What Startup Accelerators Really Do

The well-advertised boom in startups and venture capital in recent years has coincided with the emergence of new players in startup ecosystems. One of these, startup accelerators, has received a great deal of attention but also little scrutiny. Moreover, they are commonly misunderstood or mistakenly lumped in with other institutions supporting early-stage startups, such as incubators, angel investors, and early-stage venture capitalists. In a recent analysis published by the Brookings Institution, I tackle some of the confusion around startup accelerators by laying out a clearer picture of what they do, and how they differ from other early-stage institutions. I also provide a review of the research literature on the effectiveness of accelerators to achieve their stated aims, some best practices for accelerator programs, and some figures on the size, scope, and impact of these organizations in the United States. Accelerators are playing an increasing role in startup communities throughout the United
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When to Skip a Difficult Conversation

Leaders know that they’ll occasionally need to give tough feedback to their employees, colleagues, and clients. And yet, no matter how skilled or experienced they are at it, most would also do anything to find a way out. As Douglas Stone, Bruce Patton and Sheila Heen explain in their book, Difficult Conversations, this internal struggle is natural: “If we try to avoid the problem, we’ll feel taken advantage of, our feelings will fester . . . and we’ll rob the other person of the opportunity to improve things. But if we confront the problem, we may be rejected or attacked, we might hurt the other person in ways we didn’t intend, and the relationship might suffer.” In a 2013 Globis survey of more than 200 professionals on the topic of difficult conversations, 97% of respondents said they were concerned about the associated levels of stress for the other person, 94% were worried about damaging the
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Why Organizations Forget What They Learn from Failures

Organizations sometimes make catastrophic mistakes. And although they try to learn from these disasters, they tend to make similar mistakes again and again. Consider NASA, an organization employing some of the nation’s brightest minds. In 1986, the space shuttle Challenger exploded – and by now, we all know the story. Some people within the organization had concerns with a component (the O-rings) being affected by low temperatures. However, their views were not taken into account in the decision to launch the shuttle. Following the Challenger explosion, NASA did take concrete steps to correct flawed organizational processes. For example, it increased both the number and status of safety personnel, and it strengthened safety operating procedures. But learning waned as avoiding launch delays became increasingly important. This gradual forgetting was at the root of the Columbia disintegration. Then there’s the explosion of BP’s Deepwater Horizon oil rig in the Gulf of Mexico
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How a New Generation of Business Leaders Views Philanthropy

Andrew Carnegie’s advice in the 1889 essay “Wealth” was to spend the first part of  your life getting as much education as possible, to spend the second part making all the money you could, and to spend the last part giving it all away for worthwhile causes. Today, business leaders are not only trying to address community and global problems earlier in their lives; they are also questioning the traditional divide between commerce and philanthropy. As prominent hedge fund manager Bill Ackman told me, “When I graduated from business school I thought business was about making money and philanthropy was about doing good. Now I think both can be used as methods for changing the world.” Sir Ronald Cohen, the father of British venture capital, agrees. “We are on the verge of a revolution,” he explains. “Just as technology and entrepreneurship have transformed the way we live, applying investment and business tools to
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What Do You Really Mean by Business “Transformation”?

jennifer maravillas FOR HBR
Today’s corporate watchword word is transformation, and for good reason. One study suggests that 75% of the S&P 500 will turn over in the next 15 years. Another says that one in three companies will delist in the next five years. A third shows that the “topple rate” of industry leaders falling from their perch has doubled in a generation. Software is eating the world. Unicorns are prancing unabated. Executives at large companies rightly recognize that they need to respond in turn. And yet. When executives say transformation what do they really mean? Often, the word confuses three fundamentally different categories of effort. The first is operational, or doing what you are currently doing, better, faster, or cheaper. Many companies that are “going digital” fit in this category — they are using new technologies to solve old problems. A big operational change can be jarring
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How to Bring in a New CEO for Your Startup

