Description
I would like to have steps 9 to 13 according to Bill Aullet book. Each step in a different slide. My steps for these are attached. Please follow the book and the files shared. Please do the steps on the Google slides that I shared. Here is the link. (You can see my steps on the Google Slide File) https://docs.google.com/presentation/d/11dguK6bbMA…
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Contents
Preface
Acknowledgments
Introduction
Six Themes of the 24 Steps
Step 0: Getting Started
Three Ways to Start a New Venture
How to Go from “I Have a Passion” to “I Have an Idea or
Technology”
Finding a Founding Team: Entrepreneurship Is not a Solo Sport
Where You Go from Here
Step 1: Market Segmentation
In This Step, You Will:
The Single Necessary and Sufficient Condition for a Business
Create a New Market That You Will Dominate
When “Paying Customers” Lead You Astray
Complex Paying Customers: Primary Versus Secondary Customers
and Two-Sided Markets
How to Do a Market Segmentation
How Long Should I Spend on Market Segmentation?
Example
Summary
Step 2: Select a Beachhead Market
In This Step, You Will:
How to Choose Your Beachhead Market
Your Beachhead Market Still Needs to Be Segmented Further
Example
Summary
Step 3: Build an End User Profile
In This Step, You Will:
Why Target a Specific Demographic?
Does Your Founding Team Include Someone in the End User
Profile?
Examples
Summary
Step 4: Calculate the Total Addressable Market (TAM) Size for the
Beachhead Market
In This Step, You Will:
Bottom-Up Analysis
Top-Down Analysis
From “How Many End Users?” to “Show Me the Money”
What Should My Tam Be?
Examples
Summary
Step 5: Profile the Persona for the Beachhead Market
In This Step, You Will:
How to Choose and Profile Your Persona
The Persona Is more than Just an Exercise
Should I Create Multiple Personas? If so, When?
The Persona Helps You Focus on What to Do—and What Not to
Do
Examples
Summary
Step 6: Full Life Cycle Use Case
In This Step, You Will:
What to Include in a Full Life Cycle Use Case
Examples
Summary
Step 7: High-Level Product Specification
In This Step, You Will:
Creating a High-Level Product Specification
Then, Make a Product Brochure
Examples
Summary
Step 8: Quantify the Value Proposition
In This Step, You Will:
Aligning Your Value Proposition with the Persona’s Priorities
Keep it Simple: The “as-is” State Versus the “Possible” State with
Your Product
Examples
Summary
Step 9: Identify Your Next 10 Customers
In This Step, You Will:
How to Complete This Step
Is the Current Persona Valid?
Dealing with Negative Feedback
Examples
Summary
Step 10: Define Your Core
In This Step, You Will:
A few Examples of Core
How to Define your Core
What about Intellectual Property? or Culture?
