better if he’d put his money under the mattress. That may be true of public markets, too, but you can’t liquidate in VC. All those median funds are a loser,” Primack said. “That shows you that the industry has some fundamental problems and there must be some considerations to radical proposals.” (He recently blogged about one such proposal.)

David Snow, the executive editor and director of PEI Media, who is moderating a panel on how LPs can think long-term in the volatile market, discussed some of the trends he sees.

“Negotiating power has moved squarely to the LPs. During the boom years, right up through 2007, there was a sense that GPs were holding a velvet rope in front of funds and raising billions in commitments while giving the impression that they were turning down extra demand. That demand from LPs allowed GPs to receive favorable terms,” Snow said.

“Now there’s far less capital available and many signs that partners are willing to concede on some terms in exchange for capital from LPs. But many LPs are heartbroken because first, they wish they had more money to commit, and what’s more, many experienced investors are aware that the best time to invest is during a recession. The inability of LPs to do more buying is causing grief and heartache. So you see huge activity in the secondaries market, as many LPs are trying to free up cash to double down in this environment.”

Snow said he would ask panelists about the role of the accounting rule FAS 157 in private equity, which requires the use of fair-value accounting.

“I’ll ask if, because of FAS 157, LPs would be perturbed if GPs assigned huge write-downs to existing portfolios,” he said. “Of course, the silver lining may be that write downs in private equity might allow LPs to invest more capital, because lower private equity valuations will equate to freed-up private equity allocations relative to the rest of the institutional portfolio. Are LPs with a long-term view on performance begging GPs to write down portfolio values?”

Your life may get a little healthier thanks to Cyrus Massoumi ’03, founder and CEO of ZocDoc. The company aims to change the way you find and book a doctor’s appointment. While the company is not even two years old, the accolades have come quickly. In 2007, it was named one of TechCrunch’s top 40 hottest startups, and last month it won Forbes.com’s “Boost Your Business” contest (check out their video pitch). Public Offering caught up with Massoumi to talk about life as an entrepreneur.

How did you get started?
Before I came to Columbia Business School, I ran a software company called OneSizeTooSmall in Austin. It was really helpful to bring that experience with me to Columbia. After School, I joined McKinsey & Company, and the idea for ZocDoc came about from a business trip. I was on an airplane and ruptured my eardrum, and I needed to find a doctor on short notice. After that experience, I talked to my coworker, Oliver Kharraz, who was the expert on electronic health records, and we both liked the idea of an online service to connect patients with doctors. Our third co-founder, Nick Ganju EMBA ’08, joined us next as the chief technology officer.

How did you know that it was the right idea at the right time?
You kind of know in your gut. At first this was just a pebble in my shoe and I kept thinking, Do I want to do another start-up? Is this the right one? But I couldn’t get away from it, and it came to a point where I knew it wouldn’t be successful unless we immersed ourselves completely. So that’s what we did.

So how do entrepreneurs know if now is the right time to start a venture?
Now is the best time to take that leap. Everything is cheaper to do, and resources are more readily available — real estate and hiring, in particular. Fewer hedge funds are competing for talent, so more really good people are available right now. The best businesses were built in recessions, so if you have capital or time to invest, that is a great thing. With so many companies contracting and worrying about survival, you can be more aggressive and actively pursue opportunities. It might sound risky, but great ideas transcend bad economies.

What advice do you have for Columbia MBAs?
In New York City there is so much access to people with practical knowledge and I tried to find classes that had a lot of guest speakers, like Leadership in Retail. I knew I didn’t want to go into retail, but the class had 20 CEOs coming in to speak. Hearing first-hand from someone who runs a company is good for an entrepreneur. There is really no other way to prepare to be one. Also, it’s not a joke that investors like to invest with other investors. Some people invested only because they knew me, even without a business plan. Many of my CBS classmates invested in ZocDoc, and that confidence has paid off, ultimately leading to us getting investments from people like Jeff Bezos. Having people regard you well in your class is important; they need to know they can count on you.

What is the toughest thing about being an entrepreneur?
It can be lonely. There are ups and downs and the buck always stops with you. It can be hard sometimes to lead the charge uphill while getting fired at non-stop, but that comes with the territory. The great thing about co-founders is you have that feeling a lot less.

…and the best thing?
It doesn’t seem like work anymore. I love my company and I enjoy coming in to work every day. I wouldn’t go home if I didn’t have to get some sleep.

This is the inaugural column in our Next Steps series, which will profile alumni in their first five years after Columbia Business School. Do you know someone we should write about? Tell us about other candidates.

Photo credit: Julie Galluzzo

This is part of a series of posts from the International Development Club.

Handmade lingerie wasn’t at the top of my mind when I came to b-school.

Nevertheless, that’s one of the myriad surprises I encountered on my Pangea Advisors trip (formerly International Development Club Projects). Our client, Give to Colombia, an umbrella organization that liaises between U.S. donors and Colombian NGOs, wanted a monitoring and evaluation system to track the efficacy of the NGOs. We worked with the NGOs to expand their budgetary reports (e.g. how the donors’ money was spent) to include impact (e.g. how many lives were affected and by how much). Based on these case studies, we extrapolated a model of how to change the reporting criteria for all of their NGOs.

When my team (Chad Di Stefano ’10, Hernando Forero ’09, Omari Jinaki ’10 and Sachit Shah ’10) and I traveled to Colombia to meet the NGOs, we met Jorge Porras Suarez, an entrepreneur who hires women from sweatshops to make high-quality intimate apparel in better working conditions for better wages. Meeting Jorge recalibrated my notion of what industries an emerging market entrepreneur can target — and on what scale. If he can enter the luxury lingerie market and make deals with buyers in New York — keep your eyes peeled for the Black and White collection by Vanity Colors — why can’t someone else start farming sugarcane to supply an ethanol plant? Jorge reminded me that there aren’t any limits to entrepreneurship. If an idea is good enough, and the work ethic tough enough, the entrepreneur will succeed, regardless of frigid credit markets, living in a slum, or being told he can’t do it.

We also met a foundation that gives pregnant teens pre- and post-natal support, thereby cutting infant mortality in the catchment area from 5% to 1%. And another that builds bathrooms and sinks for the poorest schools in the area. It was humbling to work with people who will succeed no matter what; if we weren’t helping them them, they were focused enough to seek assistance elsewhere.

