Amar Bhidé will teach a new elective course, Lessons from Transformational Medical Advances. He received a B. Tech from the IIT Bombay in 1977, and an MBA (with High Distinction as a Baker Scholar) in 1979 and a DBA in 1988 from Harvard Business School. Bhidé taught in the Entrepreneurial Management Unit at HBS from 1988 to 2000, when he (re)developed an elective course that later became ‘The Entrepreneurial Manager’ in the Required Curriculum. He has also been the Lawrence Glaubinger Professor of Business at Columbia and a Visiting Associate Professor of Business at Chicago University. Before his academic career, he worked at McKinsey & Company and as a proprietary trader at E.F. Hutton. He is a founding member of the Center on Capitalism and Society, a life member of the Council on Foreign Relations, and serves on the board of SMIT, the largest investment trust in the UK.
Previously the Laurence D. Glaubinger Professor of Business at Columbia University, Bhidé has has been studying innovation and entrepreneurship for more than thirty years. He served on the faculties of Harvard Business School (from 1988 to 2000) and the University of Chicago’s Booth School of Business. A former Senior Engagement Manager at McKinsey & Company and proprietary trader at E.F. Hutton, Bhidé served on the staff of the Brady Commission which investigated the stock market crash of 1987.
His ten Harvard Business Review articles — the first published in 1982 — include “Hustle as Strategy” (1086), “Bootstrap Finance: the Art of Start-ups (1992),””How entrepreneurs craft strategies that work (1994),” and “The Judgment Deficit” (2010). His work on financial markets and governance includes “The Hidden Costs of Stock Market Liquidity” in the Journal of Financial Economics. He has written numerous articles, dating back to 1981, in the Wall Street Journal, the Financial Times, The New York Times, Quartz, Project Syndicate, Bloomberg Opinion, POLITICO Europe, BusinessWeek, Forbes, and The LA Times.
Bhidé earned a DBA (1988) and an MBA with high distinction as a Baker Scholar (1979) from Harvard. He received a B.Tech from the Indian Institute of Technology in 1977.
Academics and practitioners readily admit the importance of entrepreneurs for the wealth of nations. However, the relationship between the economic and social environment, entrepreneurship and value creation is not yet well understood. Moreover, at the micro-level, the optimal organization of the entrepreneurial firm and its access to human and financial capital is continuing to be an important public policy issue.
Against this backdrop the Amsterdam Center for Corporate Finance (ACCF) has decided to devote this issue of its discussion series ”Topics in Corporate Finance” to entrepreneurship, covering the economic relevance of entrepreneurship and its organizational, strategic and financial challenges. The preeminent researcher in this case, Professor Amar Bhidé of Columbia University, has provided four excellent articles that each form a chapter in this booklet. The first chapter addresses the relationship between entrepreneurship and economic growth, and thus discusses the economic relevance of entrepreneurship. The second chapter discusses the origin and evolution of successful entrepreneurs and their strategies. The third chapter focuses on the access of entrepreneurs to external finance, in particular venture capital. The final chapter discusses the importance of control of honest mistakes and its effect on the financing of novel projects.
Amar Bhidé offers an intriguing perspective on the key success factors of entrepreneurs. Perhaps most surprisingly, several of the most successful entrepreneurial companies offer “me too” products in rather turbulent and small niche markets, and have entrepreneurs that are rather inexperienced. But many more insights emerge. “Entrepreneurship and Venture Capital”, issue 9 in the discussion series “Topics in Corporate Finance”, is a joyful blend of theory, anecdotes, survey based evidence and historical insights from economic thought. It shows how complex the issues are, partially explaining the lack of specific guidance that comes from economic theory.
We hope that you enjoy reading it, and that this publication may contribute to bridging the gap between theory and practice.
Bhide, Amar. The Venturesome Economy: How Innovation Sustains Prosperity in a More Interconnected World. Princeton, NJ, USA: Princeton University Press, 2008. (Association of American Publishers' PROSE award, Best of 2008 lists of the Economist, BusinesWeek and Barrons.)