Core Is Different than Competitive Position
First-Mover Advantage Is not a Core
Locking Up Suppliers Is Typically not a Core
Example
Summary
Step 11: Chart Your Competitive Position
In This Step, You Will:
The Toughest Competitor of all: The Customer’s Status Quo
How to Chart Your Competitive Position
Examples
Summary
Step 12: Determine the Customer’s Decision-Making Unit (DMU)
In This Step, You Will:
Primary Roles in the Decision-Making Unit
Additional Roles in the Decision-Making Unit (DMU)
How to Determine the Decision-Making Unit
Examples
Summary
Step 13: Map the Process to Acquire a Paying Customer
In This Step, You Will:
How to Map the Process
Budgeting/Purchasing Authority
Time Is of the Essence
Consumer Versus B2B
Examples
Summary
Step 14: Calculate the Total Addressable Market Size for Follow-on
Markets
In This Step, You Will:
How to Calculate Broader Tam
Example
Summary
Step 15: Design a Business Model
In This Step, You Will:
A Business Model Is not Pricing
Key Factors When Designing a Business Model
Free Is not a Business Model
Generalized Categories of Business Models
Think Outside the Existing Categories
Summary
Step 16: Set Your Pricing Framework
In This Step, You Will:
Basic Pricing Concepts
Example
Summary
Step 17: Calculate the Lifetime Value (LTV) of an Acquired Customer
In This Step, You Will:
Key Inputs to Calculate the LTV
How to Calculate Lifetime Value
How to Calculate the LTV: “Widget” Plus Yearly Maintenance Fee
Important Considerations
Summary
Step 18: Map the Sales Process to Acquire a Customer
In This Step, You Will:
Four Factors Entrepreneurs Often Overlook about Customer
Acquisition Costs
Your Sales Process Changes over Time
How to Map Your Sales Process
Sales Process Comparisons: Zynga, Groupon, Linkedin, Facebook
Example
Summary
Step 19: Calculate the Cost of Customer Acquisition (COCA)
In This Step, You Will:
Why Coca Matters
How not to Calculate Coca: A bottom-up Perspective
The Right Way to Calculate Coca: A top-down Perspective
How to Reduce Coca
Examples
Summary
Step 20: Identify Key Assumptions
In This Step, You Will:
How to Identify Your Key Assumptions
Example
Summary
Step 21: Test Key Assumptions
In This Step, You Will:
Now That We Have Identified The Assumptions, Let’s Test them
Examples of Easily Testable Assumptions: Student Teams
Summary
Step 22: Define the Minimum Viable Business Product (MVBP)
In This Step, You Will:
Three Conditions of a Minimum Viable Business Product
Examples
Summary
Step 23: Show That “The Dogs Will Eat the Dog Food”
In This Step, You Will:
Examples
Summary
Step 24: Develop a Product Plan
In This Step, You Will:
Example
Summary
Postlude: A Business Is more than 24 Steps
Glossary
About the Author
Index
Praise for Disciplined Entrepreneurship
“Entrepreneurship is not only a mind-set but a skill set. The 24 Steps present a practical step-bystep process to channel the creative spirit to maximize the chances of success and ultimate impact.”
—Mitch Kapor, Founder, Lotus Development Corporation
“While I am not a big fan of business plans, I am a big fan of the business planning process. This
book provides an invaluable comprehensive framework for innovation-driven entrepreneurs to
execute the business planning process.”
—Brad Feld, Managing Director of the Foundry Group, Co-Founder of TechStars, and Creator of
the Startup Revolution book series
“We have had Bill working with entrepreneurs in Scotland for the past three years using the 24
Steps, and we have been delighted with the results. Not only is the framework an extremely helpful
road map, it has also given entrepreneurs the confidence to go on the journey and take their
businesses to the next level. This is a very valuable approach that works across borders.”
—Alex Paterson, Chief Executive, Highlands and Islands Enterprise Scotland
“This is the book I wish I’d had when I was starting out—concise, great examples, in plain
English, combining classic entrepreneurship theory with what’s happening in today’s startup
world. If you’re a serious entrepreneur, read it carefully and keep it close at hand for the journey
ahead.”
—Frederic Kerrest, Co-Founder, Okta, and MIT Patrick J. McGovern, Jr. Entrepreneurship
Award recipient
“According to conventional wisdom, entrepreneurship is solely an innate trait. Nothing could be
further from the truth. Entrepreneurship is a learned skill which can be honed through crisp
execution. This book can help every entrepreneur dramatically increase the likelihood of success
by providing step-by-step guidance on how to approach starting a new business. I recommend it to
all ambitious entrepreneurs.”
—Doug Leone, Managing Partner, Sequoia Capital
“Invaluable. This book superbly summarizes the lessons taught to us at MIT. It is the book I wish I
had when we were launching HubSpot six years ago.”
—Brian Halligan, Co-Founder and CEO, Hubspot, and author of Inbound Marketing
“Bill and I have had many discussions about entrepreneurship, and I really respect his perspective
on the topic. While the spirit of entrepreneurship is often about serendipity, the execution is not.