Most startup founders are deeply committed to the companies they have launched and heavily invested in the dream of leading the company to long-term business success. Not surprisingly, they often have a hard time asking themselves if their talents are best suited to lead their company as it transitions through the various stages of its growth life cycle. They have an even harder time admitting that the answer might be new leadership. Research shows that only a small percentage of founder-CEOs have the skills and experience needed to ensure company growth and shareholder value beyond a startup’s early stage. As a venture begins achieving a solid foothold in the marketplace, it needs different leadership capabilities to create maximum shareholder value. A smart founder understands that there is often a trade-off between creating sustainable market value and preserving control. For many, this means recognizing the need for a new CEO. But how
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Making Personalized Marketing Work

Let’s face it — U.S. marketers spent nearly $60 billion in 2015 on digital ads, but the industry doesn’t do a great job connecting people with products they want. According to Christophe Primault, CEO of GetApp, just 10% of consumers find what they’re looking for when interacting with online content. The key to relevant messaging lies with data, but the challenge is no longer collecting it. Each day, we create 2.5 quintillion bytes of data. Today’s challenge is using data to deliver customers more contextual, personalized impressions. Imagine a world where programs execute optimized, data-driven campaigns tailored to each consumer. No longer will “audience” refer to nebulous demographic swaths. Soon, every digital ad you see will be tailored to a very specific audience — you. The Silicon Valley giants that gave us social networks, smartphones, and apps have realized the power of those tools to capture the
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Don’t Take Money from VCs Until You’ve Asked 4 Questions

In the race to get the check in hand, most entrepreneurs don’t do in-depth due diligence — or any due diligence — on the venture capital (VC) firms they pitch. Founding teams eager to raise capital to grow their companies enter into long-term partnerships with VC firms they don’t know well. It’s a risky strategy that can leave startup CEOs in mis-aligned partnerships with unrealistic expectations. To better understand their investors, entrepreneurs should start by asking these four questions:

What is the VC’s track record?

Most entrepreneurs, if they had full visibility into the performance of each VC firm, would choose to partner with a top performer. After all, the best performing VC firms, by definition, have experience identifying and working with high-performing teams, helping startup companies grow rapidly, and guiding them through successful exits. VC firms with poor or unrealized performance are riskier partners for entrepreneurs. They are at
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Case Study: Should You Address a Colleague’s Erratic Behavior?

As Carlos Guerrero walked to the whiteboard where the app development team had gathered for its daily stand-up, he noticed that Larry Berman was absent again. But this time he didn’t bother to ask anyone about it. He just carried on. “Morning,” he said, staring at the dizzying assortment of sticky notes on the whiteboard. “Hit me with your updates.” As the director of digital strategy for Meals Now, a rapidly growing subscription meal-delivery service, Carlos was cosponsoring a critical app redesign project, staffed by a team of seven plus a few external consultants. Larry, the head of technology, was his partner
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Why Decisions Get Second-Guessed, and What to Do About It

Leaders strive to be decisive. But all too often their well-reasoned decisions are reopened by bosses and colleagues, or worse ignored, which slows down progress and breeds resentment, confusion, and paralysis. How can you make sure that your decisions stick? In the course of researching our new book, Simple Sabotage, we identified three of the most common reasons why they don’t and pinpointed actions you can take to ensure that people follow the plan you’ve set out. Reason 1: “You didn’t ask me!”  Upon hearing about the decision, someone balks, claiming they weren’t consulted. Maybe they disagree with the decision; maybe not. But they’re upset they weren’t brought into the process, and want to reopen the discussion. This can happen easily when an organization is growing, and decision-making rights have been delegated across a larger number of people. The question is whether the person should have been
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To Predict the Trajectory of the Internet of Things, Look to the Software Industry

With over 50 billion connected devices expected by 2020, the Internet of things (IoT) is poised to have a major impact. What’s not clear, however, is how the IoT’s complex ecosystem — a loose network of interacting products and services, pictured below will evolve and proliferate and which companies will emerge as leaders. (Click here to for a version that you can enlarge to see more detail.) The red nodes represent platform companies; the gray ones are companies that provide a product or service.
The IoT is a complex ecosystem that is not yet dominated by any major players. Consequently, it could be difficult to determine the challenges and most effective business opportunities for companies looking to move into the space. But by mapping the relationships between platform providers and component providers, I found parallels to the emergence of the software industry,
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Is Technology Really Helping Us Get More Done?

