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Entrepreneurs Say Adversity Creates Valuable Lessons

February 2006

STANFORD GRADUATE SCHOOL OF BUSINESS—When Kay Koplovitz, founder of USA Network, looks back on the 21 years she spent building a leading cable presence, one particular deal with New York Yankees' owner George Steinbrenner stands out in her mind.

The year was 1979, cable television was a fledgling industry in the United States with about 2.5 million subscribers, and USA was an all-sports service known as Madison Square Garden Sports, which televised key events for a nationwide audience.

Koplovitz recalled how she approached Steinbrenner directly to sign a key contract to broadcast Yankees games. "I took it upon myself to call him up and I didn't have a very hard time getting a contract," she said. "He accepted right away," she told the Feb. 1 Conference on Entrepreneurship at the Stanford Graduate School of Business.

Had her story ended there, it might have been a lesson in the value of fearlessly pursuing one's business objectives, but this story had a twist. After her network aired its first Yankees game—a close match against the Boston Red Sox that went into extra innings—Koplovitz received a call from the commissioner of Major League Baseball advising her that she didn't have the rights to broadcast the game. Steinbrenner, it turned out, did not have the rights to sell. They belonged to Major League Baseball.

Koplovitz said that she briefly thought, "Oh my God, I'm in trouble," before she regained her wits and proposed an even more lucrative deal. "I said, ‘I'll trade the Yankees deal for a Major League Baseball deal and televise all the games.'" She went on to cut similar deals with other professional sports leagues in exchange for rights to air their games.

Entrepreneurs tend to agree that the most valuable lessons are learned in times of adversity, and Koplovitz and other conference speakers focused their discussions on how they had overcome setbacks.

James Dyson, chairman of Dyson Ltd., described the five years and more than 5,000 prototypes he went through before developing a vacuum cleaner with design and functionality that would eventually gain the leading market position in the United States and much of Europe.

Similarly, Scott Cook, who founded and now serves as executive committee chairman of the personal finance software maker Intuit, stressed that his company succeeded without the benefit of a first- or even a second-mover advantage. "We weren't the first company to make this kind of software. We were about the last," said Cook.

Like Dyson, Cook spoke of the importance of literally walking in a customer's shoes and understanding how consumers actually used a product, rather than how they said they used it. He learned that lesson the hard way years ago when Intuit launched a software product known as Quicken Financial Planner to help individuals do in-depth financial planning at home. Although the software quickly gained a 95 percent share of the market, it never made any money because the market it served was tiny. Focus groups loved the product and many people aspired to do more at-home retirement planning, but very few were motivated enough to go out and buy the software.

Cook said he has since then resolved to always run the company like the customer is boss and to "trust what customers do more than what they say." For her part, Koplovitz says the deal with George Steinbrenner that almost became a debacle taught her that leaders must be prepared to make spur-of-the-moment decisions without a consensus from the board.

Another valuable lesson: Always have a Plan B and anticipate objections ahead of time. That practice still helps Koplovitz today in her role as co-founder and chair of Springboard Enterprises, a nonprofit that supports female entrepreneurs seeking venture capital.

"Oftentimes, someone will present a business proposal to investors and an investor will come back and say, ‘I like it, but,'" explained Koplovitz, who said that female entrepreneurs still win far less venture funding than their male counterparts. "When you can answer the ‘but' before they even ask, it really helps diffuse any objections."

—Andrea Orr

Related Links

Earlier entrepreneurship conferences

Center for Entrepreneurial Studies