Rahul Sood, GM, Microsoft Ventures, speaks to Harini Calamur about
organisations, innovation, disruption and the future of technology
Large organisations give you stability, smaller organisations give you innovation. How do you combine out-of-the-box thinking and the ‘get ready to go’ mode of innovative entrepreneurship into a big company?
When I joined Microsoft, I spent 11 months figuring out what I was going to do there. As an entrepreneur, you’re always trying to find something, and that something is a problem to solve. In a company full of brilliant people where everyone is smarter than you, how are you going to find problems to solve? Also, you need to be able to inspire people and lead them in a direction they believe in.
How do you get things done? There is a lot of collaboration in big companies. You have to bring people along, get them to get behind your ideas and buy into them. The way to do that is by finding people who know how to get it done within the company. I looked for people who had been there for a long time, and was able to get them to tell me how to get things done. That’s how things started moving.
We launched the first ever incubation fund at Microsoft, which had never made investments in small companies before. And we were told Microsoft had never done something like that before, that it wouldn’t be accepted. But we were able to find a way to make it happen. We listened to people and found out why they said no. Just because they say no doesn’t mean you have to give up. Once you find out why they said no, you figure out a way to make their no a yes. You’re trying to find the quickest way to get from A to B, and there are ways of doing that within a big company. You find people who are frustrated (with the way the system is going) and know how to get things done, and you try and short circuit the problem as quickly as possible. If you short circuit it right, you and the team are going to be successful.
Is the reason why Microsoft is looking at ventures is because it missed the bus on Search or on Social Networking, both of which grew out of garages?
There has never been a time in the history of the tech industry where the barriers to entry have been so low, and the accelerants so high, that you can put five people in a garage and they can create something really disruptive. If you look at the types of companies being created right now, the ratio of the people in the company to its value or the revenue it generates is completely lopsided compared to what it used to be.
It used to take years and years to build a big company. Now the accelerants are much higher, so you can build a company a lot faster. With access to incubators, accelerators, VC funding, angel investors and other entrepreneurs in the ecosystem, it is easier to go out and attempt to be an entrepreneur. So we’re noticing that trend.
The other thing we’re noticing is that entrepreneurship is starting out at a much younger age. Students in grade school are thinking, “We must go out and start our own company.” This is a really interesting trend. Because of these phenomena, there has been a billion dollar company created every month for the last 84 months somewhere in the world. And most of these have been funded eventually in Silicon Valley.
When you look at these developments, you ask, what are Microsoft’s biggest strengths? Besides the fact that we are a big technology company, we’ve got amazing software, and some incredibly smart people, what is our biggest strength? It is our footprint in the Enterprise. We have so many people in the Enterprise who rely on us to be successful so that they are successful. They build on our platforms, they depend on our services, on our Cloud. They use Exchange, Office and our other products without even thinking about it. Microsoft has many, many customers in the Enterprise.
Knowing that today’s start-ups are the Enterprises of tomorrow, we need to engage them at a much earlier stage. This is not about us missing the boat on certain things, but about us helping to create the next generation of billion dollar companies. And by helping to create them, they become our partners in the long term. We are investing in ecosystems around the world, not just in Silicon Valley. We’re investing everywhere so we can help develop ecosystems, bring in entrepreneurs and create a more entrepreneurial culture inside Microsoft, and get people on the outside to think of how they will partner with us.
Is it also because it is easier to think out of the box, and be disruptive outside a large organisation than inside?
It certainly is easier. You can think disruptive anywhere – inside a big organisation or outside. The question is, can you actually be disruptive inside a big organisation? The whole point of being disruptive is you are disrupting what big companies do. If you are inside a big company and being disruptive, then ideas may start getting difficult. For example, if you worked for a bank, and suggested they converted all physical branches to coffee shops, it would be disruptive, but it will also be difficult to sell the idea. It is hard to be disruptive inside a big company, when you are not disrupting yourself and when you cannot think about disrupting yourself.
