caltech, anentrepreneurialleaderkpickar/watson/watson.pdfan entrepreneur ial flair. . . •leading...

Dr. Kenneth A. PickarDr. Kenneth A. Pickar

J. Stanley Johnson ProfessorJ. Stanley Johnson Professor

Visiting Professor of Mechanical Visiting Professor of Mechanical EngineeringEngineering

March 1, 2000March 1, 2000

Caltech,An EntrepreneurialLeader

TRWTRWOrtelOrtel

Avery DennisonAvery DennisonIdealabIdealab!!CompaqCompaqBeckman InstrumentsBeckman Instruments

Global CrossingGlobal CrossingXeroxXerox

IntelIntel

Outline of Talk

•• Change and disruptive technologyChange and disruptive technology

•• What makes an Entrepreneur?What makes an Entrepreneur?

•• What are the experiences of some What are the experiences of some successful Caltech Entrepreneurs?successful Caltech Entrepreneurs?

•• What is Caltech doing now to What is Caltech doing now to encourage Entrepreneurship?encourage Entrepreneurship?

•• Thoughts on the 21st CenturyThoughts on the 21st Century

Two Major Drivers of Change

•War•Technology

War as a Driver of Change

•• WW1WW1AviationAviation

•• WW2WW2Jet aircraftJet aircraftRadarRadarNuclear energyNuclear energy

•• Cold WarCold WarSemiconductors and ComputersSemiconductors and ComputersMissiles, Communication SatellitesMissiles, Communication SatellitesInternetInternet

Technologyas a driver of change

Fundamental Law

Technology change opportunity

Always opportunities but there are times when opportunity abounds

Moore’s Law

Technological Capability

Year

Capability

What is a disruptivetechnology?

Time

Capability

Technology 1

Technology 2

80 95 100090

Then changebecame “disruptive”

Disruptive? Look at the effects. . .

Good companies failCompanies that do all the right things

• are well-managed and progressive• listen to their customers• study and act on market trends• invest significant resource in R&D• allocate capital to provide the best return

Be considered industry models for their success

. . . and then collapse under attack from much smaller entrepreneurial companies

Examples of Casualties

•• DECDEC•• IBM (early 90s)IBM (early 90s)•• WangWang•• Xerox (70s)Xerox (70s)

•• Vacuum tube Vacuum tube companiescompanies

•• Sears RoebuckSears Roebuck•• US SteelUS Steel

Why do they fail?

Cannot respond to disruptive technologies, Cannot respond to disruptive technologies, which destroy old markets and skills and which destroy old markets and skills and create new ones.create new ones.

This provides openings for new companies to be created

It has happened before. . .wagonswagons railroadrailroad

steam powersteam power electric powerelectric power

gas illumination gas illumination electric lightingelectric lighting

horses horses automobilesautomobiles

vaudevillevaudeville radio, TV, moviesradio, TV, movies

tubestubes transistorstransistors

transistorstransistors integrated circuitsintegrated circuits

New technologies lead to new business models

Process

Enterprise

Low High

Degree of Business Transformation

Focus Level

Network

ProcessReengineering

StatisticalQuality

1980’s

1990’s

Courtesy Steve Flynn

W hat happened?

•• ReRe--engineeringengineering

•• DownDown--sizingsizing

•• OutsourcingOutsourcing

These low tech, painful-but-necessary actions resulted inincreased competitiveness. . .but

But what’s happening now?

Process

Enterprise

Low High

Degree of Business Transformation

Network

ProcessReengineering

Statistical Quality

Learning and Intellectual

CapitalProcesses1980’s

1990’s

2000’s

“New Economy”Commerce

BusinessArchitecture

R&D

Courtesy Steve Flynn

Leve

l

Beginning in the late 90s. . .The Internet

•• The mother of all The mother of all disruptivedisruptive technologiestechnologies

•• Created in UniversitiesCreated in Universities

•• 30 years to reach take30 years to reach take--off (same as off (same as Xerography!)Xerography!)

•• Affects all processes and all functions of all Affects all processes and all functions of all businessesbusinesses

•• Creates new niches, values, networks, Creates new niches, values, networks, customers, personnel skills, government customers, personnel skills, government relationships, marketing, distribution, etc.relationships, marketing, distribution, etc.

Consider the Internet questions asked by a traditional company. . .

•• Who are the customers of the future?Who are the customers of the future?

•• Can we serve them with our present Can we serve them with our present Business Architecture, our present Business Architecture, our present people? people?

•• How do we need to change?How do we need to change?

•• How much time do we have? How much time do we have?

•• Can we move fast enoughCan we move fast enough? ?

Exploiting these opportunities

But. . .What is an Entrepreneur?

