How my way of thinking was broken and rebuild
Let me start by saying “I would have never thought i would do a masters cause i was against it at the beginning” but i have enjoyed my masters more than my undergraduates in so many ways.
I was very “I know this and i know that and i don`t need a second degree” before starting masters and at the start of the masters, lucky i chose something that i was very passionate about and had very limited knowledge of how deep innovation goes. Some of the most important modules this year have been Entrepreneurial Finance, Innovation Managment, Growth of Innovative Business, Design Thinking and Business Plan Development in the 3rd semester. Let me elaborate why!
My initial definition of innovation was a company that releases new products & updates the products every year. I was not far off but i didn’t know the differences of types of innovation. Therefor in Innovation management i learned all about different types of innovation such as Radical, Incremental, User Lead, Open, Closed, Active etc. and how these innovations can be managed inside an organization. What’s important for a company is to have an innovation culture and the best example of innovation culture is Google. Companies CEO, Eric Schmitd states beautifully from his quote what innovation culture is in an absent innovation culture company:
“The story of innovation has not changed. It has always been a small team of people who have a new idea, typically not understood by people around them and their executives.” (Enterprise, 2017)
and it’s true what he says because most of the time executives are stubborn and other employees which only follow orders won`t understand you (or your group) in opportunities that this people can bring a company into innovating and growing by expanding the horizon of the company. Allot of company CEO’s can ask questions how does google innovate, can innovation be planned, including myself in the beginning, before i learned what was innovation culture and how can you foster innovation culture in a company. After learning what innovation culture is i agree with the statement of Mr. Schmitd that companies culture and innovation can’t be separated and “You have to have the culture, and you need to get it right” (Enterprise, 2017). Google has an open innovation, and in a book by Henry Chesbrough he describes that “Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology” (Chesbrough, 2006), what this means that when an employee or a group of employees comes up with an idea and they pitch it to you and you decide that the project is valuable then we have open innovation where you share risk and reward with partners. Other types of open innovation is for example when a company comes up with a new Algorithm and this can be useful to other companies, you license the algorithm and therefore charge them a commission where you get part of the profit from what other companies have built.
The reason i’m emphasizing in the culture is because it was hard for me to understand it in the beginning and i was against sharing ideas and therefor innovation culture has helped me become more open minded and to sometimes stop talking and listen to what others have to say around me especially because in the near future i’m planning to open my own company which is focused highly in the creative and tech industry and following an example like google can be a learning experience into adapting our own custom company’s innovation culture and have different sources of income.
This is shown in the project where i worked with Rana, Lulu and Nora, we harvested an open innovation culture between each other unconscionably, making every decision together in a group and never bringing any of us down even when someone was wrong. From Iannis class we learned that in an open innovation you can never call someone stupid or their idea stupid even if is, instead you have to accept their idea and let them know that other ideas need to be generated OR the idea cannot be done because there are not enough resources but we will consider it. If you or somebody else have a deep desire to become an entrepreneur you should not call your ideas stupid or someone’s ideas stupid, “in business brilliant ideas are the ones that make money, not the ones that look the prettiest or sound the smartest, or are the most technologically advanced” (Anderson, 2013). You should remove your “I’m an expert” syndrome and learn to accept others opinions.
And when we were gathering ideas on what project we should do, i had a cool idea to make a table tray for phone charging but this was out of scope because we did not have enough resources (£) for something like this. In the end the girls decided to go with the bag organizer for women and i decided to go along but i knew that we don`t have the resources as in money and skills to make this bags. We kept going until it was time to start manufacturing this bag organizer than in the first week of January 2017 we decided to pivot and with the new idea we worked fast and reliable between each other where we did the whole process of 2 months in just 2 weeks and succeeded on delivering on time. The funny thing is that the 2nd idea that Lulu had was better than the bag organizer, where i proposed to add the feature of headphones to Untangled (travel card & headphones holder) to make it more attractive for our new target students.
