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Young entrepreneurs' advantage: ignorance

Young people make better entrepreneurs because they're too inexperienced to know that their ideas are silly:

The mistakes novices make come from a lack of experience. They overestimate mere fads, seeing revolution everywhere, and they make this kind of mistake a thousand times before they learn better. But the experts make the opposite mistake, so that when a real once-in-a-lifetime change comes along, they regard it as a fad. As a result of this asymmetry, the novice makes their one good call during an actual revolution, at exactly the same time the expert makes their one big mistake, but at that moment, that’s all that is needed to give the newcomer a considerable edge.

» corante.com [ Contribute: submit link / submit article / submit company ]

Book: Take a Nap! Change Your Life.

Tired after lunch or by mid-afternoon? You might think that you should go buy yourself some coffee. But according to UCSD researcher Sara Mednick, you’re better off taking a nap.

Nappers make fewer mistakes, are in a better mood and in better health, she said. “It also feels good,” she added. “And what’s wrong with that?” Napping also is important because many of us today say they have trouble sleeping, Mednick said. According to the National Sleep Foundation, about 40 percent of Americans report that they sleep less than seven hours a night – as opposed to the recommended eight hours. Everyone is affected, from infants to older adults, the researcher said.

Some of her most striking research looks at napping compared to drinking caffeine. In one study, Mednick had one group of subjects nap for 90 minutes, while another drank 200 mg of caffeine. She also set up a control group, who took a placebo. Then she tested her subjects on several tasks, including typing and spatial skills, such as remembering the layout of a room or a map. On both tasks, coffee drinkers performed much worse than the placebo group, Mednick said. “Of course, this is a bummer for Starbucks,” she added.

» UCSD's Biomedical Library

Three Perspectives on Team Learning: Outcome Improvement, Task Mastery, and Group Process

Organizations increasingly rely on teams to carry out critical strategies and operational tasks. How do teams learn, and what factors are most important to team learning? This paper reports on current perspectives and findings that address these questions, looking at empirical studies on team learning from three areas of research: outcome improvement, task mastery, and group process. Overall, Edmondson and coauthors characterize the nature of research to date and assemble what is known and unknown about the theoretically and practically important topic of team learning. Key concepts include:

• Team learning has value for organizations; learning in teams is seen as a key mechanism through which learning organizations become strategically and operationally adaptive and responsive.
• Research on team learning is at a crossroads.
• How the learning of individual work teams translates into organizational learning is not well understood, and management literature to date offers few insights.
• One avenue for future research is the durability and utility of team-based networks for the organization as a whole.
• Learning in teams almost necessarily plays a role in developing the knowledge and skills of individuals who compose the team. Another avenue for future research is how individuals benefit from their team learning experiences in terms of intellectual, career, and personal development goals.
• Organizations stand to benefit when ideas are cross-fertilized and diverse individuals learn to work together. "Outsiders" can introduce valuable ideas.
• Learning and execution are often at odds: Learning by its nature involves uncertainty, false starts, and occasional dead ends. Team learning in organizations must be recognized as a strategy for tolerating forays into the unknown.

» [PDF]  View or Download Full Working Paper

[mp3] Transforming HR to Create Real Value

The headlines tell the tale. Baby boomer retirements, an aging workforce, a highly competitive global marketplace for talent, international expansion. It’s clear that businesses in America and around the world are being critically challenged. As baby boomers retire, companies everywhere are about to face a chronic labor shortage unlike any they have ever seen. And this crisis is expected to last for decades. Companies will likely struggle just to maintain their current market position, much less grow.

[mp3] Listen or Download / DeloitteInsights

A Survey of Talent: A discussion with Adrian Wooldridge, Washington Bureau Chief of The Economist

"There is intense competition at the moment to hire the most talented and most intellectually able people ... We have a shortage of talent both within countries and between countries, and there is an intense battle between companies trying to hire the most talented workers and also between countries which are looking to recruit talented young immigrants."

[mp3] Listen or Download / The Economist

Lessons Not Learned About Innovation

Every managerial generation rediscovers the need for innovation to drive growth but, decade after decade, "grand declarations about innovation are followed by mediocre execution that produces anemic results, and innovation groups are quietly disbanded in quiet cost-cutting drives." So observes Rosabeth Moss Kanter in a new Harvard Business Review article, "Innovation: The Classic Traps."

» HBS Working Knowledge

Straight forward VC advice from Sequoia: Elements of Sustainable Companies and Business Plan Formatting

In the crowded field of US venture capital, where arguably too much money is chasing the available quality investments and some firms bemoaning the industry's prospects , Sequoia Capital is on something of a run. Having reaped a reported $495m - or 43-fold return - on its investment in YouTube.

VC Ratings points to a new feature on the company's website - a list of 10 characteristics that Sequoia, which backed both Yahoo! and Google, looks for in companies and advice on submitting a business plan.