Entrepreneurship is required to create New ways of thinking

Outline of Talk






Characteristics of Entrepreneurs

••Single minded visionariesSingle minded visionaries

••DrivenDriven-- high energy and enthusiasm high energy and enthusiasm (not 9 to 5)(not 9 to 5)

••Original thinkersOriginal thinkers-- creativecreative

••Very perseverantVery perseverant-- stubbornstubborn

••Risk takers Risk takers

••Dissatisfied, impatientDissatisfied, impatient

What does Caltech do (or not do) to enable Entrepreneurship?

First, let’s consider the students we seek. . .

What does Caltech look for in its students?

“You have that passion for math and “You have that passion for math and science; you have the grades and science; you have the grades and test scores. Your main goal is to be test scores. Your main goal is to be in the best possible academic in the best possible academic environment you can find. . .”environment you can find. . .”

-From the web site

Additionally Caltech has. . .

•An Academic Research Science and Engineering orientation

-pushing the frontiers of knowledge-training the next generation of professors

•No Business school•No Law school•No Medical School

Caltech’s many positives for the student with an Entrepreneurial flair. . .

•• Leading edge research in many Leading edge research in many subjects creates many possibilities subjects creates many possibilities

•• JPL gives additional technology JPL gives additional technology mass, quality and spinmass, quality and spin--out out opportunitiesopportunities

•• Professors are entrepreneurs of Professors are entrepreneurs of sciencescience

•• We honor “quirky independence” We honor “quirky independence” and “Outand “Out--ofof--thethe--box” creativity box” creativity

•• Enthusiastic (my own observation)Enthusiastic (my own observation)

•• Honor systemHonor system-- integrity integrity

•• Small sizeSmall size

•• Multicultural diversityMulticultural diversity

•• Challenging yet nurturingChallenging yet nurturing

•• Lots of organizations to support Lots of organizations to support studentsstudents

AlsoAlso

Zeitgeist-the spirit of the times. .

•• Caltech students Caltech students areare the digital the digital generationgeneration

•• Used to Internet TimeUsed to Internet Time

•• Accustomed to risk takingAccustomed to risk taking

•• The place is here!The place is here!

As for the Faculty, Professors already run small entrepreneurial businesses!

•• Marketing: to Funding AgenciesMarketing: to Funding Agencies

•• “Production:” Research results“Production:” Research results

•• Human resources; Employee Hiring, Human resources; Employee Hiring, Development, OutplacementDevelopment, Outplacement

•• Operations: running labsOperations: running labs

•• Financial:multiFinancial:multi--million dollar budgets, million dollar budgets, investment decisionsinvestment decisions

•• Strategic planningStrategic planning

CALTECHA company with 275 Vice Presidents!

And yet. . . Our number of professor-entrepreneurs is very few

•• Motivated by scienceMotivated by science

•• Desire for deeper knowledge vs. Desire for deeper knowledge vs. “good enough” “good enough”

•• Time horizon differenceTime horizon difference

•• Tough place to leaveTough place to leave

Outline of Talk






What can we learn from history?

Consider a few Caltech entrepreneurs-there are many more that could be mentioned

Amnon Yariv

Techers sell for Billions story

Chester Carlson

Stan Johnson

Horace Gilbert

Gordon Moore

Arnold Beckman

And then there is. . . .

Genius

Madness

Case in point-a Caltech Grad

•• Very poor backgroundVery poor background

•• Stayed home from school on washdays Stayed home from school on washdays (because he had only one pair of pants)(because he had only one pair of pants)

•• Got his MS in Earthquake EngineeringGot his MS in Earthquake Engineering

•• Became a Master TraderBecame a Master Trader

•• Real Estate MagnateReal Estate Magnatebought and sold Real Estate worth $8.5B/yearbought and sold Real Estate worth $8.5B/year

There’s more. . .

•• Private jet, Mercedes Benz (2), Rolls Private jet, Mercedes Benz (2), Rolls Royce (4)Royce (4)

•• 53m Yacht53m Yacht

•• Art collection included Rodin, Monet, Art collection included Rodin, Monet, PiccassoPiccasso

•• When wife left him, he offered the When wife left him, he offered the Vancouver opera company $20,000 for Vancouver opera company $20,000 for permission to publicly beg for his wife’s permission to publicly beg for his wife’s forgiveness during intermissionforgiveness during intermission

But. . .

Became insolvent, so he •• Started a pirate radio stationStarted a pirate radio station

•• Purchased Purchased a match factorya match factorya theme park companya theme park companya Beatles museuma Beatles museuma bar in Denvera bar in Denveran Australian satellite launch companyan Australian satellite launch company

Then he went too far...

