JAY RAO_1A Innovation & entrepreneurship facts

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Jay Rao, Professor Babson CollegeNo existeix cap correlaci entre la inversi que fa una companyia en R+D i les seves vendes


  • 1. Innovation & Entrepreneurship:Some Facts & FiguresJay Rao ProfessorBabson

2. Role of Entrepreneurs in the U.S. In the U.S. typically 600,000 new businesses are formedeach year (one every minute). This number has beenconsistent for the last 30 years. Historically through the last seven recessions its beenentrepreneurs who essentially restarted the U.S. economy Today 1/3 of the current GDP is created by firms that didnot exist in 1980 75 percent of most firms startup capital is made up in equalparts of owner equity and bank loans and/or credit carddebtSource: Kauffman Foundation 3. Survival of Startups First year: 85%Second: 70%Third:62%Fourth: 55%Fifth:50%Sixth:47%Seventh: 44%Eighth: 41%Ninth:38%Tenth:35% "Once youve hit five years, your odds of survival go way up,only two to three percent of businesses older than five shutdown each year. David BirchSource: David Birch, U.S. DoL 4. The structure of the U.S. economy More than 50% of all businesses are home-based and over72% are sole-operator (as of 2006). The average businessbring in $45,000 per year. Only 6% of firms had revenues of more than $1 million. SBA defines big business as firms over 500 employees. Bydefinition 99% of all businesses in the U.S. are smallbusinesses.Source: Invisible Capital, Chris Rabb 5. The structure of the U.S. Economy (contd) More than 6 million businesses in the U.S. only 18,000 (lessthan 1%) of them are classified as big business (more than500 employees). 49% of the U.S. workforce approximately (120 million) wasemployed by less than 1% of all employers. Firms over 2,500 employees account for 64% of the U.S.workforce, even though they make up less than 1% of allfirms. 6. Some Global Data on Midmarket Typically businesses with < 999 employees 65% of Global GDP 90% of Global workforce 90% of all businesses across the globe are SMBs Midmarket generates 13x more patents per employee vs.Enterprise segment Source: VP, GMU Mid Market, IBM 7. U.S. Firms, Labor & EmploymentEmployment by Firm Size # of Firms % of Firms # of Employees % of EmployeesNon-Employers (zero FTEs)21,708,021 78.21%21,708,02115.25%1-4 FTEs 3,705,27513.35% 6,139,463 4.31%5-9 FTEs 1,705,092 6.14%15,630,77310.98%20-99 FTEs532,3911.92%20,922,96014.70%100-499 FTEs 88,5860.32%17,173,72812.07%500+ FTEs18,3110.07%60,737,34142.68%Total27,757,676100% 142,312,286 100.00%Source: 2007 County Business Patters and 2007 Economic Census 8. 2009 Study of 550 high-growth founders Source: Kauffman Foundation 9. High Growth Entrepreneurs: Not thebrightest in college 10. High Growth Entrepreneurs: Dont comefrom great wealth 11. High Growth Entrepreneurs: Bettereducated than their parents 12. High Growth Entrepreneurs: Didnt come from family business 13. High Growth Entrepreneurs: Not Young! 14. High Growth Entrepreneurs: Had significant industry experience! 15. Where do high-growth entrepreneurs comefrom? HP turned down Steve Wozniaks initial designs for the personalcomputer and was not given a chance to work on the team at HP(1976) The same design becomes Apple 1 Arthur Blank and Bernard Marcus (founders of Home Depot) firedfrom Handy Dan Home Improvement chain (1979) Texas Instruments rejects Rod Canions designs for PC clones, heleaves with two of his colleagues to start Compaq (1982) John Lasseter left Disney to join George Lucas (1984) Steve Jobs bought it for $10 million to become known as Pixar Judy George got fired from Scandinavian Design (1985) Created Domain Home Furnishings Jeffrey Katzenberg left Disney to team with Steven Spielberg to fromDreamworks (1994) 15 16. Where do high-growth entrepreneurs comefrom? (contd) SVP Thomas Watson leaves National Cash Register (NCR) toform IBM Robert Ryan, a rising star at Digital leaves to form Ascend Sabeer Bhatia leaves Apple to form Hotmail, later sold toMicrosoft Dr. William Shockley leaves Bell Labs and moves to Californiato start Shockley Semiconductors 8 key people leave Shockley to form Fairchild Semiconductor 3 key people leave Fairchild to form Intel (1968) In total Shockley Semiconductors was a catalyst for forming 30 Silicon Valley ventures Intel, National Semiconductor, AMD, Teledyne, Rheem, LSI Logic, Kleiner Perkins 16 17. Where do high-growth entrepreneurs come from? (contd)1954Shockley moves to