Being deeply involved in IDC brought my first semester to life. It’s been more than just the project: it’s been getting to know my peers outside of cluster F ’10 (no disrespect intended), meeting students from other schools at Net Impact and forgetting about my next Corp Fin valuation when I listen to a speaker at a conference. The most rewarding part has been speaking with prospective students who are where I was a year ago.

All of this reminds me why I came to Columbia Business School: for the entire experience, the practicum, the people and to gain the technical skills that will help developing world entrepreneurs seize their own opportunities.

I’m grateful that I had the chance to seize mine.

I’m not the only one jazzed about Pangea Advisors. Just last Thursday, more than 50 students and alumni gathered at a cocktail reception to formally kick off this outstanding student-run initiative. Feel free to contact any of us at IDC to learn more.

Photo credit: Chad Di Stefano ’10

This is the last in a series of posts on the challenges surrounding social entrepreneurship.

I have learned in my life as a business professor that just as being a good manager is not the same thing as being a good leader, being a media star is far different from being a good leader or manager. We live in an era where the media-friendly entrepreneur/founder must act on stage, under the spotlight. Many of the foundations supporting social entrepreneurs encourage what the French call mediatisation, supposedly under the theory that media attention draws resources to the enterprise. It also draws attention to the foundation or private investor who funds the star leader.

All of this comes at a cost. I wonder how many tragic failures we have created as a result of our preference for sparkling leaders, rather than ones who know their business and who know how to work on a team. I am absolutely for charismatic leadership, but I am wary of the prima donnas that we tend to create.

I would like to see fewer media leaders and more good team leaders in control of social enterprises. And I would encourage investors to put aside their egos in promoting excessive media attention. It is quite possible that when we have managed to develop better social capital markets, there will be less dependence on the egos of private investors who tend to bet on media figures.

It is a tragedy when an organization’s leader must leave his business and retire, or seek another role in the project. I can think of a social enterprise in Portugal that has done great things in its work with troubled youth. After 30 years of success, the company has slowed and the founder is in danger of seeing a total reversal of the gains it has made. The problem is that too much weight was attributed to the founder and not enough effort was spent creating a team around her that had real capacity or power. Not surprisingly, the leader has become too accustomed to the media spotlight to depart.

An equally painful case is the argument between two founders of an exciting enterprise engaged in funding new ventures in deprived urban communities in a European country.

One leader managed to attract far more media attention, and the chairman of the board threw his support to him for this reason. But was he the better leader or manager? This question appears to have been almost beside the point. As a consequence and despite ample talents, the other founder was forced to leave the enterprise he helped build.

A good entrepreneurial leader is not a substitute for good management, and an organization is more than just the leader. Success also requires team leadership and capable management. To build a successful social enterprise, we must make sure that teams lead the enterprise. And watch out for media-struck leaders.

The above is drawn from remarks made at “Leadership for the 21st Century,” an interactive training session held at the U.S. Ambassador’s Residence in Paris on October 23, 2008 to launch the Ariane de Rothschild Fellows Program: Dialogue & Social Entrepreneurship. The program aims to develop a network of social entrepreneurs with an interest in fostering a culture of mutual respect and dialogue among Jewish and Muslim communities. ]]> Fri, 16 Jan 2009 13:11:56 EST ]]> Entrepreneurship Leadership Organizations Social Enterprise Strategy

This is part of a series of posts on the challenges surrounding social entrepreneurship.

The case of Ethos Water offers us an example of the challenges in financing a social enterprise and why we need to improve the instruments available to do so.

A little background: the founder of Ethos, Peter Thum, wanted to create a bottled water company that donated part of its revenues to a fund to improve water supply conditions in poor countries. Founded by Thum in 2001, Ethos was acquired by Starbucks in 2005 for a total of $8 million.

A one-liter bottle of Ethos Water sells for around $1.80. A fraction of this price is given to NGOs that work to improve access to clean drinking water in underdeveloped countries. Starbucks aims to raise $10 million in donations by 2010. Of the $1.80 sale price, however, only $0.05 is donated.

The concept and purchase of Ethos have been the topic of much criticism in the blogosphere. One blogger, writing from France, summed it up:

We agree — it's a little weird. I am not challenging these criticisms except to add that $0.05 is not negligible and that $10 million is still $10 million. Every penny counts.

I use this example to discuss the company’s initial funding. Ethos was founded in 2001 by partners Thum and Jerry Greenfield and two angel investors. Three years later, eBay founder Pierre Omidyar invested in Ethos after it had experienced difficulties. Less than 10 months later, Ethos was sold to Starbucks, where the CEO is a friend of Omidyar. After the 2005 sale to Starbucks, all of Ethos’s original investors left with capital gains. During its four years of independence Ethos never experienced a profit, though it did contribute more than $100,000 dollars to several NGOs.

In the sale, the founders stipulated that Starbucks must continue to contribute revenues to a fund under their control. Instead, I would like to advance the idea today that it would have been better to create financial instruments in social funds independently. We would prefer to see the creation of financial instruments and markets that are designed specifically for social enterprise.

To do this, it may be necessary to create alternatives to the legal status of non-for-profit organizations that still provides the fiscal benefits of charitable giving. In return, shareholders agree to allow a portion of the capital gains be automatically reinvested in a social investment fund. More interestingly, it could be encouraged that these shares be traded in markets, which would improve liquidity and also attract a new segment of investors.

The story of Ethos is an example of the immaturity of existing financial markets today for the financing of social enterprises. It is scandalous that we have not managed to create financial instruments better adapted to the needs of social enterprise. We must create new, innovative markets for financial help in social enterprise.

The above is drawn from remarks made at “Leadership for the 21st Century”, an interactive training session held at the U.S. Ambassador’s Residence in Paris on October 23, 2008 to launch the Ariane de Rothschild Fellows Program: Dialogue & Social Entrepreneurship. The program aims to develop a network of social entrepreneurs with an interest in fostering a culture of mutual respect and dialogue among Jewish and Muslim communities. ]]> Wed, 24 Dec 2008 11:30:40 EST ]]> Entrepreneurship Social Enterprise Strategy

This is the first in a series of posts on the challenges facing social entrepreneurship. The following is drawn from remarks made on October. 23, 2008 at “Leadership for the 21st Century,” an interactive training session held at the U.S. Ambassador’s Residence in Paris.

I want to consider the question of strategy and competition among social enterprises. Is it true that there is no competition between organizations? Or do social enterprises need to be better equipped to function in the context of competition?