•• Used his partners’ deposit on Used his partners’ deposit on a real estate deal for his own a real estate deal for his own private purposes private purposes

•• After 61 civil lawsuits, After 61 civil lawsuits, convicted of fraudconvicted of fraud

Not everyone in e-commerce is successful!

Dot Com

Dot Bomb

Is this a discussion that occurs in your house??

Insert cartoon

Outline of Talk






Caltech-Loyola Collaboration in Law and Technology

Some Recent Caltech Spin-out Companies

Industrial Relations Center

Insert www.irc.caltech.edu/tech.hyml

Relations with Pasadena/Southern California Community

•• IncubatorsIncubators

•• Venture CapitalistsVenture Capitalists

•• AngelsAngels

•• UniversitiesUniversities

•• InfrastructureInfrastructure

•• EntertainmentEntertainment

•• AerospaceAerospace

•• TelecommunicationsTelecommunications

Virtuous Cycle

CaltechBasic

Researchand

Education

Spin-out

NewCompany

CorporateNew

product

IPOWealth

Taxes

Profits Taxes

Research funding

Philanthropy

Outline of Talk






Thoughts on the 21st century

•• Caltech is a strong, highly successful Caltech is a strong, highly successful culture culture

•• Radical change will not happenRadical change will not happen

•• Caltech’s focus on the most exciting areas Caltech’s focus on the most exciting areas in Science and Engineering will germinate in Science and Engineering will germinate many new Entrepreneurial opportunities many new Entrepreneurial opportunities ◊◊ BiologyBiology◊◊ Computer science and communicationsComputer science and communications◊◊ “Beyond Moore’s Law” computing “Beyond Moore’s Law” computing ◊◊ Micro electronic/mechanical devices Micro electronic/mechanical devices

•• Basic Research will benefitBasic Research will benefit


•• Caltech will become more strongly Caltech will become more strongly linked to both high tech businesses linked to both high tech businesses and Venture Capitalists locally, and Venture Capitalists locally, nationally and world wide. nationally and world wide.

•• With practice, the spin off of Caltech With practice, the spin off of Caltech companies will become a managed companies will become a managed process process


•• Caltech will lag industry (and some Caltech will lag industry (and some other Universities) in the application of other Universities) in the application of new teaching technologiesnew teaching technologies

Is there a disruptive technologythat could affect us?

The present frenetic business growth linked to the stock market will not last. . .

But independently of markets, the Technology change is real, meaning the Entrepreneurial opportunity is real

•• Completely new Business models Completely new Business models

•• Internet InfrastructureInternet Infrastructure

•• B2B CommerceB2B Commerce

•• GenomicsGenomics

•• Full Human High Bandwidth Full Human High Bandwidth ConnectivityConnectivity

•• Human Function EnhancementHuman Function Enhancement

Conclusion

•• Caltech is working to nurtureCaltech is working to nurtureEntrepreneurshipEntrepreneurship

•• We probably won’t do much harm!We probably won’t do much harm!

•• Our biggest assets Our biggest assets --is an admissions process which admits the is an admissions process which admits the best and the brightest and . . .best and the brightest and . . .

--an academic program which is designed to an academic program which is designed to bring out the best of them (in all respects)bring out the best of them (in all respects)

•• Living at the right time and place in Living at the right time and place in historyhistory

And finally, Caltech’s first Entrepreneur: Amos Throop (1811-1894)

Acknowledgements

•• J. Stanley and Mary W. JohnsonJ. Stanley and Mary W. Johnson

•• I’ve had conversations with many Caltech’ers I’ve had conversations with many Caltech’ers including students, alumni, faculty. I would including students, alumni, faculty. I would like to thank them all.like to thank them all.

•• Archives Archives Bonnie LudtBonnie Ludt

•• LibraryLibraryLouisa TootLouisa Toot

•• Digital Media Center Digital Media Center Wayne Waller, Carolyn PattersonWayne Waller, Carolyn Patterson

• Mary Terrall Oral History: Interview with Horace Gilbert, Caltech Archives 1979

• Mary Terrall Oral History: Interview with Arnold O. Beckman, 1981

• American Heritage of Invention and Technology Winter 1989 Vol.4, No.3

• The Amos Gager Throop CollectionShelley Erwin, Carol H. Buge, editors

• Clayton Cristenson, “The Innovators’ Dilemma” HBS Press, 1997

• Simon Ramo, “The Business of Science” Hill and Wang, 1988

• Wall Street Journal 1/18/00 p. C1 Anthony B. Perkins “The Accidental Entrepreneur”, The Red Herring magazine, September 1995

Lecture to be posted at http://www.its.caltech.edu/~kpickar/

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