Podcast: Why It’s Crucial for Startups to Define Their Identity Early
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Entrepreneurship Careers Nov 8, 2018

Podcast: Why It’s Crucial for Startups to Define Their Identity Early

Plus, dispelling a pervasive myth about successful entrepreneurs.

Entrepreneur in a romper pitches new idea.

Lisa Röper

Based on the research and insights of

Benjamin F. Jones

Rick Desai

Listening: Why Entrepreneurs Should Find Their Identities

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In a crowded marketplace with low barriers to entry, there is one key thing entrepreneurs can do that makes all the difference: figure out exactly who they are.

In this episode of the Kel­logg Insight pod­cast, we offer advice for entre­pre­neurs on the impor­tance of defin­ing their startup’s iden­ti­ty as ear­ly in their jour­ney as pos­si­ble. We hear from Rick Desai, an adjunct pro­fes­sor of inno­va­tion and entre­pre­neur­ship at Kel­logg and founder of the ven­ture cap­i­tal firm Lis­ten, about how one fledg­ling fash­ion start­up suc­ceed­ed in find­ing its per­son­al­i­ty — before it even had a pro­to­type of its prod­uct. Then we dis­cuss with Ben Jones, a pro­fes­sor of strat­e­gy at Kel­logg, his ground­break­ing new research on the ages of suc­cess­ful entrepreneurs.

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Pod­cast Transcript

Emi­ly STONE: How long does it take to start a busi­ness in the U.S.? Accord­ing to ven­ture cap­i­tal­ist Rick Desai, about as long as your aver­age cock­tail party.

Rick DESAI: The three of us in a room in three hours could have a Shopi­fy web­site, could have ads up on Face­book, and could have an inven­to­ry man­age­ment sys­tem, accounts man­age­ment sys­tem, and a pay­ment man­age­ment sys­tem up and run­ning. We could go sell oth­er people’s products.

STONE: But there’s a down­side to that. The same tools that make it so easy to go into busi­ness also make it incred­i­bly dif­fi­cult to stay in busi­ness. When the bar to entry is low, the com­pe­ti­tion is high. 

DESAI: It’s nev­er been eas­i­er for some­one to launch a busi­ness specif­i­cal­ly online, and as a result, it’s actu­al­ly nev­er been more imper­a­tive to differentiate.

The same tools that I have as an emerg­ing entre­pre­neur to start a busi­ness, all my com­peti­tors have. Oh and by the way, all of the incum­bents have them too. If I’m going to launch a new shoelace brand, Nike can do it tomorrow.

STONE: Wel­come to the Kel­logg Insight pod­cast. I’m your host, Emi­ly Stone.

This month we look at two aspects of entre­pre­neur­ship. First, pro­duc­er Fred Schmalz learns why it’s so impor­tant for star­tups to ham­mer out their own iden­ti­ties in a crowd­ed mar­ket­place. Then, I talk with Kel­logg pro­fes­sor Ben Jones. His research upends the wide­ly held notion that entre­pre­neur­ship is a young person’s game. Stay with us.

[music inter­lude]

Fred SCHMALZ: Rick Desai is not only an adjunct pro­fes­sor of inno­va­tion and entre­pre­neur­ship at Kel­logg. He’s also a part­ner at the Chica­go ven­ture cap­i­tal firm Lis­ten and co-founder of the start­up stu­dio Dashfire. 

Over the years, he’s learned that while all star­tups think they are unique, there’s like­ly some­one else out there who can copy pret­ty much any ele­ment of your com­pa­ny. Except one.

DESAI: Overnight some­one can repli­cate basi­cal­ly every­thing, your busi­ness mod­el, your tech­nol­o­gy, your design, your mar­ket­ing, but the one thing that they can’t repli­cate is the rela­tion­ship you have with your ulti­mate end user.

SCHMALZ: In oth­er words, oth­ers can re-cre­ate what you do, but they can’t re-cre­ate who you are. Which is why, Desai says, if you want to sur­vive in the mar­ket­place, you’d bet­ter find out who you are.

This is a process that can take some tri­al and error.