• Clarity of Purpose
  Summarize the company's business on the back of a business card.
• Large Markets
  Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.
• Rich Customers
  Target customers who will move fast and pay a premium for a unique offering.
• Focus
  Customers will only buy a simple product with a singular value proposition.
• Pain Killers
  Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.
• Think Differently
  Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.
• Team DNA
  A company’s DNA is set in the first 90 days. All team members are the smartest or most clever in their domain. "A" level founders attract an "A" level team.
• Agility
  Stealth and speed will usually help beat-out large companies.
• Frugality
  Focus spending on what's critical. Spend only on the priorities and maximize profitability.
• Inferno
  Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.

Whatever the product is, who could resist? And under the mysterious heading of "Inferno" - it concludes, "start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower." How refreshing.

» Search Financial-Specific Tags: VC Advice - Venture Capital
» sequoiacap.com/ideas

Street Smarts: How Much Risk Can You Take?

In the 26 years I've been in business, I've come to realize that there are two types of people who start companies: those who like risk, and those who don't. Whichever type you may be, there are challenges you need to confront if you want to build your business. Entrepreneurs of the first type had better learn how to rein in their risk-taking, or they'll make bad decisions that put their companies in jeopardy. Those of the second type have to understand that you can't grow without taking risks. The relevant questions are, how much risk can you handle, and how much is required to get you where you want to go?

» inc.com

[mp3] Andy Grove: A Biographer's Tale

With me today is Richard Tedlow, a noted business historian on the HBS faculty and the MBA class of 1949 Professor of Business Administration. His latest book (Andy Grove: The Life and Times of an American) is a biography of Andy Grove, a founding father of Intel, which has gone from startup status in 1968, to a ranking of number 49 on the latest Fortune 500 listing. Anyone with a computer is familiar with the phrase "Intel Inside." With this book, professor Tedlow has taken us inside Andy Grove. Richard, it's great to have you with us today. 

[mp3] Podcast 

Interviewer: James Aisner - Running Time: 29 min. November 9, 2006
James Aisner is director of Media Relations and a senior editor for Harvard Business School.

What's to Be Done About Performance Reviews?

It's the season for many employee performance reviews. Why do they seem to rank alongside root canal dental work on our list of things we look forward to as managers and employees? And what are we doing about it?

If we assume that the basic purpose of employee evaluations is to build better-performing organizations, then this has to be one of the most important things we do as managers. But if formal evaluations weren't required, would we even provide them?

Much of this season's debate has centered around whether a forced ranking system works in such efforts. It was given visibility by its adoption at GE several years ago, where managers were forced to identify their direct reports in three categories on a "vitality curve": the top 20 percent, the "vital" 70 percent, and the bottom 10 percent. (Perhaps not entirely coincidentally, these are the de facto percentages used in the forced ranking system for students in required courses at this institution.) Although the system has been modified somewhat in its application, it still triggers advice to those being ranked, especially those in the bottom category who may be given help or advised to leave the organization.

Proponents of forced ranking claim that it is more humane and effective than most qualitative systems for employee appraisal in which employees don't receive frank appraisals because managers are not able or willing to give them. This helps avert surprises, or worse, lawsuits, when poorly-performing employees are fired. Opponents claim that it hurts such things as teamwork and innovation. What little research there is on forced ranking systems suggests that they produce a short-term improvement in performance that soon levels out, perhaps because the worst performers are weeded out in a timely fashion.

Perhaps a more important issue is the objective of the review itself. Is it to weed out poor performers? To recognize the so-called A players? To provide the basis for compensation decisions? To provide clues to future opportunity within the organization? To map out an individual plan for personal development? All of these? Too often this is unclear. Is it any wonder then that managers, many of whom receive little or no training in how to do it, conduct the task of reviewing performance so poorly?

The questions all of this brings to mind include: What can we do to make performance reviews more productive and less distasteful? Should their objectives be scaled back to just one or two? Should they be disengaged from the determination of compensation and, if so, how? As managers, should we invest time to keep a day-to-day scorecard on individual qualitative and quantitative performance and feed back impressions to employees on an ongoing basis? Should periodic performance reviews be relatively incidental as opposed to regular coaching "in the moment"? (After all, aren't we all teachers?) Should less emphasis be placed on looking backward and more on how to improve future performance? Should the process be renamed and redesigned as a "personal development review"? Should we put aside "forced ratings"? Just where does the process fit in building organizational performance? What do you think?

via: HBS Working Knowledge

Generic Prescription Drug Plan to Provide Pain Relief for Small Businesses

Small businesses are straining under the pressure of sharply rising health insurance costs, leading many employers to cut their employee coverage. To provide critical relief for smaller-sized companies, Medco Health Solutions, Inc. (NYSE:MHS) today announced the introduction of Generics First(TM), one of the nation's lowest cost generic prescription drug programs for small to mid-size businesses.

Generics First, an insured product available only through Medco's insurance partners via their licensed agents and brokers, is up to half the cost of traditional plans, with members receiving up to a 90-day supply of generic drugs for a $10 co-pay.

Medco is launching the Generics First product with Nationwide, a leader in insurance and financial services, who will be selling the product under the name Nationwide Select.