Among the conditions often attached to a foundation’s money is that the social enterprise receiving it must disseminate its business model to other organizations. This is not easy because there is little incentive to do so or time to allocate to this project.

I propose an alternative for exchanging knowledge that does not put a considerable burden on the people who must share it: co-location. Consider the model of La Ruche, a social enterprise that provides collective space to other social enterprises. A beehive offers a collective space where bees — the social entrepreneurs — meet and the exchange of knowledge can go through informal channels. Social enterprises that co-locate in this kind of setting are not in competition, for by design, they serve different needs by different means. Instead, the shared collective space creates a community of practice with positive incentives to share knowledge — without creating competition.

Whereas voluntary sharing knowledge is a good thing, we should not ignore that competition still exists everywhere and is itself an important driver of the dissemination of good ideas. Though often painful, it can serve us collectively if we give it the respect it deserves. Take this example: a very talented entrepreneur had the idea to create a company that would employ people with disabilities and allow the customers to share the experience of being disabled. The idea sold very well, and it came time to design a strategy to implement the concept in the real world.

But when the entrepreneur arrived in a major European city to study the possibility of implementing his business model, he was surprised to learn that he had arrived too late. Someone else had seen the idea and already launched the project. The entrepreneur was very disappointed and felt betrayed by a stranger.

When an idea is copied, who is in the wrong? In the business world, the fault lies with the creator: it is his responsibility to protect his idea and devise a strategy to exploit it.

But let’s not overlook the big picture: even though the case was disappointing for the entrepreneur, the social enterprise concept was still allowed to spread.

Like the previous example has shown, competition does not prohibit the dissemination of good ideas. However, instead of foundations demanding that the social enterprises they fund involuntarily disseminate their ideas, we should provide the tools and knowledge to entrepreneurs and equip them to effectively grow their business and innovations in the context of competition.

Photo credit: Peter Shanks

In the first half of 2008, the high price of oil caused food prices to rise dramatically. And while oil prices have come down for now, food prices are still up: it is estimated your turkey dinner will cost 5.6% more than it did last year. In addition, consumers are spending less as a result of current economic conditions. All of this means that restaurateurs — already accustomed to razor-thin margins even in a good year — must be more creative than ever to keep their businesses running successfully.

Public Offering spoke with two alumni in the restaurant business in New York City, Peter Schatzberg ’07, co-owner of FreeFoods Organic Cafe in Midtown, and Cecilia Pineda Feret ’92, co-owner of Brasserie Julien on the Upper East Side, about how they’ve changed their business models to adjust to these challenges.

Measure twice, pay once

“We work by the motto ‘What gets measured, gets done,’” says Schatzberg, who worked at GE before he ventured into the restaurant business with raw food celeb-chef Matthew Kenney. “If you are watching and measuring people, it changes people’s behavior. You can value engineer; I measure the chef every week and keep moving the target, and that changes behavior.”

Stay seasonal

“If you can change a whole item on the menu with a new name, new ingredients and a new price for the season, [a change in price] is less visible,” says Schatzberg. “We have also scaled back on meat and chicken and are offering more vegetarian choices.”

Curate the menu

“Items with higher profit margins should come first,” says Feret, who has been in business with her husband, who is the chef, for nearly 10 years. “Work with your costs and see what dishes you need to encourage people to try. We put all the entrees under $19.50 in one column because we saw people at the door were concerned with price, and this encourages them to come in.”

New food presentation

“We created a new menu item last year as a tactical way to keep our costs down but provide the same quality of meat,” says Feret. “The hanging brochette is a kebab presentation [of steak], that allows us to have the quality of filet mignon without having to worry about buying larger pieces that are more expensive.”

Photo credit: Peter Schatzberg

“My dad gave me a lot of good advice when I was growing up, including the following pearl: ‘Net worth is usually more a function of how much one spends than of how much one makes,’” said Professor Ray Horton, director of the Social Enterprise Program, when considering the question of whether you need to be “rich” to launch a successful social enterprise. “You don’t need to be rich to be happy or, for that matter, to be a social entrepreneur. If there is one thing that social scientists have nailed down, it is that money (beyond some minimal standard) and happiness are not strongly correlated.“

The question also came up at the Social Enterprise Conference on October 24. While many business people who have experienced financial success often have a second act in socially oriented causes, social enterprise stands alone as a business model. The four panelists speaking at “The Frontlines of Social Entrepreneurship” event considered the question. Here are a few of their remarks:

“If you turn in your salary to work 18 hours to do good for no money, you better have made a ton of money [before]. But can you do good every day until then? Yeah, absolutely. Get rid of the fine print. Stop making stuff out of garbage. Everybody in this room can do good starting one minute from now. Make a good decision so that the social change starts as you think about the rest of your life. Then, if you make a lot of money, maybe you want to donate some number of years to some crazy thing, but until then just be a nice guy.” Rob Wunder, Co-Founder, Yummy Earth

“I think you can start a company that makes money and does good. I am not sure if a model of social enterprise that is solely about doing good and that is not designed to make any money is scalable. It’s hard. Random, bad things happen and all of sudden you don’t have the capacity to respond. The design of the company, from the ground up, should be [geared to] doing something that makes the world better while still making money.” John Katzman, Founder and CEO, The Princeton Review and 2tor.

“A lot of people in business school ask if they should go and get skills at some consulting firm or investment bank first. I feel that at the end of the day, what’s important is that we all take step closer to what we want to be doing. The secret is that it is much harder to find interesting work and a way to make a difference, and it takes time to get there. It’s not just in one day that you're going to find the answer of what your social enterprise is going to be. What’s important is to take a step towards that path. And in the years when you're just trying to make money or get skills, while those skills may help you, you should also be searching for ways to get you closer to what you want to be doing.” Jeremy Hockenstein, Founder and CEO, Digital Data Divide

“I think you need to pay yourself first and that's enough. You don’t need to make lots of money, and there’s no need for greed … You go do what feels good and take care of you and your family.” Danny Kennedy, Founder and President, Sungevity

Do you think you need to be “rich” to be a social entrepreneur? Please leave your comments.

Photo credit: Linus Bohman

Tonight, Senators McCain and Obama will speak about public service here at Columbia University. They are likely to talk about creating a program for a year of national service. That is a fine idea, but what strikes me today is that there is a management gap in service: Social organizations need people with managerial skills to better achieve their goals and support their mission.

