ENG491 Technology Entrepreneurship

CS419 Technology EntrepreneurshipBuilding a Lean, Scalable StartupFall 2012 2013Emre Oto

www.CS419online.comFollow on Twitter: @CS419Bilkent

AgendaWho is the instructor?What is this course all about? What do I have to do in this course?

CS419 Technology EntrepreneurshipWeek #1 The StartupAgendaWho is the instructor?What is this course all about? What do I have to do in this course?

CS419 Technology EntrepreneurshipWeek #1 The StartupWho is the Instructor?General Manager, MITS

Previously Business Analyst at Calypso Technology and Research Assistant at Stanford University

MSc Management Science and Engineering, Stanford University

MSc Electrical Engineering, Stanford University

BSc Electrical and Electronics Engineering, Middle East Technical University

CS419 Technology EntrepreneurshipWeek #1 The StartupWho is the Instructor?About MITSFounded in April 2009, located at the Hacettepe University Technopolis, founded by 2 Engineers

12 full-time employees: Engineers, Graphic Designers, Videographers, 3D Designers, Project Management and Coordination Staff

Supported by three national and international grants

Recepient of national and global awards and recognitions

CS419 Technology EntrepreneurshipWeek #1 The StartupWho is the Instructor?About MITSTwo areas of operation:Medical InformaticsData MiningClinical Decision Support Systems

Alternative Communication Channels for Healthcare ProfessionalsVirtual EventsVirtual Learning CentersVirtual DetailingCS419 Technology EntrepreneurshipWeek #1 The StartupAgendaWho is the instructor?What is this course all about? What do I have to do in this course?

CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Planning is guessingBusiness plans?= Business assumptions

No business plan survives first contact with the customer

Just to do it approachBuild and see what happensYou will definitely succeed at seeing what happensCS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Probability theory is no good

CS419 Technology EntrepreneurshipWeek #1 The Startup

What is this course all about?The Black Swan

An outlier event, which could not be predicted through any past observation, and a surprise for the observer(Extremely) Low probability (extremely) hight impact eventWhile no past observation can predict the Black Swan event, retrospectively the event can be predicted and explained with perfect clarity. Black Swan events are dependent on the observer

CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Black Swans - The MITS ExperienceSudden rep visit restrictions imposed on pharma very close to MITS founding date

Government imposed budget cuts on Rx drugs led to budget cuts in Marketing and SalesSalesforce layoffs and downsizing

In August, government imposed restrictions on the number of medical conferences physicians can attend as well as restrictions on Pharma sponsorship

Pharma started seeking alternative ways to reach physiciansCS419 Technology EntrepreneurshipWeek #1 The Startup

What is this course all about?Mediocristan vs ExtremistanMediocristanExtremistanNonscalableScalableMild or type 1 randomnessWild (even superwild) or type 2 randomnessThe most typical member is mediocreThe most typical is either giant or dwarf, i.e., there is no typical memberWinners get a small segment of the total pieWinner-take-almost-all effectsMore likely to be found in our ancestral environmentMore likely to be found in our modern environmentImpervious to the Black SwanVulnerable to the Black SwanSubject to gravityThere are no physical constraints on what a number can beCorresponds (generally) to physical quantities, i.e., heightCorresponds to numbers, say, wealthAs close to utopian equality as reality can spontaneously deliverDominated by extreme winner-take-all inequalityTotal is not determined by a single instance or observationTotal will be determined by a small number of extreme eventsWhen you observe for a while you can get to know whats going onIt takes a long time to know whats going onTyranny of the collectiveTyranny of the accidentalEasy to predict from what you see and extend to what you do not seeHard to predict from past informationHistory crawlsHistory makes jumpsEvents are distributed* according to the bell curve (the GIFT) or its variationsThe distribution is either Mandelbrotian gray Swans (tractable scientifically or totally intractable Black SwansCS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Extremistan = ChaosAll social phenomena i.e. all phenomena that entail a human factor belong to Extremistan are subject to Black Swan events.

Probability theory, assumptions, predictions based on models etc. are irrelevant and extremely dangerous in Extremistan

Probability theory belongs to games, papers, and the Lab. Real life is governed by Chaos Theory

Question your assumptions! Be skeptical! Rely on empirical learning!CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about? Skeptical Empiricism Past observations can only partially reflect historical facts (vs. nave empiricism)

We can never know the absolute truth.

Evidence can refute a hypothesis, but past observations can never suffice to fully refute a hypothesisCS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Common Intellectual FallaciesNarrative Fallacy: Explaining an extreme event retrospectively as if it is a natural consequence (The crisis was evident)

Luddic Fallacy Probability theory pertaning to games canot suffice to explain the uncertainty of the real world.

Confirmation Bias The human mind has a tendency to join evidence that will validate its beliefs. It is incredibly easy to find evidence to validate any theory.

Cure for this: Negative Empiricism Seeking evidence by refuting hypotheses and assumptions. CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Prescription against Black SwansFeeble structures should break down when small

Creating redundancies (vs. nave optimization) Robustness

Avoiding complexity

CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Black Swans - The MITS experienceUnexpected budget cuts, market dynamicsContracts cancelled due to sudden budget cutsSudden changes in government Rx reimbursement policiesClients/prospects suddenly changing positions

Pareto principle is valid impossibility of scheduling, HR and capital allocation

Strategy: Diversification through a healthy balance of funded R&D projects and commercial projects.

Benefiting from Black Swans: Small investments in high-risk projects

CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Let us summarize up to this point..Real life is much more uncertain then we think, and this uncertainty is not the same as the one we learn in Probability Theory But rather through Chaos Theory (Butterfly Effect)

The least that could happen is that our assumptions fail. The true danger lies in Black Swan events.

So we cannot just believe our own assumptions, and we cannot just swing it..

How do we ride true chaos?

CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is the course all about?Scientific Method, any one?6th grade..Science class..Lesson 1..We will go back to the good old days, only in a startup context..but what is a startup?

CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Let is now define a StartupA startup is a human institution designed to create a new product or service under conditions of extreme uncertainty

A startup is a temporary organization that is in search of a repeatable and scalable business model

CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?What a startup is NOTA startup is not a smaller version of a large company (i.e. it is not a doll house)

Why is a startup not a smaller version of a large company?CS419 Technology EntrepreneurshipWeek #1 The StartupWhat is this course all about?Startup vs everything elseStartup Problem: Unknown (Market? Customers? Need?)Solution: Unknown (What are we going to build?)

Everything elseProblem: KnownSolution: KnownKnown: Small business? Clone of an existing business?Existing market, waterfall product developmentCS419 Technology EntrepreneurshipWeek #1 The Startup

Problem: knownSolution: knownWaterfallUnit of progress: Advance to Next Stage

RequirementsDesignImplementationVerificationMaintenanceCS419 Technology EntrepreneurshipWeek #1 The Startup232323What is this course all about?What is everything else?Small businesses

Large companies

Social entrepreneurship

Disruptive companies within large companiesCS419 Technology EntrepreneurshipWeek #1 The Startup

What is this class all about?#1 This Class is about Scalable StartupsNot all startups are designed to scale

Small business startups have different goalsThey are done by normal people

Scalable startups are designed to grow bigMay require angel investment / venture capital

CS419 Technology EntrepreneurshipWeek #1 The Startup25Small BusinessStartup- Business Model found- Profitable business Existing team No intention to scale / or very low scale Mostly clone businessesRisk is easily understoodCan be even financed with a bank loan

Small Business Startups5.7 million small businesses in the U.S.