Stanford’s Entrepreneurship | Douglas Y. Park

Stanford’s Entrepreneurship | Douglas Y. Park

Transcript:

Unknown Speaker 0:00
Welcome to American Dreams keys to success with your host, Alan Olsen. Welcome

Alan 0:05
back. We’re here today with Dr. Douglas Park. He practices slot remote attorneys and teaches classes and entrepreneurship at Stanford University. Welcome to today’s show, Doctor,

Douglas 0:17
thank you for having made today, Alan.

Alan 0:19
So you’ve been able to accomplish quite a bit in your life. Can you share some of your background and how you arrived where you are today?

Douglas 0:27
Sure, well, I grew up in Texas, San Antonio, Texas, and a huge purse, San Antonio Spurs basketball fan. I went to school, through high school in San Antonio went to Harvard College to for my undergraduate degree, really enjoyed my time there learned a lot I met a lot of great people studied sociology, in fact, it’s very fat, I’m very fascinated by relationships among people, and how that works and how groups and organizations work in business and society. And after I finished that Harvard, I wanted decided I wanted to teach and do research, become a faculty member. And in particular, I decided I want to do that in a very applied way. So in a business school, so I decided to attend the Ph. D. program in organizational behavior at the Stanford Graduate School of Business, where I focused on issues of strategy in companies both large and small. While I was at Stanford, I started to work with startups and companies here in Silicon Valley, which I found really fascinating, because that was really my first exposure to the tech startup scene, I remember this is almost 20 years ago, I started the program at Stanford in the early 1990s. And after I finished my degree at Stanford, I was looking for faculty positions, and I decided that business was becoming increasingly global. This is 1997, Alan, and in particular, at that point in time, Hong Kong, was going to revert from British control to Chinese control. And I thought that that would be a fascinating place to learn about business, especially on a global scale. And so I decided to take a faculty position at the business school, the Hong Kong University of Science and Technology, which is the newest University in Hong Kong, and is modeled after Western and American universities with a very heavy emphasis on research. And so when I was in Hong Kong, I taught courses on entrepreneurship, strategy and organizational behavior, all levels of students from undergraduates all the way up to senior executives. So

Alan 2:54
So So when we’re looking at a PhD in strategy, CG, on to entrepreneurship, when you’re counseling the students because you know, Stanford, yes, phenomenal record track record of some of the best companies in the world. Sure, coming out of those students. How do you how do you advise them of what it takes to succeed with a new company today?

Douglas 3:19
Sure, so one of the, you know, the biggest thing, the biggest key to success of any company, new or established is execution. So oftentimes, companies have a great product, they might even have very good funding, they might have excellent people. But where the big obstacle to their success is whether or not they can really implement and execute on their business model, their strategy, their culture. And so that is the very tricky part, because other things can become fairly routine and Trump’s of processes. But the question is, do you have the right processes? And are those processes and procedures being properly implemented and executed by the individuals in the company?

Alan 4:15
So in the process of execution, obviously, accountability is it’s important. The return in the report from what you said that you are going to do? Yes. When when companies are in the startup phase, oftentimes they’re challenged with finding money and hiring the right people. Yes. Do you cover all those bases? Yes,

Douglas 4:36
I do. I cover those bases in my not only my class, but I also cover those issues. When I advise companies I bring my I like to bring my business experience to bear on my advice that I bring to the companies and I feel that also understanding the legal implications of the legal aspects of those business decisions. Helps me give better advice.

Alan 4:59
So So when when you’re in the program there I would you advise and an individual that does not have money, go find the money before they actually started the program or would you advise they kind of bootstrap and and and find it as things progress

Douglas 5:13
Well, today to get money, you need to show some evidence of success. You have to have a prototype, a beta, website, or product or service. And so today, bootstrapping is much more important. And it’s a critical first step to getting large scale funding.

Alan 5:36
We’re here today visiting with Dr. Park. He teaches entrepreneurship at Stanford University. But we right back after this message will recover more information on what it takes to be a socially responsible business today.

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Unknown Speaker 6:20
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Alan 6:25
Welcome back. We’re visiting today with Dr. Douglas park at Stanford University. He holds a PhD in strategy and works with the students at Stanford on entrepreneurship teaching entrepreneurship classes. We’ve been talking about how to make a successful startup in today’s economy. So Dr. Park back to the question, what are the biggest challenges that entrepreneurs face and trying to overcome? You know, making a successful startup today?

Douglas 6:53
Sure. So there are really three keys to a successful the building a foundation for a successful company. One is having a great product. It’s not just an idea, but actually a product that consumers customers are willing to pay for. And that provides a benefit. Secondly, there has to be a great market. And that means that the market is large and growing. And it’s economically attractive. There are some markets that simply are not economically attractive, a big example. Two examples are restaurants, and airlines, traditionally unattractive airline industries. And third is great people, great people are critical to be able to properly motivate, develop, and execute on a business plan and strategy and implement the right kind of culture to produce success.