Twenty years ago, new office technologies like email and teleconferencing contributed to a dramatic boost in productivity. Information flows accelerated. Collaboration with coworkers became easier and easier. Productivity grew significantly faster during the 1990s and early 2000s than in previous years. Today, productivity growth has declined appreciably. Since 2007 it hasn’t even kept up with inflation. What happened? The financial crisis, sure, but that’s not all. Companies have continued to invest in new technologies for white-collar workplaces, but the benefits are no longer visible. In fact, we may have reached a tipping point where each new investment in office technology must be carefully assessed against a simple test: will it actually help people get more done, or not? The roots of this conundrum lie in a seemingly innocent piece of technological wisdom known as Metcalfe’s Law. Robert Metcalfe is a giant in the technological field, co-inventor of the Ethernet and
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A Guide to Being Compassionate During Layoffs

Far too often, leaders who are closing or shrinking an operation take the old tough guy approach. They make the hard decision, move swiftly to reap the maximum savings, and do whatever they can to please Wall Street. But in my more than 40 years in industry, much of it in turnaround situations, I have become convinced that the tough guy approach makes no sense. It can alienate surviving employees, anger customers and suppliers, and destroy shareholder value. Leaders can avoid, or at least greatly minimize, these repercussions by taking what I call a “soft hands” approach, treating important constituents with consideration and compassion. It consists of four essential principles that may appear obvious and commonsensical but are often ignored. Treat employees with dignity, fairness, and respect. Address “What does it mean for me?” Tell them why they’re losing their jobs, whether it’s because of a drop in demand, changes
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Big Companies Should Collaborate with Startups

Campbell, the food company best known for its soups, is investing $125 million in a venture fund to help finance food startups, according to the Wall Street Journal. Other large consumer companies are doing the same. They share a motive: Growth is increasingly hard to come by, so large companies are increasingly looking to entrepreneurs to help them find it. Consider the numbers. Over the last four years, the entire U.S. grocery store’s entire food and beverage category grew just 2.3% a year. The largest 25 food and beverage companies contributed only 0.1% of that annual growth rate. Who drove the growth? It came from 20,000 small companies outside of the top 100, which together saw revenue grow by $17 billion dollars. Despite that aggregate revenue growth, not every startup is successful — in fact, the vast majority will fail. Ironically, startups and established companies would both
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The Climate Movement Needs More Corporate Lobbyists

Across corporate America, there is broad support for action on climate change. Leading businesses and executives vocally supported President Obama on the Paris Agreement. Many companies have committed themselves to getting onto a sustainable path, and many are pushing their commitment out through their supply chains. This is good, and it’s important. But it makes us in Congress feel a little left out. The corporate lobbying presence in Congress is immense. But in my experience, exactly zero of it is dedicated to lobbying for a good, bipartisan climate bill. Dante wrote that above the Inferno was a sign: “Abandon hope all ye who enter here.” But there is hope in Congress. Many of my Republican colleagues are eager for some political support, to counter the fossil fuel industry’s relentless onslaught. Despite the statements emitted from oil companies’ executive suites about taking climate change seriously and supporting a price on
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How the Apple/FBI Fight Risks the Whole U.S. Tech Industry

There’s a very real cost to the actions of the U.S. Government in the San Bernardino case. From a civil liberties perspective, we’re all bearing it. But from an economic perspective, that cost is being born almost entirely by the one bright spot in the American economy: the technology sector. To consider the impact this is having on tech firms, it’s critical to understand the change the internet has had on the world of business, taking the addressable market for any one product or service from a handful of localities through to the entire planet. But underlying this revolution is something else, which is just as critical as the technology itself: trust. Remember the early days of the web, when people were afraid to enter their credit card details? It took years to get to a point where there was enough trust that buying things online was considered normal.
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