This book takes you through a systematic approach to significantly increase your odds of
succeeding in making a world-changing and sustainable company. I loved the content and the
simple nature of the book.”
—Joi Ito, Director, MIT Media Lab
“Ideas are a dime a dozen but great entrepreneurs are what create value. They have to be
passionate and skilled. Maybe passion can’t be taught, but execution skills can, and this book does
a wonderful job providing a structure and wisdom with each step to help entrepreneurs be more
successful. I highly recommend it.”
—Paul Maeder, Founding Partner of Highland Capital and 2012 Chair of the National Venture
Capital Association
“Bill’s concept of a team creating an entrepreneur is intriguing but also validated by research and
experience. This list of disciplined steps to creating a venture can not only help entrepreneurs
increase their likelihood of success, but also identify the skills and people he/she will need on the
team in the crucial early steps in a company’s life, and to create a common language the team can
share in talking about the tasks before them. I might have suggested that he call his book The
Holistic Entrepreneur.”
—Thomas A. McDonnell, President and CEO, Ewing Marion Kauffman Foundation
“Social entrepreneurs must develop business models which balance social impact with business
sustainability. Soko focuses on building a successful and scalable business model, which will lead
to scaled social impact in the communities where we work. The 24 Step process outlined by Bill
Aulet is a very useful framework for any type of business to get from an idea to full realization.”
—Ella Peinovich and Gwen Floyd, Founders of ShopSoko.com, Africa’s first mobile marketplace
“I had the great pleasure to work with Bill and see how his methodical mind breaks down complex
problems to their essence and then logically solves them to build a great company. This book will
be a great help to entrepreneurs worldwide, which is very important because the world needs more
entrepreneurs like Bill.”
—Thomas Massie, current member of Congress, and Founder, SensAble Devices and SensAble
Technologies
“Entrepreneurship is becoming increasingly scientific each day as the body of knowledge and
research grows. This book is a valuable addition in that it provides an end-to-end guide to the
product marketing process across multiple industries. It is what you would expect from MIT.”
—David Skok, Partner, Matrix Partners
“Training our young engineers to be entrepreneurs is an imperative for the future and this book will
help in that regard. It provides a road map for getting the product-market fit as tight as possible.
There are many considerations in this process and this book captures them well and provides
practical guidance on how to resolve them.”
—Tom Byers, Entrepreneurship Professorship Endowed Chair in the Stanford School of
Engineering; Faculty Director, Stanford Technology Ventures Program
“This is an excellent practical guide for entrepreneurs so they can see the whole process and not
miss critical steps as they bring products to market. Growing out of the actual experience of
teaching MIT students, it adds to the growing body of thoughtful literature in the field that bodes
well for the consistent development of young entrepreneurs.”
—Joe Lassiter, Faculty Chair of the Harvard Innovation Lab, and Heinz Professor of
Management Practice at the Harvard Business School
“I am just so excited to see now that entrepreneurs everywhere are going to get what I got at MIT to
help hone my entrepreneurial skills. It is years of knowledge and wisdom in a box that every
entrepreneur should read, even if you already have a business.”
—Sal Lupoli, Founder of Sal’s Pizza and Lupoli Companies
“As an intuitive entrepreneur, I prefer less structure. That being said, after having worked through
the steps in this book to launch Lark, I realize that some structure is very valuable. This book
provides enough guidance to help you succeed but not too much to stifle creativity. It is a must-have
for entrepreneurs to read the first time but also as a reference.”
—Julia Hu, Founder and CEO of Lark Technologies
“Disciplined Entrepreneurship is highly relevant and is on my recommended reading list for
entrepreneurship students and entrepreneurs. It moves the reader forward through practical and
important steps that they might otherwise miss, in their innovation-driven start-up journey.”