Learning Entrepreneurial Finance to calculate how much my company is worth when i only have a product and nothing else (for Venture Capital)
Entrepreneurial Finance taught us how to calculate your company when you only have a prototype or part of the product and you need resources and experts from different fields (employees) to complete your product. It was one of the most learning outcomes cause all of us had no idea we can evaluate ourselves/start-up, it seemed like putting a price tag and hoping everything goes well without difficulties and barriers to the product we are working which to be honest sounded absurd. Therefore we learned the venture capital evaluation method, which you need to know how much you are going to sell the company in the future or how much the company will be worth when the VCs want to exit & what will be the internal rate of return. The IRR is a percentage of the profit your company will make in the end when you exit to the amount of how much your company is worth. Its like saying my IRR is going to be 10% in the end when VC exit because the company has a social cause therefore will not make much return on the initial investment. Also you need to know how much your Price/Earnings ratio (P/E) is, which I need to identify by looking at the public competitors. A cash flow statement will give a look at the profit that you make over the amount of time before the exit.
Knowing your P/E ratio and profit from Cash flow Statements you will find out what will be your company worth on the year of exit also called Terminal Evaluation. Using the discounted terminal evaluation formula you dived terminal value by (1+IRR) in the power of P/E ratio you get your discounted terminal evaluation or also called your initial company’s worth before the investment recived from VC (Worthworm, 2014).
Knowing all this you can easily find how much shares you have and how much shares the venture capital company has.
The reason i made this calculations and gave an example is to show that it can sound complicated but this is very easy and in the end even if you just started and you don`t know what your company is worth you can still find out using VC evaluation method.
Design Thinking sounds strange right but…
In design thinking classes i had an argument sometimes about everything and its thanks to Janja Song that she changed me and made more open minded.
In innovation design thinking is used to foster ideas making the very concept itself of continues evolving. And design thinking process has several stages but these are the most important ones: Empathize, Define, Ideate, Prototype and Test (Cohen, 2014). With all this steps problems can be identified, the right questions can be raised, even more ideas can be generated and the best path to follow can be chosen.
Design Thinking inspires creativity while offering the ability to take an idea in the air and turn it reality. Without even noticing this is what we did with my group this year developing Untangled. In the first semester allot of the exercises like lean canvas, going outside and having a chat with people asking them what are their problems, putting yourself literally in the shoe of someone else is what slowly slowly programmed our minds into thinking in Design Thinking way (method).
The reason why this subject was important for me is because part of fostering innovation culture in my future company has to do allot with the design thinking framework and tools such as the exercises because it helps your employees be better, it generates quicker ideas systematically and in the same time helps the company to understand better their users (clients) to make something tailored for them.
In a way design thinking is user lead innovation, as this can be described in an interview with Catherine Courage when they ask her what design thinking is (Sarizan, 2015) as she states: “Traditionally, many of our product organizations would start with a problem and then—based on intuition about what our customers want—race toward a solution. Today, they actively engage customers along the way, with an iterative process of failing and learning fast as part of the journey. Getting to this point has required big process changes and a new mind-set across the company”.
To conclude i`m a better individual than what i was one year ago and i have learned that if something is important enough you should try even though the outcome can mean failure, as elon musk quote on my blog home page says.
“If something is important enough you should try, even if the probable outcome is failure!”
Anderson, A. R. (2013, May 10). There is no such thing as dumb idea. Retrieved from http://www.forbes.com: https://www.forbes.com/sites/amyanderson/2013/05/10/there-is-no-such-thing-as-a-dumb-idea/#146779622112
Chesbrough, H. (2006). Open Innovation: Researching a New Paradigm. New York: Oxford University Press.
Cohen, R. (2014, March 31). Design Thinking: A Unified Framework For Innovation. Retrieved from forbes.com: https://www.forbes.com/sites/reuvencohen/2014/03/31/design-thinking-a-unified-framework-for-innovation/#38628a2d8c11
Enterprise, G. (2017, April 20). Creating a Culture of Innovation Eight Ideas that Work in Google. Retrieved from gsuite.google.co.uk: https://gsuite.google.co.uk/intl/en_uk/learn-more/creating_a_culture_of_innovation.html
Sarizan, H. (2015, February 1). Applying design thinking across the business: An interview with Citrix’s Catherine Courage. Retrieved from mckinsey.com: http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/an-interview-with-citrixs-catherine-courage
Worthworm. (2014, January 15). Valuation Methods: Spotlight on the Venture Capital (VC) Method. Retrieved from worthworm.com: http://worthworm.com/valuation-methods-spotlight-on-the-venture-capital-vc-method/