Microsoft is such a big company that does everything from consumer to enterprise, that everyone is disrupting us. So we need to think more disruptively. Internally, we need to think about how to disrupt our own business. Ventures is interesting because it gives us access to interesting disruptive innovations that we can potentially acquire or partner with. But, I think in any large organisation, there has to be a team whose job it is to think about how to disrupt your business.
One of the areas in which technology has tremendously disrupted is media. Why?
They (technology start-ups) went after things that consumers cared about instantly. Music, media consumption, reading – people care about these. They read books, newspapers, consume music. If you are able to make their experience that much better through technology, you’re going to create something disruptive, because it is driven by people, not corporations, not by government interests. It is being consumed by people, and therefore the people are creating a movement by saying they want this.
When you take a big problem space like media, you have disrupted it through digital means. Napster was possibly one of the original disrupters. Piracy was a big problem the media industry was dealing with. At the same time, making it easier for consumers to consume was a big problem space. With this perfect storm of making piracy legitimate, and making media easier to consume, people just grabbed on to it, and it became a big deal.
Education, which should have been disrupted, was not? Why?
The reason education is not getting disrupted is because there is a lot of protectionism here. The government isn’t allowing people to be disruptive. Education should be free to the masses. If you could make education free to one billion people in India, and make it accessible to them in ways hitherto not possible, you could create a bigger emerging middle class. You can reduce poverty, and help bring in more than engineering thinking into the mix. Therefore, you need to do two things. First, you have to make education accessible to everyone, through MOOCs (massive open online courses), through online means where education can be accessible to people who cannot otherwise afford it. Second, you have to stop thinking engineering and producing that many engineers. We need more creative thinking and creative people here, and combine that with engineering. When you do that, you bring design thinking into the mix. We also need to teach entrepreneurship at school (college).
Here’s the thing with education, in India in particular and other markets like it. India produced 1.5 million engineers last year. That is absolutely insane because we don’t need those many engineers. There are schools (colleges) coming up with accredited programmes. Many of them prey on the poor to send their kids to these colleges so that they can get a degree. To what outcome? The outcome should be a job. Some of these colleges are promising jobs, and the jobs the graduates get are pretty much at data entry operator level. So why do they have to do a four year programme for that type of a job?
You actually said “online education is like the Wild West”. Why? It should be a no-brainer that online education should work. Yet there is a problem. Why?
It is the Wild West because there are no standards at the moment. Every market and ecosystem is different. Different markets have different types of needs. Education is the Wild West because, if you try and create something disruptive here, you can get shut down by someone else. Education is a big policy issue. You need to think about the big problem spaces in India that need to be disrupted. Education, policy, infrastructure – there are so many different areas that need disruption. But it needs government support. The government has to say enough is enough, let these entrepreneurs go out there and solve problems.
Does formal education itself need to be disrupted?
Universities are dying institutions. Unless you are going to be a radiologist, a doctor or a lawyer. MBA programmes, for instance, need to change. We put our companies through a four-month accelerator programme. 850 people apply to get in, and we only accept 10-15. It is harder to get into our programme than it is to get into Harvard. And, in four months, you learn more than you do in a typical MBA course. You learn everything, from taking an idea, turning it into a prototype, doing customer validation, marketing, strategy and branding. You learn pitching, how to tell a story, how to get funding, and how to structure your company. You learn all of that in four months. So the question is, are we stuck in a 19th century mindset? Four-year programmes, eight-year programmes, get your degree, go for your masters? Absolutely, we are.
How does India compare to the rest of the world for start-up ecosystems?
The top start-up ecosystem is obviously Silicon Valley. The second is Israel, and it is higher by quite a bit. When I went to Israel, I looked around to understand why it has a strong start-up ecosystem. There are only 7 million people there. In Israel, they don’t focus on local issues, because it is too small a market. They are focussed on global problems. But they are also big risk takers. Entrepreneurship is encouraged by the government, by educators, by parents, by history. And they live every day like it is their last. Husband-and-wife teams quit their jobs to start a company. So, there is the desire to be an entrepreneur and it is a badge of honour to be one. They understand the need for customer validation. Initially, when you’re creating something for a global market, you must understand the market you are creating for.
