Effectual Reasoning: A Glimpse at What Makes an Entrepreneur Entrepreneurial

By: Brett A. Hoover [Follow me on Twitter and LinkedIn]

A scientist at heart, I am a sucker for a good academic article. I read one such article a few weeks ago. It explored the differences between Causal and Effectual thinking and their approaches to starting and growing a business.
Causal thinking is what MBA’s do (and are taught to do): begin with a pre-determined goal and a given set of means, then seek to identify the optimal alternative to achieving the given goal. Effectual thinking is what entrepreneurs do: given a set of means (abilities, knowledge, and network) it allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the entrepreneur and the people they interact with. Think of it as the MBA conqueror (Alexander the Great) versus and entrepreneurial explorer (Amerigo Vespucci). The prose articulates not just how MBAs and Entrepreneurs are different, it also outlines when their schools of thought excel and when they tend to fail (and
why). As you can imagine, in the end, it’s best to be a bit of both.

In short:
1) MBAs plan, Entrepreneurs execute.
2) MBAs focus on the end, Entrepreneurs fixate on the means.
3) MBAs avoid surprises, Entrepreneurs embrace and utilize them.
4) MBAs try to control the future, Entrepreneurs seek to create it.
5) MBAs grow and sustain, Entrepreneurs innovate and start.

If you have the time, and don’t mind a little ‘academic’ reading, I highly recommend this article. Click the following link to open the .pdf file.

Effectuation: What Makes Entrepreneurs Entrepreneurial?

Slainte Mhath!

“Thou Shall Nots” of Business Development

By: Brett A. Hoover [Follow me on Twitter and LinkedIn]

1) Thou shall not tell the science story and neglect the market story!
-Do realize the market is the story and focus on it. Weave a succulent picture of success, keeping in mind that your audience is not stupid and will not fall for “our target market is $50B”.

2) Thou shall not assume the market is static!
-Do project the future market and make sure your forecast and financial assumptions make sense. If you hand-wave, it’s off with your head…and your paws!

3) Thou shall not design a product based on what you think the customer wants!
-Do get off your haunches and KNOW THY CUSTOMER.  Email them. Call them. Interview them in person. Let them beta-test a demo. Take their family out to dinner…whatever. Just don’t guess when you can know.

4) Thou should not ignore a physicians’ financial motivations! (Ok, this one’s for BigPharma and BioTech. Bare with me)
-Do understand that docs are just as interested in making money and keeping their business out of the red as you are. In other words, never assume patient outcome trumps negative financial considerations. Variable levels of healthcare reimbursement will affect the doc’s behavior. Build this into your assumptions.

5) Thou shall not ignore the importance of reimbursement on future profitability!
- Do understand who pays for what and why. Further, you need to know what the “reimburser’s” price sensitivity is and what drives it. A drug or biologic will rarely (“never”) become lucrative without first being reimbursed. As soon as your product enters FDA trials, get the reimbursement call rolling (Medicare and Medicaid).

6) Thou shall not speak in strange valuation tongues.
-Do use the valuation methods of your audience. Different strokes for different folks. Biotech is not Pharm is not Venture Capital is not… you get the point. For example, Pharma loves to use the net present value (NPV) and risk-adjusted NPV (rNPV). BioTech, on the other hand, prefers to only use rNPV. Lastly, VC’s tend to focus their eyes on comparable analysis, which compares an investments ‘exit value’ across various exit strategies and with similar exits values. The licensee performs the deal(tech)-valuation. The valuation is a crucial part of the investment decision. As such, it behooves you to learn the preferred valuation methods of your prospective investor and either follow suit or give the investment team the exact inputs it needs to quickly make a valuation estimate.

7) Thou shall not pitch thy product as ‘perfect’!
-Do be honest and disclose potential problems and pitfalls. Nobody’s technology is perfect. Investors know this, and assuming they don’t will only get you laughed at. Come right out and mention and address any disadvantages. Feel free to run down you list of way to mitigate risk. This will build credibility and allow you to damage control. Better to mention it early, then to have an investor ask you about it later.

Slainte Mhath!

Ref: Stewart J and Bonifant B. “The Seven Deadly Sins of Business Development.” Nature BioEntrepreneur. April 2008.

All That is Patented is Not Gold – The “So What?” Factor

One of the trickiest things to do when working with entrepreneurs, especially technically savvy inventors such as medical researchers or engineers, is to convince them that just because they have a patent, does not mean they are sitting on a billion dollar business. In fact, there’s a really good chance they’re not even sitting on a thousand dollar business.

