Editorial Team

Hi Thomas, Welcome to Entrepreneurship Interviews. Tell us a bit about yourself.

Tom: I am a senior partner and president of Kuczmarski & Associates, the foremost management consulting firm specializing in accelerating growth through innovation. I have authored five books and many articles on innovation. I have also been teaching innovation courses at Northwestern University’s Kellogg Graduate School of Management for 29 years. Along with Dan Miller, I am the co-founder of the Chicago Innovation Awards, an independent organization that recognizes the most innovative new products, services, business models, and processes developed in the Chicago area each year.

What are the Chicago Innovation Awards?

Tom: Established in 2002, the Chicago Innovation Awards shine a bright light on the creative spirit of Chicago by focusing attention on the most significant new products, services, business models, and processes developed in the region. The ten winners each year are innovations that uniquely fill unmet needs, spark a competitive response in the marketplace, exceed market expectations, achieve financial success, and improve people’s lives. They emerge from the public, private, and nonprofit sectors. Most importantly, the Chicago Innovation Awards remind us that innovation is thriving in America’s heartland.

Any big names that participated in the past?

Tom: Some of our more notable past winners have been Groupon, Feedburner (who was later bought by Google), 37 Signals, Vibes Media, Loggerhead Tools, Abbott, Motorola, Sara Lee, Walgreen’s, First Alert, Orbitz, United Airlines, and Rubbermaid to name a few. Many key players in the public and private sectors regularly attend our events throughout the year to see what’s new in Chicago innovation.

Who can apply, and what are the benefits of being nominated or even winning an award?

Tom: In order to qualify for a Chicago Innovation Award, you must have developed your new product or service in the Chicago area and meet some or all of the following criteria:

• Introduced within the past 3 years
• Created a whole new category of business (ex: e-trading stocks)
• Triggered a ‘me-too response from competitors (ex: Touch screen cell phones)
• Changed or elevated consumer expectations (ex: overnight delivery)
• Solved unmet customer or consumer needs
• Received market support (users) or Financial success (revenues, although not necessarily profits)

The Top 10 nominees will be honored at the Chicago Innovation Awards ceremony on November 1st at the Goodman Theatre. Each honoree will be profiled in the Chicago Sun-Times, featured in an advertising campaign on CTA trains and buses, invited to a private brunch with Mayor Richard M. Daley to discuss their winning innovation, given a free one-year membership to the Illinois Technology Association, and invited to ring the opening NASDAQ bell in New York City.

Most people are postponing starting a business because it looks like they cannot bring any innovation; they do not have that unique idea. Is this a valid reason not to start a business?

Tom: Yes, I would say this is definitely a valid reason; without a unique value-adding differentiation, you really risk being in a non-competitive situation. In order to be successful, a business needs to offer a differentiated product or service that adds value to their customer. The company needs to identify their key opportunity areas where they can best leverage their expertise in order to give themselves a strategic advantage over their competition.

How does the crisis affect innovation? Are companies coming up with ideas to make things more effective?

Tom: Crisis not only creates opportunities for innovation, they often demand innovation in order to solve the current problem and prevent the crisis from happening again. Every time there is a crisis, you immediately look to see what went wrong and try to find ways to prevent it from happening again. These causes can be a stimulus for new products and services depending on the marketplace opportunities.

I think there is some sort of cliché that innovation only happens in big companies with big budgets allocated to research. My view is a bit different: every business innovates some way or another in the process of doing things better. What do you think?

Tom: There is no secret that big companies with big budgets for R&D and captive market positions can stamp out and commercialize innovative products fairly efficiently. Still, many times you will see that the bureaucracy in these companies gets in their own way and can inhibit them from coming out with the next big idea. In cases like this, many companies will hire outside consultants to help them create a better atmosphere to foster growth from innovation. I agree it is a cliché to say that innovation only happens in big companies, and the Chicago Innovation Awards show this through our very diverse group of past winners, from companies both large and small.

Entrepreneurs are sometimes afraid of sharing their ideas, even with investors. How valid is this fear?

Tom: This is a common concern because innovators fear losing their intellectual property. It can be expensive to protect your ideas, but if it were an idea that you think has some legs, I would protect it before showing it to investors. In addition, most investors do not want to invest in a company that can’t protect itself from a fast follower. If you have no protection, the investment is much riskier. One of our Chicago Innovation Award partners, Vedder Price, is an expert in this field.

Is it expensive for a small business to have patents? When does it become important?

Tom: Intellectual property is very important and can be very expensive if you choose to file International Patents. In the US, a Utility Patent typically costs about 15K to 20K. Although, you can file a Provisional Patent to act as a preliminary protector of your idea relatively inexpensively while you sort out if your idea has market potential. The provisional is not an issued patent but can be the basis for an official patent application if you file for a utility patent within one year of receiving the provisional patent.

There is a lot of activity in developing green businesses and greener products. Do you see more innovation in this field?