Take the cus­tom fur­ni­ture web­site Inte­ri­or Define. This com­pa­ny makes it easy for con­sumers to design their home fur­nish­ings: chairs, sofas, beds, ottomans, you name it. You can choose the dimen­sions, the fab­ric, the style of the legs — all the things that gen­er­al­ly aren’t up to you in a reg­u­lar store.

But the company’s orig­i­nal brand­ing focused on some of the same ben­e­fits as stores like West Elm or Crate & Bar­rel: good price, good prod­uct. To Desai, who was an investor in Inte­ri­or Define, that pre­sent­ed a big opportunity.

DESAI: We real­ized that a lot of these brands were all oper­at­ing on the same MO: a lot of style but not a lot of life. And what we want­ed for Inte­ri­or Define was to under­stand the moment in life when you’re ready to actu­al­ly make this real­ly big sofa pur­chase and when you real­ly have the con­fi­dence to cus­tomize that sofa. That’s what we start­ed play­ing on. We real­ized that the ulti­mate out­come, the emo­tion­al out­come which I think every brand real­ly trades on, was comfort.

SCHMALZ: Inte­ri­or Define real­ized that it was real­ly sell­ing the idea of a fur­ni­ture shop­ping expe­ri­ence that was as com­fort­able as loung­ing on your couch. 

Every­thing about Inte­ri­or Define’s brand­ing now empha­sizes just how easy and straight­for­ward the process of cus­tomiz­ing your own fur­ni­ture is. There are free swatch­es. Free deliv­ery. An app that lets you visu­al­ize how your new piece will look in your home. Brick-and-mor­tar store loca­tions where you can bring your dog and have a snack while check­ing out fur­ni­ture samples.

In oth­er words, Inte­ri­or Define real­ized its pur­pose isn’t to make fur­ni­ture so much as to make peo­ple comfortable.

DESAI: We spend most of our time at Lis­ten help­ing com­pa­nies under­stand what their pur­pose is, and to us pur­pose needs to tran­scend prod­uct, tran­scend func­tion­al­i­ty. When you get your pur­pose right — and to me that’s the why, why you exist — if you get the why right, it informs the what and the how of your business.

That says to inter­nal stake­hold­ers, Hey, this is why I work at the com­pa­ny, this is why we make the prod­ucts, this is why we make the part­ner­ships, this is why we hire the peo­ple that we do.”

Now they’ve got a play­book. They can always come back to the pur­pose and say, You know what, this is on brand,” or, You know what, this doesn’t make sense for us, we should stay away from it.”

SCHMALZ: Know­ing what your brand iden­ti­ty is, and believ­ing in that iden­ti­ty, can guide your deci­sion mak­ing, even when you’re still work­ing on the business’s oth­er fundamentals.

Desai was remind­ed of this recent­ly when some Kel­logg stu­dents tried to enroll in his class for devel­op­ing new ven­tures. Their con­cept? A fetch­ing lit­tle one­sie for men. A romper, if you will. They called it the Romphim. 

The prob­lem was, they didn’t have any­thing more than an idea. Desai’s reac­tion was immediate.

DESAI: I said, No, you can’t be in this class. You haven’t made a prod­uct, you have no Insta­gram fol­low­ing, you don’t know how to make the prod­uct, you don’t know how to sell, you don’t know e-com­merce. Do some­thing, prove some­thing, inspire belief in me.” But then they fol­lowed through, they made some pro­to­types, they start­ed wear­ing their Romphims at music fes­ti­vals: Coachel­la, Pitch­fork. And then they went live on the Kick­starter, and it brought the Inter­net down.

SCHMALZ: Desai let them into the class. To say that they brought the Inter­net down” may be over­stat­ing it a bit, but the Romphim Kick­starter cam­paign was wild­ly suc­cess­ful, rais­ing 35 times its ini­tial goal in the first week. 

Desai empha­sizes that the Romphim team was suc­cess­ful because they were will­ing to start build­ing momen­tum. They knew their pur­pose, even before they had investors on board. And get­ting that atten­tion from a hip crowd drove invest­ment. The com­pa­ny is now up and running.