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Our prosperity requires the enterprise of innumerable individuals and businesses who exercise their imagination and judgment-and bear responsibility for outcomes. And it is through dialogue and relationships that widespread enterprise is fostered, not merely prices in anonymous markets. Yet modern finance blatantly neglects these necessary elements for enterprise, and the dynamism of the real economy is stifled. For the last several decades finance has become increasingly centralized, distanced, and mechanistic. Instead of thousands of lending officers making judgments about borrowers who they know, credit decisions are the output of the models of a few Wall Street wizards and credit agencies whose mistakes have widespread, sometimes disastrous consequences. A Call for Judgment explains in a clear way how bad theories and mis-regulation have caused this dangerous divergence between the real economy and finance. Bhide accessibly lays out how so-called advances in modern finance helped mass-produce toxic products, based on backward-looking, top-down models that have no place in today's dynamic and decentralized world. Thanks to excessively tight securities laws and loose banking laws, anonymous transactions have displaced relationship-based finance. Returning to relationships and case-by-case judgment requires at a minimum tough rules that limit banks-and all deposit taking institutions-to basic lending and nothing else. Financing the Venturesome Economy is essential reading for anyone interested bringing the economy back to a point at which decisions can be made that foster organic economic growth without the potentially disastrous risks currently accepted by modern finance.
Sahlman, William A., Howard H. Stevenson, Michael J Roberts, and Amar V. Bhide. The Entrepreneurial Venture. 2nd ed. Harvard Business School Press, 1999.
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Bhide, Amar. Of Politics and Economic Reality: The Art of Winning Elections with Sound Economic Policies. New York, NY, USA: Basic Books, 1984, Dutch ed.
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Stevenson, H. H., H. I. Grousbeck, M. J. Roberts, and A. V. Bhide. New Business Ventures and the Entrepreneur, Instructor's Manual. Burr Ridge, IL: Irwin/McGraw-Hill, 1999.
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Keynes thought it would be ‘splendid’ if economists became more like dentists. Disciplinary economics has instead become more like physics in focusing on concise, universal propositions verified through decisive tests. This focus, I argue, limits the practical utility of the discipline because universal propositions form only a part of new policy recipes. I further suggest that, as in engineering and medicine, developing economic recipes requires eclectic combinations of suggestive tests and judgement. Additionally, I offer a detailed example of how a simulation model can help evaluate new policy combinations that affect the screening of loan applications.
Srikant M. Datar, Amar Bhide and Katherine Stebbins
We describe how and why Magnetic Resource Imaging (MRI) came to complement – and partially replace -- computed tomography (CT) imaging of soft tissue. Specifically we chronicle: 1) the development of foundational techniques and prototypes (through the 1970s); 2) how U.S. Food & Drug Administration (FDA) approval for the new device was secured (in the early 1980s); 3) post-approval commercial adoptions (in the late 1980s); and 4) growth in adoptions and MRI use --- after setbacks (in the 1990s).
Amar Bhidé, Srikant M. Datar and Katherine Stebbins
We describe how a chance discovery of bacteria that infects stomach linings completely changed how physicians treat ulcers. Specifically, we chronicle how 1) two Australian physicians brought the bacterial infection to the world’s attention and challenged the conventional view that stomach acidity caused ulcers; 2) a global community of researchers helped corroborate the Australians’ findings and developed convenient tests and effective treatments; and 3) these tests and treatments were gradually, but not immediately, adopted.
Amar Bhidé, Srikant M. Datar and Katherine Stebbins
We describe how the development of x-ray-based techniques and equipment (“mammography”) lead to widespread screening for breast cancer and enabled “minimally invasive” biopsies of breast tumors. Specifically, we chronicle how: 1) new protocols and equipment catalyzed the first widespread screening programs and minimally invasive biopsies in the 1960s and 1970s; 2) concerns about safety and accuracy spurred technological advance in the 1980s; and, 3) digitization further improved the safety and accuracy of mammography in the 1990s and 2000s.
Amar Bhidé, Srikant M. Datar and Katherine Stebbins
We describe how endoscopy transformed the diagnosis of ulcers, cancerous polyps and other diseases of the alimentary canal and enabled “minimally invasive” surgeries to treat such diseases. Specifically, we chronicle how: 1) flexible glass fiber endoscopes developed in the 1950s and 1960s provided the foundation; 2) technical advances – promoted by evangelical innovators – in the 1970s and early 1980s enabled new diagnostic techniques and minimally invasive abdominal surgeries; 3) radical and incremental improvements through the end of the 20th century sustained growth – although they did not enable many new procedures; and, 4) capsule endoscopes containing miniaturized cameras that patients swallowed provided another breakthrough in the first decade of the 21st century.