—Professor Gregory B. Vit, Director, the Dobson Centre for Entrepreneurial Studies, McGill
University
Cover image: Marius Ursache
Cover design: C. Wallace
Copyright © 2013 by Bill Aulet. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
Adaption of figure [“Bowling Alley Market Development” (p.38)] and brief quote from pp. 22-3
from INSIDE THE TORNADO by GEOFFREY A. MOORE. Copyright 1995 © by Geoffrey A.
Moore Consulting, Inc. Reprinted by permission of HarperCollins Publishers.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form
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ISBN 978-1-118-69228-8 (cloth); ISBN 978-1-118-72081-3 (ebk); ISBN 978-1-118-72088-2 (ebk)
Throughout my entrepreneurial career, my family has been a rock of Gibraltar that I could
always count on with unconditional support and love, and I dedicate this book to them. First, I
had the best parents a son could ever have in the now-deceased Becky and Herb Aulet. I was
blessed with four wonderful sons, Kenny, Tommy, Kyle, and Chris, who wondered why their
father couldn’t be like others but put up with it . . . and have excelled in spite of this.
Most of all, I dedicate this book to my wonderful and patient wife of 30 years, Lisa, who
married a young corporate soldier so many years ago and ended up with a crazy old
entrepreneur and stuck with me the whole time. This book is for you.
PREFACE
THIS BOOK IS DESIGNED as an integrated toolbox for first-time and repeat entrepreneurs so that
they can build great enterprises based on new innovative products. Serial entrepreneurs with deep
experience in a particular field or industry will also find this 24-step guide useful to more efficiently
bring products to market.
As an entrepreneur, I have found many sources to be helpful, from books to mentors, and most of
all, my own experiences. However, I have not found a single source that pulls everything together and
does it well.
Many of the books I have found are excellent and have great material, including: Geoffrey Moore’s
Crossing the Chasm, W. Chan Kim and Renée Mauborgne’s Blue Ocean Strategy, Brian Halligan
and Dharmesh Shah’s Inbound Marketing, Steve Blank’s Four Steps to the Epiphany, Eric Ries’s
The Lean Startup, Ash Maurya’s Running Lean, and Alex Osterwalder and Yves Pigneur’s Business
Model Generation. These are valuable books and I will reference many of them in this book.
However, they are focused in depth on a few key points without providing the more fulsome roadmap
that I have felt appropriate when teaching my students at the Massachusetts Institute of Technology
(MIT) and in my other workshops. I believe that each is an important tool at the right time during
product conception, development, and launch, but what was needed was a toolbox that contained
these and more.
Using the analogy of a toolbox, a screwdriver is a great tool for certain situations, but it does not
function as well as a hammer in other situations. Likewise, to choose one example, the ideas and
techniques in Inbound Marketing are extremely valuable, but they are even more helpful as part of a
broader context used at the right time.
The goal of this book, then, is to provide guidance in a messy and sometimes confusing process
where you, the entrepreneur, are attempting to do something that has never been done before. What a
terribly difficult task to take on, but what an incredibly important one. This book comes out of my
workshops around the world and MIT courses where I built and refined this approach over years with
hundreds of great entrepreneurs.
Certainly, there are other elements to consider when working toward a successful new venture,
from culture and team to sales, financing, and leadership. But the foundation of an innovation-driven
enterprise is the product that is created, and so that is the focus of this book.
This process will not necessarily be sequential in nature. I tried to make a logical linear process of
24 steps to get you started, but you should realize that when you gain knowledge in one step, you may
need to reevaluate previous steps, and refine or even redo your previous work. This iterative process
of “spiraling” toward the optimal answer is important because you do not have unlimited time to
perfect your work on a particular step. You will need to make first-pass estimates based on research,
and they will often need revision.
Each of these steps has rigorously evaluated whether a customer would benefit from your product,
regardless of whether an analyst, potential investor, or technology writer standing on the sidelines can
see the value. As someone once said to me, “In concept, concept and reality are the same, but in
reality, concept and reality are not the same at all.”