In India – and here is the difference – we’re not encouraged to be entrepreneurs. Risk taking is not encouraged. Parents will not encourage you whatsoever. Educators do not encourage you, nor do they teach anything in this space. No one really knows what it means to be a start-up here, and they should. And, because of all this, we don’t like to take risks.
The other part is population. There are a billion people here. It is great market to create products that solve problems. But Indian entrepreneurs are focussed on solving problems in the US, building apps for the US, and not even thinking of solving local Indian problems. Here, many start-ups are creating engineer-led products or apps. They are focusing on markets they don’t understand. They are going after the US market v/s doing customer validation in India.
So what we did, at Microsoft Ventures, is said there is a reason why this ecosystem lags behind. And that is because you don’t understand the customer you are going after. We need to bring in a mix of entrepreneurs, we need to bring in more women because women think different from men. There are more women designers than men in India. We need to start blending these teams together. We did that and had some interesting things happen. We saw some start-ups emerge from our accelerators that are focussed on Indian problems that are actually growing. And they provide really unique value propositions. We can actually help these companies go into similar markets in Africa, Brazil, and China, and that is exciting. So, in order for India’s start-up ecosystem to evolve, they need to focus on Indian problems, and a more balanced approach. And parents, educators and the government need to encourage entrepreneurship.
How can technology be better used to combat social issues?
You can really do a lot with technology like cloud computing and data collection. Today, any piece of hardware you create needs to be connected to the cloud, and that cloud needs to be intelligent and be able to gather and analyse data, and produce results that you might not think about.
What are the top three tech trends to watch out for?
Security is number one. Privacy is less of an issue. As the next generation grows, privacy will be zero. Everyone will know who you are, where you live, everything about you. So, security will be everything, both in the real, physical world and online. Security companies will create an online persona that will follow you around (online) and be your guard. Security will be a huge, huge area.
Number two – education, I think, will completely change. The more we open source it, the better it will become, and the better our societies will evolve. The idea of open source education is a big trend.
Number three – wearable technology, like smart fabrics. Things like Google glass, Nike Fuel bands. In a world of connected devices, where all hardware connects to the cloud, I think you will be able to extract data about everything about us from it. As a result, our lives will be extended. We will be able to live longer lives through technology. I think people will be able to live to a hundred and fifty, with some of the technology that is coming.
What is the future of journalism?
The future of journalism is crowd sourced. The best writers will always rise, people will read them and follow them. People who began blogging f years ago are becoming famous now. They’re building big brands and big companies. They just started writing on their own. Look at Om Malik. He has come such a long way and Giga Om is such a big brand. That is the future. People who write well and influence people in a big way will disrupt the traditional journalism business.
What is your advice to young entrepreneurs?
The first piece of advice I will give them is to figure out their motivation. You have to have the motivation to want to be an entrepreneur. Because, being an entrepreneur is hard. You are not just going to become the next Facebook or Instagram. You first need to know why you want to be an entrepreneur. If your motivation is monetary, forget about it, because if you are going to chase money, you are not going to make it. Money should be the last thing on your mind. The first thing that should be on your mind is that, as an entrepreneur, you are passionate about something, and want to solve a problem in that space.
The second thing is about brand. It is not just a logo on box. It is the outcome of building a great product, having a customer base. The customer base becomes your fans. If you want to build a community, you have to get social, write, get engaged with your community and create a vibrant community where people will give you feedback that you will share with each other. Once you do that, it becomes the soul of your company, combining with your culture. Essentially, when you have those elements, when you have a great team with a great culture, a great product, a community that is writing and evangelizing about your product, then that becomes the soul of your brand. Then the outcome is the logo and all that stuff you created around the product. You just can’t go and create a brand. Brands grow.
Rahul Sood is GM, Microsoft Ventures, which looks at investing in tech start-ups. Prior to that, he was founder of VoodooPC and the CTO for Hewlett Packard.