DESAI: If some­one pitch­es me an idea, my next ques­tion is, What’s stop­ping you from get­ting your first cus­tomer?” Their typ­i­cal response is, When we have a prod­uct.” My response is, Fake it till you make it.” You can go put up ads on Face­book. You can go cold-email peo­ple on LinkedIn. You can go get an intro­duc­tion through their warm refer­ral. If you can’t get to the meet­ing, if you can’t get some­one to click your ad, if you can’t get some­one to respond to your blog post, that means the actu­al rea­son for being isn’t strong enough to get some­one to inter­act or activate.

[music inter­lude]

STONE: Con­jure up an image of a suc­cess­ful entre­pre­neur. Real­ly try to see a pic­ture in your mind. What does this per­son look like?

If you’re like most of us, you’re pic­tur­ing some­one who, if they are not actu­al­ly wear­ing a romper, may still be … on the young side. 

Here’s Kel­logg strat­e­gy pro­fes­sor Ben Jones.

Ben JONES: I think that there are, of course, promi­nent exam­ples of those indi­vid­u­als, whether it’s Bill Gates or Steve Jobs or Mark Zucker­berg, which is a part of dri­ving that perception.

STONE: And peo­ple have come up with plen­ty of the­o­ries to jus­ti­fy that perception.

JONES: For one, young peo­ple might be more cre­ative in some sense, less behold­en to exist­ing ideas, par­a­digms of thought, ways of doing things. More capa­ble of that tru­ly dis­rup­tive approach or insight.

A dif­fer­ent idea is that young peo­ple might just be extreme­ly ener­getic. They can go all in in a way that old­er indi­vid­u­als would find more dif­fi­cult. Per­haps it’s basic ener­gy. Per­haps it’s just being unen­cum­bered by oth­er respon­si­bil­i­ties when you’re very young, includ­ing fam­i­ly respon­si­bil­i­ties, being home for din­ner with the chil­dren, or pay­ing a mort­gage or pay­ing tuition, et cetera.

Then a third idea is that young peo­ple might just be sharp­er, at least in some ways. A more deduc­tive, faster, clock speed in their brain. Mark Zucker­berg once famous­ly said, Young peo­ple are just smarter.”

STONE: There’s just one prob­lem with these the­o­ries: They’re wrong. Not just a lit­tle bit wrong. Very wrong.

We know this because of a ground­break­ing study that Jones con­duct­ed with coau­thors from the U.S. Cen­sus Bureau and MIT.

Pre­vi­ous researchers had tried to deter­mine the aver­age age of suc­cess­ful entre­pre­neurs. But their results were nev­er con­clu­sive. This was like­ly because they were rely­ing on sub­sets of data, like stud­ies of a par­tic­u­lar industry.

Jones and his team took a much high­er-lev­el approach. They got all the data. The researchers com­bined IRS and Cen­sus Bureau infor­ma­tion to build a list of 2.7 mil­lion com­pa­ny founders.

JONES: This allowed us for the first time to real­ly ask in a sys­tem­at­ic way, when do peo­ple in life start? Not just firms in gen­er­al, but the firms that real­ly grow or go on to pub­lic offer­ing or are suc­cess­ful­ly acquired.

STONE: They want­ed to focus on firms that became high­ly suc­cess­ful. They learned that the aver­age age of entre­pre­neurs with the fastest grow­ing new ven­tures was — wait for it — 45.

JONES: It is part­ly age 45 because peo­ple in their mid-40s do start more com­pa­nies than peo­ple in their 30s or their 20s, so in a sense, they take the most bites of the apple or the most swings at the bat.

But if you ask a relat­ed, but very impor­tant ques­tion, which is, okay, well, con­di­tion­al on start­ing a com­pa­ny — so let’s say you tried — what is your prob­a­bil­i­ty of hit­ting a home run? If you do it that way, you find that your bat­ting aver­age for home runs only goes up with age.

Actu­al­ly, at that point, 55-year-olds look the best. They’re even bet­ter than 45-year-olds, who are bet­ter than 35-year-olds, who are bet­ter than 25-year-olds.

STONE: There are a few pos­si­ble rea­sons for that. One, of course, is that, as we age, we become more expe­ri­enced. Anoth­er is that old­er peo­ple have had more time to build their pro­fes­sion­al net­works and their finan­cial reserves.