The greatest constraint in solving the world’s most pressing problems, from health care to environmental policy to poverty, is not a lack of ideas. Many great minds, including those of large numbers of Columbia faculty members, are focused on research relating to society’s most fundamental challenges.

What the social sector still needs, however, is management. Management, along with the ability to get things done, is the scarcest skill among those who devote themselves to service. A desire to do good is an absolute requirement, but in order to navigate complex social and governmental channels and effectively create change, one must be equipped with the knowledge and skills necessary to analyze, decide, and lead.

That’s what business schools do. Top business schools are producing MBAs whose management skills will be invaluable in the social sector—even if they are not necessarily the people who are running nonprofit organizations. I argue that what a lot of development and health care reform efforts are missing is the involvement of people who know how to manage and run large, complicated organizations. If management is the scarce skill, then that means business schools need a seat at the public service table.

Columbia Business School’s involvement in Africa and other emerging markets and its health care management, entrepreneurship, and social enterprise programs are just some of ways we are committed to service. We also have programs to train principals for New York City schools and work with community businesses here in Upper Manhattan. We are taking management skills and actively applying them to public service.

Senators Obama and McCain have already demonstrated their understanding of the critical importance of business in creating and sustaining economic growth. It is my hope that when they take the stage this evening at ServiceNation’s Presidential Candidates Forum, they will also convey the need to engage business and businesspeople in the social sector.

Sensitive readers be warned: this is a story about a serious childhood addiction. Many little boys love toy cars — it’s almost a cliché. But I remember thinking at age six that I loved cars more than my playmates. When other kids made simplistic “vroom vroom” sounds as they played, I would chastise them for not shifting gears with their voices.

Packing boxes upon boxes of old car magazines every time I move has made me want to kick the habit, but it’s amazing how strong a grip a childhood passion can have on your life. My love for cars led me to engineering school and the heart of the car industry, and having passed through business school and Silicon Valley, I now find myself steeped in my passion through my company, rightpedal.

Rightpedal will be a universally appealing automotive social media site for the influential and trend-setting Generation Y. In the most fundamental sense, my goal for the company is to bring accessible automotive entertainment and information to the masses. This will be done through a Web site that is a joy to navigate and that, among other features, contains entertaining video reviews of cars. The reviews are a cornerstone of rightpedal, which will live within a social environment where visitors can contribute content and also learn from one another. The aim is to spark conversation and information exchange.

Currently, all the information that’s available online is geared mainly toward car enthusiasts — people like me. But I’ve always believed that there are millions of people out there just waiting for people to talk to them in an accessible language about cars, not technical jargon.

Interestingly, I came to see many of my classmates at CBS — young, influential, interested and with buying power — as the right target demographic for rightpedal. Many who knew me as the “car guy” would come to me with car questions and express their support of rightpedal if it could to explain cars to them in an accessible manner. Rightpedal is my way of being a “car buddy” on a national and even international level.

The challenge is reaching people who are not on the lookout for this content that I’m making. To that end, I’ve been working on establishing partnerships with existing media entities that have built-in traffic — like general portals and social networking sites — and trying to get them to adopt rightpedal as their purveyor of automotive content. I can make a convincing argument in this sense by showing how our unique content would be welcomed by these sites’ target demographic.

The critical point is this: people, no matter how much interest they have in cars, form an emotional connection to cars. We have childhood memories of driving with our parents, of our first car out of college, the car we took road trips in.

It’s very exciting, because I feel that with rightpedal, I’m awakening something that’s been dormant in people.

Photo credit: rightpedal

Ron Gonen ’04 will change the way you think about recycling. He’s been honing his strategy ever since the day he convinced his high school of the economic benefits of purchasing reusable metal silverware instead of plastic.

Get tough love

When you’re an entrepreneur in the midst of traditional businesspeople, everyone wants to pat you on the back and encourage you. But when you get into something like the Entrepreneurial Greenhouse Program and you’re in the company of other entrepreneurs, you get a much higher degree of constructive criticism, which is critical to the success of any new venture.

You have to believe in yourself when starting a business like this. Before you pitch the idea to anyone else, you first thing have to sell it to yourself, and keep convincing yourself of its potential every day. But you also have to be humble enough to acknowledge areas for improvement.

Once I had committed myself to launching RecycleBank, I needed people who were going to tell me at key junctures: “That’s not going to work.”

Articulate the benefits

People want to do good things, but it helps when they’re given an incentive.

In the RecycleBank program, we make the incentives explicit, by rewarding people with points based on how much they recycle. These points can then be redeemed through our corporate partners — vendors as diverse as Apple, Chipotle and Zales.

I’ve tried to communicate to a variety of constituents that in all the actions that we take, if we think about the environment, we can also think about the ways to cut costs. I don’t want people to think about helping the environment as just the right thing to do — which it is — I also want them to see that it’s an effective way to generate positive financial return.

Make it scalable

In 2004, I was operating this business out of my apartment on the Upper West Side, and now, in 2008, we’re already providing service in 10 states.

In the beginning, growth was largely supported by millions of dollars in private equity investments, but at this point, I hope that we’ve done our last round of fundraising.

Since RecycleBank’s revenue comes from our ability to divert trash from landfills, this program is naturally sustainable.

I believe we can continue to grow with the support of our Reward Partners, leaders in local government and our team. We’ve been incredibly successful, reaching 90 percent of households in the areas we’re operating within and increasing recycling rates by more than 100 percent.

And I’m confident that we’ll soon be able to reach the entire country, as we keep making it easier for more people to see the immediate rewards of their recycling efforts.

Photo Credit: RecycleBank

Yesterday I suited up in my shalwar kameez and GreenMango uniform and joined my team for their daily fieldwork. As we made our way through the slow moving Hyderabad traffic, someone started a discussion on marriage. And then one of my female staff members, who often goes to temple, said, “Actually, madam, we are also praying for you that you will have a marriage!” We all had a good laugh.

When I decided to move to Hyderabad, India, I knew I would not exactly be the norm. I would be a single, Caucasian woman running an internet business for low-income clients. If anything, I figured I would stand out because I wasn’t Indian or because I wasn’t from Hyderabad.

In fact, it’s being a female entrepreneur that makes me an anomaly. Some 95 percent of the meetings I have in a given week are with businessmen, nearly all of our company investors are businessmen and my most trusted advisers are businessmen.