This book also provides a common language to discuss key aspects of venture creation so that you
can more effectively discuss your new venture with advisors, mentors, and fellow entrepreneurs. I
have carefully defined each step to refer to a discrete part of the process. I recall my father getting
very frustrated when he would ask for a pair of pliers and I would give him a wrench. Now I feel the
same way he did when I ask my students what their “business model” is and they talk about their
Total Addressable Market or Pricing.
The result of this integrated toolbox with a common language is what we at MIT like to call
“disciplined entrepreneurship.” Some people tell me that entrepreneurship should not be disciplined,
but chaotic and unpredictable—and it is. But that is precisely why a framework to attack problems in
a systematic manner is extremely valuable. You already have enough risk with factors that are beyond
your control, so the framework provided by disciplined entrepreneurship helps you succeed by
reducing your risk in factors that you can have control over. The process can help you succeed, or it
can help you fail faster if failure was inevitable for the path you were on. Either way, this process
will help you.
This is the book I wish I had 20 years ago when I first became an entrepreneur.
Note on examples in this book: Throughout the book, I include a number of examples from MIT
student teams who took the 15.390 New Enterprises course while in their degree programs. These
examples are not always fully fleshed out because of the students’ time limitations. I provide them in
this book as examples that illustrate the basic concepts of the steps. I have altered some of them to
better illustrate best practices and pitfalls for various steps, but kept the essence of the situations. The
examples are all consistent with my experiences in founding companies. The projects described in the
examples might not have turned into full-fledged companies, depending on the decisions the student
teams made after completing their coursework, but their examples are educational nonetheless.
ACKNOWLEDGMENTS
A HUGE THANK YOU to my editor-in-chief Chris Snyder and editorial advisor Nancy Nichols,
without whom this book would still be in my head and maybe on my computer. A very special thanks
to my Romanian entrepreneur and friend Marius Ursache who did the illustrations for this book in
such a delightful way that I was always like a kid on Christmas morning when I saw his e-mails come
in with new drawings because I was so excited to see them and he never let me down. And thanks to
the team at John Wiley & Sons, led by Shannon Vargo, that brought this book to production in record
time and with utmost professionalism.
Lauren Abda, Yevgeniy Alexeyev, Greg Backstrom, Christina Birch, Michael Bishop, Adam Blake,
Young Joon Cha, Vishal Chaturvedi, Ryan Choi, Kevin Clough, Yazan Damiri, Charles Deguire,
Deepak Dugar, Max Faingezicht, Daniel Fisberg, Patrick Flynn, Tim Fu, Pierre Fuller, Megan
Glendon, David Gordon, Melinda Hale, Katy Hartman, Kendall Herbst, Nick Holda, Julia Hu, Max
Hurd, Ricardo Jasinski, Max Kanter, Mustafa Khalifeh, Zach LaBry, Jake Levine, Michael Lo, Dulcie
Madden, Vasco Mendes de Campos, Aditya Nag, Madeline Ng, Inigo De Pascual Basterra, Ella
Peinovich, Giorgi Razmadze, Adam Rein, Izak van Rensburg, Miriam Reyes, Sophia Scipio, Colin
Sidoti, Sam Telleen, Jocelyn Trigg, Pedro Valencia, Eduard Viladesau, and Leo Weitzenhoff all need
to be acknowledged for their contributions to and/or reviews of sections of this book. Thank you also
to 3D Systems and Dollar Shave Club for their permission to include certain images.