Alan 7:50
You know, the new market is just awful. The graduates coming out today. law degrees, a lot of them particularly they just can’t find jobs. So yes, if they wanted to go the route of starting their own company, and they come to you, Dr. Park, tell us where should we start,

Douglas 8:09
find a problem number one, find a problem that needs to be solved. But secondly, that problem has to be something that you care about, that you’re passionate about. Because starting a new company is going to be a long haul, it’s gonna be a big challenge. It’s gonna take resilience, and persistence. And you’re gonna face a lot of obstacles along the way. So if you don’t have a real commitment to your business, it’s gonna be very difficult to make it succeed.

Alan 8:42
You know, I think that’s so true. And in my business, running an accounting firm, we often get a lot of these new companies come startup, and you can tell the difference between those that will make it and those that won’t, yes, when the individual with the passion that fire in their eyes comes and says, I really want this to succeed. And I don’t care how much money I make. I want to succeed in solving the problem. Oftentimes, they’ll persevere and work through to see the company make it. Yes, that’s the individual counting, well, how much money am I going to get?

Douglas 9:17
So that’s right, and your business partners can see that too. Whether you’re going to enter into some kind of strategic alliance with them, whether you’re looking to an investor to get money, investors can tell that as well. Whether the entrepreneur really cares about what they’re doing.

Alan 9:35
So what pitfalls do startup companies often face?

Douglas 9:39
Well, oftentimes, the founders when especially when there are several co founders 234 They face issues in terms of really kind of cementing the relationship amongst themselves. So it’s very one mistake that founding teams often make is they split the equity and accompany equally that arrangement rarely works and is rarely the right solution. Because the contributions, even at the initial stages usually are not equal, and especially going forward, they’re not equal. So one thing to think about is whether it really makes sense to split equity equally. Secondly, another mistake that companies sometimes make is that the equity the stock in the company vests immediately. And in fact, it’s important to distribute any equity shares in the company over time. So those are two very simple things that at a very early stage founding teams tend to do, but tend to cause problems later on.

Alan 10:42
And you tie the equity vesting into hitting benchmarks and execution. Yes,

Douglas 10:45
absolutely. It’s better to do that, as opposed to simply time time with a company. Now time with the company is very easy to measure. But it’s also better to if you can to tie it to the benchmarks that you just mentioned, Alan,

Alan 11:02
I’m visiting here today with Dr. Douglas Park. He’s a professor at Stanford University, and also the president of the Silicon Valley Chapter of the Harvard Club. Stay tuned, we’ll be right back to these messages. And I want to expand more on what it takes to make a successful startup in today’s economy. Nothing’s more important than spending time with your family. Green stone rug upholstery company with trusted advisors, the highly successful, our goal is to help you find the right strategy to protect your wealth for yourself, and those you love. Why do I feel like it just had an audit as trusted advisors, the highly successful will make sure that you don’t lose your shirt

Unknown Speaker 11:49
apple pie baseball and now here’s all American, Alan Olsen. Welcome

Alan 11:54
back. We’re here today visiting with Dr. Douglas Park is a professor at Stanford University and teaches entrepreneurship there. And before the break, we’re talking about some of the things that the startup companies need to watch out for I’d like to pick up on this topic because, you know, it’s it’s I don’t know how accurate this statistic is right here. Like it’s one out of seven companies, startup companies making it or my close,

Douglas 12:21
it’s probably even a much smaller than that. Allen, I think it’s one out of seven venture funded companies. Make it? Okay. So yeah,

Alan 12:30
when we’re looking at this, this world of startups, yes, there’s more that aren’t making it than our. And so as a professor of Yeah, at Stanford, and by the way, 50% of all the venture money in the world is coming out of Silicon Valley. Yes. And and this is really an incubator for the world, worldwide companies. So when we look at this, what are some of the things that you advise people starting their own businesses to look out for?

Douglas 12:59
Well, when we think especially about issues of implementing and executing the strategy, and the business model, there are a couple of things that to watch out for. Number one is oftentimes, technology based companies sometimes wait too long to get their product out, that as they try to perfect their product, they wait until the product is just right, before they release it. That oftentimes, is a mistake. In fact, one of my students, the last time that I talked to startups class, who was running a networking equipment company, said that in hindsight, that was exactly the the mistake that he made, he waited too long to get the product out into the market to get feedback, and to see whether or not customers were going to be willing to pay for that product.