Harini Calamur is Head of Digital Content, Zee Media Corporation.
Large organisations give you stability, smaller organisations give you innovation. How do you combine out-of-the-box thinking and the ‘get ready to go’ mode of innovative entrepreneurship into a big company?
When I joined Microsoft, I spent 11 months figuring out what I was going to do there. As an entrepreneur, you’re always trying to find something, and that something is a problem to solve. In a company full of brilliant people where everyone is smarter than you, how are you going to find problems to solve? Also, you need to be able to inspire people and lead them in a direction they believe in.
How do you get things done? There is a lot of collaboration in big companies. You have to bring people along, get them to get behind your ideas and buy into them. The way to do that is by finding people who know how to get it done within the company. I looked for people who had been there for a long time, and was able to get them to tell me how to get things done. That’s how things started moving.
We launched the first ever incubation fund at Microsoft, which had never made investments in small companies before. And we were told Microsoft had never done something like that before, that it wouldn’t be accepted. But we were able to find a way to make it happen. We listened to people and found out why they said no. Just because they say no doesn’t mean you have to give up. Once you find out why they said no, you figure out a way to make their no a yes. You’re trying to find the quickest way to get from A to B, and there are ways of doing that within a big company. You find people who are frustrated (with the way the system is going) and know how to get things done, and you try and short circuit the problem as quickly as possible. If you short circuit it right, you and the team are going to be successful.
Is the reason why Microsoft is looking at ventures is because it missed the bus on Search or on Social Networking, both of which grew out of garages?
There has never been a time in the history of the tech industry where the barriers to entry have been so low, and the accelerants so high, that you can put five people in a garage and they can create something really disruptive. If you look at the types of companies being created right now, the ratio of the people in the company to its value or the revenue it generates is completely lopsided compared to what it used to be.
It used to take years and years to build a big company. Now the accelerants are much higher, so you can build a company a lot faster. With access to incubators, accelerators, VC funding, angel investors and other entrepreneurs in the ecosystem, it is easier to go out and attempt to be an entrepreneur. So we’re noticing that trend.
The other thing we’re noticing is that entrepreneurship is starting out at a much younger age. Students in grade school are thinking, “We must go out and start our own company.” This is a really interesting trend. Because of these phenomena, there has been a billion dollar company created every month for the last 84 months somewhere in the world. And most of these have been funded eventually in Silicon Valley.
When you look at these developments, you ask, what are Microsoft’s biggest strengths? Besides the fact that we are a big technology company, we’ve got amazing software, and some incredibly smart people, what is our biggest strength? It is our footprint in the Enterprise. We have so many people in the Enterprise who rely on us to be successful so that they are successful. They build on our platforms, they depend on our services, on our Cloud. They use Exchange, Office and our other products without even thinking about it. Microsoft has many, many customers in the Enterprise.
Knowing that today’s start-ups are the Enterprises of tomorrow, we need to engage them at a much earlier stage. This is not about us missing the boat on certain things, but about us helping to create the next generation of billion dollar companies. And by helping to create them, they become our partners in the long term. We are investing in ecosystems around the world, not just in Silicon Valley. We’re investing everywhere so we can help develop ecosystems, bring in entrepreneurs and create a more entrepreneurial culture inside Microsoft, and get people on the outside to think of how they will partner with us.
Is it also because it is easier to think out of the box, and be disruptive outside a large organisation than inside?
It certainly is easier. You can think disruptive anywhere – inside a big organisation or outside. The question is, can you actually be disruptive inside a big organisation? The whole point of being disruptive is you are disrupting what big companies do. If you are inside a big company and being disruptive, then ideas may start getting difficult. For example, if you worked for a bank, and suggested they converted all physical branches to coffee shops, it would be disruptive, but it will also be difficult to sell the idea. It is hard to be disruptive inside a big company, when you are not disrupting yourself and when you cannot think about disrupting yourself.