This book came about because I have been able to work at MIT for the past six years and interact
with the best entrepreneurship faculty in the world. I have been honored to work with them. Of the
many who have made enormous intellectual contributions, special acknowledgement must go to Fiona
Murray (who co-authored the paper on innovation-driven entrepreneurship that I reference and
paraphrase in the introduction and has provided hours of feedback on this book), Ed Roberts, Scott
Stern, Charlie Cooney, Matt Marx, Catherine Tucker, Eric von Hippel, Jim Dougherty, Katie Rae,
Reed Sturtevant, Elaine Chen, Peter Levine, and Brian Halligan, and of course my colleague in
teaching this material for so many years, the legendary Howard Anderson. Also thanks to David Skok,
Thomas Massie, Tom Ellery, Andrew Hally, Bernard Bailey, Marc Dulude, Jim Baum, Bill Warner,
Dan Schwinn, Bob Coleman, Ken Morse, Jon Hirshtick, Chuck Kane, Brad Feld, Marty Trust, Sal
Lupoli, Joi Ito, Sanjay Sarma, and the many mentors and collaborators I have been so fortunate to
have had over the years. They all contributed heavily to the intellectual content of the book, but I take
responsibility for the interpretations on how to apply and integrate it for practical implementation,
which is the goal herein. Any errors made in this document are mine and no one else’s.
The Kauffman Foundation for Entrepreneurship, specifically Wendy Torrance, Lesa Mitchell, and
Dane Stangler, have been very helpful in this process and have pushed me to do this book for some
time. I finally heard you and got it done. Thank you for your encouragement.
A key enabler of this book as well has been the fabulous team of pirates we have at the Martin
Trust Center for MIT Entrepreneurship including Colin Kennedy, Christina Chase, Ben Israelite,
Adam Cragg, Vanessa Marcoux, Allison Munichiello, Pat Fuligni, Justin Adelson, and Liz DeWolf.
They provided encouragement, perspective, and a sanity check every day I was in the center.
Lastly I want to acknowledge the thousands of students and entrepreneurs who I have had the
privilege to work with; you all give us such energy and hope every day. We all want to help you so
much, as you are our hope for the future.
INTRODUCTION
NEWS FLASH—ENTREPRENEURSHIP
CAN BE TAUGHT!
One of the first questions I often ask when I begin a workshop or a class is, “Do you think
entrepreneurship can be taught?” Invariably a silence comes over the group. They wiggle
uncomfortably in their seats. Some politely answer in the affirmative, telling me that is why they came
to class in the first place. After a polite back-and-forth someone will invariably say what is on the
mind of many in the room: “No, either you are an entrepreneur or you are not.” That person, once
empowered, begins to passionately argue the case.
I have to say that I tend to like this person, in large part because that person would have been me 15
years ago. But now I know that entrepreneurship can be taught. I experience it almost every week in
the courses I teach at the Massachusetts Institute of Technology (MIT) and around the world.
When we look at Richard Branson, Steve Jobs, Bill Gates, Larry Ellison, and all the other highly
visible entrepreneurs, they seem to be different from us. They seem extraordinary. But each of their
successes is a result of great products that made them successful, not some special gene.
To be a successful entrepreneur, you must have great and innovative products. Products can be
physical goods, but also services or the delivery of information. All the other factors that influence
success are nothing without a product. And the process of making a great product can be taught. This
book will teach you how to systematically improve your odds of making a great product.
In this book I present a disciplined step-by-step approach to creating a new venture. This
framework is useful both for a classroom setting and for those who want to create a new company that
serves a new market. Before we begin, though, we must tackle three common myths about the
entrepreneur that often hamper those wishing to start new companies or teach students how to do so.
Three Common Myths That Must Go
There are many misconceptions about what entrepreneurship is and what is required to be an
entrepreneur. The first myth is that individuals start companies. While the entrepreneur as a lone hero
is a common narrative, a close reading of the research tells a different story. Teams start companies.
Importantly, a bigger team actually adds to the odds of success. More founders = better odds of
success.1
The second myth is that all entrepreneurs are charismatic and that their charisma is a key factor in
success. In fact, while charisma may be effective for a short period, it is difficult to sustain. Instead,
research shows that more important than being charismatic, entrepreneurs need to be effective
communicators, recruiters, and salespeople.
The third myth is that there is an entrepreneurship gene, that certain people are genetically
predisposed for success in starting companies. As the cartoon at the beginning of this chapter
suggests, such a physical gene has not and will not be found. Some believe personality traits like
flamboyance or boldness are correlated with successful entrepreneurship, but that line of thought is
misguided. Instead, there are real skills that increase the odds of success, such as people management,
sales skills, and the topic of this book, product conception and delivery. These skills can be taught.