When my business partner (another woman) and I went for our legal incorporation in Hyderabad, our lawyers kept asking for our fathers’ and husbands’ signatures. This would not be possible, we explained. This started a long line of questioning and a lot of laughter as to why a single woman would start a business. One of my most memorable experiences in this regard came when I tried to get a wifi internet card from Tata Indicom. As I was applying, the staff kept asking me funny questions about my living situation, for example: Did I stay with someone?, Where did my family stay?, etc.

When they finally learned that I lived alone and did not have a husband, they triumphantly proclaimed, “Ma’am, you will need to fill special application. This is the spinster application!”

Of course, the irony of all of this is that women in India and Indian women around the world are incredibly accomplished. At the highest levels, you see amazing women as leaders in business, politics, law, medicine, science and academia. So, I wonder why do I not encounter these women more often? Are there too few of them? Are they only at the huge corporations, but not in the small and medium businesses that I interact with? Are they not in my sector? Are they not in my city?

Perhaps after a few more years here, I’ll understand. But at the end of the day, I’m not too bothered and recognize that all I have to do is accept the reality and move forward. Sometimes standing out disadvantages you. Sometimes it helps. At this point, my primary focus is making my business a success, regardless of the roadblocks or how I am perceived.

I devote much more energy to thinking about how to build a company that creates opportunities for my clients (both male and female business owners) to succeed. It is a task that is easier said than done, especially given the divisional realities I’ve observed: Having spent less time in the public sphere, women tend to have less local knowledge, such as where to go for certain goods, who to contact for certain services. Women and men come into GreenMango with very different salary histories, which seems only partially due to their work experience levels. As we build up our team, there are certain positions where I know a man would be more traditionally suitable. And I also know that the way I handle hiring decisions is what impacts whether or not women like me will continue to be anomalies in Hyderabad.

CBS Professors Nelson Fraiman and Medini Singh recently offered their views on the pace of economic development in Uruguay to the newspaper El Observador (download pdf of article here), addressing how the country could increase its levels of productivity and innovation in order to rival global competitors.

Calling Uruguay “stuck in time,” Fraiman and Singh asserted that the mindset of Uruguayan entrepreneurs has to change in order for the country to catch up to the rapid pace of development in other emerging nations, particularly India and China.

“Unlike India or China, here I don’t see hunger in the people,” Fraiman said. “Uruguayans are content, and that can be a problem.”

Both Fraiman and Singh said that Uruguay’s small geographic size should not hold it back, and proposed that if local entrepreneurs could optimistically embrace change and let go of a compulsion towards conformity, the country would be able to take advantage of limitless possibilities.

The only challenge now is to identify which business activity to focus on in order to distinguish Uruguay from other emerging nations and add unique value to the global market.

Fraiman proposed that Uruguay could exceed competitors in offering knowledge-based services, and Singh said he believes that it’s necessary for the country to focus on technical education in management and technology, “because this is what the world needs today.”

This discussion came out of a workshop to Uruguayan entrepreneurs last month on “Strategy and Operational Excellence for Global Competitiveness.”

As I wrote in a previous post, our recent Lang Center survey showed that starting multiple businesses is an important predictor of entrepreneurial success.

One thing I encourage students to do when looking to start a business is that they must temper their idealism with a bit of realism. For instance, those who start businesses in search of autonomy may find themselves jumping through hoops for a host of customers, bankers, investors and employees. Challenge, excitement and creativity are surely part of the experience, but entrepreneurship is also a lot about slogging through the tough times.

Having a great business idea is a good start, but very few ideas are compelling strokes of original genius. Most initial business concepts go through significant revision as the idea moves into reality. And it is rare for a business to unfold according to plan.

However, that original idea will get students into the venturing corridor, where one opportunity leads to another. Those who start with the long-haul view of building something significant have the right mindset for dealing with the ups and downs of an entrepreneurial career.

This post is part of a series following the “Pre-MBA World Tour,” organized by Shoaf and members of the class of 2010.

To better understand the business environment in Italy, we attended a private equity conference, where we had the opportunity to meet with the U. S. ambassador to Italy.

After a successful career at his private equity firm, Freeman Spogli, Ambassador Ronald Spogli entered the U.S. State Department, where he came to believe it was in the best interest of the United States to help modernize the stagnant Italian economy. The embassy recently established an initiative called the Partnership for Growth, which is designed to help foster the entrepreneurial mindset in Italy through four main objectives: (1) stimulate the venture capital industry and promote Italian entrepreneurial role models, (2) modernize the country’s capital markets, (3) spur innovation by protecting intellectual property rights and (4) send Italian students to U.S. schools to learn the American way of doing business.

In fact, the Italian venture capital industry is really quite nascent. A major constraint is that the entrepreneurial mindset — which is quite common to most people here in the U.S. — is foreign to most Italians. One of the reasons for this lack of entrepreneurial drive is the fear of bankruptcy. In the U.S., most new businesses fail . . . and it’s okay to fail and try again. But in Italy, if a new business fails, it’s not just the business that fails, the entrepreneur’s personal life might be ruined as well (e.g., the person would no longer able to vote or get another loan, would experience social failure, etc.).

Italian investors are also not typically comfortable with stomaching the risk required for PE/VC investments; they prefer to invest in more traditional asset classes, such as public equities and bonds. As evidence, consider this statistic: in the U.S., pension funds typically supply nearly 60 percent of the total capital invested in new private equity funds. In Italy, pension funds supply only 1 percent of such capital.

The embassy is already seeing some good results. Last year, it sent several Italian investors to Silicon Valley to learn the American approach to venture capital. Within three months of their return to Italy, these investors have already established a formal angel network and reviewed nearly 200 new business plans! As you can imagine, there was a great amount of energy in the air at the conference.

We’re looking forward to the many opportunities to learn entrepreneurial skills at CBS — which hopefully can inspire a similar energy among our class, and perhaps serve as catalysts for change in the renovation of the Italian economy.

Photo Credit: Diliff

It seems like any entrepreneur would kill for the chance to become an early leader in one of the many fast-growing global industries. Yet fast growth can lead to a wide range of problems, from human resources and managerial control to finance and information technology.

And when a company’s development is driven primarily by industry-wide expansion rather than the company’s innovation and operational excellence, you can be certain that the organization will experience its share of growing pains.