Microsoft is such a big company that does everything from consumer to enterprise, that everyone is disrupting us. So we need to think more disruptively. Internally, we need to think about how to disrupt our own business. Ventures is interesting because it gives us access to interesting disruptive innovations that we can potentially acquire or partner with. But, I think in any large organisation, there has to be a team whose job it is to think about how to disrupt your business.
One of the areas in which technology has tremendously disrupted is media. Why?
They (technology start-ups) went after things that consumers cared about instantly. Music, media consumption, reading – people care about these. They read books, newspapers, consume music. If you are able to make their experience that much better through technology, you’re going to create something disruptive, because it is driven by people, not corporations, not by government interests. It is being consumed by people, and therefore the people are creating a movement by saying they want this.
When you take a big problem space like media, you have disrupted it through digital means. Napster was possibly one of the original disrupters. Piracy was a big problem the media industry was dealing with. At the same time, making it easier for consumers to consume was a big problem space. With this perfect storm of making piracy legitimate, and making media easier to consume, people just grabbed on to it, and it became a big deal.
Education, which should have been disrupted, was not? Why?
The reason education is not getting disrupted is because there is a lot of protectionism here. The government isn’t allowing people to be disruptive. Education should be free to the masses. If you could make education free to one billion people in India, and make it accessible to them in ways hitherto not possible, you could create a bigger emerging middle class. You can reduce poverty, and help bring in more than engineering thinking into the mix. Therefore, you need to do two things. First, you have to make education accessible to everyone, through MOOCs (massive open online courses), through online means where education can be accessible to people who cannot otherwise afford it. Second, you have to stop thinking engineering and producing that many engineers. We need more creative thinking and creative people here, and combine that with engineering. When you do that, you bring design thinking into the mix. We also need to teach entrepreneurship at school (college).
Here’s the thing with education, in India in particular and other markets like it. India produced 1.5 million engineers last year. That is absolutely insane because we don’t need those many engineers. There are schools (colleges) coming up with accredited programmes. Many of them prey on the poor to send their kids to these colleges so that they can get a degree. To what outcome? The outcome should be a job. Some of these colleges are promising jobs, and the jobs the graduates get are pretty much at data entry operator level. So why do they have to do a four year programme for that type of a job?
You actually said “online education is like the Wild West”. Why? It should be a no-brainer that online education should work. Yet there is a problem. Why?
It is the Wild West because there are no standards at the moment. Every market and ecosystem is different. Different markets have different types of needs. Education is the Wild West because, if you try and create something disruptive here, you can get shut down by someone else. Education is a big policy issue. You need to think about the big problem spaces in India that need to be disrupted. Education, policy, infrastructure – there are so many different areas that need disruption. But it needs government support. The government has to say enough is enough, let these entrepreneurs go out there and solve problems.
Does formal education itself need to be disrupted?
Universities are dying institutions. Unless you are going to be a radiologist, a doctor or a lawyer. MBA programmes, for instance, need to change. We put our companies through a four-month accelerator programme. 850 people apply to get in, and we only accept 10-15. It is harder to get into our programme than it is to get into Harvard. And, in four months, you learn more than you do in a typical MBA course. You learn everything, from taking an idea, turning it into a prototype, doing customer validation, marketing, strategy and branding. You learn pitching, how to tell a story, how to get funding, and how to structure your company. You learn all of that in four months. So the question is, are we stuck in a 19th century mindset? Four-year programmes, eight-year programmes, get your degree, go for your masters? Absolutely, we are.
How does India compare to the rest of the world for start-up ecosystems?
The top start-up ecosystem is obviously Silicon Valley. The second is Israel, and it is higher by quite a bit. When I went to Israel, I looked around to understand why it has a strong start-up ecosystem. There are only 7 million people there. In Israel, they don’t focus on local issues, because it is too small a market. They are focussed on global problems. But they are also big risk takers. Entrepreneurship is encouraged by the government, by educators, by parents, by history. And they live every day like it is their last. Husband-and-wife teams quit their jobs to start a company. So, there is the desire to be an entrepreneur and it is a badge of honour to be one. They understand the need for customer validation. Initially, when you’re creating something for a global market, you must understand the market you are creating for.