They are not genetically gifted to a few lucky souls. People can adapt and learn new behaviors, and
entrepreneurship therefore can be broken down into discrete behaviors and processes that can be
taught.
For evidence, we need look no further than the one magical square mile that is MIT. Students who
attend MIT start companies at an absolutely prolific rate. In fact, as of 2006, over 25,000 existed, and
900 new ones are started each year. These companies employ over 3 million people with aggregate
annual revenues of approximately $2 trillion. To put that in perspective, the total annual revenue from
MIT alumni–founded companies taken together would make them the eleventh-largest economy in the
world.2
What Explains MIT’s Success in Entrepreneurship?
Why is MIT so successful at turning out entrepreneurs? The first response people often have is that
the students at MIT are extremely intelligent. MIT’s students are no smarter than those at other topflight institutions of higher learning throughout the world (Caltech, Harvard, and the like), but none of
them, other than Stanford, come close to producing entrepreneurial alumni like MIT. So MIT’s
success must be attributable to something else.
The second response is that this success comes about because MIT students have access to leadingedge technologies in the laboratories, and thus it is easy for them to start companies. Again, this is a
measurable hypothesis. Because of the outstanding Technology Licensing Office (TLO) at MIT, there
are numbers on how many companies are started each year with technology out of the labs because
they have to be licensed through this office. This number is 20 to 30 companies per year, which is
very impressive when compared to the stats at other universities. Yet this number seems small when
we consider that MIT alumni as a whole start 900 companies per year. 3 While the companies started
with MIT-licensed technology have great strategic importance and can be very impactful (e.g.,
Akamai4), they are only a small part of why MIT is so successful at entrepreneurship. Well over 90
percent of the companies started by MIT alumni are started without MIT laboratory–produced
technology.
The real reason why MIT is so successful at creating new companies is a combination of spirit and
skills. At MIT there is a culture that encourages people to start companies all the time and
everywhere, much like in Silicon Valley, Israel, Tech City in London, and Berlin today. Role models
are everywhere, and they are not abstract icons, but rather very real people no different from you. An
aura of possibility and collaboration so pervades the very air at MIT that students quickly adopt the
mindset that “yes, I can start a company too.” They become infected with the “entrepreneurial virus,”
believing in the benefits of launching a new venture.
Students are galvanized by the atmosphere of ambition and collaboration. The work of developing
entrepreneurial skills comes from classes, competitions, extracurricular events, and networking
programs, and the teachings available both in the classroom and outside are extremely relevant and
immediately valuable to the students so that in this environment they attack the subjects with a greater
level of interest and commitment. This is also amplified because every student in the class is fully
engaged. A class taught in such an engaging environment is far more productive for students and
instructors.
A major contributor to this virtuous cycle is the social herding mentality. As the students are
learning and working on entrepreneurship, they are also collaborating with fellow students. They talk
about their work when they are in social situations, and they naturally start to push one another with
subtle or not-so-subtle competitiveness. Not only do they learn from one another, but that learning
becomes part of their individual and group identity.
These are the factors that create the environment where entrepreneurship is so successfully “taught”
at MIT. It is a positive feedback loop (see Figure I.1).
Figure I.1 Positive feedback loop.
Distinguishing Two Distinct Types of Entrepreneurship
Entrepreneurship is about creating a new business where one did not exist before. That definition
seemed clear until my colleagues Professors Fiona Murray and Scott Stern and I spent a good deal of
time talking to various organizations about how to promote entrepreneurship in different regions of
the world. We found that when we said “entrepreneurship” to people, it could mean at least two
extremely different things—a discrepancy that had important ramifications, because each type of
entrepreneurship has dramatically different objectives and needs.5
Small and Medium Enterprise (SME) Entrepreneurship
The first type of entrepreneurship is small and me