Let’s face it, I could walk down the hallways of even a mediocre university, and if I bumped into a researcher coming around the corner, chances are three patents would fall out of his shirt pocket. As discussed in my previous post on five places you can license IP from (http://biotechbiz.wordpress.com/2009/01/04/5-places-to-find-ip-to-license/), finding patented technology to license is really not that difficult.

What IS difficult, is sitting down (ideally before you spend tens of thousands of dollars to hire IP counsel) with your technology and asking yourself, “so what?”  My device can diagnose staph infection twenty five minutes faster than the current test on the market. So what? Is there utility in knowing that information twenty five minutes faster? (for the record, I just made this up. I have no idea how they figure out if you have staph infection)

The inventor may have spent the last five years perfecting this technology, but I may show the device to an infectious diseases doctor and in five minutes he’ll tell me that diagnosing staph twenty five minutes earlier doesnt really matter because the infection won’t progress in that short a period. Plus, the current testing costs half as much as the new technology. In five minutes, I determined that our researcher’s PATENTED technology is basically worthless.

Remember, when you get a patent, the US Patent and Trademark Office is not saying you have a commercially viable idea, they are basically protecting your innovation. But innovation does not necessarily translate to commercial viability. It is certainly innovative to be able to diagnose staph infection twenty five minutes faster than the current test. But again, you have to ask yourself, “so what? Does it matter enough that someone is going to buy my technology.” If you can’t answer that yourself, good luck trying to convince a venture capitalist.

Remember, the worst kind of technology, is to have what I call, “Neat Technology.” Neat technology is any technology that a venture capitalist would look at and say, “neat technology, but it’s unnecessary.”  So the next time you are about to form a company around a really cool patented idea, take a second and ask yourself, “So what?” You may save yourself a lot of time and money by answering that simple question.

50 Ideas on Utilizing Twitter for Business

By: Brett A. Hoover [Follow me on Twitter and LinkedIn]


We really can’t deny the fact that businesses are testing out Twitter as part of their steps into the social media landscape. You can say it’s a stupid application, that no business gets done there, but there are too many of us (including me) that can disagree and point out business value. I’m not going to address the naysayers much with this. Instead, I’m going to offer 50 thoughts for people looking to use Twitter for business. And by “business,” I mean anything from a solo act to a huge enterprise customer.

First Steps

1. Build an account and immediate start using Twitter Search to listen for your name, your competitor’s names, words that relate to your space. (Listening always comes first.)
2. Add a picture. ( Shel reminds us of this.) We want to see you.
3. Talk to people about THEIR interests, too. I know this doesn’t sell more widgets, but it shows us you’re human.
4. Point out interesting things in your space, not just about you.
5. Share links to neat things in your community. (@wholefoods does this well).
6. Don’t get stuck in the apology loop. Be helpful instead. ( @jetblue gives travel tips.)
7. Be wary of always pimping your stuff. Your fans will love it. Others will tune out.
8. Promote your employees’ outside-of-work stories. ( @TheHomeDepot does it well.)
9. Throw in a few humans, like brett_hoover, LionelAtDELL, etc.
10. Talk about non-business, too, like @astrout and @jstorerj from Mzinga.

Ideas About WHAT to Tweet

1. Instead of answering the question, “What are you doing?”, answer the question, “What has your attention?”
2. Have more than one twitterer at the company. People can quit. People take vacations. It’s nice to have a variety.
3. When promoting a blog post, ask a question or explain what’s coming next, instead of just dumping a link.
4. Ask questions. Twitter is GREAT for getting opinions.
5. Follow interesting people. If you find someone who tweets interesting things, see who she follows, and follow her.
6. Tweet about other people’s stuff. Again, doesn’t directly impact your business, but makes us feel like you’re not “that guy.”
7. When you DO talk about your stuff, make it useful. Give advice, blog posts, pictures, etc.
8. Share the human side of your company. If you’re bothering to tweet, it means you believe social media has value for human connections. Point us to pictures and other human things.
9. Don’t toot your own horn too much. (Man, I can’t believe I’m saying this. I do it all the time. – Side note: I’ve gotta stop tooting my own horn).
10. Or, if you do, try to balance it out by promoting the heck out of others, too.

