Murray Low on Understanding the Context of Your Business
Professor Low is an experienced entrepreneur and a leading authority on entrepreneurship in independent, corporate and not-for-profit settings. Starting businesses in several industries led him to study how the entrepreneurial process differs by context. His current research examines the dynamics of entrepreneurial careers. As the founder of the Columbia Entrepreneurship Program, he has worked to make entrepreneurship a viable career option for MBA graduates. Low consults to both small and large companies, family businesses and not-for-profits. He teaches executive seminars in the areas of entrepreneurship and strategic management and makes frequent presentations to academic and industry groups. He has published widely in academic and practitioner journals and is a regular commentator in the media.
Murray Low: Well, there’s probably more commonalities than there are differences. But in every circumstance, you really have to understand the industry in which you’re entering. And you also have to understand the competitive dynamics. So for example, if I’m starting a medical device business, I know that I’m going to get it to a certain point, and then I’m going to have to sell the device to a larger company who has access to distribution and the resources to really commercialize it. I also know that my intellectual property needs to be protected by patents. So if I’m starting a medical device business, I’m going to start off by thinking about my exit strategy right at the beginning. I’m going to think about who I’m going to sell the company to. I’m going to think about how my product will fit in with their portfolio, and I’m going to think very carefully about how I defend my intellectual property. Because I know that if they can sort of figure a way around my patents, they’re going to do it, and they have many more dollars and high paid lawyers to be able to do that. If I’m starting-- let me give you another example. I remember doing an interview with a woman who invented a little device called a Topsy Tail, which is a little plastic device that women can use, if they have long hair, to basically make a French braid, or something like that, without knowing how to do it, a brilliant little product. She had a remarkable success and sold tremendous volumes through Home Shopping Network or one of the online markets, and she had a patent, because she realized that someone could easily knock off her product. Well, what happened? Well, someone knocked off her product. They saw it advertised on TV. They started reverse engineering it, and after the product had-- the ads kept running for a month, they knew that it must be selling, just based upon the fact that it was continuing to be advertised. And so they copied her and started to take market share from her. And this woman spent all of her profits hiring lawyers to defend her patents. Now, if she had understood the dynamics of that business, she might have still got the patents but taken a different strategy. And rather than spending the money on lawyers, she could have gone to that individual and said, “Listen, I’m going to go after you for infringement of patents,” or “I will give a license, and you’ll pay me a royalty for this product,” so understanding the nature of the business that you’re entering. And an entrepreneur, if they’re doing it for the first time, there’s kind of a catch-22. If you’re doing it for the first time, how can you sort of know the more subtler details? And in this particular case of this little hair device, we couldn’t blame the woman for thinking that if she got a patent that that would somehow protect her, and she was right to defend it. But a great lesson for entrepreneurs is to surround yourself-- if you’re sort of young and inexperienced, or even if you’re not young and inexperienced, but none of us have perfect knowledge. You surround yourself with folks who have been there before, who have done it, who can sort of sit on your shoulders and say, “Oh, look out for this. Look out for this, and here’s another thing you should be paying attention to.” And find a collection of those folks and find a way to manage their input so that they feel valued and that there’s a forum where you can collect their input and then pick and choose and help you make sort of better and more informed decisions.
Recorded on: 5/13/08
It's critical, says Low.