Amar Bhidé, Srikant M. Datar and Katherine Stebbins
We describe how Computed Tomography (CT) scanners—that combine x-rays and computers to image soft tissues of the brain and other organs—have become a widely used diagnostic tool. Specifically, we chronicle the following: 1) development of the first CT scanner (through the early 1970s); 2) rapid and enthusiastic adoption of CT scanning (until the late 1970s); 3) regulatory backlash against the perceived overuse of this expensive technology (in the 1980s); and 4) innovations that reignited growth (in the 1990s and 2000s).
Rules that restrict information required in negotiated private transactions have spurred a vast increase in the scope of anonymous financial markets, particularly in the US. The subtle costs of the information restricting rules raise questions about the social value of “completing” anonymous markets that would not naturally survive and did not historically exist.
This Note examines the development of the knowledge embodied in ‘artifacts’—things and arrangements that do not exist in nature. It focuses on ‘multi-player’ advances—artifacts and knowledge developed by and for the many—and highlights the venturesome spirit and technical scaffolding of such advances. And it suggests ways for using the scaffolding while keeping the spirit.
This case history analyzes how the founders of McKinsey & Co. built one of the world's leading management consulting firms by developing a “system” of professional norms, approach to serving clients, personnel policies, organization, governance, and ownership. The history also shows that while McKinsey’s founders resorted to considerable trial and error, it was not ad hoc: they intended to discover the best means to further a long-term vision and strategy. Moreover, their vision and strategy derived more from a priori faith and personal values than from scientific evidence or financial calculation.
Cephalosporins have played an under-appreciated role in treating deadly infections. Three generations of these antibiotics helped cut the rate of infections in patients recovering from operations in hospitals by more than half between the 1960s and 1990s. In 1986, just six years after “third-generation” cephalosporins were introduced, they accounted for 80% of the antibiotics administered in U.S. hospitals and have remained the top antibiotic given to hospitalized patients according to a 2010 survey. Some physicians call cephalosporins “wonder drugs” that, like penicillin, helped produce a “golden age” in antibiotic treatments; however, their story is not as well known.
Bhidé, Amar, Srikant Datar, and Katherine Stebbins. "Third-Generation Cephalosporins: Case Histories of Significant Medical Advances." Harvard Business School Working Paper, No. 20-133, July 2020.
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Tamoxifen is considered a “gold standard” treatment for millions of breast cancer patients. In 1985, twelve years after Imperial Chemical Industries (ICI), had first introduced tamoxifen in the United Kingdom (UK), the World Health Organization (WHO) designated it an essential cancer drug. In 2003, V. Craig Jordan, a leading tamoxifen researcher, estimated that “over 400,000 women are alive…as a result of tamoxifen therapy.”
Bhidé, Amar, Srikant Datar, and Katherine Stebbins. "Tamoxifen: Case Histories of Significant Medical Advances." Harvard Business School Working Paper, No. 20-134, July 2020.
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Amar Bhidé, Srikant M. Datar and Katherine Stebbins
Prozac is widely hailed as “a breakthrough drug for depression.” In 2020, the World Health Organization (WHO) estimated that over 264 million people worldwide suffer from depression, and 800,000 die by suicide each year. In 2014, researchers calculated the economic impact of depression—in terms of lost productivity, absenteeism, and treatment costs—to be USD$63 billion per year in the United States alone. Depression’s toll on lives and livelihoods prompted the WHO to place Prozac on its list of essential medicines in 2009.
Bhidé, Amar, Srikant M. Datar, and Katherine Stebbins. "SSRIs and Non-SSRIs: Case Histories of Significant Medical Advances." Harvard Business School Working Paper, No. 20-135, July 2020.
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Chris Hackett and Val Rayzman have spent six months after graduating from business school exploring the possibility of building a chain of upscale drycleaners. This fragmented industry looked ripe for an innovative new entrant. Chris and Val have researched the industry thoroughly, selected a metropolitan area in which to start, searched for acquisition candidates, and considered the prospect of de novo start-up. They have uncovered only one feasible acquisition candidate. With time and money running out, they feel pressured to decide whether to go through with the acquisition, to start their own store, or to abandon the project. This case is designed to focus on the strategic aspects of entrepreneurial management. May be used to emphasize the importance of understanding industry economics and competitive dynamics. May also be used to examine acquisition as an alternative to start-up.
Martha Radosevich, president of Health Payment Review, a small software start-up, confronts a serious cash-flow problem: Health Payment Review has built a PC-based prototype but has run out of funds to build a commercially acceptable mainframe product. As a stop-gap measure to generate cash, Marcia tries to sell the PC prototype but encounters resistance from conservative buyers. Teaching Purpose: To highlight the challenges of selling and negotiation faced by entrepreneurs, and to help students develop their skills in this area.