Some Sanity For You

1. You don’t have to read every tweet.
2. You don’t have to reply to every @ tweet directed to you (try to reply to some, but don’t feel guilty).
3. Use direct messages for 1-to-1 conversations if you feel there’s no value to Twitter at large to hear the conversation ( got this from @pistachio).
4. Use services like Twitter Search to make sure you see if someone’s talking about you. Try to participate where it makes sense.
5. 3rd party clients like Tweetdeck and Twhirl make it a lot easier to manage Twitter.
6. If you tweet all day while your coworkers are busy, you’re going to hear about it.
7. If you’re representing clients and billing hours, and tweeting all the time, you might hear about it.
8. Learn quickly to use the URL shortening tools like TinyURL and all the variants. It helps tidy up your tweets.
9. If someone says you’re using twitter wrong, forget it. It’s an opt out society. They can unfollow if they don’t like how you use it.
10. Commenting on others’ tweets, and retweeting what others have posted is a great way to build community.

The Negatives People Will Throw At You

1. Twitter takes up time.
2. Twitter takes you away from other productive work.
3. Without a strategy, it’s just typing.
4. There are other ways to do this.
5. As Frank hears often, Twitter doesn’t replace customer service (Frank is @comcastcares and is a superhero for what he’s started.)
6. Twitter is buggy and not enterprise-ready.
7. Twitter is just for technonerds.
8. Twitter’s only a few million people. (only)
9. Twitter doesn’t replace direct email marketing.
10. Twitter opens the company up to more criticism and griping.

Some Positives to Throw Back

1. Twitter helps one organize great, instant meetups (tweetups).
2. Twitter works swell as an opinion poll.
3. Twitter can help direct people’s attention to good things.
4. Twitter at events helps people build an instant “backchannel.”
5. Twitter breaks news faster than other sources, often (especially if the news impacts online denizens).
6. Twitter gives businesses a glimpse at what status messaging can do for an organization. Remember presence in the 1990s?
7. Twitter brings great minds together, and gives you daily opportunities to learn (if you look for it, and/or if you follow the right folks).
8. Twitter gives your critics a forum, but that means you can study them.
9. Twitter helps with business development, if your prospects are online (mine are).
10. Twitter can augment customer service. (but see above)

I’d like to thank Chris Brogan for his permission to use his wisdom in this ’string of pearls’.

Slainte Mhath!

5 Places To Find IP to License

Want to know a little secret? You don’t need your own IP to start a biotech company. There are literally hundreds, perhaps thousands, of patented ideas waiting for you to license on very reasonable terms.

Let me answer your first question: If these patents are so great, why aren’t they already being commercialized? That is actually quite simple to answer. First, not everyone who is an inventor is ready to jump off the lab bench and into a meeting with venture capitalists. Many are quite happy to put another notch on the old “patent belt” and move on to the next research project.

Next, even if the inventors were willing to commercialize the technology, many of the inventors work for institutions that would prefer the inventor to keep doing what they’re doing, and leave the commercialization to those who know what they are doing. That’s where you, the biotech entrepreneur comes in.

That wasn’t always the case. Even just ten years ago, many universities would actively block anyone trying to commercialize their technology. Now there are entire tech-transfer offices dedicated to commercializing technology created by institutions. Why? Because when you commercialize their technology, they’ve just created income without doing much, and letting you take on the risk. So if a technology is successful, great! they get paid. If it’s not, oh well, maybe someone else will take a crack at it.

So without further delay, below are five places with IP just waiting to be licensed. In upcoming posts, I’ll cover how to go about licensing technology, and how to identify technology you actually want to license. In the meantime, enjoy:

1. USDA Patents and Licensing http://tinyurl.com/6yvyjy

The USDA has a great page that clearly delineates the IP available for licensing covering a wide variety of  technology interests. It has has a cool section detailing success stories, and has a very easy to follow application process.

2. MIT Patents Available for Licensing http://tinyurl.com/9wfd65
I always like to see what’s available for licensing from one of the preeminent institutions in the world. Unfortunately, their site is not very user-friendly, and doesn’t have many of the bells and whistles that USDA’s site has. With that being said, I think it’s safe to say that MIT doesn’t have to impress anyone.

3. NASA Technology Transfer and Partnership Office http://tinyurl.com/88ap2r

Obviously NASA is always working on cutting edge research, and naturally NASA spins a lot of IP out of that research. NASA’s site is very user-friendly and has a lot of very helpful information, such as  a thorough explanation on how to partner with NASA.