CA1957Shockley Semiconductor has 50 employees196514 Semiconductor spinoff firms197035 Semiconductor firms197554 Semiconductor firms198063 Semiconductor firms1986102 Semiconductor firmsBetween 1947 and 1986,129 Semiconductor firmsWere launched in Silicon Valley17 18. Founded by Ken Olsen in 1967First Firm to be funded by venture capitalDECs PDP-8 is considered the first mini-computer1972 revenues = $6.5 billion1989 revenues = $14 billionAPOLLOWANG COMPUTER,WAYNEINC. Source: Christensen19 19. All Firms Die! Number of Firms in the U.S. Typewriter IndustryNumber of Firms in the U.S. Automobile Industry9080Entry7570Number of FirmsExit 7060Total50% of U.S. products in50 65all-steel closed body40 80% of U.S. products in 6030 all-steel closed body20 5510 500 74 77 80 83 86 89 92 95 98 1 4 7 10 13 16 19 22 25 28 31 34 36 38 45 Entry Number of Firms Years (1874 to 1936) Exit 40TotalNumber of Firms in the U.S. Picture Tube Producers 359080 3070Entry 25Number of FirmsExit60Total205040 1530 1020 51000 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 190019101920193019401950 1960Years (1949 to 1970) Years (1900 to 1960)Source: Mastering the Dynamics of Innovation, Uttberback20 20. Corporate Mortality is also very high! Average life expectancy of all firms, regardless of size, measured in Japanand much of Europe, is only 12.5 years The average life span of a multinational organization Fortune 500 orequivalent is around 45 years Only 16% of firms listed on the 1957 S&P 500 remained on the 2007 list. One third of the companies listed in the Fortune 500 in 1970 for example,had disappeared by 1983 acquired, merged or broken to pieces Of the top 500 firms in the U.S. in 1980, only 202 had survived by the year2000. The first S&P index of 90 major U.S. firms was created in the 1920s. Thefirms on that original list stayed there for an average of 65 years. By 1998,the average tenure of a firm on the expanded S&P 500 was 10 years. 21. Like human beings, firms are constantly being born that cannotlive. Others may meetdeath from accident or illness. Stillothers die a natural death, as men die of old age. And thenatural cause, in the case of firms, is precisely their inability tokeep up the pace in innovating which they themselves had beeninstrumental in setting in the time of their vigor. Schumpeter, Joseph A. (1939), Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process (New York: McGraw-Hill) 22. 23 23. 24 24. YearAge (inYearAge (inYearAge (inCompany Name3M1902 What can we learn from The Old Started 2007)Company Name105 EatonStarted 19112007) Company Name96Northrop Grumman Started1939 2007) 68Abbott LaboratoriesAlcoa18881886 Masters?119 Eli Lilly121 Exxon Mobil 1876 1882131Owens Corning125Owens-Illinois19381929 69 78Altria Group1847160 Fortune Brands 1890 117Paccar 1905 102American Standard 1875132 General Dynamics 1952 55PepsiCo 1898 109Anheuser-Busch1852155 General Electric 1890 117Pfizer 1849 158Archer Daniels Midland1902105 General Mills1928 79Phelps Dodge1834 173Ashland 1924 83 General Motors 1908 99PPG Industries1883 124Avon Products 1886121 Georgia-Pacific1927 80Procter & Gamble1837 170Boeing1910 97 Gillette 1901 104Raytheon 1922 85Bristol-Myers Squibb1887120 Goodyear Tire & Rubber 1898 109Rockwell Automation1903 104Campbell Soup 1869138 Heinz (H.J.) 1869 138Rohm & Haas1907 100Caterpillar 1925 82 Hershey Foods1894 113Sunoco 1886 121Chevron Texaco1879128 International Paper1898 109Textron1923 84Coca-Cola 1886121 Intl. Business Machines1889 118Unisys 1873 134Colgate-Palmolive 1806201 Johnson & Johnson1887 120United Technologies1853 154ConocoPhillips1875132 Kellogg1906 101Unocal 1890 117Crown Holdings1892115 Kimberly-Clark 1872 135USG1902 105Cummins 1919 88 Lockheed Martin1912 95Weyerhaeuser1900 107Dana1904103 Marathon Oil 1887 120Whirlpool1911 96Deere 1838169 McGraw-Hill1909 98Wyeth 1860 147Dow Chemical1897110 Merck1891 116 AVERAGE115DuPont1802205 Motorola 1928 79Eastman Kodak 1888119 Navistar International 1902 105 Source:25 Fortune, April 5, 2004 25. Some empirical findings about Innovations More than 90% of all innovations that ultimately becomesuccessful started off in the wrong direction. Given more money and time, firms are known to pursue thewrong strategies for a longer period of time. Most new innovations are started without access to credit ingood times and bad. Most of the great businesses today started without a lot ofVC funding or with any bank lending until 5-6 years afterthey were up and running. Source: Innosight