These challenges were the focus of Professor Michael Preston’s class, Managing the Growing Company. In this class we examined the common patterns that emerge when high-performing small and mid-sized companies outgrow their infrastructures. We studied many companies that successfully made this transition, including TheKnot.com and Mitchells & Richards, and some that did not.

Turns out that companies that grew successfully exhibited some of the same patterns:

1. The founders acknowledged their weaknesses and sought outside help. They were willing to consider that the people and processes that contributed the most to their growth in the start-up phase could be part of what was holding them back in the next phase.

2. When the organization grew, formal systems were put in place to manage functions like accounting and human resources that were once handled on an ad-hoc basis.

3. Founders avoided becoming a bottleneck by delegating important decisions. Trusted operational managers focused on day-to-day firefighting, while top executives focused on more strategic issues.

For the final class project, our team studied Did-It.com, a leader in search engine marketing (SEM). Over the past ten years, SEM has undergone wave after wave of upheaval and growth. Industry changes, which now occur almost daily, have left a long trail of shattered business models.

It was technological change that led Did-It.com to change its business model at least a half dozen times since it was founded in 1996. Each time the industry shifted, the company managed to move to an even stronger position. Over the past five years, the company recorded growth of 1,369 percent, landing it at number 137 on Inc. magazine’s list of the fastest-growing private companies in the United States.

How has Did-It.com remained so nimble? To find out, Jindra Zitek ’08 and I caught up with founder Kevin Lee at the company’s New York headquarters.

It became clear almost immediately that the leadership of Lee and his partner Dave Pasternack has been a huge factor in the company’s success. By constantly adapting their vision to both market realities and employee sentiments, they’ve kept their organization one step ahead of the curve.

For example, Lee told us that a few years ago he was walking around the office when he noticed that half of his employees were stressed-out and unhappy — employees focused on “organic” SEM. When this trend continued, he and Pasternak promptly closed this part of the business to focus on paid listings-management.

When asked about the defining factor that allowed Did-It.com to succeed where many rivals foundered, Lee cited his willingness to delegate responsibility. Employees are empowered to make important decisions without oversight, allowing them to deliver exceptional customer service while adapting quickly to whatever changes new technologies may bring.

“My employees don’t work for me,” Lee said. “They work for my customers.”

The highlight of my year at CBS is teaching Entrepreneurial Finance. I enjoy interacting with students, putting together the cases and bringing in speakers from the entrepreneurial and venture capital communities.

But what I enjoy most as an economist is the opportunity to think deeply about entrepreneurship. To many, entrepreneurship calls to mind the path-breaking motivation envisioned by Schumpeter’s “creative destruction.” But much of entrepreneurship — and much of what we can teach in business school — is more akin to “nondestructive creation,” in which the entrepreneur puts the pieces of a puzzle together in a way others haven’t seen before.

And many examples bring these economic insights to light: CBS ’01 grads John Londono and Zohar Yardeni discussing how they turned listening to corporate calls into a multi-million dollar business. Ben Rosen ’61 recognizing great potential in Lotus. Russ Carson ’67 taking insights from the healthcare industry to transform a modest hospital contract-management business into a major hospital chain, collecting billions of dollars in value.

The combination of a compelling profit model at a disruptive time by the right entrepreneur can be a winning one. This critical feature of entrepreneurship — identifying and capturing opportunity — is teachable, and is integral to the efforts of many faculty members at CBS. Instead of saying “no” whenever an opportunity has problems (as it always does) one can learn to ask: “What can go right? What can go wrong? And how can I tilt the odds toward success?”

Yasmina McCarty ’08, a graduate of the EMBA-Global program, won the 2007 Cartier Women’s Initiative Award in recognition of GreenMango, a company she developed with business partner Nandini Narula.

On February 1st I moved to Hyderabad, India to officially start GreenMango’s operations. That first day, a lot went wrong.

After a 29-hour journey, I arrived at the Hyderabad airport with my entire life in suitcases and the driver wasn’t there to meet me. Apparently there was a little mix up on the whole a.m./p.m. thing.

When he did finally arrive, he informed me that the guest house my business partner Nandini Narula and I had booked for the month (and secured with a deposit) was no longer available. I found another guesthouse to stay in for the night, and finally had a chance to rest, until someone else walked into my room — they had double booked the place.

I had a very low moment where I thought: “Oh my god, what have I just done?” Two weeks prior I had graduated with my MBA (as part of the EMBA-Global program) and watched my classmates take phenomenal jobs in the world’s business capitals as prestigious bankers, consultants, etc. And here I was moving to a new country, to a city I didn’t know and trying to start a company — what was I thinking?!

As my jetlag faded, my excitement about GreenMango returned, and since then our experience has been absolutely amazing. In our first week here we found a place to stay, set up the office, brought our first staff on board and signed up our first nine customers — it was exhilarating. All the months of planning and preparation were over and we were on our way!

I now stay in a lovely flat, where the rich sounds of life in India waft into my window every morning. We have a small but growing team, who are invaluable with their hard work and belief in GreenMango. And best of all, the customers are excited and signing up for our product.

Every day greets me with an unending list of problems waiting to be solved (e.g., how to get work done when the cricket match is on) and opportunities waiting to be grabbed (e.g., how to structure partnerships with Goliath when you are David).

But I couldn’t be happier and am truly enjoying every minute of this adventure.

Now Reed and Eric Chesin ’09 have come up with a way for pharmacies to organize medications that increases the chance of compliance. The idea, Bluepak, recently won CBS’s 2008 Outrageous Business Plan Competition; their elevator pitch is below.
 

The competition, which is in its ninth year, drew 46 submissions in a diverse cross section of industries. You can see all the pitches in this real media video, including a crêpe business pitch that shows how to make crêpes right in a manila folder.

“To be where the consumers are just before they get there and offer them what they didn’t know they wanted.”

This ability to see change before it happens — or to imagine change and create it — can result in billions of dollars. We know the legends well:

Bernie Marcus was fired as CEO at Handy Dan, a small home-improvement chain. Together with a colleague who had also been axed by the board, he developed a customer-centric supersized chain known today as Home Depot.

Jerry Perenchio co-purchased Univision television network for $500 million in 1992. Since that time, Univision Network grew to become one of the top five networks in the country in any language, and in 2006, Perenchio sold Univision for $13.5 billion.

Howard Schultz was an executive at a housewares manufacturer when he noticed that a client was ordering an unusually large number of specialty coffee machines. He visited the client, a four-store operation called Starbucks Coffee, Tea and Spice — and today he oversees more than 3,300 stores worldwide.