Alan 13:53
So if you ever start a company, and you have a customer, just go for it. That’s right. And yeah, and if it doesn’t work, you adjust

Douglas 14:00
along. That’s right, you improve you revise, okay. And that is something that in general, companies need to do, especially at the very early stages is to be willing to revise their plan. But at the same time, it’s also important not Secondly, not to lose your commitment to your chosen path too early. So for instance, if you look at Pinterest, now wildly successful, that team went for almost two, three years before they experienced success, but they didn’t change the basic nature of of their business, what they were doing, and how they wanted to do it. A third thing, Allen, that I think a lot of companies should think about is instead of focusing so much on a product, and the tech, in particular, the technological features, is focusing on really understanding and trying to figure out the match between As features and what the customers want. And this involves a degree of storytelling, once you know what your product is and who your customer is, and what problem it’s solving, what story are going to tell about that? So again, if you look at Pinterest, the company has a almost a third of its about 20 employees are not technical people at all. They’re out there trying to understand what their community of users wants, from Pinterest.

Alan 15:33
So it’s interesting, it’s oftentimes those relationships that make or break these new companies. Yes. And, you know, so often you hear the, the guy that was working for an HP or another company, and they said, Well, we’re gonna fire you. But if you want to go develop this product, and we’ll pay you as an independent, and that’s right, and these little companies are born. That’s right, time after time. I, you know, familiar with Cisco has done that time and time again, they may have something that’s not part of their core strategy, but they they release the group, and then they do a joint venture with them.

Douglas 16:09
That’s right. So those kinds of relationships from former employers, former business colleagues, can be extremely valuable in getting support. All kinds of support, people support, financial support, technical support,

Alan 16:22
what are the best for the individual that says, Well, I just want to go make the next Cisco but I don’t have a relationship? How would you advise them?

Douglas 16:30
That? Certainly, you’re going to be facing an uphill battle? If you do that? So I think it’s very important. First of all, I mean, it’s very important to understand the market or the industry you’re in. And that includes understanding who the key players are the companies, the individuals. And I would say you need to take some time actually, to develop those relationships, it’s extremely helpful to do that. It’s very hard. It’s an extreme challenge to go into an industry where you don’t know people, because presumably, if you don’t know, people, you probably don’t have much experience in that market space.

Alan 17:08
So the the point there’s build your network while you’re in place, that’s right, before you step out and start to do your urine.

Douglas 17:16
I think that’s an excellent advice, Alan.

Alan 17:18
Yeah, it’s, and I think that in the world, when, when we deal with the new startup, I see there’s three things that you need, you need to know the person like the person and trust the person, yes. And in and then once that’s in place, it’s never about price. It’s about, you know, trusting and feeling that a deliverable can come back. These are all good thoughts there. So you serve as a director of several startup companies here. Yes. And what do you think in terms of the state of the valley right now, what do you see happening with innovation? Is it continuing or what

Douglas 17:56
it is, I think that there is innovation. You know, some there have been some critics, in particular about startups surrounding social networking and social media companies, saying that those kinds of companies aren’t really doing anything new or really innovating. But I think what you see all around is in a number of different industries. Alan, there’s extreme disruption and change going on just a couple of examples, digital media, including movies, books, and music. In the last 510 years, we’ve seen see changes in the delivery and distribution and the economics of all of those, for example, with the rise of iTunes, Netflix, other streaming services. If you look at financial services, now there’s a much greater ability of consumers and even institutions to do business. In terms of financial transactions, online health care has been greatly disrupted the delivery and the economics of it now there are even online providers of various healthcare, medical services, diagnostic services, health care, it is changing the way that information is shared among medical providers.

Alan 19:16
You know, it’s amazing innovation as it continues into so we think what we’ve seen it all yesterday I got this email on my computer. Corning Glass was showing the future that computer sure there was no computer was hauling your mirror in your, in the glass that you looked at. Right. It’s just amazing.

Douglas 19:36
So there’s a company out of Korea. Now that is developing a flexible battery. That will, if it works will allow for mobile devices of all types that can be folded and made extremely compact, but unfolded as well in use on a large scale form. So that’s just that kind of just that’s just sending example. We see innovation not only here on the valley, but increasingly in many innovation centers around the world and it’s I think it’s truly exciting.

Alan 20:08
Dr. Park, it’s been a pleasure having you on our show.

Douglas 20:11
Thank you for having me, Alan.

Alan 20:12
Thank you. We’ll be right back after these messages.

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About Dr. Douglas Y. Park

Douglas Y. Park is a Partner and Chief Sustainability Officer at Rimon PC, in Palo Alto, California. He specializes in solving problems in corporate governance, corporate and securities law, and strategy for companies, board members, and investors. A recognized authority on corporate governance, Doug has been quoted in Time.com, Reuters, Agenda (a Financial Times service for corporate directors), Corporate Secretary, and other publications.

With an active advisory in sustainability and responsible investment issues, Doug serves on the Board of Advisors of the Responsible Investment at Harvard Coalition. Additionally, Triple Pundit named him one of the “25 Hottest Sustainability Professionals.” He teaches classes on Starting Startups and Mergers and Acquisitions at the Stanford Continuing Studies Program. Doug received his J.D. from the University of Michigan Law School, his Ph.D. in Strategy and Organization from the Stanford Graduate School of Business, and his B.A. magna cum laude with highest honors in Sociology from Harvard University.