In India – and here is the difference – we’re not encouraged to be entrepreneurs. Risk taking is not encouraged. Parents will not encourage you whatsoever. Educators do not encourage you, nor do they teach anything in this space. No one really knows what it means to be a start-up here, and they should. And, because of all this, we don’t like to take risks.
The other part is population. There are a billion people here. It is great market to create products that solve problems. But Indian entrepreneurs are focussed on solving problems in the US, building apps for the US, and not even thinking of solving local Indian problems. Here, many start-ups are creating engineer-led products or apps. They are focusing on markets they don’t understand. They are going after the US market v/s doing customer validation in India.
So what we did, at Microsoft Ventures, is said there is a reason why this ecosystem lags behind. And that is because you don’t understand the customer you are going after. We need to bring in a mix of entrepreneurs, we need to bring in more women because women think different from men. There are more women designers than men in India. We need to start blending these teams together. We did that and had some interesting things happen. We saw some start-ups emerge from our accelerators that are focussed on Indian problems that are actually growing. And they provide really unique value propositions. We can actually help these companies go into similar markets in Africa, Brazil, and China, and that is exciting. So, in order for India’s start-up ecosystem to evolve, they need to focus on Indian problems, and a more balanced approach. And parents, educators and the government need to encourage entrepreneurship.
How can technology be better used to combat social issues?
You can really do a lot with technology like cloud computing and data collection. Today, any piece of hardware you create needs to be connected to the cloud, and that cloud needs to be intelligent and be able to gather and analyse data, and produce results that you might not think about.
What are the top three tech trends to watch out for?
Security is number one. Privacy is less of an issue. As the next generation grows, privacy will be zero. Everyone will know who you are, where you live, everything about you. So, security will be everything, both in the real, physical world and online. Security companies will create an online persona that will follow you around (online) and be your guard. Security will be a huge, huge area.
Number two – education, I think, will completely change. The more we open source it, the better it will become, and the better our societies will evolve. The idea of open source education is a big trend.
Number three – wearable technology, like smart fabrics. Things like Google glass, Nike Fuel bands. In a world of connected devices, where all hardware connects to the cloud, I think you will be able to extract data about everything about us from it. As a result, our lives will be extended. We will be able to live longer lives through technology. I think people will be able to live to a hundred and fifty, with some of the technology that is coming.
What is the future of journalism?
The future of journalism is crowd sourced. The best writers will always rise, people will read them and follow them. People who began blogging f years ago are becoming famous now. They’re building big brands and big companies. They just started writing on their own. Look at Om Malik. He has come such a long way and Giga Om is such a big brand. That is the future. People who write well and influence people in a big way will disrupt the traditional journalism business.
What is your advice to young entrepreneurs?
The first piece of advice I will give them is to figure out their motivation. You have to have the motivation to want to be an entrepreneur. Because, being an entrepreneur is hard. You are not just going to become the next Facebook or Instagram. You first need to know why you want to be an entrepreneur. If your motivation is monetary, forget about it, because if you are going to chase money, you are not going to make it. Money should be the last thing on your mind. The first thing that should be on your mind is that, as an entrepreneur, you are passionate about something, and want to solve a problem in that space.
The second thing is about brand. It is not just a logo on box. It is the outcome of building a great product, having a customer base. The customer base becomes your fans. If you want to build a community, you have to get social, write, get engaged with your community and create a vibrant community where people will give you feedback that you will share with each other. Once you do that, it becomes the soul of your company, combining with your culture. Essentially, when you have those elements, when you have a great team with a great culture, a great product, a community that is writing and evangelizing about your product, then that becomes the soul of your brand. Then the outcome is the logo and all that stuff you created around the product. You just can’t go and create a brand. Brands grow.
Rahul Sood is GM, Microsoft Ventures, which looks at investing in tech start-ups. Prior to that, he was founder of VoodooPC and the CTO for Hewlett Packard.
Harini Calamur is Head of Digital Content, Zee Media Corporation.