Ted Turner bought two failing TV stations in the Southeast and launched a revolution in the way we watch and receive the news. In 1970, he believed that a 24-hour all-news network would turn a profit and transform the news business. By 1980, that vision became CNN.

In all of these, it’s easy to see that innovative thinking was critical in their success.

But can we be taught that? Or is innovation instinctive?

While you consider your answer, I asked experts on the topic to weigh in:

Tom Kelley:

I absolutely believe that innovation can be learned. And the good news is that everyone has that innovator’s mindset already inside them, so the challenge is not so much to learn innovation as to recover some of the open-minded creativity of youth. Baudelaire said “Genius is childhood recalled at will,” and the innovator’s challenge is to tap into that latent talent hidden within their team.

Kelley is the author of The Art of Innovation and general manager of IDEO, the award-winning design and development firm that produced the Apple mouse, the Palm V and the revolutionary and deceptively simple Shimano Coasting bike. Kelley’s work deconstructs the practice of creativity and examines the genesis and execution of an original idea.

John Maeda:

It is this basic question the innovator asks herself, “Am I normal” or asked another way: “Am I different?” Innovators are born when they choose to leverage their mind to the fullest — when they flip the simple switch in their mind from “normal” to “different.” Keeping the switch flipped ON while the pressures of the world keep flipping it OFF — now that’s the hard part and the real challenge: how to stay innovative for life. That’s the greater question in my mind.

Maeda is from MIT’s Media Lab and soon will assume the reins of the Rhode Island School of Design. He is a world-renowned graphic designer, artist, computer programmer, educator and theorist. Esquire magazine named him one of the most important people in the 21st century. I.D. magazine selected him as one of the year’s 40 most influential people in design.

Bernd Schmitt:

Many view innovation as technical innovation; that’s a narrow engineering mentality. From a customer-oriented perspective, innovation is anything that improves customers’ lives in product design, but also communications, shopping environments, on web sites, etc. Think Dove’s Campaign for Real Beauty (the message and the innovative You Tube ads); think Abercrombie’s hip retail space; think Facebook. And that type of innovation can certainly be learned and taught — just like technical innovation. In my marketing courses and in my writings I equip students and executives with tools that marketers can use to challenge marketing and communications assumptions (the sacred cows), look outside the industry for inspiration (outside-industry benchmarking) and examine the core of a strategy and take it to an extreme (strategy stripping).

Schmitt is executive director of the Center on Global Brand Leadership at CBS and has written about the limitations of traditional corporate culture, the need to promote creativity and innovation and the unique challenges of establishing and cultivating a powerful brand.

What do you think? When it comes to entrepreneurship and innovation, what can and can’t be taught?

Before working at a venture capital company, I tried for years to figure out how to quickly determine if something is a venture capital investment or a private equity investment.

Some suggested that private equity is a super-umbrella term that is called venture capital when the investment is at an early stage. However, some companies have operated for 6–10 years before they come for venture funding.

Others believe that venture capital is the original term that became popular after World War II, and private equity is the term coined in the 80’s after famous people like Henry Kravis ’69 invested in bigger companies.

But I’ve found that determining by size of the company gets tricky, as revenue of $2 million might be considered small in a developed country but large in a developing country.

The size of the investment doesn’t work either if you base it on country. An investment of $10 million in a U.S.-based company would be considered a venture investment, but might be considered a private equity investment in the developing world.

Some professionals strictly define private equity as a leveraged buyout (LBO) activity. But in developing countries like India, there is almost no LBO activity due to banking regulations, and yet billions of dollars are invested in large corporations by private equity players as equity or convertible debt. This sure looks like private equity investment, but does not fall under the LBO or management buyout (MBO) category.

There is also conventional wisdom that says if a company is not yet successful but the promoter is very confident, it is a venture capital investment, but if the reverse is true — if a company is successful but the promoter is not that confident and wants to either restructure using LBO or wants to exit — it is for sure a private equity investment.

Though there may be some truth in that, it’s not quite scientific enough and does not cover all investment scenarios.

So here’s my own litmus test: if a company has no additional bank-debt carrying capacity due to its current financial state, an investment in it should be considered a venture capital investment. Otherwise, it should be considered a private equity investment. This works for companies of any size, stage or location.

Prior to business school, I managed both web marketing and the supply chain for a leading distributor of luxury bathroom fixtures that has taken advantage of both these trends.

In 2005-06 I was the company’s lead U.S. representative in Asia, and met with reps from hundreds of companies eager to find customers in global markets. Encouraged by my boss, I soon formed a side venture to export furniture products to the U.S.

To buy our first 20' container of goods, I borrowed $15,000 from my mom, and scraped together another $10,000 together with a friend. By the time I started business school, we were running two successful businesses at the intersection of international trade and e-commerce: backrubhub.com and zodeco.com

In 2007, although we hit $90,000 in sales and paid back all our loans, the combined company is nowhere near its potential. I had basically put my business on hold to focus on learning as much as possible during my first three semesters as a full-time student in the MBA program.

Now as graduation nears, scaling up the business has again become my top priority. I’m raising new debt to replenish inventory stocks. I’ve hired two web designers in the Philippines, a programmer in the Ukraine, and a virtual assistant in South Africa. I’m looking for office space in Manhattan. And this weekend I’ll attend Search Engine Strategies New York to learn how to drive more traffic to my sites.

I’ve also been getting free legal counsel (thanks to the school’s Entrepreneurial Greenhouse Program) and I’ve had the chance to sit down with a legal expert to review my articles of incorporation, shore up the company’s corporate veil, as well as to identify and hopefully avoid potential liabilities.

While no new venture is risk free, the lowering of barriers to entry has made it cheaper than ever to launch a new business. Over the past 16 months at Columbia, I’ve crafted a strategy that I believe will allow me to develop an adaptable, high-performance organization.

Now the hard part: execution.

So during winter break, I was one of 30 CBS students who traveled to Africa to write case studies about successful entrepreneurial businesses on the continent. (See previous posts here and here.)

Our goal was to develop a world-class business school case study about Computer Warehouse Group (CWG). This project presented the opportunity to dispel the myth that there are no sophisticated businesses on the African continent — or worse, that businesses there can only get ahead through corruption.