Many small businesses have seen their premiums rise as much as 50 percent over the past several years making health care costs the #1 issue they're facing, according to a recent study by the National Federation of Independent Business Trade Group. With the average generic drug costing approximately 70 percent less than its branded counterpart - and nearly 75 percent of all FDA approved drugs available in generic form - fully utilizing these lower-cost alternatives can mean the difference between a business providing an effective prescription drug plan for its employees or eliminating coverage altogether.

Sleep Deficit: The Performance Killer

Frenzied corporate cultures still confuse sleeplessness with vitality and high performance. An ambitious manager logs 80-hour work weeks, surviving on five or six hours of sleep a night and eight cups of coffee (the world’s second-most widely sold commodity, after oil) a day. A Wall Street trader goes to bed at 11 or midnight and wakes to his BlackBerry buzz at 2:30 am to track opening activity on the DAX. A road warrior lives out of a suitcase while traveling to Tokyo, St. Louis, Miami, and Zurich, conducting business in a cloud of caffeinated jet lag. A negotiator takes a red-eye flight, hops into a rental car, and zooms through an unfamiliar city to make a delicate M&A meeting at 8 in the morning.
Via: HBR Sleep Deficit: The Performance Killer, October 2006

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Small Business / Small Startup

A small business may be defined as a business with a small number of employees. The legal definition of "small" often varies by country and industry, but is generally under 100 employees. These businesses are normally privately owned corporations, partnerships, or sole proprietorships.

Small businesses are common in many countries, depending on the economic system in operation. Typical examples include: small shops, hairdressers, tradesmen, solicitors, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing etc. The smallest businesses, often located in private homes, are called microbusinesses.

Problems Faced By Small Businesses

Small businesses often face a variety of problems related to their size. A frequent cause of bankruptcy is undercapitalization. This is often a result of poor planning rather than economic conditions, it is common rule of thumb that the entrepreneur should have access to a sum of money at least equal to the projected revenue for the first year of business in addition to his anticipated expenses. For example if the prospective owner thinks that he will generate $100,000 in revenues in the first year with $150,000 in start-up expenses, then he should have no less than $250,000 available. Failure to provide this level of funding for the company could leave the owner liable for all of the company's debt should he end up in bankruptcy court, under the theory of undercapitalization.

In addition to insuring that the business has enough capital, the small business owner must also be mindful of gross margin (sales minus variable costs). To break even, the business must be able to reach a level of sales where the gross margin exceeds fixed costs. When they first start out, many small business owners underprice their products to a point where even at their maximum capacity, it would impossible to break even. The good news is that cost controls or a price increase can often resolve this problem.

In the United States, some of the largest concerns of small business owners are insurance costs (such as liability and health), rising energy costs and taxes. In the United Kingdom and Australia, small business owners tend to be more concerned with excessive governmental red tape.

Certification And Trust

Building trust with new customers can be a difficult task for a new and establishing business. Some organizations like the Better Business Bureau and the International Charter now offer Small Business Certification, which certifies the quality of the services and goods you produce and can encourage new and larger customers. These services may require a few hours of work, but a certification may reassure potential customers. However, the most effective way to earn trust is through customer referrals.

Personnel

A good accountant is a requirement. A retired person can usually be located for part-time work. There is a wide gulf between an accountant and a bookkeeper. An accountant can do everything from initial entry right through tax returns and financial statements.

Sources Of Funding

There are several sources available for start-up capital. The owner can finance it himself through his savings or an equity loan on his home or other assets. The owner could use financing via a stock issue (although there would be legal problems if it were offered to the general public). A partnership could be formed or perhaps a venture capitalist would provide funds if the business venture plans were sound enough. Relatives could also loan money but the owner should realize that if anyone else participates in the venture some elements of control will be lost.

Financing a business with credit card debt is usually a poor choice, the interest rate on credit cards is often several times the rate that would be paid on a line of credit or bank loan. Many owners seek a bank loan in the name of their business, however banks will usually insist on a personal guarantee by the business owner. In the United States, the Small Business Administration (SBA) runs several loan programs that may help a small business secure loans. In these programs, the SBA guarantees a portion of the loan to the issuing bank and thus relieves the bank of some of the risk of extending the loan to a small business.

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Entrepreneur

Entrepreneur is an import from the same French word. In its most general sense, it means a person who creates or starts a new project, opportunity, or venture.

Most commonly, the term entrepreneur applies to someone who establishes a new entity to offer a new or existing product or service into a new or existing market, whether for a profit or not-for-profit venture, a business entrepreneur. Business entrepreneurs often have strong beliefs about a market opportunity and are willing to accept a high level of personal, professional or financial risk to pursue that opportunity.

Research has demonstrated that there is such thing as an "entrepreneurial type," with certain characteristics (such as having a father or a mother who was an entrepreneur) linked to the probability of someone being an entrepreneur themselves. There is little good evidence, however, that entrepreneurial type is linked to ultimate success of an entrepeneurial venture.

Business entrepreneurs are often highly regarded in US culture as being a critical component of its capitalistic society. Famous entrepreneurs include: Henry Ford (automobiles), J. Pierpont Morgan (banking), Thomas Edison (electricity/light bulbs), Bill Gates (computer operating systems and applications) and others.

Some distinguish business entrepreneurs as either "political entrepreneurs" or "market entrepreneurs."

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