Presents the conclusions of a 1992 mail survey of Harvard MBAs who started their own businesses. Questions focused on 4 areas: 1) development of the business concept, 2) sales and marketing, 3) finance, and 4) building a staff. The entrepreneurs surveyed include 24 in consulting, 17 in professional services (most financial), and 46 in "traditional" ventures ranging from farming to manufacturing to long-distance phone service. Throughout, the survey responses are directly compared with those from an earlier study of 100 entrepreneurs drawn from the "Inc. 500" list of fast-growing new businesses. Despite differences in the education and capital resources of the two groups, they are shown to be remarkably similar. Includes 82 exhibits and concludes with a summary of "travel tips" for aspiring entrepreneurs. Points to skills, attitudes, and knowledge that will help students considering entrepreneurial careers. Also contains a wealth of data that can provide useful background information on virtually all the topics that a typical entrepreneurship course covers.
Describes a systematic approach to selling. The author, a former IBM salesman, believes that selling requires progressing through a series of stages, which culminate in "getting the order." Describes several techniques useful in managing this progression.
In an interview with an HBS faculty member, Deaver Brown of Cross River, Inc. talks about how to get customers to distribute your product--knowledge of their objectives, knowing the deal, understanding your relative perspectives, flexibility, presenting the benefits to the buyer, establishing credibility, demos, and establishing a presence.
Samuel Kaymen and Gary Hirshberg founded Stonyfield Farm in 1983, in part to demonstrate that "environmentally and socially responsible businesses can also be profitable." In 1994, the company has grown to over $21 million in revenues, derived mainly from refrigerated and frozen yogurt. It has expanded beyond its core New England base to natural food stores nationwide and to supermarkets in 20 states. All its production, however, is concentrated in its New Hampshire plant, which has limited the company's growth on the West Coast. Now Stonyfield has to decide whether to build a plant in California. It has also entered a joint venture agreement to make ice cream in Russia. It faces competitive challenges in its traditional markets as well.
Bob Reiss, a seasoned entrepreneur, "accidentally" started Valdawn in 1988 and in six years built the company into a $7 million marketer of "fun and fashion" watches. Valdawn, a "virtual" company, has very few employees or fixed assets and enjoys attractive profit margins and, Reiss believes, bright prospects for growth. Nevertheless, Reiss is wary of making the investment such growth would require and wonders whether he should scale back the business or sell his interest.
Jim Bender has just been hired as CEO of Alert, Inc. Alert, founded in 1986 by a charismatic technologist, has accumulated an impressive portfolio of patents and leading edge technology projects in a variety of fields. The company has never, however, shown a profit and has accumulated significant losses. What can Bender do to turn the situation around?
Describes the strategic and organizational challenges of turning a fledgling enterprise into a self-sustaining business. In contrast to traditional life-cycle models, the note argues that businesses evolve in idiosyncratic ways. Therefore the leaders of young businesses have to develop strategies while taking into account the whole situation (rather than a "stage of growth") and after consideration of a broad mix of options. Furthermore, success in attaining sustainability is as much a matter of execution as it is of picking the right growth strategy.
Bhide, Amar, and Myra M. Hart. "Peanut Butter Fantasies, Teaching Note." Harvard Business School Teaching Note 392-119, March 1992. (Revised April 1996.)
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Based on a 1992 mail survey of Harvard MBAs who started their own businesses. Questions focused on 4 areas: 1) development of the business concept, 2) sales and marketing, 3) finance, and 4) building a staff. The entrepreneurs surveyed include 24 in consulting, 17 in professional services (most financial), and 46 in "traditional" ventures ranging from farming to manufacturing to long-distance phone service. Throughout, the survey responses are directly compared with those from an earlier study of 100 entrepreneurs drawn from the "Inc. 500" list of fast-growing new businesses. Despite differences in the education and capital resources of the two groups, they are shown to be remarkably similar. Includes 82 exhibits and concludes with a summary of "travel tips" for aspiring entrepreneurs. Points to skills, attitudes, and knowledge that will help students considering entrepreneurial careers. Also contains a wealth of data that can provide useful background information on virtually all the topics that a typical entrepreneurship course covers.
Johnson-Grace is a cash-strapped start-up company negotiating a licensing agreement with America OnLine (AOL), a leading provider of on-line services in the United States. The Johnson-Grace technology would enable AOL to transmit visual images to its customers more quickly than existing technology. In addition to price, Johnson-Grace must consider whether to give AOL exclusivity and whether to encourage AOL to make an equity investment in their company.