Addi­tion­al­ly, the researchers found that peo­ple who had pre­vi­ous­ly worked in a par­tic­u­lar indus­try more than dou­bled their chances of becom­ing suc­cess­ful entre­pre­neurs in that industry.

But what about vision­ar­ies like Steve Jobs or Bill Gates? They all start­ed their com­pa­nies very young, right? That’s true, but there’s a big catch.

JONES: Steve Jobs, what was his block­buster prod­uct? What was Apple’s great suc­cess? Well, it’s the iPhone. Maybe some­what before that, the iPod, but cer­tain­ly the iPhone. That comes when Jobs is 52. It’s once he has come back to Apple lat­er in life, more sea­soned, after some fail­ures along the way, and pro­duces this block­buster inven­tion, inno­va­tion. So too, Microsoft. Its mar­ket cap­i­tal­iza­tion has grown most rapid­ly when Bill Gates is in his mid­dle age.

If you real­ly are a true out­lier, you can do well in your 20s, but you still are going to even do bet­ter in mid­dle age.

STONE: To Jones, the myth of the young founder is not only wrong, it may be dis­cour­ag­ing some would-be entre­pre­neurs in their 40s.

JONES: Let’s say you’re self-reflect­ing on whether you want to start a com­pa­ny and every­one seems to think that, Well, if you were in your young 20s, that was the time to do it, and now you’re over-the-hill,” that can be chill­ing, and peo­ple who might be inter­est­ed won’t nec­es­sar­i­ly do it.

STONE: And ven­ture cap­i­tal­ists should also be aware that, while it may be tempt­ing to con­cen­trate resources on younger entre­pre­neurs, doing so may be risky.

JONES: Sep­a­rate­ly, those who are giv­ing out lim­it­ed ear­ly stage finance to help entre­pre­neurs get going, if they believe it’s all about young peo­ple, very young peo­ple, they, oth­er things equal, are going to be less like­ly to allo­cate dol­lars towards more mid­dle-aged peo­ple. In fact, they’re going to be giv­ing mon­ey in the wrong direc­tion in terms of where the suc­cess is like­ly to be. That sug­gests that we might have poten­tial­ly a much less effi­cient financ­ing sys­tem than we oth­er­wise would.

STONE: Not only that, but we might see fund­ing direct­ed away from enter­pris­es that enrich soci­ety in the long term. If all the atten­tion goes to trend-set­ting con­sumer tech, that may mean less invest­ment in oth­er impor­tant innovations. 

Because, while Face­book and Snapchat are use­ful for con­nect­ing with friends and fam­i­ly, those prod­ucts are def­i­nite­ly NOT designed to solve some oth­er problems.

JONES: It’s not advanced man­u­fac­tur­ing. It’s not solv­ing clean ener­gy and deal­ing with cli­mate-change prob­lems. It’s not super inter­est­ing insights in foren­sic account­ing or finance. It’s not biotech typ­i­cal­ly. It’s not solv­ing the health­care sys­tems. Young peo­ple have a wide vari­ety of ideas, but typ­i­cal­ly you’re going to end up bias­ing inno­va­tion towards cer­tain con­sumer-lev­el social media­ – type things and prob­a­bly away from areas that are, if any­thing, as or more impor­tant to socioe­co­nom­ic pros­per­i­ty, like health or ener­gy or those kinds of things.

[music out­ro]

STONE: This pro­gram was pro­duced by Kevin Bai­ley, Jes­si­ca Love, Fred Schmalz, Jake Smith, Emi­ly Stone, and Michael Spikes. It was writ­ten by Anne Ford.

Spe­cial thanks to our guests, Rick Desai and Ben Jones.

As a reminder, you can find us on iTunes, Google Play, or our web­site, where you can read more about how to find suc­cess as an entre­pre­neur. Vis­it us at insight​.kel​logg​.north​west​ern​.edu. We’ll be back next month with anoth­er episode of the Kel­logg Insight podcast.

Featured Faculty

Benjamin F. Jones

Professor of Strategy; Faculty Director, Kellogg Innovation and Entrepreneurship Initiative (KIEI)

Rick Desai

Adjunct Lecturer of Innovation & Entrepreneurship

About the Writer

Anne Ford is a freelance writer based in Evanston, Illinois.

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