We knew only that the firm had experienced explosive growth over the past few years, achieving some $100 million in revenues in 2007. We knew the firm was an early reseller for Dell, and that it was an important partner for a variety of blue chip Silicon Valley firms, including Cisco, Sun Microsystems and Oracle. We understood CWG’s strategy to position the firm as a strategic partner capable of delivering turn-key IT solutions for big companies, and we knew that a well-known global private equity fund had made an offer to purchase a minority stake in the company.

And until we got to Lagos, we didn’t have any sense of this company’s culture. Was it a one-man show, heavily dependent on its charismatic founder, Austin Okere? Or did it have people and processes in place to ensure continued growth into the future? Did employees at the bottom live the values expressed by those at the top? Or was it more of a show to impress customers, potential investors or other stakeholders?

To answer these questions about the company’s culture, we interviewed dozens of employees, from the most senior management to the most junior customer service and sales teams.

As it turned out, we couldn’t have picked a better company to lay these stereotypes to rest. The company has thrived in difficult circumstances because of an entrepreneurial culture that embodies the work ethic, personal responsibility and integrity of its founder. The firm has distinguished itself from the competition by consistently delivering on promises to customers and is one of Nigeria’s 50 fastest growing companies.

A rep from Cisco told us that the firm is “probably the most entrepreneurial company in Nigeria, certainly in the most entrepreneurial in IT sector.” The founder of the competing firm, who has since sold his business to a larger international player, expressed similar respect for his former rivals.

Because the case study requires a valuation of the company, we also spent a good deal of time learning about the country’s capital markets in general and the private equity group’s offer in particular. We interviewed senior leaders at several private equity firms, the founder of a local investment bank and high-ranking officials from Citigroup. The information we gained from these meetings was invaluable for understanding the similarities and differences between Nigerian capital markets and those of more developed economies.

We concluded our trip with a visit to the Lagos Business School, a member of the Association of African Business Schools and a huge supporter of our project. The folks there not only linked us up with Computer Warehouse Group at the outset but also booked our hotels and even provided our team with a driver during our stay. The school’s ultramodern facilities and helpful administrators were very impressive. We are excited that our work will help contribute to the world-class institution they are building in the heart of Africa.

But my nervous tension is dwarfed by the excitement that only a once-in-a-lifetime opportunity can create. Columbia’s new Entrepreneurship in Africa Master Class has me traveling to Nigeria to write a case study on Computer Warehouse Group, West Africa's leading IT systems integrator.

I’ll be working alongside three close friends from Columbia’s class of 2008, Jindrich Zitek of the Czech Republic and two Lagos natives, Gbolade Arinoso and Lara Junaid. We'll interview many of Nigeria’s leading banks, private equity groups, IT firms, oil companies and telecommunications providers to flesh out the company’s story.

Ultimately it’s the chance to tell this story that generates the most excitement for our team. Computer Warehouse Group started in 1992 as a tiny Dell reseller committed to empowering its employees to provide superior customer service to business clients. Over the past 15 years, these principles, combined with the entrepreneurial spirit of its founders, have allowed the company to grow into a $100 million IT powerhouse providing comprehensive hardware, software and networking solutions for corporations throughout West Africa.

Over the next week, our team intends to write a case study about Computer Warehouse Group's phenomenal rise. We hope it will provide locally relevant teaching material for Africa’s leading business schools.

More next week . . .

But to win, players must answer algebra questions.

The video game, Meltdown, is being tested as a new way to teach math to middle schoolers, including pilot programs in some of the country’s biggest school systems, such as Miami, Chicago and New York.

“It's a paradigm shift in thinking about education,” said Ntiedo “NT” Etuk ’02, who is also cofounder, chairman and CEO of Tabula Digita, the maker of Meltdown. “I really believe that the reason kids are doing poorly is because what is happening outside the classroom is not being translated to what is happening inside the classroom.”

Preliminary results suggest that the game helps students’ standardized test scores, and that students in classes that use the game have better attendance and are more engaged in learning.

I think education is important in ways that are obvious to every human being out there. You think about what education did to your life, you think about the teachers who changed your life, you think about the knowledge you developed.

For the country and for the city, education is important for two reasons, and one is that we have a racial and ethnic achievement gap in this country that is the greatest shame of this great nation.

The idea that skin color or poverty can determine the quality of the education you get is wrong. It’s fine for rich people to have bigger houses, larger cars, more diamonds — but a better education is morally wrong.

That moral issue takes on another dimension as we move forward in an increasingly globalized competitive economy, and I think it’s going to create enormous economic challenges.

We cannot have an education underclass in an increasingly competitive global economy. If you watch what’s going on in the rest of the world, there are people out there — quite literally — looking to eat our lunch.

And it is so critical to the transformation to have people who are bringing entrepreneurial, innovative juices — who instinctively get accountability, who understand leadership and care deeply about management. In the world of education, when I talked like that in the beginning, people looked at me like I was nuts. This was an alien language.

But at its core, education is a service-delivery challenge — if you don’t lead it, manage it and create the proper incentives in order to make it happen, it won’t happen. It’s about cultural transformation. That’s why the kids from business school want to come and be a part of it.

The core leaders that I have at many levels in the system are not people who came from the education schools — they’re people who came from the business schools, and from the business sector.

That causes me a lot of political heat, but that’s just fine, because if you don’t inject entrepreneurialism, accountability, innovation, differentiation, all of those things — you know what? We’ll continue to get the same pitiful results that we have gotten for the last 50 years in American education.

The two then wrote a business plan for a truck that would sell freshly made gourmet desserts like crème brûlée and molten chocolate cake on the street. After receiving a small-business loan, Chris and Jerome began building their business.

“There were some things we didn’t foresee,”said Chris, including the hassle of getting a mobile food vendor permit. “Once you start a business, the business plan goes out the window.”

But on Halloween this past year, his full-fledged idea — the Dessert Truck — premiered on a Greenwich Village street. It was an immediate hit.

In addition to being the co-founder and managing partner, Chris works the truck at night, while Jerome makes desserts during the day. “Every day is a different experience,” he said.

Chris is also in his last semester as an MBA. When asked to give a piece of advice for future entrepreneurs, he offered this: “Take your best estimate for working capital and double it. Because that’s what you’re really going to need.”

The Dessert Truck can be found after 6 p.m. on University Place at 8th Street, and is offering a Valentine’s Day special: winter fruit mousse cake and a package of chocolate mendiants for $8.