4. Army Patents Available for Licensing http://tinyurl.com/axomk4

Admittedly, the Army’s site is pretty basic, but the military always has fascinating technology available for licensing. Also, it’s very possible you’ll be able to get some funding from the Army towards commercializing their technology. Plus, if you commercialize it in a way the military can use it, there really is no better customer to have than the U.S. military.

5. IBM Intellectual Property and Licensing http://tinyurl.com/23q7c

In 2007, IBM was awarded over 3000 patents, and maintained its 15 year streak of being awarded more patents than any other company in the world. That is an incredible accomplishment. Obviously, IBM is not able to commercialize each and every one of its patents, and so they list patents that are available for licensing. Not a bad site, but could be a little easier to use.

Small Business 2009: ‘Pearls’ To Consider

By: Brett A. Hoover [Follow me on Twitter and LinkedIn]

As we move forward and away from the proverbial disaster that was 2008, I feel its important for small businesses and entrepreneurs alike to consider how we are going to handle things in 2009. More importantly, how we plan to do well by being better. Here are a few ‘pearls’ that came to mind:

1) Make, Create, Find Possibilities: 2009 will be full of ideas, opportunities, and possibilities. Don’t sit back on your haunches and plan. Get up, get out, and find them! The hardest part of any project is just getting the ball rolling in the right direction.

2) Create Unique Value: Make your product, service, and company uniquely valuable. Sure times are ‘tough’, but that doesn’t mean people will suddenly stop buying what the need. It simply means that your potential customers are more price-/quality-sensitive and that you must cater to this. By differentiating your company from the competition, you position yourself to be the preferred choice of your target market.

3) Market like a Madman: Now, more than ever, it’s crucial to let the customers know that you exist. Don’t hesitate to be creative and to use any means necessary: blogs, Twitter, Facebook, Newsvine, Digg, LinkedIN, strategic networking, word of mouth, cold calls, e-mail, snail mail, etc. By focusing at least part of your marketing efforts online, you stand to save of green$$$. The end-game here is to get your name in front of potential customers.

4) Customers First…Especially Now: Life is sales and business is about customers. Period. During an economic downturn, this is only more true. If you’re not doing right by the client, you’re not selling. If you’re not selling, you’re not making money. If you’re not making money… it’s only matter of time until you’re a goner. If you’re going to make cuts to your budgets, see to it that customer service (and contact) remains wholly in-tact.

5) Vet Your Ideas…Often: Don’t be afraid to discuss your idea with someone. It’s not easy to trust others, but it’s rare than vetting your idea with a trusted mentor or colleague will do more harm than good. By bouncing your ideas off of a diverse and experienced crowd, you will  strengthen both the idea and your ability to think critically about it. Look at it this way, no one likes to pitch their idea to investors, only having to respond to their questions with “Shucks, I never thought of that”. Ouch!

6) Cut any Financial Tomfoolery: No one wants to appear cheap, but that’s no reason to be a fiscal idiot…especially during an economic recession. Take a close look at what you spend money on and think about what is truly necessary and what is not. For example, consider bundling your phone and cable services. This can save an upwards of $300/year. Further, do you really need digital cable at the office (aside from a wicked-fast Internet connection)? Lastly, try to avoid cutting the salaries of good, hard working employees. There’s nothing wrong with firing people who don’t give 110%, who have no passion for their job or the company, or who (as Bob Sutton puts it) are big A$$$#()!&$. Just remember that the right people are your most valuable asset. Try to treat them as such. As my father always says: “it’s just plain bad business to mistreat good.”

7) Consider Investing: If you haven’t noticed, now is a great time to reinvest in your company, your family, yourself, etc. Consider investing you mutual funds, ETFs, or even the stock market. Be smart about it though…don’t just read Morningstar for a week and assume you have a clue (I’ve done this…eek!). Take your family on a vacation, taking advantage of all the airline and hotel deals floating around out there in the ether. Not to over paraphrase W. Buffet, but he makes a good point when he tell us to be ‘greedy’ when other folks are scared.

There are literally hundreds, maybe thousands, of other ideas on how to improve you business in 2009. I could keep going, but I personally enjoy blog entries that are short and succulent. Be sure to think about the previous points relative to your own life. With any luck, something I’ve written will positively impact someone silly enough to take me seriously.

Slainte Mhath!