A medical products distribution company faces strategic opportunities and challenges in a rapidly changing market. Physician Sales and Service (PSS), founded by Patrick Kelly in 1983, operates in 20 states in the United States and intends to expand to 50 states by 1997. By charging premium prices for high-quality service, training its sales representatives intensively, and professionalizing management, PSS has achieved above-average profit margins and, apparently successfully coped with the organizational challenges of rapid geographic concentration. But now, in 1992, PSS must cope with the uncertainties of Bill Clinton's impending election to the U.S. presidency and his promise of sweeping health care reform.
Cross River makes and sells an innovative, folding baby stroller to the U.S. market. The company has broken even in its first year, selling mainly to small retailers. CEO Deaver Brown urgently wants to expand distribution to national chains and has secured appointments with the buyers of Macy's and K-Mart. What pitch should he make?
Professional service firms, in law, accounting, advertising, consulting, and so on are ubiquitous and relatively easy to start. Few firms, however, gain scale or permanence. This case explores the reasons behind McKinsey & Co.'s exceptional success in building a prestigious, global institution and the role played by its leader in making it so. May be used with McKinsey & Co. (B)--1966. Describes many interrelated strategic, organizational, and governance issues facing the partners of McKinsey & Co. in 1956.
Provides students with a workable framework for analyzing new ventures. Stresses the importance of matching analytical tasks to the type of venture contemplated.
Momenta is a one-year-old corporation that has sought to build a distinct culture and identity through a structured process and organized rituals. The company is seeking to be a major player in the highly competitive pen-based computer market and has attracted significant funding and top-quality talent. The case describes the emergence of the corporate culture from the point of view of several key managers. Teaching Objective: To discuss the process and content of corporate culture in a start-up in a rapidly growing and competitive market. Also to discuss the CEO's role in managing highly qualified and talented subordinates. May be used with Momenta Corp. (A).
Paul Olsen, a doctoral management student, is considering forming a limited partnership to open a restaurant in a renovated downtown mall in Pittsburgh. He must assess the opportunity, find investors for the anticipated $250,000 start-up costs, and create a workable business plan for the restaurant. He has no prior industry experience.
Momenta is a one-month-old high-tech company founded by Kamran Elahian who has already helped found two other successful firms. Having faced problems of teamwork and communication before, Kamran is determined to establish the right corporate culture early on. Teaching Objective: To discuss when and how corporate cultures might be established in a rapidly growing industry. May be used with Momenta Corp. (B).
Helps the potential franchisee analyze the issues to be faced when considering opening or buying a franchise. What are the opportunities--what makes franchising attractive? How does someone look for and then evaluate a franchise?
Outlines the issues and alternatives faced by start-up businesses in attracting bank credit. The topics covered are how to lay the groundwork for establishing a banking relationship, selecting a bank, preparing an application, and negotiating a loan.
Describes how Vinod Khosla got Sun Microsystems started, and a critical marketing challenge the company faced at the end of the first year. Objective is to illustrate how bold creative thinking can make or break start-ups.
Acquiring resources--or to put it more broadly, attracting stakeholders--is a basic entrepreneurial task. While every enterprise needs employees, customers, suppliers, and financiers who are willing to risk their time and money, attracting these "stakeholders" to an entrepreneurial venture is a particularly difficult challenge. This note first describes the importance of the challenge and then the set of tasks the entrepreneur must work on in order to overcome it: Designing the enterprise to minimize the stakeholder investment needed, selecting the right stakeholders, and then convincing them to participate in the enterprise.
Bhide, Amar. "The Indeterminate Goodness of the Economy (and Life)."The Center on Capitalism and Society (2011). (Comments at The Center on Capitalism and Society’s 9th Annual Conference on: “Philosophical Foundations of Economics and the Good Economy: Individual Values, Human Pursuits, Self-Realization and Becoming”.)
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Like sepsis, a life-threatening, uncontrolled immune response to infections, draconian efforts to contain the coronavirus outbreak may cause more harm than the infection itself. Yet the measures now paralysing the western world before many have actually died are based on heroic, unverifiable assumptions about infection and death rates.
Unprecedented lockdowns and quarantines to combat the COVID-19 pandemic have evoked emotional disagreements, both between and within different countries. Yet, the consequences of this or any future pandemic depend as much on responses and capabilities on the front lines as on high-level policy choices.