Tom: Yes, I continuously see more and more innovation in this area. The unique thing about green products is that there is a large movement in our culture right now towards “living greener lives.” This creates a situation where a company can seek to create differentiated product appeal to green-minded customers because of the emotional desire to live greener lives. There are also many new laws and regulations that will continue to drive innovation in this field.

I know from my own experience that just having an idea is not enough. Executing the idea the right way is what brings the money to the table. Any words of advice for people looking for investors for their innovations?

Tom: The first thing I would say is to determine if you have a market-based business case for your idea. Second, you must design a value-added differentiation that creates value in the market. Third, you must be sure that this design can be protected by IP or some other reliable strategy. Fourth you need to test your product or service on your target customer group to validate the product’s ability to compete for market share at the price you can supply the product profitably to the market. Finally, you need a robust business plan that defines the investments and executables necessary to succeed in the marketplace, as well as the organization or team to make it happen. You must do these things prior to asking investors for money for them to take you seriously.

Do you think the U.S. has a native advantage in creating and implementing innovations?

Tom: Innovation can happen anywhere, but there have traditionally been some notable advantages for innovating in the states. We have traditionally had a well-developed distribution system and system of communications to facilitate commerce. Culturally we have embraced the spirit of the American Dream and the popular belief that anyone can succeed in the states independent of their social, racial, or religious status. There are also many world-renowned universities in the U.S. that educate students about innovation. The Kellogg School of Management, where I teach, is just one example. These factors have combined to systematically and culturally encourage individual innovation and entrepreneurship. Simply, the ability to enter such a large market without the past restrictions that many other economies have created has allowed US innovators and entrepreneurs substantial opportunity to succeed.

What would be your most important advice for people having an idea and not knowing what to do about it?

Tom: First thing you should do is write up a business plan to validate the business case. A great idea that cannot translate into profitable sales in the marketplace is not sustainable. If you don’t know how to write one, you can go online or seek experienced help on how to do this. Next, you need to get out there and meet people who have done what you are trying to do or will support your venture. Get out to networking events and try to befriend people who are in the industry that your new idea relates to. Ask questions, learn and make friends. The most basic thing is to do your homework. There are lots of resources that can give you some advice or background on what you’re about to get yourself into. It is always easier to learn from other people’s mistakes rather than having to go through them yourself.

If you read entrepreneurship and small business blogs long enough, you will notice that there is a question that keeps coming back each year: are entrepreneurs born or taught? The question became more important as younger and younger entrepreneurs become successful even before finishing High School. I’m, too, guilty of trying to answer this question, although my entrepreneurial life was much more typical, leaving the 9 to 5 and becoming an entrepreneur.

Luckily for me, there is now a book called “We Are All Born Entrepreneurs,” and I got the chance to interview the author, Steve Welch, about the book and his discoveries about entrepreneurs:
Steve, you wrote a book called “We Are All Born Entrepreneurs.” What is it about?

Steve: The book uses my story and other entrepreneurs to help others learn from their successes and failures. At the same time, it explains why so many of us have a deep-rooted passion for entrepreneurship.

Do you consider yourself a successful entrepreneur?

Steve: I have certainly had some successful ventures, but I have also had some unsuccessful ventures. However, like most good entrepreneurs, I think I have consistently learned from my successes and mistakes.

How did you come up with the idea to write a book?

Steve: As I started to work with so many young entrepreneurs at DreamIt Ventures, I became frustrated with what was clearly being emphasized at the MBA School. Too often, I saw entrepreneurs focusing on raising money as if raising money was the validation of a viable business. I bootstrapped my first business, as did most of the entrepreneurs in this book. I told the many stories in “We Are All Born Entrepreneurs” to show that there are many different paths to success. However, successful entrepreneurs develop the skills necessary to succeed and then adapt to the individual circumstances of their venture. Sometimes this means raising money from outside sources; often, it does not.

I know from my own experience and from interviewing other entrepreneurs that most people are afraid to start a business on their own. Is the fear of entrepreneurship a reason not to start a business?

Steve: Fear is certainly a natural part of starting a business. I have not found a successful entrepreneur who does not remember fear being an emotion they felt in their early ventures. So much of life and early-stage ventures is timing. I was 23 when I started my first big success, Mitos. I had no children, no mortgage, and parents that would not let me starve to death if I failed. This is a good time to start a business because the consequences of failure are not that great. More important, the benefits of success outweigh the negatives that come with failure. Whether succeed or fail, entrepreneurs learn the most on their first venture. The earlier this happens, the more they will draw on these experiences throughout their lifetime.

From the stories in the book, what is most common amongst people starting a business? Determination? Good planning? Desire to make things work?

Steve: Successful entrepreneurs find purpose in what they do. They use this purpose as a foundation to constantly learn and turn their inherited traits into the skills needed to succeed. They accepted failure as part of their learning process and are adaptable. No one gets an idea right from the start. Still, successful entrepreneurs build a plan, execute on that plan, but most importantly, adapt to that plan as new information became available.

