Until one is committed, there is hesitancy, the chance to draw back -- Concerning all acts of initiative (and creation), there is one elementary truth that ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one's favor all manner of unforeseen incidents and meetings and material assistance, which no man could have dreamed would have come his way. Whatever you can do, or dream you can do, begin it. Boldness has genius, power, and magic in it. Begin it now.
-- Goethe (actually, W. H. Murray in The Scottish Himalaya Expedition, 1951) see here for background
Ya Gotta Believe
-- Tug McGraw, 1973 regular season New York Mets run for the World Series
Over the past dozen years of successful entrepreneurship, a few lessons have stood out. One critical one is the importance of faith and commitment. I'm always surprised by how dramatic the outcome difference is when someone is working on something they believe in and are committed to vs. how generally weak and crappy the output is when those two things are missing. Creativity, harder-than-hard work, breakthrough thinking, and brilliant execution all are highly correlated in my experience with the level of faith and commitment. When Faith and Commitment are present, you put in play the serendipity of a certain conversation; that ah-ha moment in the shower when you crack the product positioning in a novel way; that midnight email you send on a fluke that becomes a turning point in the financing strategy. And so on.
In every single one of my companies, it is overwhelmingly obvious to me that certain things would not have fallen into place if I hadn't been 110% committed, and if I hadn't possessed a certain, bedrock belief in my product or service. There are just way too many issues, obstacles and unknowns that will stop the average person/product/business. I'm not a military history buff, but I'd venture to say that the military would also have an infinite number of examples where forces that were committed and believed overcame tremendous odds. And, just as likely, where forces that weren't fully committed, and were torn over their beliefs, lost battles they should have by all rights won. I could also point to sports, for I think the analogies are just as effective and common there. How many times has the mentally weaker opponent, who didn't believe he could play better than the other guy, won the contest?
And with that, I ask, why should new products be any different?!
We're learning at EIP that getting large organizations to have Faith and Commitment is much harder than we anticipated. Particularly in the world of really new products where there is much unknown and one can posit 100 questions the data doesn't definitively answer. And if you don't have faith in the product, you can't commit. And if you can't commit, there's no license deal to be done.
So, at the risk of pre-announcing some developments with EIP, I am proud to say that we have a ton of faith in, and commitment to, the products in our portfolio. So much so that we are going to launch a few them ourselves. Read that again, for that that's not a typo... As Dostoevsky said, in The Insulted and the Injured You're a poet, and I'm a simple mortal, and therefore I will say we must look at things from the simplest, most practical point of view. The simple and most practical answer for us mortals at EIP, given the above facts about BigCo behavior, is that we must be the launch vehicle to get these awesome products to market.
The last several months have been incredibly exciting for EIP, and, at the same time, quite stressful as we are learning, exploring, experiencing delays, and succeeding across almost all the projects in our portfolio. As we blaze a new trail in Open Innovation, we're pushing boundaries and organizations in ways that they haven't been pushed before. And we're seeing all sorts of fascinating organizational and financial dynamics that we could not (and did not) predict when we started the company. As I've discussed in prior posts, the dynamic inside of BigCos is a little different from the PR fluff you read about. While organizations tout their Open Innovation successes and talk about all the "outside collaboration" they're doing, when you dig under the covers, 95% of the "Open Innovation" deals out there are basically supply/distribution agreements, consulting agreements, or M&A transactions.
We think that opens up some avenues for us to create a new and different type of value for our investors and to leverage changes in the online and DR worlds that enable rapid market launches with a test-and-learn philosophy. We think we can move more quickly and more successfully than a BigCo can in launching products, and that we can create enterprise value in addition to IP value by exploiting the current market dynamic. If it's easier to do an M&A deal than an IP licensing deal, so be it. We can talk until we're blue in the face about how this isn't the way it /should/ be. But the reality is that organizations, for all their happy talk, are not yet capable of systematically evaluating new product opportunities from the outside, entering into license agreements, and launching new products. There are exceptions, of course. But, by and large, company after company will tell you it's easier for them to buy, at a premium, a fast-growing company with proven product in the marketplace using balance sheet dollars or stock than it is for them to license that very same product pre-launch and run the corresponding launch costs (advertising and marketing, staff, manufacturing spool up, etc.) through their P&L. They seem oblivious to the fact that this M&A vs. license path costs their shareholders an order of magnitude more...
To be clear, we are NOT abandoning our primary monetization model of licensing. We continue to believe that is the optimal outcome that maps to the business and industry trends. And, candidly, preserves the bulk of the absolute dollar value creation for the BigCo. However, in classic arbitrage fashion, if they aren't seeing that value creation opportunity for what it is, shame on them. We'll create it and take it for our investors...
So for 2008, we'll be engaged in more entrepreneurial/start-up work than in pure-play licensing presentations and terms sheet negotiations... It promises to be an exciting year!
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