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Google Chairman Optimistic about Entrepreneurial Trends

February, 2004

STANFORD GRADUATE SCHOOL OF BUSINESS—Successful entrepreneurs need to focus on their customers, check their egos at the door, and avoid the paralysis of trying to make things perfect speakers said at the eighth annual Stanford Conference on Entrepreneurship, held Feb. 21 at the Graduate School of Business.

Eric Schmidt, Chairman and CEO of Google, opened the forum with the optimistic view that in the next four years changes in information technologies will set up an extraordinarily powerful platform for entrepreneurs. The rapid pace at which the world is getting wired and the proliferation of television channels and of new sources of information are just some of the forces that "will bring the next boom."

As for Google, Schmidt predicted radical changes in the next four years; creating a much more personalized service with a more prominent international component. Competition from Microsoft and Yahoo does not threaten him. "There's so much innovation and it's such a large opportunity," Schmidt said, "that it's perfectly possible that these strategies can coexist for many years as this whole new model gets built."

Google encourages "unusual creativity" by asking its employees to spend 20 percent of their time working on new projects and discuss their ideas openly. Throughout the process, he said, the focus must always be on the users. The search engine giant's algorithm follows the same logic, ranking websites according to how others refer to them, measuring the site's relevance to the community.

Hal Klopp, MBA '66

The founder of the North Face, Hap Klopp, MBA '66, also is encouraged by the ongoing revolution in communication technologies. The bubble of the late 90s "was nothing compared to the one coming in the next 5 to 10 years," he predicted. Things are changing so fast that it is impossible to have all the information to make the "perfect" business, he said, warning entrepreneurs to avoid "perfection paralysis" and move ahead.

He also urged attention to customers' needs. "It's the customer who's going to decide how big your business is going to be." In 1966 Klopp followed his interest in sports to found the outdoor equipment and clothing firm, identifying the needs of a new generation more active and interested in outdoor activities than in the past. Enthusiasm builds success, he said. "You have to have fun doing it," and instill a vision in the entire company. "Lack of passion, not competition, is what may kill your company."

"Be in an area you're really interested in, but check your ego at the door," advised Mark Gainey, founder of Kana Communications, during a panel discussing The Next Big Idea. Conviction must translate into a "passionate pragmatism," an authentic interest in the idea combined with a realistic sense of where the opportunities are.

As an expert in the evaluation of new projects, Mike Orsak, MBA '90, founder of Worldview Technology Partners, advised that the best ideas are based on the customers' needs rather than excitement about a new technology. Dave Whorton, MBA '97, partner of TPG Ventures, agreed. "You have to know who your customer is and build your business around that," he said.

"Break some rules," advised Matt Glickman, MBA '93, former CEO of BabyCenter Inc. He challenged the conventional wisdom of online retailing in the 90's by combining editorial content and commerce. An important part of BabyCenter's success, according to Glickman, was that the editorial content gave credibility to retailing.

Where to look for the next big idea? Apart from the wireless and biotech industries, panelists suggested areas related to health and fitness, home information technologies, and the migration of products to services. It may be time, as well, to look back at ideas that failed in the 80's, paying attention to how conditions have changed, recommended Whorton.

Even the best ideas can fail. Another panel discussed lessons learned and "Bouncing Back."

Kamran Elahian co-founded Momenta in 1989 after two successful startups. It caught him by surprise when the board of directors fired him and the company became known for having the biggest loss of venture capital in the shortest time. The day after he was fired, Elahian got up and got ready to go to the office before his wife reminded him he did not have an office anymore. "The first reaction is denial," Elahian explained. "One says: 'No, this couldn't happen to me.'"

Entrepreneurs don't want to see failure, Elahian said. Their mantra of move forward and "don't confuse yourself with the facts" conceals warning signs. They also face insufficient criticism said Elahian who tries to foster an environment of open criticism where people feel comfortable sharing their views about a company's problems. "The sooner, [you learn of problems] the better."

Kaleil Tuzman was the co-founder and CEO of govWorks, a company that fell into bankruptcy in 1991. What helped him was to stay in govWorks during the company's restructuring. That process forced him to analyze his mistakes and also to understand that failure—like success—is a "group process." Moreover, it turned him into managing partner and president of the restructuring advisory company Recognition Group.

The panelists agreed that denial is followed by anger, then acceptance, and finally, recovery. Keith Teare compared the process with the healing that follows the loss of a long-term relationship. Founder of RealNames, a company that failed when Microsoft terminated its partnership, Teare initially was uninterested in starting a new enterprise. It was only when he got excited by a new technology and its social implications that he joined Santa Cruz Networks. Like his colleagues, Teare considers entrepreneurship to be all about passion. "I'm not able to be an entrepreneur in the cold; I need to feel the excitement," he said.

—Isabel Awad

Related Links

Report on the 2003 Entrepreneurship Conference

Center for Entrepreneurial Studies