Most people think about accomplished entrepreneurs that they got lucky and they, on the other hand, would never get lucky. Is luck part of entrepreneurial success?

Steve: There is certainly randomness to the world and a number of variables that are outside one’s control; however that is why self-awareness and adaptability are so important. If you are able to adjust to a constantly moving landscape, you increase your chance of success dramatically.

When talking about the book, you say that the paths of the entrepreneurs are different. At the same time, a lot of people are afraid to start a business because they don’t have a unique idea. Should this (not having an innovative idea) be a reason not to start a business?

Steve: Absolutely not. I know a lot of people that have started a business in which there was nothing unique about them at the get-go. Many markets are constantly expanding and need increased capacity. I know many people in the distribution business that does not have any unique value add, but they execute efficiently and make a good living. I also have many friends that have used more traditional business as a springboard to other innovative products and services once they had a customer base. Often this is much easier because the customers know you, and you know the customers. I think what is key is that entrepreneurs focus on bringing value.

What about the crisis? From my own research, people think that the good times to start a business have passed, and now it is harder to become successful. Is the crisis a challenge, an opportunity, or both?

Steve: It is both. There certainly are challenges, especially for businesses to fundraise. I think these challenges are far outweighed by the opportunities. There is so much working for entrepreneurs.

1) Communities and cultures across the globe are focusing on helping people develop the skills needed to start a business.

2) The costs of starting a business have plummeted. Whether software or physical product partnerships are easier to develop, and Alpha and Beta products can get out the door at a fraction of the cost of a decade ago.

3) Perhaps most important, the cost of reaching customers across the globe has decreased. This allows products targeted at a very specific niche to achieve profitability in a way they could not have a decade ago.

You started your first business quite young. What were the factors that pushed you to start a business instead of a 9 to 5 job?

Steve: One of the most common experiences of the entrepreneurs throughout my book was their memory of a supportive friend or family member at a young age. I was no different. I had supportive parents that even at a young age, allowed me to succeed and, yes, fail at my ventures. The lessons I learned as young as 12 years old prepared me for my ventures later in life.

You seem to be quite focused on helping other entrepreneurs succeed. Why is that?

Steve: I have always found purpose in entrepreneurship. Helping others succeed is my own selfish way of filling my own need for purpose. To me, there is nothing more exciting than seeing a need in the marketplace and working to bring value to society by filling that need. What is exciting about DreamIt is that we are helping 10-15 companies a year go through that process.

Founding DreamIT Ventures as a result of this?

Steve: Yes. I was fortunate to meet up with two other successful entrepreneurs, Mike Levinson and David Bookspan, who shared my passion for helping get businesses off the ground.

How exactly does DreamIt Ventures help and support entrepreneurs?

Steve: We provide a small amount of money, mentorship, space, donated legal and accounting, and most importantly, a community atmosphere in which each year 40-50 entrepreneurs are working in the same space to develop their businesses.
It was created as a pre-seed venture fund that nurtures enthusiastic, bright, and motivated people with big ideas who can build a prototype, beta, or market-ready product or service within three months. By providing the tools needed to flourish, this new model for funding simultaneously accelerates the development of new businesses and increases their likelihood of success.
In essence, DreamIt allows start-up companies to progress forward by eliminating as many risks as possible. For some participants who enter the program with an idea on a napkin, the three months are used to develop the product and eliminate the risk of building it. For companies with an early-stage product, the time period allows them to test, understand and refine its value to potential customers.

How different is entrepreneurship around the World? Do things happen the same?

Steve: Amazing enough, the skills developed to succeed is almost universal. What tends to be dramatically different are the cultural norms, especially around risk. America, for example, admires risk-taking, and we accept failures as part of the learning process. We celebrate those that are successful based on their own merits. Many other societies punish failure. Meaning that people in society that try and fail are looked down upon, often for life. In America, we expect people to try and fail, and we really respect those that try again.
What is shocking is how the Asian cultures recognize the importance of this and are working to change these social norms often through government policies. They are working to bring capital to early-stage entrepreneurs and focusing on their own immigration policies to recruit talent to their prospective regions. I would argue that above all else, the reason America has been so successful over the last century is that our relatively decentralized society that allowed individuals to be rewarded for successful risk-taking resulted in the best and the brightest from around the world coming to America.
Like current, which follows the path of least resistance, Entrepreneurs flow to the areas of the greatest opportunity.

Who should read the book? Any specific demographic?

Steve: Certainly aspiring entrepreneurs; however, I think there are many lessons that managers within any business can learn and use to improve their own organizations. Oh yeah, and parents, it is clear that successful entrepreneurs all had positive influences early in life the encourage them. Some parents even had extraordinary ways of teaching their children about business as early as 8.

Besides the book, how can wanna-be entrepreneurs learn more?
Steve: Most importantly, surround yourself with people that have gone through the startup process or are going through the process.