When it comes to startup strategies, many entrepreneurs assume there is one optimal path. They may need to experiment or “pivot” initially among alternatives, but once they fix on an ideal strategy they simply need to execute. For example, a startup attempting to commercialize a new technology faces the strategic choice of whether to “go it alone” or cooperate with existing companies. Entrepreneurs are often taught to settle on a single strategy rather than trying to do too many things at once, but for some new ventures it may be advantageous to adopt multiple strategies—sequentially.
A new way to look at strategy involves the concept of a “switchback.” Think of a hill that is too steep to directly climb. An alternative is to proceed diagonally up the grade, eventually reversing direction, similar to mountain trains like the Darjeeling Express. It may seem like a slower path—and may even involve some backtracking—but in the end the climber reaches the top rather than getting stuck when trying to go directly.
This approach can work for entrepreneurs too. If the climb to their ideal commercialization strategy is too steep, they may build a “strategic switchback” in that they initially pursue a different strategy—which would be suboptimal in the long run—but which enables later switching back to their ideal strategy.
This is different from the popular notion of “pivoting,” where the entrepreneur iterates through a series of experiments to find potential approaches to the market. While pivoting involves trying multiple approaches in a trial-and-error fashion, switchbacks depend on the success of the initial strategy—not failure. It’s only when that initial strategy works that the startup is able to switch to its originally preferred strategy.
There’s been quite the brouhaha lately about disruptive innovation. On one side is Harvard Prof. Clay Christensen (author of The Innovator’s Dilemma) and his long-prevailing theory about how disruptive innovation drives incumbents out of the market. On the other side is Jill Lepore and her attack of Christensen’s theory in The New Yorker. It’s an interesting issue: Do disruptive innovations almost always lead to the downfall of incumbent companies? Is their only hope to “disrupt” themselves?
Along with Joshua Gans of the University of Toronto and David Hsu of Wharton, I conducted a study on the speech recognition industry over the last 58 years. We found a surprising pattern among entrants that adopted disruptive technologies: Instead of always going head-to-head with incumbents, they often adopted a dynamic commercialization strategy in which they started out competing against them, but later switched to cooperating with them (e.g. by licensing their technology). To understand how this can happen, we need to review what it means for a technology to be “disruptive.”
When we teach our introductory entrepreneurship class at MIT, we take it for granted that each of our 75 students will be able to start an American company upon graduating.
But many of them lack one thing they need to be able to do so—permission from the United States government to continue working in our country.
In this academic year, three in 10 MIT students, including four in 10 graduate students, are not U.S. citizens or permanent residents. So for them our entrepreneurship class is likely to remain just an academic exercise. Their student visas expire when they graduate, leaving them with two options, to leave the country or find an existing company to sponsor them for a chance at an H-1B visa.